Note 1 – Significant Accounting Policies

Organization – Lockheed Martin Corporation is a global security company engaged in the research, design, development, manufacture, integration, operation, and sustainment of advanced technology systems and products, and provides a broad range of management, engineering, technical, scientific, logistic, and information services. As a systems integrator, our products and services range from electronics and information systems, including integrated net-centric solutions, to missiles, aircraft, and spacecraft. We serve both domestic and international customers with products and services that have defense, civil, and commercial applications, with our principal customers being agencies of the U.S. Government.

Basis of consolidation and classifications – Our consolidated financial statements include the accounts of subsidiaries we control and other entities where we are the primary beneficiary. We eliminate intercompany balances and transactions in consolidation. Our receivables, inventories, customer advances, and certain amounts in other current liabilities are primarily attributable to long-term contracts or programs in progress for which the related operating cycles are longer than one year. In accordance with industry practice, we include these items in Current Assets and Current Liabilities. We have reclassified certain amounts for prior years to conform to the 2009 presentation.

We have evaluated subsequent events through the time of filing this Form 10-K with the United States Securities and Exchange Commission (SEC) on February 25, 2010. No material subsequent events have occurred since December 31, 2009 that required recognition or disclosure in these financial statements.

Use of estimates – We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP). In doing so, we are required to make estimates and assumptions, including estimates of anticipated contract costs and revenues utilized in the earnings recognition process, that affect the reported amounts in the financial statements and accompanying notes. Due to the size and nature of many of our programs, the estimation of total revenues and cost at completion is subject to a wide range of variables, including assumptions for schedule and technical issues. Our actual results may differ from those estimates.

Cash and cash equivalents – Cash equivalents include highly liquid instruments with original maturities of 90 days or less.

Receivables – Receivables include amounts billed and currently due from customers, and unbilled costs and accrued profits primarily related to revenues on long-term contracts that have been recognized for accounting purposes but not yet billed to customers. As we recognize those revenues, we reflect appropriate amounts of customer advances, performance-based payments, and progress payments as an offset to the related receivables balance.

Inventories – We record inventories at the lower of cost or estimated net realizable value. Costs on long-term contracts and programs in progress represent recoverable costs incurred for production or contract-specific facilities and equipment, allocable operating overhead, advances to suppliers and, in the case of contracts with the U.S. Government, research and development and general and administrative expenses. Pursuant to contract provisions, agencies of the U.S. Government and certain other customers have title to, or a security interest in, inventories related to such contracts as a result of advances, performance-based payments, and progress payments. We reflect those advances and payments as an offset against the related inventory balances. We expense general and administrative costs related to products and services provided essentially under commercial terms and conditions as incurred. We determine the costs of other product and supply inventories by the first-in first-out or average cost methods.

Property, plant and equipment – We include property, plant, and equipment on our Balance Sheet principally at cost. We provide for depreciation and amortization on plant and equipment generally using accelerated methods during the first half of the estimated useful lives of the assets, and the straight-line method thereafter. The estimated useful lives of our plant and equipment generally range from 10 to 40 years for buildings and five to 15 years for machinery and equipment.

Goodwill – We evaluate goodwill for potential impairment annually on October 1, or if impairment indicators are present. Our evaluation includes comparing the fair value of a reporting unit, using a discounted cash flow methodology, to its carrying value including goodwill recorded by the reporting unit. If the carrying value exceeds the fair value, we measure impairment by comparing the derived fair value of goodwill to its carrying value, and any impairment determined is recorded in the current period. We define reporting units at the business segment level or one level below the business segment.

Purchased intangibles – We amortize on a straight-line basis intangible assets acquired as part of business combinations over their estimated useful lives unless their useful lives are determined to be indefinite. For material business combinations, the amounts we record related to purchased intangibles are determined from independent valuations. Our purchased intangibles primarily relate to contracts and programs acquired and customer relationships, which are amortized over periods of 10 years or less, and trade names that have indefinite lives. As of December 31, 2009 and 2008, purchased intangibles totaled $311 million and $355 million, net of accumulated amortization of $2,203 million and $2,098 million. Amortization expense related to these intangible assets was $104 million in 2009, $118 million in 2008, and $153 million in 2007. We estimate amortization expense will be $103 million in 2010, $93 million in 2011, $36 million in 2012, $27 million in 2013, and $7 million in 2014. The unamortized balance of purchased intangibles at December 31, 2009 included $41 million of intangibles with indefinite lives.

Capitalized software – We capitalize certain direct costs associated with the development of internal-use software. Expenditures are included in operating activities on our Statement of Cash Flows. The amounts capitalized are included in other assets on our Balance Sheet and amortized on a straight-line basis over the estimated useful life of the resulting software, which ranges from two to seven years. We amortize capitalized internal-use software beginning when the asset is substantially ready for use. As of December 31, 2009 and 2008, capitalized software totaled $887 million and $758 million, net of accumulated amortization of $948 million and $796 million. Amortization expense related to capitalized software was $152 million in 2009, $135 million in 2008, and $114 million in 2007.

Customer advances and amounts in excess of cost incurred – We receive advances, performance-based payments, and progress payments from customers that may exceed costs incurred on certain contracts, including contracts with agencies of the U.S. Government. We classify such advances, other than those reflected as a reduction of receivables or inventories as discussed above, as Current Liabilities.

Environmental matters – We record a liability for environmental matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. The amount of liability recorded is based on our best estimate of the costs to be incurred for remediation at a particular site within a range of estimates for that site or, in cases where no amount within the range is better than another, we record an amount at the low end of the range. We do not discount the recorded liabilities, as the amount and timing of future cash payments are not fixed or cannot be reliably determined. We expect to include a substantial portion of environmental costs in net sales and cost of sales pursuant to U.S. Government agreement or regulation. At the time a liability is recorded for future environmental costs, we record an asset for estimated future recovery considered probable through the pricing of products and services to agencies of the U.S. Government. We include the portion of those costs expected to be allocated to commercial business or that is determined to be unallowable for pricing under U.S. Government contracts in cost of sales at the time the liability is established.

Sales and earnings – We record sales and anticipated profits under long-term fixed-price design, development, and production (DD&P) contracts on a percentage of completion basis, generally using units-of-delivery as the basis to measure progress toward completing the contract and recognizing revenue. We include estimated contract profits in earnings in proportion to recorded sales. We record sales under certain long-term fixed-price DD&P contracts that, among other factors, provide for the delivery of minimal quantities or require a substantial level of development effort in relation to total contract value, upon achievement of performance milestones or using the cost-to-cost method of accounting where sales and profits are recorded based on the ratio of costs we incur to our estimate of total costs at completion. We record sales and an estimated profit under DD&P cost-reimbursement-type contracts as costs are incurred in the proportion that the incurred costs bear to total estimated costs. When adjustments in estimated contract revenues or estimated costs at completion are required, any changes from prior estimates are recognized by recording adjustments in the current period for the inception-to-date effect of the changes on current and prior periods. When estimates of total costs to be incurred on a contract exceed total estimates of revenue to be earned, a provision for the entire loss on the contract is recorded in the period the loss is determined. We record sales of products and services provided under essentially commercial terms and conditions upon delivery and passage of title.

We consider incentives or penalties related to performance on DD&P contracts in estimating sales and profit rates, and record them when there is sufficient information to assess anticipated contract performance. We also consider estimates of award fees in estimating sales and profit rates based on actual awards and anticipated performance. We do not recognize incentive provisions that increase or decrease earnings based solely on a single significant event until the event occurs. We only include amounts representing contract change orders, claims, or other items in sales when they can be reliably estimated and realization is probable.

 

We record revenue under contracts for services other than those associated with DD&P activities either as services are performed or when a contractually required event has occurred, depending on the contract. The majority of our service contracts is in our Information Systems & Global Services segment. We record revenue under such services contracts on a straight-line basis over the period of contract performance, unless evidence suggests that the revenue is earned or the obligations are fulfilled in a different pattern. Costs we incur under these services contracts are expensed as incurred, except that we capitalize and recognize initial “set-up” costs over the life of the agreement. Award and incentive fees related to our performance on services contracts are recognized when they are fixed or determinable, which is typically on the date the amount is communicated to us by the customer.

Research and development and similar costs – Except for certain arrangements described below, we account for independent research and development costs as part of the general and administrative costs that are allocated among all of our contracts and programs in progress under U.S. Government contractual arrangements. Costs for product development initiatives we sponsor that are not otherwise allocable are charged to expense when incurred. Under some arrangements in which a customer shares in product development costs, our portion of unreimbursed costs is expensed as incurred. Independent research and development costs charged to cost of sales totaled $750 million in 2009, $719 million in 2008, and $678 million in 2007. Costs we incur under customer-sponsored research and development programs pursuant to contracts are accounted for as net sales and cost of sales under the contract.

Restructuring activities – Under existing U.S. Government regulations, certain costs we incur for consolidation or restructuring activities that we can demonstrate will result in savings in excess of the cost to implement those actions can be deferred and amortized for government contracting purposes and included as allowable costs in future pricing of our products and services to agencies of the U.S. Government. Assets recorded at December 31, 2009 and 2008 for deferred costs related to various consolidation and restructuring activities were not material.

Impairment of certain long-lived assets – We review the carrying values of long-lived assets other than goodwill for impairment if events or changes in the facts and circumstances indicate that their carrying values may not be recoverable. We assess impairment by comparing the estimated undiscounted future cash flows of the related asset to its carrying value. If an asset is determined to be impaired, we recognize an impairment charge in the current period for the difference between the fair value of the asset and its carrying value.

Investments in marketable securities – Investments in marketable securities consist of debt and equity securities of publicly-traded companies and are accounted for at fair value. Marketable securities are classified as either available-for-sale securities or trading securities. If classified as available-for-sale securities, unrealized gains and losses are reflected net of income taxes in accumulated other comprehensive income (loss) on the Statement of Stockholders’ Equity. If declines in the value of investments are determined to be other than temporary, a loss is recorded in earnings in the current period. We make such determinations by considering, among other factors, the length of time the fair value of the investment has been less than the carrying value, future business prospects for the investee, and information regarding market and industry trends for the investee’s business, if available. As of December 31, 2009 and 2008, the fair value of our available-for-sale securities totaled $346 million and $61 million and was included in other current assets on the Balance Sheet.

If marketable securities are classified as trading securities, unrealized gains and losses are recorded in other non-operating income (expense), net on the Statement of Earnings. As of December 31, 2009 and 2008, the fair value of our trading securities totaled $757 million and $500 million and was included in other assets on the Balance Sheet. Our net unrealized gains (losses) on trading securities were $115 million in 2009, $(158) million in 2008, and $(13) million in 2007. Our trading securities are held in a Rabbi Trust, which includes investments to fund certain of our nonqualified deferred compensation plans.

We record realized gains and losses on marketable securities in other non-operating income (expense), net. For purposes of computing realized gains and losses, we determine cost on a specific identification basis.

Equity method investments – Investments where we have the ability to exercise significant influence over the investee are accounted for under the equity method of accounting and are included in other assets on the Balance Sheet. Significant influence typically exists if we have a 20% to 50% ownership interest in the investee. Under this method of accounting, our share of the net earnings or losses of the investee is included in operating profit in other income (expense), net since the activities of the investee are closely aligned with the operations of the business segment holding the investment. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

 

Derivative financial instruments – We use derivative financial instruments to manage our exposure to fluctuations in foreign currency exchange rates. Foreign currency exchange contracts are entered into to manage the foreign currency exchange rate risk of forecasted foreign currency denominated cash receipts and cash payments. The majority of our foreign currency exchange contracts are designated as cash flow hedges. We may also use derivative financial instruments to manage our exposure to changes in interest rates. Our financial instruments that are subject to interest rate risk principally include fixed rate long-term debt. We do not hold or issue derivative financial instruments for trading or speculative purposes.

We record derivatives at their fair value. The classification of gains and losses resulting from changes in the fair values of derivatives is dependent on our intended use of the derivative and its resulting designation. Adjustments to reflect changes in fair values of derivatives attributable to the effective portion of hedges that we consider highly effective hedges are either reflected in earnings and largely offset by corresponding adjustments to the hedged items, or reflected net of income taxes in accumulated other comprehensive income (loss) until the hedged transaction is recognized in earnings. Changes in the fair value of the derivatives that are attributable to the ineffective portion of the hedges, or of derivatives that are not considered to be highly effective hedges, if any, are immediately recognized in earnings. The aggregate notional amount of the outstanding foreign currency exchange contracts at December 31, 2009 and 2008 was $1.9 billion and $1.4 billion. There were no interest rate derivatives outstanding at December 31, 2009 and 2008.

The effect of our derivative instruments on the Statement of Earnings for the years ended December 31, 2009, 2008, and 2007 was not material. The fair values of our derivative assets as of December 31, 2009 and 2008 were $21 million and $100 million and were recorded in other current assets. The fair values of our derivative liabilities as of December 31, 2009 and 2008 were $23 million and $48 million and were recorded in other current liabilities. These amounts were not material to our financial statements. See Note 15 for further discussion on the fair value measurements related to our derivative instruments.

Stock-based compensation – We recognize compensation cost related to all share-based payments (stock options, restricted stock awards, and restricted stock units) based on their estimated fair value at the date of grant.

Income taxes – We periodically assess our tax filing exposures related to periods that are open to examination. Based on the latest available information, we evaluate tax positions to determine whether the position will more likely than not be sustained upon examination by the Internal Revenue Service (IRS). If we determine that the tax position is more likely than not to be sustained, we record the largest amount of benefit that is more likely than not to be realized when the tax position is settled. If we cannot reach that determination, no benefit is recorded. We record interest and penalties related to income taxes as a component of income tax expense in our consolidated financial statements.

Comprehensive income (loss) – Comprehensive income (loss) and its components are presented on the Statement of Stockholders’ Equity.

Accumulated other comprehensive income (loss) consisted of the following:

 

(In millions)		2009				2008
Postretirement benefit plan adjustments		$	(8,564	)		$	(9,059	)
Foreign currency translation adjustments			(26	)			(108	)
Other, net			(5	)			18
		$	(8,595	)		$	(9,149	)

Recent accounting pronouncements – In October 2009, the Financial Accounting Standards Board (FASB) revised its accounting guidance related to revenue arrangements with multiple deliverables. The guidance relates to the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting and modifies the manner in which the transaction consideration is allocated across the individual deliverables, thereby affecting the timing of revenue recognition. Also, the guidance expands the disclosure requirements for revenue arrangements with multiple deliverables. The guidance will be effective for us beginning on January 1, 2011, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted provided that the guidance is retroactively applied to the beginning of the year of adoption. We are currently assessing the potential effect, if any, on our financial statements.

In June 2009, the FASB issued an accounting standard that changes the approach to determining the primary beneficiary of a variable interest entity (“VIE”) and requires companies to continuously assess whether they must consolidate VIEs. This standard is effective for us beginning on January 1, 2010. We do not expect the adoption of this accounting standard will have a material impact on our financial statements.

 

In December 2008, the FASB issued an accounting standard that requires additional disclosures about assets held in defined benefit pension plans and other postretirement plans (see Note 10). The accounting standard requires us to disclose the fair value of each major category of plan assets, the level within the fair value hierarchy that each major category of plan assets falls, and reconcile the beginning and ending balances of plan assets with fair values measured using significant unobservable inputs (Level 3 in the hierarchy). We adopted the provisions of the standard beginning with our 2009 annual consolidated financial statements.

In 2009, we adopted accounting standards issued by the FASB related to the following topics, none of which had a material effect on our financial statements:

 

•

Accounting and disclosures for subsequent events;

•

Determining fair value when the volume and level of activity for an asset or liability have significantly decreased and identifying transactions that are not orderly;

•

Recognition and presentation of other-than-temporary impairments;

•

Fair value disclosures related to certain non-financial assets and liabilities;

•

Determining whether instruments granted in share-based payment transactions are participating securities;

•

Revised accounting rules related to business combinations; and

•

Increased disclosures related to derivative financial instruments (see “Derivative financial instruments” section above).

Effective January 1, 2007, we adopted a FASB interpretation that sets forth consistent rules for accounting for uncertain income tax positions in accordance with GAAP (see Note 8). The cumulative effect of applying the provisions of this interpretation was a $31 million noncash increase to our opening balance of retained earnings in 2007.

In May 2008, the FASB issued an accounting standard that affects the accounting for certain convertible debt instruments. The standard was effective beginning with our first quarter 2009 financial reporting, requires retrospective application to all periods presented, and does not grandfather existing debt instruments. The standard would have changed the accounting for our previously outstanding $1.0 billion in original principal amount of floating rate convertible debentures in that it would have required that we bifurcate the proceeds from the debt issuance between a debt and equity component as of the August 2003 issuance date and through the August 2008 date that they were converted or redeemed. The equity component would have reflected the value of the conversion feature of the debentures. We did not adopt the provisions of the standard for the floating rate convertible debentures that were delivered for conversion or redeemed in August 2008, as the effect on our previously reported financial statements was not material.

In December 2007, the FASB issued an accounting standard that required that the noncontrolling interests in consolidated subsidiaries be presented as a separate component of stockholders’ equity in the balance sheet, that the amount of consolidated net earnings attributable to the parent and the noncontrolling interest be separately presented in the statement of earnings, and that the amount of consolidated other comprehensive income attributable to the noncontrolling interest be separately disclosed. The standard also required gains or losses from the sale of stock of subsidiaries where control is maintained to be recognized as an equity transaction. The standard was effective beginning with our first quarter 2009 financial reporting. We did not adopt the presentation or disclosure provisions of this standard relative to our noncontrolling interests, as the effect on our financial statements was not material.

Note 2 – Earnings Per Share

We compute basic and diluted per share amounts based on net earnings for the periods presented. We use the weighted average number of common shares outstanding during the period to calculate basic earnings per share. Our calculation of diluted per share amounts includes the dilutive effects of stock options and restricted stock based on the treasury stock method in the weighted average number of common shares.

Unless otherwise noted, we present all per share amounts cited in these consolidated financial statements on a “per diluted share” basis.

 

The calculations of basic and diluted earnings per share are as follows:

 

(In millions, except per share data)		2009			2008			2007
Net earnings for basic and diluted computations		$	3,024		$	3,217		$	3,033
Weighted average common shares outstanding
Average number of common shares outstanding for basic computations			384.8			399.7			416.0
Dilutive stock options, restricted stock and convertible securities			4.1			9.7			11.1
Average number of common shares outstanding for diluted computations			388.9			409.4			427.1
Earnings per common share
Basic		$	7.86		$	8.05		$	7.29
Diluted		$	7.78		$	7.86		$	7.10

Stock options to purchase 11.2 million and 3.5 million shares of common stock outstanding at December 31, 2009 and 2008 had exercise prices that were in excess of the average market price of our common stock at the respective dates. As such, we did not include these stock options in our calculation of diluted earnings per share, as their effect would have been anti-dilutive. No stock options to purchase common stock outstanding at December 31, 2007 had exercise prices that were in excess of the average market price of our common stock at December 31, 2007.

As of August 15, 2008, all of our $1.0 billion of floating rate convertible debentures had been delivered for conversion or were redeemed. Upon conversion of the debentures, we paid cash for the principal amount of the debentures relative to our conversion obligations, and satisfied the conversion obligations in excess of the principal amount by issuing 5.0 million shares of our common stock (see Note 9). The accounting standard for earnings per share required an assumption that shares would be used to pay the conversion obligations in excess of the accreted principal amount and that those shares would be included in our calculation of weighted average common shares outstanding for the diluted earnings per share computation up to the date the convertible securities were converted. The number of shares included in the computation for the year ended December 31, 2007 did not have a material impact on earnings per share.

Note 3 – Other Income (Expense), Net

The components of other income (expense), net included the following:

 

(In millions)		2009				2008			2007
Included in operating profit
Equity in net earnings of equity investees		$	282			$	289		$	203
Loss on sale of foreign subsidiary			(24	)			—			—
Gain on sale of ownership interests in LKEI and ILS			—				108			—
Earnings from elimination of reserves associated with various land sales			—				85			—
Gain on sale of Comsat International			—				—			25
Gain on sales of land			—				—			25
Reversal of legal reserves due to settlement			—				—			21
Other activities, net			(16	)			—			19
		$	242			$	482		$	293

See Note 14 for a discussion of certain transactions included in the table above.

Other non-operating income (expense), net consisted of gains (losses) on investments held in the Rabbi Trust and interest income associated with our cash, cash equivalents, and short-term investments.

Note 4 – Information on Business Segments

We operate in four principal business segments: Aeronautics, Electronic Systems, Information Systems & Global Services, and Space Systems. We organize our business segments based on the nature of the products and services offered. In the following tables of financial data, the total of the operating results of these business segments is reconciled, as appropriate, to the corresponding consolidated amount. With respect to the caption “Operating profit,” the reconciling item “Unallocated Corporate income (expense), net” includes the FAS/CAS pension adjustment (see discussion below), costs for certain stock-based compensation programs (including stock-based compensation costs for stock options and restricted stock as discussed in Note 12), the effects of items not considered part of management’s evaluation of segment operating performance, Corporate costs not allocated to the operating segments and other miscellaneous Corporate activities. Since the activities of the investees in which certain business segments hold equity interests are closely aligned with the operations of those segments, the equity earnings (losses) from those investees are included in the operating profit of the respective segments. For financial data other than operating profit where amounts are reconciled to consolidated totals, all activities other than those pertaining to the principal business segments are included in “Corporate activities.”

The FAS/CAS pension adjustment represents the difference between pension expense or income calculated for financial reporting purposes under GAAP and pension costs calculated and funded in accordance with U.S. Government Cost Accounting Standards (CAS), which are reflected in our business segment results. CAS is a major factor in determining our pension funding requirements, and governs the extent of allocability and recoverability of pension costs on government contracts. The CAS expense is recovered through the pricing of our products and services on U.S. Government contracts, and therefore recognized in segment net sales. The results of operations of our segments only include pension expense as determined and funded in accordance with CAS rules.

Transactions between segments are generally negotiated and accounted for under terms and conditions similar to other government and commercial contracts. These intercompany transactions are eliminated in consolidation and for purposes of the presentation of net sales in the related table that follows. Other accounting policies of the business segments are the same as those described in Note 1.

The following is a brief description of the activities of the principal business segments:

 

•

Aeronautics – Engaged in the research, design, development, manufacture, integration, sustainment, support, and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles, and related technologies. Major products and programs include design, development, production and sustainment of the F-35 international multi-role, stealth fighter; the F-22 air dominance and multi-mission stealth fighter; the F-16 international multi-role fighter; the C-130J tactical transport aircraft; the C-5M strategic airlifter modernization program; and support for the P-3 maritime patrol aircraft and the U-2 high-altitude reconnaissance aircraft. The Skunk Works advanced development organization provides next generation innovative system solutions using rapid prototype applications and advanced technologies.

 

•

Electronic Systems – Engaged in managing complex programs and designs, develops, and integrates hardware and software solutions to ensure the mission readiness of armed forces and government agencies worldwide. Global security solutions include advanced sensors, decision systems, and weapons for air-, land-, and sea-based platforms. The segment integrates land vehicles, ships, and fixed- and rotary-wing aircraft. Major lines of business include air and missile defense; tactical missiles; weapon fire control systems; surface ship and submarine combat systems; anti-submarine and undersea warfare systems; land, sea-based, and airborne radars; surveillance and reconnaissance systems; simulation and training systems; and integrated logistics and sustainment services. Electronic Systems also manages and operates the Sandia National Laboratories for the U.S. Department of Energy and is part of the consortium that manages the United Kingdom’s Atomic Weapons Establishment.

 

•

Information Systems & Global Services – Engaged in providing federal services, Information Technology (IT) solutions, and advanced technology expertise across a broad spectrum of applications and customers. Information Systems & Global Services provides a full life-cycle support and highly specialized talent in the areas of software and systems engineering, including capabilities in space, air and ground systems, and also provides logistics, mission operation support, peacekeeping, and nation-building services for a wide variety of defense and civil government agencies in the U.S. and abroad.

 

•

Space Systems – Engaged in the design, research and development, engineering, and production of satellites, strategic and defensive missile systems, and space transportation systems. The Satellite product line includes both government and commercial satellites. Strategic & Defensive Missile Systems includes missile defense technologies and systems and fleet ballistic missiles. Space Transportation Systems includes portions of the next generation human space flight system. Through ownership interests in two joint ventures, Space Transportation Systems also includes Space Shuttle processing activities and expendable launch services for the U.S. Government.

 

Selected Financial Data by Business Segment

 

(In millions)		2009				2008			2007
Net sales
Aeronautics		$	12,201			$	11,473		$	12,303
Electronic Systems			12,204				11,620			11,143
Information Systems & Global Services			12,130				11,611			10,213
Space Systems			8,654				8,027			8,203
Total		$	45,189			$	42,731		$	41,862
Operating profit (a)
Aeronautics		$	1,577			$	1,433		$	1,476
Electronic Systems			1,595				1,508			1,410
Information Systems & Global Services			1,011				1,076			949
Space Systems			972				953			856
Total business segments			5,155				4,970			4,691
Unallocated Corporate income (expense), net (b)			(689	)			161			(164	)
Operating profit		$	4,466			$	5,131		$	4,527
Intersegment revenue
Aeronautics		$	210			$	147		$	147
Electronic Systems			791				625			595
Information Systems & Global Services			994				937			1,054
Space Systems			122				203			150
Total		$	2,117			$	1,912		$	1,946
Depreciation and amortization of plant and equipment
Aeronautics		$	198			$	190		$	181
Electronic Systems			242				252			227
Information Systems & Global Services			69				66			68
Space Systems			182				166			136
Total business segments			691				674			612
Corporate activities			59				53			54
Total		$	750			$	727		$	666
Amortization of purchased intangibles
Aeronautics		$	50			$	50		$	50
Electronic Systems			11				10			27
Information Systems & Global Services			41				44			55
Space Systems			2				5			9
Total business segments			104				109			141
Corporate activities			—				9			12
Total		$	104			$	118		$	153
Expenditures for property, plant and equipment
Aeronautics		$	248			$	227		$	235
Electronic Systems			264				267			327
Information Systems & Global Services			54				80			75
Space Systems			210				231			228
Total business segments			776				805			865
Corporate activities			76				121			75
Total		$	852			$	926		$	940

 

Selected Financial Data by Business Segment (continued)

 

(In millions)		2009			2008			2007
Assets (c)
Aeronautics		$	4,356		$	3,521		$	3,014
Electronic Systems			9,106			8,515			8,500
Information Systems & Global Services			7,457			7,593			7,477
Space Systems			3,097			2,908			2,977
Total business segments			24,016			22,537			21,968
Corporate activities (d)			11,095			10,902			6,958
Total		$	35,111		$	33,439		$	28,926
Goodwill
Aeronautics		$	148		$	148		$	148
Electronic Systems			4,970			4,573			4,518
Information Systems & Global Services			4,337			4,334			4,265
Space Systems			493			471			456
Total		$	9,948		$	9,526		$	9,387
Customer advances and amounts in excess of costs incurred
Aeronautics		$	2,389		$	2,132		$	1,833
Electronic Systems			2,281			2,002			1,801
Information Systems & Global Services			188			187			202
Space Systems			191			214			376
Total		$	5,049		$	4,535		$	4,212

 

(a)	Operating profit included equity in net earnings (losses) of equity investees as follows:

(In millions)		2009				2008			2007
Aeronautics		$	9			$	21		$	25
Electronic Systems			42				36			58
Information Systems & Global Services			15				8			6
Space Systems			218				224			134
Total business segments			284				289			223
Corporate activities			(2	)			—			(20	)
Total		$	282			$	289		$	203

 

(b)	Unallocated Corporate income (expense), net includes the following:

(In millions)		2009				2008				2007
FAS/CAS pension adjustment		$	(456	)		$	128			$	(58	)
Items not considered in segment operating performance			—				193				71
Stock-based compensation			(154	)			(155	)			(149	)
Other			(79	)			(5	)			(28	)
		$	(689	)		$	161			$	(164	)

For information regarding the items not considered in management’s evaluation of segment operating performance, see Notes 3 and 14 to the consolidated financial statements.

 

(c)	We have no significant long-lived assets located in foreign countries.

(d)	Assets primarily include cash and cash equivalents, short-term investments, deferred income taxes, the prepaid pension asset, deferred environmental assets, and investments in the Rabbi Trust.

 

Selected Financial Data by Business Segment (continued)

Net Sales by Customer Category

 

(In millions)		2009			2008			2007
U.S. Government
Aeronautics		$	10,151		$	9,268		$	9,597
Electronic Systems			8,494			8,247			8,196
Information Systems & Global Services			11,364			10,850			9,591
Space Systems			8,405			7,685			7,681
Total		$	38,414		$	36,050		$	35,065
Foreign governments (a) (b)
Aeronautics		$	1,990		$	2,043		$	2,531
Electronic Systems			3,314			3,039			2,672
Information Systems & Global Services			510			390			284
Space Systems			27			15			13
Total		$	5,841		$	5,487		$	5,500
Commercial and Other (b)
Aeronautics		$	60		$	162		$	175
Electronic Systems			396			334			275
Information Systems & Global Services			256			371			338
Space Systems			222			327			509
Total		$	934		$	1,194		$	1,297
		$	45,189		$	42,731		$	41,862

 

(a)	Sales made to foreign governments through the U.S. Government, or “foreign military sales,” are included in the “Foreign governments” category.

(b)	International sales, including export sales reflected in the “Foreign governments” and “Commercial and Other” categories, were $6.5 billion in 2009, $5.9 billion in 2008, and $6.3 billion in 2007.