Northrop Grumman 2010 Annual Report Download - page 86

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value. Strategic alternatives for the Shipbuilding segment include, but are not limited to, a spin-off to the
company’s shareholders. While the company continues its evaluation of strategic alternatives for the Shipbuilding
segment, it will continue to be reported in continuing operations.
In preparation for an anticipated spin-off to the company’s shareholders, a registration statement on Form 10 for
the shares of Huntington Ingalls Industries, Inc. (HII or the Shipbuilding business) was initially filed with the
SEC in October 2010, with amendments filed in November 2010, December 2010 and January 2011.
Additionally, in connection with, and prior to, the anticipated spin-off, the company repurchased $178 million of
the Gulf Opportunity Zone Industrial Revenue Development Bonds (see Note 14).
8. SEGMENT INFORMATION
At December 31, 2010, the company was aligned into five reportable segments: Aerospace Systems, Electronic
Systems, Information Systems, Shipbuilding, and Technical Services.
The company, from time to time, acquires or disposes of businesses, and realigns contracts, programs or business
areas among and within its operating segments that possess similar customers, expertise, and capabilities. Internal
realignments are designed to more fully leverage existing capabilities and enhance development and delivery of
products and services.
Segment Realignments – In January 2010, the company transferred its internal information technology services unit
from the Information Systems segment to the company’s corporate shared services group. The intersegment sales
and operating income for this unit that were previously recognized in the Information Systems segment are
immaterial and have been eliminated for all periods presented.
In January 2009, the company streamlined its organizational structure by reducing the number of operating
segments from seven to five. The five segments are Aerospace Systems, which combines the former Integrated
Systems and Space Technology segments; Electronic Systems; Information Systems, which combines the former
Information Technology and Mission Systems segments; Shipbuilding; and Technical Services. Creation of the
Aerospace Systems and Information Systems segments is intended to strengthen alignment with customers,
improve the company’s ability to execute on programs and win new business, and enhance cost competitiveness.
Product sales are predominantly generated in the Aerospace Systems, Electronic Systems and Shipbuilding
segments, while the majority of the company’s service revenues are generated by the Information Systems and
Technical Services segments.
During the first quarter of 2009, the company realigned certain logistics, services, and technical support programs
and transferred assets from the Information Systems and Electronic Systems segments to the Technical Services
segment. This realignment is intended to strengthen the company’s core capability in aircraft and electronics
maintenance, repair and overhaul, life cycle optimization, and training and simulation services.
Sales and segment operating income in the tables below have been revised to reflect the above realignments for
all periods presented.
During the first quarter of 2009, the company transferred certain optics and laser programs from the Information
Systems segment to the Aerospace Systems segment. As the operating results of this business were not considered
material, the prior year sales and segment operating income were not reclassified to reflect this business transfer.
U.S. Government Sales – Revenue from the U.S. Government (which includes Foreign Military Sales) includes
revenue from contracts for which Northrop Grumman is the prime contractor as well as those for which the
company is a subcontractor and the ultimate customer is the U.S. Government. All of the company’s segments
derive substantial revenue from the U.S. Government. Sales to the U.S. Government amounted to approximately
$32.1 billion, $31.0 billion, and $29.3 billion, or 92.3 percent, 91.8 percent, and 90.7 percent, of total revenue
for the years ended December 31, 2010, 2009, and 2008, respectively.
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NORTHROP GRUMMAN CORPORATION