Northrop Grumman 2012 Annual Report Download - page 36

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NORTHROP GRUMMAN CORPORATION
-26-
Consolidated operating results for the year ended December 31, 2012, reflect our customer's overall lower spending
levels, lower sales due to our portfolio shaping actions and our focus on working capital. Our margin rates and cash
provided by operating activities demonstrate strong operating performance, and our continued focus on performance
and affordability, as further discussed below.
Segment operating income, as reconciled below, is a non-GAAP measure and is used by management as an internal
measure of the financial performance of our individual operating segments.
Year Ended December 31
$ in millions 2012 2011 2010
Segment operating income $3,176 $3,055 $3,010
Segment operating margin rate 12.6% 11.6% 10.7%
The table below reconciles segment operating income to total operating income:
Year Ended December 31
$ in millions 2012 2011 2010
Segment operating income $3,176 $3,055 $3,010
FAS pension expense in accordance with GAAP (374)(238)(461)
Pension expense in accordance with CAS 506 638 471
Net FAS/CAS pension adjustment 132 400 10
Unallocated corporate expenses (168)(166)(182)
Other (10)(13)(11)
Total operating income $3,130 $3,276 $2,827
For financial statement purposes, we account for our employee pension plans in accordance with GAAP under
Financial Accounting Standards (FAS). We charge the costs of these plans to our contracts in accordance with the
FAR and the related Cost Accounting Standards (CAS) that govern such plans. The net FAS/CAS pension
adjustment is pension expense determined in accordance with GAAP less pension expense charged to contracts and
included in segment operating income. Unallocated corporate expenses generally include the portion of corporate
expenses, other than FAS pension costs, not considered allowable or allocable under applicable CAS and FAR rules,
and therefore not allocated to the segments, such as a portion of management and administration, legal,
environmental, certain compensation and retiree benefits, and other expenses.
Sales
2012 – Sales for 2012 decreased $1.2 billion, or 5 percent, as compared to 2011, reflecting lower sales in three of
our four operating segments.
2011 – Sales for 2011 decreased $1.7 billion, or 6 percent, as compared to 2010, reflecting lower sales at all four
operating segments.
The table below shows the variances in segment sales from the respective prior years:
Variance from Prior Year
$ in millions 2012 2011
Aerospace Systems $ 13 0% ($472) (5%)
Electronic Systems (422)(6%) (241) (3%)
Information Systems (565)(7%) (474) (6%)
Technical Services (174)(5%) (512) (14%)
Intersegment sales elimination (46)(2%) (32) (2%)
For further information by segment refer to the Segment Operating Results below, and for product and service detail,
refer to the Product and Service Analysis section that follows.