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Systems Integration – Engaged in the design, development, integration and production of high performance systems for undersea, shipboard, land, and airborne applications. Major product lines include missiles and fire control systems; air and theater missile defense systems; surface ship and submarine combat systems; anti-submarine and undersea warfare systems; avionics and ground combat vehicle integration; radars; platform integration services; command, control, communications, computers and intelligence (C4I) systems for naval, airborne and ground applications; surveillance and reconnaissance systems; air traffic control systems; simulation and training systems; and postal automation systems.

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Space Systems – Engaged in the design, development, engineering and production of civil, commercial and military space systems. Major product lines include spacecraft, space launch vehicles and manned space systems; their supporting ground systems and services; and strategic fleet ballistic missiles. In addition to its consolidated business units, the segment has investments in joint ventures that are principally engaged in businesses, which complement and enhance other activities of the segment.

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Aeronautics – Engaged in design, research and development, systems integration, production and support of advanced military aircraft and related technologies. Its customers include the military services of the United States and allied countries throughout the world. Major products and programs include the F-16 multi-role fighter, F/A-22 air dominance fighter, F-35 Joint Strike Fighter, T-50 advanced trainer, C-130 and C-130J tactical airlift aircraft, C-5 strategic airlift, and support for the F-117 stealth fighter, and special mission and reconnaissance aircraft, the P-3 Orion, S-3 Viking and U-2.

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Technology Services – Provides a wide array of management, engineering, scientific, logistic and information services to federal agencies and other customers. Major product lines include e-commerce, enterprise information services, software modernization, information assurance and data center management primarily for Department of Defense and civil government agencies, and also for commercial customers; engineering, science and information services for NASA; aircraft and engine maintenance and modification services; management, operation, maintenance, training, and logistics support for military and civilian systems; launch, mission, and analysis services for military, classified and commercial satellites; and research, development, engineering and science in support of nuclear weapons stewardship and naval reactor programs.

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1.

As a result of our adoption of SFAS No. 142 as of January 1, 2002, goodwill is no longer being amortized and the estimated remaining useful life of the contract intangible asset related to the F-16 program was extended. In connection with the adoption of the new standard, goodwill amortization expense and the impact of the change in the estimated remaining useful life of the

2.

In April 2002, the Financial Accounting Standards Board issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” Among other things, the Statement generally prohibits the classification of gains or losses from the early extinguishment of debt as extraordinary items, and therefore rescinds the previous requirement to do so. Gains and losses from previously reported early debt repayments are required to be reclassified. In the third quarter of 2002, we elected to adopt the Statement and, accordingly, reclassified all previously reported losses on early repayments of debt to other income and expenses, net. Our management does not view such losses as resulting from recurring operations, and as such, they are presented in “Unallocated corporate income (expense), net.” This change resulted in the reduction of operating profit reported for the years ended December 31, 2001 and 2000 by $55 million and $146 million, respectively.

3.

The CAS pension funding and (expense) reported in the operating segments and the SFAS No. 87 pension income (expense) amounts for the periods presented in the selected financial data exhibits are shown in the table below. The differences between the SFAS No. 87 and CAS amounts represent the adjustment recorded in “Unallocated corporate income (expense), net” that is necessary to report our consolidated operating profit on a GAAP basis.

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4.

As previously reported, operating profit from continuing operations for the years ended December 31, 2001 and 2000 included the impact of the following items. There were no such items for the nine months ended September 30, 2002.

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