Aeronautics is 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. Aeronautics also provides logistics support, sustainment, and upgrade modification services for its aircraft. Aeronautics’ major programs include: The F-35 program, which is the largest in our corporation and generated 42% of Aeronautics’ net sales in 2011, consists of multiple contracts. Under our customer’s acquisition strategy, the System Development and Demonstration (SDD) contract will be performed concurrently with the low-rate initial production (LRIP) contracts. Concurrent performance of development and production contracts is advantageous in complex programs to test airplanes, shorten the time to field systems, and achieve overall cost savings. Accordingly, we are performing the SDD contract concurrently with LRIP aircraft lots 2 through 6. We expect the SDD portion of the F-35 program to continue into 2017. In 2011, both LRIP lot 1 aircraft and seven of the 12 LRIP lot 2 aircraft were delivered to the U.S. Government. We received additional funding for LRIP 5 and long lead funding for LRIP 6 in 2011. We now have 93 production aircraft on order. Despite the reduced defense spending levels in the President’s fiscal year 2013 budget proposal, the F-35 program continues to receive strong support from our customers. The budget supports continuation of all three variants of the F-35 aircraft and still maintains the same ultimate inventory objective of 2,443 aircraft for the U.S. Government as last year, although ramp up of production will be slowed in the near term due to budgetary constraints and to allow for more testing and to minimize design changes impacting production aircraft. International interest in the F-35 continues to grow with two U.S. Government FMS customers to go along with eight partner countries. In 2011, the Israeli government signed a letter of offer and acceptance with the U.S. Government for the procurement of F-35 aircraft, and the Japanese Ministry of Defense selected the F-35 to be its next generation fighter. Israel and Japan are expected to be the first two countries to receive the F-35 aircraft through the FMS process. For additional information on the F-35 program, see “Status of the F-35 Program” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. Aeronautics continues to produce F-16 aircraft for foreign governments under the FMS process and through direct foreign government sales. Aeronautics also provides service-life extension and other upgrade programs for our customers’ F-16 aircraft. Production of the F-22 is scheduled to be completed in 2012 with on-going modernization and sustainment activities continuing thereafter. Aeronautics produces and provides support and sustainment services for the C-130J Super Hercules, upgrade and support services for the legacy C-130 Hercules worldwide fleet, support services for the existing C-5A/B/C/M Galaxy fleet, and modernization of Galaxy aircraft to the C-5M Super Galaxy configuration. In addition to the above aircraft programs, Aeronautics is involved in advanced development programs incorporating innovative design and rapid prototype applications. Our Advanced Development Programs (ADP) organization, which includes the Skunk Works, is focused on future systems, including unmanned aerial systems and next generation capabilities for long-range strike, intelligence, surveillance, reconnaissance, situational awareness, and air mobility. We continue to explore technology advancement and insertion in existing aircraft, such as the F-35, F-22, F-16, C-130, U-2, and P-3. We also are involved in numerous network-enabled activities that allow separate systems to work together to increase effectiveness, and continue to invest in new technologies to maintain and enhance competitiveness in military aircraft design and development. In 2011, our Electronic Systems business segment generated net sales of $14.6 billion, which represented 31% of our total consolidated net sales. Electronic Systems’ customers include the military services and various government agencies of the U.S. and allied countries around the world as well as commercial and other customers. In 2011, U.S. Government customers accounted for 73%, international customers accounted for 26%, and U.S. commercial and other customers accounted for 1% of Electronic Systems’ net sales. No Electronic Systems’ product or service lines generated more than 10% of our total consolidated net sales in 2011, 2010, or 2009. Electronic Systems 4 • F-35 Lightning II Joint Strike Fighter – international multi-role, stealth fighter; • F-16 Fighting Falcon – low-cost, combat-proven, international multi-role fighter; • F-22 Raptor – air dominance and multi-mission stealth fighter; • C-130J Hercules – international tactical airlifter; and • C-5M Super Galaxy – modernization of the C-5 Galaxy, a strategic airlifter.