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DIVESTITURE | 9 Months Ended
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Sep. 24, 2017
Discontinued Operations and Disposal Groups [Abstract] |
DIVESTITURE | DIVESTITURE Divestiture of the Information Systems & Global Solutions Business On August 16, 2016, we divested our former IS&GS business, which merged with Leidos, in a Reverse Morris Trust transaction (the Transaction). The Transaction was completed in a multi-step process pursuant to which we initially contributed the IS&GS business to Abacus Innovations Corporation (Abacus), a wholly-owned subsidiary of Lockheed Martin created to facilitate the Transaction, and the common stock of Abacus was distributed to participating Lockheed Martin stockholders through an exchange offer. Under the terms of the exchange offer, Lockheed Martin stockholders had the option to exchange shares of Lockheed Martin common stock for shares of Abacus common stock. At the conclusion of the exchange offer, all shares of Abacus common stock were exchanged for 9,369,694 shares of Lockheed Martin common stock held by Lockheed Martin stockholders that elected to participate in the exchange. The shares of Lockheed Martin common stock that were exchanged and accepted were retired, reducing the number of shares of our common stock outstanding by approximately 3%. Following the exchange offer, Abacus merged with a subsidiary of Leidos, with Abacus continuing as the surviving corporation and a wholly-owned subsidiary of Leidos. As a result of the Transaction, we recognized a net gain of $1.2 billion in net earnings from discontinued operations during the quarter and nine months ended September 25, 2016. The net gain represents the $2.5 billion fair value of the shares of Lockheed Martin common stock exchanged and retired as part of the exchange offer, plus a $1.8 billion one-time special cash payment received from Abacus, less the net book value of the IS&GS business of about $3.0 billion at August 16, 2016 and other adjustments of about $100 million. The final gain is subject to certain post-closing adjustments, including final working capital, indemnification, and tax adjustments. The operating results of the IS&GS business that have been reflected within net earnings from discontinued operations for the quarter and nine months ended September 25, 2016 are as follows (in millions):
|  | Quarter Ended |  | Nine Months Ended
Net sales |  | $ | 739 |  |  |  | $ | 3,410 |  |
Cost of sales |  | (635 | ) |  |  | (2,953 | ) |
Severance charges |  | — |  |  |  | (19 | ) |
Gross profit |  | 104 |  |  |  | 438 |  |
Other income, net |  | 19 |  |  |  | 16 |  |
Operating profit |  | 123 |  |  |  | 454 |  |
Earnings from discontinued operations before income taxes |  | 123 |  |  |  | 454 |  |
Income tax expense |  | (51 | ) |  |  | (168 | ) |
Net gain on divestiture of discontinued operations |  | 1,234 |  |  |  | 1,234 |  |
Net earnings from discontinued operations |  | $ | 1,306 |  |  |  | $ | 1,520 |  |
The operating results of the IS&GS business reported as discontinued operations for the quarter and nine months ended September 25, 2016 are different than the results previously reported for our former IS&GS business segment. Certain corporate overhead and pension costs that were historically allocated to and included in the operating results of IS&GS during the quarter and nine months ended September 25, 2016 have been reclassified into unallocated items and included in the results of our continuing operations because they were not directly attributable to IS&GS and we continue to incur these costs subsequent to the divestiture. The amount of corporate overhead costs previously included in the operating results of IS&GS that have been reclassified to and included in our earnings from continuing operations were $17 million and $82 million during the quarter and nine months ended September 25, 2016. These costs are included in the other unallocated, net line. Additionally, we retained all assets and obligations related to the pension benefits earned by former IS&GS salaried employees through the date of the divestiture. We continue to incur the non-service portion of net pension costs (e.g., interest cost, actuarial gains and losses and expected return on plan assets) for these employees subsequent to the divestiture. The amount of the non-service pension costs previously included in the operating results of IS&GS that have been reclassified to and included in our continuing operations were $11 million and $54 million during the quarter and nine months ended September 25, 2016. These costs are included in the other unallocated, net line. Financial information related to cash flows generated by the IS&GS business, such as depreciation and amortization, capital expenditures, and other non-cash items included in our consolidated statement of cash flows for the nine months ended September 25, 2016 were not significant. In connection with the Transaction, Lockheed Martin retained certain liabilities, including liabilities associated with the New York Metropolitan Transportation Authority and its Capital Construction Company (collectively, the MTA) litigation discussed in “Note 7 – Legal Proceedings and Contingencies,” and has indemnified Abacus and Leidos in connection with other liabilities associated with the IS&GS business, including certain liabilities associated with ongoing investigations by the Department of Energy and the Department of Justice (DOJ) relating to the IS&GS business's involvement in the Mission Support Alliance, LLC (MSA) joint venture that manages and operates the Hanford Nuclear site for the Department of Energy. The DOJ has issued a number of Civil Investigative Demands to MSA, Lockheed Martin and the subsidiary of Lockheed Martin that performed information technology services for MSA, as well as current and former employees of each of these entities, and is continuing its False Claims Act investigation into matters involving MSA and the IS&GS business. The DOJ also is conducting a parallel criminal investigation. The investigations relate primarily to certain information technology services performed by a subsidiary of Lockheed Martin under a fixed price/fixed unit rate subcontract to MSA. In the event that the DOJ were to pursue a claim in connection with the ongoing MSA investigation, through the indemnification provisions agreed to as part of the Transaction, Lockheed Martin and Leidos have allocated liabilities between themselves.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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