XML 37 R19.htm IDEA: XBRL DOCUMENT
v3.8.0.1

RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended
--- | ---
Mar. 25, 2018
Accounting Changes and Error Corrections [Abstract] |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS Recent Accounting Pronouncements Adopted Effective January 1, 2018, we adopted ASC 606, which replaces existing revenue recognition guidance and outlines a single set of comprehensive principles for recognizing revenue under GAAP. Among other things, ASC 606 requires entities to assess the products or services promised in contracts with customers at contract inception to determine the appropriate unit at which to record revenues, which is referred to as a performance obligation. Revenue is recognized when control of the promised products or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those products or services. Prior to the adoption of ASC 606, we recognized the majority of our revenues using the percentage-of-completion method of accounting. Based on the nature of products provided or services performed, revenue was recorded as costs were incurred (the percentage-of-completion cost-to-cost method) or as units were delivered (the percentage-of-completion units-of-delivery method). For most of our contracts, the customer obtains control or receives benefits as we perform on the contract. As a result, under ASC 606 revenue is recognized over a period of time utilizing the percentage-of-completion cost-to-cost method. This change generally results in an acceleration of revenue for contracts that were historically accounted for using the percentage-of-completion units-of-delivery method as revenues are now recognized earlier in the performance period as we incur costs. For more information on our policy for recognizing revenue under ASC 606, see “Note 2 – Significant Accounting Policy Updates.” Significant programs impacted by these changes include the C-130J and C-5 programs in our Aeronautics business segment; tactical missile programs (Hellfire and Joint Air-to-Surface Standoff Missile (JASSM)), Patriot Advanced Capability-3 (PAC-3), and fire control programs (LANTIRN® and SNIPER®) in our MFC business segment; the Black Hawk and Seahawk helicopter programs in our RMS business segment; and commercial satellite programs in our Space business segment. We adopted ASC 606 using the full retrospective method, which means we applied the new standard to each prior year presented in our financial statements going back to January 1, 2016, with a cumulative effect adjustment to retained earnings as of January 1, 2016 for contracts that were in process at that point in time. Accordingly, the amounts for all periods presented in this Form 10-Q have been adjusted to reflect the impacts of ASC 606. The net impact of adjustments on our January 1, 2016 opening balance sheet resulted in an increase in both our current assets and current liabilities of approximately 1%. There was no cumulative impact to our retained earnings at January 1, 2016. Our 2016 net sales increased by $42 million and our operating profit and net earnings from continuing operations decreased by $132 million and $92 million ($0.30 per share), respectively. The adoption of ASC 606 decreased our 2017 net sales by $1.1 billion and decreased our operating profit and net earnings from continuing operations by $23 million and $39 million ($0.14 per share), respectively. Total net cash provided by operating activities and total net cash used by investing activities and financing activities on our consolidated statements of cash flows were not impacted by the adoption of ASC 606. These amounts are updated from the preliminary assessment of the impacts of adopting ASC 606 included in our 2017 Form 10-K. Effective January 1, 2018, we also adopted ASU 2017-07, which changed the income statement presentation of certain components of net periodic benefit cost related to defined benefit pension and other postretirement benefit plans. ASU 2017-07 requires entities to record only the service cost component of FAS pension and other postretirement benefit plan expense in operating profit and the non-service cost components of FAS pension and other postretirement benefit plan expense (i.e., interest cost, expected return on plan assets, net actuarial gains or losses, and amortization of prior service cost or credits) as part of non-operating income. Previously, we recorded all components of net periodic benefit cost in operating profit as part of cost of sales. We adopted ASU 2017-07 using the retrospective method, which means we applied the new standard to each prior period presented in our financial statements going back to January 1, 2016. The adoption of ASU 2017-07 increased our 2016 and 2017 consolidated operating profit by $471 million and $846 million due to the reclassification of the non-service cost components of FAS pension and other postretirement benefit plan expense to other non-operating expense, net with zero impact to net income in both periods. There was no cumulative impact to our retained earnings at January 1, 2016 because the reclassification of the non-service cost components of FAS pension and other postretirement benefit plan expense has no impact to net income. Additionally, our business segment operating profit, cash flows, and pension and other postretirement benefit obligations were not impacted by the adoption of ASU 2017-07. The following table summarizes the effects of adopting ASC 606 and ASU 2017-07 on our consolidated statement of earnings for the quarter ended March 26, 2017 (unaudited; in millions, except per share data):
|  |  |  | Adjustments for |  |
|  | Historical |  | ASC 606 |  | ASU 2017-07 |  | Adjusted
Net sales |  |  |  |  |  |  |  |  |  |  |  |
Products |  | $ | 9,513 |  |  |  | $ | 100 |  |  |  | $ | — |  |  |  | $ | 9,613 |  |
Services |  | 1,544 |  |  |  | 55 |  |  |  | — |  |  |  | 1,599 |  |
Total net sales |  | 11,057 |  |  |  | 155 |  |  |  | — |  |  |  | 11,212 |  |
Cost of sales |  |  |  |  |  |  |  |  |  |  |  |
Products |  | (8,687 | ) |  |  | (57 | ) |  |  | — |  |  |  | (8,744 | ) |
Services |  | (1,376 | ) |  |  | (58 | ) |  |  | — |  |  |  | (1,434 | ) |
Other unallocated, net |  | 159 |  |  |  | — |  |  |  | 213 |  |  |  | 372 |  |
Total cost of sales |  | (9,904 | ) |  |  | (115 | ) |  |  | 213 |  |  |  | (9,806 | ) |
Gross profit |  | 1,153 |  |  |  | 40 |  |  |  | 213 |  |  |  | 1,406 |  |
Other expense, net |  | (4 | ) |  |  | — |  |  |  | — |  |  |  | (4 | ) |
Operating profit |  | 1,149 |  |  |  | 40 |  |  |  | 213 |  |  |  | 1,402 |  |
Interest expense |  | (155 | ) |  |  | — |  |  |  | — |  |  |  | (155 | ) |
Other non-operating income (expense), net |  | 1 |  |  |  | — |  |  |  | (213 | ) |  |  | (212 | ) |
Earnings before income taxes |  | 995 |  |  |  | 40 |  |  |  | — |  |  |  | 1,035 |  |
Income tax expense |  | (232 | ) |  |  | (14 | ) |  |  | — |  |  |  | (246 | ) |
Net earnings |  | $ | 763 |  |  |  | $ | 26 |  |  |  | $ | — |  |  |  | $ | 789 |  |
Earnings per common share |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 2.63 |  |  |  | $ | 0.09 |  |  |  | $ | — |  |  |  | $ | 2.72 |  |
Diluted |  | $ | 2.61 |  |  |  | $ | 0.08 |  |  |  | $ | — |  |  |  | $ | 2.69 |  |
Cash dividends paid per common share |  | $ | 1.82 |  |  |  | $ | — |  |  |  | $ | — |  |  |  | $ | 1.82 |  |
As a result of the increase in net earnings, our comprehensive income for the quarter ended March 26, 2017 increased by $26 million to $999 million. The following table summarizes the effects of adopting ASC 606 on our consolidated balance sheet as of December 31, 2017 (ASU 2017-07 had no impact on our consolidated balance sheet) (unaudited; in millions, except par value):
|  |  | Adjustments for |
|  | Historical |  | ASC 606 |  | Adjusted
Assets |  |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 2,861 |  |  |  | $ | — |  |  |  | $ | 2,861 |  |
Receivables, net |  | 8,603 |  |  |  | (6,338 | ) |  |  | 2,265 |  |
Contract assets |  | — |  |  |  | 7,992 |  |  |  | 7,992 |  |
Inventories |  | 4,487 |  |  |  | (1,609 | ) |  |  | 2,878 |  |
Other current assets |  | 1,510 |  |  |  | (1 | ) |  |  | 1,509 |  |
Total current assets |  | 17,461 |  |  |  | 44 |  |  |  | 17,505 |  |
Property, plant and equipment, net |  | 5,775 |  |  |  | — |  |  |  | 5,775 |  |
Goodwill |  | 10,807 |  |  |  | — |  |  |  | 10,807 |  |
Intangible assets, net |  | 3,797 |  |  |  | — |  |  |  | 3,797 |  |
Deferred income taxes |  | 3,111 |  |  |  | 45 |  |  |  | 3,156 |  |
Other noncurrent assets |  | 5,570 |  |  |  | 10 |  |  |  | 5,580 |  |
Total assets |  | $ | 46,521 |  |  |  | $ | 99 |  |  |  | $ | 46,620 |  |
Liabilities and equity |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 1,467 |  |  |  | $ | — |  |  |  | $ | 1,467 |  |
Contract liabilities (a) |  | 6,752 |  |  |  | 276 |  |  |  | 7,028 |  |
Salaries, benefits and payroll taxes |  | 1,785 |  |  |  | — |  |  |  | 1,785 |  |
Current maturities of long-term debt |  | 750 |  |  |  | — |  |  |  | 750 |  |
Other current liabilities |  | 1,883 |  |  |  | — |  |  |  | 1,883 |  |
Total current liabilities |  | 12,637 |  |  |  | 276 |  |  |  | 12,913 |  |
Long-term debt, net |  | 13,513 |  |  |  | — |  |  |  | 13,513 |  |
Accrued pension liabilities |  | 15,703 |  |  |  | — |  |  |  | 15,703 |  |
Other postretirement benefit liabilities |  | 719 |  |  |  | — |  |  |  | 719 |  |
Other noncurrent liabilities |  | 4,558 |  |  |  | (10 | ) |  |  | 4,548 |  |
Total liabilities |  | 47,130 |  |  |  | 266 |  |  |  | 47,396 |  |
Stockholders’ equity |  |  |  |  |  |  |  |  |
Common stock, $1 par value per share |  | 284 |  |  |  | — |  |  |  | 284 |  |
Additional paid-in capital |  | — |  |  |  | — |  |  |  | — |  |
Retained earnings |  | 11,573 |  |  |  | (168 | ) |  |  | 11,405 |  |
Accumulated other comprehensive loss |  | (12,540 | ) |  |  | 1 |  |  |  | (12,539 | ) |
Total stockholders’ deficit |  | (683 | ) |  |  | (167 | ) |  |  | (850 | ) |
Noncontrolling interests in subsidiary |  | 74 |  |  |  | — |  |  |  | 74 |  |
Total deficit |  | (609 | ) |  |  | (167 | ) |  |  | (776 | ) |
Total liabilities and equity |  | $ | 46,521 |  |  |  | $ | 99 |  |  |  | $ | 46,620 |  |
(a) | Formerly referred to as customer advances and amounts in excess of costs incurred.
The following table summarizes the effects of adopting ASC 606 on certain components within our net cash provided by operating activities for the quarter ended March 26, 2017 (ASC 606 had no impact on total operating cash flows or cash flows from investing and financing activities) (unaudited; in millions):
|  |  | Adjustments for |
|  | Historical |  | ASC 606 |  | Adjusted
Operating activities |  |  |  |  |  |  |  |  |
Net earnings |  | $ | 763 |  |  |  | $ | 26 |  |  |  | $ | 789 |  |
Adjustments to reconcile net earnings to net cash provided by operating activities |  |  |  |  |  |  |  |  |
Depreciation and amortization |  | 285 |  |  |  | — |  |  |  | 285 |  |
Stock-based compensation |  | 44 |  |  |  | — |  |  |  | 44 |  |
Changes in assets and liabilities |  |  |  |  |  |  |  |  |
Receivables, net |  | (667 | ) |  |  | (132 | ) |  |  | (799 | ) |
Contract assets |  | — |  |  |  | (62 | ) |  |  | (62 | ) |
Inventories |  | (404 | ) |  |  | 179 |  |  |  | (225 | ) |
Accounts payable |  | 1,111 |  |  |  | — |  |  |  | 1,111 |  |
Contract liabilities (a) |  | (204 | ) |  |  | 19 |  |  |  | (185 | ) |
Postretirement benefit plans |  | 345 |  |  |  | — |  |  |  | 345 |  |
Income taxes |  | 175 |  |  |  | — |  |  |  | 175 |  |
Other, net |  | 218 |  |  |  | (30 | ) |  |  | 188 |  |
Net cash provided by operating activities |  | $ | 1,666 |  |  |  | $ | — |  |  |  | $ | 1,666 |  |
(a) | Formerly referred to as customer advances and amounts in excess of costs incurred.
Effective January 1, 2018, we also adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which provides entities an option to reclassify certain tax effects as a result of the Tax Act from accumulated other comprehensive income or loss to retained earnings. The adoption of ASU 2018-02 increased our AOCL at January 1, 2018 by $2.4 billion with a corresponding increase to retained earnings by the same amount with zero impact to total equity. The reclassification was primarily related to the impact of U.S. tax reform on deferred tax assets associated with net actuarial losses (and prior service credits) resulting from our defined benefit pension and other postretirement benefit plans that were originally recorded in AOCL within equity. Those amounts were originally recorded net of deferred tax benefits based on the federal statutory income tax rate in effect at the time they were recorded. GAAP requires entities to remeasure deferred tax assets and liabilities as a result of a change in tax laws or rates, with the impacts reflected in earnings. Accordingly, in the fourth quarter of 2017, we remeasured the deferred tax assets associated with our AOCL using the lower U.S. corporate income tax rate under the Tax Act, with the impacts of the remeasurement recorded as a one-time charge to earnings. Prior to ASU 2018-02, GAAP required the original deferred tax amount recorded in accumulated other comprehensive income or loss, to remain at the old tax rate despite the fact that its related deferred tax asset or liability was remeasured as a result of the Tax Act. ASU 2018-02 allows entities to record a one-time reclassification of these tax effects between accumulated other comprehensive income or loss and retained earnings. We reclassify the impact of the income tax effects of tax reform from AOCL in the period in which they occur. Recent Accounting Pronouncements Not Yet Adopted In August 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-12, Derivatives and Hedging (Topic 815), which eliminates the requirement to separately measure and report hedge ineffectiveness. The guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We do not expect a significant impact to our consolidated assets and liabilities, net earnings, or cash flows as a result of adopting this new standard. We plan to adopt the new standard effective January 1, 2019. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements for both lessees and lessors. The new standard is effective January 1, 2019 for public companies, with early adoption permitted. Currently, ASU 2016-02 requires companies to adopt the requirements of the new standard by applying a modified retrospective approach to the beginning of the earliest period presented in the financial statements. However, the FASB issued an exposure draft in January 2018, which would allow companies the option to instead apply the provisions of the new standard at the effective date without adjusting the comparative periods presented. We are continuing to evaluate the expected impact to our consolidated financial statements and related disclosures. We plan to adopt the new standard effective January 1, 2019.

X
- References No definition available. + Details
Name: | us-gaap_AccountingChangesAndErrorCorrectionsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
Name: | us-gaap_NewAccountingPronouncementsAndChangesInAccountingPrinciplesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration