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Business Segment Information | 9 Months Ended
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Mar. 29, 2019
Segment Reporting [Abstract] |
Business Segment Information | Note Q — Business Segment Information We structure our operations primarily around the products, systems and services we sell and the markets we serve, and we report the financial results of our continuing operations in the following three reportable segments, which are also referred to as our business segments:
• | Communication Systems, serving markets in tactical communications and defense products, including tactical ground and airborne radio communications solutions and night vision technology, and in public safety networks;
• | Electronic Systems, providing electronic warfare, avionics, and command, control, communications, computers, intelligence, surveillance and reconnaissance (“C4ISR”) solutions for defense and classified customers and mission-critical communication systems for civil and military aviation and other customers; and
• | Space and Intelligence Systems, providing intelligence, space protection, geospatial, complete Earth observation, universe exploration, positioning, navigation and timing (“PNT”), and environmental solutions for national security, defense, civil and commercial customers, using advanced sensors, antennas and payloads, as well as ground processing and information analytics.
As discussed in more detail in Note A — Significant Accounting Policies and Recent Accounting Standards in these Notes and in Note 1: “Significant Accounting Policies” and Note 2: “Accounting Changes or Recent Accounting Pronouncements” in our Notes to Consolidated Financial Statements in our Fiscal 2017-2018 Update 8-K, effective June 30, 2018, we adopted ASC 606 and ASU 2017-07 using the full retrospective method. The historical results, discussion and presentation of our business segments as set forth in our Condensed Consolidated Financial Statements (Unaudited) and these Notes reflect the impact of our adoption of ASC 606 and ASU 2017-07 for all periods presented in order to present all segment information on a comparable basis. The accounting policies of our business segments are the same as those described in Note 1: “Significant Accounting Policies” in our Notes to Consolidated Financial Statements in our Fiscal 2017-2018 Update 8-K. We evaluate each segment’s performance based on segment operating income or loss, which we define as profit or loss from operations before income taxes, including pension income and excluding interest income and expense, royalties and related intellectual property expenses, equity method investment income or loss and gains or losses from securities and other investments. Intersegment sales are generally transferred at cost to the buying segment, and the sourcing segment recognizes a profit that is eliminated. The “Corporate eliminations” line item in the table below represents the elimination of intersegment sales. The “Unallocated corporate expense and corporate eliminations” line item in the table below represents the portion of corporate expenses not allocated to our business segments and the elimination of intersegment profits. The “Pension adjustment” line item in the table below represents the reconciliation of the non-service components of net periodic pension and postretirement benefit costs, which are a component of segment operating income but are included in the “Non-operating income” line item in our Condensed Consolidated Statement of Income (Unaudited) as a result of our adoption of ASU 2017-07 as discussed in Note A — Significant Accounting Policies and Recent Accounting Standards in these Notes. The non-service components of net periodic pension and postretirement benefit costs include interest cost, expected return on plan assets and amortization of net actuarial gain. Segment revenue, segment operating income and a reconciliation of segment operating income to total income from continuing operations before income taxes are as follows:
| Quarter Ended |  | Three Quarters Ended
| March 29, 2019 |  | March 30, 2018 |  | March 29, 2019 |  | March 30, 2018
| (In millions)
Revenue |  |  |  |  |  |  |
Communication Systems | $ | 568 |  |  | $ | 479 |  |  | $ | 1,577 |  |  | $ | 1,377 |
Electronic Systems | 649 |  |  | 606 |  |  | 1,855 |  |  | 1,729 |
Space and Intelligence Systems | 514 |  |  | 482 |  |  | 1,515 |  |  | 1,410 |
Corporate eliminations | (3 | ) |  | (5 | ) |  | (11 | ) |  | (9 | )
| $ | 1,728 |  |  | $ | 1,562 |  |  | $ | 4,936 |  |  | $ | 4,507 |
Income From Continuing Operations Before Income Taxes
Segment Operating Income: |  |  |  |  |  |  |
Communication Systems | $ | 172 |  |  | $ | 144 |  |  | $ | 474 |  |  | $ | 404 |
Electronic Systems | 123 |  |  | 108 |  |  | 355 |  |  | 314 |
Space and Intelligence Systems | 87 |  |  | 83 |  |  | 265 |  |  | 250 |
Unallocated corporate expense and corporate eliminations(1) | (56 | ) |  | (86 | ) |  | (155 | ) |  | (182 | )
Pension adjustment | (47 | ) |  | (46 | ) |  | (140 | ) |  | (138 | )
Non-operating income | 46 |  |  | 46 |  |  | 140 |  |  | 136 |
Net interest expense | (42 | ) |  | (41 | ) |  | (128 | ) |  | (123 | )
| $ | 283 |  |  | $ | 208 |  |  | $ | 811 |  |  | $ | 661 |
_______________
(1) | Unallocated corporate expense and corporate eliminations included: (i) $16 million and $29 million of L3 Technologies, Inc. (“L3”) merger-related transaction and integration costs for the quarter and three quarters ended March 29, 2019, respectively; (ii) $45 million of charges related to our decision to transition and exit a commercial air-to-ground long term evolution (“LTE”) radio communications line of business in the quarter and three quarters ended March 30, 2018; (iii) a $12 million adjustment for deferred compensation in the three quarters ended March 30, 2018; and (iv) $25 million and $76 million of expense in the quarter and three quarters ended March 29, 2019, respectively, compared with $25 million and $75 million of expense in the quarter and three quarters ended March 30, 2018, respectively, for amortization of identifiable intangible assets acquired as a result of our acquisition of Exelis. Because the acquisition of Exelis benefited the entire Company as opposed to any individual segment, the amortization of identifiable intangible assets acquired in the Exelis acquisition was recorded as unallocated corporate expense. Corporate eliminations of intersegment profits were not material in the quarter or three quarters ended March 29, 2019 or the quarter or three quarters ended March 30, 2018.
Disaggregation of Revenue Communication Systems: Communication Systems operates principally on a “commercial” market-driven business model through which the business segment provides ready-to-ship commercial off-the-shelf products to customers in the U.S. and internationally. Communication Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when the product is received and accepted by the customer. We disaggregate Communication Systems revenue by geographical region, as we believe this category best depicts how the nature, amount, timing and uncertainty of Communication Systems revenue and cash flows are affected by economic factors:
| Quarter Ended |  | Three Quarters Ended
| March 29, 2019 |  | March 30, 2018 |  | March 29, 2019 |  | March 30, 2018
| (In millions)
Revenue By Geographical Region |  |  |  |  |  |  |
United States | $ | 324 |  |  | $ | 232 |  |  | $ | 882 |  |  | $ | 716 |
International | 244 |  |  | 247 |  |  | 695 |  |  | 661 |
| $ | 568 |  |  | $ | 479 |  |  | $ | 1,577 |  |  | $ | 1,377 |
Electronic Systems: Electronic Systems revenue is primarily derived from U.S. Government development and production contracts and is generally recognized over time using the POC cost-to-cost method. We disaggregate Electronic Systems revenue by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of Electronic Systems revenue and cash flows are affected by economic factors:
| Quarter Ended |  | Three Quarters Ended
| March 29, 2019 |  | March 30, 2018 |  | March 29, 2019 |  | March 30, 2018
| (In millions)
Revenue By Customer Relationship |  |  |  |  |  |  |
Prime contractor | $ | 402 |  |  | $ | 426 |  |  | $ | 1,195 |  |  | $ | 1,234 |
Subcontractor | 247 |  |  | 180 |  |  | 660 |  |  | 495 |
| $ | 649 |  |  | $ | 606 |  |  | $ | 1,855 |  |  | $ | 1,729 |
Revenue By Contract Type |  |  |  |  |  |  |
Fixed-price(1) | $ | 515 |  |  | $ | 491 |  |  | $ | 1,501 |  |  | $ | 1,376 |
Cost-reimbursable | 134 |  |  | 115 |  |  | 354 |  |  | 353 |
| $ | 649 |  |  | $ | 606 |  |  | $ | 1,855 |  |  | $ | 1,729 |
Revenue By Geographical Region |  |  |  |  |  |  |
United States | $ | 539 |  |  | $ | 491 |  |  | $ | 1,503 |  |  | $ | 1,381 |
International | 110 |  |  | 115 |  |  | 352 |  |  | 348 |
| $ | 649 |  |  | $ | 606 |  |  | $ | 1,855 |  |  | $ | 1,729 |
_______________
(1) | Includes revenue derived from time-and-materials contracts.
Space and Intelligence Systems: Space and Intelligence Systems revenue is primarily derived from U.S. Government development and production contracts and is generally recognized over time using the POC cost-to-cost method. We disaggregate Space and Intelligence Systems revenue by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of Space and Intelligence Systems revenue and cash flows are affected by economic factors:
| Quarter Ended |  | Three Quarters Ended
| March 29, 2019 |  | March 30, 2018 |  | March 29, 2019 |  | March 30, 2018
| (In millions)
Revenue By Customer Relationship |  |  |  |  |  |  |
Prime contractor | $ | 355 |  |  | $ | 353 |  |  | $ | 1,069 |  |  | $ | 1,016 |
Subcontractor | 159 |  |  | 129 |  |  | 446 |  |  | 394 |
| $ | 514 |  |  | $ | 482 |  |  | $ | 1,515 |  |  | $ | 1,410 |
Revenue By Contract Type |  |  |  |  |  |  |
Fixed-price(1) | $ | 173 |  |  | $ | 140 |  |  | $ | 533 |  |  | $ | 383 |
Cost-reimbursable | 341 |  |  | 342 |  |  | 982 |  |  | 1,027 |
| $ | 514 |  |  | $ | 482 |  |  | $ | 1,515 |  |  | $ | 1,410 |
Revenue By Geographical Region |  |  |  |  |  |  |
United States | $ | 504 |  |  | $ | 466 |  |  | $ | 1,480 |  |  | $ | 1,364 |
International | 10 |  |  | 16 |  |  | 35 |  |  | 46 |
| $ | 514 |  |  | $ | 482 |  |  | $ | 1,515 |  |  | $ | 1,410 |
_______________
(1) | Includes revenue derived from time-and-materials contracts.
Total assets by business segment are summarized below:
| March 29, 2019 |  | June 29, 2018
| (In millions)
Total Assets |  |  |
Communication Systems | $ | 1,562 |  |  | $ | 1,567 |
Electronic Systems | 4,251 |  |  | 4,174 |
Space and Intelligence Systems | 2,216 |  |  | 2,193 |
Corporate(1) | 1,763 |  |  | 1,917 |
| $ | 9,792 |  |  | $ | 9,851 |
_______________ (1) Identifiable intangible assets acquired in connection with our acquisition of Exelis in the fourth quarter of fiscal 2015 were recorded as Corporate assets because they benefited the entire Company as opposed to any individual segment. Exelis identifiable intangible asset balances recorded as Corporate assets were $898 million and $974 million at March 29, 2019 and June 29, 2018, respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred compensation plan assets and buildings and equipment.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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