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Business Segment Information | 6 Months Ended
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Jul. 03, 2020
Segment Reporting [Abstract] |
Business Segment Information | Note V — Business Segment Information We adjusted our segment reporting due to the L3Harris Merger to reflect our new organizational structure that was effective June 29, 2019 and announced July 1, 2019. We structure our operations primarily around the products and services we sell and the markets we serve, and we report the financial results of our operations in the following four operating segments, which are also our reportable segments and are referred to as our business segments: •Integrated Mission Systems, including multi-mission ISR and communication systems; integrated electrical and electronic systems for maritime platforms; and advanced electro-optical and infrared solutions; •Space and Airborne Systems, including space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; avionics; and electronic warfare; •Communication Systems, including tactical communications; broadband communications; integrated vision solutions; and public safety; and •Aviation Systems, including defense aviation products; commercial aviation products; commercial and military pilot training; and mission networks for air traffic management. The historical results, discussion and presentation of our business segments as set forth in this Report reflect the impact of these adjustments for all periods presented. There is no impact on our previously reported consolidated statements of income, balance sheets, statements of cash flows or statements of equity resulting from these adjustments. As noted in Note C — Business Divestitures and Assets Sales and elsewhere in these Notes, during the quarter ended July 3, 2020, we completed the divestiture of our airport security and automation business, the operating results of which through the date of divestiture are reported as part of our Aviation Systems segment, and the divestiture of our Applied Kilovolts and Analytical Instrumentation business, the operating results of which through the date of divestiture are reported as part of our Space and Airborne Systems segment. The accounting policies of our business segments are the same as those described in Note 1: “Significant Accounting Policies” in the Notes to Consolidated Financial Statements in our Fiscal Transition Period Form 10-KT. We evaluate each segment’s performance based on its 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 may recognize a profit that is eliminated. The “Corporate eliminations” line item in the table below represents the elimination of intersegment sales. Corporate expenses are allocated to our operating segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. 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). 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 or loss. Segment revenue, segment operating income (loss) and a reconciliation of segment operating income to total income from continuing operations before income taxes are as follows:
| Quarter Ended |  |  |  | Two Quarters Ended |  |
| July 3, 2020 |  | June 28, 2019 |  | July 3, 2020 |  | June 28, 2019
| (In millions) |  |  |  |  |  |
Revenue |  |  |  |  |  |  |
Integrated Mission Systems | $ | 1,331 |  |  | $ | 11 |  |  | $ | 2,701 |  |  | $ | 25 |
Space and Airborne Systems | 1,249 |  |  | 1,019 |  |  | 2,441 |  |  | 1,975 |
Communication Systems | 1,112 |  |  | 609 |  |  | 2,206 |  |  | 1,189 |
Aviation Systems | 800 |  |  | 186 |  |  | 1,811 |  |  | 330 |
Other non-reportable business segments(1) | — |  |  | 44 |  |  | — |  |  | 79 |
Corporate eliminations | (47) |  |  | (4) |  |  | (88) |  |  | (5) |
| $ | 4,445 |  |  | $ | 1,865 |  |  | $ | 9,071 |  |  | $ | 3,593 |
Income From Continuing Operations Before Income Taxes |  |  |  |  |  |  |
Segment Operating Income (Loss): |  |  |  |  |  |  |
Integrated Mission Systems | $ | 224 |  |  | $ | 3 |  |  | $ | 425 |  |  | $ | 6 |
Space and Airborne Systems | 235 |  |  | 195 |  |  | 456 |  |  | 369 |
Communication Systems | 265 |  |  | 176 |  |  | 515 |  |  | 343 |
Aviation Systems | 31 |  |  | 19 |  |  | (146) |  |  | 36 |
Other non-reportable business segments(1) | — |  |  | 8 |  |  | — |  |  | 14 |
Unallocated corporate expenses(2) | (116) |  |  | (1) |  |  | (149) |  |  | (1) |
L3Harris Merger-related transaction and integration expenses | (37) |  |  | (36) |  |  | (68) |  |  | (52) |
Amortization of acquisition-related intangibles(3) | (208) |  |  | (25) |  |  | (353) |  |  | (50) |
Pension adjustment | (98) |  |  | (46) |  |  | (195) |  |  | (93) |
Non-operating income | 105 |  |  | 48 |  |  | 200 |  |  | 94 |
Net interest expense | (65) |  |  | (39) |  |  | (128) |  |  | (81) |
Total | $ | 336 |  |  | $ | 302 |  |  | $ | 557 |  |  | $ | 585 |
_______________ (1)Includes the operating results of the Harris Night Vision business prior to the divestiture on September 13, 2019. See Note C — Business Divestitures and Assets Sales in these Notes for more information. (2)Unallocated corporate expenses for the quarter and two quarters ended July 3, 2020 includes: (i) $16 million and $31 million, respectively, of additional cost of sales related to the fair value step-up in inventory sold (see Note B — Business Combination in these Notes for more information); (ii) $58 million and $61 million, respectively, of divestiture-related expenses, including a $26 million loss on sale of business, a $14 million non-cash remeasurement loss on a potential divestiture, a $12 million non-cash adjustment to the gain on sale of business and other items; (iii) a $14 million non-cash goodwill impairment charge related to a potential divestiture; and (iv) $7 million of L3Harris integration-related restructuring charges. Unallocated corporate expenses for the two quarters ended July 3, 2020 also includes a $5 million non-cash goodwill impairment charge related to the divestiture of the Applied Kilovolts and Analytical Instrumentation business. (3)Includes $183 million and $303 million of amortization of identifiable intangible assets acquired as a result of the L3Harris Merger for the quarter and two quarters ended July 3, 2020, respectively. Also includes $25 million and $50 million of amortization of identifiable intangible assets acquired as a result of our acquisition of Exelis Inc. for the quarters and two quarters ended June 28, 2019, respectively. Because the L3Harris Merger and the acquisition of Exelis Inc. benefited the entire Company as opposed to any individual segment, the amortization of identifiable intangible assets acquired was not allocated to any segment. Disaggregation of Revenue All four segments disaggregate revenue by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Integrated Mission Systems: Integrated Mission 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 revenue recognition method.
| Quarter Ended |  |  |  | Two Quarters Ended |  |
| July 3, 2020 |  | June 28, 2019 |  | July 3, 2020 |  | June 28, 2019
| (In millions) |  |  |  |  |  |
Revenue By Customer Relationship |  |  |  |  |  |  |
Prime contractor | $ | 858 |  |  | $ | 4 |  |  | $ | 1,807 |  |  | $ | 12 |
Subcontractor | 473 |  |  | 7 |  |  | 894 |  |  | 13 |
| $ | 1,331 |  |  | $ | 11 |  |  | $ | 2,701 |  |  | $ | 25 |
Revenue By Contract Type |  |  |  |  |  |  |
Fixed-price(1) | $ | 998 |  |  | $ | 11 |  |  | $ | 2,023 |  |  | $ | 25 |
Cost-reimbursable | 333 |  |  | — |  |  | 678 |  |  | — |
| $ | 1,331 |  |  | $ | 11 |  |  | $ | 2,701 |  |  | $ | 25 |
Revenue By Geographical Region |  |  |  |  |  |  |
United States | $ | 1,038 |  |  | $ | 6 |  |  | $ | 2,143 |  |  | $ | 15 |
International | 293 |  |  | 5 |  |  | 558 |  |  | 10 |
| $ | 1,331 |  |  | $ | 11 |  |  | $ | 2,701 |  |  | $ | 25 |
_______________ (1) Includes revenue derived from time-and-materials contracts. Space and Airborne Systems: Space and Airborne 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 revenue recognition method.
| Quarter Ended |  |  |  | Two Quarters Ended |  |
| July 3, 2020 |  | June 28, 2019 |  | July 3, 2020 |  | June 28, 2019
| (In millions) |  |  |  |  |  |
Revenue By Customer Relationship |  |  |  |  |  |  |
Prime contractor | $ | 674 |  |  | $ | 590 |  |  | $ | 1,332 |  |  | $ | 1,162 |
Subcontractor | 575 |  |  | 429 |  |  | 1,109 |  |  | 813 |
| $ | 1,249 |  |  | $ | 1,019 |  |  | $ | 2,441 |  |  | $ | 1,975 |
Revenue By Contract Type |  |  |  |  |  |  |
Fixed-price(1) | $ | 702 |  |  | $ | 601 |  |  | $ | 1,372 |  |  | $ | 1,132 |
Cost-reimbursable | 547 |  |  | 418 |  |  | 1,069 |  |  | 843 |
| $ | 1,249 |  |  | $ | 1,019 |  |  | $ | 2,441 |  |  | $ | 1,975 |
Revenue By Geographical Region |  |  |  |  |  |  |
United States | $ | 1,054 |  |  | $ | 886 |  |  | $ | 2,057 |  |  | $ | 1,732 |
International | 195 |  |  | 133 |  |  | 384 |  |  | 243 |
| $ | 1,249 |  |  | $ | 1,019 |  |  | $ | 2,441 |  |  | $ | 1,975 |
_______________ (1) Includes revenue derived from time-and-materials contracts. Communication Systems: Communication Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems, and services.
| Quarter Ended |  |  |  | Two Quarters Ended |  |
| July 3, 2020 |  | June 28, 2019 |  | July 3, 2020 |  | June 28, 2019
| (In millions) |  |  |  |  |  |
Revenue By Customer Relationship(1) |  |  |  |  |  |  |
Prime contractor | $ | 749 |  |  |  |  | $ | 1,489 |  |  |
Subcontractor | 363 |  |  |  |  | 717 |  |  |
| $ | 1,112 |  |  |  |  | $ | 2,206 |  |  |
Revenue By Contract Type(1) |  |  |  |  |  |  |
Fixed-price(2) | $ | 951 |  |  |  |  | $ | 1,869 |  |  |
Cost-reimbursable | 161 |  |  |  |  | 337 |  |  |
| $ | 1,112 |  |  |  |  | $ | 2,206 |  |  |
Revenue by Geographical Region |  |  |  |  |  |  |
United States | $ | 844 |  |  | $ | 355 |  |  | $ | 1,678 |  |  | $ | 702 |
International | 268 |  |  | 254 |  |  | 528 |  |  | 487 |
| $ | 1,112 |  |  | $ | 609 |  |  | $ | 2,206 |  |  | $ | 1,189 |
______________ (1) Prior to the L3Harris Merger, Communication Systems did not recognize significant revenue for customer-specific products and systems, and currently, such customer arrangements primarily exist at operating businesses acquired in connection with the L3Harris Merger. The “Revenue by Customer Relationship” and “Revenue by Contract Type” disaggregation categories were added beginning in the Fiscal Transition Period to best depict how the nature, amount, timing and uncertainty of revenue and cash flows from these types of customer arrangements are affected by economic factors. (2) Includes revenue derived from time-and-materials contracts. Aviation Systems: Aviation Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems, and services.
| Quarter Ended |  |  |  | Two Quarters Ended |  |
| July 3, 2020 |  | June 28, 2019 |  | July 3, 2020 |  | June 28, 2019
| (In millions) |  |  |  |  |  |
Revenue By Customer Relationship |  |  |  |  |  |  |
Prime contractor | $ | 514 |  |  | $ | 180 |  |  | $ | 1,178 |  |  | $ | 320 |
Subcontractor | 286 |  |  | 6 |  |  | 633 |  |  | 10 |
| $ | 800 |  |  | $ | 186 |  |  | $ | 1,811 |  |  | $ | 330 |
Revenue By Contract Type |  |  |  |  |  |  |
Fixed-price(1) | $ | 627 |  |  | $ | 164 |  |  | $ | 1,468 |  |  | $ | 286 |
Cost-reimbursable | 173 |  |  | 22 |  |  | 343 |  |  | 44 |
| $ | 800 |  |  | $ | 186 |  |  | $ | 1,811 |  |  | $ | 330 |
Revenue By Geographical Region |  |  |  |  |  |  |
United States | $ | 696 |  |  | $ | 178 |  |  | $ | 1,445 |  |  | $ | 321 |
International | 104 |  |  | 8 |  |  | 366 |  |  | 9 |
| $ | 800 |  |  | $ | 186 |  |  | $ | 1,811 |  |  | $ | 330 |
______________ (1) Includes revenue derived from time-and-materials contracts. Total assets by business segment are summarized below:
| July 3, 2020 |  | January 3, 2020
| (In millions) |  |
Total Assets |  |  |
Integrated Mission Systems | $ | 8,675 |  |  | $ | 7,896 |
Space and Airborne Systems | 6,899 |  |  | 6,829 |
Communication Systems | 5,719 |  |  | 5,930 |
Aviation Systems | 5,269 |  |  | 7,569 |
Corporate(1) | 11,290 |  |  | 10,112 |
| $ | 37,852 |  |  | $ | 38,336 |
_______________ (1)Identifiable intangible assets acquired in connection with the L3Harris Merger in the quarter ended September 27, 2019 and our acquisition of Exelis Inc. in fiscal 2015 were recorded as Corporate assets because they benefited the entire Company as opposed to any individual segment. Identifiable intangible asset balances recorded as Corporate assets were approximately $8.3 billion and $8.5 billion at July 3, 2020 and January 3, 2020, respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred compensation plan investments, buildings and equipment, as well as any assets and liabilities from discontinued operations and divestitures. See Note C — Business Divestitures and Assets Sales in these Notes for additional information.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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