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BUSINESS SEGMENT INFORMATION | 9 Months Ended
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Sep. 29, 2023
Segment Reporting [Abstract] |
BUSINESS SEGMENT INFORMATION | NOTE O: BUSINESS SEGMENT INFORMATION We structure our operations primarily around the products, systems and services we sell and the markets we serve and report our financial results in the following four reportable segments: •SAS: including space payloads, sensors and full-mission solutions; classified intelligence and cyber; avionics; electronic warfare; and mission networks for air traffic management operations; •IMS: including multi-mission intelligence, surveillance and reconnaissance (“ISR”) systems; integrated electrical and electronic systems for maritime platforms; advanced electro-optical and infrared solutions; fuzing and ordnance systems; commercial aviation products; and commercial pilot training operations; •CS: including tactical communications with global communications solutions; broadband communications; tactical data links; integrated vision solutions; and public safety radios, and system applications and equipment; and •AR: including missile solutions with technologies for strategic defense, missile defense, and hypersonic and tactical systems; and space propulsion and power systems for national security space and exploration missions. Business Realignment. Effective December 31, 2022, we adjusted our reporting to better align our businesses and transferred our ADG business from our IMS segment to our SAS segment. See Note A: Basis of Presentation and Summary of Significant Accounting Policies in the Notes for further information. Acquisition of TDL. On January 3, 2023, we completed the acquisition of TDL, which is reported within our CS segment. See Note B: Acquisitions, Divestitures and Asset Sales in these Notes for additional information regarding our acquisition of TDL. Acquisition of AJRD and New Business Segment. On July 28, 2023, we completed the acquisition of AJRD. Upon completion of the acquisition, we established a new reportable segment, AR. See Note B: Acquisitions, Divestitures and Asset Sales in these Notes for additional information regarding our acquisition of AJRD. Business Segment Financial Information Segment revenue, segment operating income (loss) and a reconciliation of segment operating income (loss) to total income (loss) before income taxes are as follows:
| Quarter Ended |  | Three Quarters Ended
(In millions) | September 29, 2023 |  | September 30, 2022 |  | September 29, 2023 |  | September 30, 2022
Revenue from Product Sales and Services |  |  |  |  |  |  |
SAS | $ | 1,686 |  |  | $ | 1,593 |  |  | $ | 5,056 |  |  | $ | 4,682 |
IMS | 1,568 |  |  | 1,630 |  |  | 5,003 |  |  | 4,897 |
CS | 1,255 |  |  | 1,068 |  |  | 3,707 |  |  | 3,024 |
AR | 455 |  |  | ** |  | 455 |  |  | **
Corporate eliminations | (49) |  |  | (45) |  |  | (142) |  |  | (119) |
Total revenue from product sales and services | $ | 4,915 |  |  | $ | 4,246 |  |  | $ | 14,079 |  |  | $ | 12,484 |
Income (loss) before Income Taxes |  |  |  |  |  |  |
Segment operating income (loss): |  |  |  |  |  |  |
SAS(1) | $ | 210 |  |  | $ | 92 |  |  | $ | 565 |  |  | $ | 472 |
IMS(1) | 187 |  |  | (143) |  |  | 534 |  |  | 315 |
CS | 282 |  |  | (97) |  |  | 873 |  |  | 370 |
AR | 56 |  |  | ** |  | 56 |  |  | **
Total segment operating income (loss) | 735 |  |  | (148) |  |  | 2,028 |  |  | 1,157 |
Unallocated Items: |  |  |  |  |  |  |
Unallocated corporate department (expense) income, net(2) | 14 |  |  | 18 |  |  | (27) |  |  | 33 |
Amortization of acquisition-related intangibles(3) | (208) |  |  | (151) |  |  | (546) |  |  | (454) |
Additional cost of sales related to the fair value step-up in inventory sold | — |  |  | — |  |  | (30) |  |  | — |
Merger, acquisition, and divestiture related expenses | (56) |  |  | (31) |  |  | (144) |  |  | (117) |
Sale of asset group and business divestiture-related gains, net | — |  |  | — |  |  | 26 |  |  | 8 |
Impairment of goodwill and other assets(4) | — |  |  | — |  |  | (39) |  |  | — |
LHX NeXt(5) | (33) |  |  | — |  |  | (68) |  |  | — |
Charges for severance and other termination costs | — |  |  | (29) |  |  | — |  |  | (29) |
Charge related to an additional pre-merger legal contingency | — |  |  | (31) |  |  | — |  |  | (31) |
FAS/CAS operating adjustment(6) | 27 |  |  | 22 |  |  | 72 |  |  | 65 |
Total unallocated items | (256) |  |  | (202) |  |  | (756) |  |  | (525) |
Non-operating income, net | 80 |  |  | 99 |  |  | 245 |  |  | 313 |
Interest expense, net | (159) |  |  | (70) |  |  | (372) |  |  | (205) |
Income (loss) before income taxes | $ | 400 |  |  | $ | (321) |  |  | $ | 1,145 |  |  | $ | 740 |
_______________ ** AR is a new reportable segment established during the quarter ended September 29, 2023, which consists of operations of AJRD. As such, there is no comparable prior year information. (1)For the three quarters ended September 29, 2023, includes non-cash charges for impairment of other assets of $27 million and $12 million for SAS and IMS, respectively, related to restructuring of a customer contract impacting both segments and facility closures in IMS. (2)Includes certain corporate-level expenses that are not included in management’s evaluation of any segment’s operating performance. (3)Includes amortization of identifiable intangible assets acquired in connection with business combinations. Because our acquisitions benefited the entire Company, the amortization of identifiable intangible assets acquired was not allocated to any segment. (4)For the three quarters ended September 29, 2023, includes a $21 million non-cash charge for impairment of intangible assets related to the closure of a facility and an $18 million charge related to an impairment of a customer contract. See Note G: Goodwill and Other Intangible Assets in these Notes for additional information regarding impairment of intangible assets. (5)Costs associated with transforming multiple functions, systems and processes to increase agility and competitiveness, including third-party consulting, workforce optimization and incremental information technology (“IT”) expenses for implementation of new systems. (6)Represents the difference between the service cost component of Financial Accounting Standards (“FAS”) pension and other postretirement benefits (“OPEB”) cost and total U.S. Government Cost Accounting Standards (“CAS”) pension and OPEB cost and replaces the “Pension adjustment” line item previously presented, which included the non-service components of FAS pension and OPEB income. See FAS/CAS operating adjustment table below. FAS/CAS Pension Operating Adjustment In accordance with CAS, we allocate a portion of pension and OPEB plan costs to our U.S. Government contracts. However, our Condensed Consolidated Financial Statements require pension and OPEB plan income or expense to be calculated in accordance with FAS requirements under GAAP. The “FAS/CAS operating adjustment” line item in the table below represents the difference between the service cost component of FAS pension and OPEB cost and total CAS pension and OPEB cost. The non-service cost components of FAS pension and OPEB income or expense are included as component of the “Non-operating income, net” line item in our Condensed Consolidated Statement of Operations. See Note I: Pension and Other Postretirement Benefit Plans in these Notes for more information on the composition of non-service cost components of FAS pension and OPEB income and expense. The table below is a reconciliation of the FAS/CAS operating adjustment:
| Quarter Ended |  | Three Quarters Ended
(In millions) | September 29, 2023 |  | September 30, 2022 |  | September 29, 2023 |  | September 30, 2022
FAS pension service cost | $ | (10) |  |  | $ | (11) |  |  | $ | (23) |  |  | $ | (34) |
Less: CAS pension cost | (37) |  |  | (33) |  |  | (95) |  |  | (99) |
FAS/CAS operating adjustment | 27 |  |  | 22 |  |  | 72 |  |  | 65 |
Non-service FAS pension income | 78 |  |  | 111 |  |  | 232 |  |  | 332 |
FAS/CAS pension adjustment, net | $ | 105 |  |  | $ | 133 |  |  | $ | 304 |  |  | $ | 397 |
Disaggregation of Revenue We disaggregate revenue for all four business segments 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.
| Quarter Ended
| September 29, 2023 |  | September 30, 2022
(In millions) | SAS |  | IMS |  | CS |  | AR |  | SAS |  | IMS |  | CS |  | AR
Revenue By Customer Relationship
Prime contractor | $ | 1,082 |  |  | $ | 962 |  |  | $ | 866 |  |  | $ | 113 |  |  | $ | 1,013 |  |  | $ | 1,089 |  |  | $ | 690 |  |  | **
Subcontractor | 592 |  |  | 585 |  |  | 374 |  |  | 342 |  |  | 565 |  |  | 525 |  |  | 364 |  |  | **
Intersegment | 12 |  |  | 21 |  |  | 15 |  |  | — |  |  | 15 |  |  | 16 |  |  | 14 |  |  | **
Total revenue | $ | 1,686 |  |  | $ | 1,568 |  |  | $ | 1,255 |  |  | $ | 455 |  |  | $ | 1,593 |  |  | $ | 1,630 |  |  | $ | 1,068 |  |  | **
Revenue By Contract Type
Fixed-price(1) | $ | 1,040 |  |  | $ | 1,164 |  |  | $ | 1,047 |  |  | $ | 272 |  |  | $ | 939 |  |  | $ | 1,246 |  |  | $ | 899 |  |  | **
Cost-reimbursable | 634 |  |  | 383 |  |  | 193 |  |  | 183 |  |  | 639 |  |  | 368 |  |  | 155 |  |  | **
Intersegment | 12 |  |  | 21 |  |  | 15 |  |  | — |  |  | 15 |  |  | 16 |  |  | 14 |  |  | **
Total revenue | $ | 1,686 |  |  | $ | 1,568 |  |  | $ | 1,255 |  |  | $ | 455 |  |  | $ | 1,593 |  |  | $ | 1,630 |  |  | $ | 1,068 |  |  | **
Revenue By Geographical Region
United States | $ | 1,478 |  |  | $ | 1,141 |  |  | $ | 874 |  |  | $ | 443 |  |  | $ | 1,414 |  |  | $ | 1,213 |  |  | $ | 706 |  |  | **
International | 196 |  |  | 406 |  |  | 366 |  |  | 12 |  |  | 164 |  |  | 401 |  |  | 348 |  |  | **
Intersegment | 12 |  |  | 21 |  |  | 15 |  |  | — |  |  | 15 |  |  | 16 |  |  | 14 |  |  | **
Total revenue | $ | 1,686 |  |  | $ | 1,568 |  |  | $ | 1,255 |  |  | $ | 455 |  |  | $ | 1,593 |  |  | $ | 1,630 |  |  | $ | 1,068 |  |  | **
| Three Quarters Ended
| September 29, 2023 |  | September 30, 2022
(In millions) | SAS |  | IMS |  | CS |  | AR |  | SAS |  | IMS |  | CS |  | AR
Revenue By Customer Relationship
Prime contractor | $ | 3,176 |  |  | $ | 3,243 |  |  | $ | 2,471 |  |  | $ | 113 |  |  | $ | 2,977 |  |  | $ | 3,210 |  |  | $ | 2,037 |  |  | **
Subcontractor | 1,845 |  |  | 1,694 |  |  | 1,196 |  |  | 342 |  |  | 1,669 |  |  | 1,636 |  |  | 954 |  |  | **
Intersegment | 35 |  |  | 66 |  |  | 40 |  |  | — |  |  | 36 |  |  | 51 |  |  | 33 |  |  | **
Total revenue | $ | 5,056 |  |  | $ | 5,003 |  |  | $ | 3,707 |  |  | $ | 455 |  |  | $ | 4,682 |  |  | $ | 4,897 |  |  | $ | 3,024 |  |  | **
Revenue By Contract Type
Fixed-price(1) | $ | 3,161 |  |  | $ | 3,767 |  |  | $ | 3,127 |  |  | $ | 272 |  |  | $ | 2,737 |  |  | $ | 3,716 |  |  | $ | 2,530 |  |  | **
Cost-reimbursable | 1,860 |  |  | 1,170 |  |  | 540 |  |  | 183 |  |  | 1,909 |  |  | 1,130 |  |  | 461 |  |  | **
Intersegment | 35 |  |  | 66 |  |  | 40 |  |  | — |  |  | 36 |  |  | 51 |  |  | 33 |  |  | **
Total revenue | $ | 5,056 |  |  | $ | 5,003 |  |  | $ | 3,707 |  |  | $ | 455 |  |  | $ | 4,682 |  |  | $ | 4,897 |  |  | $ | 3,024 |  |  | **
Revenue By Geographical Region
United States | $ | 4,407 |  |  | $ | 3,679 |  |  | $ | 2,499 |  |  | $ | 443 |  |  | $ | 4,136 |  |  | $ | 3,549 |  |  | $ | 1,962 |  |  | **
International | 614 |  |  | 1,258 |  |  | 1,168 |  |  | 12 |  |  | 510 |  |  | 1,297 |  |  | 1,029 |  |  | **
Intersegment | 35 |  |  | 66 |  |  | 40 |  |  | — |  |  | 36 |  |  | 51 |  |  | 33 |  |  | **
Total revenue | $ | 5,056 |  |  | $ | 5,003 |  |  | $ | 3,707 |  |  | $ | 455 |  |  | $ | 4,682 |  |  | $ | 4,897 |  |  | $ | 3,024 |  |  | **
_______________ ** AR is a new reportable segment established during the quarter ended September 29, 2023, which consists of operations of AJRD. As such, there is no comparable prior year information. (1)Includes revenue derived from time-and-materials contracts. Assets by Business Segment Total assets by business segment are as follows:
(In millions) | September 29, 2023 |  | December 30, 2022
Total Assets |  |  |
SAS | $ | 9,099 |  |  | $ | 8,838 |
IMS | 10,869 |  |  | 10,925 |
CS | 7,184 |  |  | 5,800 |
AR | 4,078 |  |  | **
Corporate(1) | 11,063 |  |  | 7,961 |
Total Assets | $ | 42,293 |  |  | $ | 33,524 |
_______________ ** AR is a new reportable segment established during the quarter ended September 29, 2023, which consists of operations of AJRD. As such, there is no comparable prior year information. (1)Identifiable intangible assets acquired in connection with business combinations were recorded as corporate assets because they benefited the entire Company. Identifiable intangible asset balances recorded as corporate assets were $9.1 billion and $6.0 billion at September 29, 2023 and December 30, 2022, respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred compensation plan investments, buildings and equipment, real estate held for development and leasing, as well as any assets of businesses held for sale.

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