Segment Information and Disaggregation of Net Sales

The Company has three reportable segments, which are described in Note 1. The Company evaluates the performance of its operating segments and reportable segments based on their sales, operating income and operating margin. Corporate expenses are allocated to the Company’s operating segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. Accordingly, segment results include all costs and expenses, except for goodwill impairment charges, merger and acquisition related expenses, gains or losses related to business divestitures and certain other items that are excluded by management for purposes of evaluating the operating performance of the Company’s business segments.

The tables below present net sales, operating income, depreciation and amortization and total assets by reportable segment.



	First Quarter Ended
	March 29, 2019			March 30, 2018
	(in millions)
Net Sales:
ISRS	$	1,259		$	1,018
C&NS	793			713
Electronic Systems	670			659
Elimination of intercompany sales	(22		)	(19		)
Consolidated total	$	2,700		$	2,371
Operating Income:
ISRS	$	130		$	93
C&NS	84			64
Electronic Systems	97			94
Segment total	311			251
Merger, acquisition and divestiture related expenses and losses	(18		)	—
Consolidated total	$	293		$	251
Depreciation and amortization:
ISRS	$	23		$	21
C&NS	16			17
Electronic Systems	19			18
Consolidated total	$	58		$	56



	March 29, 2019		December 31, 2018
	(in millions)
Total Assets:
ISRS	$	4,823	$	4,749
C&NS	3,991		3,641
Electronic Systems	4,257		4,128
Corporate	1,192		1,000
Consolidated total	$	14,263	$	13,518

Disaggregation of Total Net Sales. The Company disaggregates its sales from contracts with customers by: (1) end customer, (2) contract type, (3) deliverable type and (4) revenue recognition method for each of its segments. The Company believes these factors affect the nature, amount, timing and uncertainty of the Company’s revenue and cash flows.

Sales by End Customer. Direct sales to the end customer represented approximately 63% and 65% of the Company’s consolidated sales for the quarterly periods ended March 29, 2019 and March 30, 2018, respectively, and indirect sales as a subcontractor or supplier represented the remaining 37% and 35%, respectively. The tables below present total net sales disaggregated by end customer.



	First Quarter Ended March 29, 2019
End Customer	ISRS		C&NS		Electronic Systems		Consolidated L3
	(in millions)
Total DoD	$	921	$	593	$	335	$	1,849
Other U.S. Government	26		25		28		79
Total U.S. Government	947		618		363		1,928
Foreign governments ⁽¹⁾	254		86		57		397
Commercial — foreign	20		31		160		211
Commercial — domestic	32		50		82		164
Total	$	1,253	$	785	$	662	$	2,700



	First Quarter Ended March 30, 2018
End Customer	ISRS		C&NS		Electronic Systems		Consolidated L3
	(in millions)
Total DoD	$	726	$	516	$	320	$	1,562
Other U.S. Government	30		27		36		93
Total U.S. Government	756		543		356		1,655
Foreign governments ⁽¹⁾	205		83		43		331
Commercial — foreign	29		26		162		217
Commercial — domestic	26		55		87		168
Total	$	1,016	$	707	$	648	$	2,371

__________________


⁽¹⁾	Includes sales under foreign military sales agreements, which are made directly between the U.S. Government and foreign governments.

Sales by Contract Type. Generally, the sales price arrangements for the Company’s contracts are either fixed-price, cost-plus or time-and-material type. Fixed-price type contracts generally offer higher profit margin potential than cost-plus type or time-and-material type contracts due to the greater levels of risk assumed on a fixed-price type contract.

On a fixed-price type contract, the Company agrees to perform the contractual statement of work for a predetermined sales price. On a cost-plus type contract, the Company is paid its allowable incurred costs plus a profit which can be fixed or variable depending on the contract’s fee arrangement up to predetermined funding levels determined by the customer. Cost-plus type contracts with award and incentive fee provisions are the Company’s primary variable contract fee arrangement. On a time-and-material type contract, the Company is paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost.

Substantially all of the Company’s cost-plus type contracts and time-and-material type contracts are with U.S. Government customers, while sales to foreign government and commercial customers are generally transacted under fixed-price sales arrangements and are included in the Company’s fixed-price contract type sales. The tables below present total net sales disaggregated by contract type.



	First Quarter Ended March 29, 2019
Contract Type	ISRS		C&NS		Electronic Systems		Consolidated L3
	(in millions)
Fixed-price⁽¹⁾	$	908	$	577	$	545	$	2,030
Cost-plus⁽²⁾	295		189		107		591
Time-and-material	50		19		10		79
Total sales	$	1,253	$	785	$	662	$	2,700



	First Quarter Ended March 30, 2018
Contract Type	ISRS		C&NS		Electronic Systems		Consolidated L3
	(in millions)
Fixed-price⁽¹⁾	$	639	$	506	$	547	$	1,692
Cost-plus⁽²⁾	324		179		93		596
Time-and-material	53		22		8		83
Total sales	$	1,016	$	707	$	648	$	2,371

__________________


⁽¹⁾	Includes fixed-price incentive fee type contracts, which contributed approximately 1% and 2% to the Company's total net sales for the quarterly periods ended March 29, 2019 and March 30, 2018, respectively.


⁽²⁾	Includes cost-plus award and incentive fee type contracts, which contributed approximately 3% and 4% to the Company's total net sales for the quarterly periods ended March 29, 2019 and March 30, 2018, respectively.

Sales by Deliverable Type: The tables below present total net sales disaggregated by the type of deliverable, which is determined by the Company at the performance obligation level.



	First Quarter Ended March 29, 2019
Sales by Deliverable Type	ISRS		C&NS		Electronic Systems		Consolidated L3
	(in millions)
Products	$	855	$	606	$	471	$	1,932
Services	398		179		191		768
Total sales	$	1,253	$	785	$	662	$	2,700



	First Quarter Ended March 30, 2018
Sales by Deliverable Type	ISRS		C&NS		Electronic Systems		Consolidated L3
	(in millions)
Products	$	655	$	532	$	459	$	1,646
Services	361		175		189		725
Total sales	$	1,016	$	707	$	648	$	2,371

Revenue Recognition Method: The tables below present total net sales disaggregated based on the revenue recognition method applied.



	First Quarter Ended March 29, 2019
Revenue Recognition Method	ISRS		C&NS		Electronic Systems		Consolidated L3
	(in millions)
Over time (cost-to-cost method)	$	981	$	647	$	417	$	2,045
Point in time	225		115		163		503
Output method	24		5		67		96
Billing method	23		18		15		56
Total sales	$	1,253	$	785	$	662	$	2,700



	First Quarter Ended March 30, 2018
Revenue Recognition Method	ISRS		C&NS		Electronic Systems		Consolidated L3
	(in millions)
Over time (cost-to-cost method)	$	807	$	576	$	419	$	1,802
Point in time	157		103		172		432
Output method	16		7		51		74
Billing method	36		21		6		63
Total sales	$	1,016	$	707	$	648	$	2,371