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Business Segment Information
3 Months Ended
Apr. 02, 2021
Segment Reporting [Abstract]  
Business Segment Information
Note T — 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 four operating segments, which are also our reportable segments and are referred to as our business segments:
Integrated Mission Systems, including multi-mission intelligence, surveillance and reconnaissance (“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; public safety and global communications solutions; and
Aviation Systems, including defense aviation; commercial aviation products; commercial and military pilot training; and mission networks for air traffic management.
As described in more detail in Note B — Business Divestitures and elsewhere in these Notes, during fiscal 2020 and 2021, we announced the divestitures of the following businesses:
Airport security and automation business, completed on May 4, 2020, the results of which were reported as part of our Aviation Systems segment through the date of divestiture;
Applied Kilovolts and Analytical Instrumentation business, completed on May 15, 2020, the results of which were reported as part of our Space and Airborne Systems segment through the date of divestiture;
EOTech business, completed on July 31, 2020, the results of which were reported as part of our Communication Systems segment through the date of divestiture;
VSE disposal group, definitive agreement entered into on February 23, 2021, expected to be completed in the second half of fiscal 2021, the results of which are reported as part of our Aviation Systems segment;
Military training business, definitive agreement entered into on February 27, 2021, expected to be completed in the second half of 2021, the results of which are reported as part of our Aviation Systems segment; and
CPS business, definitive agreement entered into on March 1, 2021, expected to be completed in the second half of 2021, the results of which are reported as part of our Aviation 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 2020 Form 10-K. We evaluate each business 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 recognizes a profit that is eliminated. The “Corporate eliminations” line item in the table below represents the elimination of intersegment sales. Corporate expenses are primarily allocated to our business segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. The “Unallocated corporate expenses” line item in the table below represents the portion of corporate expenses not allocated to our business segments and 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). The non-service components of net periodic pension and postretirement benefit costs include interest cost, expected return on plan assets, amortization of net actuarial gain or loss, and effect of curtailments or settlements.
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
(In millions)April 2, 2021April 3, 2020
Revenue
Integrated Mission Systems$1,451 $1,370 
Space and Airborne Systems1,236 1,192 
Communication Systems1,112 1,094 
Aviation Systems814 1,011 
Corporate eliminations(46)(41)
Total revenue$4,567 $4,626 
Income From Continuing Operations Before Income Taxes
Segment Operating Income (Loss):
Integrated Mission Systems$240 $201 
Space and Airborne Systems240 221 
Communication Systems281 250 
Aviation Systems128 (177)
Unallocated corporate expenses(1)
(40)(25)
L3Harris Merger-related integration and restructuring expenses (21)(31)
Amortization of acquisition-related intangibles(2)
(164)(145)
Business divestiture-related losses(15)(3)
Impairment of goodwill and other assets(62)(5)
Pension adjustment(111)(97)
Non-operating income117 95 
Net interest expense(66)(63)
Total income from continuing operations before income taxes$527 $221 
_______________
(1)For the quarter ended April 2, 2021, includes $7 million of divestiture-related expenses and a $15 million accrual for a value added tax obligation. For the quarter ended April 3, 2020, includes $15 million of additional cost of sales related to the fair value step-up in inventory sold.
(2)For the quarters ended April 2, 2021 and April 3, 2020, respectively, includes $140 million and $120 million of amortization of identifiable intangible assets acquired as a result of the L3Harris Merger and $24 million and $25 million of amortization of identifiable intangible assets acquired as a result of
our acquisition of Exelis Inc. 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
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.
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
(In millions)April 2, 2021April 3, 2020
Revenue By Customer Relationship
Prime contractor$1,006 $949 
Subcontractor445 421 
$1,451 $1,370 
Revenue By Contract Type
Fixed-price(1)
$1,093 $1,025 
Cost-reimbursable358 345 
$1,451 $1,370 
Revenue By Geographical Region
United States$1,033 $1,105 
International418 265 
$1,451 $1,370 
_______________
(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
(In millions)April 2, 2021April 3, 2020
Revenue By Customer Relationship
Prime contractor$683 $658 
Subcontractor553 534 
$1,236 $1,192 
Revenue By Contract Type
Fixed-price(1)
$716 $670 
Cost-reimbursable520 522 
$1,236 $1,192 
Revenue By Geographical Region
United States$1,062 $1,003 
International174 189 
$1,236 $1,192 
_______________
(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
(In millions)April 2, 2021April 3, 2020
Revenue By Customer Relationship
Prime contractor$729 $740 
Subcontractor383 354 
$1,112 $1,094 
Revenue By Contract Type
Fixed-price(1)
$946 $918 
Cost-reimbursable166 176 
$1,112 $1,094 
Revenue by Geographical Region
United States$841 $834 
International271 260 
$1,112 $1,094 
_______________
(1)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
(In millions)April 2, 2021April 3, 2020
Revenue By Customer Relationship
Prime contractor$536 $664 
Subcontractor278 347 
$814 $1,011 
Revenue By Contract Type
Fixed-price(1)
$652 $841 
Cost-reimbursable162 170 
$814 $1,011 
Revenue By Geographical Region
United States$699 $749 
International115 262 
$814 $1,011 
_______________
(1)Includes revenue derived from time-and-materials contracts.
Total assets by business segment are summarized below:
(In millions)April 2, 2021January 1, 2021
Total Assets
Integrated Mission Systems$9,080 $8,906 
Space and Airborne Systems6,996 6,943 
Communication Systems5,720 5,746 
Aviation Systems5,436 5,026 
Corporate(1)
9,358 10,339 
Total Assets$36,590 $36,960 
_______________
(1)Identifiable intangible assets acquired in connection with the L3Harris Merger on June 29, 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 $7.3 billion and $7.9 billion at April 2, 2021 and January 1, 2021, 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 B — Business Divestitures in these Notes for additional information.