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BUSINESS SEGMENT INFORMATION
 3 Months Ended
Apr. 01, 2022
Segment Reporting [Abstract]  
BUSINESS SEGMENT INFORMATION
NOTE Q — BUSINESS SEGMENT INFORMATION
Effective for fiscal 2022, which began January 1, 2022, we report our financial results in the following three reportable segments:
•Integrated Mission Systems, including multi-mission surveillance and reconnaissance (“ISR”) systems; integrated electrical and electronic systems for maritime platforms; advanced electro-optical and infrared (“EO/IR”) solutions; fuzing and ordnance systems; commercial aviation products; and commercial pilot training operations;
•Space & Airborne Systems, including space payloads, sensors and full-mission solutions; classified intelligence and cyber; avionics; electronic warfare; and mission networks for air traffic management operations; and
•Communication Systems, including tactical communications with global communications solutions; broadband communications; integrated vision solutions; and public safety radios, system applications and equipment.
We structure our operations primarily around the products, systems and services we sell and the markets we serve. Effective January 1, 2022, we have streamlined our business segments from four business segments to three business segments. As a result of the segment reorganization, the Aviation Systems segment was eliminated as a business segment. As part of our new business segment structure, the ongoing operations that had been part of our former Aviation Systems segment were integrated into the remaining segments. Defense aviation, commercial aviation products and commercial pilot training operations were moved into our Integrated Mission Systems segment; and mission networks for air traffic management operations was moved into our Space & Airborne Systems segment.
See Note 3: “Business Divestitures and Asset Sales” in the Notes to Consolidated Financial Statement in our Fiscal 2021 Form 10-K for additional information relating to businesses divested in fiscal 2021.
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 2021 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 CAS pension cost 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 items in the table below represent the portion of corporate expenses not allocated to our business segments and elimination of intersegment profits.
In accordance with CAS, we allocate a portion of pension and other postretirement benefit plan costs to our U.S. Government contracts. However, our consolidated financial statements require pension and other postretirement benefit plan income or expense be calculated in accordance with FAS requirements under GAAP. The “FAS/CAS pension adjustment” line item in the table below represents the difference between the service cost component of FAS pension and OPEB expense and total CAS
pension and OPEB cost. The net non-service cost components of FAS pension and OPEB income are included as an income component in the “Non-operating income” line item in our Condensed Consolidated Statement of Income (Unaudited). See Note J — Postretirement Benefit Plans for more information on the composition of non-service components of FAS pension and OPEB income and expense.
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
(In millions)April 1, 2022April 2, 2021
Revenue
Integrated Mission Systems$1,721 $1,751 
Space & Airborne Systems1,450 1,460 
Communication Systems963 1,112 
Other non-reportable businesses— 284 
Corporate eliminations(31)(40)
Total revenue$4,103 $4,567 
Income from Continuing Operations before Income Taxes
Segment Operating Income:
Integrated Mission Systems$255 $234 
Space & Airborne Systems172 192 
Communication Systems229 270 
Other non-reportable businesses— 52 
656 748 
Unallocated Items:
Unallocated corporate department expense, net(1)
(7)(33)
L3Harris Merger-related transaction, integration and other expenses and losses
(20)(21)
Amortization of acquisition-related intangibles(2)
(152)(164)
Business divestiture-related losses— (15)
Impairment of goodwill and other assets— (62)
Other items (1)(7)
FAS/CAS pension adjustment(3)
22 30 
(158)(272)
Non-operating income106 117 
Net interest expense(68)(66)
Income from continuing operations before income taxes$536 $527 
_______________
(1)For the quarter ended April 2, 2021, includes a $15 million accrual for a value added tax obligation.
(2)Includes amortization of identifiable intangible assets acquired as a result of the all-stock merger between Harris Corporation and L3 Technologies, Inc. (the “L3Harris Merger”) and the acquisition of Exelis Inc. (“Exelis”). Because the L3Harris Merger and the acquisition of Exelis benefited the entire Company as opposed to any individual segment, the amortization of identifiable intangible assets acquired was not allocated to any segment.
(3)Represents the difference between the service cost component of FAS pension and OPEB income and total CAS pension and OPEB cost and replaces the “Pension adjustment” line item previously presented, which included the non-service components of FAS pension and OPEB income. See Net FAS/CAS pension adjustment table below.
The table below is a reconciliation of the FAS/CAS pension adjustment:
Quarter Ended
(In millions)April 1, 2022April 2, 2021
FAS pension service cost$(11)$(18)
Less: CAS pension cost(33)(48)
FAS/CAS pension adjustment22 30 
Non-service FAS pension income110 111 
Net FAS/CAS pension adjustment(1)
$132 $141 
_______________
(1)Net FAS/CAS pension adjustment excludes net settlement and curtailment losses recognized in fiscal 2021.
Disaggregation of Revenue
We disaggregate revenue for all three 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
(In millions)April 1, 2022April 2, 2021
Integrated Mission SystemsSpace & Airborne SystemsCommunication SystemsIntegrated Mission SystemsSpace & Airborne SystemsCommunication Systems
Revenue By Customer Relationship
Prime contractor$1,131 $931 $656 $1,189 $876 $728 
Subcontractor574 513 296 550 581 373 
Intersegment16 6 11 12 3 11 
$1,721 $1,450 $963 $1,751 $1,460 $1,112 
Revenue By Contract Type
Fixed-price(1)
$1,277 $863 $797 $1,294 $914 $940 
Cost-reimbursable428 581 155 445 543 161 
Intersegment16 6 11 12 3 11 
$1,721 $1,450 $963 $1,751 $1,460 $1,112 
Revenue By Geographical Region
United States$1,244 $1,279 $625 $1,275 $1,274 $832 
International461 165 327 464 183 269 
Intersegment16 6 11 12 3 11 
$1,721 $1,450 $963 $1,751 $1,460 $1,112 
_______________
(1)Includes revenue derived from time-and-materials contracts.
Total assets by business segment are as follows:
(In millions)April 1, 2022December 31, 2021
Total Assets
Integrated Mission Systems$11,811 $11,830 
Space & Airborne Systems8,573 8,151 
Communication Systems6,083 6,035 
Other non-reportable businesses— 3 
Corporate(1)
7,977 8,690 
$34,444 $34,709 
_______________
(1)Identifiable intangible assets acquired in connection with the L3Harris Merger in the two quarters ended January 3, 2020 and our acquisition of Exelis 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 $6.5 billion and $6.6 billion at April 1, 2022 and December 31, 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 of discontinued operations and divestitures.