Basis of Presentation (Policies)

9 Months Ended

Sep. 29, 2012

Basis of Presentation

Use of Estimates

Use of Estimates

We prepare our financial statements in conformity with generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in the financial statements.  Actual results could differ from those estimates.  Our estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the Consolidated Statements of Operations in the period that they are determined.

During 2012 and 2011, we changed our estimates of revenues and costs on certain long-term contracts that are accounted for under the percentage-of-completion method of accounting.  The changes in estimates included in income from continuing operations before income taxes in the third quarter of 2012 and 2011 were $(6) million and $23 million, respectively, ($(4) million and $15 million after tax, or $(0.02) and $0.04 per diluted share, respectively).  For the third quarter of 2012 and 2011, the gross favorable program profit adjustments totaled $12 million and $28 million, respectively, and the gross unfavorable program profit adjustments totaled $18 million and $5 million, respectively.

The changes in estimates increased income from continuing operations before income taxes in the first nine months of 2012 and 2011 by $10 million and $47 million, respectively, ($6 million and $30 million after tax, or $0.02 and $0.09 per diluted share, respectively).  For the first nine months of 2012 and 2011, the gross favorable program profit adjustments totaled $52 million and $70 million, respectively, and the gross unfavorable program profit adjustments totaled $42 million and $23 million, respectively.