Prior-Period Financial Statements

3 Months Ended

Apr. 02, 2017

Accounting Changes and Error Corrections [Abstract]

Prior-Period Financial Statements

PRIOR-PERIOD FINANCIAL STATEMENTS

Our prior-period financial statements were restated for the adoption of three ASUs that are discussed below.

ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. We adopted ASU 2016-09 in the second quarter of 2016. ASU 2016-09 impacted several aspects of our accounting for share-based payment transactions. The ASU requires that excess tax benefits and tax deficiencies (the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes) be recognized as income tax expense or benefit in the Consolidated Statement of Earnings. Previously, these amounts were recognized directly to shareholders’ equity. While this area of the ASU permits only prospective adoption, because we adopted the standard in the second quarter of 2016, we were required to restate the first-quarter 2016 financial statements to reflect the adoption as of the beginning of the year.

In the Consolidated Statement of Cash Flows, the excess tax benefit from equity-based compensation, previously classified as a financing activity, is now classified as an operating activity. Additionally, cash paid when directly withholding shares on an employee’s behalf for tax withholding purposes is classified as a financing activity. These areas were adopted retrospectively.

ASC Topic 606. We adopted ASC Topic 606 on January 1, 2017, using the retrospective method. The adoption of ASC Topic 606 had two primary impacts on our Consolidated Financial Statements. The impact of adjustments on profit recorded to date is now recognized in the period identified (cumulative catch-up method), rather than prospectively over the remaining contract term. For our contracts for the manufacture of business-jet aircraft, we now recognize revenue at a single point in time when control is transferred to the customer, generally when the customer accepts the fully outfitted aircraft. Prior to the adoption of ASC Topic 606, we recognized revenue for these contracts at two contractual milestones: when green aircraft were completed and accepted by the customer and when the customer accepted final delivery of the fully outfitted aircraft. The cumulative effect of the adoption was recognized as a decrease to retained earnings of $372 on January 1, 2015.

We applied the standard's practical expedient that permits the omission of prior-period information about our remaining performance obligations. No other practical expedients were applied.

ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. We adopted ASU 2015-17 on January 1, 2017, using the retrospective method. ASU 2015-17 requires that deferred tax assets and liabilities be classified as noncurrent on the Consolidated Balance Sheet. The adoption of ASU 2015-17 resulted in reclassifications among accounts on the Consolidated Balance Sheet, but had no other impacts on our results of operations, financial condition or cash flows.

The following tables summarize the effects of adopting these accounting standards on our unaudited Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)

	Three Months Ended			Effect of the Adoption of								Three Months Ended
	April 3, 2016			ASU			ASC			ASU		April 3, 2016
(Dollars in millions, except per-share amounts)	As Reported			2016-09			Topic 606			2015-17		As Adjusted
Revenue:
Products	$	4,864		$	—		$	(282	)	$	—	$	4,582
Services	2,860			—			34			—		2,894
	7,724			—			(248		)	—		7,476
Operating costs and expenses:
Products	3,784			—			(149		)	—		3,635
Services	2,427			—			29			—		2,456
G&A	460			—			1			—		461
	6,671			—			(119		)	—		6,552
Operating earnings	1,053			—			(129		)	—		924
Interest, net	(22		)	—			—			—		(22		)
Other, net	10			—			—			—		10
Earnings from continuing operations    before income tax	1,041			—			(129		)	—		912
Provision for income tax, net	311			(15		)	(38		)	—		258
Earnings from continuing operations	730			15			(91		)	—		654
Discontinued operations	(13		)	—			—			—		(13		)
Net earnings	$	717		$	15		$	(91	)	$	—	$	641
Earnings per share
Basic:
Continuing operations	$	2.37		$	0.05		$	(0.30	)	$	—	$	2.12
Discontinued operations	(0.04		)	—			—			—		(0.04		)
Net earnings	$	2.33		$	0.05		$	(0.30	)	$	—	$	2.08
Diluted:
Continuing operations	$	2.34		$	0.03		$	(0.29	)	$	—	$	2.08
Discontinued operations	(0.04		)	—			—			—		(0.04		)
Net earnings	$	2.30		$	0.03		$	(0.29	)	$	—	$	2.04

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended			Effect of the Adoption of							Three Months Ended
	April 3, 2016			ASU		ASC			ASU		April 3, 2016
(Dollars in millions)	As Reported			2016-09		Topic 606			2015-17		As Adjusted
Net earnings	$	717		$	15	$	(91	)	$	—	$	641
Gains on cash flow hedges	182			—		—			—		182
Unrealized losses on securities	(9		)	—		—			—		(9		)
Foreign currency translation adjustments	181			—		(1		)	—		180
Change in retirement plans’ funded status	60			—		—			—		60
Other comprehensive income, pretax	414			—		(1		)	—		413
Provision for income tax, net	69			—		—			—		69
Other comprehensive income, net of tax	345			—		(1		)	—		344
Comprehensive income	$	1,062		$	15	$	(92	)	$	—	$	985

CONSOLIDATED BALANCE SHEET (UNAUDITED)

				Effect of the Adoption of
	December 31, 2016			ASU		ASC			ASU			December 31, 2016
(Dollars in millions)	As Reported			2016-09		Topic 606			2015-17*			As Adjusted
ASSETS
Current assets:
Cash and equivalents	$	2,334		$	—	$	—		$	—		$	2,334
Accounts receivable	3,611			—		(212		)	—			3,399
Unbilled receivables	5,282			—		(1,070		)	—			4,212
Inventories	3,523			—		2,294			—			5,817
Other current assets	697			—		90			(15		)	772
Total current assets	15,447			—		1,102			(15		)	16,534
Noncurrent assets:
Property, plant and equipment, net	3,467			—		10			—			3,477
Intangible assets, net	678			—		—			—			678
Goodwill	11,445			—		—			—			11,445
Other assets	1,835			—		—			(797		)	1,038
Total noncurrent assets	17,425			—		10			(797		)	16,638
Total assets	$	32,872		$	—	$	1,112		$	(812	)	$	33,172
LIABILITIES AND     SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of     long-term debt	$	900		$	—	$	—		$	—		$	900
Accounts payable	2,538			—		—			—			2,538
Customer advances and deposits	4,939			—		1,888			—			6,827
Other current liabilities	4,469			—		(361		)	(923		)	3,185
Total current liabilities	12,846			—		1,527			(923		)	13,450
Noncurrent liabilities:
Long-term debt	2,988			—		—			—			2,988
Other liabilities	6,062			—		260			111			6,433
Commitments and contingencies     (see Note M)
Total noncurrent liabilities	9,050			—		260			111			9,421
Shareholders’ equity:
Common stock	482			—		—			—			482
Surplus	2,819			—		—			—			2,819
Retained earnings	25,227			—		(684		)	—			24,543
Treasury stock	(14,156		)	—		—			—			(14,156		)
Accumulated other comprehensive loss	(3,396		)	—		9			—			(3,387		)
Total shareholders’ equity	10,976			—		(675		)	—			10,301
Total liabilities and     shareholders’ equity	$	32,872		$	—	$	1,112		$	(812	)	$	33,172

* The effect of the adoption of ASU 2015-17 includes the reclassification of current deferred tax assets and liabilities of $10 and $335, respectively, which are included as effects of adopting ASC Topic 606.

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

	Three Months Ended			Effect of the Adoption of								Three Months Ended
	April 3, 2016			ASU			ASC			ASU		April 3, 2016
(Dollars in millions)	As Reported			2016-09			Topic 606			2015-17		As Adjusted
Cash flows from operating activities -     continuing operations:
Net earnings	$	717		$	15		$	(91	)	$	—	$	641
Adjustments to reconcile net earnings to net cash     provided by operating activities:
Depreciation of property, plant and equipment	90			—			(1		)	—		89
Amortization of intangible assets	27			—			—			—		27
Equity-based compensation expense	27			—			—			—		27
Excess tax benefit from equity-based     compensation	(15		)	15			—			—		—
Deferred income tax provision	20			—			(38		)	—		(18		)
Discontinued operations	13			—			—			—		13
(Increase) decrease in assets, net of effects of     business acquisitions:
Accounts receivable	(195		)	—			(15		)	—		(210		)
Unbilled receivables	(337		)	—			61			—		(276		)
Inventories	(133		)	—			(88		)	—		(221		)
Increase (decrease) in liabilities, net of effects of     business acquisitions:
Accounts payable	179			—			—			—		179
Customer advances and deposits	(209		)	—			191			—		(18		)
Income taxes payable	268			(15		)	—			—		253
Other current liabilities	(70		)	26			(8		)	—		(52		)
Other, net	57			—			(11		)	—		46
Net cash provided by operating activities	439			41			—			—		480
Cash flows from investing activities:
Capital expenditures	(65		)	—			—			—		(65		)
Other, net	(53		)	—			—			—		(53		)
Net cash used by investing activities	(118		)	—			—			—		(118		)
Cash flows from financing activities:
Purchases of common stock	(1,026		)	—			—			—		(1,026		)
Dividends paid	(215		)	—			—			—		(215		)
Other, net	48			(41		)	—			—		7
Net cash used by financing activities	(1,193		)	(41		)	—			—		(1,234		)
Net cash used by discontinued operations	(6		)	—			—			—		(6		)
Net decrease in cash and equivalents	(878		)	—			—			—		(878		)
Cash and equivalents at beginning of period	2,785			—			—			—		2,785
Cash and equivalents at end of period	$	1,907		$	—		$	—		$	—	$	1,907

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)

	Common Stock					Retained			Treasury			Accumulated Other  Comprehensive			Total Shareholders’
(Dollars in millions)	Par		Surplus			Earnings			Stock			Loss			Equity
December 31, 2015 - as reported	$	482	$	2,730		$	23,204		$	(12,392	)	$	(3,286	)	$	10,738
Cumulative-effect adjustment of ASC     Topic 606 on January 1, 2016	—		—			(301		)	—			3			(298		)
December 31, 2015 - as adjusted	482		2,730			22,903			(12,392		)	(3,283		)	10,440
First quarter 2016 - as reported	—		10			483			(994		)	345			(156		)
Effect of the adoption of ASU 2016-09	—		(15		)	15			—			—			—
Effect of the adoption of ASC Topic 606	—		—			(91		)	—			(1		)	(92		)
Effect of the adoption of ASU 2015-17	—		—			—			—			—			—
April 3, 2016 - as adjusted	$	482	$	2,725		$	23,310		$	(13,386	)	$	(2,939	)	$	10,192