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Acquisitions and Divestitures, Goodwill and Intangible Assets
9 Months Ended
Sep. 29, 2019
Business Combinations, Goodwill and Intangible Assets Disclosure [Abstract]  
Acquisitions and Divestitures, Goodwill and Intangible Assets ACQUISITIONS AND DIVESTITURES, GOODWILL, AND INTANGIBLE ASSETS
CSRA Acquisition
On April 3, 2018, we acquired 100% of the outstanding shares of CSRA Inc. (CSRA) for $41.25 per share in cash plus the assumption of outstanding net debt. CSRA is a provider of IT solutions to the defense, intelligence and federal civilian markets and is included in our Information Technology segment.
Fair Value of Net Assets Acquired. The following table summarizes the allocation of the $9.7 billion cash purchase price to the estimated fair values of the assets acquired and liabilities assumed on the acquisition date, with the excess recorded as goodwill:
Cash and equivalents
$
45

Accounts receivable
155

Unbilled receivables
415

Other current assets
303

Property, plant and equipment, net
326

Intangible assets, net
2,066

Goodwill
7,935

Other noncurrent assets
369

Total assets
$
11,614

Accounts payable
$
(135
)
Customer advances and deposits
(151
)
Current lease obligation
(51
)
Other current liabilities
(434
)
Noncurrent lease obligation
(207
)
Noncurrent deferred tax liability
(355
)
Other noncurrent liabilities
(532
)
Total liabilities
$
(1,865
)
Net assets acquired
$
9,749


Pro Forma Information. The following pro forma information presents our consolidated revenue and earnings from continuing operations as if the acquisition of CSRA and the related financing transactions had occurred on January 1, 2017:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2018
Revenue
$
9,094

 
$
27,156

Earnings from continuing operations
872

 
2,470

Diluted earnings per share from continuing operations
$
2.92

 
$
8.23


The pro forma information was prepared by combining our reported historical results with the historical results of CSRA for the pre-acquisition periods. In addition, the reported historical amounts were adjusted for the following items, net of associated tax effects:
The impact of acquisition financing.
The removal of certain CSRA operations we were required by a government customer to dispose of to address an organizational conflict of interest with respect to services provided to the customer. We completed the sale of these operations in the third quarter of 2018.
The removal of CSRA’s historical pre-acquisition intangible asset amortization expense and debt-related interest expense.
The impact of intangible asset amortization expense assuming our estimate of fair value was applied on January 1, 2017.
The payment of acquisition-related costs assuming they were incurred on January 1, 2017.
The pro forma information does not reflect the realization of expected cost savings or synergies from the acquisition, and does not reflect what our combined results of operations would have been had the acquisition occurred on January 1, 2017.
Other Acquisitions and Divestitures
In the first nine months of 2019, we acquired two businesses in our Aerospace segment and a business in our Missions Systems segment for a total of $19. In 2018, we acquired five businesses in addition to the acquisition of CSRA for approximately $400: Hawker Pacific, a leading provider of integrated aviation solutions across Asia Pacific and the Middle East, and two fixed-base operation (FBO) businesses in our Aerospace segment; a maintenance and service provider for the German Army and other international customers in our Combat Systems segment; and a provider of specialized transmitters and receivers in our Mission Systems segment.
The operating results of these acquisitions have been included with our reported results since the respective closing dates. The purchase prices of the acquisitions have been allocated to the estimated fair value of net tangible and intangible assets acquired, with any excess purchase price recorded as goodwill.
In the first nine months of 2019, we completed the sale of a business in our Information Technology segment that was classified as held for sale on the Consolidated Balance Sheet on December 31, 2018. In 2018, we completed the sale of a commercial health products business during the first quarter and the sale of a public-facing contact-center business during the fourth quarter in our Information Technology segment. For the nine-month periods ended September 29, 2019, and September 30, 2018, the proceeds from the sale of businesses were not material and are included in other investing activities, net, in the unaudited Consolidated Statement of Cash Flows.
Goodwill
The changes in the carrying amount of goodwill by reporting unit were as follows:
 
Aerospace
 
Combat Systems
 
Information Technology
 
Mission Systems
 
Marine Systems
 
Total
Goodwill
December 31, 2018 (a)
$
2,813

 
$
2,633

 
$
9,622

 
$
4,229

 
$
297

 
$
19,594

Acquisitions/divestitures (b)
2

 
15

 
77

 
6

 

 
100

Other (c)
(16
)
 
14

 

 
(75
)
 

 
(77
)
September 29, 2019 (a)
$
2,799

 
$
2,662

 
$
9,699

 
$
4,160

 
$
297


$
19,617


(a)Goodwill in the Information Technology and Mission Systems reporting units is net of $536 and $1.3 billion of accumulated impairment losses, respectively.
(b)Includes adjustments during the purchase price allocation period.
(c)Consists primarily of adjustments for foreign currency translation. Also includes an estimated allocation of goodwill in our Mission Systems reporting unit associated with a non-core operation classified as held for sale on the unaudited Consolidated Balance Sheet on September 29, 2019. As we expect this operation to be divested within the next 12 months, the assets and liabilities held for sale are included in other current assets and liabilities on the unaudited Consolidated Balance Sheet.

Intangible Assets
Intangible assets consisted of the following:
 
Gross Carrying Amount (a)
Accumulated Amortization
Net Carrying Amount
 
Gross Carrying Amount (a)
Accumulated Amortization
Net Carrying Amount
 
September 29, 2019
 
December 31, 2018
Contract and program
    intangible assets (b)
$
3,775

$
(1,717
)
$
2,058

 
$
3,771

$
(1,531
)
$
2,240

Trade names and trademarks
465

(188
)
277

 
469

(177
)
292

Technology and software
165

(126
)
39

 
165

(116
)
49

Other intangible assets
159

(157
)
2

 
159

(155
)
4

Total intangible assets
$
4,564

$
(2,188
)
$
2,376

 
$
4,564

$
(1,979
)
$
2,585

(a)
Change in gross carrying amounts consists primarily of adjustments for acquired intangible assets and foreign currency translation.
(b)
Consists of acquired backlog and probable follow-on work and associated customer relationships.
Amortization expense for intangible assets was $69 and $209 for the three- and nine-month periods ended September 29, 2019, and $86 and $190 for the three- and nine-month periods ended September 30, 2018, respectively.