Cover
Cover - shares shares in Millions | 6 Months Ended | |
Jun. 30, 2022 | Aug. 15, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2022 | |
Document Transition Report | false | |
Entity File Number | 333-253583 | |
Entity Registrant Name | Leonardo DRS, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 13-2632319 | |
Entity Address, Address Line One | 2345 Crystal Drive | |
Entity Address, Address Line Two | Suite 1000 | |
Entity Address, City or Town | Arlington | |
Entity Address, State or Province | VA | |
Entity Address, Postal Zip Code | 22202 | |
City Area Code | 703 | |
Local Phone Number | 416-8000 | |
Title of 12(b) Security | ||
Trading Symbol | ||
Security Exchange Name | ||
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 145 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q2 | |
Entity Central Index Key | 0001833756 | |
Current Fiscal Year End Date | --12-31 |
Consolidated Statements of Earn
Consolidated Statements of Earnings (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Revenues: | ||||
Total revenues | $ 627 | $ 658 | $ 1,239 | $ 1,339 |
Cost of revenues: | ||||
Total cost of revenues | (500) | (531) | (978) | (1,076) |
Gross profit | 127 | 127 | 261 | 263 |
General and administrative expenses | (84) | (73) | (160) | (152) |
Amortization of intangibles | (2) | (2) | (4) | (4) |
Other operating expenses, net | 1 | (1) | 1 | (5) |
Operating earnings | 42 | 51 | 98 | 102 |
Interest expense | (10) | (9) | (18) | (18) |
Other, net | 0 | 1 | 0 | 0 |
Earnings before taxes | 32 | 43 | 80 | 84 |
Income tax provision | 7 | 11 | 19 | 23 |
Net earnings | $ 25 | $ 32 | $ 61 | $ 61 |
Net earnings per share from common stock: | ||||
Basic earnings per share (in dollars per share) | $ 0.17 | $ 0.22 | $ 0.42 | $ 0.42 |
Diluted earnings per share (in dollars per share) | $ 0.17 | $ 0.22 | $ 0.42 | $ 0.42 |
Products | ||||
Revenues: | ||||
Total revenues | $ 549 | $ 562 | $ 1,090 | $ 1,132 |
Cost of revenues: | ||||
Total cost of revenues | (445) | (470) | (867) | (930) |
Services | ||||
Revenues: | ||||
Total revenues | 78 | 96 | 149 | 207 |
Cost of revenues: | ||||
Total cost of revenues | $ (55) | $ (61) | $ (111) | $ (146) |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 25 | $ 32 | $ 61 | $ 61 |
Other comprehensive income (loss): | ||||
Foreign currency translation gain (loss), net of income taxes | (1) | 3 | 0 | 3 |
Gain from pension settlements | 0 | 0 | 3 | 0 |
Net unrecognized gain (loss) on postretirement obligations, net of income taxes | (1) | 10 | 1 | 9 |
Other comprehensive income (loss), net of income tax | (2) | 13 | 4 | 12 |
Total comprehensive income | $ 23 | $ 45 | $ 65 | $ 73 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Jun. 30, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 69 | $ 240 |
Accounts receivable, net | 125 | 156 |
Contract assets | 874 | 743 |
Inventories | 249 | 205 |
Related party note receivable | 0 | 0 |
Prepaid expenses | 17 | 23 |
Other current assets | 29 | 22 |
Held for sale | 174 | 0 |
Total current assets | 1,537 | 1,389 |
Noncurrent assets: | ||
Property, plant and equipment, net | 363 | 364 |
Intangible assets, net | 47 | 52 |
Goodwill | 952 | 1,071 |
Deferred tax assets, net | 46 | 56 |
Other noncurrent assets | 98 | 137 |
Total noncurrent assets | 1,506 | 1,680 |
Total assets | 3,043 | 3,069 |
Current liabilities: | ||
Short-term borrowings and current portion of long-term debt | 140 | 41 |
Accounts payable | 291 | 479 |
Contract liabilities | 156 | 174 |
Other current liabilities | 279 | 295 |
Held for sale | 45 | 0 |
Total current liabilities | 911 | 989 |
Noncurrent liabilities: | ||
Long-term debt | 350 | 352 |
Pension and other postretirement benefit plan liabilities | 54 | 61 |
Other noncurrent liabilities | 70 | 74 |
Total noncurrent liabilities | 474 | 487 |
Shareholder's equity: | ||
Preferred stock, $0.01 par value: 10,000,000 shares authorized; none issued | 0 | 0 |
Common stock, $0.01 par value: 300,000,000 shares authorized; 145,000,000 shares issued and outstanding | 1 | 1 |
Additional paid-in capital | 4,633 | 4,633 |
Accumulated deficit | (2,922) | (2,983) |
Accumulated other comprehensive loss | (54) | (58) |
Total shareholder's equity | 1,658 | 1,593 |
Total liabilities and shareholder's equity | $ 3,043 | $ 3,069 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2022 | Dec. 31, 2021 |
Shareholder's equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 300,000,000 | 300,000,000 |
Common stock, issued (in shares) | 145,000,000 | 145,000,000 |
Common stock, outstanding (in shares) | 145,000,000 | 145,000,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Operating activities | ||
Net earnings | $ 61 | $ 61 |
Adjustments to reconcile net earnings to net cash used in operating activities: | ||
Depreciation and amortization | 31 | 28 |
Deferred income taxes | 14 | 23 |
Other | 0 | (1) |
Changes in assets and liabilities: | ||
Accounts receivable | 24 | (3) |
Contract assets | (131) | (82) |
Inventories | (47) | (10) |
Prepaid expenses | (3) | 13 |
Other current assets | (7) | (8) |
Other noncurrent assets | 22 | 10 |
Defined benefit obligations | (3) | (6) |
Other current liabilities | (9) | 5 |
Other noncurrent liabilities | (17) | (13) |
Accounts payable | (165) | (172) |
Contract liabilities | (12) | (30) |
Net cash used in operating activities | (242) | (185) |
Investing activities | ||
Capital expenditures | (22) | (29) |
Repayments received (net of advances) on related party note receivable | 0 | 115 |
Investment in unconsolidated affiliate | 0 | (2) |
Net cash provided by investing activities | (22) | 84 |
Financing activities | ||
Net decrease in third party borrowings (maturities of 90 days or less) | (17) | (16) |
Repayment of related party debt | (335) | (475) |
Borrowings from related parties | 445 | 625 |
Other | 0 | (2) |
Net cash provided by financing activities | 93 | 132 |
Effect of exchange rate changes on cash and cash equivalents | 0 | (1) |
Net change in cash and cash equivalents | (171) | 30 |
Cash and cash equivalents at beginning of year | 240 | 61 |
Cash and cash equivalents at end of period | $ 69 | $ 91 |
Consolidated Statements of Shar
Consolidated Statements of Shareholder's Equity (Unaudited) - USD ($) $ in Millions | Total | Common stock | Additional paid- in capital | Accumulated other comprehensive loss | Accumulated deficit |
Balance at beginning of period at Dec. 31, 2020 | $ 1,427 | $ 1 | $ 4,633 | $ (70) | $ (3,137) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Total comprehensive income | 73 | 12 | 61 | ||
Balance at end of period at Jun. 30, 2021 | 1,500 | 1 | 4,633 | (58) | (3,076) |
Balance at beginning of period at Dec. 31, 2021 | 1,593 | 1 | 4,633 | (58) | (2,983) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Total comprehensive income | 65 | 4 | 61 | ||
Balance at end of period at Jun. 30, 2022 | $ 1,658 | $ 1 | $ 4,633 | $ (54) | $ (2,922) |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies A. Organization Leonardo DRS, Inc., together with its wholly owned subsidiaries (hereinafter, “DRS,” “the Company,” “us,” “our,” or “we”) is a supplier of defense electronics products, systems and military support services. The Company is controlled by Leonardo S.p.A (hereinafter, “Leonardo S.p.A.,” or “the Parent”), an Italian multi-national aerospace, defense and security company headquartered in Rome, Italy, through its direct sole ownership of Leonardo US Holding, Inc. (“US Holding”). US Holding is the direct and sole shareholder of the Company. DRS is a provider of defense products and technologies that are used across land, air, sea, space and cyber domains. Our diverse array of defense systems and solutions are offered to all branches of the U.S. military, major aerospace and defense prime contractors, government intelligence agencies, international military customers and industrial markets for deployment on a wide range of military platforms. We focus our capabilities in areas of critical importance to the U.S. military, such as sensing, electronic warfare (“EW”), network computing and communications, force protection and electrical power conversion and propulsion. These capabilities directly align with our two reportable segments: Advanced Sensing and Computing and Integrated Mission Systems. The U.S. Department of Defense (“DoD”) is our largest customer and accounts for approximately 78% and 82% of our total revenues as an end-user for the second quarter and first six months of 2022, respectively, and 85% for the second quarter and first six months of 2021. Specific international commercial market opportunities exist within these segments and make up approximately 22% and 18% of our total revenues for the second quarter and first six months of 2022, respectively, and 15% for the second quarter and first half of 2021. Our two reportable segments reflect the way performance is assessed and resources are allocated by our Chief Executive Officer, who is our chief operating decision maker (“CODM”). Advanced Sensing and Computing (“ASC”) The ASC segment provides sensing and computing systems and subsystem solutions to the U.S. military and allied nations focused on solving the most complex threat dynamics facing our service men and women today. We provide world class sensing products in all warfighting domains along with the computation systems to provide situational understanding. Our technologies and products are deployed on nearly all military platforms across land, sea, air, cyberspace, and space on individual soldiers, ground vehicles, ships, aircraft, and satellites. We have market leading capabilities in electro-optic and infrared imaging, advanced lasers, electronic warfare and cyber, communications, and computing in these domains. Integrated Mission Systems (“IMS”) The IMS segment provides critical force protection, platform integration, transportation and logistics and power conversion and propulsion systems to the U.S. military and its allies. Our force protection systems provide much needed protection for our service members and military assets from evolving and proliferating threats and include advanced solutions for counter-unmanned aerial systems, short-range air defense systems and active protection systems on ground vehicles. Additionally, we provide power conversion and propulsion systems for the U.S. Navy’s top priority shipbuilding programs, building on our legacy of providing power components and systems for nearly all naval combat vessels for three decades, positioning us to continue as a leading provider of electrical ship propulsion systems and components for the U.S. Navy and its allies. Other The Company separately presents the unallocable costs associated with corporate functions and certain non-operating subsidiaries of the Company as Corporate & Eliminations. See Note 15 : Segment Information for further information regarding our business segments. B. Basis of presentation The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of DRS, its wholly owned subsidiaries and its controlling interests. Interests in joint ventures that are controlled by the Company, or for which the Company is otherwise deemed to be the primary beneficiary, are consolidated. For joint ventures in which the Company does not have a controlling interest, but exerts significant influence, the Company applies the equity method of accounting. All intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to current year presentation. Interim Financial Statements . The unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These rules and regulations permit some of the information and footnote disclosures included in financial statements prepared in accordance with U.S. GAAP to be condensed or omitted. These unaudited Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements as of and for the year ended December 31, 2021 filed as Exhibit 99.1 to the Current Report on Form 8-K filed on August 2, 2022. C. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant of these estimates and assumptions relate to the recognition of contract revenues and estimated costs to complete contracts in process, recoverability of reported amounts of goodwill, long-lived assets and intangible assets, valuation of pensions and other postretirement benefits, the valuation of deferred tax assets and liabilities and the valuation of unrecognized tax benefits. Actual results could differ from these estimates. D. Revenue Recognition Our revenues consist of sales of products (tangible goods) and sales of services to customers. We recognize the majority of our revenue from contracts with customers using an over time, cost-to-cost method of accounting. On certain other contracts, primarily time and material (“T&M”) and cost-plus contracts, revenue is recognized using the right-to-invoice practical expedient as we are contractually able to bill our customer based on control transferred to the customer. See Note 2 . Revenue from Contracts with Customers for additional information regarding revenue recognition. E. Cost of Revenues Cost of revenues includes materials, labor and overhead costs incurred in the manufacturing, design, and provision of products and services sold in the period as well as warranty costs. Material costs include raw materials, purchased components and sub-assemblies, outside processing and inbound freight costs. Labor and overhead costs consist of direct and indirect manufacturing costs, including wages and fringe benefits, operating supplies, depreciation and amortization, occupancy costs, and purchasing, receiving and inspection costs. F. Research and Development Expenses We conduct research and development (“R&D”) activities using our own funds (referred to as company-funded R&D or independent research and development (“IR&D”)) and under contractual arrangements with our customers (referred to as customer-funded R&D) to enhance existing products and services and to develop future products, solutions, and technologies. R&D costs include basic research, applied research, concept formulation studies, design, development, and related test activities. IR&D costs are allocated to customer contracts as part of the general and administrative overhead costs and generally recoverable on our customer contracts with the U.S. Government. Customer-funded R&D costs are charged directly to the related customer contract. Substantially all R&D costs are charged to cost of revenues as incurred. G. Foreign Currency Significant transactions in foreign currencies are translated into U.S. dollars at the approximate prevailing rate at the time of the transaction. Foreign exchange transaction gains and losses in the second quarter and first six months of 2022 and 2021 were immaterial to the Company's results of operations. The operations of the Company's foreign subsidiaries are translated from the local (functional) currencies into U.S. dollars using weighted average rates of exchange during each monthly period. The rates of exchange at each balance sheet date are used for translating certain balance sheet accounts and gains or losses resulting from these translation adjustments are included in the accompanying Consolidated Balance Sheets as a component of other comprehensive earnings. H. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits with banks or other short-term, highly liquid investments with original maturities of three months or less. I. Accounts Receivable Accounts receivable consist of amounts billed and currently due from customers. We maintain an allowance recorded in the Allowance for Credit Losses account that is estimated and recorded utilizing relevant information about past events, including historical experience, current conditions and a reasonable and supportable forecast that affects the collectability of the related financial asset. See Note 3 : Accounts Receivable for additional information regarding accounts receivable. J. Inventories Inventories are recorded at the lower of cost (determined by either actual, weighted average or first-in, first-out methods) or net realizable value, and include direct production costs as well as indirect costs, such as factory overhead. The net realizable value is calculated as the expected sales price in the course of normal operations net of estimated costs to finish and sell the goods. See Note 4 : Inventories for additional information regarding inventories. K. Property, Plant and Equipment Property, plant and equipment is carried at cost less accumulated depreciation. Depreciation is calculated on the straight-line method. The estimated useful lives of plant, machinery and equipment and building and building improvements generally range from 3 to 10 years and 15 to 40 years, respectively. Leasehold improvements are amortized over the shorter of the estimated useful life of the improvements or the remaining life of the lease. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the Consolidated Balance Sheets, and the net gain or loss is included in the determination of net earnings. Maintenance and repairs are charged to operations as incurred and renewals and improvements are capitalized. See Note 5 : Property, Plant and Equipment for additional information regarding property, plant and equipment. L. Goodwill Goodwill is assigned to reporting units and is reviewed for impairment at the reporting unit level on an annual basis, or whenever changes in circumstances indicate that the carrying amount may not be recoverable. A reporting unit is an operating segment, or one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by the segment manager. Two or more components of an operating segment may be aggregated and deemed a single reporting unit if the components have similar economic characteristics. Based upon the aggregation criteria the Company concluded it had seven reporting units at both June 30, 2022 and December 31, 2021. The annual impairment test is conducted as of December 31. The Company did not identify any triggering events during the six months ended June 30, 2022 or June 30, 2021. See Note 7 : Goodwill for additional information regarding goodwill. M. Long-Lived Assets and Acquired Identifiable Intangible Assets Identifiable intangible assets represent assets acquired as part of the Company's business acquisitions and include customer and program/contract-related assets. The values assigned to acquired identifiable intangible assets are determined as of the date of acquisition based on estimates and judgments regarding expectations for the estimated future after-tax cash flows from those assets over their lives, including the probability of expected future contract renewals and revenues, all of which are discounted to present value. The Company assesses the recoverability of the carrying value of its long-lived assets and intangible assets with finite useful lives whenever events or changes in circumstances indicate that the carrying amount of the assets or asset group may not be recoverable. If there are any indicators of impairment present, the Company then evaluates the recoverability of the potentially impaired long-lived assets and acquired identifiable intangible assets based upon expectations of undiscounted net cash flows from such assets. If the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset or asset group, a loss is recognized for the difference between the estimated fair value and the carrying amount of the assets. Assets to be disposed of, including those of discontinued operations, are reported at the lower of the carrying amount or fair value, less the costs to sell. See Note 5 : Property, Plant and Equipment and Note 8 : Intangible Assets for additional information regarding long-lived assets and intangible assets. N. Derivative Financial Instruments The Company does not use derivative financial instruments for trading purposes. All derivative instruments are carried on the Consolidated Balance Sheets as either assets or liabilities at fair value. The classification of gains and losses resulting from changes in the fair values of derivatives depends on the intended use of the derivative and its resultant designation. The Company had no significant derivative or hedging instruments for the periods presented. O. Pension and Other Postretirement Benefits The obligations for the Company's pension plans and postretirement benefit plans and the related annual costs of employee benefits are calculated based on several long-term assumptions, including discount rates for participant benefit liabilities, rates of return on plan assets, expected annual rates of salary increases for employee participants in the case of pension plans and expected annual increases in the costs of medical and other health care benefits in the case of postretirement benefit plans. These long-term assumptions are subject to revision based on changes in interest rates, financial market conditions, expected versus actual returns on plan assets, participant mortality rates and other actuarial assumptions, including future rates of salary increases, benefit formulas and levels, and rates of increase in the costs of benefits. Changes in these assumptions, if significant, can materially affect the amount of annual net periodic benefit costs recognized in the Company's results of operations from one year to the next, the liabilities for the pension plans and postretirement benefit plans and the Company's annual cash requirements to fund these plans. See Note 11: Pension and Other Postretirement Benefits for further information regarding our pension and postretirement plans. P. Income Taxes We and US Holding have entered into a Tax Allocation Agreement (“Tax Allocation Agreement”), dated as of November 16, 2020, with members of an affiliated group, as defined in Section 1504(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Tax Code”), members of one or more consolidated, combined, unitary or similar state tax groups and additional parties who are part of an “expanded affiliated group” for certain tax purposes. The agreement provides for the method of computing and allocating the consolidated U.S. federal tax liability of the affiliated group among its members and of allocating any state group tax liabilities among the state members for the taxable year ending December 31, 2020 and each subsequent year in which the parties are members of a group (whether federal or state). The agreement also provides for reimbursement of US Holding and/or DRS for payment of such tax liabilities, for compensation of any member for use of its “net operating loss” or “tax credits” in arriving at such tax liabilities and the allocation and payment of any refund arising from a carryback of net operating losses or tax credits from subsequent taxable years. Under the agreement, the parties have agreed to calculate and allocate their respective tax liabilities and other tax attributes for taxable years beginning with the first consolidated taxable year that included DRS (i.e., the taxable year ended December 31, 2008) as if the agreement was then in effect. We calculate the provision for incomes taxes during interim periods by applying an estimate of our annual effective tax rate for the full year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items). The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Income taxes as presented attribute deferred income taxes of US Holding to DRS in a manner that is systematic, rational and consistent with the asset and liability method and the governing Tax Allocation Agreement which allocates the tax liability amongst the entities, including DRS. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of DRS’ assets and liabilities and are adjusted for changes in tax rates and tax laws when such changes are enacted. In general, the taxable income of DRS is included in the consolidated U.S. federal and state tax returns of US Holding. Where applicable, US Holding’s current portion of U.S. federal income taxes payable were offset against DRS’ net operating loss carryforwards in the period the related tax expense was recorded. Consequently, our net operating loss carryforwards are deemed to have been settled with US Holding in each year in an amount commensurate with the carrying value of the tax effected net operating loss utilized. If management determines that some portion or all of a deferred tax asset is not “more likely than not” to be realized, a valuation allowance is recorded as a component of the income tax provision to reduce the deferred tax asset to the amounts expected to be realized. In determining whether the Company’s deferred tax assets are realizable, management considers all evidence, both positive and negative, including the history of financial reporting earnings, existing taxable temporary differences and their projected reversals, as well as projected future income and tax planning strategies. We believe it is more likely than not that we will generate sufficient taxable income in future periods to realize our deferred tax assets, subject to the valuation allowances recognized. The Company assesses its tax positions for all periods open to examination by tax authorities based on the latest available information. Those positions are evaluated to determine whether they will more likely than not be sustained upon examination by the relevant taxing authorities. Liabilities for unrecognized tax benefits are measured based on the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. These unrecognized tax benefits are recorded as a component of income tax expense. Interest and penalties related to unrecognized tax benefits are not material. See Note 9 : Income Taxes for additional information regarding income taxes. Q. Earnings Per Share Basic earnings per share (“EPS”) is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during each period. The computation of diluted EPS includes the dilutive effect of outstanding stock-based compensation awards, only in periods in which such effect would have been dilutive for the period. In February 2021, the Company completed a forward stock split of 1,450,000 - for- 1 share of common stock. The consolidated financial statements have been adjusted to reflect the forward stock split for all periods presented. There were 100 shares and 145 million basic and diluted common shares outstanding before and after the forward stock split, respectively, for all periods presented. R. Fair Value Measurements Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant on the measurement date. We are required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value, and to utilize a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three hierarchical levels used to measure fair value are as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices that are directly or indirectly observable. Level 3 — Significant inputs to the valuation model are unobservable. In certain instances, fair value is determined through information obtained from third parties using the latest available market data. In obtaining such data from third parties, we have evaluated the methodologies used to develop the estimate of fair value in order to assess whether such valuations are representative of fair value. The Company categorizes plan assets for disclosure purposes in accordance with this fair value hierarchy. Certain plan investments are measured at fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient and are therefore not categorized as Level 1, 2, or 3. NAV is defined as the total value of the fund divided by the number of the fund’s shares outstanding. See Note 12: Pension and Other Postretirement Benefits for further information regarding our pension and postretirement plans. S. Financial Instruments Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities. Financial instruments are reported in the Consolidated Balance Sheets at carrying value, which other than the 7.5% Term loan due November 30, 2023, approximate fair value. See Note 11: Debt for further information regarding our debt. T. Acquisitions, Investments and Variable Interest Entities Acquisitions Our consolidated financial statements include the operations of acquired businesses from the date of acquisition. We account for acquired businesses using the acquisition method of accounting, which requires that any assets acquired and liabilities assumed be measured at their respective fair values on the acquisition date. The accounting for business combinations requires the Company to make significant judgments and estimates. Any excess of the fair value of consideration transferred over the assigned values of the net assets acquired is recognized as goodwill. As previously announced, on June 21, 2022, we entered into the Agreement and Plan of Merger, dated as of June 21, 2022 (the “merger agreement”), by and among the Company, RADA Electronic Industries Ltd (“RADA”) and Blackstart Ltd, a company organized under the laws of the State of Israel and a wholly owned subsidiary of DRS (“Merger Sub”). Upon the terms and subject to the conditions of the merger agreement, and in accordance with the Companies Law, 5759-1999, of the State of Israel, at the effective time of the merger contemplated by the merger agreement (the “merger”), Merger Sub will be merged with and into RADA, with RADA as the surviving company of the merger and thereby becoming a wholly owned subsidiary of DRS. At the effective time of the merger (the “effective time”), each ordinary share of RADA, par value New Israeli Shekel 0.03 per share (“RADA shares”), issued and outstanding immediately prior to the effective time will be converted into and become exchangeable for one share of common stock of DRS, par value $0.01 per share (“DRS common stock”). Immediately prior to the effective time, the shares of DRS common stock held by US Holding, the current sole stockholder of DRS, will be split (rounded up to the nearest whole share), as necessary, such that, immediately following the effective time and the issuance of the shares of DRS common stock to holders of RADA shares and the treatment of options to purchase RADA shares: (A) US Holding will hold 80.5% of the issued and outstanding shares of DRS common stock on a fully diluted basis (with US Holding’s ownership percentage including 50% of any awards or other equity interests that DRS may issue pursuant to entitlements under any grants of certain one-time special awards of restricted stock units (the “One-Time Awards”) and the foregoing percentage calculation excluding any awards or other equity interests that DRS may issue pursuant to entitlements under the DRS’s long term incentive plan and 50% of any awards or other equity interests that DRS may issue pursuant to entitlements in connection with any grants of One-Time Awards, and such foregoing percentage will assume a reference price for RADA options equal to the volume-weighted average price of the RADA shares on the NASDAQ for the ten trading days immediately prior to the closing date); and (B) the holders of RADA shares, RADA vested options and RADA unvested options (or DRS options issued pursuant to the provisions of the merger agreement) will hold or have entitlements to 19.5% of the issued and outstanding shares of DRS common stock on a fully diluted basis (the foregoing percentage calculation excluding any awards or other equity interests that DRS may issue pursuant to entitlements under the DRS long-term incentive plan or the issuance of any One-Time Awards). Each of DRS’s and RADA’s obligation to consummate the merger is subject to the satisfaction or waiver of a number of conditions specified in the merger agreement. The merger is expected to close in the fourth quarter of 2022. On August 3, 2022, we filed a registration statement on Form S-4 with the SEC for the shares of DRS common stock to be issued in the merger, which has not yet been declared effective by the SEC. Investments Investments where we have the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in other noncurrent assets on our Consolidated Balance Sheets. Significant influence typically exists if we have a 20% to 50% ownership interest in the investee. Under this method of accounting, our share of the net earnings or losses of the investee is included in operating profit in other income, net on our Consolidated Statements of Earnings since the activities of the investee are closely aligned with the operations of the business segment holding the investment. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is therefore recorded during the current period. The Company’s cost method investment consists of an investment in a private company in which we do not have the ability to exercise significant influence over its operating and financial activities. Management evaluates this investment for possible impairment quarterly. Variable Interest Entities The Company occasionally forms joint ventures and/or enters into arrangements with special purpose limited liability companies for the purpose of bidding and executing on specific projects. The Company analyzes each such arrangement to determine whether it represents a variable interest entity (“VIE”). If the arrangement is determined to be a VIE, the Company assesses whether it is the primary beneficiary of the VIE and if it is, consequently required to consolidate the VIE. The Company did not have any investment in VIEs for the periods presented. Divestitures / Held for Sale On March 21, 2022, the Company entered into a definitive agreement to sell its Global Enterprise Solutions (“GES”) business to SES Government Solutions, Inc., a wholly-owned subsidiary of SES S.A., for $450 million in cash. The transaction was completed on August 1, 2022 and resulted in proceeds of $427 million. We are in the process of finalizing the accounting for the transaction and will report the gain on the transaction in the third quarter. GES, which was part of the ASC segment, provides commercial satellite communications to the U.S. Government and delivers satellite communications and security solutions to customers worldwide. SES S.A. has guaranteed the payment of the purchase price and performance of all other obligations of SES Government Solutions, Inc. under the agreement. As of June 30, 2022, the assets and liabilities related to GES were reported on the Consolidated Balance Sheets as Held for Sale. In February 2022, the Company’s Board of Directors approved the strategic initiative to divest of the Company’s interest in Advanced Acoustic Concepts (“AAC”). On April 19, 2022, we entered into a definitive sales agreement to divest our share of our equity investment in AAC for $56 million to Thales Defense & Security, Inc., the minority partner in the joint venture. The transaction was completed on July 8, 2022 and resulted in proceeds of $56 million. We are in the process of finalizing the accounting for the transaction and will report the gain on the transaction in the third quarter. As of June 30, 2022, the Investment was reported as Held for Sale. The proceeds generated from the GES and AAC divestitures resulted in a $396 million dividend to Leonardo US Holdings, our sole shareholder. The $396 million represents the proceeds generated net of our costs to sell and estimated tax obligations. The dividend was issued on August 5, 2022 |
Revenue from Contracts with Cus
Revenue from Contracts with Customers | 6 Months Ended |
Jun. 30, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | Revenue from Contracts with Customers The Company recognizes revenue for each separately identifiable performance obligation in a contract representing an obligation to transfer a distinct good or service to a customer. In most cases, goods and services provided under the Company’s contracts are accounted for as single performance obligations due to the complex and integrated nature of our products and services. These contracts generally require significant integration of a group of goods and/or services to deliver a combined output. In some contracts, the Company provides multiple distinct goods or services to a customer. In those cases, the Company accounts for the distinct contract deliverables as separate performance obligations and allocates the transaction price to each performance obligation based on its relative standalone selling price, which is generally estimated using cost plus a reasonable margin. We classify revenues as products or services on our Consolidated Statements of Earnings based on the predominant attributes of the performance obligations. While the Company provides warranties on certain contracts, we typically do not provide for services beyond standard assurances and therefore do not consider warranties to be separate performance obligations. Typically we enter into three types of contracts: fixed-price contracts, cost-plus contracts and T&M contracts (cost-plus contracts and T&M contracts are aggregated below as flexibly priced contracts). The majority of our total revenues are derived from fixed-price contracts; refer to the revenue disaggregation disclosures that follow. For fixed-price contracts, customers agree to pay a fixed amount, negotiated in advanced for a specified scope of work. For cost-plus contracts typically we are reimbursed for allowable or otherwise defined total costs (defined as cost of revenues plus allowable general and administrative expenses) incurred, plus a fee. The contracts may also include incentives for various performance criteria, including quality, timeliness and cost-effectiveness. In addition, costs are generally subject to review by clients and regulatory audit agencies, and such reviews could result in costs being disputed as non-reimbursable under the terms of the contract. T&M contracts provide for reimbursement of labor hours expended at a contractual fixed labor rate per hour, plus the actual costs of material and other direct non-labor costs. The fixed labor rates on T&M contracts include amounts for the cost of direct labor, indirect contract costs and profit. Estimating the transaction price for an arrangement requires judgment and is based on expected results which are determined using the Company’s historical data. We estimate that the revenue that we expect to be entitled to receive from a customer to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. Revenue from contracts with customers is recognized when the performance obligations are satisfied through the transfer of control over the good or service to the customer, which may occur either over time or at a point in time. Revenues for the majority of our contracts are measured as determined by the ratio of cumulative costs incurred to date to estimated total contract costs at completion (the "cost-to-cost method"). We believe this is an appropriate measure of progress toward satisfaction of performance obligations as this measure most accurately depicts the progress of our work and transfer of control to our customers. Due to the long-term nature of many of our contracts, developing the estimated total cost at completion and total transaction price often requires judgment. Factors that must be considered in estimating the cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance. After establishing the estimated total cost at completion, we follow a standard Estimate at Completion (“EAC”) process in which we review the progress and performance on our ongoing contracts at least quarterly. Adjustments to original estimates for a contract's revenue, estimated costs at completion and estimated profit or loss often are required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change and are also required if contract modifications occur. When adjustments in estimated total costs at completion or in estimated total transaction price are determined, the related impact on revenue and operating income are recognized using the cumulative catch-up method, which recognizes in the current period the cumulative effect of such adjustments for all prior periods. Any anticipated losses on these contracts are fully recognized in the period in which the losses become evident. EAC adjustments had the following impacts to revenue for the periods presented: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 Revenue $ (10) $ (8) $ (11) $ (9) Total % of Revenue 1.6 % 1.3 % 0.9 % 0.7 % The impacts noted above are attributed primarily to changes in our firm-fixed-price type programs. They consist of changes in the designs required to achieve contractual specifications for fixed priced development programs and inflationary impacts on certain naval production programs that resulted in a change in the programs’ estimate and related profitability. The reduction to revenue for the three- and six-month periods ended June 30, 2022 and June 30, 2021 was attributed primarily to certain cost impacts on surface ship programs within our IMS segment and inflationary pressures on naval programs within our ASC segment. Conversely, if the requirements for the recognition of contracts over time are not met, revenue is recognized at a point in time when control transfers to the customer, which is generally upon transfer of title. In such cases, the production that is in progress and costs that will be recognized at a future point in time are reported within "inventories". Costs to obtain a contract are incremental direct costs incurred to obtain a contract with a customer, including sales commissions and dealer fees, and are capitalized if material. Costs to fulfill a contract include costs directly related to a contract or specific anticipated contract (e.g., certain design costs) that generate or enhance our ability to satisfy our performance obligations under these contracts. These costs are capitalized to the extent they are expected to be recovered from the associated contract. Contract Assets and Liabilities The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities. (Dollars in millions) June 30, 2022 December 31, 2021 Contract assets $ 874 $ 743 Contract liabilities 156 174 Net contract assets $ 718 $ 569 Revenue recognized in the three-and six-month periods ended June 30, 2022 that was included in the contract liability balance at the beginning of each period was $33 million and $107 million, respectively. Revenue recognized in the three- and six-month periods ended June 30, 2021 that was included in the contract liability balance at the beginning of each period was $20 million and $89 million, respectively. The change in the balances of the Company’s contract assets and liabilities primarily results from timing differences between revenue recognition and customer billings and/or payments. Contract assets related to amounts withheld by customers until contract completion are not considered a significant financing component of our contracts because the intent is to protect the customers from our failure to satisfactorily complete our performance obligations. Payments received from customers in advance of revenue recognition (contract liabilities) are not considered a significant financing component of our contracts because they are utilized to pay for contract costs within a one-year period or are requested by us to ensure the customers meet their payment obligations. Value of Remaining Performance Obligations The value of remaining performance obligations, which we also refer to as total backlog, includes the following components: • Funded - Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts. • Unfunded - Unfunded backlog represents the revenue value of firm orders for products and services under existing contracts for which funding has not yet been appropriated less funding previously recognized on these contracts. The following table summarizes the value of our total backlog as of June 30, 2022, incorporating both funded and unfunded components: Backlog: June 30, 2022 (Dollars in millions) Total Backlog $ 3,051 We expect to recognize approximately 39% of our June 30, 2022 backlog as revenue over the next six months, with the remainder to be recognized thereafter. Disaggregation of Revenue ASC : ASC revenue is primarily derived from U.S. government development and production contracts and is generally recognized over time using the cost-to-cost method. We disaggregate ASC revenue by geographical region, customer relationship and contract type. We believe these categories best depict how the nature, amount, timing and uncertainty of ASC revenue and cash flows are affected by economic factors: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 Revenue by Geographical Region United States $ 367 $ 457 $ 739 $ 901 International 74 28 96 63 Intersegment Sales 3 4 5 7 Total $ 444 $ 489 $ 840 $ 971 Revenue by Customer Relationship Prime contractor $ 216 $ 279 $ 448 $ 555 Subcontractor 225 206 387 409 Intersegment Sales 3 4 5 7 Total $ 444 $ 489 $ 840 $ 971 Revenue by Contract Type Firm Fixed Price $ 394 $ 419 $ 736 $ 845 Flexibly Priced (1) 47 66 99 119 Intersegment Sales 3 4 5 7 Total $ 444 $ 489 $ 840 $ 971 ________________ (1) Includes revenue derived from time-and-materials contracts. IMS : IMS revenue is primarily derived from U.S. government development and production contracts and is generally recognized over time using the cost-to-cost method. We disaggregate IMS revenue by geographical region, customer relationship and contract type We believe these categories best depict how the nature, amount, timing and uncertainty of IMS revenue and cash flows are affected by economic factors: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 Revenue by Geographical Region United States $ 178 $ 160 $ 390 $ 349 International 8 14 14 26 Intersegment Sales 1 — 1 — Total $ 187 $ 174 $ 405 $ 375 Revenue by Customer Relationship Prime contractor $ 36 $ 42 $ 69 $ 86 Subcontractor 150 132 335 289 Intersegment Sales 1 — 1 — Total $ 187 $ 174 $ 405 $ 375 Revenue by Contract Type Firm Fixed Price $ 154 $ 146 $ 347 $ 316 Flexibly Priced (1) 32 28 57 59 Intersegment Sales 1 — 1 — Total $ 187 $ 174 $ 405 $ 375 ________________ (1) Includes revenue derived from time-and-materials contracts. |
Accounts Receivable
Accounts Receivable | 6 Months Ended |
Jun. 30, 2022 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts Receivable Accounts receivable represent amounts billed and currently due from customers. Payment is typically received from our customers either at periodic intervals (e.g., biweekly, or monthly) or upon achievement of contractual milestones. Accounts receivable consist of the following: (Dollars in millions) June 30, 2022 December 31, 2021 Accounts receivable $ 126 $ 157 Less allowance for credit losses (1) (1) Accounts receivable, net $ 125 $ 156 The Company maintains certain agreements with financial institutions to sell certain trade receivables. Receivables are derecognized in their entirety when sold, and the Company’s continuing involvement in the sold receivables is limited to their servicing, for which the Company receives a fee commensurate with the service provided. Pursuant to the servicing agreements, the Company collected approximately $1 million and $15 million at June 30, 2022 and December 31, 2021, respectively, of these sold receivables that had not yet been remitted to the financial institutions. These unremitted amounts collected on behalf of the financial institutions are included within short-term borrowings and current portion of long-term debt in the Consolidated Balance Sheets. |
Inventories
Inventories | 6 Months Ended |
Jun. 30, 2022 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consists of the following: (Dollars in millions) June 30, 2022 December 31, 2021 Raw materials $ 49 $ 43 Work in progress 198 161 Finished goods 2 1 Total $ 249 $ 205 |
Property, Plant and Equipment
Property, Plant and Equipment | 6 Months Ended |
Jun. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment by major asset class consists of the following: (Dollars in millions) June 30, 2022 December 31, 2021 Land, buildings and improvements $ 321 $ 312 Plant and machinery 194 191 Equipment and other 303 298 Total property, plant and equipment, at cost 818 801 Less accumulated depreciation (455) (437) Total property, plant and equipment, net $ 363 $ 364 Depreciation expense related to property, plant and equipment was $14 million and $27 million for the three- and six-month periods ended June 30, 2022, and $12 million and $24 million for the three- and six-month periods ended June 30, 2021, respectively. |
Other Liabilities
Other Liabilities | 6 Months Ended |
Jun. 30, 2022 | |
Other Liabilities Disclosure [Abstract] | |
Other Liabilities | Other Liabilities A summary of significant other liabilities by balance sheet caption follows: (Dollars in millions) June 30, 2022 December 31, 2021 Salaries, wages and accrued bonuses $ 46 $ 70 Fringe benefits 75 74 Litigation 10 10 Restructuring costs 1 4 Provision for contract losses 57 48 Operating lease liabilities 22 24 Other (1) 68 65 Total other current liabilities $ 279 $ 295 Operating lease liabilities $ 68 $ 73 Other 2 1 Total other noncurrent liabilities $ 70 $ 74 ________________ (1) Consists primarily of taxes payable, environmental remediation reserves and warranty reserves. See Note 15: Commitments and Contingencies for more information regarding the warranty provision |
Goodwill
Goodwill | 6 Months Ended |
Jun. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill Changes in the carrying amount of goodwill by reportable segment are as follows: (Dollars in millions) ASC IMS Total Balance as of December 31, 2021 $ 652 $ 419 $ 1,071 Reclassification to assets held for sale (117) — (117) Acquisition adjustment (2) (2) Balance as of June 30, 2022 533 419 952 |
Intangible Assets
Intangible Assets | 6 Months Ended |
Jun. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible Assets Other intangible assets mainly refer to the fair value of existing customer contractual relationships attributable to the acquired business and patents which are being amortized over their respective lives. The fair value of intangible assets typically is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows (including cash flows for working capital) arising from backlog and follow-on sales to the customer over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory assets charge, all of which is discounted to present value. The following disclosure presents certain information regarding the Company's intangible assets as of June 30, 2022 and December 31, 2021. All intangible assets are being amortized over their estimated useful lives, as indicated below, with no estimated residual values. June 30, 2022 December 31, 2021 (Dollars in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 957 $ (913) $ 44 $ 957 $ (908) $ 49 Patents and licenses 9 (6) 3 9 (6) 3 Total intangible assets $ 966 $ (919) $ 47 $ 966 $ (914) $ 52 Amortization expense related to intangible assets was $2 million and $4 million for the three- and six-month periods ended June 30, 2022 and was $2 million and $4 million for the three- and six-month periods ended June 30, 2021. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of June 30, 2022 and December 31, 2021 are as follows: (Dollars in millions) June 30, 2022 December 31, 2021 Deferred tax assets $ 107 $ 120 Valuation allowance 10 10 Deferred tax assets 97 110 Deferred tax liabilities 51 54 Deferred tax assets, net $ 46 $ 56 Our deferred tax balance associated with our retirement benefit plans includes a deferred tax asset of $10 million and $11 million as of June 30, 2022 and December 31, 2021, respectively, that are recorded in accumulated other comprehensive earnings to recognize the funded status of our retirement plans. See Note 11: Pension and Other Postretirement Benefits |
Debt
Debt | 6 Months Ended |
Jun. 30, 2022 | |
Debt Disclosure [Abstract] | |
Debt | Debt The Company’s debt consists of the following: (Dollars in millions) June 30, 2022 December 31, 2021 7.5% Term loan due November 30, 2023 (1) $ 139 $ 139 5.0% Daylight term loan due October 15, 2024 (1) 78 78 Borrowings under revolving credit facility (1) 110 — Finance lease and other 162 161 Short-term borrowings 1 15 Total debt principal 490 393 Less unamortized debt issuance costs and discounts — — Total debt, net 490 393 Less short-term borrowings and current portion of long-term debt (140) (41) Total long-term debt $ 350 $ 352 ________________ (1) The Company’s debt with related parties consists of two term loans and a working capital credit facility with US Holding, as described below. Term Loans In January 2009, the Company entered into a credit agreement with its ultimate parent company, Finmeccanica S.p.A. (presently Leonardo S.p.A.) in the amount of $2 billion (the “2009 Credit Agreement”). The 2009 Credit Agreement was subsequently assigned to US Holding and has a maturity of November 30, 2023. The 2009 Credit Agreement provides for a term loan bearing interest at a rate of 7.5%, with interest payments due semi-annually on June 20 and December 20 in each year (the “7.5% Term loan”). The outstanding balance of the 7.5% Term loan at June 30, 2022 and December 31, 2021 was $139 million. The fair value of this term loan at June 30, 2022 and December 31, 2021 was $142 million and $182 million, respectively; however, the Company has the ability to prepay the outstanding principal balance at the carrying amount without penalty. In June 2017, the Company entered into an unsecured term loan with US Holding in the principal amount of $137.5 million, the proceeds of which were used to finance the acquisition of Daylight Solutions, Inc. (the “Daylight Term Loan”). The Daylight Term Loan had an outstanding balance of $78 million at June 30, 2022 and December 31, 2021. The fair value of the Daylight Term Loan as of June 30, 2020 and December 31, 2021 was approximately $81 million and $84 million, respectively. The Daylight Term Loan matures on October 15, 2024. The Daylight Term Loan has an interest rate of 5.0%, with interest payments due semi-annually on April 15 and October 15. Credit Facilities The 2009 Credit Agreement provides for a revolving credit facility available for working capital needs of the Company (the “Revolving Credit Facility”). As of June 30, 2022 and December 31, 2021, the Revolving Credit Facility had a credit limit of $450 million and an interest rate of LIBOR plus 3.5%. There is a commitment fee of 0.25% applied to the unused balance of the Revolving Credit Facility and there are no compensating balance requirements. The outstanding balance as of June 30, 2022 was $110 million and there was no balance on the Revolving Credit Facility as of December 31, 2021. The Company also maintains uncommitted working capital credit facilities with certain financial institutions in the aggregate of $65 million at June 30, 2022 and December 31, 2021, respectively (the “Financial Institution Credit Facilities”). The Financial Institution Credit Facilities are guaranteed by Leonardo S.p.A. The primary purpose of the Financial Institution Credit Facilities is to support standby letter of credit issuances on contracts with customers and also includes a revolving facility with a maximum borrowing limit of $15 million, which bears interest at LIBOR plus 0.5%. At June 30, 2022 and December 31, 2021, there was no balance outstanding on the revolving facility. The Company had letters of credit outstanding of approximately $31 million and $35 million as of June 30, 2022, and December 31, 2021, respectively, which reduces the available capacity of the Financial Institution Credit Facilities by an equal amount. Short-term Borrowings As of June 30, 2022 and December 31, 2021, the Company recognized $1 million and $15 million, respectively, collected on behalf of the buyers of our trade receivables pursuant to our factoring arrangements as short-term borrowings and current portion of long-term debt in the Consolidated Balance Sheets, which approximates its fair value. Refer to Note 3: Accounts Receivable |
Pension and Other Postretiremen
Pension and Other Postretirement Benefits | 6 Months Ended |
Jun. 30, 2022 | |
Retirement Benefits [Abstract] | |
Pension and Other Postretirement Benefits | Pension and Other Postretirement Benefits Retirement Plan Summary Information The Company maintains multiple pension plans, both contributory and non-contributory, covering employees at certain locations. Eligibility requirements for participation in the plans vary, and benefits generally are based on the participant's compensation and years of service, as defined in the respective plan. The Company's funding policy generally is to contribute in accordance with cost accounting standards that affect government contractors, subject to the Tax Code and regulations thereunder. Plan assets are invested primarily in equities, bonds (both corporate and U.S. government), U.S. government-sponsored entity instruments, cash and cash equivalents and real estate. The Company also provides postretirement medical benefits for certain retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company's postretirement benefit plans. The Company's contractual arrangements with the U.S. government provide for the recovery of contributions to a Voluntary Employees' Beneficiary Association (“VEBA”) trust and, for non-funded plans, recovery of claims on a pay-as-you-go basis, subject to the Tax Code and regulations thereunder, with the retiree generally paying a portion of the costs through contributions, deductibles and coinsurance provisions. The Company also maintains certain non-contributory and unfunded supplemental retirement plans. Eligibility for participation in the supplemental retirement plans is limited, and benefits generally are based on the participant's compensation and/or years of service. The following table summarizes the components of net periodic benefit cost for the Company's pension, postretirement and supplemental retirement plans for the three months ended June 30: Defined Benefit Pension Plans Postretirement Benefit Plan Supplemental Retirement Plans (Dollars in millions) Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Service cost $ — $ — $ — $ — $ — $ — Interest cost 1 2 — — — — Less Expected return on plan assets (2) (2) — — — — Amortization of net actuarial loss (gain) 1 — — — — — Amortization of prior service cost — — — — — — Settlement expense (income) — — — — — — Net periodic benefit cost $ — $ — $ — $ — $ — $ — The following table summarizes the components of net periodic benefit cost for the Company's pension, postretirement and supplemental retirement plans for the six months ended June 30: Defined Benefit Pension Plans Postretirement Benefit Plan Supplemental Retirement Plans (Dollars in millions) Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Service cost $ — $ — $ — $ — $ — $ — Interest cost $ 3 $ 3 — — — — Less Expected return on plan assets $ (4) $ (4) — — — — Amortization of net actuarial loss (gain) $ 1 $ 1 — — — — Amortization of prior service cost $ — $ — — — — — Settlement expense (income) $ 1 $ — — — — — Net periodic benefit cost $ 1 $ — $ — $ — $ — $ — The expected long-term return on plan assets assumption represents the average rate that the Company expects to earn over the long-term on the assets of the Company's benefit plans, including those from dividends, interest income and capital appreciation. The assumption has been determined based on expectations regarding future rates of return for the plans' investment portfolio, with consideration given to the allocation of investments by asset class and historical rates of return for each individual asset class. Pension related expenses are reflected in the Total costs of revenues and General and administrative expenses on the Consolidated Statement of Earnings (unaudited). |
Share-based compensation plans
Share-based compensation plans | 6 Months Ended |
Jun. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Share-based compensation plans | Share-based compensation plans The Company does not have any share-based compensation plans. See Note 6 : Other Liabilities |
Commitment and Contingencies
Commitment and Contingencies | 6 Months Ended |
Jun. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Commitments The Company’s commitments are primarily related to our lease and credit agreements. Contingencies From time to time we are subject to certain legal proceedings and claims in the ordinary course of business. These matters are subject to many uncertainties and it is possible that some of these matters ultimately could be decided, resolved or settled in a manner adverse to us. Although the precise amount of liability that may result from these matters is not ascertainable, the Company believes that any amounts exceeding the Company's recorded accruals should not materially adversely affect the Company's financial condition or liquidity. It is possible, however, that the ultimate resolution of those matters could result in a material adverse effect on the Company's results of operations and/or cash flows from operating activities for a particular reporting period. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Some environmental laws, such as the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (also known as “CERCLA” or the “Superfund law”) and similar state statutes, can impose liability upon former owners or operators for the entire cost of investigating and remediating contaminated sites regardless of the lawfulness of the original activities that led to the contamination. In July 2000, an entity which later became a subsidiary of the Company received a Section 104(e) Request for Information (“RFI”) from the National Park Service (“NPS”), pursuant to CERCLA, regarding the presence of radioactive material at a site within a national park, which site was operated by an alleged predecessor to our subsidiary over 50 years ago. Following the subsidiary’s response to the RFI, the NPS directed it and another alleged former operator to perform an Engineering Evaluation and Cost Analysis (“EE/CA”) of a portion of the site. The Company’s subsidiary made a good faith offer to conduct an alternative EE/CA work plan, but the NPS rejected this offer and opted to perform the EE/CA itself. The NPS previously posted its intention to open a formal public comment period regarding the EE/CA at the end of 2019. To the Company’s knowledge, the EE/CA has not been released and a public comment period has yet to be opened. Following completion of the EE/CA, the NPS may seek reimbursement for its investigative and remedial efforts to date, or direct one or more of the potentially responsible parties to perform any remediation that may be required by CERCLA or may enter an alternative dispute resolution proceeding to attempt to resolve each party’s share. In addition, the NPS may seek to recover damages for loss of use of certain natural resources. The Company believes that it has legitimate defenses to its subsidiary’s potential liability and that there are other potentially responsible parties for the environmental conditions at the site, including the U.S. government as owner, operator and arranger at the site. The potential liability associated with this matter could change substantially due to such factors as additional information on the nature or extent of contamination, methods of remediation that might be recommended or required, changes in the apportionment of costs among the responsible parties, whether the NPS seeks to recover additional damages, whether the NPS’s plans to investigate additional areas to identify a need for further remedial action for which the Company may be identified as a potentially responsible party and other actions by governmental agencies or private parties. The Company has recorded its best estimate of damages and its share of remediation costs related to the site to reflect what we and our advisors reasonably believe we would be liable for based on the current information and circumstances of the claim, exclusive of other potential liabilities that may be asserted in the future. In the performance of our contracts we routinely request contract modifications that require additional funding from the customer. Most often, these requests are due to customer-directed changes in the scope of work. While we are entitled to recovery of these costs under our contracts, the administrative process with our customer may be protracted. Based on the circumstances, we periodically file requests for equitable adjustment (“REAs”) that are sometimes converted into claims. In some cases, these requests are disputed by our customer. We believe our outstanding modifications, REAs and other claims will be resolved without material impact to our results of operations, financial condition or cash flows. As a government contractor, with customers including the U.S. government as well as various state and local government entities, the Company may be subject to audits, investigations and claims with respect to its contract performance, pricing, costs, cost allocations and procurement practices. Additionally, amounts billed under such contracts, including direct and indirect costs, are subject to potential adjustments before final settlement. Management believes that adequate provisions for such potential audits, investigations, claims and contract adjustments, if any, have been made in the financial statements. Product Warranties Product warranty costs generally are accrued in proportion to product revenue realized in conjunction with our over-time revenue recognition policy. Product warranty expense is recognized based on the term of the product warranty, generally one year to three years, and the related estimated costs, considering historical claims expense. Accrued warranty costs are reduced as these costs are incurred and as the warranty period expires, and otherwise may be modified as specific product performance issues are identified and resolved. The following is a summary of changes in the product warranty balances during the period ended June 30, 2022: (Dollars in millions) Balance as of December 31, 2021 $ 19 Additional provision 6 Reversal and utilization (6) Balance as of June 30, 2022 19 |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The Company provides services related to the US interface for the Parent and its other affiliates. These services include financial, tax, trade compliance, marketing and communications and legal. The Company also has related-party sales with the Parent and its other affiliates that occur in the regular course of business. Related-party sales for these transactions are included in revenues and were $54 million and $4 million or the six-month periods ended June 30, 2022 and June 30, 2021, respectively and $51 million and $2 million for the three- month periods ended June 30, 2022 and June 30, 2021 respectively. The Company has related-party purchases with the Parent and its other affiliates that occur in the regular course of business. Related-party purchases for these transactions are included in cost of revenues and were $18 million and $6 million for the six-month periods ended June 30, 2022 and June 30, 2021, respectively and related-party purchases for these transactions are included in cost of revenues for the three -month periods ended June 30, 2022 and June 30, 2021 were $7 million and $5 million, respectively. The receivables related to these transactions with the Parent and its other affiliates of $17 million and $2 million as of June 30, 2022 and December 31, 2021, respectively, and payables of $9 million and $1 million respectively, are recorded in our Consolidated Balance Sheets. An unbilled receivable with the Parent and its other affiliates of $36 million is included in contract assets in our Consolidated Balance Sheets as of June 30, 2022. The Company entered into a Surplus Treasury Agreement with US Holding (the “Surplus Agreement”) in December 2019. The Surplus Agreement allows the Company to advance excess funds to US Holding when funds are available. The advances bear interest at LIBOR plus between 5 and 20 basis points depending on the tenor of the advance. As of June 30, 2022 and December 31, 2021 the Company did not advance any amount to US Holding. The Company entered into Tax Allocation Agreement with US Holding, dated as of November 16, 2020. Refer to Note 1: Summary of Significant Accounting Policies for more information. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2022 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Operating segments represent components of an enterprise for which separate financial information is available that is regularly reviewed by the CODM in determining how to allocate resources and assess performance. Our Chief Executive Officer is our CODM and he uses a variety of measures to assess the performance of the Company as a whole, depending on the nature of the activity. Beginning in the first quarter of 2022, the Company’s operating and reportable segments were revised into two reportable segments, ASC and IMS, to align our market strategy and capital allocation decision making with our operating structure. Prior year information was revised to reflect the new segment structure. All other operations, which consists primarily of DRS Corporate Headquarters and certain non-operating subsidiaries of the Company, are grouped in Corporate & Eliminations. We primarily use Adjusted EBITDA to manage the Company and allocate resources. Adjusted EBITDA of our business segments includes our net earnings before income taxes, amortization of acquired intangible assets, depreciation, restructuring costs, interest, transaction costs related to an anticipated offering of securities, acquisition and divestiture related expenses, foreign exchange, COVID-19 response costs, non-service pension expenditures and other one-time non-operational events. Adjusted EBITDA is used to facilitate a comparison of the ordinary, ongoing and customary course of our operations on a consistent basis from period to period and provide an additional understanding of factors and trends affecting our business segments. This measure assists the CODM in assessing segment operating performance consistently over time without the impact of our capital structure, asset base and items outside the control of the management team and expenses that do not relate to our core operations. Certain information related to our segments for the three- and six-month periods ended June 30, 2022 and June 30, 2021 is presented in the following tables. Consistent accounting policies have been applied by all segments within the Company, within all reporting periods. A description of our reportable segments as of June 30, 2022 and June 30, 2021 has been included in Note 1: Summary of Significant Accounting Policies . Transactions between segments generally are negotiated and accounted for under terms and conditions that are similar to other government and commercial contracts; however, these intercompany transactions are eliminated in consolidation. Total revenues and intersegment revenues by segment for the three- and six-month periods ended June 30, 2022 and, June 30, 2021 consists of the following: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 ASC $ 444 $ 489 $ 840 $ 971 IMS 187 174 405 375 Corporate & Eliminations (4) (4) (6) (7) Total revenue $ 627 $ 658 $ 1,239 $ 1,339 (Dollars in millions) 2022 2021 2022 2021 ASC $ 3 $ 4 $ 5 $ 7 IMS 1 — 1 — Total intersegment revenue $ 4 $ 4 $ 6 $ 7 Depreciation by segment for the three- and six-month periods ended June 30, 2022 and June 30, 2021 consists of the following: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 ASC $ 9 $ 8 $ 18 $ 16 IMS 5 4 9 8 Total depreciation $ 14 $ 12 $ 27 $ 24 Total assets by segment as of June 30, 2022 and December 31, 2021 consist of the following: (Dollars in millions) June 30, 2022 December 31, 2021 ASC $ 1,619 $ 1,545 IMS 1,124 1,145 Corporate & Eliminations 126 379 Held for Sale 174 — Total assets $ 3,043 $ 3,069 Reconciliation of reportable segment Adjusted EBITDA to Net Earnings (loss) consists of the following: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 Adjusted EBITDA ASC $ 57 $ 61 $ 89 $ 115 IMS 10 7 51 25 Corporate & Eliminations — 1 — — Total Adjusted EBITDA 67 69 140 140 Amortization of intangibles (2) (2) (4) (4) Depreciation (14) (12) (27) (24) Restructuring costs — — — — Interest expense (10) (9) (18) (18) Deal related transaction costs (8) — (10) (4) Acquisition and divestiture related expenses — — — — Foreign exchange — (1) — (1) COVID-19 response costs — (2) — (5) Non-service pension expense (1) — (1) — Other one-time non-operational events — — — — Income tax (provision) benefit (7) (11) (19) (23) Net earnings $ 25 $ 32 $ 61 $ 61 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Company has evaluated subsequent events through August 15, 2022 , which represents the date on which the Consolidated Financial Statements were issued. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
Segment Reporting | Our two reportable segments reflect the way performance is assessed and resources are allocated by our Chief Executive Officer, who is our chief operating decision maker (“CODM”). Advanced Sensing and Computing (“ASC”) The ASC segment provides sensing and computing systems and subsystem solutions to the U.S. military and allied nations focused on solving the most complex threat dynamics facing our service men and women today. We provide world class sensing products in all warfighting domains along with the computation systems to provide situational understanding. Our technologies and products are deployed on nearly all military platforms across land, sea, air, cyberspace, and space on individual soldiers, ground vehicles, ships, aircraft, and satellites. We have market leading capabilities in electro-optic and infrared imaging, advanced lasers, electronic warfare and cyber, communications, and computing in these domains. Integrated Mission Systems (“IMS”) The IMS segment provides critical force protection, platform integration, transportation and logistics and power conversion and propulsion systems to the U.S. military and its allies. Our force protection systems provide much needed protection for our service members and military assets from evolving and proliferating threats and include advanced solutions for counter-unmanned aerial systems, short-range air defense systems and active protection systems on ground vehicles. Additionally, we provide power conversion and propulsion systems for the U.S. Navy’s top priority shipbuilding programs, building on our legacy of providing power components and systems for nearly all naval combat vessels for three decades, positioning us to continue as a leading provider of electrical ship propulsion systems and components for the U.S. Navy and its allies. Other The Company separately presents the unallocable costs associated with corporate functions and certain non-operating subsidiaries of the Company as Corporate & Eliminations. |
Basis of Presentation | Basis of presentation The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of DRS, its wholly owned subsidiaries and its controlling interests. Interests in joint ventures that are controlled by the Company, or for which the Company is otherwise deemed to be the primary beneficiary, are consolidated. For joint ventures in which the Company does not have a controlling interest, but exerts significant influence, the Company applies the equity method of accounting. All intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to current year presentation. Interim Financial Statements . The unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These rules and regulations permit some of the information and footnote disclosures included in financial statements prepared in accordance with U.S. GAAP to be condensed or omitted. These unaudited Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements as of and for the year ended December 31, 2021 filed as Exhibit 99.1 to the Current Report on Form 8-K filed on August 2, 2022. |
Use of Estimates | Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant of these estimates and assumptions relate to the recognition of contract revenues and estimated costs to complete contracts in process, recoverability of reported amounts of goodwill, long-lived assets and intangible assets, valuation of pensions and other postretirement benefits, the valuation of deferred tax assets and liabilities and the valuation of unrecognized tax benefits. Actual results could differ from these estimates. |
Revenue Recognition and Cost of Revenues | Revenue RecognitionOur revenues consist of sales of products (tangible goods) and sales of services to customers. We recognize the majority of our revenue from contracts with customers using an over time, cost-to-cost method of accounting. On certain other contracts, primarily time and material (“T&M”) and cost-plus contracts, revenue is recognized using the right-to-invoice practical expedient as we are contractually able to bill our customer based on control transferred to the customer.Cost of RevenuesCost of revenues includes materials, labor and overhead costs incurred in the manufacturing, design, and provision of products and services sold in the period as well as warranty costs. Material costs include raw materials, purchased components and sub-assemblies, outside processing and inbound freight costs. Labor and overhead costs consist of direct and indirect manufacturing costs, including wages and fringe benefits, operating supplies, depreciation and amortization, occupancy costs, and purchasing, receiving and inspection costs. The Company recognizes revenue for each separately identifiable performance obligation in a contract representing an obligation to transfer a distinct good or service to a customer. In most cases, goods and services provided under the Company’s contracts are accounted for as single performance obligations due to the complex and integrated nature of our products and services. These contracts generally require significant integration of a group of goods and/or services to deliver a combined output. In some contracts, the Company provides multiple distinct goods or services to a customer. In those cases, the Company accounts for the distinct contract deliverables as separate performance obligations and allocates the transaction price to each performance obligation based on its relative standalone selling price, which is generally estimated using cost plus a reasonable margin. We classify revenues as products or services on our Consolidated Statements of Earnings based on the predominant attributes of the performance obligations. While the Company provides warranties on certain contracts, we typically do not provide for services beyond standard assurances and therefore do not consider warranties to be separate performance obligations. Typically we enter into three types of contracts: fixed-price contracts, cost-plus contracts and T&M contracts (cost-plus contracts and T&M contracts are aggregated below as flexibly priced contracts). The majority of our total revenues are derived from fixed-price contracts; refer to the revenue disaggregation disclosures that follow. For fixed-price contracts, customers agree to pay a fixed amount, negotiated in advanced for a specified scope of work. For cost-plus contracts typically we are reimbursed for allowable or otherwise defined total costs (defined as cost of revenues plus allowable general and administrative expenses) incurred, plus a fee. The contracts may also include incentives for various performance criteria, including quality, timeliness and cost-effectiveness. In addition, costs are generally subject to review by clients and regulatory audit agencies, and such reviews could result in costs being disputed as non-reimbursable under the terms of the contract. T&M contracts provide for reimbursement of labor hours expended at a contractual fixed labor rate per hour, plus the actual costs of material and other direct non-labor costs. The fixed labor rates on T&M contracts include amounts for the cost of direct labor, indirect contract costs and profit. Estimating the transaction price for an arrangement requires judgment and is based on expected results which are determined using the Company’s historical data. We estimate that the revenue that we expect to be entitled to receive from a customer to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. Revenue from contracts with customers is recognized when the performance obligations are satisfied through the transfer of control over the good or service to the customer, which may occur either over time or at a point in time. Revenues for the majority of our contracts are measured as determined by the ratio of cumulative costs incurred to date to estimated total contract costs at completion (the "cost-to-cost method"). We believe this is an appropriate measure of progress toward satisfaction of performance obligations as this measure most accurately depicts the progress of our work and transfer of control to our customers. Due to the long-term nature of many of our contracts, developing the estimated total cost at completion and total transaction price often requires judgment. Factors that must be considered in estimating the cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance. Conversely, if the requirements for the recognition of contracts over time are not met, revenue is recognized at a point in time when control transfers to the customer, which is generally upon transfer of title. In such cases, the production that is in progress and costs that will be recognized at a future point in time are reported within "inventories". Costs to obtain a contract are incremental direct costs incurred to obtain a contract with a customer, including sales commissions and dealer fees, and are capitalized if material. Costs to fulfill a contract include costs directly related to a contract or specific anticipated contract (e.g., certain design costs) that generate or enhance our ability to satisfy our performance obligations under these contracts. These costs are capitalized to the extent they are expected to be recovered from the associated contract. Contract Assets and Liabilities The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities. The change in the balances of the Company’s contract assets and liabilities primarily results from timing differences between revenue recognition and customer billings and/or payments. Contract assets related to amounts withheld by customers until contract completion are not considered a significant financing component of our contracts because the intent is to protect the customers from our failure to satisfactorily complete our performance obligations. Payments received from customers in advance of revenue recognition (contract liabilities) are not considered a significant financing component of our contracts because they are utilized to pay for contract costs within a one-year period or are requested by us to ensure the customers meet their payment obligations. Value of Remaining Performance Obligations The value of remaining performance obligations, which we also refer to as total backlog, includes the following components: • Funded - Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts. • Unfunded - Unfunded backlog represents the revenue value of firm orders for products and services under existing contracts for which funding has not yet been appropriated less funding previously recognized on these contracts. |
Research and Development Expenses | Research and Development ExpensesWe conduct research and development (“R&D”) activities using our own funds (referred to as company-funded R&D or independent research and development (“IR&D”)) and under contractual arrangements with our customers (referred to as customer-funded R&D) to enhance existing products and services and to develop future products, solutions, and technologies. R&D costs include basic research, applied research, concept formulation studies, design, development, and related test activities. IR&D costs are allocated to customer contracts as part of the general and administrative overhead costs and generally recoverable on our customer contracts with the U.S. Government. Customer-funded R&D costs are charged directly to the related customer contract. Substantially all R&D costs are charged to cost of revenues as incurred. |
Foreign Currency | Foreign CurrencySignificant transactions in foreign currencies are translated into U.S. dollars at the approximate prevailing rate at the time of the transaction. Foreign exchange transaction gains and losses in the second quarter and first six months of 2022 and 2021 were immaterial to the Company's results of operations. The operations of the Company's foreign subsidiaries are translated from the local (functional) currencies into U.S. dollars using weighted average rates of exchange during each monthly period. The rates of exchange at each balance sheet date are used for translating certain balance sheet accounts and gains or losses resulting from these translation adjustments are included in the accompanying Consolidated Balance Sheets as a component of other comprehensive earnings. |
Cash and Cash Equivalents | Cash and Cash EquivalentsCash and cash equivalents include cash on hand, deposits with banks or other short-term, highly liquid investments with original maturities of three months or less. |
Accounts Receivable | Accounts ReceivableAccounts receivable consist of amounts billed and currently due from customers. We maintain an allowance recorded in the Allowance for Credit Losses account that is estimated and recorded utilizing relevant information about past events, including historical experience, current conditions and a reasonable and supportable forecast that affects the collectability of the related financial asset. |
Inventories | InventoriesInventories are recorded at the lower of cost (determined by either actual, weighted average or first-in, first-out methods) or net realizable value, and include direct production costs as well as indirect costs, such as factory overhead. The net realizable value is calculated as the expected sales price in the course of normal operations net of estimated costs to finish and sell the goods. |
Property, Plant and Equipment | Property, Plant and EquipmentProperty, plant and equipment is carried at cost less accumulated depreciation. Depreciation is calculated on the straight-line method. The estimated useful lives of plant, machinery and equipment and building and building improvements generally range from 3 to 10 years and 15 to 40 years, respectively. Leasehold improvements are amortized over the shorter of the estimated useful life of the improvements or the remaining life of the lease.When assets are retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the Consolidated Balance Sheets, and the net gain or loss is included in the determination of net earnings. Maintenance and repairs are charged to operations as incurred and renewals and improvements are capitalized. |
Goodwill | Goodwill Goodwill is assigned to reporting units and is reviewed for impairment at the reporting unit level on an annual basis, or whenever changes in circumstances indicate that the carrying amount may not be recoverable. A reporting unit is an operating segment, or one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by the segment manager. Two or more components of an operating segment may be aggregated and deemed a single reporting unit if the components have similar economic characteristics. Based upon the aggregation criteria the Company concluded it had seven reporting units at both June 30, 2022 and December 31, 2021. The annual impairment test is conducted as of December 31. The Company did not identify any triggering events during the six months ended June 30, 2022 or June 30, 2021. |
Acquired Identifiable Intangible Assets | Identifiable intangible assets represent assets acquired as part of the Company's business acquisitions and include customer and program/contract-related assets. The values assigned to acquired identifiable intangible assets are determined as of the date of acquisition based on estimates and judgments regarding expectations for the estimated future after-tax cash flows from those assets over their lives, including the probability of expected future contract renewals and revenues, all of which are discounted to present value.Other intangible assets mainly refer to the fair value of existing customer contractual relationships attributable to the acquired business and patents which are being amortized over their respective lives. The fair value of intangible assets typically is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows (including cash flows for working capital) arising from backlog and follow-on sales to the customer over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory assets charge, all of which is discounted to present value. |
Long-Lived Assets | The Company assesses the recoverability of the carrying value of its long-lived assets and intangible assets with finite useful lives whenever events or changes in circumstances indicate that the carrying amount of the assets or asset group may not be recoverable. If there are any indicators of impairment present, the Company then evaluates the recoverability of the potentially impaired long-lived assets and acquired identifiable intangible assets based upon expectations of undiscounted net cash flows from such assets. If the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset or asset group, a loss is recognized for the difference between the estimated fair value and the carrying amount of the assets. Assets to be disposed of, including those of discontinued operations, are reported at the lower of the carrying amount or fair value, less the costs to sell. |
Derivative Financial Instruments | Derivative Financial InstrumentsThe Company does not use derivative financial instruments for trading purposes. All derivative instruments are carried on the Consolidated Balance Sheets as either assets or liabilities at fair value. The classification of gains and losses resulting from changes in the fair values of derivatives depends on the intended use of the derivative and its resultant designation. The Company had no significant derivative or hedging instruments for the periods presented. |
Pension and Other Postretirement Benefits | Pension and Other Postretirement BenefitsThe obligations for the Company's pension plans and postretirement benefit plans and the related annual costs of employee benefits are calculated based on several long-term assumptions, including discount rates for participant benefit liabilities, rates of return on plan assets, expected annual rates of salary increases for employee participants in the case of pension plans and expected annual increases in the costs of medical and other health care benefits in the case of postretirement benefit plans. These long-term assumptions are subject to revision based on changes in interest rates, financial market conditions, expected versus actual returns on plan assets, participant mortality rates and other actuarial assumptions, including future rates of salary increases, benefit formulas and levels, and rates of increase in the costs of benefits. Changes in these assumptions, if significant, can materially affect the amount of annual net periodic benefit costs recognized in the Company's results of operations from one year to the next, the liabilities for the pension plans and postretirement benefit plans and the Company's annual cash requirements to fund these plans. The Company maintains multiple pension plans, both contributory and non-contributory, covering employees at certain locations. Eligibility requirements for participation in the plans vary, and benefits generally are based on the participant's compensation and years of service, as defined in the respective plan. The Company's funding policy generally is to contribute in accordance with cost accounting standards that affect government contractors, subject to the Tax Code and regulations thereunder. Plan assets are invested primarily in equities, bonds (both corporate and U.S. government), U.S. government-sponsored entity instruments, cash and cash equivalents and real estate. The Company also provides postretirement medical benefits for certain retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company's postretirement benefit plans. The Company's contractual arrangements with the U.S. government provide for the recovery of contributions to a Voluntary Employees' Beneficiary Association (“VEBA”) trust and, for non-funded plans, recovery of claims on a pay-as-you-go basis, subject to the Tax Code and regulations thereunder, with the retiree generally paying a portion of the costs through contributions, deductibles and coinsurance provisions. The Company also maintains certain non-contributory and unfunded supplemental retirement plans. Eligibility for participation in the supplemental retirement plans is limited, and benefits generally are based on the participant's compensation and/or years of service. |
Income Taxes | Income TaxesWe and US Holding have entered into a Tax Allocation Agreement (“Tax Allocation Agreement”), dated as of November 16, 2020, with members of an affiliated group, as defined in Section 1504(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Tax Code”), members of one or more consolidated, combined, unitary or similar state tax groups and additional parties who are part of an “expanded affiliated group” for certain tax purposes. The agreement provides for the method of computing and allocating the consolidated U.S. federal tax liability of the affiliated group among its members and of allocating any state group tax liabilities among the state members for the taxable year ending December 31, 2020 and each subsequent year in which the parties are members of a group (whether federal or state). The agreement also provides for reimbursement of US Holding and/or DRS for payment of such tax liabilities, for compensation of any member for use of its “net operating loss” or “tax credits” in arriving at such tax liabilities and the allocation and payment of any refund arising from a carryback of net operating losses or tax credits from subsequent taxable years. Under the agreement, the parties have agreed to calculate and allocate their respective tax liabilities and other tax attributes for taxable years beginning with the first consolidated taxable year that included DRS (i.e., the taxable year ended December 31, 2008) as if the agreement was then in effect. We calculate the provision for incomes taxes during interim periods by applying an estimate of our annual effective tax rate for the full year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items). The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Income taxes as presented attribute deferred income taxes of US Holding to DRS in a manner that is systematic, rational and consistent with the asset and liability method and the governing Tax Allocation Agreement which allocates the tax liability amongst the entities, including DRS. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of DRS’ assets and liabilities and are adjusted for changes in tax rates and tax laws when such changes are enacted. In general, the taxable income of DRS is included in the consolidated U.S. federal and state tax returns of US Holding. Where applicable, US Holding’s current portion of U.S. federal income taxes payable were offset against DRS’ net operating loss carryforwards in the period the related tax expense was recorded. Consequently, our net operating loss carryforwards are deemed to have been settled with US Holding in each year in an amount commensurate with the carrying value of the tax effected net operating loss utilized. If management determines that some portion or all of a deferred tax asset is not “more likely than not” to be realized, a valuation allowance is recorded as a component of the income tax provision to reduce the deferred tax asset to the amounts expected to be realized. In determining whether the Company’s deferred tax assets are realizable, management considers all evidence, both positive and negative, including the history of financial reporting earnings, existing taxable temporary differences and their projected reversals, as well as projected future income and tax planning strategies. We believe it is more likely than not that we will generate sufficient taxable income in future periods to realize our deferred tax assets, subject to the valuation allowances recognized. The Company assesses its tax positions for all periods open to examination by tax authorities based on the latest available information. Those positions are evaluated to determine whether they will more likely than not be sustained upon examination by the relevant taxing authorities. Liabilities for unrecognized tax benefits are measured based on the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. These unrecognized tax benefits are recorded as a component of income tax expense. Interest and penalties related to unrecognized tax benefits are not material. |
Earnings Per Share | Earnings Per ShareBasic earnings per share (“EPS”) is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during each period. The computation of diluted EPS includes the dilutive effect of outstanding stock-based compensation awards, only in periods in which such effect would have been dilutive for the period. In February 2021, the Company completed a forward stock split of 1,450,000 - for- 1 share of common stock. The consolidated financial statements have been adjusted to reflect the forward stock split for all periods presented. There were 100 shares and 145 million basic and diluted common shares outstanding before and after the forward stock split, respectively, for all periods presented. |
Fair Value Measurements | Fair Value MeasurementsFair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant on the measurement date. We are required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value, and to utilize a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three hierarchical levels used to measure fair value are as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices that are directly or indirectly observable. Level 3 — Significant inputs to the valuation model are unobservable. |
Financial Instruments | Financial InstrumentsOur financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities. Financial instruments are reported in the Consolidated Balance Sheets at carrying value, which other than the 7.5% Term loan due November 30, 2023, approximate fair value. |
Acquisitions | Acquisitions Our consolidated financial statements include the operations of acquired businesses from the date of acquisition. We account for acquired businesses using the acquisition method of accounting, which requires that any assets acquired and liabilities assumed be measured at their respective fair values on the acquisition date. The accounting for business combinations requires the Company to make significant judgments and estimates. Any excess of the fair value of consideration transferred over the assigned values of the net assets acquired is recognized as goodwill. As previously announced, on June 21, 2022, we entered into the Agreement and Plan of Merger, dated as of June 21, 2022 (the “merger agreement”), by and among the Company, RADA Electronic Industries Ltd (“RADA”) and Blackstart Ltd, a company organized under the laws of the State of Israel and a wholly owned subsidiary of DRS (“Merger Sub”). Upon the terms and subject to the conditions of the merger agreement, and in accordance with the Companies Law, 5759-1999, of the State of Israel, at the effective time of the merger contemplated by the merger agreement (the “merger”), Merger Sub will be merged with and into RADA, with RADA as the surviving company of the merger and thereby becoming a wholly owned subsidiary of DRS. At the effective time of the merger (the “effective time”), each ordinary share of RADA, par value New Israeli Shekel 0.03 per share (“RADA shares”), issued and outstanding immediately prior to the effective time will be converted into and become exchangeable for one share of common stock of DRS, par value $0.01 per share (“DRS common stock”). Immediately prior to the effective time, the shares of DRS common stock held by US Holding, the current sole stockholder of DRS, will be split (rounded up to the nearest whole share), as necessary, such that, immediately following the effective time and the issuance of the shares of DRS common stock to holders of RADA shares and the treatment of options to purchase RADA shares: (A) US Holding will hold 80.5% of the issued and outstanding shares of DRS common stock on a fully diluted basis (with US Holding’s ownership percentage including 50% of any awards or other equity interests that DRS may issue pursuant to entitlements under any grants of certain one-time special awards of restricted stock units (the “One-Time Awards”) and the foregoing percentage calculation excluding any awards or other equity interests that DRS may issue pursuant to entitlements under the DRS’s long term incentive plan and 50% of any awards or other equity interests that DRS may issue pursuant to entitlements in connection with any grants of One-Time Awards, and such foregoing percentage will assume a reference price for RADA options equal to the volume-weighted average price of the RADA shares on the NASDAQ for the ten trading days immediately prior to the closing date); and (B) the holders of RADA shares, RADA vested options and RADA unvested options (or DRS options issued pursuant to the provisions of the merger agreement) will hold or have entitlements to 19.5% of the issued and outstanding shares of DRS common stock on a fully diluted basis (the foregoing percentage calculation excluding any awards or other equity interests that DRS may issue pursuant to entitlements under the DRS long-term incentive plan or the issuance of any One-Time Awards). Each of DRS’s and RADA’s obligation to consummate the merger is subject to the satisfaction or waiver of a number of conditions specified in the merger agreement. The merger is expected to close in the fourth quarter of 2022. On August 3, 2022, we filed a registration statement on Form S-4 with the SEC for the shares of DRS common stock to be issued in the merger, which has not yet been declared effective by the SEC. |
Investments | Investments Investments where we have the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in other noncurrent assets on our Consolidated Balance Sheets. Significant influence typically exists if we have a 20% to 50% ownership interest in the investee. Under this method of accounting, our share of the net earnings or losses of the investee is included in operating profit in other income, net on our Consolidated Statements of Earnings since the activities of the investee are closely aligned with the operations of the business segment holding the investment. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is therefore recorded during the current period. The Company’s cost method investment consists of an investment in a private company in which we do not have the ability to exercise significant influence over its operating and financial activities. Management evaluates this investment for possible impairment quarterly. |
Variable Interest Entities | Variable Interest Entities The Company occasionally forms joint ventures and/or enters into arrangements with special purpose limited liability companies for the purpose of bidding and executing on specific projects. The Company analyzes each such arrangement to determine whether it represents a variable interest entity (“VIE”). If the arrangement is determined to be a VIE, the Company assesses whether it is the primary beneficiary of the VIE and if it is, consequently required to consolidate the VIE. The Company did not have any investment in VIEs for the periods presented. |
Revenue from Contracts with C_2
Revenue from Contracts with Customers (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Change in Estimate at Completion Adjustments | EAC adjustments had the following impacts to revenue for the periods presented: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 Revenue $ (10) $ (8) $ (11) $ (9) Total % of Revenue 1.6 % 1.3 % 0.9 % 0.7 % |
Schedule of Contract Assets and Contract Liabilities | (Dollars in millions) June 30, 2022 December 31, 2021 Contract assets $ 874 $ 743 Contract liabilities 156 174 Net contract assets $ 718 $ 569 |
Schedule of Remaining Performance Obligations, Expected Timing of Satisfaction | The following table summarizes the value of our total backlog as of June 30, 2022, incorporating both funded and unfunded components: Backlog: June 30, 2022 (Dollars in millions) Total Backlog $ 3,051 |
Schedule of Disaggregation of Revenue | We believe these categories best depict how the nature, amount, timing and uncertainty of ASC revenue and cash flows are affected by economic factors: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 Revenue by Geographical Region United States $ 367 $ 457 $ 739 $ 901 International 74 28 96 63 Intersegment Sales 3 4 5 7 Total $ 444 $ 489 $ 840 $ 971 Revenue by Customer Relationship Prime contractor $ 216 $ 279 $ 448 $ 555 Subcontractor 225 206 387 409 Intersegment Sales 3 4 5 7 Total $ 444 $ 489 $ 840 $ 971 Revenue by Contract Type Firm Fixed Price $ 394 $ 419 $ 736 $ 845 Flexibly Priced (1) 47 66 99 119 Intersegment Sales 3 4 5 7 Total $ 444 $ 489 $ 840 $ 971 ________________ (1) Includes revenue derived from time-and-materials contracts. Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 Revenue by Geographical Region United States $ 178 $ 160 $ 390 $ 349 International 8 14 14 26 Intersegment Sales 1 — 1 — Total $ 187 $ 174 $ 405 $ 375 Revenue by Customer Relationship Prime contractor $ 36 $ 42 $ 69 $ 86 Subcontractor 150 132 335 289 Intersegment Sales 1 — 1 — Total $ 187 $ 174 $ 405 $ 375 Revenue by Contract Type Firm Fixed Price $ 154 $ 146 $ 347 $ 316 Flexibly Priced (1) 32 28 57 59 Intersegment Sales 1 — 1 — Total $ 187 $ 174 $ 405 $ 375 ________________ (1) Includes revenue derived from time-and-materials contracts. |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Receivables [Abstract] | |
Schedule of Accounts Receivable | Accounts receivable consist of the following: (Dollars in millions) June 30, 2022 December 31, 2021 Accounts receivable $ 126 $ 157 Less allowance for credit losses (1) (1) Accounts receivable, net $ 125 $ 156 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory, Current | Inventories consists of the following: (Dollars in millions) June 30, 2022 December 31, 2021 Raw materials $ 49 $ 43 Work in progress 198 161 Finished goods 2 1 Total $ 249 $ 205 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | Property, plant and equipment by major asset class consists of the following: (Dollars in millions) June 30, 2022 December 31, 2021 Land, buildings and improvements $ 321 $ 312 Plant and machinery 194 191 Equipment and other 303 298 Total property, plant and equipment, at cost 818 801 Less accumulated depreciation (455) (437) Total property, plant and equipment, net $ 363 $ 364 |
Other Liabilities (Tables)
Other Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Other Liabilities Disclosure [Abstract] | |
Other Liabilities | A summary of significant other liabilities by balance sheet caption follows: (Dollars in millions) June 30, 2022 December 31, 2021 Salaries, wages and accrued bonuses $ 46 $ 70 Fringe benefits 75 74 Litigation 10 10 Restructuring costs 1 4 Provision for contract losses 57 48 Operating lease liabilities 22 24 Other (1) 68 65 Total other current liabilities $ 279 $ 295 Operating lease liabilities $ 68 $ 73 Other 2 1 Total other noncurrent liabilities $ 70 $ 74 ________________ (1) Consists primarily of taxes payable, environmental remediation reserves and warranty reserves. See Note 15: Commitments and Contingencies for more information regarding the warranty provision |
Goodwill (Tables)
Goodwill (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | Changes in the carrying amount of goodwill by reportable segment are as follows: (Dollars in millions) ASC IMS Total Balance as of December 31, 2021 $ 652 $ 419 $ 1,071 Reclassification to assets held for sale (117) — (117) Acquisition adjustment (2) (2) Balance as of June 30, 2022 533 419 952 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | The following disclosure presents certain information regarding the Company's intangible assets as of June 30, 2022 and December 31, 2021. All intangible assets are being amortized over their estimated useful lives, as indicated below, with no estimated residual values. June 30, 2022 December 31, 2021 (Dollars in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 957 $ (913) $ 44 $ 957 $ (908) $ 49 Patents and licenses 9 (6) 3 9 (6) 3 Total intangible assets $ 966 $ (919) $ 47 $ 966 $ (914) $ 52 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Schedule of Deferred Tax Assets and Liabilities | The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of June 30, 2022 and December 31, 2021 are as follows: (Dollars in millions) June 30, 2022 December 31, 2021 Deferred tax assets $ 107 $ 120 Valuation allowance 10 10 Deferred tax assets 97 110 Deferred tax liabilities 51 54 Deferred tax assets, net $ 46 $ 56 |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | The Company’s debt consists of the following: (Dollars in millions) June 30, 2022 December 31, 2021 7.5% Term loan due November 30, 2023 (1) $ 139 $ 139 5.0% Daylight term loan due October 15, 2024 (1) 78 78 Borrowings under revolving credit facility (1) 110 — Finance lease and other 162 161 Short-term borrowings 1 15 Total debt principal 490 393 Less unamortized debt issuance costs and discounts — — Total debt, net 490 393 Less short-term borrowings and current portion of long-term debt (140) (41) Total long-term debt $ 350 $ 352 ________________ (1) The Company’s debt with related parties consists of two term loans and a working capital credit facility with US Holding, as described below. |
Pension and Other Postretirem_2
Pension and Other Postretirement Benefits (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Retirement Benefits [Abstract] | |
Schedule of Net Benefit Costs | The following table summarizes the components of net periodic benefit cost for the Company's pension, postretirement and supplemental retirement plans for the three months ended June 30: Defined Benefit Pension Plans Postretirement Benefit Plan Supplemental Retirement Plans (Dollars in millions) Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Service cost $ — $ — $ — $ — $ — $ — Interest cost 1 2 — — — — Less Expected return on plan assets (2) (2) — — — — Amortization of net actuarial loss (gain) 1 — — — — — Amortization of prior service cost — — — — — — Settlement expense (income) — — — — — — Net periodic benefit cost $ — $ — $ — $ — $ — $ — The following table summarizes the components of net periodic benefit cost for the Company's pension, postretirement and supplemental retirement plans for the six months ended June 30: Defined Benefit Pension Plans Postretirement Benefit Plan Supplemental Retirement Plans (Dollars in millions) Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Service cost $ — $ — $ — $ — $ — $ — Interest cost $ 3 $ 3 — — — — Less Expected return on plan assets $ (4) $ (4) — — — — Amortization of net actuarial loss (gain) $ 1 $ 1 — — — — Amortization of prior service cost $ — $ — — — — — Settlement expense (income) $ 1 $ — — — — — Net periodic benefit cost $ 1 $ — $ — $ — $ — $ — |
Commitment and Contingencies (T
Commitment and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Product Warranty Liability | The following is a summary of changes in the product warranty balances during the period ended June 30, 2022: (Dollars in millions) Balance as of December 31, 2021 $ 19 Additional provision 6 Reversal and utilization (6) Balance as of June 30, 2022 19 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Segment Reporting [Abstract] | |
Schedule of Total Revenues and Intersegment Revenues by Segment | Total revenues and intersegment revenues by segment for the three- and six-month periods ended June 30, 2022 and, June 30, 2021 consists of the following: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 ASC $ 444 $ 489 $ 840 $ 971 IMS 187 174 405 375 Corporate & Eliminations (4) (4) (6) (7) Total revenue $ 627 $ 658 $ 1,239 $ 1,339 (Dollars in millions) 2022 2021 2022 2021 ASC $ 3 $ 4 $ 5 $ 7 IMS 1 — 1 — Total intersegment revenue $ 4 $ 4 $ 6 $ 7 |
Schedule of Depreciation, Assets by Segment and EBITDA Reconciliation to Net Earnings | Depreciation by segment for the three- and six-month periods ended June 30, 2022 and June 30, 2021 consists of the following: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 ASC $ 9 $ 8 $ 18 $ 16 IMS 5 4 9 8 Total depreciation $ 14 $ 12 $ 27 $ 24 Total assets by segment as of June 30, 2022 and December 31, 2021 consist of the following: (Dollars in millions) June 30, 2022 December 31, 2021 ASC $ 1,619 $ 1,545 IMS 1,124 1,145 Corporate & Eliminations 126 379 Held for Sale 174 — Total assets $ 3,043 $ 3,069 Reconciliation of reportable segment Adjusted EBITDA to Net Earnings (loss) consists of the following: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2022 2021 2022 2021 Adjusted EBITDA ASC $ 57 $ 61 $ 89 $ 115 IMS 10 7 51 25 Corporate & Eliminations — 1 — — Total Adjusted EBITDA 67 69 140 140 Amortization of intangibles (2) (2) (4) (4) Depreciation (14) (12) (27) (24) Restructuring costs — — — — Interest expense (10) (9) (18) (18) Deal related transaction costs (8) — (10) (4) Acquisition and divestiture related expenses — — — — Foreign exchange — (1) — (1) COVID-19 response costs — (2) — (5) Non-service pension expense (1) — (1) — Other one-time non-operational events — — — — Income tax (provision) benefit (7) (11) (19) (23) Net earnings $ 25 $ 32 $ 61 $ 61 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Concentration Risk (Details) - segment | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Concentration Risk [Line Items] | ||||
Number of reportable segments | 2 | |||
U.S. Department Of Defense | Revenue from Contract with Customer Benchmark | Government Contracts Concentration Risk | ||||
Concentration Risk [Line Items] | ||||
Concentration risk, percentage | 78% | 85% | 82% | 85% |
International And Commercial Customers | Revenue from Contract with Customer Benchmark | Customer Concentration Risk | ||||
Concentration Risk [Line Items] | ||||
Concentration risk, percentage | 22% | 15% | 18% | 15% |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Property, Plant and Equipment (Details) | 6 Months Ended |
Jun. 30, 2022 | |
Plant and machinery | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful life (in years) | 3 years |
Plant and machinery | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful life (in years) | 10 years |
Building and Building Improvements | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful life (in years) | 15 years |
Building and Building Improvements | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful life (in years) | 40 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Goodwill (Details) - reportingUnit | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2021 | |
Accounting Policies [Abstract] | ||
Number of reporting units | 7 | 7 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Earnings Per Share (Details) | 1 Months Ended | |||
Feb. 28, 2021 shares | Jun. 30, 2022 shares | Dec. 31, 2021 shares | Jan. 31, 2021 shares | |
Accounting Policies [Abstract] | ||||
Stockholders' Equity Note, Stock Split, Conversion Ratio | 1,450,000 | |||
Basic and Diluted common shares outstanding (in shares) | 145,000,000 | 145,000,000 | 145,000,000 | 100 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Financial Instruments (Details) | Jun. 30, 2022 |
Term Loan | Line of Credit | |
Debt Instrument [Line Items] | |
Stated interest rate (as percent) | 7.50% |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Acquisitions (Details) | Jun. 30, 2022 $ / shares | Jun. 21, 2022 $ / shares | Jun. 21, 2022 ₪ / shares | Dec. 31, 2021 $ / shares |
Business Acquisition [Line Items] | ||||
Common stock, par value (in monetary per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |
Common stock, exchange ratio | 1 | 1 | ||
Holders Of RADA's Equity Interests | ||||
Business Acquisition [Line Items] | ||||
Business combination, percent of ownership after transaction | 19.50% | 19.50% | ||
RADA Electronic Industries Ltd | ||||
Business Acquisition [Line Items] | ||||
Common stock, par value (in monetary per share) | ₪ / shares | ₪ 0.03 | |||
US Holdings | ||||
Business Acquisition [Line Items] | ||||
Business combination, percent of ownership after transaction | 80.50% | 80.50% | ||
Business combination, percent of ownership of one time awards | 50% | 50% |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Divestitures/Held for Sale (Details) - USD ($) $ in Millions | Aug. 01, 2022 | Jul. 08, 2022 | Jun. 30, 2022 | Mar. 21, 2022 |
US Holdings | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Dividends payable | $ 396 | |||
Global Enterprise Solutions | Disposal Group, Held-for-sale, Not Discontinued Operations | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Sale of business, consideration to be received | $ 450 | |||
Global Enterprise Solutions | Disposal Group, Disposed of by Sale, Not Discontinued Operations | Subsequent Event | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Proceeds from divestiture of businesses | $ 427 | |||
Advanced Acoustic Concepts | Disposal Group, Held-for-sale, Not Discontinued Operations | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Sale of business, consideration to be received | $ 56 | |||
Advanced Acoustic Concepts | Disposal Group, Disposed of by Sale, Not Discontinued Operations | Subsequent Event | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Proceeds from divestiture of interest in joint venture | $ 56 |
Revenue from Contracts with C_3
Revenue from Contracts with Customers - Estimate at Completion Adjustments (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Change in Accounting Estimate [Line Items] | ||||
Revenue | $ 627 | $ 658 | $ 1,239 | $ 1,339 |
Contracts Accounted for under Percentage of Completion | ||||
Change in Accounting Estimate [Line Items] | ||||
Revenue | $ (10) | $ (8) | $ (11) | $ (9) |
Total % of Revenue | 1.60% | 1.30% | 0.90% | 0.70% |
Revenue from Contracts with C_4
Revenue from Contracts with Customers - Contract Assets and Liabilities (Details) - USD ($) $ in Millions | Jun. 30, 2022 | Dec. 31, 2021 |
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 874 | $ 743 |
Contract liabilities | 156 | 174 |
Net contract assets | $ 718 | $ 569 |
Revenue from Contracts with C_5
Revenue from Contracts with Customers - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Revenue from Contract with Customer [Abstract] | ||||
Contract with customer, liability, revenue recognized | $ 33 | $ 20 | $ 107 | $ 89 |
Revenue from Contracts with C_6
Revenue from Contracts with Customers - Remaining Performance Obligations, Backlog Schedule (Details) $ in Millions | Jun. 30, 2022 USD ($) |
Revenue from Contract with Customer [Abstract] | |
Total Backlog | $ 3,051 |
Revenue from Contracts with C_7
Revenue from Contracts with Customers - Remaining Performance Obligations, Narrative (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01 | Jun. 30, 2022 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, remaining performance obligation, percentage | 39% |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 6 months |
Revenue from Contracts with C_8
Revenue from Contracts with Customers - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Disaggregation of Revenue [Line Items] | ||||
Total revenues | $ 627 | $ 658 | $ 1,239 | $ 1,339 |
Intersegment Sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | (4) | (4) | (6) | (7) |
ASC | Prime contractor | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 216 | 279 | 448 | 555 |
ASC | Subcontractor | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 225 | 206 | 387 | 409 |
ASC | Firm Fixed Price | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 394 | 419 | 736 | 845 |
ASC | Flexibly Priced | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 47 | 66 | 99 | 119 |
ASC | Intersegment Sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 3 | 4 | 5 | 7 |
ASC | Operating Segments | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 444 | 489 | 840 | 971 |
IMS | Prime contractor | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 36 | 42 | 69 | 86 |
IMS | Subcontractor | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 150 | 132 | 335 | 289 |
IMS | Firm Fixed Price | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 154 | 146 | 347 | 316 |
IMS | Flexibly Priced | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 32 | 28 | 57 | 59 |
IMS | Intersegment Sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 1 | 0 | 1 | 0 |
IMS | Operating Segments | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 187 | 174 | 405 | 375 |
United States | ASC | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 367 | 457 | 739 | 901 |
United States | IMS | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 178 | 160 | 390 | 349 |
International | ASC | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 74 | 28 | 96 | 63 |
International | IMS | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | $ 8 | $ 14 | $ 14 | $ 26 |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) $ in Millions | Jun. 30, 2022 | Dec. 31, 2021 |
Receivables [Abstract] | ||
Accounts receivable | $ 126 | $ 157 |
Less allowance for credit losses | (1) | (1) |
Accounts receivable, net | $ 125 | $ 156 |
Accounts Receivable - Narrative
Accounts Receivable - Narrative (Details) - USD ($) $ in Millions | Jun. 30, 2022 | Dec. 31, 2021 |
Receivables [Abstract] | ||
Collection of sold receivables | $ 1 | $ 15 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Jun. 30, 2022 | Dec. 31, 2021 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 49 | $ 43 |
Work in progress | 198 | 161 |
Finished goods | 2 | 1 |
Total | $ 249 | $ 205 |
Property, Plant and Equipment -
Property, Plant and Equipment - Components of Property, Plant and Equipment (Details) - USD ($) $ in Millions | Jun. 30, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, at cost | $ 818 | $ 801 |
Less accumulated depreciation | (455) | (437) |
Total property, plant and equipment, net | 363 | 364 |
Land, buildings and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, at cost | 321 | 312 |
Plant and machinery | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, at cost | 194 | 191 |
Equipment and other | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, at cost | $ 303 | $ 298 |
Property, Plant and Equipment_2
Property, Plant and Equipment - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation | $ 14 | $ 12 | $ 27 | $ 24 |
Other Liabilities (Details)
Other Liabilities (Details) - USD ($) $ in Millions | Jun. 30, 2022 | Dec. 31, 2021 |
Other Liabilities Disclosure [Abstract] | ||
Salaries, wages and accrued bonuses | $ 46 | $ 70 |
Fringe benefits | 75 | 74 |
Litigation | 10 | 10 |
Restructuring costs | 1 | 4 |
Provision for contract losses | 57 | 48 |
Operating lease liabilities | 22 | 24 |
Other | $ 68 | $ 65 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] | Total other current liabilities | Total other current liabilities |
Total other current liabilities | $ 279 | $ 295 |
Operating lease liabilities | 68 | 73 |
Other | $ 2 | $ 1 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration] | Total other noncurrent liabilities | Total other noncurrent liabilities |
Total other noncurrent liabilities | $ 70 | $ 74 |
Goodwill (Details)
Goodwill (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2022 USD ($) | |
Goodwill [Roll Forward] | |
Beginning balance | $ 1,071 |
Reclassification to assets held for sale | (117) |
Acquisition adjustment | (2) |
Ending balance | 952 |
ASC | |
Goodwill [Roll Forward] | |
Beginning balance | 652 |
Reclassification to assets held for sale | (117) |
Acquisition adjustment | (2) |
Ending balance | 533 |
IMS | |
Goodwill [Roll Forward] | |
Beginning balance | 419 |
Reclassification to assets held for sale | 0 |
Acquisition adjustment | |
Ending balance | $ 419 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) $ in Millions | Jun. 30, 2022 | Dec. 31, 2021 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 966 | $ 966 |
Accumulated Amortization | (919) | (914) |
Net Carrying Amount | 47 | 52 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 957 | 957 |
Accumulated Amortization | (913) | (908) |
Net Carrying Amount | 44 | 49 |
Patents and licenses | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 9 | 9 |
Accumulated Amortization | (6) | (6) |
Net Carrying Amount | $ 3 | $ 3 |
Intangible Assets - Additional
Intangible Assets - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of intangible assets | $ 2 | $ 2 | $ 4 | $ 4 |
Minimum | Customer relationships | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-lived intangible asset, useful life | 10 years | |||
Minimum | Patents and licenses | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-lived intangible asset, useful life | 5 years | |||
Maximum | Customer relationships | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-lived intangible asset, useful life | 15 years | |||
Maximum | Patents and licenses | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-lived intangible asset, useful life | 10 years |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | Jun. 30, 2022 | Dec. 31, 2021 |
Income Tax Disclosure [Abstract] | ||
Deferred tax assets | $ 107 | $ 120 |
Valuation allowance | 10 | 10 |
Deferred tax assets | 97 | 110 |
Deferred tax liabilities | 51 | 54 |
Deferred tax assets, net | $ 46 | $ 56 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Millions | Jun. 30, 2022 | Dec. 31, 2021 |
Income Tax Disclosure [Abstract] | ||
Tax deferred asset | $ 10 | $ 11 |
Debt - Schedule of Long-Term De
Debt - Schedule of Long-Term Debt (Details) $ in Millions | Jun. 30, 2022 USD ($) loan | Dec. 31, 2021 USD ($) | Jan. 31, 2009 |
Debt Instrument [Line Items] | |||
Finance lease and other | $ 162 | $ 161 | |
Short-term borrowings | 1 | 15 | |
Total debt principal | 490 | 393 | |
Less unamortized debt issuance costs and discounts | 0 | 0 | |
Total debt, net | 490 | 393 | |
Less short-term borrowings and current portion of long-term debt | (140) | (41) | |
Total long-term debt | $ 350 | 352 | |
7.5% Term Loan due November 30, 2022 | Notes Payable, Other Payables | |||
Debt Instrument [Line Items] | |||
Stated interest rate (as percent) | 7.50% | 7.50% | |
Long-term debt, gross | $ 139 | 139 | |
5.0% Daylight Term Loan Due October 15, 2024 | Notes Payable, Other Payables | |||
Debt Instrument [Line Items] | |||
Stated interest rate (as percent) | 5% | ||
Long-term debt, gross | $ 78 | 78 | |
Revolving Credit Facility | Line of Credit | |||
Debt Instrument [Line Items] | |||
Long-term debt, gross | $ 110 | $ 0 | |
Term Loan | Notes Payable, Other Payables | Affiliated Entity | US Holdings | |||
Debt Instrument [Line Items] | |||
Number of term loans | loan | 2 | ||
Term Loan | Line of Credit | |||
Debt Instrument [Line Items] | |||
Stated interest rate (as percent) | 7.50% |
Debt - Narrative (Details)
Debt - Narrative (Details) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2022 | Dec. 31, 2021 | Jun. 30, 2017 | Jan. 31, 2009 | |
Debt Instrument [Line Items] | ||||
Collection of sold receivables | $ 1,000,000 | $ 15,000,000 | ||
Line of Credit | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Credit limit | 450,000,000 | 450,000,000 | ||
Line of credit outstanding | $ 110,000,000 | $ 0 | ||
Line of Credit | Revolving Credit Facility | LIBOR | ||||
Debt Instrument [Line Items] | ||||
Variable rate percentage | 3.50% | 3.50% | ||
Commitment fee percentage | 0.25% | |||
7.5% Term Loan due November 30, 2022 | Notes Payable, Other Payables | ||||
Debt Instrument [Line Items] | ||||
Principal amount | $ 2,000,000,000 | |||
Stated interest rate (as percent) | 7.50% | 7.50% | ||
Long-term debt, gross | $ 139,000,000 | $ 139,000,000 | ||
Fair value of long-term debt | $ 142,000,000 | 182,000,000 | ||
5.0% Daylight Term Loan Due October 15, 2024 | Notes Payable, Other Payables | ||||
Debt Instrument [Line Items] | ||||
Principal amount | $ 137,500,000 | |||
Stated interest rate (as percent) | 5% | |||
Long-term debt, gross | $ 78,000,000 | 78,000,000 | ||
Fair value of long-term debt | 81,000,000 | 84,000,000 | ||
Financial Institution Credit Facilities | Line of Credit | ||||
Debt Instrument [Line Items] | ||||
Credit limit | 65,000,000 | 65,000,000 | ||
Letters of credit outstanding | 31,000,000 | 35,000,000 | ||
Financial Institution Credit Facilities | Line of Credit | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Credit limit | 15,000,000 | |||
Line of credit outstanding | $ 0 | $ 0 | ||
Financial Institution Credit Facilities | Line of Credit | Revolving Credit Facility | LIBOR | ||||
Debt Instrument [Line Items] | ||||
Variable rate percentage | 0.50% |
Pension and Other Postretirem_3
Pension and Other Postretirement Benefits (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Pension Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $ 0 | $ 0 | $ 0 | $ 0 |
Interest cost | 1 | 2 | 3 | 3 |
Less Expected return on plan assets | (2) | (2) | (4) | (4) |
Amortization of net actuarial loss (gain) | 1 | 0 | 1 | 1 |
Amortization of prior service cost | 0 | 0 | 0 | 0 |
Settlement expense (income) | 0 | 0 | 1 | 0 |
Net periodic benefit cost | 0 | 0 | 1 | 0 |
Other Postretirement Benefits Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 0 | 0 | 0 | 0 |
Interest cost | 0 | 0 | 0 | 0 |
Less Expected return on plan assets | 0 | 0 | 0 | 0 |
Amortization of net actuarial loss (gain) | 0 | 0 | 0 | 0 |
Amortization of prior service cost | 0 | 0 | 0 | 0 |
Settlement expense (income) | 0 | 0 | 0 | 0 |
Net periodic benefit cost | 0 | 0 | 0 | 0 |
Supplemental Employee Retirement Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 0 | 0 | 0 | 0 |
Interest cost | 0 | 0 | 0 | 0 |
Less Expected return on plan assets | 0 | 0 | 0 | 0 |
Amortization of net actuarial loss (gain) | 0 | 0 | 0 | 0 |
Amortization of prior service cost | 0 | 0 | 0 | 0 |
Settlement expense (income) | 0 | 0 | 0 | 0 |
Net periodic benefit cost | $ 0 | $ 0 | $ 0 | $ 0 |
Commitment and Contingencies (D
Commitment and Contingencies (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2022 USD ($) | |
Movement in Standard Product Warranty Accrual [Roll Forward] | |
Beginning balance | $ 19 |
Additional provision | 6 |
Reversal and utilization | (6) |
Ending balance | $ 19 |
Minimum | |
Product Warranty Liability [Line Items] | |
Product warranty term | 1 year |
Maximum | |
Product Warranty Liability [Line Items] | |
Product warranty term | 3 years |
Related Party Transactions (Det
Related Party Transactions (Details) - Affiliated Entity - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2019 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | |
Leonardo S.p.A. | ||||||
Related Party Transaction [Line Items] | ||||||
Revenue from related parties | $ 51 | $ 2 | $ 54 | $ 4 | ||
Related parties amount in cost of sales | 7 | $ 5 | 18 | $ 6 | ||
Receivables | 17 | 17 | $ 2 | |||
Payables | 9 | 9 | $ 1 | |||
Unbilled receivable from related party | $ 36 | $ 36 | ||||
US Holdings | Minimum | Surplus Agreement Receivable | ||||||
Related Party Transaction [Line Items] | ||||||
Variable rate spread | 0.05% | |||||
US Holdings | Maximum | Surplus Agreement Receivable | ||||||
Related Party Transaction [Line Items] | ||||||
Variable rate spread | 0.20% |
Segment Information - Revenues
Segment Information - Revenues and Intersegment Revenues (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Segment Reporting Information [Line Items] | ||||
Revenue | $ 627 | $ 658 | $ 1,239 | $ 1,339 |
Operating Segments | ASC | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 444 | 489 | 840 | 971 |
Operating Segments | IMS | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 187 | 174 | 405 | 375 |
Total intersegment revenue | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | (4) | (4) | (6) | (7) |
Total intersegment revenue | ASC | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 3 | 4 | 5 | 7 |
Total intersegment revenue | IMS | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | $ 1 | $ 0 | $ 1 | $ 0 |
Segment Information - Depreciat
Segment Information - Depreciation and Assets (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | |
Segment Reporting Information [Line Items] | |||||
Depreciation | $ 14 | $ 12 | $ 27 | $ 24 | |
Assets | 3,043 | 3,043 | $ 3,069 | ||
Held for sale | 174 | 174 | 0 | ||
ASC | |||||
Segment Reporting Information [Line Items] | |||||
Depreciation | 9 | 8 | 18 | 16 | |
IMS | |||||
Segment Reporting Information [Line Items] | |||||
Depreciation | 5 | $ 4 | 9 | $ 8 | |
Operating Segments | ASC | |||||
Segment Reporting Information [Line Items] | |||||
Assets | 1,619 | 1,619 | 1,545 | ||
Operating Segments | IMS | |||||
Segment Reporting Information [Line Items] | |||||
Assets | 1,124 | 1,124 | 1,145 | ||
Corporate & Eliminations | |||||
Segment Reporting Information [Line Items] | |||||
Assets | $ 126 | $ 126 | $ 379 |
Segment Information - EBITDA Re
Segment Information - EBITDA Reconciliation to Net Earnings (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Adjusted EBITDA | ||||
Adjusted EBITDA | $ 67 | $ 69 | $ 140 | $ 140 |
Amortization of intangibles | (2) | (2) | (4) | (4) |
Depreciation | (14) | (12) | (27) | (24) |
Restructuring costs | 0 | 0 | 0 | 0 |
Interest expense | (10) | (9) | (18) | (18) |
Deal related transaction costs | (8) | 0 | (10) | (4) |
Acquisition and divestiture related expenses | 0 | 0 | 0 | 0 |
Foreign exchange | 0 | (1) | 0 | (1) |
COVID-19 response costs | 0 | (2) | 0 | (5) |
Non-service pension expense | (1) | 0 | (1) | 0 |
Other one-time non-operational events | 0 | 0 | 0 | 0 |
Income tax (provision) benefit | (7) | (11) | (19) | (23) |
Net earnings | 25 | 32 | 61 | 61 |
ASC | ||||
Adjusted EBITDA | ||||
Depreciation | (9) | (8) | (18) | (16) |
IMS | ||||
Adjusted EBITDA | ||||
Depreciation | (5) | (4) | (9) | (8) |
Operating Segments | ASC | ||||
Adjusted EBITDA | ||||
Adjusted EBITDA | 57 | 61 | 89 | 115 |
Operating Segments | IMS | ||||
Adjusted EBITDA | ||||
Adjusted EBITDA | 10 | 7 | 51 | 25 |
Corporate & Eliminations | ||||
Adjusted EBITDA | ||||
Adjusted EBITDA | $ 0 | $ 1 | $ 0 | $ 0 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Millions | Aug. 05, 2022 USD ($) |
Subsequent Event | US Holdings | |
Subsequent Event [Line Items] | |
Payments of dividends | $ 396 |