Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2018shares | |
Document And Entity Information [Abstract] | |
Entity Registrant Name | LOCKHEED MARTIN CORP |
Trading Symbol | LMT |
Entity Central Index Key | 936,468 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Entity Emerging Growth Company | false |
Entity Small Business | false |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2018 |
Document Fiscal Year Focus | 2,018 |
Document Fiscal Period Focus | Q3 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding | 284,425,688 |
Consolidated Statements of Earn
Consolidated Statements of Earnings - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Net sales | ||||
Total net sales | $ 14,318 | $ 12,341 | $ 39,351 | $ 36,116 |
Cost of sales | ||||
Total cost of sales | (12,397) | (10,741) | (34,019) | (31,454) |
Severance and restructuring charges | 0 | 0 | (96) | 0 |
Gross profit | 1,921 | 1,600 | 5,332 | 4,662 |
Other income, net | 42 | 77 | 151 | 133 |
Operating profit | 1,963 | 1,677 | 5,483 | 4,795 |
Interest expense | (177) | (162) | (497) | (477) |
Other non-operating expense, net | (211) | (218) | (631) | (644) |
Earnings before income taxes | 1,575 | 1,297 | 4,355 | 3,674 |
Income tax expense | (102) | (334) | (562) | (967) |
Net earnings | $ 1,473 | $ 963 | $ 3,793 | $ 2,707 |
Earnings per common share | ||||
Basic (in dollars per share) | $ 5.18 | $ 3.35 | $ 13.31 | $ 9.38 |
Diluted (in dollars per share) | 5.14 | 3.32 | 13.21 | 9.29 |
Cash dividends paid per common share (in dollars per share) | $ 2 | $ 1.82 | $ 6 | $ 5.46 |
Products | ||||
Net sales | ||||
Total net sales | $ 11,918 | $ 10,628 | $ 32,830 | $ 30,863 |
Cost of sales | ||||
Total cost of sales | (10,701) | (9,544) | (29,391) | (27,850) |
Services | ||||
Net sales | ||||
Total net sales | 2,400 | 1,713 | 6,521 | 5,253 |
Cost of sales | ||||
Total cost of sales | (2,070) | (1,584) | (5,726) | (4,724) |
Other unallocated, net | ||||
Cost of sales | ||||
Total cost of sales | $ 374 | $ 387 | $ 1,194 | $ 1,120 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 1,473 | $ 963 | $ 3,793 | $ 2,707 |
Postretirement benefit plans | ||||
Amounts reclassified from accumulated other comprehensive loss | 300 | 200 | 900 | 602 |
Other comprehensive gain recognized during the period | 0 | 0 | 0 | 3 |
Other, net | 18 | 77 | (30) | 137 |
Other comprehensive income, net of tax | 318 | 277 | 870 | 742 |
Comprehensive income | $ 1,791 | $ 1,240 | $ 4,663 | $ 3,449 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 24, 2017 | Dec. 31, 2016 |
Current assets | ||||
Cash and cash equivalents | $ 897,000,000 | $ 2,861,000,000 | $ 2,941,000,000 | $ 1,837,000,000 |
Receivables, net | 2,416,000,000 | 2,265,000,000 | ||
Contract assets | 9,769,000,000 | 7,992,000,000 | ||
Inventories | 3,050,000,000 | 2,878,000,000 | ||
Other current assets | 727,000,000 | 1,509,000,000 | ||
Total current assets | 16,859,000,000 | 17,505,000,000 | ||
Property, plant and equipment, net | 5,902,000,000 | 5,775,000,000 | ||
Goodwill | 10,788,000,000 | 10,807,000,000 | ||
Intangible assets, net | 3,570,000,000 | 3,797,000,000 | ||
Deferred income taxes | 3,036,000,000 | 3,156,000,000 | ||
Other noncurrent assets | 5,340,000,000 | 5,580,000,000 | ||
Total assets | 45,495,000,000 | 46,620,000,000 | ||
Current liabilities | ||||
Accounts payable | 2,691,000,000 | 1,467,000,000 | ||
Contract liabilities | 6,489,000,000 | 7,028,000,000 | ||
Salaries, benefits and payroll taxes | 2,165,000,000 | 1,785,000,000 | ||
Current maturities of long-term debt and commercial paper | 1,240,000,000 | 750,000,000 | ||
Other current liabilities | 2,619,000,000 | 1,883,000,000 | ||
Total current liabilities | 15,204,000,000 | 12,913,000,000 | ||
Long-term debt, net | 13,486,000,000 | 13,513,000,000 | ||
Accrued pension liabilities | 10,692,000,000 | 15,703,000,000 | ||
Other postretirement benefit liabilities | 700,000,000 | 719,000,000 | ||
Other noncurrent liabilities | 4,411,000,000 | 4,548,000,000 | ||
Total liabilities | 44,493,000,000 | 47,396,000,000 | ||
Stockholders’ equity | ||||
Common stock, $1 par value per share | 283,000,000 | 284,000,000 | ||
Additional paid-in capital | 0 | 0 | ||
Retained earnings | 14,737,000,000 | 11,405,000,000 | ||
Accumulated other comprehensive loss | (14,077,000,000) | (12,539,000,000) | ||
Total stockholders’ equity (deficit) | 943,000,000 | (850,000,000) | ||
Noncontrolling interests in subsidiary | 59,000,000 | 74,000,000 | ||
Total equity (deficit) | 1,002,000,000 | (776,000,000) | $ 2,108,000,000 | $ 1,477,000,000 |
Total liabilities and equity | $ 45,495,000,000 | $ 46,620,000,000 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2018 | Sep. 24, 2017 | |
Operating activities | ||
Net earnings | $ 3,793 | $ 2,707 |
Adjustments to reconcile net earnings to net cash provided by operating activities | ||
Depreciation and amortization | 857 | 880 |
Stock-based compensation | 148 | 133 |
Severance and restructuring charges | 96 | 0 |
Changes in assets and liabilities | ||
Receivables, net | (151) | (834) |
Contract assets | (1,777) | (228) |
Inventories | (172) | (66) |
Accounts payable | 1,237 | 1,229 |
Contract liabilities | (539) | (492) |
Postretirement benefit plans | (3,935) | 1,012 |
Income taxes | 729 | (202) |
Other, net | 635 | 825 |
Net cash provided by operating activities | 921 | 4,964 |
Investing activities | ||
Capital expenditures | (819) | (670) |
Other, net | 146 | 15 |
Net cash used for investing activities | (673) | (655) |
Financing activities | ||
Dividends paid | (1,725) | (1,591) |
Repurchases of common stock | (826) | (1,500) |
Proceeds from issuance of commercial paper, net | 490 | 0 |
Other, net | (151) | (114) |
Net cash used for financing activities | (2,212) | (3,205) |
Net change in cash and cash equivalents | (1,964) | 1,104 |
Cash and cash equivalents at beginning of period | 2,861 | 1,837 |
Cash and cash equivalents at end of period | $ 897 | $ 2,941 |
Consolidated Statements of Equi
Consolidated Statements of Equity - USD ($) $ in Millions | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | Noncontrolling Interests in Subsidiary |
Beginning Balance at Dec. 31, 2016 | $ 1,477 | $ 289 | $ 0 | $ 13,195 | $ (12,102) | $ 1,382 | $ 95 |
Increase (Decrease) in Stockholders' Equity | |||||||
Net earnings | 2,707 | 2,707 | 2,707 | ||||
Other comprehensive income, net of tax | 742 | 742 | 742 | ||||
Repurchases of common stock | (1,500) | (5) | (282) | (1,213) | (1,500) | ||
Dividends declared | (1,583) | (1,583) | (1,583) | ||||
Stock-based awards, ESOP activity and other | 283 | 1 | 282 | 283 | |||
Net decrease in noncontrolling interests in subsidiary | (18) | (18) | |||||
Ending Balance at Sep. 24, 2017 | 2,108 | 285 | 0 | 13,106 | (11,360) | 2,031 | 77 |
Beginning Balance at Dec. 31, 2017 | (776) | 284 | 0 | 11,405 | (12,539) | (850) | 74 |
Increase (Decrease) in Stockholders' Equity | |||||||
Net earnings | 3,793 | 3,793 | 3,793 | ||||
Other comprehensive income, net of tax | 870 | 870 | 870 | ||||
Repurchases of common stock | (826) | (3) | (300) | (523) | (826) | ||
Dividends declared | (2,346) | (2,346) | (2,346) | ||||
Stock-based awards, ESOP activity and other | 302 | 2 | 300 | 302 | |||
Reclassification of income tax effects from tax reform | 2,400 | 2,408 | (2,408) | ||||
Net decrease in noncontrolling interests in subsidiary | (15) | (15) | |||||
Ending Balance at Sep. 30, 2018 | $ 1,002 | $ 283 | $ 0 | $ 14,737 | $ (14,077) | $ 943 | $ 59 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION We prepared these consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, these consolidated financial statements reflect all adjustments that are of a normal recurring nature necessary for a fair presentation of our results of operations, financial condition and cash flows for the interim periods presented. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates. Significant estimates inherent in the preparation of our consolidated financial statements include, but are not limited to, accounting for sales and cost recognition, postretirement benefit plans, environmental receivables and liabilities, evaluation of goodwill and other assets for impairment, income taxes including deferred tax assets, fair value measurements and contingencies. The consolidated financial statements include the accounts of subsidiaries we control and variable interest entities if we are the primary beneficiary. We eliminate intercompany balances and transactions in consolidation. We close our books and records on the last Sunday of the calendar quarter, which was on September 30 for the third quarter of 2018 and September 24 for the third quarter of 2017 , to align our financial closing with our business processes. The consolidated financial statements and tables of financial information included herein are labeled based on that convention. This practice only affects interim periods as our fiscal year ends on December 31. Effective January 1, 2018, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers , as amended (Topic 606) (commonly referred to as ASC 606), which changed the way we recognize revenue for certain contracts and significantly expanded disclosures about revenue recognition. In addition, effective January 1, 2018, we adopted ASU 2017-07, Compensation-Retirement Benefits , which changed the statement of earnings presentation of certain components of pension and other postretirement benefit plan expense. The amounts for all periods presented in this Form 10-Q have been adjusted to reflect these new methods of accounting. See “ Note 12 – Recent Accounting Pronouncements ” for more information regarding the adoption of these standards. Other than the changes in our accounting policies related to revenue recognition and the classification of certain components of financial accounting standards (FAS) pension and other postretirement benefit plan expense, we followed the accounting policies disclosed in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 ( 2017 Form 10-K) filed with the SEC. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the full year or future periods. Unless otherwise noted, we present all per share amounts cited in these consolidated financial statements on a “per diluted share” basis. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2017 Form 10-K. |
SIGNIFICANT ACCOUNTING POLICY U
SIGNIFICANT ACCOUNTING POLICY UPDATES | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICY UPDATES | SIGNIFICANT ACCOUNTING POLICY UPDATES As described in “ Note 1 – Basis of Presentation ” and “ Note 12 – Recent Accounting Pronouncements ,” effective January 1, 2018, we adopted ASC 606, which changed the way we recognize revenue for certain contracts. Accounting policies that were significantly affected by the adoption of ASC 606 are discussed below. Revenue Recognition The majority of our net sales are generated from long-term contracts with the U.S. Government and international customers (including foreign military sales (FMS) contracted through the U.S. Government) for the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We provide our products and services under fixed-price and cost-reimbursable contracts. Under fixed-price contracts we agree to perform the specified work for a pre-determined price. To the extent our actual costs vary from the estimates upon which the price was negotiated, we will generate more or less profit or could incur a loss. Some fixed-price contracts have a performance-based component under which we may earn incentive payments or incur financial penalties based on our performance. Cost-reimbursable contracts provide for the payment of allowable costs incurred during performance of the contract plus a fee up to a ceiling based on the amount that has been funded. Typically, we enter into three types of cost-reimbursable contracts: cost-plus-award-fee, cost-plus-incentive-fee, and cost-plus-fixed-fee. Cost-plus-award-fee contracts provide for an award fee that varies within specified limits based on the customer’s assessment of our performance against a predetermined set of criteria, such as targets based on cost, quality, technical and schedule criteria. Cost-plus-incentive-fee contracts provide for reimbursement of costs plus a fee, which is adjusted by a formula based on the relationship of total allowable costs to total target costs (i.e., incentive based on cost) or reimbursement of costs plus an incentive to exceed stated performance targets (i.e., incentive based on performance). The fixed-fee in a cost-plus-fixed-fee contract is negotiated at the inception of the contract and that fixed-fee does not vary with actual costs. We account for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We assess each contract at its inception to determine whether it should be combined with other contracts. When making this determination, we consider factors such as whether two or more contracts were negotiated and executed at or near the same time or were negotiated with an overall profit objective. If combined, we treat the combined contracts as a single contract for revenue recognition purposes. We evaluate the products or services promised in each contract at inception to determine whether the contract should be accounted for as having one or more performance obligations. The products and services in our contracts are typically not distinct from one another due to their complex relationships and the significant contract management functions we are required to perform under the contract. Accordingly, our contracts are typically accounted for as one performance obligation. In limited cases, our contracts have more than one distinct performance obligation, which occurs when we perform activities that are not highly complex or interrelated or involve different product lifecycles. Significant judgment is required in determining performance obligations, and these decisions could change the amount of revenue and profit recorded in a given period. We classify net sales as products or services on our consolidated statements of earnings based on the predominant attributes of the performance obligations. We determine the transaction price for each contract based on the consideration we expect to receive for the products or services being provided under the contract. For contracts where a portion of the price may vary we estimate variable consideration at the most likely amount, which is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. We analyze the risk of a significant revenue reversal and if necessary constrain the amount of variable consideration recognized in order to mitigate this risk. At the inception of a contract we estimate the transaction price based on our current rights and do not contemplate future modifications (including unexercised options) or follow-on contracts until they become legally enforceable. Contracts are often subsequently modified to include changes in specifications, requirements or price, which may create new or change existing enforceable rights and obligations. Depending on the nature of the modification, we consider whether to account for the modification as an adjustment to the existing contract or as a separate contract. Generally, modifications to our contracts are not distinct from the existing contract due to the significant integration and interrelated tasks provided in the context of the contract. Therefore, such modifications are accounted for as if they were part of the existing contract and recognized as a cumulative adjustment to revenue. For contracts with multiple performance obligations, we allocate the transaction price to each performance obligation based on the estimated standalone selling price of the product or service underlying each performance obligation. The standalone selling price represents the amount we would sell the product or service to a customer on a standalone basis (i.e., not bundled with any other products or services). Our contracts with the U.S. Government, including FMS contracts, are subject to the Federal Acquisition Regulations (FAR) and the price is typically based on estimated or actual costs plus a reasonable profit margin. As a result of these regulations, the standalone selling price of products or services in our contracts with the U.S. Government and FMS contracts are typically equal to the selling price stated in the contract. Therefore, we typically do not need to allocate (or reallocate) the transaction price to multiple performance obligations. For non-U.S. Government contracts with multiple performance obligations, we evaluate whether the stated selling prices for the products or services represent their standalone selling prices. We primarily sell customized solutions unique to a customer’s specifications. When it is necessary to allocate the transaction price to multiple performance obligations, we typically use the expected cost plus a reasonable profit margin to estimate the standalone selling price of each product or service. We occasionally sell standard products or services with observable standalone sales transactions. In these situations, the observable standalone sales transactions are used to determine the standalone selling price. We recognize revenue as performance obligations are satisfied and the customer obtains control of the products and services. In determining when performance obligations are satisfied, we consider factors such as contract terms, payment terms and whether there is an alternative future use of the product or service. Substantially all of our revenue is recognized over a period of time as we perform under the contract because control of the work in process transfers continuously to the customer. For contracts with the U.S. Government and FMS contracts, this continuous transfer of control of the work in process to the customer is supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit, and take control of any work in process. Our non-U.S. Government contracts, primarily international direct commercial contracts, typically do not include termination for convenience provisions. However, continuous transfer of control to our customer is supported as, if our customer were to terminate the contract for reasons other than our non-performance, we would have the right to recover damages which would include, among other potential damages, the right to payment for our work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to us. For performance obligations to deliver products with continuous transfer of control to the customer, revenue is recognized based on the extent of progress towards completion of the performance obligation, generally using the percentage-of-completion cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer as we incur costs on our contracts. Under the percentage-of-completion cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation(s). For performance obligations to provide services to the customer, revenue is recognized over a period of time based on costs incurred or the right to invoice method (in situations where the value transferred matches our billing rights) as our customer receives and consumes the benefits. For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time in which each performance obligation is fully satisfied. This coincides with the point in time the customer obtains control of the product or service, which typically occurs upon customer acceptance or receipt of the product or service, given that we maintain control of the product or service until that point. Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. For our cost-reimbursable and fixed-priced-incentive contracts, the estimated consideration we expect to receive pursuant to the terms of the contract may exceed the contractual award amount. The estimated consideration is determined at the outset of the contract and is continuously reviewed throughout the contract period. In determining the estimated consideration, we consider the risks related to the technical, schedule and cost aspects of the contract and an estimate of any variable consideration. Periodically, we review these risks and may increase or decrease backlog accordingly. As the risks on such contracts are successfully retired, the estimated consideration from customers may be reduced, resulting in a reduction of backlog without a corresponding recognition of sales. As of September 30, 2018 , our ending backlog was $109 billion . We expect to recognize approximately 40% over the next 12 months and approximately 65% over the next 24 months as revenue, with the remainder recognized thereafter. For arrangements with the U.S. Government and FMS contracts, we generally do not begin work on contracts until funding is appropriated by the customer. Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type. Typical payment terms under fixed-price contracts with the U.S. Government provide that the customer pays either performance-based payments (PBPs) based on the achievement of contract milestones or progress payments based on a percentage of costs we incur. For the majority of our international direct commercial contracts to deliver complex systems, we typically receive advance payments prior to commencement of work, as well as milestone payments that are paid in accordance with the terms of our contract as we perform. We recognize a liability for payments in excess of revenue recognized, which is presented as a contract liability on the balance sheet. The portion of payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer from our failure to adequately complete some or all of the obligations under the contract. Payments received from customers in advance of revenue recognition are not considered to be significant financing components because they are used to meet working capital demands that can be higher in the early stages of a contract. For fixed-price and cost-reimbursable contracts, we present revenues recognized in excess of billings as contract assets on the balance sheet. Amounts billed and due from our customers under both contract types are classified as receivables on the balance sheet. Significant estimates and assumptions are made in estimating contract sales and costs, including the profit booking rate. At the outset of a long-term contract, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract, as well as variable consideration, and assess the effects of those risks on our estimates of sales and total costs to complete the contract. The estimates consider the technical requirements (e.g., a newly-developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., material, labor, subcontractor, overhead, general and administrative and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers). The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract. Profit booking rates may increase during the performance of the contract if we successfully retire risks surrounding the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease. All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate. When estimates of total costs to be incurred on a contract exceed total estimates of the transaction price, a provision for the entire loss is determined at the contract level and is recorded in the period in which the loss is determined. Comparability of our segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on our contracts for which we recognize revenue over a period of time using the percentage-of-completion cost-to-cost method to measure progress towards completion. Increases in the profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes. Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales. Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions, which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of certain assets. Our consolidated net adjustments not related to volume, including net profit booking rate adjustments and other matters, increased segment operating profit by approximately $545 million and $1.4 billion during the quarter and nine months ended September 30, 2018 and $365 million and $1.2 billion during the quarter and nine months ended September 24, 2017 . These adjustments increased net earnings by approximately $431 million ( $1.50 per share) and $1.1 billion ( $3.93 per share) during the quarter and nine months ended September 30, 2018 and $237 million ( $0.82 per share) and $765 million ( $2.63 per share) during the quarter and nine months ended September 24, 2017 . We recognized net sales from performance obligations satisfied in prior periods of approximately $595 million and $1.6 billion during the quarter and nine months ended September 30, 2018 and $385 million and $1.3 billion during the quarter and nine months ended September 24, 2017 , which primarily relate to changes in profit booking rates that impacted revenue. We have a program, EADGE-T, to design, integrate, and install an air missile defense command, control, communications, computers – intelligence (C4I) system for an international customer that has experienced performance matters and for which we have periodically accrued reserves. During the first quarter of 2017, we revised our estimated costs to complete the EADGE-T contract as a consequence of ongoing performance matters and recorded an additional charge of $120 million ( $74 million or $0.25 per share, after tax) at our Rotary and Mission Systems (RMS) business segment, which resulted in cumulative losses of approximately $260 million on this program. As of September 30, 2018 , cumulative losses remained at approximately $260 million . We continue to monitor program requirements and our performance. At this time, we do not anticipate additional charges that would be material to our operating results or financial condition. We have two commercial satellite programs, for the delivery of three satellites in total, at our Space business segment, for which we have experienced performance issues related to the development and integration of a modernized LM 2100 satellite platform. These commercial programs require the development of new satellite technology to enhance the LM 2100’s power, propulsion and electronics, among other items. The enhanced LM 2100 satellite platform is expected to benefit other commercial and government satellite programs. We have periodically revised our estimated costs to complete these developmental commercial programs. During the first six months of 2018, we recorded losses of approximately $75 million ( $56 million , or $0.20 per share, after tax), which resulted in cumulative losses of approximately $380 million for these programs. As of September 30, 2018 , cumulative losses remain at approximately $380 million . While these losses reflect our estimated total losses on the programs, we will continue to incur unrecoverable general and administrative costs each period until we complete these programs . These programs remain developmental and further challenges in the delivery and integration of new satellite technology, anomalies discovered during system testing requiring repair or rework, further schedule delays and potential penalties could require that we record additional loss reserves which could be material to our operating results. As we did not meet the July 2018 delivery requirement on one of the programs, the customer could seek to exercise a termination right, but we believe that the probability that this will occur is remote as the customer has an immediate need for the satellites. Were the customer to seek to exercise a termination right and be successful in this effort, we would have to refund the payments we have received and pay certain penalties. On the other program, we currently anticipate delivering the satellite before the date upon which the customer could seek to exercise a termination right although we may have to pay certain penalties and have sought to address this possibility in our reserves. We are responsible for designing, developing and installing an upgraded turret for the Warrior Capability Sustainment Program. During the first six months of 2018 , we revised our estimated costs to complete the program as a consequence of performance issues, and recorded a reserve of $85 million ( $64 million , or $0.22 per share, after tax) at our MFC business segment, which resulted in cumulative losses of approximately $140 million on this program. As of September 30, 2018, cumulative losses remain at approximately $140 million. We may continue to experience issues related to customer requirements and our performance under this contract and have to record additional reserves. However, based on the losses already recorded and our current estimate of the sales and costs to complete the program, at this time we do not anticipate that additional losses, if any, would be material to our operating results or financial condition. Receivables, Net Receivables, net represent our unconditional right to consideration under the contract and include amounts billed and currently due from customers. The amounts are stated at their net estimated realizable value. There were no significant impairment losses related to our receivables during the quarters and nine months ended September 30, 2018 and September 24, 2017 . On occasion, our customers may seek deferred payment terms to purchase our products. In connection with these transactions, we may, at our customer’s request, enter into arrangements for the non-recourse sale of customer receivables to unrelated third–party financial institutions. For accounting purposes, these transactions are not discounted and are treated as a sale of receivables as we have no continuing involvement. The sale proceeds from the financial institutions are reflected in our operating cash flows on the statement of cash flows. We sold customer receivables of $41 million and $268 million during the quarter and nine months ended September 30, 2018 and $146 million and $511 million during the quarter and nine months ended September 24, 2017 . There were no gains or losses related to sales of these receivables. Contract Assets Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. The amounts may not exceed their estimated net realizable value. Contract assets are classified as current based on our contract operating cycle and are reported on a contract-by-contract basis, net of revenue recognized, at the end of each reporting period. Inventories We record inventories at the lower of cost or estimated net realizable value. If events or changes in circumstances indicate that the utility of our inventories have diminished through damage, deterioration, obsolescence, changes in price or other causes, a loss is recognized in the period in which it occurs. We capitalize labor, material, subcontractor and overhead costs as work-in-process for contracts where control has not yet passed to the customer. In addition, we capitalize costs incurred to fulfill a contract in advance of contract award in inventories as work-in-process if we determine that contract award is probable. We determine the costs of other product and supply inventories by using the first-in first-out or average cost methods. Contract Liabilities Contract liabilities (formerly referred to as customer advances and amounts in excess of costs incurred) include advance payments and billings in excess of revenue recognized. Contract liabilities are classified as current based on our contract operating cycle and are reported on a contract-by-contract basis, net of revenue recognized, at the end of each reporting period. |
EARNINGS PER COMMON SHARE
EARNINGS PER COMMON SHARE | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
EARNINGS PER COMMON SHARE | EARNINGS PER COMMON SHARE The weighted average number of shares outstanding used to compute earnings per common share were as follows (in millions): Quarters Ended Nine Months Ended September 30, September 24, September 30, September 24, Weighted average common shares outstanding for basic computations 284.3 287.1 284.9 288.5 Weighted average dilutive effect of equity awards 2.4 2.9 2.3 2.8 Weighted average common shares outstanding for diluted computations 286.7 290.0 287.2 291.3 We compute basic and diluted earnings per common share by dividing net earnings by the respective weighted average number of common shares outstanding for the periods presented. Our calculation of diluted earnings per common share also includes the dilutive effects for the assumed vesting of outstanding restricted stock units (RSUs) and performance stock units (PSUs) and exercise of outstanding stock options based on the treasury stock method. There were no significant anti-dilutive equity awards during the quarters and nine months ended September 30, 2018 or September 24, 2017 . |
INFORMATION ON BUSINESS SEGMENT
INFORMATION ON BUSINESS SEGMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
INFORMATION ON BUSINESS SEGMENTS | INFORMATION ON BUSINESS SEGMENTS We operate in four business segments: Aeronautics, MFC, RMS and Space. We organize our business segments based on the nature of the products and services offered. Net sales of our business segments exclude intersegment sales as these activities are eliminated in consolidation. Operating profit of our business segments includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments. In addition, operating profit of our business segments includes total pension costs recoverable on U.S. Government contracts as determined in accordance with U.S. Government cost accounting standards (CAS). Operating profit of the business segments excludes the FAS/CAS operating adjustment for our qualified defined benefit pension plans (described below); the adjustment from CAS to the FAS service cost component for all other postretirement benefit plans; expense for stock-based compensation; the effects of items not considered part of management’s evaluation of segment operating performance, such as charges related to significant severance actions and certain asset impairments; gains or losses from significant divestitures; the effects of certain legal settlements; corporate costs not allocated to our business segments; and other miscellaneous corporate activities. These items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit. See “ Note 2 – Significant Accounting Policy Updates ” for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments. Summary operating results for each of our business segments were as follows (in millions): Quarters Ended Nine Months Ended September 30, September 24, September 30, September 24, Net sales Aeronautics $ 5,642 $ 4,716 $ 15,361 $ 13,758 Missiles and Fire Control 2,273 1,957 6,035 5,290 Rotary and Mission Systems 3,848 3,363 10,637 9,904 Space 2,555 2,305 7,318 7,164 Total net sales $ 14,318 $ 12,341 $ 39,351 $ 36,116 Operating profit Aeronautics $ 600 $ 513 $ 1,646 $ 1,519 Missiles and Fire Control 332 298 872 785 Rotary and Mission Systems (a) 361 257 1,013 656 Space 293 219 831 765 Total business segment operating profit 1,586 1,287 4,362 3,725 Unallocated items FAS/CAS operating adjustment (b) 451 403 1,353 1,210 Stock-based compensation (50 ) (32 ) (148 ) (133 ) Severance and restructuring charges (c) — — (96 ) — Other, net (d) (24 ) 19 12 (7 ) Total unallocated items 377 390 1,121 1,070 Total consolidated operating profit $ 1,963 $ 1,677 $ 5,483 $ 4,795 Intersegment sales Aeronautics $ 35 $ 33 $ 87 $ 98 Missiles and Fire Control 122 104 330 243 Rotary and Mission Systems 544 453 1,509 1,446 Space 63 31 156 76 Total intersegment sales $ 764 $ 621 $ 2,082 $ 1,863 (a) Operating profit at our RMS business segment for the nine months ended September 24, 2017 includes a charge of $120 million ( $74 million , or $0.25 per share, after tax) recognized in the first quarter of 2017 for performance matters on the EADGE-T contract. See “ Note 2 – Significant Accounting Policy Updates ” (under the caption “Revenue Recognition”) for more information. (b) The FAS/CAS operating adjustment represents the difference between the service cost component of FAS pension expense and total pension costs recoverable on U.S. Government contracts as determined in accordance with CAS. For a detail of the FAS/CAS operating adjustment and the total net FAS/CAS pension adjustment, see the table below. (c) Unallocated items for the nine months ended September 30, 2018 includes severance and restructuring charges totaling $96 million ( $76 million , or $0.26 per share, after tax) recognized in the second quarter of 2018 for planned workforce reductions and the consolidation of certain operations at our RMS business segment. See “ Note 11 – Other ” (under the caption “Severance and Restructuring Charges”) for more information. (d) Other, net for the nine months ended September 24, 2017 includes a $64 million charge ( $40 million , or $0.14 per share, after tax) recognized in the first quarter of 2017, which represents our portion of a non-cash asset impairment charge recorded by our equity method investee, Advanced Military Maintenance, Repair and Overhaul Center LLC (AMMROC). See “ Note 11 – Other ” (under the caption “Equity Method Investee Impairment”) for more information. Our total net FAS/CAS pension adjustment for the quarters and nine months ended September 30, 2018 and September 24, 2017 , including the service and non-service cost components of FAS pension expense for our qualified defined benefit pension plans, were as follows (in millions): Quarters Ended Nine Months Ended September 30, September 24, September 30, September 24, Total FAS expense and CAS costs FAS pension expense $ (356 ) $ (342 ) $ (1,069 ) $ (1,030 ) Less: CAS pension cost 608 562 1,825 1,686 Net FAS/CAS pension adjustment $ 252 $ 220 $ 756 $ 656 Service and non-service cost reconciliation FAS pension service cost $ (157 ) $ (159 ) $ (472 ) $ (476 ) Less: CAS pension cost 608 562 1,825 1,686 FAS/CAS operating adjustment 451 403 1,353 1,210 Non-operating FAS pension expense (a) (199 ) (183 ) (597 ) (554 ) Net FAS/CAS pension adjustment $ 252 $ 220 $ 756 $ 656 (a) We record the non-service cost components of net periodic benefit cost as part of other non-operating expense, net in the consolidated statement of earnings. The non-service cost components in the table above relate only to our qualified defined benefit pension plans. We incurred total non-service costs for our qualified defined benefit pension plans in the table above, along with similar costs for our other postretirement benefit plans of $16 million and $49 million for the quarters and nine months ended September 30, 2018 and $28 million and $82 million for the quarters and nine months ended September 24, 2017 . We recover CAS pension cost through the pricing of our products and services on U.S. Government contracts and, therefore, recognize CAS pension cost in each of our business segment’s net sales and cost of sales. Our consolidated financial statements must present FAS pension and other postretirement benefit plan expense calculated in accordance with FAS requirements under U.S. GAAP. The operating portion of the net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension expense and CAS pension cost. The non-service FAS pension cost component is included in other non-operating expense, net on our consolidated statements of earnings. The net FAS/CAS pension adjustment increases or decreases CAS pension cost to equal total FAS pension cost (both service and non-service). Net sales by total products and services, contract type, customer category and geographic region for each of our business segments were as follows (in millions): Quarter Ended September 30, 2018 Aeronautics MFC RMS Space Total Net sales Products $ 4,799 $ 1,873 $ 3,132 $ 2,114 $ 11,918 Services 843 400 716 441 2,400 Total net sales $ 5,642 $ 2,273 $ 3,848 $ 2,555 $ 14,318 Net sales by contract type Fixed-price $ 4,163 $ 1,536 $ 2,710 $ 534 $ 8,943 Cost-reimbursable 1,479 737 1,138 2,021 5,375 Total net sales $ 5,642 $ 2,273 $ 3,848 $ 2,555 $ 14,318 Net sales by customer U.S. Government $ 3,700 $ 1,625 $ 2,765 $ 2,174 $ 10,264 International (a) 1,909 600 959 362 3,830 U.S. commercial and other 33 48 124 19 224 Total net sales $ 5,642 $ 2,273 $ 3,848 $ 2,555 $ 14,318 Net sales by geographic region United States $ 3,733 $ 1,673 $ 2,889 $ 2,193 $ 10,488 Asia Pacific 854 126 377 8 1,365 Europe 691 112 213 324 1,340 Middle East 326 347 202 30 905 Other 38 15 167 — 220 Total net sales $ 5,642 $ 2,273 $ 3,848 $ 2,555 $ 14,318 Nine Months Ended September 30, 2018 Aeronautics MFC RMS Space Total Net sales Products $ 13,080 $ 4,935 $ 8,753 $ 6,062 $ 32,830 Services 2,281 1,100 1,884 1,256 6,521 Total net sales $ 15,361 $ 6,035 $ 10,637 $ 7,318 $ 39,351 Net sales by contract type Fixed-price $ 11,284 $ 4,043 $ 7,368 $ 1,394 $ 24,089 Cost-reimbursable 4,077 1,992 3,269 5,924 15,262 Total net sales $ 15,361 $ 6,035 $ 10,637 $ 7,318 $ 39,351 Net sales by customer U.S. Government $ 9,909 $ 4,215 $ 7,729 $ 6,114 $ 27,967 International (a) 5,321 1,696 2,562 1,162 10,741 U.S. commercial and other 131 124 346 42 643 Total net sales $ 15,361 $ 6,035 $ 10,637 $ 7,318 $ 39,351 Net sales by geographic region United States $ 10,040 $ 4,339 $ 8,075 $ 6,156 $ 28,610 Asia Pacific 2,394 349 1,002 62 3,807 Europe 1,877 227 592 1,082 3,778 Middle East 903 1,091 516 18 2,528 Other 147 29 452 — 628 Total net sales $ 15,361 $ 6,035 $ 10,637 $ 7,318 $ 39,351 (a) International sales include FMS contracted through the U.S. Government and direct commercial sales to international governments and other international customers. Quarter Ended September 24, 2017 Aeronautics MFC RMS Space Total Net sales Products $ 4,196 $ 1,614 $ 2,861 $ 1,957 $ 10,628 Services 520 343 502 348 1,713 Total net sales $ 4,716 $ 1,957 $ 3,363 $ 2,305 $ 12,341 Net sales by contract type Fixed-price $ 3,396 $ 1,321 $ 2,471 $ 464 $ 7,652 Cost-reimbursable 1,320 636 892 1,841 4,689 Total net sales $ 4,716 $ 1,957 $ 3,363 $ 2,305 $ 12,341 Net sales by customer U.S. Government $ 3,093 $ 1,404 $ 2,417 $ 1,919 $ 8,833 International (a) 1,589 511 848 367 3,315 U.S. commercial and other 34 42 98 19 193 Total net sales $ 4,716 $ 1,957 $ 3,363 $ 2,305 $ 12,341 Net sales by geographic region United States $ 3,127 $ 1,446 $ 2,515 $ 1,938 $ 9,026 Asia Pacific 653 88 371 28 1,140 Europe 555 58 226 310 1,149 Middle East 348 353 103 23 827 Other 33 12 148 6 199 Total net sales $ 4,716 $ 1,957 $ 3,363 $ 2,305 $ 12,341 Nine Months Ended September 24, 2017 Aeronautics MFC RMS Space Total Net sales Products $ 12,036 $ 4,323 $ 8,372 $ 6,132 $ 30,863 Services 1,722 967 1,532 1,032 5,253 Total net sales $ 13,758 $ 5,290 $ 9,904 $ 7,164 $ 36,116 Net sales by contract type Fixed-price $ 9,624 $ 3,664 $ 7,199 $ 1,566 $ 22,053 Cost-reimbursable 4,134 1,626 2,705 5,598 14,063 Total net sales $ 13,758 $ 5,290 $ 9,904 $ 7,164 $ 36,116 Net sales by customer U.S. Government $ 9,009 $ 3,540 $ 7,091 $ 6,036 $ 25,676 International (a) 4,647 1,643 2,548 1,082 9,920 U.S. commercial and other 102 107 265 46 520 Total net sales $ 13,758 $ 5,290 $ 9,904 $ 7,164 $ 36,116 Net sales by geographic region United States $ 9,111 $ 3,647 $ 7,356 $ 6,082 $ 26,196 Asia Pacific 1,878 294 988 68 3,228 Europe 1,657 215 673 932 3,477 Middle East 983 1,105 339 76 2,503 Other 129 29 548 6 712 Total net sales $ 13,758 $ 5,290 $ 9,904 $ 7,164 $ 36,116 (a) International sales include FMS contracted through the U.S. Government and direct commercial sales to international governments and other international customers. Total assets for each of our business segments were as follows (in millions): September 30, December 31, Assets Aeronautics $ 8,746 $ 7,713 Missiles and Fire Control 4,865 4,577 Rotary and Mission Systems 18,545 18,292 Space 5,469 5,240 Total business segment assets 37,625 35,822 Corporate assets (a) 7,870 10,798 Total assets $ 45,495 $ 46,620 (a) Corporate assets primarily include cash and cash equivalents, deferred income taxes, environmental receivables, and investments held in a separate trust to fund certain of our non-qualified deferred compensation plans. Our Aeronautics business segment includes our largest program, the F-35 Lightning II Joint Strike Fighter, an international multi-role, multi-variant, stealth fighter aircraft. Net sales for the F-35 program represented approximately 27% and 26% of our total consolidated net sales for the quarter and nine months ended September 30, 2018 and 26% and 25% of our total consolidated net sales for the quarter and nine months ended September 24, 2017 . |
CONTRACT ASSETS AND LIABILITIES
CONTRACT ASSETS AND LIABILITIES | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
CONTRACT ASSETS AND LIABILITIES | CONTRACT ASSETS AND LIABILITIES Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Contract liabilities (formerly referred to as customer advances and amounts in excess of costs incurred) include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in millions): September 30, December 31, Contract assets $ 9,769 $ 7,992 Contract liabilities 6,489 7,028 Contract assets increased $1.8 billion during the nine months ended September 30, 2018 , primarily due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during the nine months ended September 30, 2018 for which we have not yet had the right to bill our customers. There were no significant impairment losses related to our contract assets during the quarters and nine months ended September 30, 2018 and September 24, 2017 . Contract liabilities decreased $539 million during the nine months ended September 30, 2018 , primarily due to revenue recognized in excess of payments received on these performance obligations. During the quarter and nine months ended September 30, 2018 , we recognized $711 million and $3.4 billion of our contract liabilities at December 31, 2017 as revenue. During the quarter and nine months ended September 24, 2017 , we recognized $507 million and $2.9 billion of our contract liabilities at December 31, 2016 as revenue. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES Inventories consisted of the following (in millions): September 30, December 31, Materials, spares and supplies $ 470 $ 563 Work-in-process 2,089 1,823 Finished goods 491 492 Total inventories $ 3,050 $ 2,878 Costs incurred to fulfill a contract in advance of the contract being awarded are included in inventories as work-in-process if we determine that those costs relate directly to a contract or to an anticipated contract that we can specifically identify and contract award is probable, the costs generate or enhance resources that will be used in satisfying performance obligations, and the costs are recoverable (referred to as pre-contract costs). Pre-contract costs that are initially capitalized in inventory are generally recognized as cost of sales consistent with the transfer of products and services to the customer upon the receipt of the anticipated contract. All other pre-contract costs, including start-up costs, are expensed as incurred. As of September 30, 2018 and December 31, 2017 , $554 million and $466 million of pre-contract costs were included in inventory. |
POSTRETIREMENT BENEFIT PLANS
POSTRETIREMENT BENEFIT PLANS | 9 Months Ended |
Sep. 30, 2018 | |
Retirement Benefits [Abstract] | |
POSTRETIREMENT BENEFIT PLANS | POSTRETIREMENT BENEFIT PLANS Our pretax net periodic benefit cost related to our qualified defined benefit pension plans and retiree medical and life insurance plans consisted of the following (in millions): Quarters Ended Nine Months Ended September 30, September 24, September 30, September 24, Qualified defined benefit pension plans Service cost $ 157 $ 159 $ 472 $ 476 Interest cost 435 459 1,305 1,377 Expected return on plan assets (599 ) (563 ) (1,796 ) (1,687 ) Recognized net actuarial losses 444 376 1,332 1,129 Amortization of prior service credits (81 ) (89 ) (244 ) (265 ) Total net periodic benefit cost $ 356 $ 342 $ 1,069 $ 1,030 Retiree medical and life insurance plans Service cost $ 4 $ 4 $ 13 $ 14 Interest cost 23 26 69 77 Expected return on plan assets (34 ) (31 ) (101 ) (95 ) Recognized net actuarial losses 2 4 4 14 Amortization of prior service costs 4 4 11 11 Total net periodic benefit (credit) cost $ (1 ) $ 7 $ (4 ) $ 21 We record the service cost component of net periodic benefit cost as part of cost of sales and the non-service cost components of net periodic benefit cost (i.e., interest cost, expected return on plan assets, net actuarial gains or losses, and amortization of prior service cost or credits) as part of other non-operating expense, net in the consolidated statements of earnings. The recognized net actuarial losses and amortization of prior service credits or costs in the table above, along with similar costs related to our other postretirement benefit plans ( $13 million and $42 million for the quarter and nine months ended September 30, 2018 and $14 million and $41 million for the quarter and nine months ended September 24, 2017 ), were reclassified from accumulated other comprehensive loss (AOCL) and recorded as a component of net periodic benefit cost for the periods presented. These costs totaled $382 million ( $300 million , net of tax) and $1.1 billion ( $900 million , net of tax) during the quarter and nine months ended September 30, 2018 and $309 million ( $200 million , net of tax) and $930 million ( $602 million , net of tax) during the quarter and nine months ended September 24, 2017 , which were recorded on our consolidated statements of comprehensive income as an increase to other comprehensive income. The funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Pension Protection Act of 2006 (PPA), and in a manner consistent with CAS and Internal Revenue Code rules. During the quarter and nine months ended September 30, 2018 , we contributed $1.5 billion and $5.0 billion to our qualified defined benefit pension plans. There were no material contributions to our qualified defined benefit pension plans during the quarter and nine months ended September 24, 2017 . |
LEGAL PROCEEDINGS AND CONTINGEN
LEGAL PROCEEDINGS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS AND CONTINGENCIES | LEGAL PROCEEDINGS AND CONTINGENCIES We are a party to or have property subject to litigation and other proceedings that arise in the ordinary course of our business, including matters arising under provisions relating to the protection of the environment and are subject to contingencies related to certain businesses we previously owned. These types of matters could result in fines, penalties, compensatory or treble damages or non-monetary sanctions or relief. We believe the probability is remote that the outcome of each of these matters, including the legal proceedings described below, will have a material adverse effect on the corporation as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings in any particular interim reporting period. Among the factors that we consider in this assessment are the nature of existing legal proceedings and claims, the asserted or possible damages or loss contingency (if estimable), the progress of the case, existing law and precedent, the opinions or views of legal counsel and other advisers, our experience in similar cases and the experience of other companies, the facts available to us at the time of assessment and how we intend to respond to the proceeding or claim. Our assessment of these factors may change over time as individual proceedings or claims progress. Although we cannot predict the outcome of legal or other proceedings with certainty, where there is at least a reasonable possibility that a loss may have been incurred, GAAP requires us to disclose an estimate of the reasonably possible loss or range of loss or make a statement that such an estimate cannot be made. We follow a thorough process in which we seek to estimate the reasonably possible loss or range of loss, and only if we are unable to make such an estimate do we conclude and disclose that an estimate cannot be made. Accordingly, unless otherwise indicated below in our discussion of legal proceedings, a reasonably possible loss or range of loss associated with any individual legal proceeding cannot be estimated. Legal Proceedings As a result of our acquisition of Sikorsky Aircraft Corporation (Sikorsky), we assumed the defense of and any potential liability for two civil False Claims Act lawsuits pending in the U.S. District Court for the Eastern District of Wisconsin. In October 2014, the U.S. Government filed a complaint in intervention in the first suit, which was brought by qui tam relator Mary Patzer, a former Derco Aerospace (Derco) employee. In May 2017, the U.S. Government filed a complaint in intervention in the second suit, which was brought by qui tam relator Peter Cimma, a former Sikorsky Support Services, Inc. (SSSI) employee. In November 2017, the Court consolidated the cases into a single action for discovery and trial. The U.S. Government alleges that Sikorsky and two of its wholly-owned subsidiaries, Derco and SSSI, violated the civil False Claims Act and the Truth in Negotiations Act in connection with a contract the U.S. Navy awarded to SSSI in June 2006 to support the Navy’s T-34 and T-44 fixed-wing turboprop training aircraft. SSSI subcontracted with Derco, primarily to procure and manage spare parts for the training aircraft. The U.S. Government contends that SSSI overbilled the Navy on the contract as the result of Derco’s use of prohibited cost-plus-percentage-of-cost pricing to add profit and overhead costs as a percentage of the price of the spare parts that Derco procured and then sold to SSSI. The U.S. Government also alleges that Derco’s claims to SSSI, SSSI’s claims to the Navy, and SSSI’s yearly Certificates of Final Indirect Costs from 2006 through 2012 were false and that SSSI submitted inaccurate cost or pricing data in violation of the Truth in Negotiations Act for a sole-sourced, follow-on “bridge” contract. The U.S. Government’s complaints assert common law claims for breach of contract and unjust enrichment. The U.S. Government further alleged violations of the Anti-Kickback Act and False Claims Act based on a monthly “chargeback,” through which SSSI billed Derco for the cost of certain SSSI personnel, allegedly in exchange for SSSI’s permitting a pricing arrangement that was “highly favorable” to Derco. On January 12, 2018, the Corporation filed a partial motion to dismiss intended to narrow the U.S. Government’s claims, including by seeking dismissal of the Anti-Kickback Act allegations. The Corporation also moved to dismiss Cimma as a party under the False Claims Act’s first-to-file rule, which permits only the first relator to recover in a pending case. The District Court granted these motions, in part, on July 20, 2018, dismissing the Government’s claims under the Anti-Kickback Act and dismissing Cimma as a party to the litigation. The U.S. Government seeks damages of approximately $52 million , subject to trebling, plus statutory penalties. We believe that we have legal and factual defenses to the U.S. Government’s remaining claims. Although we continue to evaluate our liability and exposure, we do not currently believe that it is probable that we will incur a material loss. If, contrary to our expectations, the U.S. Government prevails in this matter and proves damages at or near $52 million and is successful in having such damages trebled, the outcome could have an adverse effect on our results of operations in the period in which a liability is recognized and on our cash flows for the period in which any damages are paid. On April 24, 2009, we filed a declaratory judgment action against the New York Metropolitan Transportation Authority and its Capital Construction Company (collectively, the MTA) asking the U.S. District Court for the Southern District of New York to find that the MTA is in material breach of our agreement based on the MTA’s failure to provide access to sites where work must be performed and the customer-furnished equipment necessary to complete the contract. The MTA filed an answer and counterclaim alleging that we breached the contract and subsequently terminated the contract for alleged default. The primary damages sought by the MTA are the costs to complete the contract and potential re-procurement costs. While we are unable to estimate the cost of another contractor to complete the contract and the costs of re-procurement, we note that our contract with the MTA had a total value of $323 million , of which $241 million was paid to us, and that the MTA is seeking damages of approximately $190 million . We dispute the MTA’s allegations and are defending against them. Additionally, following an investigation, our sureties on a performance bond related to this matter, who were represented by independent counsel, concluded that the MTA’s termination of the contract was improper. Finally, our declaratory judgment action was later amended to include claims for monetary damages against the MTA of approximately $95 million . This matter was taken under submission by the District Court in December 2014, after a five-week bench trial and the filing of post-trial pleadings by the parties. We continue to await a decision from the District Court. Although this matter relates to our former Information Systems & Global Solutions (IS&GS) business, we retained the litigation when we divested IS&GS in 2016. Environmental Matters We are involved in proceedings and potential proceedings relating to soil, sediment, surface water, and groundwater contamination, disposal of hazardous waste, and other environmental matters at several of our current or former facilities and at third-party sites where we have been designated as a potentially responsible party (PRP). A substantial portion of environmental costs will be included in our net sales and cost of sales in future periods pursuant to U.S. Government regulations. At the time a liability is recorded for future environmental costs, we record a receivable for estimated future recovery considered probable through the pricing of products and services to agencies of the U.S. Government, regardless of the contract form (e.g., cost-reimbursable, fixed-price). We continually evaluate the recoverability of our environmental receivables by assessing, among other factors, U.S. Government regulations, our U.S. Government business base and contract mix, our history of receiving reimbursement of such costs, and efforts by some U.S. Government representatives to limit such reimbursement. We include the portion of those environmental costs expected to be allocated to our non-U.S. Government contracts, or that is determined not to be recoverable under U.S. Government contracts, in our cost of sales at the time the liability is established. At September 30, 2018 and December 31, 2017 , the aggregate amount of liabilities recorded relative to environmental matters was $899 million and $920 million , most of which are recorded in other noncurrent liabilities on our consolidated balance sheets. We have recorded receivables totaling $781 million and $799 million at September 30, 2018 and December 31, 2017 , most of which are recorded in other noncurrent assets on our consolidated balance sheets, for the estimated future recovery of these costs, as we consider the recovery probable based on the factors previously mentioned. We project costs and recovery of costs over approximately 20 years . Environmental remediation activities usually span many years, which makes estimating liabilities a matter of judgment because of uncertainties with respect to assessing the extent of the contamination as well as such factors as changing remediation technologies and changing regulatory environmental standards. There are a number of former and present operating facilities that we are monitoring or investigating for potential future remediation. We perform quarterly reviews of the status of our environmental remediation sites and the related liabilities and receivables. Additionally, in our quarterly reviews, we consider these and other factors in estimating the timing and amount of any future costs that may be required for remediation activities, and record a liability when it is probable that a loss has occurred and the loss can be reasonably estimated. The amount of liability recorded is based on our estimate of the costs to be incurred for remediation at a particular site. We do not discount the recorded liabilities, as the amount and timing of future cash payments are not fixed or cannot be reliably determined. We reasonably cannot determine the extent of our financial exposure in all cases as, although a loss may be probable or reasonably possible, in some cases it is not possible at this time to estimate the loss or reasonably possible loss or range of loss. We also pursue claims for recovery of costs incurred or for contribution to site remediation costs against other PRPs, including the U.S. Government, and are conducting remediation activities under various consent decrees, orders, and agreements relating to soil, groundwater, sediment, or surface water contamination at certain sites of former or current operations. Under agreements related to certain sites in California and New York, the U.S. Government reimburses us an amount equal to a percentage, specific to each site, of expenditures for certain remediation activities in the U.S. Government’s capacity as a PRP under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). In addition to the proceedings and potential proceedings discussed above, California previously established a maximum level of the contaminant hexavalent chromium in drinking water of 10 parts per billion (ppb). This standard was successfully challenged by the California Manufacturers and Technology Association (CMTA) for failure to conduct the required economic feasibility analysis. In response to the court’s ruling, the State Water Resources Control Board (State Board), a branch of the California Environmental Protection Agency, withdrew the hexavalent chromium standard from the published regulations, leaving only the 50 ppb standard for total chromium. The State Board has indicated it will work to re-establish a hexavalent chromium standard. If the standard for hexavalent chromium is re‑established at 10 ppb or above, it will not have a material impact on our existing remediation costs in California. Further, the U.S. Environmental Protection Agency (U.S. EPA) is considering whether to regulate hexavalent chromium. California is also reevaluating its existing drinking water standard of 6 ppb for perchlorate, and the U.S. EPA is taking steps to regulate perchlorate in drinking water. If substantially lower standards are adopted, in either California or at the federal level for perchlorate or for hexavalent chromium, we expect a material increase in our estimates for environmental liabilities and the related assets for the portion of the increased costs that are probable of future recovery in the pricing of our products and services for the U.S. Government. The amount that would be allocable to our non-U.S. Government contracts or that is determined not to be recoverable under U.S. Government contracts would be expensed, which may have a material effect on our earnings in any particular interim reporting period. Letters of Credit, Surety Bonds and Third-Party Guarantees We have entered into standby letters of credit and surety bonds issued on our behalf by financial institutions, and directly issued guarantees to third parties primarily relating to advances received from customers and the guarantee of future performance on certain contracts. Letters of credit and surety bonds generally are available for draw down in the event we do not perform. In some cases, we may guarantee the contractual performance of third parties such as venture partners. We had total outstanding letters of credit, surety bonds and third-party guarantees aggregating $3.4 billion and $3.3 billion at September 30, 2018 and December 31, 2017 . Third-party guarantees do not include guarantees of subsidiaries and other consolidated entities. At September 30, 2018 and December 31, 2017 , third-party guarantees totaled approximately $810 million and $750 million , of which approximately 64% and 62% related to guarantees of contractual performance of ventures to which we currently are or previously were a party. This amount represents our estimate of the maximum amount we would expect to incur upon the contractual non-performance of the venture, venture partners or divested businesses. Generally, we also have cross-indemnities in place that may enable us to recover amounts that may be paid on behalf of a venture partner. In determining our exposures, we evaluate the reputation, performance on contractual obligations, technical capabilities and credit quality of our current and former venture partners and the transferee under novation agreements all of which include a guarantee as required by the FAR. There were no material amounts recorded in our financial statements related to third-party guarantees or novation agreements. United Launch Alliance In connection with our 50% ownership interest of ULA, we and The Boeing Company (Boeing) are required to provide ULA an additional capital contribution if ULA is unable to make required payments under its inventory supply agreement with Boeing. As of September 30, 2018 , ULA’s total remaining obligation to Boeing under the inventory supply agreement was $120 million . The parties have agreed to defer the remaining payment obligation, as it is more than offset by other commitments to ULA. Accordingly, we do not expect to be required to make a capital contribution to ULA under this agreement. In addition, both we and Boeing have cross-indemnified each other for guarantees by us and Boeing of the performance and financial obligations of ULA under certain launch service contracts. We believe ULA will be able to fully perform its obligations, as it has done through September 30, 2018 , and that it will not be necessary to make payments under the cross-indemnities or guarantees. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following (in millions): September 30, 2018 December 31, 2017 Total Level 1 Level 2 Total Level 1 Level 2 Assets Mutual funds $ 1,074 $ 1,074 $ — $ 917 $ 917 $ — U.S. Government securities 103 — 103 116 — 116 Derivatives 16 — 16 23 — 23 Other securities 147 29 118 209 39 170 Liabilities Derivatives 78 — 78 106 — 106 Assets measured at NAV (a) Other commingled funds 19 19 (a) Net Asset Value (NAV) is the total value of the fund divided by the number of the fund’s shares outstanding. Substantially all assets measured at fair value, other than derivatives, represent investments held in a separate trust to fund certain of our non-qualified deferred compensation plans and are recorded in other noncurrent assets on our consolidated balance sheets. The fair values of mutual funds and certain other securities are determined by reference to the quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs. The fair values of U.S. Government and other securities are determined using pricing models that use observable inputs (e.g., interest rates and yield curves observable at commonly quoted intervals), bids provided by brokers or dealers or quoted prices of securities with similar characteristics. The fair values of derivative instruments, which consist of foreign currency exchange forward and interest rate swap contracts, primarily are determined based on the present value of future cash flows using model-derived valuations that use observable inputs such as interest rates, credit spreads and foreign currency exchange rates. The derivatives outstanding at both September 30, 2018 and December 31, 2017 consist of foreign currency forward contracts and interest rate swaps and foreign currency related contract embedded derivatives. We use derivative instruments principally to reduce our exposure to market risks from changes in foreign currency exchange rates and interest rates. We do not enter into or hold derivative instruments for speculative trading purposes. We transact business globally and are subject to risks associated with changing foreign currency exchange rates. We enter into foreign currency hedges such as forward and option contracts that change in value as foreign currency exchange rates change. These contracts hedge forecasted foreign currency transactions in order to mitigate fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates. We designate foreign currency hedges as cash flow hedges. We also are exposed to the impact of interest rate changes primarily through our borrowing activities. For fixed rate borrowings, we may use variable interest rate swaps, effectively converting fixed rate borrowings to variable rate borrowings in order to reduce the amount of interest paid. These swaps are designated as fair value hedges. For variable rate borrowings, we may use fixed interest rate swaps, effectively converting variable rate borrowings to fixed rate borrowings in order to mitigate the impact of interest rate changes on earnings. These swaps are designated as cash flow hedges. We also may enter into derivative instruments that are not designated as hedges and do not qualify for hedge accounting, which are intended to mitigate certain economic exposures. The aggregate notional amount of our outstanding interest rate swaps at both September 30, 2018 and December 31, 2017 was $1.2 billion and the fair value was not significant. The aggregate notional amount of our outstanding foreign currency hedges at September 30, 2018 and December 31, 2017 was $3.5 billion and $4.1 billion and the fair value was not significant. Derivative instruments did not have a material impact on net earnings and comprehensive income during the quarters and nine months ended September 30, 2018 and September 24, 2017 . Substantially all of our derivatives are designated for hedge accounting. In addition to the financial instruments listed in the table above, we hold other financial instruments, including debt and commercial paper. The estimated fair value of our outstanding debt and commercial paper was $16.2 billion and $16.8 billion at September 30, 2018 and December 31, 2017 (Level 2). The outstanding principal amount of debt and commercial paper was $15.9 billion and $15.5 billion , excluding unamortized discounts and issuance costs of $1.2 billion at both September 30, 2018 and December 31, 2017 . |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY Repurchases of Common Stock During the nine months ended September 30, 2018 , we repurchased 2.5 million shares of our common stock for $826 million . The total remaining authorization for future common share repurchases under our share repurchase program was $3.7 billion as of September 30, 2018 , including a $1.0 billion increase to the program authorized by our Board of Directors on September 27, 2018. As we repurchase our common shares, we reduce common stock for the $1 of par value of the shares repurchased, with the excess purchase price over par value recorded as a reduction of additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess purchase price over par value as a reduction of retained earnings. Due to the volume of repurchases and the prices at which these were made, additional paid-in capital was reduced to zero , with the remainder of the excess purchase price over par value of $523 million and $1.2 billion recorded as a reduction of retained earnings during the nine months ended September 30, 2018 and September 24, 2017 . Dividends We declared cash dividends totaling $1.2 billion ( $4.20 per share) and $2.3 billion ( $8.20 per share) during the quarter and nine months ended September 30, 2018 . The 2018 dividend amounts include the declaration of our 2018 fourth quarter dividend of $2.20 per share, an increase of $0.20 over the third quarter 2018 dividend, which totaled $569 million . We did not declare any cash dividends during the third quarter of 2017 but we declared cash dividends of $1.6 billion ( $5.46 per share) during the nine months ended September 24, 2017 . Our third quarter 2017 dividend of $528 million ( $1.82 per share) was declared during the second quarter of 2017. Restricted Stock Unit Grants During the nine months ended September 30, 2018 , we granted certain employees approximately 0.4 million RSUs with a grant date fair value of $353.99 per RSU. The grant date fair value of these RSUs is equal to the closing market price of our common stock on the grant date less a discount to reflect the delay in payment of dividend-equivalent cash payments that are made only upon vesting, which is generally three years from the grant date. We recognize the grant date fair value of RSUs, less estimated forfeitures, as compensation expense ratably over the requisite service period, which is shorter than the vesting period if the employee is retirement eligible on the date of grant or will become retirement eligible before the end of the vesting period. Accumulated Other Comprehensive Loss Changes in the balance of AOCL, net of tax, consisted of the following (in millions): Postretirement Benefit Plans Other, net AOCL Balance at December 31, 2017 $ (12,559 ) $ 20 $ (12,539 ) Other comprehensive income before reclassifications — (53 ) (53 ) Amounts reclassified from AOCL Recognition of net actuarial losses (a) 1,092 — 1,092 Amortization of net prior service credits (a) (192 ) — (192 ) Other — 23 23 Total reclassified from AOCL 900 23 923 Total other comprehensive income 900 (30 ) 870 Reclassification of income tax effects from tax reform (b) (2,396 ) (12 ) (2,408 ) Balance at September 30, 2018 $ (14,055 ) $ (22 ) $ (14,077 ) Balance at December 31, 2016 $ (11,981 ) $ (121 ) $ (12,102 ) Other comprehensive income before reclassifications 3 123 126 Amounts reclassified from AOCL Recognition of net actuarial losses (a) 774 — 774 Amortization of net prior service credits (a) (172 ) — (172 ) Other — 14 14 Total reclassified from AOCL 602 14 616 Total other comprehensive income 605 137 742 Balance at September 24, 2017 $ (11,376 ) $ 16 $ (11,360 ) (a) Reclassifications from AOCL related to our postretirement benefit plans were recorded as a component of net periodic benefit cost for each period presented (see “ Note 7 – Postretirement Benefit Plans ”). These amounts include $300 million and $200 million , net of tax, for the quarters ended September 30, 2018 and September 24, 2017 , which are comprised of the recognition of net actuarial losses of $364 million and $258 million for the quarters ended September 30, 2018 and September 24, 2017 and the amortization of net prior service credits of $(64) million and $(58) million for the quarters ended September 30, 2018 and September 24, 2017 . (b) We reclassified the impact of the income tax effects related to the Tax Cuts and Jobs Act of 2017 (the Tax Act) from AOCL during the first quarter of 2018 to retained earnings by the same amount with zero impact to total equity. See ASU 2018-02 in “ Note 12 – Recent Accounting Pronouncements ” for additional information. |
OTHER
OTHER | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
OTHER | OTHER Short-Term Debt and Commercial Paper As of September 30, 2018 , we had $1.2 billion of short-term borrowings due within one year, of which $750 million was comprised of our 1.85% notes and $490 million was comprised of commercial paper borrowings with a weighted-average rate of 2.35% . As of December 31, 2017 we had $750 million of short-term borrowings comprised of our 1.85% notes and no commercial paper borrowings outstanding. On August 24, 2018, we entered into a new $2.5 billion revolving credit facility (the 5 -year Facility) with various banks that is available for general corporate purposes and which has an expiration date of August 24, 2023. The undrawn portion of the 5 -year Facility is also available to serve as a backup facility for the issuance of commercial paper. We may request and the banks may grant, at their discretion, an increase in the borrowing capacity under the 5 -year Facility of up to an additional $500 million . There were no borrowings outstanding under the 5 -year Facility at September 30, 2018 . In September 2017, we issued notes totaling approximately $1.6 billion with a fixed interest rate of 4.09% , maturing in September 2052 in exchange for outstanding notes totaling approximately $1.4 billion with fixed interest rates ranging from 4.70% to 8.50% maturing 2029 to 2046. In connection with the exchange of principal, we paid a premium of $237 million , substantially all of which was in the form of new notes. Equity Method Investee Impairment During the quarter ended March 26, 2017, equity earnings included a charge recorded of approximately $64 million ( $40 million , or $0.14 per share, after tax), which represented our portion of a non-cash asset impairment related to certain long-lived assets held by our equity method investee, AMMROC. As of September 30, 2018 , our equity method investment in AMMROC totaled approximately $560 million . We are continuing to monitor this investment in light of ongoing performance, business base and economic issues and we may have to record our portion of additional charges, or an impairment of our investment, or both, should the carrying value of our investment exceed its fair value. These charges could adversely affect our results of operations. Severance and Restructuring Charges During the second quarter of 2018 , we recorded charges totaling $96 million ( $76 million , or $0.26 per share, after tax) related to certain severance and restructuring actions at our RMS business segment. These charges consist of $75 million of severance costs for the planned elimination of certain positions through either voluntary or involuntary actions and $21 million of asset impairment charges associated with our decision to consolidate certain operations. Upon separation, terminated employees will receive lump-sum severance payments primarily based on years of service, a majority of which we expect to pay by the end of 2019. These actions resulted from a strategic review of our RMS business segment and are intended to improve the efficiency of our operations and better align our organization and cost structure with changing economic conditions. We expect to recover a portion of the severance and restructuring charges through the pricing of our products and services to the U.S. Government and other customers in future periods, which will be included in RMS’ operating results. During the quarter and nine months ended September 30, 2018 , we paid approximately $10 million in severance payments associated with these actions. Income Taxes Our effective income tax rates were 6.5% and 12.9% for the quarter and nine months ended September 30, 2018 , and 25.8% and 26.3% for the quarter and nine months ended September 24, 2017 . The lower rate for the quarter and nine months ended September 30, 2018 was primarily due to the reduction of the federal statutory rate from 35% to 21% and the deduction for foreign derived intangible income, both as a result of the Tax Cuts and Jobs Act of 2017 ( the Tax Act ) enacted in December 2017. The rates for both periods benefited from tax deductions for dividends paid to our defined contribution plans with an employee stock ownership plan feature, tax deductions for employee equity awards, and the research and development tax credit. The rate for the quarter and nine months ended September 30, 2018 benefited from our change in a tax accounting method recorded discretely in this quarter, reflecting a 2012 Court of Federal Claims decision, which held that the tax basis in certain assets should be increased and realized upon the assets’ disposition. The rate for the quarter and nine months ended September 24, 2017 benefited from tax deductions for U.S. manufacturing activities, which the Tax Act repealed for years after 2017. While we have substantially completed our provisional analysis of the income tax effects of the Tax Act as of December 31, 2017 and recorded a reasonable estimate in 2017 of such effects, actual effects may differ, possibly materially, due to, among other things, further refinement of our calculations, changes in interpretations and assumptions that we have made, additional guidance that may be issued by the U.S. Government, and actions and related accounting policy decisions we may take as a result of the Tax Act. We will complete our analysis of the impact of the Tax Act for 2017 over a one-year measurement period ending December 22, 2018, and any adjustments during this measurement period will be included in net earnings as an adjustment to income tax expense in the reporting period when such adjustments are determined. During the first nine months of 2018 we have not identified any material change to the net one-time charge for the year ended December 31, 2017 related to the Tax Act. |
RECENT ACCOUNTING PRONOUNCEMENT
RECENT ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS Recent Accounting Pronouncements Adopted Effective January 1, 2018, we adopted ASC 606, which replaces existing revenue recognition guidance and outlines a single set of comprehensive principles for recognizing revenue under GAAP. Among other things, ASC 606 requires entities to assess the products or services promised in contracts with customers at contract inception to determine the appropriate unit at which to record revenues, which is referred to as a performance obligation. Revenue is recognized when control of the promised products or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those products or services. Prior to the adoption of ASC 606, we recognized the majority of our revenues using the percentage-of-completion method of accounting. Based on the nature of products provided or services performed, revenue was recorded as costs were incurred (the percentage-of-completion cost-to-cost method) or as units were delivered (the percentage-of-completion units-of-delivery method). For most of our contracts, the customer obtains control or receives benefits as we perform on the contract. As a result, under ASC 606 revenue is recognized over a period of time utilizing the percentage-of-completion cost-to-cost method. This change generally results in an acceleration of revenue for contracts that were historically accounted for using the percentage-of-completion units-of-delivery method as revenues are now recognized earlier in the performance period as we incur costs. For more information on our policy for recognizing revenue under ASC 606, see “ Note 2 – Significant Accounting Policy Updates .” Significant programs impacted by these changes include the C-130J and C-5 programs in our Aeronautics business segment; tactical missile programs (Hellfire and Joint Air-to-Surface Standoff Missile (JASSM)), Patriot Advanced Capability-3 (PAC-3), and fire control programs (LANTIRN ® and SNIPER ® ) in our MFC business segment; the Black Hawk ® and Seahawk ® helicopter programs in our RMS business segment; and commercial satellite programs in our Space business segment. We adopted ASC 606 using the full retrospective method, which means we applied the new standard to each prior year presented in our financial statements going back to January 1, 2016, with a cumulative effect adjustment to retained earnings as of January 1, 2016 for contracts that were in process at that point in time. Accordingly, the amounts for all periods presented in this Form 10-Q have been adjusted to reflect the impacts of ASC 606. Effective January 1, 2018, we also adopted ASU 2017-07, which changed the income statement presentation of certain components of net periodic benefit cost related to defined benefit pension and other postretirement benefit plans. ASU 2017-07 requires entities to record only the service cost component of FAS pension and other postretirement benefit plan expense in operating profit and the non-service cost components of FAS pension and other postretirement benefit plan expense (i.e., interest cost, expected return on plan assets, net actuarial gains or losses, and amortization of prior service cost or credits) as part of non-operating expense. Previously, we recorded all components of net periodic benefit cost in operating profit as part of cost of sales. We adopted ASU 2017-07 using the retrospective method, which means we applied the new standard to each prior period presented in our financial statements going back to January 1, 2016 . The following tables summarize the effects of adopting ASC 606 and ASU 2017-07 on our consolidated statement of earnings for the quarter and nine months ended September 24, 2017 (unaudited; in millions, except per share data): Quarter Ended Adjustments for Historical ASC 606 ASU 2017-07 Adjusted Net sales Products $ 10,496 $ 132 $ — $ 10,628 Services 1,673 40 — 1,713 Total net sales 12,169 172 — 12,341 Cost of sales Products (9,481 ) (63 ) — (9,544 ) Services (1,513 ) (71 ) — (1,584 ) Other unallocated, net 176 — 211 387 Total cost of sales (10,818 ) (134 ) 211 (10,741 ) Gross profit 1,351 38 211 1,600 Other income, net 77 — — 77 Operating profit 1,428 38 211 1,677 Interest expense (162 ) — — (162 ) Other non-operating expense, net (7 ) — (211 ) (218 ) Earnings before income taxes 1,259 38 — 1,297 Income tax expense (320 ) (14 ) — (334 ) Net earnings $ 939 $ 24 $ — $ 963 Earnings per common share Basic $ 3.27 $ 0.08 $ — $ 3.35 Diluted $ 3.24 $ 0.08 $ — $ 3.32 Cash dividends paid per common share $ 1.82 $ — $ — $ 1.82 Nine Months Ended Adjustments for Historical ASC 606 ASU 2017-07 Adjusted Net sales Products $ 30,837 $ 26 $ — $ 30,863 Services 5,074 179 — 5,253 Total net sales 35,911 205 — 36,116 Cost of sales Products (27,919 ) 69 — (27,850 ) Services (4,547 ) (177 ) — (4,724 ) Other unallocated, net 484 — 636 1,120 Total cost of sales (31,982 ) (108 ) 636 (31,454 ) Gross profit 3,929 97 636 4,662 Other income, net 133 — — 133 Operating profit 4,062 97 636 4,795 Interest expense (477 ) — — (477 ) Other non-operating expense, net (8 ) — (636 ) (644 ) Earnings before income taxes 3,577 97 — 3,674 Income tax expense (933 ) (34 ) — (967 ) Net earnings $ 2,644 $ 63 $ — $ 2,707 Earnings per common share Basic $ 9.16 $ 0.22 $ — $ 9.38 Diluted $ 9.08 $ 0.21 $ — $ 9.29 Cash dividends paid per common share $ 5.46 $ — $ — $ 5.46 As a result of the increase in net earnings, our comprehensive income for the quarter and nine months ended September 24, 2017 increased by $24 million to $1.2 billion and increased by $63 million to $3.4 billion . The following table summarizes the effects of adopting ASC 606 on our consolidated balance sheet as of December 31, 2017 (ASU 2017-07 had no impact on our consolidated balance sheet) (unaudited; in millions, except par value): Adjustments for Historical ASC 606 Adjusted Assets Current assets Cash and cash equivalents $ 2,861 $ — $ 2,861 Receivables, net 8,603 (6,338 ) 2,265 Contract assets — 7,992 7,992 Inventories 4,487 (1,609 ) 2,878 Other current assets 1,510 (1 ) 1,509 Total current assets 17,461 44 17,505 Property, plant and equipment, net 5,775 — 5,775 Goodwill 10,807 — 10,807 Intangible assets, net 3,797 — 3,797 Deferred income taxes 3,111 45 3,156 Other noncurrent assets 5,570 10 5,580 Total assets $ 46,521 $ 99 $ 46,620 Liabilities and equity Current liabilities Accounts payable $ 1,467 $ — $ 1,467 Contract liabilities (a) 6,752 276 7,028 Salaries, benefits and payroll taxes 1,785 — 1,785 Current maturities of long-term debt 750 — 750 Other current liabilities 1,883 — 1,883 Total current liabilities 12,637 276 12,913 Long-term debt, net 13,513 — 13,513 Accrued pension liabilities 15,703 — 15,703 Other postretirement benefit liabilities 719 — 719 Other noncurrent liabilities 4,558 (10 ) 4,548 Total liabilities 47,130 266 47,396 Stockholders’ equity Common stock, $1 par value per share 284 — 284 Additional paid-in capital — — — Retained earnings 11,573 (168 ) 11,405 Accumulated other comprehensive loss (12,540 ) 1 (12,539 ) Total stockholders’ deficit (683 ) (167 ) (850 ) Noncontrolling interests in subsidiary 74 — 74 Total deficit (609 ) (167 ) (776 ) Total liabilities and equity $ 46,521 $ 99 $ 46,620 (a) Formerly referred to as customer advances and amounts in excess of costs incurred. The following table summarizes the effects of adopting ASC 606 on certain components within our net cash provided by operating activities for the nine months ended September 24, 2017 (ASC 606 had no impact on total operating cash flows or cash flows from investing and financing activities) (unaudited; in millions): Adjustments for Historical ASC 606 Adjusted Operating activities Net earnings $ 2,644 $ 63 $ 2,707 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 880 — 880 Stock-based compensation 133 — 133 Changes in assets and liabilities Receivables, net (819 ) (15 ) (834 ) Contract assets — (228 ) (228 ) Inventories (133 ) 67 (66 ) Accounts payable 1,229 — 1,229 Contract liabilities (a) (581 ) 89 (492 ) Postretirement benefit plans 1,012 — 1,012 Income taxes (202 ) — (202 ) Other, net 801 24 825 Net cash provided by operating activities $ 4,964 $ — $ 4,964 (a) Formerly referred to as customer advances and amounts in excess of costs incurred. Effective January 1, 2018, we also adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which provides entities an option to reclassify certain tax effects as a result of the Tax Act from accumulated other comprehensive income or loss to retained earnings. The adoption of ASU 2018-02 increased our AOCL at January 1, 2018 by $2.4 billion with a corresponding increase to retained earnings by the same amount with zero impact to total equity. The reclassification was primarily related to the impact of the Tax Act on deferred tax assets associated with net actuarial losses (and prior service credits) resulting from our defined benefit pension and other postretirement benefit plans that were originally recorded in AOCL within equity. Those amounts were originally recorded net of deferred tax benefits based on the federal statutory income tax rate in effect at the time they were recorded. GAAP requires entities to remeasure deferred tax assets and liabilities as a result of a change in tax laws or rates, with the impacts reflected in earnings. Accordingly, in the fourth quarter of 2017, we remeasured the deferred tax assets associated with our AOCL using the lower U.S. corporate income tax rate under the Tax Act, with the impacts of the remeasurement recorded as a one-time charge to earnings. Prior to ASU 2018-02, GAAP required the original deferred tax amount recorded in accumulated other comprehensive income or loss, to remain at the old tax rate despite the fact that its related deferred tax asset or liability was remeasured as a result of the Tax Act. ASU 2018-02 allows entities to record a one-time reclassification of these tax effects between accumulated other comprehensive income or loss and retained earnings. We reclassified the impact of the income tax effects of the Tax Act from AOCL in the period in which they occurred. Recent Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements For Defined Benefit Plans . The new standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing and adding certain disclosures for these plans. The effective date is our fiscal year ending December 31, 2020 with early adoption permitted and requires application on a retrospective basis. The adoption will not have a material effect on the Company’s consolidated financial statements. In August 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-12, Derivatives and Hedging (Topic 815) , which eliminates the requirement to separately measure and report hedge ineffectiveness. The guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted and required application on a retrospective basis. We do not expect a significant impact to our consolidated assets and liabilities, net earnings, or cash flows as a result of adopting this new standard. We plan to adopt the new standard effective January 1, 2019. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , as amended, which requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for most lease arrangements and expands disclosures about leasing arrangements for both lessees and lessors, among other items. The new standard is effective for fiscal years beginning after December 15, 2018, which makes the new standard effective for us on January 1, 2019. We may apply the transition provisions of ASU 2016-02, as amended, either at the beginning of the earliest period presented in our fiscal year 2019 Form 10-K, which would be January 1, 2017, or on the effective date of adoption, which would be January 1, 2019. Among other requirements, the transition provisions require the lessee to recognize a right-of-use asset and liability for most existing lease arrangements on the date the transition provisions are applied. We have elected to apply the transition provisions of this new standard on January 1, 2019. Therefore, periods prior to the effective date of adoption will continue to be reported using current GAAP (ASC 840). We commenced our evaluation of the impact of the new lease accounting standard in late 2016 by evaluating its impact on selected contracts. With this baseline understanding, we developed a project plan to evaluate numerous contracts across our corporation, develop processes and tools to implement the new standard and identify and design changes to internal controls by January 1, 2019. We have successfully identified and classified our lease population and we continued to perform under the project plan through the end of the third quarter of 2018. The majority of our existing lease arrangements are classified as operating leases, which we expect will continue to be classified as operating under the new standard. Based on the net present value of leases outstanding at September 30, 2018, we expect to record a right-of-use asset and lease liability of approximately $1.1 billion each, on our balance sheet upon adoption of the new standard on January 1, 2019. We do not anticipate that adoption of the new standard will have a significant impact on our net earnings or cash flows. |
SIGNIFICANT ACCOUNTING POLICY_2
SIGNIFICANT ACCOUNTING POLICY UPDATES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICY UPDATES | SIGNIFICANT ACCOUNTING POLICY UPDATES As described in “ Note 1 – Basis of Presentation ” and “ Note 12 – Recent Accounting Pronouncements ,” effective January 1, 2018, we adopted ASC 606, which changed the way we recognize revenue for certain contracts. Accounting policies that were significantly affected by the adoption of ASC 606 are discussed below. Revenue Recognition The majority of our net sales are generated from long-term contracts with the U.S. Government and international customers (including foreign military sales (FMS) contracted through the U.S. Government) for the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We provide our products and services under fixed-price and cost-reimbursable contracts. Under fixed-price contracts we agree to perform the specified work for a pre-determined price. To the extent our actual costs vary from the estimates upon which the price was negotiated, we will generate more or less profit or could incur a loss. Some fixed-price contracts have a performance-based component under which we may earn incentive payments or incur financial penalties based on our performance. Cost-reimbursable contracts provide for the payment of allowable costs incurred during performance of the contract plus a fee up to a ceiling based on the amount that has been funded. Typically, we enter into three types of cost-reimbursable contracts: cost-plus-award-fee, cost-plus-incentive-fee, and cost-plus-fixed-fee. Cost-plus-award-fee contracts provide for an award fee that varies within specified limits based on the customer’s assessment of our performance against a predetermined set of criteria, such as targets based on cost, quality, technical and schedule criteria. Cost-plus-incentive-fee contracts provide for reimbursement of costs plus a fee, which is adjusted by a formula based on the relationship of total allowable costs to total target costs (i.e., incentive based on cost) or reimbursement of costs plus an incentive to exceed stated performance targets (i.e., incentive based on performance). The fixed-fee in a cost-plus-fixed-fee contract is negotiated at the inception of the contract and that fixed-fee does not vary with actual costs. We account for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We assess each contract at its inception to determine whether it should be combined with other contracts. When making this determination, we consider factors such as whether two or more contracts were negotiated and executed at or near the same time or were negotiated with an overall profit objective. If combined, we treat the combined contracts as a single contract for revenue recognition purposes. We evaluate the products or services promised in each contract at inception to determine whether the contract should be accounted for as having one or more performance obligations. The products and services in our contracts are typically not distinct from one another due to their complex relationships and the significant contract management functions we are required to perform under the contract. Accordingly, our contracts are typically accounted for as one performance obligation. In limited cases, our contracts have more than one distinct performance obligation, which occurs when we perform activities that are not highly complex or interrelated or involve different product lifecycles. Significant judgment is required in determining performance obligations, and these decisions could change the amount of revenue and profit recorded in a given period. We classify net sales as products or services on our consolidated statements of earnings based on the predominant attributes of the performance obligations. We determine the transaction price for each contract based on the consideration we expect to receive for the products or services being provided under the contract. For contracts where a portion of the price may vary we estimate variable consideration at the most likely amount, which is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. We analyze the risk of a significant revenue reversal and if necessary constrain the amount of variable consideration recognized in order to mitigate this risk. At the inception of a contract we estimate the transaction price based on our current rights and do not contemplate future modifications (including unexercised options) or follow-on contracts until they become legally enforceable. Contracts are often subsequently modified to include changes in specifications, requirements or price, which may create new or change existing enforceable rights and obligations. Depending on the nature of the modification, we consider whether to account for the modification as an adjustment to the existing contract or as a separate contract. Generally, modifications to our contracts are not distinct from the existing contract due to the significant integration and interrelated tasks provided in the context of the contract. Therefore, such modifications are accounted for as if they were part of the existing contract and recognized as a cumulative adjustment to revenue. For contracts with multiple performance obligations, we allocate the transaction price to each performance obligation based on the estimated standalone selling price of the product or service underlying each performance obligation. The standalone selling price represents the amount we would sell the product or service to a customer on a standalone basis (i.e., not bundled with any other products or services). Our contracts with the U.S. Government, including FMS contracts, are subject to the Federal Acquisition Regulations (FAR) and the price is typically based on estimated or actual costs plus a reasonable profit margin. As a result of these regulations, the standalone selling price of products or services in our contracts with the U.S. Government and FMS contracts are typically equal to the selling price stated in the contract. Therefore, we typically do not need to allocate (or reallocate) the transaction price to multiple performance obligations. For non-U.S. Government contracts with multiple performance obligations, we evaluate whether the stated selling prices for the products or services represent their standalone selling prices. We primarily sell customized solutions unique to a customer’s specifications. When it is necessary to allocate the transaction price to multiple performance obligations, we typically use the expected cost plus a reasonable profit margin to estimate the standalone selling price of each product or service. We occasionally sell standard products or services with observable standalone sales transactions. In these situations, the observable standalone sales transactions are used to determine the standalone selling price. We recognize revenue as performance obligations are satisfied and the customer obtains control of the products and services. In determining when performance obligations are satisfied, we consider factors such as contract terms, payment terms and whether there is an alternative future use of the product or service. Substantially all of our revenue is recognized over a period of time as we perform under the contract because control of the work in process transfers continuously to the customer. For contracts with the U.S. Government and FMS contracts, this continuous transfer of control of the work in process to the customer is supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit, and take control of any work in process. Our non-U.S. Government contracts, primarily international direct commercial contracts, typically do not include termination for convenience provisions. However, continuous transfer of control to our customer is supported as, if our customer were to terminate the contract for reasons other than our non-performance, we would have the right to recover damages which would include, among other potential damages, the right to payment for our work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to us. For performance obligations to deliver products with continuous transfer of control to the customer, revenue is recognized based on the extent of progress towards completion of the performance obligation, generally using the percentage-of-completion cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer as we incur costs on our contracts. Under the percentage-of-completion cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation(s). For performance obligations to provide services to the customer, revenue is recognized over a period of time based on costs incurred or the right to invoice method (in situations where the value transferred matches our billing rights) as our customer receives and consumes the benefits. For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time in which each performance obligation is fully satisfied. This coincides with the point in time the customer obtains control of the product or service, which typically occurs upon customer acceptance or receipt of the product or service, given that we maintain control of the product or service until that point. Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. For our cost-reimbursable and fixed-priced-incentive contracts, the estimated consideration we expect to receive pursuant to the terms of the contract may exceed the contractual award amount. The estimated consideration is determined at the outset of the contract and is continuously reviewed throughout the contract period. In determining the estimated consideration, we consider the risks related to the technical, schedule and cost aspects of the contract and an estimate of any variable consideration. Periodically, we review these risks and may increase or decrease backlog accordingly. As the risks on such contracts are successfully retired, the estimated consideration from customers may be reduced, resulting in a reduction of backlog without a corresponding recognition of sales. As of September 30, 2018 , our ending backlog was $109 billion . We expect to recognize approximately 40% over the next 12 months and approximately 65% over the next 24 months as revenue, with the remainder recognized thereafter. For arrangements with the U.S. Government and FMS contracts, we generally do not begin work on contracts until funding is appropriated by the customer. Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type. Typical payment terms under fixed-price contracts with the U.S. Government provide that the customer pays either performance-based payments (PBPs) based on the achievement of contract milestones or progress payments based on a percentage of costs we incur. For the majority of our international direct commercial contracts to deliver complex systems, we typically receive advance payments prior to commencement of work, as well as milestone payments that are paid in accordance with the terms of our contract as we perform. We recognize a liability for payments in excess of revenue recognized, which is presented as a contract liability on the balance sheet. The portion of payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer from our failure to adequately complete some or all of the obligations under the contract. Payments received from customers in advance of revenue recognition are not considered to be significant financing components because they are used to meet working capital demands that can be higher in the early stages of a contract. For fixed-price and cost-reimbursable contracts, we present revenues recognized in excess of billings as contract assets on the balance sheet. Amounts billed and due from our customers under both contract types are classified as receivables on the balance sheet. Significant estimates and assumptions are made in estimating contract sales and costs, including the profit booking rate. At the outset of a long-term contract, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract, as well as variable consideration, and assess the effects of those risks on our estimates of sales and total costs to complete the contract. The estimates consider the technical requirements (e.g., a newly-developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., material, labor, subcontractor, overhead, general and administrative and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers). The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract. Profit booking rates may increase during the performance of the contract if we successfully retire risks surrounding the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease. All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate. When estimates of total costs to be incurred on a contract exceed total estimates of the transaction price, a provision for the entire loss is determined at the contract level and is recorded in the period in which the loss is determined. Comparability of our segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on our contracts for which we recognize revenue over a period of time using the percentage-of-completion cost-to-cost method to measure progress towards completion. Increases in the profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes. Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales. Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions, which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of certain assets. Our consolidated net adjustments not related to volume, including net profit booking rate adjustments and other matters, increased segment operating profit by approximately $545 million and $1.4 billion during the quarter and nine months ended September 30, 2018 and $365 million and $1.2 billion during the quarter and nine months ended September 24, 2017 . These adjustments increased net earnings by approximately $431 million ( $1.50 per share) and $1.1 billion ( $3.93 per share) during the quarter and nine months ended September 30, 2018 and $237 million ( $0.82 per share) and $765 million ( $2.63 per share) during the quarter and nine months ended September 24, 2017 . We recognized net sales from performance obligations satisfied in prior periods of approximately $595 million and $1.6 billion during the quarter and nine months ended September 30, 2018 and $385 million and $1.3 billion during the quarter and nine months ended September 24, 2017 , which primarily relate to changes in profit booking rates that impacted revenue. We have a program, EADGE-T, to design, integrate, and install an air missile defense command, control, communications, computers – intelligence (C4I) system for an international customer that has experienced performance matters and for which we have periodically accrued reserves. During the first quarter of 2017, we revised our estimated costs to complete the EADGE-T contract as a consequence of ongoing performance matters and recorded an additional charge of $120 million ( $74 million or $0.25 per share, after tax) at our Rotary and Mission Systems (RMS) business segment, which resulted in cumulative losses of approximately $260 million on this program. As of September 30, 2018 , cumulative losses remained at approximately $260 million . We continue to monitor program requirements and our performance. At this time, we do not anticipate additional charges that would be material to our operating results or financial condition. We have two commercial satellite programs, for the delivery of three satellites in total, at our Space business segment, for which we have experienced performance issues related to the development and integration of a modernized LM 2100 satellite platform. These commercial programs require the development of new satellite technology to enhance the LM 2100’s power, propulsion and electronics, among other items. The enhanced LM 2100 satellite platform is expected to benefit other commercial and government satellite programs. We have periodically revised our estimated costs to complete these developmental commercial programs. During the first six months of 2018, we recorded losses of approximately $75 million ( $56 million , or $0.20 per share, after tax), which resulted in cumulative losses of approximately $380 million for these programs. As of September 30, 2018 , cumulative losses remain at approximately $380 million . While these losses reflect our estimated total losses on the programs, we will continue to incur unrecoverable general and administrative costs each period until we complete these programs . These programs remain developmental and further challenges in the delivery and integration of new satellite technology, anomalies discovered during system testing requiring repair or rework, further schedule delays and potential penalties could require that we record additional loss reserves which could be material to our operating results. As we did not meet the July 2018 delivery requirement on one of the programs, the customer could seek to exercise a termination right, but we believe that the probability that this will occur is remote as the customer has an immediate need for the satellites. Were the customer to seek to exercise a termination right and be successful in this effort, we would have to refund the payments we have received and pay certain penalties. On the other program, we currently anticipate delivering the satellite before the date upon which the customer could seek to exercise a termination right although we may have to pay certain penalties and have sought to address this possibility in our reserves. We are responsible for designing, developing and installing an upgraded turret for the Warrior Capability Sustainment Program. During the first six months of 2018 , we revised our estimated costs to complete the program as a consequence of performance issues, and recorded a reserve of $85 million ( $64 million , or $0.22 per share, after tax) at our MFC business segment, which resulted in cumulative losses of approximately $140 million on this program. As of September 30, 2018, cumulative losses remain at approximately $140 million. We may continue to experience issues related to customer requirements and our performance under this contract and have to record additional reserves. However, based on the losses already recorded and our current estimate of the sales and costs to complete the program, at this time we do not anticipate that additional losses, if any, would be material to our operating results or financial condition. Receivables, Net Receivables, net represent our unconditional right to consideration under the contract and include amounts billed and currently due from customers. The amounts are stated at their net estimated realizable value. There were no significant impairment losses related to our receivables during the quarters and nine months ended September 30, 2018 and September 24, 2017 . On occasion, our customers may seek deferred payment terms to purchase our products. In connection with these transactions, we may, at our customer’s request, enter into arrangements for the non-recourse sale of customer receivables to unrelated third–party financial institutions. For accounting purposes, these transactions are not discounted and are treated as a sale of receivables as we have no continuing involvement. The sale proceeds from the financial institutions are reflected in our operating cash flows on the statement of cash flows. We sold customer receivables of $41 million and $268 million during the quarter and nine months ended September 30, 2018 and $146 million and $511 million during the quarter and nine months ended September 24, 2017 . There were no gains or losses related to sales of these receivables. Contract Assets Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. The amounts may not exceed their estimated net realizable value. Contract assets are classified as current based on our contract operating cycle and are reported on a contract-by-contract basis, net of revenue recognized, at the end of each reporting period. Inventories We record inventories at the lower of cost or estimated net realizable value. If events or changes in circumstances indicate that the utility of our inventories have diminished through damage, deterioration, obsolescence, changes in price or other causes, a loss is recognized in the period in which it occurs. We capitalize labor, material, subcontractor and overhead costs as work-in-process for contracts where control has not yet passed to the customer. In addition, we capitalize costs incurred to fulfill a contract in advance of contract award in inventories as work-in-process if we determine that contract award is probable. We determine the costs of other product and supply inventories by using the first-in first-out or average cost methods. Contract Liabilities Contract liabilities (formerly referred to as customer advances and amounts in excess of costs incurred) include advance payments and billings in excess of revenue recognized. Contract liabilities are classified as current based on our contract operating cycle and are reported on a contract-by-contract basis, net of revenue recognized, at the end of each reporting period. Recent Accounting Pronouncements Adopted Effective January 1, 2018, we adopted ASC 606, which replaces existing revenue recognition guidance and outlines a single set of comprehensive principles for recognizing revenue under GAAP. Among other things, ASC 606 requires entities to assess the products or services promised in contracts with customers at contract inception to determine the appropriate unit at which to record revenues, which is referred to as a performance obligation. Revenue is recognized when control of the promised products or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those products or services. Prior to the adoption of ASC 606, we recognized the majority of our revenues using the percentage-of-completion method of accounting. Based on the nature of products provided or services performed, revenue was recorded as costs were incurred (the percentage-of-completion cost-to-cost method) or as units were delivered (the percentage-of-completion units-of-delivery method). For most of our contracts, the customer obtains control or receives benefits as we perform on the contract. As a result, under ASC 606 revenue is recognized over a period of time utilizing the percentage-of-completion cost-to-cost method. This change generally results in an acceleration of revenue for contracts that were historically accounted for using the percentage-of-completion units-of-delivery method as revenues are now recognized earlier in the performance period as we incur costs. For more information on our policy for recognizing revenue under ASC 606, see “ Note 2 – Significant Accounting Policy Updates .” Significant programs impacted by these changes include the C-130J and C-5 programs in our Aeronautics business segment; tactical missile programs (Hellfire and Joint Air-to-Surface Standoff Missile (JASSM)), Patriot Advanced Capability-3 (PAC-3), and fire control programs (LANTIRN ® and SNIPER ® ) in our MFC business segment; the Black Hawk ® and Seahawk ® helicopter programs in our RMS business segment; and commercial satellite programs in our Space business segment. We adopted ASC 606 using the full retrospective method, which means we applied the new standard to each prior year presented in our financial statements going back to January 1, 2016, with a cumulative effect adjustment to retained earnings as of January 1, 2016 for contracts that were in process at that point in time. Accordingly, the amounts for all periods presented in this Form 10-Q have been adjusted to reflect the impacts of ASC 606. Effective January 1, 2018, we also adopted ASU 2017-07, which changed the income statement presentation of certain components of net periodic benefit cost related to defined benefit pension and other postretirement benefit plans. ASU 2017-07 requires entities to record only the service cost component of FAS pension and other postretirement benefit plan expense in operating profit and the non-service cost components of FAS pension and other postretirement benefit plan expense (i.e., interest cost, expected return on plan assets, net actuarial gains or losses, and amortization of prior service cost or credits) as part of non-operating expense. Previously, we recorded all components of net periodic benefit cost in operating profit as part of cost of sales. We adopted ASU 2017-07 using the retrospective method, which means we applied the new standard to each prior period presented in our financial statements going back to January 1, 2016 . The following tables summarize the effects of adopting ASC 606 and ASU 2017-07 on our consolidated statement of earnings for the quarter and nine months ended September 24, 2017 (unaudited; in millions, except per share data): Quarter Ended Adjustments for Historical ASC 606 ASU 2017-07 Adjusted Net sales Products $ 10,496 $ 132 $ — $ 10,628 Services 1,673 40 — 1,713 Total net sales 12,169 172 — 12,341 Cost of sales Products (9,481 ) (63 ) — (9,544 ) Services (1,513 ) (71 ) — (1,584 ) Other unallocated, net 176 — 211 387 Total cost of sales (10,818 ) (134 ) 211 (10,741 ) Gross profit 1,351 38 211 1,600 Other income, net 77 — — 77 Operating profit 1,428 38 211 1,677 Interest expense (162 ) — — (162 ) Other non-operating expense, net (7 ) — (211 ) (218 ) Earnings before income taxes 1,259 38 — 1,297 Income tax expense (320 ) (14 ) — (334 ) Net earnings $ 939 $ 24 $ — $ 963 Earnings per common share Basic $ 3.27 $ 0.08 $ — $ 3.35 Diluted $ 3.24 $ 0.08 $ — $ 3.32 Cash dividends paid per common share $ 1.82 $ — $ — $ 1.82 Nine Months Ended Adjustments for Historical ASC 606 ASU 2017-07 Adjusted Net sales Products $ 30,837 $ 26 $ — $ 30,863 Services 5,074 179 — 5,253 Total net sales 35,911 205 — 36,116 Cost of sales Products (27,919 ) 69 — (27,850 ) Services (4,547 ) (177 ) — (4,724 ) Other unallocated, net 484 — 636 1,120 Total cost of sales (31,982 ) (108 ) 636 (31,454 ) Gross profit 3,929 97 636 4,662 Other income, net 133 — — 133 Operating profit 4,062 97 636 4,795 Interest expense (477 ) — — (477 ) Other non-operating expense, net (8 ) — (636 ) (644 ) Earnings before income taxes 3,577 97 — 3,674 Income tax expense (933 ) (34 ) — (967 ) Net earnings $ 2,644 $ 63 $ — $ 2,707 Earnings per common share Basic $ 9.16 $ 0.22 $ — $ 9.38 Diluted $ 9.08 $ 0.21 $ — $ 9.29 Cash dividends paid per common share $ 5.46 $ — $ — $ 5.46 As a result of the increase in net earnings, our comprehensive income for the quarter and nine months ended September 24, 2017 increased by $24 million to $1.2 billion and increased by $63 million to $3.4 billion . The following table summarizes the effects of adopting ASC 606 on our consolidated balance sheet as of December 31, 2017 (ASU 2017-07 had no impact on our consolidated balance sheet) (unaudited; in millions, except par value): Adjustments for Historical ASC 606 Adjusted Assets Current assets Cash and cash equivalents $ 2,861 $ — $ 2,861 Receivables, net 8,603 (6,338 ) 2,265 Contract assets — 7,992 7,992 Inventories 4,487 (1,609 ) 2,878 Other current assets 1,510 (1 ) 1,509 Total current assets 17,461 44 17,505 Property, plant and equipment, net 5,775 — 5,775 Goodwill 10,807 — 10,807 Intangible assets, net 3,797 — 3,797 Deferred income taxes 3,111 45 3,156 Other noncurrent assets 5,570 10 5,580 Total assets $ 46,521 $ 99 $ 46,620 Liabilities and equity Current liabilities Accounts payable $ 1,467 $ — $ 1,467 Contract liabilities (a) 6,752 276 7,028 Salaries, benefits and payroll taxes 1,785 — 1,785 Current maturities of long-term debt 750 — 750 Other current liabilities 1,883 — 1,883 Total current liabilities 12,637 276 12,913 Long-term debt, net 13,513 — 13,513 Accrued pension liabilities 15,703 — 15,703 Other postretirement benefit liabilities 719 — 719 Other noncurrent liabilities 4,558 (10 ) 4,548 Total liabilities 47,130 266 47,396 Stockholders’ equity Common stock, $1 par value per share 284 — 284 Additional paid-in capital — — — Retained earnings 11,573 (168 ) 11,405 Accumulated other comprehensive loss (12,540 ) 1 (12,539 ) Total stockholders’ deficit (683 ) (167 ) (850 ) Noncontrolling interests in subsidiary 74 — 74 Total deficit (609 ) (167 ) (776 ) Total liabilities and equity $ 46,521 $ 99 $ 46,620 (a) Formerly referred to as customer advances and amounts in excess of costs incurred. The following table summarizes the effects of adopting ASC 606 on certain components within our net cash provided by operating activities for the nine months ended September 24, 2017 (ASC 606 had no impact on total operating cash flows or cash flows from investing and financing activities) (unaudited; in millions): Adjustments for Historical ASC 606 Adjusted Operating activities Net earnings $ 2,644 $ 63 $ 2,707 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 880 — 880 Stock-based compensation 133 — 133 Changes in assets and liabilities Receivables, net (819 ) (15 ) (834 ) Contract assets — (228 ) (228 ) Inventories (133 ) 67 (66 ) Accounts payable 1,229 — 1,229 Contract liabilities (a) (581 ) 89 (492 ) Postretirement benefit plans 1,012 — 1,012 Income taxes (202 ) — (202 ) Other, net 801 24 825 Net cash provided by operating activities $ 4,964 $ — $ 4,964 (a) Formerly referred to as customer advances and amounts in excess of costs incurred. Effective January 1, 2018, we also adopted ASU 2018-02, Income Statement - Reporting Comprehensive Incom |
EARNINGS PER COMMON SHARE | We compute basic and diluted earnings per common share by dividing net earnings by the respective weighted average number of common shares outstanding for the periods presented. Our calculation of diluted earnings per common share also includes the dilutive effects for the assumed vesting of outstanding restricted stock units (RSUs) and performance stock units (PSUs) and exercise of outstanding stock options based on the treasury stock method. |
INVENTORY COSTS FOR CONTRACTS | Costs incurred to fulfill a contract in advance of the contract being awarded are included in inventories as work-in-process if we determine that those costs relate directly to a contract or to an anticipated contract that we can specifically identify and contract award is probable, the costs generate or enhance resources that will be used in satisfying performance obligations, and the costs are recoverable (referred to as pre-contract costs). Pre-contract costs that are initially capitalized in inventory are generally recognized as cost of sales consistent with the transfer of products and services to the customer upon the receipt of the anticipated contract. All other pre-contract costs, including start-up costs, are expensed as incurred. |
EARNINGS PER COMMON SHARE (Tabl
EARNINGS PER COMMON SHARE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Weighted Average Shares Outstanding Used to Compute Earnings Per Common Share | The weighted average number of shares outstanding used to compute earnings per common share were as follows (in millions): Quarters Ended Nine Months Ended September 30, September 24, September 30, September 24, Weighted average common shares outstanding for basic computations 284.3 287.1 284.9 288.5 Weighted average dilutive effect of equity awards 2.4 2.9 2.3 2.8 Weighted average common shares outstanding for diluted computations 286.7 290.0 287.2 291.3 |
INFORMATION ON BUSINESS SEGME_2
INFORMATION ON BUSINESS SEGMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Summary Of Operating Results and Total Assets For Each Business Segment | Net sales by total products and services, contract type, customer category and geographic region for each of our business segments were as follows (in millions): Quarter Ended September 30, 2018 Aeronautics MFC RMS Space Total Net sales Products $ 4,799 $ 1,873 $ 3,132 $ 2,114 $ 11,918 Services 843 400 716 441 2,400 Total net sales $ 5,642 $ 2,273 $ 3,848 $ 2,555 $ 14,318 Net sales by contract type Fixed-price $ 4,163 $ 1,536 $ 2,710 $ 534 $ 8,943 Cost-reimbursable 1,479 737 1,138 2,021 5,375 Total net sales $ 5,642 $ 2,273 $ 3,848 $ 2,555 $ 14,318 Net sales by customer U.S. Government $ 3,700 $ 1,625 $ 2,765 $ 2,174 $ 10,264 International (a) 1,909 600 959 362 3,830 U.S. commercial and other 33 48 124 19 224 Total net sales $ 5,642 $ 2,273 $ 3,848 $ 2,555 $ 14,318 Net sales by geographic region United States $ 3,733 $ 1,673 $ 2,889 $ 2,193 $ 10,488 Asia Pacific 854 126 377 8 1,365 Europe 691 112 213 324 1,340 Middle East 326 347 202 30 905 Other 38 15 167 — 220 Total net sales $ 5,642 $ 2,273 $ 3,848 $ 2,555 $ 14,318 Nine Months Ended September 30, 2018 Aeronautics MFC RMS Space Total Net sales Products $ 13,080 $ 4,935 $ 8,753 $ 6,062 $ 32,830 Services 2,281 1,100 1,884 1,256 6,521 Total net sales $ 15,361 $ 6,035 $ 10,637 $ 7,318 $ 39,351 Net sales by contract type Fixed-price $ 11,284 $ 4,043 $ 7,368 $ 1,394 $ 24,089 Cost-reimbursable 4,077 1,992 3,269 5,924 15,262 Total net sales $ 15,361 $ 6,035 $ 10,637 $ 7,318 $ 39,351 Net sales by customer U.S. Government $ 9,909 $ 4,215 $ 7,729 $ 6,114 $ 27,967 International (a) 5,321 1,696 2,562 1,162 10,741 U.S. commercial and other 131 124 346 42 643 Total net sales $ 15,361 $ 6,035 $ 10,637 $ 7,318 $ 39,351 Net sales by geographic region United States $ 10,040 $ 4,339 $ 8,075 $ 6,156 $ 28,610 Asia Pacific 2,394 349 1,002 62 3,807 Europe 1,877 227 592 1,082 3,778 Middle East 903 1,091 516 18 2,528 Other 147 29 452 — 628 Total net sales $ 15,361 $ 6,035 $ 10,637 $ 7,318 $ 39,351 (a) International sales include FMS contracted through the U.S. Government and direct commercial sales to international governments and other international customers. Quarter Ended September 24, 2017 Aeronautics MFC RMS Space Total Net sales Products $ 4,196 $ 1,614 $ 2,861 $ 1,957 $ 10,628 Services 520 343 502 348 1,713 Total net sales $ 4,716 $ 1,957 $ 3,363 $ 2,305 $ 12,341 Net sales by contract type Fixed-price $ 3,396 $ 1,321 $ 2,471 $ 464 $ 7,652 Cost-reimbursable 1,320 636 892 1,841 4,689 Total net sales $ 4,716 $ 1,957 $ 3,363 $ 2,305 $ 12,341 Net sales by customer U.S. Government $ 3,093 $ 1,404 $ 2,417 $ 1,919 $ 8,833 International (a) 1,589 511 848 367 3,315 U.S. commercial and other 34 42 98 19 193 Total net sales $ 4,716 $ 1,957 $ 3,363 $ 2,305 $ 12,341 Net sales by geographic region United States $ 3,127 $ 1,446 $ 2,515 $ 1,938 $ 9,026 Asia Pacific 653 88 371 28 1,140 Europe 555 58 226 310 1,149 Middle East 348 353 103 23 827 Other 33 12 148 6 199 Total net sales $ 4,716 $ 1,957 $ 3,363 $ 2,305 $ 12,341 Nine Months Ended September 24, 2017 Aeronautics MFC RMS Space Total Net sales Products $ 12,036 $ 4,323 $ 8,372 $ 6,132 $ 30,863 Services 1,722 967 1,532 1,032 5,253 Total net sales $ 13,758 $ 5,290 $ 9,904 $ 7,164 $ 36,116 Net sales by contract type Fixed-price $ 9,624 $ 3,664 $ 7,199 $ 1,566 $ 22,053 Cost-reimbursable 4,134 1,626 2,705 5,598 14,063 Total net sales $ 13,758 $ 5,290 $ 9,904 $ 7,164 $ 36,116 Net sales by customer U.S. Government $ 9,009 $ 3,540 $ 7,091 $ 6,036 $ 25,676 International (a) 4,647 1,643 2,548 1,082 9,920 U.S. commercial and other 102 107 265 46 520 Total net sales $ 13,758 $ 5,290 $ 9,904 $ 7,164 $ 36,116 Net sales by geographic region United States $ 9,111 $ 3,647 $ 7,356 $ 6,082 $ 26,196 Asia Pacific 1,878 294 988 68 3,228 Europe 1,657 215 673 932 3,477 Middle East 983 1,105 339 76 2,503 Other 129 29 548 6 712 Total net sales $ 13,758 $ 5,290 $ 9,904 $ 7,164 $ 36,116 (a) International sales include FMS contracted through the U.S. Government and direct commercial sales to international governments and other international customers. Total assets for each of our business segments were as follows (in millions): September 30, December 31, Assets Aeronautics $ 8,746 $ 7,713 Missiles and Fire Control 4,865 4,577 Rotary and Mission Systems 18,545 18,292 Space 5,469 5,240 Total business segment assets 37,625 35,822 Corporate assets (a) 7,870 10,798 Total assets $ 45,495 $ 46,620 (a) Corporate assets primarily include cash and cash equivalents, deferred income taxes, environmental receivables, and investments held in a separate trust to fund certain of our non-qualified deferred compensation plans. Summary operating results for each of our business segments were as follows (in millions): Quarters Ended Nine Months Ended September 30, September 24, September 30, September 24, Net sales Aeronautics $ 5,642 $ 4,716 $ 15,361 $ 13,758 Missiles and Fire Control 2,273 1,957 6,035 5,290 Rotary and Mission Systems 3,848 3,363 10,637 9,904 Space 2,555 2,305 7,318 7,164 Total net sales $ 14,318 $ 12,341 $ 39,351 $ 36,116 Operating profit Aeronautics $ 600 $ 513 $ 1,646 $ 1,519 Missiles and Fire Control 332 298 872 785 Rotary and Mission Systems (a) 361 257 1,013 656 Space 293 219 831 765 Total business segment operating profit 1,586 1,287 4,362 3,725 Unallocated items FAS/CAS operating adjustment (b) 451 403 1,353 1,210 Stock-based compensation (50 ) (32 ) (148 ) (133 ) Severance and restructuring charges (c) — — (96 ) — Other, net (d) (24 ) 19 12 (7 ) Total unallocated items 377 390 1,121 1,070 Total consolidated operating profit $ 1,963 $ 1,677 $ 5,483 $ 4,795 Intersegment sales Aeronautics $ 35 $ 33 $ 87 $ 98 Missiles and Fire Control 122 104 330 243 Rotary and Mission Systems 544 453 1,509 1,446 Space 63 31 156 76 Total intersegment sales $ 764 $ 621 $ 2,082 $ 1,863 (a) Operating profit at our RMS business segment for the nine months ended September 24, 2017 includes a charge of $120 million ( $74 million , or $0.25 per share, after tax) recognized in the first quarter of 2017 for performance matters on the EADGE-T contract. See “ Note 2 – Significant Accounting Policy Updates ” (under the caption “Revenue Recognition”) for more information. (b) The FAS/CAS operating adjustment represents the difference between the service cost component of FAS pension expense and total pension costs recoverable on U.S. Government contracts as determined in accordance with CAS. For a detail of the FAS/CAS operating adjustment and the total net FAS/CAS pension adjustment, see the table below. (c) Unallocated items for the nine months ended September 30, 2018 includes severance and restructuring charges totaling $96 million ( $76 million , or $0.26 per share, after tax) recognized in the second quarter of 2018 for planned workforce reductions and the consolidation of certain operations at our RMS business segment. See “ Note 11 – Other ” (under the caption “Severance and Restructuring Charges”) for more information. (d) Other, net for the nine months ended September 24, 2017 includes a $64 million charge ( $40 million , or $0.14 per share, after tax) recognized in the first quarter of 2017, which represents our portion of a non-cash asset impairment charge recorded by our equity method investee, Advanced Military Maintenance, Repair and Overhaul Center LLC (AMMROC). See “ Note 11 – Other ” (under the caption “Equity Method Investee Impairment”) for more information. Our total net FAS/CAS pension adjustment for the quarters and nine months ended September 30, 2018 and September 24, 2017 , including the service and non-service cost components of FAS pension expense for our qualified defined benefit pension plans, were as follows (in millions): Quarters Ended Nine Months Ended September 30, September 24, September 30, September 24, Total FAS expense and CAS costs FAS pension expense $ (356 ) $ (342 ) $ (1,069 ) $ (1,030 ) Less: CAS pension cost 608 562 1,825 1,686 Net FAS/CAS pension adjustment $ 252 $ 220 $ 756 $ 656 Service and non-service cost reconciliation FAS pension service cost $ (157 ) $ (159 ) $ (472 ) $ (476 ) Less: CAS pension cost 608 562 1,825 1,686 FAS/CAS operating adjustment 451 403 1,353 1,210 Non-operating FAS pension expense (a) (199 ) (183 ) (597 ) (554 ) Net FAS/CAS pension adjustment $ 252 $ 220 $ 756 $ 656 (a) We record the non-service cost components of net periodic benefit cost as part of other non-operating expense, net in the consolidated statement of earnings. The non-service cost components in the table above relate only to our qualified defined benefit pension plans. We incurred total non-service costs for our qualified defined benefit pension plans in the table above, along with similar costs for our other postretirement benefit plans of $16 million and $49 million for the quarters and nine months ended September 30, 2018 and $28 million and $82 million for the quarters and nine months ended September 24, 2017 . |
CONTRACT ASSETS AND LIABILITI_2
CONTRACT ASSETS AND LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Summary of Contract Assets and Liabilities | Contract assets and contract liabilities were as follows (in millions): September 30, December 31, Contract assets $ 9,769 $ 7,992 Contract liabilities 6,489 7,028 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories, Net | Inventories consisted of the following (in millions): September 30, December 31, Materials, spares and supplies $ 470 $ 563 Work-in-process 2,089 1,823 Finished goods 491 492 Total inventories $ 3,050 $ 2,878 |
POSTRETIREMENT BENEFIT PLANS (T
POSTRETIREMENT BENEFIT PLANS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Retirement Benefits [Abstract] | |
Schedule of Pretax Net Periodic Benefit Cost | Our pretax net periodic benefit cost related to our qualified defined benefit pension plans and retiree medical and life insurance plans consisted of the following (in millions): Quarters Ended Nine Months Ended September 30, September 24, September 30, September 24, Qualified defined benefit pension plans Service cost $ 157 $ 159 $ 472 $ 476 Interest cost 435 459 1,305 1,377 Expected return on plan assets (599 ) (563 ) (1,796 ) (1,687 ) Recognized net actuarial losses 444 376 1,332 1,129 Amortization of prior service credits (81 ) (89 ) (244 ) (265 ) Total net periodic benefit cost $ 356 $ 342 $ 1,069 $ 1,030 Retiree medical and life insurance plans Service cost $ 4 $ 4 $ 13 $ 14 Interest cost 23 26 69 77 Expected return on plan assets (34 ) (31 ) (101 ) (95 ) Recognized net actuarial losses 2 4 4 14 Amortization of prior service costs 4 4 11 11 Total net periodic benefit (credit) cost $ (1 ) $ 7 $ (4 ) $ 21 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of Assets and Liabilities Measured and Recorded at Fair Value | Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following (in millions): September 30, 2018 December 31, 2017 Total Level 1 Level 2 Total Level 1 Level 2 Assets Mutual funds $ 1,074 $ 1,074 $ — $ 917 $ 917 $ — U.S. Government securities 103 — 103 116 — 116 Derivatives 16 — 16 23 — 23 Other securities 147 29 118 209 39 170 Liabilities Derivatives 78 — 78 106 — 106 Assets measured at NAV (a) Other commingled funds 19 19 (a) Net Asset Value (NAV) is the total value of the fund divided by the number of the fund’s shares outstanding. |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Schedule of Changes in the Balance of AOCL, Net of Tax | Changes in the balance of AOCL, net of tax, consisted of the following (in millions): Postretirement Benefit Plans Other, net AOCL Balance at December 31, 2017 $ (12,559 ) $ 20 $ (12,539 ) Other comprehensive income before reclassifications — (53 ) (53 ) Amounts reclassified from AOCL Recognition of net actuarial losses (a) 1,092 — 1,092 Amortization of net prior service credits (a) (192 ) — (192 ) Other — 23 23 Total reclassified from AOCL 900 23 923 Total other comprehensive income 900 (30 ) 870 Reclassification of income tax effects from tax reform (b) (2,396 ) (12 ) (2,408 ) Balance at September 30, 2018 $ (14,055 ) $ (22 ) $ (14,077 ) Balance at December 31, 2016 $ (11,981 ) $ (121 ) $ (12,102 ) Other comprehensive income before reclassifications 3 123 126 Amounts reclassified from AOCL Recognition of net actuarial losses (a) 774 — 774 Amortization of net prior service credits (a) (172 ) — (172 ) Other — 14 14 Total reclassified from AOCL 602 14 616 Total other comprehensive income 605 137 742 Balance at September 24, 2017 $ (11,376 ) $ 16 $ (11,360 ) (a) Reclassifications from AOCL related to our postretirement benefit plans were recorded as a component of net periodic benefit cost for each period presented (see “ Note 7 – Postretirement Benefit Plans ”). These amounts include $300 million and $200 million , net of tax, for the quarters ended September 30, 2018 and September 24, 2017 , which are comprised of the recognition of net actuarial losses of $364 million and $258 million for the quarters ended September 30, 2018 and September 24, 2017 and the amortization of net prior service credits of $(64) million and $(58) million for the quarters ended September 30, 2018 and September 24, 2017 . (b) We reclassified the impact of the income tax effects related to the Tax Cuts and Jobs Act of 2017 (the Tax Act) from AOCL during the first quarter of 2018 to retained earnings by the same amount with zero impact to total equity. See ASU 2018-02 in “ Note 12 – Recent Accounting Pronouncements ” for additional information. |
RECENT ACCOUNTING PRONOUNCEME_2
RECENT ACCOUNTING PRONOUNCEMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The following tables summarize the effects of adopting ASC 606 and ASU 2017-07 on our consolidated statement of earnings for the quarter and nine months ended September 24, 2017 (unaudited; in millions, except per share data): Quarter Ended Adjustments for Historical ASC 606 ASU 2017-07 Adjusted Net sales Products $ 10,496 $ 132 $ — $ 10,628 Services 1,673 40 — 1,713 Total net sales 12,169 172 — 12,341 Cost of sales Products (9,481 ) (63 ) — (9,544 ) Services (1,513 ) (71 ) — (1,584 ) Other unallocated, net 176 — 211 387 Total cost of sales (10,818 ) (134 ) 211 (10,741 ) Gross profit 1,351 38 211 1,600 Other income, net 77 — — 77 Operating profit 1,428 38 211 1,677 Interest expense (162 ) — — (162 ) Other non-operating expense, net (7 ) — (211 ) (218 ) Earnings before income taxes 1,259 38 — 1,297 Income tax expense (320 ) (14 ) — (334 ) Net earnings $ 939 $ 24 $ — $ 963 Earnings per common share Basic $ 3.27 $ 0.08 $ — $ 3.35 Diluted $ 3.24 $ 0.08 $ — $ 3.32 Cash dividends paid per common share $ 1.82 $ — $ — $ 1.82 Nine Months Ended Adjustments for Historical ASC 606 ASU 2017-07 Adjusted Net sales Products $ 30,837 $ 26 $ — $ 30,863 Services 5,074 179 — 5,253 Total net sales 35,911 205 — 36,116 Cost of sales Products (27,919 ) 69 — (27,850 ) Services (4,547 ) (177 ) — (4,724 ) Other unallocated, net 484 — 636 1,120 Total cost of sales (31,982 ) (108 ) 636 (31,454 ) Gross profit 3,929 97 636 4,662 Other income, net 133 — — 133 Operating profit 4,062 97 636 4,795 Interest expense (477 ) — — (477 ) Other non-operating expense, net (8 ) — (636 ) (644 ) Earnings before income taxes 3,577 97 — 3,674 Income tax expense (933 ) (34 ) — (967 ) Net earnings $ 2,644 $ 63 $ — $ 2,707 Earnings per common share Basic $ 9.16 $ 0.22 $ — $ 9.38 Diluted $ 9.08 $ 0.21 $ — $ 9.29 Cash dividends paid per common share $ 5.46 $ — $ — $ 5.46 The following table summarizes the effects of adopting ASC 606 on our consolidated balance sheet as of December 31, 2017 (ASU 2017-07 had no impact on our consolidated balance sheet) (unaudited; in millions, except par value): Adjustments for Historical ASC 606 Adjusted Assets Current assets Cash and cash equivalents $ 2,861 $ — $ 2,861 Receivables, net 8,603 (6,338 ) 2,265 Contract assets — 7,992 7,992 Inventories 4,487 (1,609 ) 2,878 Other current assets 1,510 (1 ) 1,509 Total current assets 17,461 44 17,505 Property, plant and equipment, net 5,775 — 5,775 Goodwill 10,807 — 10,807 Intangible assets, net 3,797 — 3,797 Deferred income taxes 3,111 45 3,156 Other noncurrent assets 5,570 10 5,580 Total assets $ 46,521 $ 99 $ 46,620 Liabilities and equity Current liabilities Accounts payable $ 1,467 $ — $ 1,467 Contract liabilities (a) 6,752 276 7,028 Salaries, benefits and payroll taxes 1,785 — 1,785 Current maturities of long-term debt 750 — 750 Other current liabilities 1,883 — 1,883 Total current liabilities 12,637 276 12,913 Long-term debt, net 13,513 — 13,513 Accrued pension liabilities 15,703 — 15,703 Other postretirement benefit liabilities 719 — 719 Other noncurrent liabilities 4,558 (10 ) 4,548 Total liabilities 47,130 266 47,396 Stockholders’ equity Common stock, $1 par value per share 284 — 284 Additional paid-in capital — — — Retained earnings 11,573 (168 ) 11,405 Accumulated other comprehensive loss (12,540 ) 1 (12,539 ) Total stockholders’ deficit (683 ) (167 ) (850 ) Noncontrolling interests in subsidiary 74 — 74 Total deficit (609 ) (167 ) (776 ) Total liabilities and equity $ 46,521 $ 99 $ 46,620 (a) Formerly referred to as customer advances and amounts in excess of costs incurred. The following table summarizes the effects of adopting ASC 606 on certain components within our net cash provided by operating activities for the nine months ended September 24, 2017 (ASC 606 had no impact on total operating cash flows or cash flows from investing and financing activities) (unaudited; in millions): Adjustments for Historical ASC 606 Adjusted Operating activities Net earnings $ 2,644 $ 63 $ 2,707 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 880 — 880 Stock-based compensation 133 — 133 Changes in assets and liabilities Receivables, net (819 ) (15 ) (834 ) Contract assets — (228 ) (228 ) Inventories (133 ) 67 (66 ) Accounts payable 1,229 — 1,229 Contract liabilities (a) (581 ) 89 (492 ) Postretirement benefit plans 1,012 — 1,012 Income taxes (202 ) — (202 ) Other, net 801 24 825 Net cash provided by operating activities $ 4,964 $ — $ 4,964 (a) Formerly referred to as customer advances and amounts in excess of costs incurred. |
SIGNIFICANT ACCOUNTING POLICY_3
SIGNIFICANT ACCOUNTING POLICY UPDATES (Details) | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018USD ($)program$ / shares | Sep. 24, 2017USD ($)$ / shares | Mar. 26, 2017USD ($)$ / shares | Jun. 24, 2018USD ($)$ / shares | Sep. 30, 2018USD ($)programcontract$ / shares | Sep. 24, 2017USD ($)$ / shares | Mar. 25, 2018USD ($) | |
Disaggregation of Revenue [Line Items] | |||||||
Number of types of contracts | contract | 3 | ||||||
Performance obligation satisfied in previous period | $ 595,000,000 | $ 385,000,000 | $ 1,600,000,000 | $ 1,300,000,000 | |||
Customer receivables sold | 41,000,000 | 146,000,000 | 268,000,000 | 511,000,000 | |||
Gains or losses related to sales of receivables | 0 | 0 | 0 | 0 | |||
Contracts Accounted for under Percentage of Completion | |||||||
Disaggregation of Revenue [Line Items] | |||||||
Increase in operating profit due to profit rate adjustments | 545,000,000 | 365,000,000 | 1,400,000,000 | 1,200,000,000 | |||
Increase in net earnings due to profit rate adjustments | $ 431,000,000 | $ 237,000,000 | $ 1,100,000,000 | $ 765,000,000 | |||
Increase in diluted earnings per common share due to profit rate adjustments (in dollars per share) | $ / shares | $ 1.50 | $ 0.82 | $ 3.93 | $ 2.63 | |||
EADGE-T | |||||||
Disaggregation of Revenue [Line Items] | |||||||
Contract loss incurred, gross | $ 120,000,000 | ||||||
Contract loss incurred, after tax | $ 74,000,000 | ||||||
Contract loss incurred, earnings per share (in dollars per share) | $ / shares | $ 0.25 | ||||||
Cumulative losses on development | $ 260,000,000 | $ 260,000,000 | $ 260,000,000 | ||||
LM 2100 Project | |||||||
Disaggregation of Revenue [Line Items] | |||||||
Contract loss incurred, gross | 75,000,000 | ||||||
Contract loss incurred, after tax | $ 56,000,000 | ||||||
Contract loss incurred, earnings per share (in dollars per share) | $ / shares | $ 0.20 | ||||||
Cumulative losses on development | $ 380,000,000 | ||||||
Warrior Capability Sustainment Program | |||||||
Disaggregation of Revenue [Line Items] | |||||||
Contract loss incurred, gross | 85,000,000 | ||||||
Contract loss incurred, after tax | $ 64,000,000 | ||||||
Contract loss incurred, earnings per share (in dollars per share) | $ / shares | $ 0.22 | ||||||
Cumulative losses on development | $ 140,000,000 | $ 140,000,000 | $ 140,000,000 | ||||
Space | |||||||
Disaggregation of Revenue [Line Items] | |||||||
Number of commercial satellite programs with performance issues | program | 2 | 2 |
SIGNIFICANT ACCOUNTING POLICY_4
SIGNIFICANT ACCOUNTING POLICY UPDATES - Remaining Performance Obligations (Details) $ in Billions | Sep. 30, 2018USD ($) |
Accounting Policies [Abstract] | |
Remaining performance obligation | $ 109 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, remaining performance obligation, percentage | 40.00% |
Expected time of satisfaction | 12 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, remaining performance obligation, percentage | 25.00% |
Expected time of satisfaction | 12 months |
EARNINGS PER COMMON SHARE - Sch
EARNINGS PER COMMON SHARE - Schedule of Weighted Average Shares Outstanding Used to Compute Earnings Per Common Share (Details) - shares shares in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Earnings Per Share [Abstract] | ||||
Weighted average common shares outstanding for basic computations (in shares) | 284.3 | 287.1 | 284.9 | 288.5 |
Weighted average dilutive effect of equity awards (in shares) | 2.4 | 2.9 | 2.3 | 2.8 |
Weighted average common shares outstanding for diluted computations (in shares) | 286.7 | 290 | 287.2 | 291.3 |
EARNINGS PER COMMON SHARE - Nar
EARNINGS PER COMMON SHARE - Narrative (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Earnings Per Share [Abstract] | ||||
Significant anti-dilutive equity awards (in shares) | 0 | 0 | 0 | 0 |
INFORMATION ON BUSINESS SEGME_3
INFORMATION ON BUSINESS SEGMENTS - Narrative (Details) - segment | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Segment Reporting [Abstract] | ||||
Number of business segments | 4 | |||
Product Concentration Risk | Sales Revenue, Net | F-35 program | Aeronautics | ||||
Segment Reporting Information [Line Items] | ||||
Net sales for the F-35 program representing total consolidated net sales (as a percent) | 27.00% | 26.00% | 26.00% | 25.00% |
INFORMATION ON BUSINESS SEGME_4
INFORMATION ON BUSINESS SEGMENTS - Summary of Operating Results For Each Business Segment (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018 | Jun. 24, 2018 | Sep. 24, 2017 | Mar. 26, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Net sales | ||||||
Total net sales | $ 14,318 | $ 12,341 | $ 39,351 | $ 36,116 | ||
Operating profit | ||||||
Total operating profit | 1,963 | 1,677 | 5,483 | 4,795 | ||
Unallocated items | ||||||
Severance and restructuring charges | 0 | 0 | 96 | 0 | ||
Severance and restructuring charges | 0 | 0 | 96 | 0 | ||
Aeronautics | ||||||
Net sales | ||||||
Total net sales | 5,642 | 4,716 | 15,361 | 13,758 | ||
Missiles and Fire Control | ||||||
Net sales | ||||||
Total net sales | 2,273 | 1,957 | 6,035 | 5,290 | ||
Rotary and Mission Systems | ||||||
Net sales | ||||||
Total net sales | 3,848 | 3,363 | 10,637 | 9,904 | ||
Unallocated items | ||||||
Severance and restructuring charges | $ 96 | |||||
Severance and restructuring charges | 96 | |||||
Restructuring charges, net of tax | $ 76 | |||||
Restructuring charges (in dollars per share) | $ 0.26 | |||||
Space | ||||||
Net sales | ||||||
Total net sales | 2,555 | 2,305 | 7,318 | 7,164 | ||
Business segments | ||||||
Net sales | ||||||
Total net sales | 14,318 | 12,341 | 39,351 | 36,116 | ||
Operating profit | ||||||
Total operating profit | 1,586 | 1,287 | 4,362 | 3,725 | ||
Business segments | Aeronautics | ||||||
Net sales | ||||||
Total net sales | 5,642 | 4,716 | 15,361 | 13,758 | ||
Operating profit | ||||||
Total operating profit | 600 | 513 | 1,646 | 1,519 | ||
Business segments | Missiles and Fire Control | ||||||
Net sales | ||||||
Total net sales | 2,273 | 1,957 | 6,035 | 5,290 | ||
Operating profit | ||||||
Total operating profit | 332 | 298 | 872 | 785 | ||
Business segments | Rotary and Mission Systems | ||||||
Net sales | ||||||
Total net sales | 3,848 | 3,363 | 10,637 | 9,904 | ||
Operating profit | ||||||
Total operating profit | 361 | 257 | 1,013 | 656 | ||
Business segments | Space | ||||||
Net sales | ||||||
Total net sales | 2,555 | 2,305 | 7,318 | 7,164 | ||
Operating profit | ||||||
Total operating profit | 293 | 219 | 831 | 765 | ||
Segment reconciling items | ||||||
Unallocated items | ||||||
FAS/CAS operating adjustment | 451 | 403 | 1,353 | 1,210 | ||
Stock-based compensation | (50) | (32) | (148) | (133) | ||
Severance and restructuring charges | 0 | 0 | (96) | 0 | ||
Other, net | (24) | 19 | 12 | (7) | ||
Total unallocated items | 377 | 390 | 1,121 | 1,070 | ||
Severance and restructuring charges | 0 | 0 | (96) | 0 | ||
Intersegment sales | ||||||
Net sales | ||||||
Total net sales | 764 | 621 | 2,082 | 1,863 | ||
Intersegment sales | Aeronautics | ||||||
Net sales | ||||||
Total net sales | 35 | 33 | 87 | 98 | ||
Intersegment sales | Missiles and Fire Control | ||||||
Net sales | ||||||
Total net sales | 122 | 104 | 330 | 243 | ||
Intersegment sales | Rotary and Mission Systems | ||||||
Net sales | ||||||
Total net sales | 544 | 453 | 1,509 | 1,446 | ||
Intersegment sales | Space | ||||||
Net sales | ||||||
Total net sales | $ 63 | $ 31 | $ 156 | $ 76 | ||
Advanced Military Maintenance, Repair and Overhaul Center | ||||||
Unallocated items | ||||||
Equity method investee impairment | $ 64 | |||||
Equity method investee impairment, after tax | $ 40 | |||||
Equity method investee impairment (in dollars per share) | $ 0.14 |
INFORMATION ON BUSINESS SEGME_5
INFORMATION ON BUSINESS SEGMENTS - FAS/CAS Pension Adjustment (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Segment Reporting Information [Line Items] | ||||
Non-operating FAS pension expense | $ (199) | $ (183) | $ (597) | $ (554) |
Net FAS/CAS pension adjustment | 252 | 220 | 756 | 656 |
Segment reconciling items | ||||
Segment Reporting Information [Line Items] | ||||
Less: CAS pension cost | 608 | 562 | 1,825 | 1,686 |
FAS pension service cost | (157) | (159) | (472) | (476) |
FAS/CAS operating adjustment | 451 | 403 | 1,353 | 1,210 |
Qualified defined benefit pension plans | ||||
Segment Reporting Information [Line Items] | ||||
FAS pension expense/service cost | 356 | 342 | 1,069 | 1,030 |
FAS pension service cost | (157) | (159) | (472) | (476) |
Qualified defined benefit pension plans | Qualified Plan | ||||
Segment Reporting Information [Line Items] | ||||
FAS pension expense/service cost | (356) | (342) | (1,069) | (1,030) |
Non-operating FAS pension expense | $ 16 | $ 28 | $ 49 | $ 82 |
INFORMATION ON BUSINESS SEGME_6
INFORMATION ON BUSINESS SEGMENTS - Income Statement Information For Each Segment (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Net sales | ||||
Net sales | $ 14,318 | $ 12,341 | $ 39,351 | $ 36,116 |
Aeronautics | ||||
Net sales | ||||
Net sales | 5,642 | 4,716 | 15,361 | 13,758 |
MFC | ||||
Net sales | ||||
Net sales | 2,273 | 1,957 | 6,035 | 5,290 |
RMS | ||||
Net sales | ||||
Net sales | 3,848 | 3,363 | 10,637 | 9,904 |
Space | ||||
Net sales | ||||
Net sales | 2,555 | 2,305 | 7,318 | 7,164 |
United States | ||||
Net sales | ||||
Net sales | 10,488 | 9,026 | 28,610 | 26,196 |
United States | Aeronautics | ||||
Net sales | ||||
Net sales | 3,733 | 3,127 | 10,040 | 9,111 |
United States | MFC | ||||
Net sales | ||||
Net sales | 1,673 | 1,446 | 4,339 | 3,647 |
United States | RMS | ||||
Net sales | ||||
Net sales | 2,889 | 2,515 | 8,075 | 7,356 |
United States | Space | ||||
Net sales | ||||
Net sales | 2,193 | 1,938 | 6,156 | 6,082 |
Asia Pacific | ||||
Net sales | ||||
Net sales | 1,365 | 1,140 | 3,807 | 3,228 |
Asia Pacific | Aeronautics | ||||
Net sales | ||||
Net sales | 854 | 653 | 2,394 | 1,878 |
Asia Pacific | MFC | ||||
Net sales | ||||
Net sales | 126 | 88 | 349 | 294 |
Asia Pacific | RMS | ||||
Net sales | ||||
Net sales | 377 | 371 | 1,002 | 988 |
Asia Pacific | Space | ||||
Net sales | ||||
Net sales | 8 | 28 | 62 | 68 |
Europe | ||||
Net sales | ||||
Net sales | 1,340 | 1,149 | 3,778 | 3,477 |
Europe | Aeronautics | ||||
Net sales | ||||
Net sales | 691 | 555 | 1,877 | 1,657 |
Europe | MFC | ||||
Net sales | ||||
Net sales | 112 | 58 | 227 | 215 |
Europe | RMS | ||||
Net sales | ||||
Net sales | 213 | 226 | 592 | 673 |
Europe | Space | ||||
Net sales | ||||
Net sales | 324 | 310 | 1,082 | 932 |
Middle East | ||||
Net sales | ||||
Net sales | 905 | 827 | 2,528 | 2,503 |
Middle East | Aeronautics | ||||
Net sales | ||||
Net sales | 326 | 348 | 903 | 983 |
Middle East | MFC | ||||
Net sales | ||||
Net sales | 347 | 353 | 1,091 | 1,105 |
Middle East | RMS | ||||
Net sales | ||||
Net sales | 202 | 103 | 516 | 339 |
Middle East | Space | ||||
Net sales | ||||
Net sales | 30 | 23 | 18 | 76 |
Other | ||||
Net sales | ||||
Net sales | 220 | 199 | 628 | 712 |
Other | Aeronautics | ||||
Net sales | ||||
Net sales | 38 | 33 | 147 | 129 |
Other | MFC | ||||
Net sales | ||||
Net sales | 15 | 12 | 29 | 29 |
Other | RMS | ||||
Net sales | ||||
Net sales | 167 | 148 | 452 | 548 |
Other | Space | ||||
Net sales | ||||
Net sales | 0 | 6 | 0 | 6 |
U.S. Government | ||||
Net sales | ||||
Net sales | 10,264 | 8,833 | 27,967 | 25,676 |
U.S. Government | Aeronautics | ||||
Net sales | ||||
Net sales | 3,700 | 3,093 | 9,909 | 9,009 |
U.S. Government | MFC | ||||
Net sales | ||||
Net sales | 1,625 | 1,404 | 4,215 | 3,540 |
U.S. Government | RMS | ||||
Net sales | ||||
Net sales | 2,765 | 2,417 | 7,729 | 7,091 |
U.S. Government | Space | ||||
Net sales | ||||
Net sales | 2,174 | 1,919 | 6,114 | 6,036 |
International | ||||
Net sales | ||||
Net sales | 3,830 | 3,315 | 10,741 | 9,920 |
International | Aeronautics | ||||
Net sales | ||||
Net sales | 1,909 | 1,589 | 5,321 | 4,647 |
International | MFC | ||||
Net sales | ||||
Net sales | 600 | 511 | 1,696 | 1,643 |
International | RMS | ||||
Net sales | ||||
Net sales | 959 | 848 | 2,562 | 2,548 |
International | Space | ||||
Net sales | ||||
Net sales | 362 | 367 | 1,162 | 1,082 |
U.S. commercial and other | ||||
Net sales | ||||
Net sales | 224 | 193 | 643 | 520 |
U.S. commercial and other | Aeronautics | ||||
Net sales | ||||
Net sales | 33 | 34 | 131 | 102 |
U.S. commercial and other | MFC | ||||
Net sales | ||||
Net sales | 48 | 42 | 124 | 107 |
U.S. commercial and other | RMS | ||||
Net sales | ||||
Net sales | 124 | 98 | 346 | 265 |
U.S. commercial and other | Space | ||||
Net sales | ||||
Net sales | 19 | 19 | 42 | 46 |
Fixed-price | ||||
Net sales | ||||
Net sales | 8,943 | 7,652 | 24,089 | 22,053 |
Fixed-price | Aeronautics | ||||
Net sales | ||||
Net sales | 4,163 | 3,396 | 11,284 | 9,624 |
Fixed-price | MFC | ||||
Net sales | ||||
Net sales | 1,536 | 1,321 | 4,043 | 3,664 |
Fixed-price | RMS | ||||
Net sales | ||||
Net sales | 2,710 | 2,471 | 7,368 | 7,199 |
Fixed-price | Space | ||||
Net sales | ||||
Net sales | 534 | 464 | 1,394 | 1,566 |
Cost-reimbursable | ||||
Net sales | ||||
Net sales | 5,375 | 4,689 | 15,262 | 14,063 |
Cost-reimbursable | Aeronautics | ||||
Net sales | ||||
Net sales | 1,479 | 1,320 | 4,077 | 4,134 |
Cost-reimbursable | MFC | ||||
Net sales | ||||
Net sales | 737 | 636 | 1,992 | 1,626 |
Cost-reimbursable | RMS | ||||
Net sales | ||||
Net sales | 1,138 | 892 | 3,269 | 2,705 |
Cost-reimbursable | Space | ||||
Net sales | ||||
Net sales | 2,021 | 1,841 | 5,924 | 5,598 |
Products | ||||
Net sales | ||||
Net sales | 11,918 | 10,628 | 32,830 | 30,863 |
Products | Aeronautics | ||||
Net sales | ||||
Net sales | 4,799 | 4,196 | 13,080 | 12,036 |
Products | MFC | ||||
Net sales | ||||
Net sales | 1,873 | 1,614 | 4,935 | 4,323 |
Products | RMS | ||||
Net sales | ||||
Net sales | 3,132 | 2,861 | 8,753 | 8,372 |
Products | Space | ||||
Net sales | ||||
Net sales | 2,114 | 1,957 | 6,062 | 6,132 |
Services | ||||
Net sales | ||||
Net sales | 2,400 | 1,713 | 6,521 | 5,253 |
Services | Aeronautics | ||||
Net sales | ||||
Net sales | 843 | 520 | 2,281 | 1,722 |
Services | MFC | ||||
Net sales | ||||
Net sales | 400 | 343 | 1,100 | 967 |
Services | RMS | ||||
Net sales | ||||
Net sales | 716 | 502 | 1,884 | 1,532 |
Services | Space | ||||
Net sales | ||||
Net sales | $ 441 | $ 348 | $ 1,256 | $ 1,032 |
INFORMATION ON BUSINESS SEGME_7
INFORMATION ON BUSINESS SEGMENTS - Total Assets For Each Business Segment (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Segment Reporting Information [Line Items] | ||
Total assets | $ 45,495 | $ 46,620 |
Business segments | ||
Segment Reporting Information [Line Items] | ||
Total assets | 37,625 | 35,822 |
Business segments | Aeronautics | ||
Segment Reporting Information [Line Items] | ||
Total assets | 8,746 | 7,713 |
Business segments | Missiles and Fire Control | ||
Segment Reporting Information [Line Items] | ||
Total assets | 4,865 | 4,577 |
Business segments | Rotary and Mission Systems | ||
Segment Reporting Information [Line Items] | ||
Total assets | 18,545 | 18,292 |
Business segments | Space | ||
Segment Reporting Information [Line Items] | ||
Total assets | 5,469 | 5,240 |
Corporate | ||
Segment Reporting Information [Line Items] | ||
Total assets | $ 7,870 | $ 10,798 |
CONTRACT ASSETS AND LIABILITI_3
CONTRACT ASSETS AND LIABILITIES (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 9,769 | $ 7,992 |
Contract liabilities | $ 6,489 | $ 7,028 |
CONTRACT ASSETS AND LIABILITI_4
CONTRACT ASSETS AND LIABILITIES - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Revenue from Contract with Customer [Abstract] | ||||
Increase in contract assets | $ 1,777 | $ 228 | ||
Impairment loss | $ 0 | $ 0 | 0 | 0 |
Increase (decrease) in contract liabilities | (539) | (492) | ||
Liability, revenue recognized | $ 711 | $ 507 | $ 3,400 | $ 2,900 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Materials, spares and supplies | $ 470 | $ 563 |
Work-in-process | 2,089 | 1,823 |
Finished goods | 491 | 492 |
Total inventories | 3,050 | 2,878 |
Capitalized contract cost | $ 554 | $ 466 |
POSTRETIREMENT BENEFIT PLANS -
POSTRETIREMENT BENEFIT PLANS - Schedule of Pretax Net Periodic Benefit Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Qualified defined benefit pension plans | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Service cost | $ 157 | $ 159 | $ 472 | $ 476 |
Interest cost | 435 | 459 | 1,305 | 1,377 |
Expected return on plan assets | (599) | (563) | (1,796) | (1,687) |
Recognized net actuarial losses | 444 | 376 | 1,332 | 1,129 |
Amortization of prior service credits | (81) | (89) | (244) | (265) |
Total net periodic benefit cost | 356 | 342 | 1,069 | 1,030 |
Retiree medical and life insurance plans | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Service cost | 4 | 4 | 13 | 14 |
Interest cost | 23 | 26 | 69 | 77 |
Expected return on plan assets | (34) | (31) | (101) | (95) |
Recognized net actuarial losses | 2 | 4 | 4 | 14 |
Amortization of prior service credits | 4 | 4 | 11 | 11 |
Total net periodic benefit cost | $ (1) | $ 7 | $ (4) | $ 21 |
POSTRETIREMENT BENEFIT PLANS _2
POSTRETIREMENT BENEFIT PLANS - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Defined Benefit Plan Disclosure [Line Items] | ||||
Recognition of previously deferred postretirement benefit plan amounts, before tax | $ 382 | $ 309 | $ 1,100 | $ 930 |
Recognition of previously deferred postretirement benefit plan amounts, net of tax | 300 | 200 | 900 | 602 |
Retiree medical and life insurance plans | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Recognition of previously deferred postretirement benefit plan amounts, before tax | 13 | 14 | 42 | 41 |
Qualified defined benefit pension plans | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Material contributions to qualified defined benefit pension plans | $ 1,500 | $ 0 | $ 5,000 | $ 0 |
LEGAL PROCEEDINGS AND CONTING_2
LEGAL PROCEEDINGS AND CONTINGENCIES (Details) $ in Millions | 1 Months Ended | 9 Months Ended | 12 Months Ended | ||
Dec. 31, 2014 | Sep. 30, 2018USD ($)subsidiary | Dec. 31, 2017USD ($) | May 31, 2017lawsuit | Apr. 24, 2009USD ($) | |
Loss Contingencies [Line Items] | |||||
Damages sought by plaintiff | $ 52 | ||||
Liabilities recorded relative to environmental matters | 899 | $ 920 | |||
Environmental costs eligible for future recovery | $ 781 | 799 | |||
Period over which costs and recovery of costs is projected | 20 years | ||||
Outstanding letters of credit, surety bonds, and third-party guarantees | $ 3,400 | 3,300 | |||
Third-party guarantees | $ 810 | $ 750 | |||
Guarantees of contractual performance of joint ventures (as a percent) | 64.00% | 62.00% | |||
United Launch Alliance | |||||
Loss Contingencies [Line Items] | |||||
Ownership interest of ULA (as a percent) | 50.00% | ||||
Inventory supply agreement | $ 120 | ||||
N.Y. Metropolitan Transportation Authority | |||||
Loss Contingencies [Line Items] | |||||
Damages sought by plaintiff | 190 | ||||
Contract value | $ 323 | ||||
Contract payments received to date | 241 | ||||
Claims for monetary damages against the plaintiff | $ 95 | ||||
Period of bench trial | 35 days | ||||
Sikorsky Aircraft Corporation | |||||
Loss Contingencies [Line Items] | |||||
Number of pending claims | lawsuit | 2 | ||||
Number of entities involved in litigation | subsidiary | 2 |
FAIR VALUE MEASUREMENTS - Sched
FAIR VALUE MEASUREMENTS - Schedule of Assets and Liabilities Measured and Recorded at Fair Value (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Assets | ||
Derivatives | $ 16 | $ 23 |
Liabilities | ||
Derivatives | 78 | 106 |
Mutual funds | ||
Assets | ||
Fair Value of Investments | 1,074 | 917 |
U.S. Government securities | ||
Assets | ||
Fair Value of Investments | 103 | 116 |
Other securities | ||
Assets | ||
Fair Value of Investments | 147 | 209 |
Level 1 | ||
Assets | ||
Derivatives | 0 | 0 |
Liabilities | ||
Derivatives | 0 | 0 |
Level 1 | Mutual funds | ||
Assets | ||
Fair Value of Investments | 1,074 | 917 |
Level 1 | U.S. Government securities | ||
Assets | ||
Fair Value of Investments | 0 | 0 |
Level 1 | Other securities | ||
Assets | ||
Fair Value of Investments | 29 | 39 |
Level 2 | ||
Assets | ||
Derivatives | 16 | 23 |
Liabilities | ||
Derivatives | 78 | 106 |
Level 2 | Mutual funds | ||
Assets | ||
Fair Value of Investments | 0 | 0 |
Level 2 | U.S. Government securities | ||
Assets | ||
Fair Value of Investments | 103 | 116 |
Level 2 | Other securities | ||
Assets | ||
Fair Value of Investments | 118 | 170 |
NAV | Other commingled funds | ||
Liabilities | ||
Assets measured at NAV | $ 19 | $ 19 |
FAIR VALUE MEASUREMENTS - Narra
FAIR VALUE MEASUREMENTS - Narrative (Details) - USD ($) $ in Billions | Sep. 30, 2018 | Dec. 31, 2017 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Estimated fair value of outstanding debt | $ 16.2 | $ 16.8 |
Outstanding principal amount | 15.9 | 15.5 |
Unamortized discounts and issuance costs | 1.2 | 1.2 |
Interest rate swaps | Designated as hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Aggregate notional amount of outstanding interest rate swaps | 1.2 | 1.2 |
Foreign currency hedges | Designated as hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Aggregate notional amount of outstanding interest rate swaps | $ 3.5 | $ 4.1 |
STOCKHOLDERS' EQUITY - Repurcha
STOCKHOLDERS' EQUITY - Repurchases of Common Stock (Narrative) (Details) - USD ($) $ / shares in Units, shares in Millions | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 27, 2018 | Dec. 31, 2017 | |
Shareholders Equity [Line Items] | ||||
Common stock repurchased (in shares) | 2.5 | |||
Reduction to stockholders' equity due to repurchases of common stock | $ 826,000,000 | $ 1,500,000,000 | ||
Total remaining authorization for future common share repurchases | $ 3,700,000,000 | |||
Number of shares authorized to be repurchased (in shares) | 1,000 | |||
Par value of shares repurchased (in dollars per share) | $ 1 | $ 1 | ||
Additional paid-in capital after reduction | $ 0 | $ 0 | ||
Reduction to retained earnings | ||||
Shareholders Equity [Line Items] | ||||
Reduction to stockholders' equity due to repurchases of common stock | $ 523,000,000 | $ 1,213,000,000 |
STOCKHOLDERS' EQUITY - Dividend
STOCKHOLDERS' EQUITY - Dividends (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2018 | Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Dividends Payable [Line Items] | |||||
Cash dividends declared, amount | $ 1,200 | $ 528 | $ 2,346 | $ 1,583 | |
Cash dividends declared (in dollars per share) | $ 4.20 | $ 1.82 | $ 8.20 | $ 5.46 | |
Common stock, dividends per share, period increase (decrease) (USD per share) | $ 0.20 | ||||
Forecast | |||||
Dividends Payable [Line Items] | |||||
Cash dividends declared, amount | $ 569 | ||||
Cash dividends declared (in dollars per share) | $ 2.20 |
STOCKHOLDERS' EQUITY - Restrict
STOCKHOLDERS' EQUITY - Restricted Stock Unit Grants (Narrative) (Details) - RSUs shares in Millions | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
RSUs granted to certain employees (in shares) | shares | 0.4 |
Grant date fair value per RSU (in dollars per share) | $ / shares | $ 353.99 |
Award vesting period | 3 years |
STOCKHOLDERS' EQUITY - Schedule
STOCKHOLDERS' EQUITY - Schedule of Changes in the Balance of AOCL, Net of Tax (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Beginning Balance | $ (776) | $ 1,477 | ||
Other comprehensive income before reclassifications | (53) | 126 | ||
Total reclassified from AOCL | 923 | 616 | ||
Other comprehensive income, net of tax | $ 318 | $ 277 | 870 | 742 |
Reclassification of income tax effects from tax reform | 2,400 | |||
Ending Balance | 1,002 | 2,108 | 1,002 | 2,108 |
Amounts reclassified from accumulated other comprehensive loss | 300 | 200 | 900 | 602 |
Postretirement Benefit Plans | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Beginning Balance | (12,559) | (11,981) | ||
Other comprehensive income before reclassifications | 0 | 3 | ||
Total reclassified from AOCL | 900 | 602 | ||
Other comprehensive income, net of tax | 900 | 605 | ||
Reclassification of income tax effects from tax reform | (2,396) | |||
Ending Balance | (14,055) | (11,376) | (14,055) | (11,376) |
Other, net | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Beginning Balance | 20 | (121) | ||
Other comprehensive income before reclassifications | (53) | 123 | ||
Total reclassified from AOCL | 23 | 14 | ||
Other comprehensive income, net of tax | (30) | 137 | ||
Reclassification of income tax effects from tax reform | (12) | |||
Ending Balance | (22) | 16 | (22) | 16 |
AOCL | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Beginning Balance | (12,539) | (12,102) | ||
Other comprehensive income, net of tax | 870 | 742 | ||
Reclassification of income tax effects from tax reform | (2,408) | |||
Ending Balance | (14,077) | (11,360) | (14,077) | (11,360) |
Recognition of net actuarial losses | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Total reclassified from AOCL | 1,092 | 774 | ||
Amortization of net prior service credits | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Total reclassified from AOCL | (192) | (172) | ||
Other | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Total reclassified from AOCL | $ 23 | $ 14 | ||
Postretirement Benefit Plan Adjustments | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Amounts reclassified from accumulated other comprehensive loss | 300 | 200 | ||
Recognition of net actuarial losses | 364 | 258 | ||
Amortization of net prior service credits | $ (64) | $ (58) |
OTHER - Long-Term Debt and Comm
OTHER - Long-Term Debt and Commercial Paper (Details) - USD ($) | Aug. 24, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 |
Short-term Debt [Line Items] | ||||
Short term borrowings due within one year | $ 1,240,000,000 | $ 750,000,000 | ||
Long-term Debt, Current Maturities | 750,000,000 | |||
Commercial paper borrowings | $ 0 | |||
Commercial Paper | ||||
Short-term Debt [Line Items] | ||||
Short term borrowings due within one year | $ 490,000,000 | |||
Weighted average interest rate | 2.35% | |||
1.85% due 2018 | ||||
Short-term Debt [Line Items] | ||||
Interest rate | 1.85% | 1.85% | ||
Five Year Revolving Credit Facility | Unsecured Debt | ||||
Short-term Debt [Line Items] | ||||
Credit facility, maximum borrowing amount | $ 2,500,000,000 | |||
Line of credit facility expiration period | 5 years | |||
Maximum additional borrowing | $ 500,000,000 | |||
Line of credit facility, amount outstanding | $ 0 | |||
4.09% Notes Due 2052 | Senior Notes | ||||
Short-term Debt [Line Items] | ||||
Interest rate | 4.09% | |||
Amount of issued debt | $ 1,600,000,000 | |||
4.70% To 8.50% Senior Notes Maturing 2029 To 2046 | Senior Notes | ||||
Short-term Debt [Line Items] | ||||
Debt instrument, repurchase amount | $ 1,400,000,000 | |||
Minimum | Five Year Revolving Credit Facility | Senior Notes | ||||
Short-term Debt [Line Items] | ||||
Interest rate | 4.70% | |||
Maximum | Five Year Revolving Credit Facility | Senior Notes | ||||
Short-term Debt [Line Items] | ||||
Interest rate | 8.50% | |||
Senior Notes | 4.70% To 8.50% Senior Notes Maturing 2029 To 2046 | ||||
Short-term Debt [Line Items] | ||||
Debt instrument, unamortized premium | $ 237,000,000 |
OTHER - Equity Method Investee
OTHER - Equity Method Investee Impairment (Narrative) (Details) - Advanced Military Maintenance, Repair and Overhaul Center - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 26, 2017 | Sep. 30, 2018 | |
Schedule of Equity Method Investments [Line Items] | ||
Charge included in equity earnings | $ 64 | |
Equity method investee impairment, after tax | $ 40 | |
Equity method investee impairment (in dollars per share) | $ 0.14 | |
Equity method investments | $ 560 |
OTHER - Severance and Restructu
OTHER - Severance and Restructuring Charges (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Jun. 24, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Restructuring Cost and Reserve [Line Items] | |||||
Severance and restructuring charges | $ 0 | $ 0 | $ 96 | $ 0 | |
RMS | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Severance and restructuring charges | $ 96 | ||||
Severance and restructuring charges, net of tax | $ 76 | ||||
Severance and restructuring charges (in dollars per share) | $ 0.26 | ||||
Severance costs | $ 75 | ||||
Operations Consolidation | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Payments for restructuring | $ 10 | $ 10 | |||
Operations Consolidation | RMS | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Severance and restructuring charges | $ 21 |
OTHER - Income Taxes (Narrative
OTHER - Income Taxes (Narrative) (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Accounting Policies [Abstract] | ||||
Effective income tax rate | 6.50% | 25.80% | 12.90% | 26.30% |
RECENT ACCOUNTING PRONOUNCEME_3
RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | Jan. 01, 2019 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Comprehensive income | $ 1,791 | $ 1,240 | $ 4,663 | $ 3,449 | |
Reclassification of income tax effects from tax reform | $ 2,400 | ||||
Adjustments for | ASC 606 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Comprehensive income | $ 24 | $ 63 | |||
Forecast | ASU 2016-02 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Operating lease, right-of-use asset | $ 1,100 | ||||
Operating lease, liability | $ 1,100 |
RECENT ACCOUNTING PRONOUNCEME_4
RECENT ACCOUNTING PRONOUNCEMENTS - Effect of Topic 606 and ASU 2017-07 Adoption on Income Statement (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Net sales | ||||
Total net sales | $ 14,318 | $ 12,341 | $ 39,351 | $ 36,116 |
Cost of sales | ||||
Total cost of sales | (12,397) | (10,741) | (34,019) | (31,454) |
Gross profit | 1,921 | 1,600 | 5,332 | 4,662 |
Other income, net | 42 | 77 | 151 | 133 |
Operating profit | 1,963 | 1,677 | 5,483 | 4,795 |
Interest expense | (177) | (162) | (497) | (477) |
Other non-operating expense, net | (211) | (218) | (631) | (644) |
Earnings before income taxes | 1,575 | 1,297 | 4,355 | 3,674 |
Income tax expense | (102) | (334) | (562) | (967) |
Net earnings | $ 1,473 | $ 963 | $ 3,793 | $ 2,707 |
Earnings per common share | ||||
Basic (in dollars per share) | $ 5.18 | $ 3.35 | $ 13.31 | $ 9.38 |
Diluted (in dollars per share) | 5.14 | 3.32 | 13.21 | 9.29 |
Cash dividends paid per common share (in dollars per share) | $ 2 | $ 1.82 | $ 6 | $ 5.46 |
Products | ||||
Net sales | ||||
Total net sales | $ 11,918 | $ 10,628 | $ 32,830 | $ 30,863 |
Cost of sales | ||||
Total cost of sales | (10,701) | (9,544) | (29,391) | (27,850) |
Services | ||||
Net sales | ||||
Total net sales | 2,400 | 1,713 | 6,521 | 5,253 |
Cost of sales | ||||
Total cost of sales | (2,070) | (1,584) | (5,726) | (4,724) |
Other unallocated, net | ||||
Cost of sales | ||||
Total cost of sales | $ 374 | 387 | $ 1,194 | 1,120 |
Historical | ||||
Net sales | ||||
Total net sales | 12,169 | 35,911 | ||
Cost of sales | ||||
Total cost of sales | (10,818) | (31,982) | ||
Gross profit | 1,351 | 3,929 | ||
Other income, net | 77 | 133 | ||
Operating profit | 1,428 | 4,062 | ||
Interest expense | (162) | (477) | ||
Other non-operating expense, net | (7) | (8) | ||
Earnings before income taxes | 1,259 | 3,577 | ||
Income tax expense | (320) | (933) | ||
Net earnings | $ 939 | $ 2,644 | ||
Earnings per common share | ||||
Basic (in dollars per share) | $ 3.27 | $ 9.16 | ||
Diluted (in dollars per share) | 3.24 | 9.08 | ||
Cash dividends paid per common share (in dollars per share) | $ 1.82 | $ 5.46 | ||
Historical | Products | ||||
Net sales | ||||
Total net sales | $ 10,496 | $ 30,837 | ||
Cost of sales | ||||
Total cost of sales | (9,481) | (27,919) | ||
Historical | Services | ||||
Net sales | ||||
Total net sales | 1,673 | 5,074 | ||
Cost of sales | ||||
Total cost of sales | (1,513) | (4,547) | ||
Historical | Other unallocated, net | ||||
Cost of sales | ||||
Total cost of sales | 176 | 484 | ||
Adjustments for | ASC 606 | ||||
Net sales | ||||
Total net sales | 172 | 205 | ||
Cost of sales | ||||
Total cost of sales | (134) | (108) | ||
Gross profit | 38 | 97 | ||
Other income, net | 0 | 0 | ||
Operating profit | 38 | 97 | ||
Interest expense | 0 | 0 | ||
Other non-operating expense, net | 0 | 0 | ||
Earnings before income taxes | 38 | 97 | ||
Income tax expense | (14) | (34) | ||
Net earnings | $ 24 | $ 63 | ||
Earnings per common share | ||||
Basic (in dollars per share) | $ 0.08 | $ 0.22 | ||
Diluted (in dollars per share) | $ 0.08 | $ 0.21 | ||
Adjustments for | ASU 2017-07 | ||||
Net sales | ||||
Total net sales | $ 0 | $ 0 | ||
Cost of sales | ||||
Total cost of sales | 211 | 636 | ||
Gross profit | 211 | 636 | ||
Other income, net | 0 | 0 | ||
Operating profit | 211 | 636 | ||
Interest expense | 0 | 0 | ||
Other non-operating expense, net | (211) | (636) | ||
Earnings before income taxes | 0 | 0 | ||
Income tax expense | 0 | 0 | ||
Net earnings | $ 0 | $ 0 | ||
Earnings per common share | ||||
Basic (in dollars per share) | $ 0 | $ 0 | ||
Diluted (in dollars per share) | $ 0 | $ 0 | ||
Adjustments for | Products | ASC 606 | ||||
Net sales | ||||
Total net sales | $ 132 | $ 26 | ||
Cost of sales | ||||
Total cost of sales | (63) | 69 | ||
Adjustments for | Products | ASU 2017-07 | ||||
Net sales | ||||
Total net sales | 0 | 0 | ||
Cost of sales | ||||
Total cost of sales | 0 | 0 | ||
Adjustments for | Services | ASC 606 | ||||
Net sales | ||||
Total net sales | 40 | 179 | ||
Cost of sales | ||||
Total cost of sales | (71) | (177) | ||
Adjustments for | Services | ASU 2017-07 | ||||
Net sales | ||||
Total net sales | 0 | 0 | ||
Cost of sales | ||||
Total cost of sales | 0 | 0 | ||
Adjustments for | Other unallocated, net | ASC 606 | ||||
Cost of sales | ||||
Total cost of sales | 0 | 0 | ||
Adjustments for | Other unallocated, net | ASU 2017-07 | ||||
Cost of sales | ||||
Total cost of sales | $ 211 | $ 636 |
RECENT ACCOUNTING PRONOUNCEME_5
RECENT ACCOUNTING PRONOUNCEMENTS - Effect of Topic 606 and ASU 2017-07 Adoption on Balance Sheets (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 24, 2017 | Dec. 31, 2016 |
Current assets | ||||
Cash and cash equivalents | $ 897,000,000 | $ 2,861,000,000 | $ 2,941,000,000 | $ 1,837,000,000 |
Receivables, net | 2,416,000,000 | 2,265,000,000 | ||
Contract assets | 9,769,000,000 | 7,992,000,000 | ||
Inventories | 3,050,000,000 | 2,878,000,000 | ||
Other current assets | 727,000,000 | 1,509,000,000 | ||
Total current assets | 16,859,000,000 | 17,505,000,000 | ||
Property, plant and equipment, net | 5,902,000,000 | 5,775,000,000 | ||
Goodwill | 10,788,000,000 | 10,807,000,000 | ||
Intangible assets, net | 3,570,000,000 | 3,797,000,000 | ||
Deferred income taxes | 3,036,000,000 | 3,156,000,000 | ||
Other noncurrent assets | 5,340,000,000 | 5,580,000,000 | ||
Total assets | 45,495,000,000 | 46,620,000,000 | ||
Current liabilities | ||||
Accounts payable | 2,691,000,000 | 1,467,000,000 | ||
Contract liabilities | 6,489,000,000 | 7,028,000,000 | ||
Salaries, benefits and payroll taxes | 2,165,000,000 | 1,785,000,000 | ||
Current maturities of long-term debt | 1,240,000,000 | 750,000,000 | ||
Other current liabilities | 2,619,000,000 | 1,883,000,000 | ||
Total current liabilities | 15,204,000,000 | 12,913,000,000 | ||
Long-term debt, net | 13,486,000,000 | 13,513,000,000 | ||
Accrued pension liabilities | 10,692,000,000 | 15,703,000,000 | ||
Other postretirement benefit liabilities | 700,000,000 | 719,000,000 | ||
Other noncurrent liabilities | 4,411,000,000 | 4,548,000,000 | ||
Total liabilities | 44,493,000,000 | 47,396,000,000 | ||
Stockholders’ equity | ||||
Common stock, $1 par value per share | 283,000,000 | 284,000,000 | ||
Additional paid-in capital | 0 | 0 | ||
Retained earnings | 14,737,000,000 | 11,405,000,000 | ||
Accumulated other comprehensive loss | (14,077,000,000) | (12,539,000,000) | ||
Total stockholders’ equity (deficit) | 943,000,000 | (850,000,000) | ||
Noncontrolling interests in subsidiary | 59,000,000 | 74,000,000 | ||
Total equity (deficit) | 1,002,000,000 | (776,000,000) | $ 2,108,000,000 | $ 1,477,000,000 |
Total liabilities and equity | $ 45,495,000,000 | $ 46,620,000,000 | ||
Common stock, par value (in dollars per share) | $ 1 | $ 1 | ||
Historical | ||||
Current assets | ||||
Cash and cash equivalents | $ 2,861,000,000 | |||
Receivables, net | 8,603,000,000 | |||
Contract assets | 0 | |||
Inventories | 4,487,000,000 | |||
Other current assets | 1,510,000,000 | |||
Total current assets | 17,461,000,000 | |||
Property, plant and equipment, net | 5,775,000,000 | |||
Goodwill | 10,807,000,000 | |||
Intangible assets, net | 3,797,000,000 | |||
Deferred income taxes | 3,111,000,000 | |||
Other noncurrent assets | 5,570,000,000 | |||
Total assets | 46,521,000,000 | |||
Current liabilities | ||||
Accounts payable | 1,467,000,000 | |||
Contract liabilities | 6,752,000,000 | |||
Salaries, benefits and payroll taxes | 1,785,000,000 | |||
Current maturities of long-term debt | 750,000,000 | |||
Other current liabilities | 1,883,000,000 | |||
Total current liabilities | 12,637,000,000 | |||
Long-term debt, net | 13,513,000,000 | |||
Accrued pension liabilities | 15,703,000,000 | |||
Other postretirement benefit liabilities | 719,000,000 | |||
Other noncurrent liabilities | 4,558,000,000 | |||
Total liabilities | 47,130,000,000 | |||
Stockholders’ equity | ||||
Common stock, $1 par value per share | 284,000,000 | |||
Additional paid-in capital | 0 | |||
Retained earnings | 11,573,000,000 | |||
Accumulated other comprehensive loss | (12,540,000,000) | |||
Total stockholders’ equity (deficit) | (683,000,000) | |||
Noncontrolling interests in subsidiary | 74,000,000 | |||
Total equity (deficit) | (609,000,000) | |||
Total liabilities and equity | 46,521,000,000 | |||
Adjustments for | ASC 606 | ||||
Current assets | ||||
Cash and cash equivalents | 0 | |||
Receivables, net | (6,338,000,000) | |||
Contract assets | 7,992,000,000 | |||
Inventories | (1,609,000,000) | |||
Other current assets | (1,000,000) | |||
Total current assets | 44,000,000 | |||
Property, plant and equipment, net | 0 | |||
Goodwill | 0 | |||
Intangible assets, net | 0 | |||
Deferred income taxes | 45,000,000 | |||
Other noncurrent assets | 10,000,000 | |||
Total assets | 99,000,000 | |||
Current liabilities | ||||
Accounts payable | 0 | |||
Contract liabilities | 276,000,000 | |||
Salaries, benefits and payroll taxes | 0 | |||
Current maturities of long-term debt | 0 | |||
Other current liabilities | 0 | |||
Total current liabilities | 276,000,000 | |||
Long-term debt, net | 0 | |||
Accrued pension liabilities | 0 | |||
Other postretirement benefit liabilities | 0 | |||
Other noncurrent liabilities | (10,000,000) | |||
Total liabilities | 266,000,000 | |||
Stockholders’ equity | ||||
Common stock, $1 par value per share | 0 | |||
Additional paid-in capital | 0 | |||
Retained earnings | (168,000,000) | |||
Accumulated other comprehensive loss | 1,000,000 | |||
Total stockholders’ equity (deficit) | (167,000,000) | |||
Noncontrolling interests in subsidiary | 0 | |||
Total equity (deficit) | (167,000,000) | |||
Total liabilities and equity | $ 99,000,000 |
RECENT ACCOUNTING PRONOUNCEME_6
RECENT ACCOUNTING PRONOUNCEMENTS - Effect of Topic 606 and ASU 2017-07 Adoption on Cash Flows Statement (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 24, 2017 | Sep. 30, 2018 | Sep. 24, 2017 | |
Operating activities | ||||
Net earnings | $ 1,473 | $ 963 | $ 3,793 | $ 2,707 |
Adjustments to reconcile net earnings to net cash provided by operating activities | ||||
Depreciation and amortization | 857 | 880 | ||
Stock-based compensation | 148 | 133 | ||
Changes in assets and liabilities | ||||
Receivables, net | (151) | (834) | ||
Contract assets | (1,777) | (228) | ||
Inventories | (172) | (66) | ||
Accounts payable | 1,237 | 1,229 | ||
Contract liabilities | (539) | (492) | ||
Postretirement benefit plans | (3,935) | 1,012 | ||
Income taxes | 729 | (202) | ||
Other, net | 635 | 825 | ||
Net cash provided by operating activities | $ 921 | 4,964 | ||
Historical | ||||
Operating activities | ||||
Net earnings | 939 | 2,644 | ||
Adjustments to reconcile net earnings to net cash provided by operating activities | ||||
Depreciation and amortization | 880 | |||
Stock-based compensation | 133 | |||
Changes in assets and liabilities | ||||
Receivables, net | (819) | |||
Contract assets | 0 | |||
Inventories | (133) | |||
Accounts payable | 1,229 | |||
Contract liabilities | (581) | |||
Postretirement benefit plans | 1,012 | |||
Income taxes | (202) | |||
Other, net | 801 | |||
Net cash provided by operating activities | 4,964 | |||
Adjustments for | ASC 606 | ||||
Operating activities | ||||
Net earnings | $ 24 | 63 | ||
Adjustments to reconcile net earnings to net cash provided by operating activities | ||||
Depreciation and amortization | 0 | |||
Stock-based compensation | 0 | |||
Changes in assets and liabilities | ||||
Receivables, net | (15) | |||
Contract assets | (228) | |||
Inventories | 67 | |||
Accounts payable | 0 | |||
Contract liabilities | 89 | |||
Postretirement benefit plans | 0 | |||
Income taxes | 0 | |||
Other, net | 24 | |||
Net cash provided by operating activities | $ 0 |