Document and Entity Information
Document and Entity Information | 3 Months Ended |
Mar. 27, 2016shares | |
Document Information [Line Items] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Mar. 27, 2016 |
Document Fiscal Year Focus | 2,016 |
Document Fiscal Period Focus | Q1 |
Trading Symbol | LMT |
Entity Registrant Name | LOCKHEED MARTIN CORP |
Entity Central Index Key | 936,468 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 304,453,019 |
Consolidated Statements of Earn
Consolidated Statements of Earnings - USD ($) $ in Millions | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Net sales | ||
Products | $ 8,944 | $ 7,853 |
Services | 2,758 | 2,258 |
Total net sales | 11,702 | 10,111 |
Cost of sales | ||
Products | (8,092) | (6,951) |
Services | (2,463) | (1,951) |
Severance charges | (99) | |
Other unallocated, net | 187 | 54 |
Total cost of sales | (10,467) | (8,848) |
Gross profit | 1,235 | 1,263 |
Other income, net | 62 | 93 |
Operating profit | 1,297 | 1,356 |
Interest expense | (164) | (93) |
Other non-operating income, net | 1 | 3 |
Earnings before income taxes | 1,134 | 1,266 |
Income tax expense | (340) | (388) |
Net earnings | $ 794 | $ 878 |
Earnings per common share | ||
Basic earnings per common share in USD | $ 2.61 | $ 2.78 |
Diluted earnings per common share in USD | 2.58 | 2.74 |
Cash dividends paid per common share in USD | $ 1.65 | $ 1.50 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Net earnings | $ 794 | $ 878 |
Other comprehensive income (loss), net of tax | ||
Recognition of previously deferred postretirement benefit plan amounts | 173 | 212 |
Other, net | 17 | (57) |
Other comprehensive income, net of tax | 190 | 155 |
Comprehensive income | $ 984 | $ 1,033 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Mar. 27, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 1,452 | $ 1,090 |
Receivables, net | 8,620 | 8,061 |
Inventories, net | 5,223 | 4,962 |
Other current assets | 472 | 460 |
Total current assets | 15,767 | 14,573 |
Property, plant and equipment, net | 5,417 | 5,490 |
Goodwill | 13,583 | 13,576 |
Intangible assets, net | 4,121 | 4,147 |
Deferred income taxes | 5,893 | 5,931 |
Other noncurrent assets | 5,377 | 5,411 |
Total assets | 50,158 | 49,128 |
Current liabilities | ||
Accounts payable | 2,715 | 1,974 |
Customer advances and amounts in excess of costs incurred | 6,856 | 6,988 |
Salaries, benefits and payroll taxes | 1,963 | 1,916 |
Current maturities of long-term debt | 956 | 956 |
Other current liabilities | 2,422 | 2,085 |
Total current liabilities | 14,912 | 13,919 |
Long-term debt, net | 14,320 | 14,305 |
Accrued pension liabilities | 11,800 | 11,807 |
Other postretirement benefit liabilities | 1,072 | 1,070 |
Other noncurrent liabilities | 4,877 | 4,930 |
Total liabilities | 46,981 | 46,031 |
Stockholders' equity | ||
Common stock, $1 par value per share | 303 | 303 |
Additional paid-in capital | 0 | 0 |
Retained earnings | 14,128 | 14,238 |
Accumulated other comprehensive loss | (11,254) | (11,444) |
Total stockholders' equity | 3,177 | 3,097 |
Total liabilities and stockholders' equity | $ 50,158 | $ 49,128 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 27, 2016 | Dec. 31, 2015 |
Common stock, par value (in USD per share) | $ 1 | $ 1 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Operating activities | ||
Net earnings | $ 794 | $ 878 |
Adjustments to reconcile net earnings to net cash provided by operating activities | ||
Depreciation and amortization | 296 | 244 |
Stock-based compensation | 44 | 40 |
Severance charges | 99 | |
Changes in assets and liabilities | ||
Receivables, net | (558) | (661) |
Inventories, net | (310) | (205) |
Accounts payable | 751 | 375 |
Customer advances and amounts in excess of costs incurred | (146) | (242) |
Postretirement benefit plans | 246 | 292 |
Income taxes | 225 | 395 |
Other, net | 122 | (159) |
Net cash provided by operating activities | 1,563 | 957 |
Investing activities | ||
Capital expenditures | (151) | (118) |
Other, net | 4 | 26 |
Net cash used for investing activities | (147) | (92) |
Financing activities | ||
Issuance of long-term debt, net of related costs | 2,213 | |
Repurchases of common stock | (501) | (604) |
Proceeds from stock option exercises | 28 | 65 |
Dividends paid | (533) | (498) |
Other, net | (48) | (1) |
Net cash (used for) provided by financing activities | (1,054) | 1,175 |
Net change in cash and cash equivalents | 362 | 2,040 |
Cash and cash equivalents at beginning of period | 1,090 | 1,446 |
Cash and cash equivalents at end of period | $ 1,452 | $ 3,486 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Millions | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss |
Beginning Balance at Dec. 31, 2014 | $ 3,400 | $ 314 | $ 14,956 | $ (11,870) | |
Net earnings | 878 | 878 | |||
Other comprehensive income, net of tax | 155 | 155 | |||
Repurchases of common stock | (604) | (3) | $ (166) | (435) | |
Dividends declared | (477) | (477) | |||
Stock-based awards and ESOP activity | 168 | 2 | 166 | ||
Ending Balance at Mar. 29, 2015 | 3,520 | 313 | 14,922 | (11,715) | |
Beginning Balance at Dec. 31, 2015 | 3,097 | 303 | 14,238 | (11,444) | |
Net earnings | 794 | 794 | |||
Other comprehensive income, net of tax | 190 | 190 | |||
Repurchases of common stock | (501) | (2) | (107) | (392) | |
Dividends declared | (512) | (512) | |||
Stock-based awards and ESOP activity | 109 | 2 | $ 107 | ||
Ending Balance at Mar. 27, 2016 | $ 3,177 | $ 303 | $ 14,128 | $ (11,254) |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Mar. 27, 2016 | |
BASIS OF PRESENTATION | NOTE 1 – 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. 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, 2015 (2015 Form 10-K) filed with the SEC. 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 March 27 for the first quarter of 2016 and March 29 for the first quarter of 2015, 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. On November 6, 2015, we completed the acquisition of Sikorsky Aircraft Corporation (Sikorsky) for $9.0 billion, net of cash acquired. Sikorsky, a global company primarily engaged in the design, manufacture, service and support of military and commercial helicopters, has become a wholly-owned subsidiary of ours, aligned under our Mission Systems and Training (MST) business segment. The financial results of the acquired Sikorsky business have been included in our consolidated results of operations since the November 6, 2015 acquisition date. Accordingly, the results of Sikorsky’s operations are included in our consolidated financial results for the quarter ended March 27, 2016 but not for the quarter ended March 29, 2015. See “Note 3 – Acquisitions and Divestitures” for additional information about the acquisition of Sikorsky and related purchase accounting. On January 26, 2016, we entered into definitive agreements to separate and combine our Information Systems & Global Solutions (IS&GS) business segment with Leidos Holdings, Inc. (Leidos) in a tax-efficient Reverse Morris Trust transaction. The transaction is expected to close in the third or fourth quarter of 2016. Until closing, IS&GS will operate as a business segment and financial results for the IS&GS business segment will be reported in our continuing operations. See “Note 3 – Acquisitions and Divestitures” for additional information about the planned divestiture of our IS&GS business segment. During the fourth quarter of 2015, we realigned certain programs among our business segments in connection with a strategic review of our government information technology (IT) and technical services businesses. The amounts, discussion and presentation of our business segments for all periods presented in these consolidated financial statements have been reclassified to reflect the program realignment. The realignment did not impact our previously reported consolidated financial statements for 2015. During the first quarter of 2016, we adopted a new standard that simplifies the presentation of deferred income taxes and requires that deferred tax assets and liabilities be classified as noncurrent in our consolidated balance sheets. We applied the provisions of the standard retrospectively and reclassified approximately $1.6 billion from current to noncurrent assets and approximately $140 million from current to noncurrent liabilities in our consolidated balance sheet as of December 31, 2015. 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 2015 Form 10-K. |
EARNINGS PER COMMON SHARE
EARNINGS PER COMMON SHARE | 3 Months Ended |
Mar. 27, 2016 | |
EARNINGS PER COMMON SHARE | NOTE 2 – 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 March 27, March 29, 2015 Weighted average common shares outstanding for basic computations 304.5 315.4 Weighted average dilutive effect of equity awards 3.3 4.8 Weighted average common shares outstanding for diluted computations 307.8 320.2 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 and exercise of outstanding stock options based on the treasury stock method. There were no anti-dilutive equity awards during the quarters ended March 27, 2016 or March 29, 2015. |
ACQUISITIONS AND DIVESTITURES
ACQUISITIONS AND DIVESTITURES | 3 Months Ended |
Mar. 27, 2016 | |
ACQUISITIONS AND DIVESTITURES | NOTE 3 – ACQUISITIONS AND DIVESTITURES Acquisition of Sikorsky Aircraft Corporation On November 6, 2015, we completed the acquisition of Sikorsky Aircraft Corporation and certain affiliated companies (collectively Sikorsky) from United Technologies Corporation (UTC) and certain of UTC’s subsidiaries. The purchase price of the acquisition was $9.0 billion, net of cash acquired. As a result of the acquisition, Sikorsky became a wholly-owned subsidiary. Sikorsky is a global company primarily engaged in the research, design, development, manufacture and support of military and commercial helicopters. Sikorsky’s products include military helicopters such as the H-60 Black Hawk, MH-60R Seahawk, CH-53K, H-92, and commercial helicopters such as the S-76 and S-92. The acquisition enables us to extend our core business into the military and commercial rotary wing markets, allowing us to strengthen our position in the aerospace and defense industry. Further, this acquisition will expand our presence in commercial and international markets. Sikorsky has been aligned under our MST business segment. Preliminary Allocation of Purchase Price to Assets Acquired and Liabilities Assumed We accounted for the acquisition of Sikorsky as a business combination, which requires us to record the assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of the net assets acquired is recorded as goodwill. We commenced the appraisals necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed and the amount of goodwill to be recognized as of the acquisition date. The amounts recorded for certain assets and liabilities are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the acquisition date. The final determination of the fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the acquisition date, as permitted under GAAP. The size and breadth of the Sikorsky acquisition could necessitate the need to use the full one year measurement period to adequately analyze and assess a number of the factors used in establishing the asset and liability fair values as of the acquisition date including contractual and operational factors underlying the customer programs intangible assets, the trademarks intangible asset, customer contractual obligations, inventories, receivables and customer advances, and the assumptions underpinning certain reserves such as those for environmental and legal obligations. The final values may also result in changes to depreciation and amortization expense related to certain assets such as buildings, equipment and intangible assets. Any potential adjustments made could be material in relation to the values presented in the table below. During the quarter ended March 27, 2016, we continued to obtain information to refine the estimated fair values for certain tangible and intangible assets acquired, liabilities assumed and the amount of goodwill recognized. As a result of the additional information obtained during the first quarter of 2016, the carrying amounts for inventories and customer programs intangible assets were reduced by $49 million and $28 million, while the carrying amounts of the trademarks intangible asset, deferred income tax assets and customer advances and amounts in excess of costs incurred increased by $71 million, $11 million and $10 million. The measurement period adjustments did not result in a significant adjustment to 2015 amortization expense for intangible assets. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date, including the refinements described in the previous paragraph (in millions): Cash and cash equivalents $ 75 Receivables 1,921 Inventories 1,768 Other current assets 25 Property, plant and equipment 654 Goodwill 2,764 Intangible assets: Customer programs 3,099 Trademarks 887 Other noncurrent assets 513 Deferred income tax assets 297 Total identifiable assets and goodwill 12,003 Accounts payable (565) Customer advances and amounts in excess of costs incurred (1,230) Salaries, benefits and payroll taxes (105) Current maturities of long-term debt (5) Other current liabilities (347) Long-term debt (11) Customer contractual obligations (a) (480) Other noncurrent liabilities (150) Deferred income tax liabilities (a) (32) Total liabilities assumed (2,925) Total purchase price $ 9,078 (a) Recorded in Other noncurrent liabilities on the consolidated balance sheet. Intangible assets related to customer programs were recognized for each major helicopter and aftermarket program and represent the aggregate value associated with the customer relationships, contracts, technology and tradenames underlying the associated program. These intangible assets will be amortized over a weighted-average useful life of approximately 15 years. The amortization of the intangible assets is calculated in accordance with the underlying pattern of economic benefit as reflected by the future net cash inflows. Customer contractual obligations represent liabilities on certain development programs where the expected costs exceed the expected sales under contract. We measured these liabilities based on the price to transfer the obligation to a market participant at the measurement date, assuming that the liability will remain outstanding in the marketplace. Based on the estimated net cash outflows of the developmental programs plus a reasonable contracting profit margin required to transfer the contracts to market participants, we recorded assumed liabilities of approximately $480 million. These liabilities will be liquidated in accordance with the underlying economic pattern of the contractual obligations, as reflected by the estimated future net cash outflows incurred on the associated contracts. From the acquisition date through the period ended March 27, 2016, we recognized $31 million in sales related to customer contractual obligations. Estimated liquidation of the customer contractual obligations is as follows: $52 million remaining in 2016, $96 million in 2017, $68 million in 2018, $59 million in 2019, $59 million in 2020, $56 million in 2021 and $59 million thereafter. The fair values of the assets acquired and liabilities assumed were preliminarily determined using income, market and cost valuation methodologies. The fair value measurements were estimated using significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in Accounting Standards Codification (ASC) 820, Fair Value Measurement The preliminary purchase price allocation resulted in the recognition of $2.8 billion of goodwill, all of which is expected to be amortizable for tax purposes. All of the goodwill was assigned to our MST business segment. The goodwill recognized is attributable to expected revenue synergies generated by the integration of our products and technologies with those of Sikorsky, cost synergies resulting from the consolidation or elimination of certain functions, and intangible assets that do not qualify for separate recognition, such as the assembled workforce of Sikorsky. Determining the fair value of assets acquired and liabilities assumed requires the exercise of significant judgments, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. The cash flows employed in the discounted cash flow analyses are based on our best estimate of future sales, earnings and cash flows after considering factors such as general market conditions, customer budgets, existing firm orders, expected future orders, contracts with suppliers, labor agreements, changes in working capital, long term business plans and recent operating performance. Use of different estimates and judgments could yield different results. Supplemental Pro Forma Financial Information Sikorsky’s financial results have been included in our consolidated financial results for the periods subsequent to the November 6, 2015 acquisition date. The following table presents summarized unaudited pro forma financial information as if Sikorsky had been included in our financial results for the quarter ended March 29, 2015 (in millions): Quarter Ended March 29, 2015 Net sales $ 11,344 Net earnings 842 Basic earnings per common share 2.67 Diluted earnings per common share 2.63 The unaudited supplemental pro forma financial data above have been calculated after applying our accounting policies and adjusting the historical results of Sikorsky with pro forma adjustments, net of tax, that assume the acquisition occurred on January 1, 2014. Significant pro forma adjustments include the recognition of additional amortization expense related to acquired intangible assets and additional interest expense related to the debt used to finance most of the Sikorsky purchase price. These adjustments assume the Sikorsky acquisition and debt issued to finance most of the purchase price occurred on January 1, 2014. The adjustments include amortization expense of $36 million and interest expense of $43 million during the quarter ended March 29, 2015. The increase in interest expense is the result of the debt issued to finance most of the Sikorsky purchase price. The unaudited supplemental pro forma financial information does not reflect the realization of any expected ongoing revenue or cost synergies relating to the integration of the two companies. Further, the pro forma data should IS&GS Divestiture On January 26, 2016, we entered into definitive agreements to separate and combine our IS&GS business segment with Leidos in a tax-efficient Reverse Morris Trust transaction. As part of the transaction, we will receive a $1.8 billion one-time special cash payment. The cash payment is subject to adjustment and could be less or more than anticipated due to variances in working capital. Additionally, our stockholders will receive approximately 50.5 percent of the outstanding equity of Leidos on a fully diluted basis (approximately 77 million shares) with an estimated value of $3.2 billion based on the average trading price of Leidos’ common stock during a period immediately prior to the January 26, 2016 announcement, adjusted for the special dividend of $1.0 billion to be paid by Leidos to its shareholders, and approximately 77 million shares of Leidos common stock being issued in the merger. However, the actual value of the stock to be received by our stockholders will depend on the value of such shares at the time of closing of the transaction, and our stockholders may receive more or less than the anticipated value. At our election, the distribution may be effected by means of a pro rata dividend in a spin-off transaction or in an exchange offer for outstanding Lockheed Martin shares in a split-off transaction. The transaction structure, which is subject to market conditions, is currently contemplated to be a split-off transaction resulting in a decrease in our outstanding common shares and a significant book gain at closing. In a split-off transaction, only those stockholders that elect to participate will receive Leidos shares in the merger transaction, provided that, if the exchange offer is not fully subscribed, we will spin off the remaining shares pro rata to all shares not tendered, and those shares will also be converted into Leidos stock in the merger. The value of the shares of Leidos stock to be received and the value of our stock at the time of the split-off will also impact the number of any shares of our stock retired in the split-off and the amount of any book gain. Although the transaction structure is currently contemplated to be a split-off transaction, there is no assurance that the transaction will be structured as a split-off transaction or that it will result in a reduction in our shares or a gain at closing. The transaction is subject to approval by Leidos’ stockholders of the issuance of the Leidos shares in the merger and the satisfaction of customary closing conditions, including regulatory approvals, the absence of a material adverse change with respect to each of IS&GS and Leidos, the receipt of solvency opinions and opinions of tax counsel. On March 29, 2016, the review period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in the U.S. expired, satisfying one of the necessary closing conditions. The transaction remains subject to regulatory review in the United Kingdom. The transaction is expected to close in the third or fourth quarter of 2016. |
GOODWILL AND ACQUIRED INTANGIBL
GOODWILL AND ACQUIRED INTANGIBLE ASSETS | 3 Months Ended |
Mar. 27, 2016 | |
Goodwill by Segment | |
GOODWILL AND ACQUIRED INTANGIBLE ASSETS | NOTE 4 – GOODWILL AND ACQUIRED INTANGIBLE ASSETS Changes in the carrying amount of goodwill by segment were as follows (in millions): Aeronautics IS&GS MFC MST Space Systems Total Balance at December 31, 2015 $ 171 $ 2,881 $ 2,198 $ 6,738 $ 1,588 $ 13,576 Foreign currency translation — (6 ) (3 ) 16 — 7 Balance at March 27, 2016 $ 171 $ 2,875 $ 2,195 $ 6,754 $ 1,588 $ 13,583 Acquired intangible assets consisted of the following (in millions): March 27, 2016 December 31, 2015 Gross Accumulated Net Carrying Gross Amount Accumulated Net Finite-Lived: Customer programs $ 3,099 $ (91 ) $ 3,008 $ 3,127 $ (38 ) $ 3,089 Customer relationships 309 (174 ) 135 309 (166 ) 143 Other 171 (98 ) 73 171 (90 ) 81 Total finite-lived intangibles 3,579 (363 ) 3,216 3,607 (294 ) 3,313 Indefinite Lived: Trademarks 905 - 905 834 - 834 Total acquired intangibles $ 4,484 $ (363 ) $ 4,121 $ 4,441 $ (294 ) $ 4,147 Acquired finite-lived intangible assets are amortized to expense over the following estimated useful lives: customer programs from nine to 20 years, customer relationships from four to 10 years, other intangible assets from two to 10 years. During the quarter ended March 27, 2016, we continued to obtain information and refine the appraisals of the fair values of intangible assets related to the Sikorsky acquisition. For further details on changes in intangible asset values see Note 3. Amortization expense for acquired finite-lived intangible assets was $69 million and $22 million for the quarters ended March 27, 2016 and March 29, 2015, respectively. Estimated future amortization expense is as follows: $211 million remaining in 2016; $262 million in 2017; $248 million in 2018; $243 million in 2019; $236 million in 2020; $232 million in 2021 and $1.8 billion thereafter. Our estimates of amortization expense for finite-lived intangible assets are subject to change, pending the final determination of the fair value of intangible assets acquired in connection with the Sikorsky acquisition (See Note 3). |
INFORMATION ON BUSINESS SEGMENT
INFORMATION ON BUSINESS SEGMENTS | 3 Months Ended |
Mar. 27, 2016 | |
INFORMATION ON BUSINESS SEGMENTS | NOTE 5 – INFORMATION ON BUSINESS SEGMENTS We operate in five business segments: Aeronautics, Information Systems & Global Solutions (IS&GS), Missiles and Fire Control (MFC), MST and Space Systems. We organize our business segments based on the nature of the products and services offered. The results of our MST business segment include the operations of Sikorsky since its November 6, 2015 acquisition date. Accordingly, the results of Sikorsky operations are included in the results of our MST business segment for the quarter ended March 27, 2016 but not for the quarter ended March 29, 2015. 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. United Launch Alliance (ULA), which is part of our Space Systems business segment, is our primary equity method investee. Operating profit of our business segments excludes the FAS/CAS pension adjustment described below; expense for stock-based Our business segments’ results of operations include pension expense only as calculated under U.S. Government Cost Accounting Standards (CAS), which we refer to as CAS pension cost. We recover CAS pension cost through the pricing of our products and services on U.S. Government contracts and, therefore, the CAS pension cost is recognized in each of our business segments’ net sales and cost of sales. Since our consolidated financial statements must present pension expense calculated in accordance with the financial accounting standards (FAS) requirements under GAAP, which we refer to as FAS pension expense, the FAS/CAS pension adjustment increases or decreases the CAS pension cost recorded in our business segments’ results of operations to equal the FAS pension expense. Summary operating results for each of our business segments were as follows (in millions): Quarters Ended March 27, March 29, 2015 Net sales Aeronautics $ 3,799 $ 3,134 Information Systems & Global Solutions 1,334 1,390 Missiles and Fire Control 1,434 1,383 Mission Systems and Training 3,004 1,979 Space Systems 2,131 2,225 Total net sales $ 11,702 $ 10,111 Operating profit Aeronautics $ 420 $ 371 Information Systems & Global Solutions 109 145 Missiles and Fire Control 221 286 Mission Systems and Training 229 180 Space Systems 244 324 Total business segment operating profit 1,223 1,306 Unallocated items FAS/CAS pension adjustment FAS pension expense (254) (284) Less: CAS pension cost 500 403 FAS/CAS pension adjustment 246 119 Stock-based compensation (44) (40) Severance charges (99) — Other, net (29) (29) Total unallocated items 74 50 Total consolidated operating profit $ 1,297 $ 1,356 Intersegment sales Aeronautics $ 35 $ 20 Information Systems & Global Solutions 24 2 Missiles and Fire Control 75 74 Mission Systems and Training 445 319 Space Systems 33 33 Total intersegment sales $ 612 $ 448 Total assets for each of our business segments were as follows (in millions): March 27, December 31, Assets Aeronautics $ 7,070 $ 6,618 Information Systems & Global Solutions 4,112 4,206 Missiles and Fire Control 4,038 4,027 Mission Systems and Training 19,187 19,187 Space Systems 5,031 4,861 Total business segment assets 39,438 38,899 Corporate assets (a) 10,720 10,229 Total assets $ 50,158 $ 49,128 (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 20% and 19% of our total consolidated net sales in the quarters ended March 27, 2016 and March 29, 2015, respectively. |
INVENTORIES, NET
INVENTORIES, NET | 3 Months Ended |
Mar. 27, 2016 | |
INVENTORIES, NET | NOTE 6 – INVENTORIES, NET Inventories, net consisted of the following (in millions): March 27, 2016 December 31, 2015 Work-in-process, primarily related to long-term contracts and programs in progress $ 8,801 $ 8,199 Less: customer advances and progress payments (5,152) (5,035) 3,649 3,164 Other inventories 1,574 1,798 Total inventories, net $ 5,223 $ 4,962 |
POSTRETIREMENT BENEFIT PLANS
POSTRETIREMENT BENEFIT PLANS | 3 Months Ended |
Mar. 27, 2016 | |
POSTRETIREMENT BENEFIT PLANS | NOTE 7 – 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 March 27, March 29, Qualified defined benefit pension plans Service cost $ 212 $ 217 Interest cost 465 448 Expected return on plan assets (667) (684) Recognized net actuarial losses 340 400 Amortization of net prior service credits (96) (97) Total net periodic benefit cost $ 254 $ 284 Retiree medical and life insurance plans Service cost $ 6 $ 5 Interest cost 30 28 Expected return on plan assets (34) (37) Recognized net actuarial losses 8 11 Amortization of net prior service costs 5 1 Total net periodic benefit cost $ 15 $ 8 The recognized net actuarial losses and the amortization of net prior service (credits) costs in the table above, as well as similar amounts related to our other postretirement benefit plans ($11 million during the quarter ended March 27, 2016 and $13 million during the quarter ended March 29, 2015), include amounts that 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 $173 million (net of $95 million of tax expense) during the quarter ended March 27, 2016 and $212 million (net of $116 million of tax expense) during the quarter ended March 29, 2015, which were recorded on our 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. There were no contributions to our heritage qualified defined benefit pension plans during the quarters ended March 27, 2016 and March 29, 2015. We do not plan to make contributions to our heritage pension plans in 2016 or 2017 because none are required using current assumptions, including anticipated investment returns on plan assets. |
LEGAL PROCEEDINGS AND CONTINGEN
LEGAL PROCEEDINGS AND CONTINGENCIES | 3 Months Ended |
Mar. 27, 2016 | |
LEGAL PROCEEDINGS AND CONTINGENCIES | NOTE 8 – 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 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 When we acquired Sikorsky, we assumed responsibility for a civil False Claims Act lawsuit filed by the U.S. Government in October 2014 in the U.S. District Court for the Eastern District of Wisconsin. The Government’s complaint asserts numerous claims for violations of the False Claims Act, breach of contract, and unjust enrichment. The Government alleges that Sikorsky and two of its wholly-owned subsidiaries, Derco Aerospace (Derco) and Sikorsky Support Services, Inc. (SSSI), violated the civil False Claims 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 Government alleges that SSSI overbilled the Navy because Derco added profit and overhead costs to the price of the spare parts Derco procured and then sold to SSSI. The Government also contends that SSSI submitted false Certificates of Final Indirect Costs in the years 2006 through 2012. In a late April 2015 court filing, the Government disclosed that it seeks damages of approximately $45 million, subject to trebling, plus statutory penalties of approximately $13 million, all totaling approximately $148 million. We believe that we have legal and factual defenses to the Government’s claims. Although we continue to evaluate our liability and exposure, we do not currently believe it probable that we will incur a material loss. If, contrary to our expectations, the Government prevails in this matter and proves damages at the high end of the range sought and is successful in having these 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 damages are paid. The U.S. Department of Justice (DOJ) informed us on February 4, 2016, that it has closed the related criminal investigation with no action against the corporate entities or individuals. Sikorsky and its subsidiaries cooperated fully with the investigation since learning about it in a July 13, 2015, letter from DOJ. 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 cost to complete the contract and potential re-procurement costs. While we are unable to estimate the cost of another contractor completing 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 expect a decision in 2016. We have settled two previously disclosed lawsuits, United States ex rel. Natural Resources Defense Council, et al., v. Lockheed Martin Corporation, et al., and United States ex rel. John D. Tillson v. Lockheed Martin Energy Systems, Inc., et al. The relators filed the lawsuits in 1999 under the civil qui tam provisions of the False Claims Act in the U.S. District Court for the Western District of Kentucky, and DOJ filed complaints in partial intervention on August 28, 2003. Pursuant to the terms of the settlement agreement executed by all parties on February 26, 2016, we paid $5 million, of which $4 million was allocated to the False Claims Act allegations and assessed against all Defendants, including the Corporation and its predecessor, Martin Marietta Corporation; wholly-owned subsidiary Lockheed Martin Energy Systems, Inc., and its predecessor, Martin Marietta Energy Systems, Inc.; and wholly-owned subsidiary Lockheed Martin Utility Services, Inc., and its predecessor Martin Marietta Utility Services, Inc.; $500,000 was allocated to Resource Conservation and Recovery Act (RCRA) civil penalties assessed against Lockheed Martin Energy Systems, Inc.; and $500,000 was allocated to RCRA civil penalties assessed against Lockheed Martin Utility Services, Inc. We believe we had substantial defenses to all of the allegations but settled the cases to avoid the costs of further litigation of this matter, which was ongoing for more than sixteen years. We admitted to no liability or wrongdoing in resolving the matter. Environmental Matters We are involved in environmental proceedings and potential proceedings relating to soil, sediment and groundwater contamination, disposal of hazardous waste and other environmental matters at several of our current or former facilities or 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 continuously 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 and our history of receiving reimbursement of such costs. We include the portion of those environmental costs expected to be allocated to our non-U.S. Government contracts, or that is determined to not be recoverable under U.S. Government contracts, in our cost of sales at the time the liability is established. At March 27, 2016 and December 31, 2015, the aggregate amount of liabilities recorded relative to environmental matters was $991 million and $1.0 billion, most of which are recorded in other noncurrent liabilities on our Balance Sheets. We have recorded receivables totaling $849 million and $858 million at March 27, 2016 and December 31, 2015, most of which are recorded in other noncurrent assets on our 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. We also are pursuing claims for recovery of costs incurred or contribution to site cleanup costs against other PRPs, including the U.S. Government, and are conducting remediation activities under various consent decrees and orders relating to soil, groundwater, sediment or surface water contamination at certain sites of former or current operations. Under an agreement related to our Burbank and Glendale, California, sites, the U.S. Government reimburses us an amount equal to approximately 50% of expenditures for certain remediation activities in its capacity as a PRP under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). On July 1, 2014, a regulation became effective in California setting the maximum level of the contaminant hexavalent chromium in drinking water at 10 parts per billion (ppb). In May 2014, the California Manufacturers and Technology Association filed a suit alleging the 10 ppb threshold is lower than is required to protect public health and thus imposes unjustified costs on the regulated community. We cannot predict the outcome of this suit or whether other challenges may be advanced by the regulated community or environmental groups which had sought a significantly higher and lower standard, respectively. If the new standard remains at 10 ppb, it will not have a material impact on our existing remediation costs in California. In addition, California is reevaluating its existing drinking water standard with respect to a second contaminant, perchlorate, and the U.S. Environmental Protection Agency (U.S. EPA) is also considering whether to regulate perchlorate and hexavalent chromium in drinking water. In February 2016, the Natural Resources Defense Council filed suit in federal court in New York against the U.S. EPA to compel the U.S. EPA to set an enforceable drinking water standard for perchlorate. If a substantially lower standard is adopted, in either California or at the federal level, for perchlorate, or if the U.S. EPA were to adopt a standard for hexavalent chromium lower than 10 ppb, 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 to not 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, surety bonds and third-party guarantees with financial institutions and other 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 $3.7 billion and $3.8 billion at March 27, 2016 and December 31, 2015. Third-party guarantees do not include guarantees of subsidiaries and other consolidated entities. At March 27, 2016 and December 31, 2015, third-party guarantees totaled $669 million and $678 million, of which approximately 79% 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 partners. In addition, we generally have cross-indemnities in place that may enable us to recover amounts that may be paid on behalf of a venture partner. We believe our current and former venture partners will be able to perform their obligations, as they have done through March 27, 2016, and that it will not be necessary to make payments under the third-party guarantees. In determining our exposures, we evaluate the reputation, performance on contractual obligations, technical capabilities and credit quality of our current and former venture partners. There were no material amounts recorded in our financial statements related to third-party guarantees. 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 March 27, 2016, 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 March 27, 2016, and that it will not be necessary to make payments under the cross-indemnities or guarantees. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 27, 2016 | |
FAIR VALUE MEASUREMENTS | NOTE 9 – FAIR VALUE MEASUREMENTS Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following (in millions): March 27, 2016 December 31, 2015 Total Level 1 Level 2 Total Level 1 Level 2 Assets Equity securities $ 87 $ 87 $ — $ 89 $ 89 $ — Mutual funds 702 702 — 745 745 — U.S. Government securities 126 — 126 119 — 119 Other securities 153 — 153 147 — 147 Derivatives 29 — 29 15 — 15 Liabilities Derivatives 31 — 31 35 — 35 Substantially all assets measured at fair value, other than derivatives, represent investments classified as trading securities held in a separate trust to fund certain of our non-qualified deferred compensation plans and are recorded in other noncurrent assets on our Balance Sheets. The fair values of equity securities and mutual funds 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. We did not have any transfers of assets or liabilities between levels of the fair value hierarchy during the quarter ended March 27, 2016. 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 March 27, 2016 and December 31, 2015 was $1.5 billion. The aggregate notional amount of our outstanding foreign currency hedges at March 27, 2016 and December 31, 2015 was $4.6 billion and $4.1 billion. Derivative instruments did not have a material impact on net earnings and comprehensive income during the quarters ended March 27, 2016 and March 29, 2015, respectively. 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 cash and cash equivalents, receivables, accounts payable and debt. The carrying amounts for cash and cash equivalents, receivables and accounts payable approximated their fair values. The estimated fair value of our outstanding debt was $17.2 billion and $16.5 billion at March 27, 2016 and December 31, 2015 and the outstanding principal amount was $16.2 billion at both March 27, 2016 and December 31, 2015, excluding unamortized discounts and deferred financing costs of $1.0 billion at both March 27, 2016 and December 31, 2015. The estimated fair values of our outstanding debt were determined based on quoted prices for similar instruments in active markets (Level 2). |
OTHER
OTHER | 3 Months Ended |
Mar. 27, 2016 | |
OTHER | NOTE 10 – OTHER Changes in Estimates Accounting for contracts using the percentage-of-completion method requires judgment relative to assessing risks, estimating contract sales and costs (including estimating award and incentive fees and penalties related to performance) and making assumptions for schedule and technical issues. Due to the number of years it may take to complete many of our contracts and the scope and nature of the work required to be performed on those contracts, the estimation of total sales and costs at completion is complicated and subject to many variables and, accordingly is subject to change. When adjustments in estimated total contract sales or estimated total costs are required, any changes from prior estimates are recognized in the current period for the inception-to-date effect of such changes. When estimates of total costs to be incurred on a contract exceed estimates of total sales to be earned, a provision for the entire loss on the contract is recorded in the period in which the loss is determined. Many of our contracts span several years and include highly complex technical requirements. At the outset of a contract, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract and assess the effects of those risks on our estimates of 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 and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset 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. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase. All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate. 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 accounted for using the percentage-of-completion method of accounting. Increases in the profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs 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 complete 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 margins may also be impacted favorably or unfavorably by other items. Favorable items may include the positive resolution of contractual matters, cost recoveries on 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; asset impairments; and losses on sales of assets. We have a contract to provide an integrated air and missile defense system to an international customer. In the quarter ended March 29, 2015, we revised our estimated costs to complete the program as a consequence of performance issues and recorded a reserve of $70 million. Since that time, we have continued to experience issues related to customer requirements and the implementation of this contract and have periodically accrued additional reserves. Consequently, we are re-evaluating the scope, estimated costs, and viability of the program. Depending on the outcome of this re-evaluation, it is possible that we may have to record additional loss reserves in future periods, which could be material to our operating results. However, as this re-evaluation is in process and will include further discussions with our customer, we cannot make an estimate of the total expected costs at this time due to uncertainties inherent in the estimation process. Our consolidated net adjustments not related to volume, including net profit booking rate adjustments and other matters, increased segment operating profit by approximately $405 million and $490 million in the quarters ended March 27, 2016 and March 29, 2015, respectively. These adjustments increased net earnings by approximately $265 million ($0.86 per share) and $320 million ($1.00 per share) in the quarters ended March 27, 2016 and March 29, 2015, respectively. Restructuring Charges 2016 Actions During the quarter ended March 27, 2016, we recorded severance charges totaling approximately $99 million, of which $80 million related to our Aeronautics business segment and $19 million related to our IS&GS business segment. The charges consisted of severance costs associated with the planned elimination of certain positions through either voluntary or involuntary actions. Upon separation, terminated employees will receive lump-sum severance payments primarily based on years of service, the majority of which are expected to be paid by the end of 2016. 2015 Actions During the third and fourth quarters of 2015, we recorded severance charges totaling $102 million, of which $67 million related to our MST business segment and $35 million related to our IS&GS business segment (prior to our fourth quarter 2015 program realignment). The charges consisted of severance costs associated with the planned elimination of certain positions through either voluntary or involuntary actions. Upon separation, terminated employees will receive lump-sum severance payments primarily based on years of service, the majority of which are expected to be paid over the next several quarters. As of March 27, 2016, we have paid approximately $32 million in severance payments associated with these actions, of which approximately $14 million was paid in the quarter ended March 27, 2016. In connection with the Sikorsky acquisition, we assumed obligations related to certain restructuring actions committed to by Sikorsky in June 2015. Net of amounts we anticipate to recover through the pricing of our products and services to our customers, we also expect to incur an additional $40 million of costs in 2016 related to these actions. We expect to recover a substantial amount of the restructuring charges through the pricing of our products and services to the U.S. Government and other customers in future periods, with the impact included in the respective business segment’s results of operations. Income Taxes Our effective income tax rates were 29.9% and 30.6% during the quarters ended March 27, 2016 and March 29, 2015, respectively. The rates for both periods benefited from tax deductions for U.S. manufacturing activities and for dividends paid to our defined contribution plans with an employee stock ownership plan feature. The rate in the quarter ended March 27, 2016 benefited from the research and development tax credit, which was permanently extended and reinstated in the fourth quarter of 2015. February 2015 Debt Issuance On February 20, 2015, we issued $2.25 billion of notes (the February 2015 Notes) in a registered public offering. The February 2015 Notes consist of $750 million maturing in 2025 with a fixed interest rate of 2.90%, $500 million maturing in 2035 with a fixed interest rate of 3.60% and $1.0 billion maturing in 2045 with a fixed interest rate of 3.80%. Interest on the notes is payable on March 1 and September 1 of each year, beginning on September 1, 2015. Stockholders’ Equity Repurchases of Common Stock During the quarter ended March 27, 2016, we repurchased 2.4 million shares of our common stock for $501 million. The total remaining authorization for future common share repurchases under our share repurchase program was $3.1 billion as of March 27, 2016. 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. Dividends We declared cash dividends totaling $512 million ($1.65 per share) and $477 million ($1.50 per share) during the quarters ended March 27, 2016 and March 29, 2015, respectively. Restricted Stock Unit Grants In January 2016, we granted certain employees approximately 0.7 million restricted stock units (RSUs) with a grant-date fair value of $206.41 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 Other, net AOCL Balance at December 31, 2014 $ (11,813) $ (57) $ (11,870) Other comprehensive loss before reclassifications — (54) (54) Amounts reclassified from AOCL Recognition of net actuarial losses (a) 277 — 277 Amortization of net prior service credits (a) (65) — (65) Other — (3) (3) Total reclassified from AOCL 212 (3) 209 Total other comprehensive income (loss) 212 (57) 155 Balance at March 29, 2015 $ (11,601) $ (114) $ (11,715) Balance at December 31, 2015 $ (11,314) $ (130) $ (11,444) Other comprehensive loss before reclassifications — 15 15 Amounts reclassified from AOCL Recognition of net actuarial losses (a) 234 — 234 Amortization of net prior service credits (a) (61) — (61) Other — 2 2 Total reclassified from AOCL 173 2 175 Total other comprehensive income (loss) 173 17 190 Balance at March 27, 2016 $ (11,141) $ (113) $ (11,254) (a) Reclassifications from AOCL related to our postretirement benefit plans were recorded as a component of net periodic benefit cost for each period presented (Note 7). Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard that will change the way we recognize revenue and significantly expand the disclosure requirements for revenue arrangements. In July 2015, the FASB approved a one-year deferral of the effective date of the standard to 2018 for public companies, with an option that would permit companies to adopt the standard in 2017. Early adoption prior to 2017 is not permitted. The new standard may be adopted either retrospectively or on a modified retrospective basis whereby the new standard would be applied to new contracts and existing contracts with remaining performance obligations as of the effective date, with a cumulative catch-up adjustment recorded to beginning retained earnings at the effective date for existing contracts with remaining performance obligations. We are currently evaluating the methods of adoption allowed by the new standard and the effect the standard is expected to have on our consolidated financial statements and related disclosures. As the new standard will supersede substantially all existing revenue guidance affecting us under GAAP, it could impact revenue and cost recognition on thousands of contracts across all our business segments, in addition to our business processes and our information technology systems. As a result, our evaluation of the effect of the new standard will extend over future periods. In February 2016, the FASB issued a new standard that increases transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements for both lessees and lessors. The standard is effective January 1, 2019 for public companies, with early adoption permitted. The standard will be applied using a modified retrospective approach to the beginning of the earliest period presented in the financial statements. We are currently evaluating when we will adopt the standard and the expected impact to our consolidated financial statements and related disclosures. In March 2016, the FASB issued a new standard that simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The standard is effective January 1, 2017 for public companies, with early adoption permitted. We are currently evaluating when we will adopt the standard and the expected impact to our consolidated financial statements and related disclosures. In September 2015, the FASB issued a new standard that simplifies the accounting for adjustments made to preliminary amounts recognized in a business combination by eliminating the requirement to retrospectively account for those adjustments. Instead, adjustments will be recognized in the period in which the adjustments are determined, including the effect on earnings of any amounts that would have been recorded in previous periods if the accounting had been completed at the acquisition date. We adopted the standard on January 1, 2016 and are prospectively applying the standard to business combination adjustments identified after the date of adoption. In November 2015, the FASB issued a new standard that simplifies the presentation of deferred income taxes and requires that deferred tax assets and liabilities, as well as any related valuation allowance, be classified as noncurrent in our consolidated balance sheets. We applied the provisions of the standard retrospectively and reclassified approximately $1.6 billion from current to noncurrent assets and approximately $140 million from current to noncurrent liabilities in our consolidated balance sheet as of December 31, 2015. |
EARNINGS PER COMMON SHARE (Tabl
EARNINGS PER COMMON SHARE (Tables) | 3 Months Ended |
Mar. 27, 2016 | |
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 March 27, March 29, 2015 Weighted average common shares outstanding for basic computations 304.5 315.4 Weighted average dilutive effect of equity awards 3.3 4.8 Weighted average common shares outstanding for diluted computations 307.8 320.2 |
ACQUISITIONS AND DIVESTITURES (
ACQUISITIONS AND DIVESTITURES (Tables) | 3 Months Ended |
Mar. 27, 2016 | |
Summary of Estimated Fair Values of Assets Acquired and Liabilities Assumed | The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date, including the refinements described in the previous paragraph (in millions): Cash and cash equivalents $ 75 Receivables 1,921 Inventories 1,768 Other current assets 25 Property, plant and equipment 654 Goodwill 2,764 Intangible assets: Customer programs 3,099 Trademarks 887 Other noncurrent assets 513 Deferred income tax assets 297 Total identifiable assets and goodwill 12,003 Accounts payable (565) Customer advances and amounts in excess of costs incurred (1,230) Salaries, benefits and payroll taxes (105) Current maturities of long-term debt (5) Other current liabilities (347) Long-term debt (11) Customer contractual obligations (a) (480) Other noncurrent liabilities (150) Deferred income tax liabilities (a) (32) Total liabilities assumed (2,925) Total purchase price $ 9,078 (a) Recorded in Other noncurrent liabilities on the consolidated balance sheet. |
Summary of Pro Forma Financial Information | The following table presents summarized unaudited pro forma financial information as if Sikorsky had been included in our financial results for the quarter ended March 29, 2015 (in millions): Quarter Ended March 29, 2015 Net sales $ 11,344 Net earnings 842 Basic earnings per common share 2.67 Diluted earnings per common share 2.63 |
GOODWILL AND ACQUIRED INTANGI20
GOODWILL AND ACQUIRED INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 27, 2016 | |
Acquired Intangible Assets | Acquired intangible assets consisted of the following (in millions): March 27, 2016 December 31, 2015 Gross Accumulated Net Carrying Gross Amount Accumulated Net Finite-Lived: Customer programs $ 3,099 $ (91 ) $ 3,008 $ 3,127 $ (38 ) $ 3,089 Customer relationships 309 (174 ) 135 309 (166 ) 143 Other 171 (98 ) 73 171 (90 ) 81 Total finite-lived intangibles 3,579 (363 ) 3,216 3,607 (294 ) 3,313 Indefinite Lived: Trademarks 905 - 905 834 - 834 Total acquired intangibles $ 4,484 $ (363 ) $ 4,121 $ 4,441 $ (294 ) $ 4,147 |
Goodwill by Segment | |
Acquired Intangible Assets | Changes in the carrying amount of goodwill by segment were as follows (in millions): Aeronautics IS&GS MFC MST Space Systems Total Balance at December 31, 2015 $ 171 $ 2,881 $ 2,198 $ 6,738 $ 1,588 $ 13,576 Foreign currency translation — (6 ) (3 ) 16 — 7 Balance at March 27, 2016 $ 171 $ 2,875 $ 2,195 $ 6,754 $ 1,588 $ 13,583 |
INFORMATION ON BUSINESS SEGME21
INFORMATION ON BUSINESS SEGMENTS (Tables) | 3 Months Ended |
Mar. 27, 2016 | |
Summary Of Financial Information For Each Business Segment | Summary operating results for each of our business segments were as follows (in millions): Quarters Ended March 27, March 29, 2015 Net sales Aeronautics $ 3,799 $ 3,134 Information Systems & Global Solutions 1,334 1,390 Missiles and Fire Control 1,434 1,383 Mission Systems and Training 3,004 1,979 Space Systems 2,131 2,225 Total net sales $ 11,702 $ 10,111 Operating profit Aeronautics $ 420 $ 371 Information Systems & Global Solutions 109 145 Missiles and Fire Control 221 286 Mission Systems and Training 229 180 Space Systems 244 324 Total business segment operating profit 1,223 1,306 Unallocated items FAS/CAS pension adjustment FAS pension expense (254) (284) Less: CAS pension cost 500 403 FAS/CAS pension adjustment 246 119 Stock-based compensation (44) (40) Severance charges (99) — Other, net (29) (29) Total unallocated items 74 50 Total consolidated operating profit $ 1,297 $ 1,356 Intersegment sales Aeronautics $ 35 $ 20 Information Systems & Global Solutions 24 2 Missiles and Fire Control 75 74 Mission Systems and Training 445 319 Space Systems 33 33 Total intersegment sales $ 612 $ 448 |
Selected Financial Data By Business Segment | Total assets for each of our business segments were as follows (in millions): March 27, December 31, Assets Aeronautics $ 7,070 $ 6,618 Information Systems & Global Solutions 4,112 4,206 Missiles and Fire Control 4,038 4,027 Mission Systems and Training 19,187 19,187 Space Systems 5,031 4,861 Total business segment assets 39,438 38,899 Corporate assets (a) 10,720 10,229 Total assets $ 50,158 $ 49,128 (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. |
INVENTORIES, NET (Tables)
INVENTORIES, NET (Tables) | 3 Months Ended |
Mar. 27, 2016 | |
Inventories | Inventories, net consisted of the following (in millions): March 27, 2016 December 31, 2015 Work-in-process, primarily related to long-term contracts and programs in progress $ 8,801 $ 8,199 Less: customer advances and progress payments (5,152) (5,035) 3,649 3,164 Other inventories 1,574 1,798 Total inventories, net $ 5,223 $ 4,962 |
POSTRETIREMENT BENEFIT PLANS (T
POSTRETIREMENT BENEFIT PLANS (Tables) | 3 Months Ended |
Mar. 27, 2016 | |
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 March 27, March 29, Qualified defined benefit pension plans Service cost $ 212 $ 217 Interest cost 465 448 Expected return on plan assets (667) (684) Recognized net actuarial losses 340 400 Amortization of net prior service credits (96) (97) Total net periodic benefit cost $ 254 $ 284 Retiree medical and life insurance plans Service cost $ 6 $ 5 Interest cost 30 28 Expected return on plan assets (34) (37) Recognized net actuarial losses 8 11 Amortization of net prior service costs 5 1 Total net periodic benefit cost $ 15 $ 8 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 27, 2016 | |
Fair Value, Assets and Liabilities Measured on Recurring Basis | Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following (in millions): March 27, 2016 December 31, 2015 Total Level 1 Level 2 Total Level 1 Level 2 Assets Equity securities $ 87 $ 87 $ — $ 89 $ 89 $ — Mutual funds 702 702 — 745 745 — U.S. Government securities 126 — 126 119 — 119 Other securities 153 — 153 147 — 147 Derivatives 29 — 29 15 — 15 Liabilities Derivatives 31 — 31 35 — 35 |
OTHER (Tables)
OTHER (Tables) | 3 Months Ended |
Mar. 27, 2016 | |
Accumulated Other Comprehensive Loss | Changes in the balance of AOCL, net of tax, consisted of the following (in millions): Postretirement Other, net AOCL Balance at December 31, 2014 $ (11,813) $ (57) $ (11,870) Other comprehensive loss before reclassifications — (54) (54) Amounts reclassified from AOCL Recognition of net actuarial losses (a) 277 — 277 Amortization of net prior service credits (a) (65) — (65) Other — (3) (3) Total reclassified from AOCL 212 (3) 209 Total other comprehensive income (loss) 212 (57) 155 Balance at March 29, 2015 $ (11,601) $ (114) $ (11,715) Balance at December 31, 2015 $ (11,314) $ (130) $ (11,444) Other comprehensive loss before reclassifications — 15 15 Amounts reclassified from AOCL Recognition of net actuarial losses (a) 234 — 234 Amortization of net prior service credits (a) (61) — (61) Other — 2 2 Total reclassified from AOCL 173 2 175 Total other comprehensive income (loss) 173 17 190 Balance at March 27, 2016 $ (11,141) $ (113) $ (11,254) (a) Reclassifications from AOCL related to our postretirement benefit plans were recorded as a component of net periodic benefit cost for each period presented (Note 7). |
Basis of Presentation - Additio
Basis of Presentation - Additional Information (Detail) - USD ($) $ in Millions | Nov. 06, 2015 | Mar. 27, 2016 | Dec. 31, 2015 |
Significant Accounting Policies [Line Items] | |||
Deferred income taxes assets, noncurrent | $ 5,893 | $ 5,931 | |
Restatement Adjustment | |||
Significant Accounting Policies [Line Items] | |||
Deferred income taxes assets, current | (1,600) | ||
Deferred income taxes assets, noncurrent | 1,600 | ||
Deferred income taxes liabilities, current | (140) | ||
Deferred income taxes liabilities, noncurrent | $ 140 | ||
Sikorsky Aircraft Corporation | |||
Significant Accounting Policies [Line Items] | |||
Acquisitions of businesses and investments in affiliates | $ 9,000 |
Schedule of Weighted Average Sh
Schedule of Weighted Average Shares Outstanding Used to Compute Earnings Per Common Share (Detail) - shares shares in Millions | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Weighted Average Shares Used In Computing Earnings Per Share [Line Items] | ||
Weighted average common shares outstanding for basic computations | 304.5 | 315.4 |
Weighted average dilutive effect of equity awards | 3.3 | 4.8 |
Weighted average common shares outstanding for diluted computations | 307.8 | 320.2 |
Earnings Per Common Share - Add
Earnings Per Common Share - Additional Information (Detail) - shares | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Equity awards excluded from the computation of diluted earnings per common share, because their inclusion would have been anti-dilutive | 0 | 0 |
Acquisition and Divestitures -
Acquisition and Divestitures - Additional Information (Detail) - USD ($) shares in Millions, $ in Millions | Jan. 26, 2016 | Nov. 06, 2015 | Mar. 27, 2016 | Mar. 29, 2015 | Dec. 31, 2015 |
Acquisitions And Divestitures [Line Items] | |||||
Goodwill | $ 13,583 | $ 13,576 | |||
Amortization of intangible assets | 69 | $ 22 | |||
Leidos | |||||
Acquisitions And Divestitures [Line Items] | |||||
One-time special cash receipt | $ 1,800 | ||||
Outstanding equity to be received by stockholders, percentage | 50.50% | ||||
Outstanding equity to be received by stockholders, shares | 77 | ||||
Outstanding equity to be received by stockholders, value | $ 3,200 | ||||
Dividend payable by Leidos to Leidos shareholders | $ 1,000 | ||||
Leidos common shares issued | 77 | ||||
Sikorsky Aircraft Corporation | |||||
Acquisitions And Divestitures [Line Items] | |||||
Acquisitions of businesses and investments in affiliates | $ 9,000 | ||||
Inventories | (49) | ||||
Deferred income tax assets | 11 | ||||
Customer advances and amounts in excess of costs incurred | 10 | ||||
Intangible assets weighted-average useful life | 15 years | ||||
Customer contractual obligations | $ 480 | ||||
Customer contractual obligations remaining in 2016 | 52 | ||||
Customer contractual obligations due in 2017 | 96 | ||||
Customer contractual obligations due in 2018 | 68 | ||||
Customer contractual obligations due in 2019 | 59 | ||||
Customer contractual obligations due in 2020 | 59 | ||||
Customer contractual obligations due in 2021 | 56 | ||||
Customer contractual obligations due after 2021 | 59 | ||||
Customer contractual obligations current | 31 | ||||
Goodwill | $ 2,764 | ||||
Sikorsky Aircraft Corporation | Pro Forma Adjustment | |||||
Acquisitions And Divestitures [Line Items] | |||||
Amortization of intangible assets | 36 | ||||
Interest expense, debt | $ 43 | ||||
Sikorsky Aircraft Corporation | Customer Programs | |||||
Acquisitions And Divestitures [Line Items] | |||||
Intangible assets | (28) | ||||
Sikorsky Aircraft Corporation | Trademarks | |||||
Acquisitions And Divestitures [Line Items] | |||||
Intangible assets | $ 71 |
Summary of Estimated Fair Value
Summary of Estimated Fair Values of Assets Acquired and Liabilities Assumed at Acquisition Date (Detail) - USD ($) $ in Millions | Mar. 27, 2016 | Dec. 31, 2015 | Nov. 06, 2015 | |
Business Acquisition [Line Items] | ||||
Goodwill | $ 13,583 | $ 13,576 | ||
Sikorsky Aircraft Corporation | ||||
Business Acquisition [Line Items] | ||||
Cash and cash equivalents | $ 75 | |||
Receivables | 1,921 | |||
Inventories | 1,768 | |||
Other current assets | 25 | |||
Property, plant and equipment | 654 | |||
Goodwill | 2,764 | |||
Other noncurrent assets | 513 | |||
Deferred income tax assets | 297 | |||
Total identifiable assets and goodwill | 12,003 | |||
Accounts payable | (565) | |||
Customer advances and amounts in excess of costs incurred | (1,230) | |||
Salaries, benefits and payroll taxes | (105) | |||
Current maturities of long-term debt | (5) | |||
Other current liabilities | (347) | |||
Long-term debt | (11) | |||
Customer contractual obligations | [1] | (480) | ||
Other noncurrent liabilities | (150) | |||
Deferred income tax liabilities | [1] | (32) | ||
Total liabilities assumed | (2,925) | |||
Total purchase price | 9,078 | |||
Sikorsky Aircraft Corporation | Customer Programs | ||||
Business Acquisition [Line Items] | ||||
Intangible assets | 3,099 | |||
Sikorsky Aircraft Corporation | Trademarks | ||||
Business Acquisition [Line Items] | ||||
Intangible assets | $ 887 | |||
[1] | Recorded in Other noncurrent liabilities on the consolidated balance sheet. |
Summary of Pro Forma Financial
Summary of Pro Forma Financial Information As If Included in Financial Results (Detail) $ / shares in Units, $ in Millions | 3 Months Ended |
Mar. 29, 2015USD ($)$ / shares | |
Business Acquisition [Line Items] | |
Net sales | $ | $ 11,344 |
Net earnings | $ | $ 842 |
Basic earnings per common share | $ / shares | $ 2.67 |
Diluted earnings per common share | $ / shares | $ 2.63 |
Goodwill and Acquired Intangi32
Goodwill and Acquired Intangibles (Detail) $ in Millions | 3 Months Ended |
Mar. 27, 2016USD ($) | |
Goodwill [Line Items] | |
Goodwill, beginning balance | $ 13,576 |
Foreign currency translation | 7 |
Goodwill, ending balance | 13,583 |
Aeronautics | |
Goodwill [Line Items] | |
Goodwill, beginning balance | 171 |
Goodwill, ending balance | 171 |
Information Systems & Global Solutions | |
Goodwill [Line Items] | |
Goodwill, beginning balance | 2,881 |
Foreign currency translation | (6) |
Goodwill, ending balance | 2,875 |
Missiles and Fire Control | |
Goodwill [Line Items] | |
Goodwill, beginning balance | 2,198 |
Foreign currency translation | (3) |
Goodwill, ending balance | 2,195 |
Mission Systems and Training | |
Goodwill [Line Items] | |
Goodwill, beginning balance | 6,738 |
Foreign currency translation | 16 |
Goodwill, ending balance | 6,754 |
Space Systems | |
Goodwill [Line Items] | |
Goodwill, beginning balance | 1,588 |
Goodwill, ending balance | $ 1,588 |
Acquired Intangible Assets (Det
Acquired Intangible Assets (Detail) - USD ($) $ in Millions | Mar. 27, 2016 | Dec. 31, 2015 |
Indefinite Lived and Finite Lived Intangible Assets [Line Items] | ||
Finite-Lived, Gross Carrying Amount | $ 3,579 | $ 3,607 |
Indefinite Lived, Trademarks, Gross Carrying Amount | 905 | 834 |
Finite-Lived, Accumulated Amortization | (363) | (294) |
Total acquired intangibles | 4,484 | 4,441 |
Finite-Lived, Net Carrying Amount | 3,216 | 3,313 |
Indefinite Lived, Trademarks, Net Carrying Amount | 905 | 834 |
Total acquired intangibles, Net Carrying Amount | 4,121 | 4,147 |
Customer Programs | ||
Indefinite Lived and Finite Lived Intangible Assets [Line Items] | ||
Finite-Lived, Gross Carrying Amount | 3,099 | 3,127 |
Finite-Lived, Accumulated Amortization | (91) | (38) |
Finite-Lived, Net Carrying Amount | 3,008 | 3,089 |
Customer relationships | ||
Indefinite Lived and Finite Lived Intangible Assets [Line Items] | ||
Finite-Lived, Gross Carrying Amount | 309 | 309 |
Finite-Lived, Accumulated Amortization | (174) | (166) |
Finite-Lived, Net Carrying Amount | 135 | 143 |
Other Intangibles | ||
Indefinite Lived and Finite Lived Intangible Assets [Line Items] | ||
Finite-Lived, Gross Carrying Amount | 171 | 171 |
Finite-Lived, Accumulated Amortization | (98) | (90) |
Finite-Lived, Net Carrying Amount | $ 73 | $ 81 |
Goodwill and Acquired Intangi34
Goodwill and Acquired Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Finite-Lived Intangible Assets [Line Items] | ||
Amortization expense for acquired finite lived intangible assets | $ 69 | $ 22 |
Amortization of finite lived intangible assets remaining in 2016 | 211 | |
Amortization of finite lived intangible assets in 2017 | 262 | |
Amortization of finite lived intangible assets in 2018 | 248 | |
Amortization of finite lived intangible assets in 2019 | 243 | |
Amortization of finite lived intangible assets in 2020 | 236 | |
Amortization of finite lived intangible assets in 2021 | 232 | |
Amortization of finite lived intangible assets after 2021 | $ 1,800 | |
Customer Programs | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Acquired finite-lived intangible assets are amortized | 9 years | |
Customer Programs | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Acquired finite-lived intangible assets are amortized | 20 years | |
Customer relationships | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Acquired finite-lived intangible assets are amortized | 4 years | |
Customer relationships | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Acquired finite-lived intangible assets are amortized | 10 years | |
Other Intangibles | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Acquired finite-lived intangible assets are amortized | 2 years | |
Other Intangibles | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Acquired finite-lived intangible assets are amortized | 10 years |
Information on Business Segme35
Information on Business Segments - Additional Information (Detail) - Segment | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Segment Reporting Information [Line Items] | ||
Number of business segments | 5 | |
F-35 program | Aeronautics | ||
Segment Reporting Information [Line Items] | ||
Program net sales as percent of total net sales | 20.00% | 19.00% |
Summary of Financial Informatio
Summary of Financial Information for Each Business Segment (Detail) - USD ($) $ in Millions | 3 Months Ended | ||||
Mar. 27, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Mar. 29, 2015 | ||
Segment Reporting Information [Line Items] | |||||
Total net sales | $ 11,702 | $ 10,111 | |||
Less: CAS pension cost | 500 | 403 | |||
FAS/CAS pension adjustment | 246 | 119 | |||
Stock-based compensation | (44) | (40) | |||
Severance charges | (99) | $ (102) | $ (102) | ||
Other, net | (29) | (29) | |||
Total unallocated items | 74 | 50 | |||
Operating profit | 1,297 | 1,356 | |||
Total assets | 50,158 | 49,128 | |||
Qualified defined benefit pension plans | |||||
Segment Reporting Information [Line Items] | |||||
FAS pension expense | (254) | (284) | |||
Aeronautics | |||||
Segment Reporting Information [Line Items] | |||||
Severance charges | (80) | ||||
Information Systems & Global Solutions | |||||
Segment Reporting Information [Line Items] | |||||
Severance charges | (19) | (35) | (35) | ||
Mission Systems and Training | |||||
Segment Reporting Information [Line Items] | |||||
Severance charges | (67) | $ (67) | |||
Goodwill by Segment | |||||
Segment Reporting Information [Line Items] | |||||
Operating profit | 1,223 | 1,306 | |||
Total assets | 39,438 | 38,899 | |||
Goodwill by Segment | Aeronautics | |||||
Segment Reporting Information [Line Items] | |||||
Total net sales | 3,799 | 3,134 | |||
Operating profit | 420 | 371 | |||
Total assets | 7,070 | 6,618 | |||
Goodwill by Segment | Information Systems & Global Solutions | |||||
Segment Reporting Information [Line Items] | |||||
Total net sales | 1,334 | 1,390 | |||
Operating profit | 109 | 145 | |||
Total assets | 4,112 | 4,206 | |||
Goodwill by Segment | Missiles and Fire Control | |||||
Segment Reporting Information [Line Items] | |||||
Total net sales | 1,434 | 1,383 | |||
Operating profit | 221 | 286 | |||
Total assets | 4,038 | 4,027 | |||
Goodwill by Segment | Mission Systems and Training | |||||
Segment Reporting Information [Line Items] | |||||
Total net sales | 3,004 | 1,979 | |||
Operating profit | 229 | 180 | |||
Total assets | 19,187 | 19,187 | |||
Goodwill by Segment | Space Systems | |||||
Segment Reporting Information [Line Items] | |||||
Total net sales | 2,131 | 2,225 | |||
Operating profit | 244 | 324 | |||
Total assets | 5,031 | 4,861 | |||
Intersegment elimination | |||||
Segment Reporting Information [Line Items] | |||||
Total intersegment sales | 612 | 448 | |||
Intersegment elimination | Aeronautics | |||||
Segment Reporting Information [Line Items] | |||||
Total intersegment sales | 35 | 20 | |||
Intersegment elimination | Information Systems & Global Solutions | |||||
Segment Reporting Information [Line Items] | |||||
Total intersegment sales | 24 | 2 | |||
Intersegment elimination | Missiles and Fire Control | |||||
Segment Reporting Information [Line Items] | |||||
Total intersegment sales | 75 | 74 | |||
Intersegment elimination | Mission Systems and Training | |||||
Segment Reporting Information [Line Items] | |||||
Total intersegment sales | 445 | 319 | |||
Intersegment elimination | Space Systems | |||||
Segment Reporting Information [Line Items] | |||||
Total intersegment sales | 33 | $ 33 | |||
Corporate | |||||
Segment Reporting Information [Line Items] | |||||
Total assets | [1] | $ 10,720 | $ 10,229 | ||
[1] | 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. |
Inventories (Detail)
Inventories (Detail) - USD ($) $ in Millions | Mar. 27, 2016 | Dec. 31, 2015 |
Inventory [Line Items] | ||
Work-in-process, primarily related to long-term contracts and programs in progress | $ 8,801 | $ 8,199 |
Less: customer advances and progress payments | (5,152) | (5,035) |
Inventory for long term contracts or programs net of customer advances and progress payments | 3,649 | 3,164 |
Other inventories | 1,574 | 1,798 |
Total inventories, net | $ 5,223 | $ 4,962 |
Pretax Net Periodic Benefit Cos
Pretax Net Periodic Benefit Cost (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Qualified defined benefit pension plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | $ 212 | $ 217 |
Interest cost | 465 | 448 |
Expected return on plan assets | (667) | (684) |
Recognized net actuarial losses | 340 | 400 |
Amortization of net prior service costs | (96) | (97) |
Total net periodic benefit cost | 254 | 284 |
Retiree medical and life insurance plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | 6 | 5 |
Interest cost | 30 | 28 |
Expected return on plan assets | (34) | (37) |
Recognized net actuarial losses | 8 | 11 |
Amortization of net prior service costs | 5 | 1 |
Total net periodic benefit cost | $ 15 | $ 8 |
Postretirement Benefit Plans -
Postretirement Benefit Plans - Additional Information (Detail) - USD ($) | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Defined Benefit Plan Disclosure [Line Items] | ||
Recognition of previously deferred postretirement benefit plan amounts, net of tax | $ 173,000,000 | $ 212,000,000 |
Recognition of previously deferred postretirement benefit plan amounts, tax | 95,000,000 | 116,000,000 |
Other postretirement benefit plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Recognition of previously deferred postretirement benefit plan amounts, before tax | 11,000,000 | 13,000,000 |
Heritage Qualified Defined Benefit Pension Plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Contributions made by the employer | $ 0 | $ 0 |
Legal Proceedings and Conting40
Legal Proceedings and Contingencies - Additional Information (Detail) - USD ($) | Feb. 26, 2016 | Apr. 30, 2015 | Mar. 27, 2016 | Dec. 31, 2015 | Apr. 24, 2009 |
Legal Proceedings And Contingencies [Line Items] | |||||
Damages sought by plaintiff | $ 45,000,000 | ||||
Statutory penalty | 13,000,000 | ||||
Total damages | $ 148,000,000 | ||||
Payment related to agreement | $ 5,000,000 | ||||
Liabilities recorded relative to environmental matters | $ 991,000,000 | $ 1,000,000,000 | |||
Environmental costs eligible for future recovery | $ 849,000,000 | 858,000,000 | |||
Time period environmental costs and recovery of environmental costs are projected over, years | 20 years | ||||
Percentage of expenditures that are reimbursed for certain remediation activities | 50.00% | ||||
Outstanding letters of credit, surety bonds, and third-party guarantees | $ 3,700,000,000 | 3,800,000,000 | |||
Third-party guarantees outstanding | $ 669,000,000 | $ 678,000,000 | |||
Percentage of total guarantees that relate to guarantees of contractual performance of joint ventures | 79.00% | 79.00% | |||
Lockheed Martin Energy Systems Incorporated | |||||
Legal Proceedings And Contingencies [Line Items] | |||||
Total damages | 500,000 | ||||
Lockheed Martin Utility Services Incorporated | |||||
Legal Proceedings And Contingencies [Line Items] | |||||
Total damages | 500,000 | ||||
Defendant | |||||
Legal Proceedings And Contingencies [Line Items] | |||||
Payment related to agreement | $ 4,000,000 | ||||
United Launch Alliance | |||||
Legal Proceedings And Contingencies [Line Items] | |||||
Percentage of ownership interest in affiliated entity | 50.00% | ||||
Inventory supply agreement | $ 120,000,000 | ||||
N.Y. Metropolitan Transportation Authority | |||||
Legal Proceedings And Contingencies [Line Items] | |||||
Damages sought by plaintiff | 190,000,000 | ||||
Contract value | $ 323,000,000 | ||||
Contract payments received to date | 241,000,000 | ||||
Claims for monetary damages against the plaintiff | $ 95,000,000 |
Fair Value, Assets and Liabilit
Fair Value, Assets and Liabilities Measured on Recurring Basis (Detail) - Fair Value, Measurements, Recurring - USD ($) $ in Millions | Mar. 27, 2016 | Dec. 31, 2015 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets | $ 29 | $ 15 |
Derivative liabilities | 31 | 35 |
Equity securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of investments measured on recurring basis | 87 | 89 |
Mutual funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of investments measured on recurring basis | 702 | 745 |
U.S. Government securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of investments measured on recurring basis | 126 | 119 |
Other securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of investments measured on recurring basis | 153 | 147 |
Fair value, inputs, level 1 | Equity securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of investments measured on recurring basis | 87 | 89 |
Fair value, inputs, level 1 | Mutual funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of investments measured on recurring basis | 702 | 745 |
Fair value, inputs, level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets | 29 | 15 |
Derivative liabilities | 31 | 35 |
Fair value, inputs, level 2 | U.S. Government securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of investments measured on recurring basis | 126 | 119 |
Fair value, inputs, level 2 | Other securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of investments measured on recurring basis | $ 153 | $ 147 |
Fair Value Measurements - Addit
Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Billions | Mar. 27, 2016 | Dec. 31, 2015 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Estimated fair values of debt instruments | $ 17.2 | $ 16.5 |
Outstanding principal amount of debt instruments | 16.2 | 16.2 |
Unamortized discounts and deferred financing costs | 1 | 1 |
Interest rate swaps | Designated as hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Aggregate notional amount of derivatives | 1.5 | 1.5 |
Foreign currency contracts | Designated as hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Aggregate notional amount of derivatives | $ 4.6 | $ 4.1 |
Other - Additional Information
Other - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Contract reserve | $ 70 | |
Increase in operating profit due to profit rate adjustments | $ 405 | 490 |
Increase in net earnings due to profit rate adjustments | $ 265 | $ 320 |
Increase in diluted earnings per common share due to profit rate adjustments | $ 0.86 | $ 1 |
Effective income tax rate | 29.90% | 30.60% |
Restructuring Charges - Additio
Restructuring Charges - Additional Information (Detail) - USD ($) $ in Millions | Mar. 27, 2016 | Mar. 27, 2016 | Dec. 31, 2015 | Sep. 30, 2015 |
Restructuring Cost and Reserve [Line Items] | ||||
Severance charges | $ 99 | $ 102 | $ 102 | |
2015 Action | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Severance charges | 14 | |||
Severance payments | $ 32 | |||
Sikorsky Aircraft Corporation | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring cost expected in 2016 | $ 40 | 40 | ||
Mission Systems and Training | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Severance charges | 67 | 67 | ||
Information Systems & Global Solutions | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Severance charges | 19 | $ 35 | $ 35 | |
Aeronautics | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Severance charges | $ 80 |
Debt - Additional Information (
Debt - Additional Information (Detail) - USD ($) $ in Millions | Feb. 20, 2015 | Mar. 27, 2016 |
February 2015 Notes | ||
Debt Instrument [Line Items] | ||
Amount of issued debt | $ 2,250 | |
Notes interest payment dates | March 1 and September 1 of each year, beginning on September 1, 2015 | |
2.90% Notes Due 2025 | ||
Debt Instrument [Line Items] | ||
Amount of issued debt | $ 750 | |
Long-term debt maturity year | 2,025 | |
Interest Rate | 2.90% | |
3.60% Notes Due 2035 | ||
Debt Instrument [Line Items] | ||
Amount of issued debt | $ 500 | |
Long-term debt maturity year | 2,035 | |
Interest Rate | 3.60% | |
3.80% Notes Due 2045 | ||
Debt Instrument [Line Items] | ||
Amount of issued debt | $ 1,000 | |
Long-term debt maturity year | 2,045 | |
Interest Rate | 3.80% |
Stockholders' Equity - Addition
Stockholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | ||
Mar. 27, 2016 | Mar. 29, 2015 | Dec. 31, 2015 | |
Shareholders Equity [Line Items] | |||
Cash paid for repurchases of common stock | $ 501 | $ 604 | |
Number of shares of common stock repurchased with cash | 2.4 | ||
Remaining authorized repurchase amount under share repurchase program | $ 3,100 | ||
Additional paid-in capital | $ 0 | $ 0 | |
Common stock par value, per share | $ 1 | $ 1 | |
Dividends declared | $ 512 | $ 477 | |
Dividends declared, per share (in USD) | $ 1.65 | $ 1.50 |
Stock-Based Compensation - Addi
Stock-Based Compensation - Additional Information (Detail) - Restricted Stock Units (RSUs) shares in Millions | 1 Months Ended |
Jan. 31, 2016$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of stock units, granted, in shares | shares | 0.7 |
Average grant date fair value per unit | $ / shares | $ 206.41 |
Number of years over which equity awards vest | 3 years |
Changes in Balance of Accumulat
Changes in Balance of Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 27, 2016 | Mar. 29, 2015 | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | $ (11,444) | $ (11,870) | |
Other comprehensive loss before reclassifications | 15 | (54) | |
Amounts reclassified from AOCL | |||
Recognition of net actuarial losses | [1] | 234 | 277 |
Amortization of net prior service credits | [1] | (61) | (65) |
Other | 2 | (3) | |
Total reclassified from AOCL | 175 | 209 | |
Other comprehensive income, net of tax | 190 | 155 | |
Ending balance | (11,254) | (11,715) | |
Postretirement Benefit Plan Adjustments | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | (11,314) | (11,813) | |
Amounts reclassified from AOCL | |||
Recognition of net actuarial losses | [1] | 234 | 277 |
Amortization of net prior service credits | [1] | (61) | (65) |
Total reclassified from AOCL | 173 | 212 | |
Other comprehensive income, net of tax | 173 | 212 | |
Ending balance | (11,141) | (11,601) | |
Other, net | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | (130) | (57) | |
Other comprehensive loss before reclassifications | 15 | (54) | |
Amounts reclassified from AOCL | |||
Other | 2 | (3) | |
Total reclassified from AOCL | 2 | (3) | |
Other comprehensive income, net of tax | 17 | (57) | |
Ending balance | $ (113) | $ (114) | |
[1] | Reclassifications from AOCL related to our postretirement benefit plans were recorded as a component of net periodic benefit cost for each period presented (Note 7). |
Recent Accounting Pronouncement
Recent Accounting Pronouncements - Additional Information (Detail) - USD ($) $ in Millions | Mar. 27, 2016 | Dec. 31, 2015 |
Recent Accounting Pronouncements [Line Items] | ||
Deferred income taxes assets, noncurrent | $ 5,893 | $ 5,931 |
Restatement Adjustment | ||
Recent Accounting Pronouncements [Line Items] | ||
Deferred income taxes assets, current | (1,600) | |
Deferred income taxes assets, noncurrent | 1,600 | |
Deferred income taxes liabilities, current | (140) | |
Deferred income taxes liabilities, noncurrent | $ 140 |