Segment Information

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segment Information

Segment InformationOperating segments represent components of an enterprise for which separate financial information is available that is regularly reviewed by the CODM in determining how to allocate resources and assess performance. Our Chief Executive Officer is our CODM and he uses a variety of measures to assess the performance of the Company as a whole, depending on the nature of the activity. Beginning in the first quarter of 2022, the Company’s operating and reportable segments were revised into two reportable segments, ASC and IMS, to align our market strategy and capital allocation decision making with our operating structure. Prior year information was revised to reflect the new segment structure. All other operations, which consists primarily of DRS corporate headquarters and certain non-operating subsidiaries of the Company, are grouped in Corporate & Eliminations.

We primarily use Adjusted EBITDA, a non-GAAP financial measure, to manage the Company and allocate resources. Adjusted EBITDA of our business segments includes our net earnings before income taxes, amortization of acquired intangible assets, depreciation, restructuring costs, interest, transaction costs related to an anticipated offering of securities, acquisition and divestiture related expenses, foreign exchange, the coronavirus pandemic (“COVID-19”) response costs, non-service pension expenditures and other one-time non-operational events. Adjusted EBITDA is used to facilitate a comparison of the ordinary, ongoing and customary course of our operations on a consistent basis from period to period and provide an additional understanding of factors and trends affecting our business segments. This measure assists the CODM in assessing segment operating performance consistently over time without the impact of our capital structure, asset base and items outside the control of the management team and expenses that do not relate to our core operations.

Certain information related to our segments for the periods ended March 31, 2023 and March 31, 2022 is presented in the following tables. Consistent accounting policies have been applied by all segments within the Company, within all reporting periods. A description of our reportable segments as of March 31, 2023 and March 31, 2022 has been included in Note 1: Summary of Significant Accounting Policies. Intersegment sales are generally transferred at cost to the buying segment, and the sourcing segment does not recognize a profit. Such intercompany operating income is eliminated in consolidation, so that the Company’s total revenues and operating earnings reflect only those transactions with external customers.

Total revenues and intersegment revenues by segment for the periods ended March 31, 2023 and, March 31, 2022 consists of the following:

	Three Months Ended March 31,
(Dollars in millions)	2023		2022
ASC	$	391	$	396
IMS	189		218
Corporate & Eliminations	(11)		(2)
Total revenue	$	569	$	612

(Dollars in millions)	2023		2022
ASC	$	11	$	2
IMS	—		—
Total intersegment revenue	$	11	$	2

Reconciliation of reportable segment Adjusted EBITDA to Net Earnings (loss) consists of the following:

(Dollars in millions)	March 31, 2023		March 31, 2022
Adjusted EBITDA
ASC	$	37	$	32
IMS	12		41
Corporate & Eliminations	—		—
Total Adjusted EBITDA	49		73
Amortization of intangibles	(6)		(2)
Depreciation	(16)		(13)
Interest expense	(8)		(8)
Deal related transaction costs	(2)		(2)
Other one-time non-operational events	(1)		—
Income tax (provision) benefit	(4)		(12)
Net earnings	$	12	$	36