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BUSINESS SEGMENTS
 12 Months Ended
Jan. 01, 2021
Segment Reporting [Abstract]  
BUSINESS SEGMENTS
NOTE 25: BUSINESS SEGMENTS
We structure our operations primarily around the products, systems and services we sell and the markets we serve, and we report the financial results of our continuing operations in the following four operating segments, which are also our reportable segments and are referred to as our business segments:
•Integrated Mission Systems, including multi-mission ISR and communication systems; integrated electrical and electronic systems for maritime platforms; and advanced electro-optical and infrared solutions;
•Space and Airborne Systems, including space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; mission avionics; and electronic warfare;
•Communication Systems, including tactical communications; broadband communications; integrated vision solutions; and public safety; and
•Aviation Systems, including defense aviation; commercial aviation products; commercial and military pilot training; and mission networks for air traffic management.
During the first quarter of fiscal 2020, we adjusted our segment reporting to better align our businesses and transferred two businesses between our Integrated Mission Systems and Space and Airborne Systems segments. The historical results, discussion and presentation of our business segments as set forth in our Consolidated Financial Statements and these Notes reflect the impact of these adjustments to our segment reporting for all periods presented in order to present the segment information on a comparable basis. There is no impact on our previously reported consolidated statements of income, balance sheets, statements of cash flows or statements of equity resulting from these adjustments.
As described in more detail in Note 3: Business Divestitures and Asset Sales and elsewhere in these Notes, during the Fiscal Transition Period and fiscal 2020, we completed the following business divestitures:
•The divestiture of the Harris Night Vision business, completed on September 13, 2019, the results of which are included in “Other non-reportable business segments” through the date of divestiture;
•The divestiture of the airport security and automation business, completed on May 4, 2020, the results of which are reported as part of our Aviation Systems segment through the date of divestiture;
•The divestiture of the Applied Kilovolts and Analytical Instrumentation business, completed on May 15, 2020, the results of which are reported as part of our Space and Airborne Systems segment through the date of divestiture; and
•The divestiture of the EOTech business, completed on July 31, 2020, the results of which are reported as part of our Communication Systems segment through the date of divestiture.
Segment revenue, segment operating income and a reconciliation of segment operating income to total income from continuing operations before income taxes are as follows:
Fiscal Year EndedTwo Quarters EndedFiscal Years Ended
(In millions)January 1, 2021January 3, 2020June 28, 2019June 29, 2018
Revenue
Integrated Mission Systems$5,538 $2,758 $52 $55 
Space and Airborne Systems4,946 2,377 3,711 3,294 
Communication Systems4,443 2,151 2,208 2,015 
Aviation Systems3,448 2,038 672 668 
Other non-reportable business segments(1)
— 23 165 148 
Corporate eliminations(181)(84)(7)(12)
$18,194 $9,263 $6,801 $6,168 
Income from Continuing Operations before Income Taxes
Segment Operating Income:
Integrated Mission Systems$847 $371 $10 $9 
Space and Airborne Systems932 447 696 626 
Communication Systems1,084 493 637 561 
Aviation Systems(177)289 76 54 
Other non-reportable business segments(1)
— — 27 20 
Unallocated corporate expenses and corporate eliminations(2)
(109)(139)(2)(65)
L3Harris Merger-related transaction, integration and other expenses and losses(130)(273)(65)— 
L3Harris Merger-related restructuring costs(10)(117)— — 
Amortization of acquisition-related intangibles(3)
(709)(289)(101)(101)
Impairment of identifiable intangible assets(113)— — — 
Business divestiture-related (losses) gains(51)229 — — 
Pension adjustment(389)(172)(186)(184)
Non-operating income401 192 188 156 
Net interest expense(254)(123)(167)(168)
Total income from continuing operations before income taxes$1,322 $908 $1,113 $908 
_______________
(1)Includes the operating results of the Harris Night Vision business prior to the date of divestiture on September 13, 2019. See Note 3: Business Divestitures and Asset Sales in these Notes for more information.
(2)For fiscal 2020 includes: (i) $31 million of additional cost of sales related to the fair value step-up in inventory sold (see Note 5: Business Combination in these Notes for more information); (ii) a $22 million gain on sale of property, plant and equipment; (iii) a $14 million non-cash goodwill impairment charge related to a potential divestiture, (iv) $13 million of divestiture-related expenses; (v) a $5 million non-cash goodwill impairment charge related to the divestiture of the Applied Kilovolts and Analytical Instrumentation business; and (vi) a $2 million non-cash cumulative adjustment to lease expense. For the two quarters ended January 3, 2020 includes: (i) $142 million of additional cost of sales related to the fair value step-up in inventory sold; (ii) a $12 million gain on the sale of an asset group; and (iii) a $10 million non-cash cumulative adjustment to lease expense. For fiscal 2018 includes: (i) $47 million of charges related to our decision to transition and exit a commercial air-to-ground LTE radio communications line of business and other items; (ii) a $12 million non-cash adjustment for deferred compensation; and (iii) $5 million of Exelis acquisition-related and other charges.
(3)Includes $609 million and $239 million of amortization of identifiable intangible assets acquired as a result of the L3Harris Merger for fiscal 2020 and the two quarters ended January 3, 2020, respectively; and $100 million, $50 million, $101 million and $101 million of amortization of identifiable intangible assets acquired as a result of our acquisition of Exelis for fiscal 2020, the two quarters ended January 3, 2020, and fiscal 2019 and 2018, respectively. Because the L3Harris Merger and the acquisition of Exelis benefited the entire Company as opposed to any individual segment, the amortization of identifiable intangible assets acquired was not allocated to any segment.
Disaggregation of Revenue
We disaggregate revenue for all four business segments by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors:
Integrated Mission Systems: Integrated Mission Systems revenue is primarily derived from U.S. Government development and production contracts and is generally recognized over time using the POC cost-to-cost revenue recognition method.
Fiscal Year EndedTwo Quarters EndedFiscal Years Ended
(In millions)January 1, 2021January 3, 2020June 28, 2019June 29, 2018
Revenue By Customer Relationship
Prime contractor$3,718 $1,892 $27 $26 
Subcontractor1,820 866 25 29 
$5,538 $2,758 $52 $55 
Revenue By Contract Type
Fixed-price(1)
$4,179 $2,121 $52 $54 
Cost-reimbursable1,359 637 — 1 
$5,538 $2,758 $52 $55 
Revenue By Geographical Region
United States$4,389 $2,146 $30 $40 
International1,149 612 22 15 
$5,538 $2,758 $52 $55 
_______________
(1)Includes revenue derived from time-and-materials contracts.
Space and Airborne Systems: Space and Airborne Systems revenue is primarily derived from U.S. Government development and production contracts and is generally recognized over time using the POC cost-to-cost revenue recognition method.
Fiscal Year EndedTwo Quarters EndedFiscal Years Ended
(In millions)January 1, 2021January 3, 2020June 28, 2019June 29, 2018
Revenue By Customer Relationship
Prime contractor$2,684 $1,348 $2,244 $2,152 
Subcontractor2,262 1,029 1,467 1,142 
$4,946 $2,377 $3,711 $3,294 
Revenue By Contract Type
Fixed-price(1)
$2,838 $1,384 $2,093 $1,625 
Cost-reimbursable2,108 993 1,618 1,669 
$4,946 $2,377 $3,711 $3,294 
Revenue By Geographical Region
United States$4,195 $2,043 $3,255 $2,936 
International751 334 456 358 
$4,946 $2,377 $3,711 $3,294 
_______________
(1)Includes revenue derived from time-and-materials contracts.
Communication Systems: Communication Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems and services.
Fiscal Year EndedTwo Quarters EndedFiscal Years Ended
(In millions)January 1, 2021January 3, 2020June 28, 2019June 29, 2018
Revenue By Customer Relationship(1)
Prime contractor$3,102 $1,406 
Subcontractor1,341 745 
$4,443 $2,151 
Revenue By Contract Type(1)
Fixed-price(2)
$3,805 $1,849 
Cost-reimbursable638 302 
$4,443 $2,151 
Revenue By Geographical Region
United States$3,204 $1,518 $1,281 $1,031 
International1,239 633 927 984 
$4,443 $2,151 $2,208 $2,015 
_______________
(1)Prior to the L3Harris Merger, Communication Systems did not recognize significant revenue for customer-specific products and systems, and currently, such customer arrangements primarily exist at operating businesses acquired in connection with the L3Harris Merger. The “Revenue by Customer Relationship” and “Revenue by Contract Type” disaggregation categories were added beginning in the Fiscal Transition Period to best depict how the nature, amount, timing and uncertainty of revenue and cash flows from these types of customer arrangements are affected by economic factors.
(2)Includes revenue derived from time-and-materials contracts.
Aviation Systems: Aviation Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems and services.
Fiscal Year EndedTwo Quarters EndedFiscal Years Ended
(In millions)January 1, 2021January 3, 2020June 28, 2019June 29, 2018
Revenue By Customer Relationship
Prime contractor$2,258 $1,246 $654 $656 
Subcontractor1,190 792 18 12 
$3,448 $2,038 $672 $668 
Revenue By Contract Type
Fixed-price(1)
$2,809 $1,688 $587 $582 
Cost-reimbursable639 350 85 86 
$3,448 $2,038 $672 $668 
Revenue By Geographical Region
United States$2,843 $1,514 $644 $627 
International605 524 28 41 
$3,448 $2,038 $672 $668 
______________
(1)Includes revenue derived from time-and-materials contracts.
Total assets by business segment is as follows:
(In millions)January 1, 2021January 3, 2020
Total Assets
Integrated Mission Systems$8,906 $7,888 
Space and Airborne Systems6,943 6,837 
Communication Systems5,746 5,930 
Aviation Systems5,026 7,569 
Corporate(1)
10,339 10,112 
$36,960 $38,336 
_______________
(1)Identifiable intangible assets acquired in connection with the L3Harris Merger in the two quarters ended January 3, 2020 and our acquisition of Exelis in fiscal 2015 were recorded as Corporate assets because they benefited the entire Company as opposed to any individual segment. Identifiable intangible asset balances recorded as Corporate assets were $7.9 billion and $8.5 billion at January 1, 2021 and January 3, 2020, respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred compensation plan investments, buildings and equipment, as well as any assets of discontinued operations and divestitures. See Note 3: Business Divestitures and Asset Sales in these Notes for additional information.
Other selected financial information by business segment and geographical area is summarized below:
Fiscal Year EndedTwo Quarters EndedFiscal Years Ended
(In millions)January 1, 2021January 3, 2020June 28, 2019June 29, 2018
Capital Expenditures
Integrated Mission Systems$67 $29 $1 $1 
Space and Airborne Systems92 36 48 49 
Communication Systems58 22 29 25 
Aviation Systems87 64 54 37 
Other non-reportable business segments(1)
— — 6 4 
Corporate64 22 23 20 
$368 $173 $161 $136 
Depreciation and Amortization
Integrated Mission Systems$70 $37 $2 $2 
Space and Airborne Systems66 31 50 54 
Communication Systems61 32 49 54 
Aviation Systems103 53 29 22 
Other non-reportable business segments(1)
— — 3 5 
Corporate732 289 125 122 
$1,032 $442 $258 $259 
Geographical Information for Continuing Operations
U.S. operations:
Revenue$16,998 $8,485 $6,530 $5,854 
Long-lived assets(2)
$1,949 $1,865 $866 $892 
International operations:
Revenue$1,196 $778 $271 $314 
Long-lived assets(2)
$153 $252 $28 $8 
_______________
(1)Includes capital expenditures and depreciation and amortization of the Harris Night Vision business prior to the date of divestiture on September 13, 2019. See Note 3: Business Divestitures and Asset Sales in these Notes for more information.
(2)Long-lived assets are net fixed assets attributed to the respective geographic regions.
In addition to depreciation and amortization expense related to property, plant and equipment, “Depreciation and Amortization” in the table above also includes $714 million $285 million, $120 million and $116 million of amortization related to identifiable intangible assets, debt premium, debt discount, debt issuance costs and other items in fiscal 2020, the two quarters ended January 3, 2020, and fiscal 2019 and 2018, respectively.
Our products and systems are produced principally in the U.S. with international revenue derived primarily from exports. No revenue earned from any individual foreign country exceeded 5 percent of our total revenue in fiscal 2020, the two quarters ended January 3, 2020, or fiscal 2019 or 2018.
Sales made to U.S. Government customers, including foreign military sales funded through the U.S. Government, whether directly or through prime contractors, by all segments as a percentage of total revenue were 78 percent, 73 percent, 77 percent and 75 percent in fiscal 2020, the two quarters ended January 3, 2020, and fiscal 2019 and 2018, respectively. Revenue from services in fiscal 2020 was 34 percent, 16 percent, 15 percent and 38 percent of total revenue in our Integrated Mission Systems, Space and Airborne Systems, Communication Systems and Aviation Systems segments, respectively.
Revenue from products and services where the end consumer is located outside the U.S., including foreign military sales through the U.S. Government, was $3.7 billion (20 percent of our revenue), $2.0 billion (21 percent of our revenue), $1.5 billion (22 percent of our revenue) and $1.4 billion (23 percent of our revenue) in fiscal 2020, the two quarters ended January 3, 2020, and fiscal 2019 and 2018, respectively. Export revenue and revenue from international operations in fiscal 2020 was principally from the EMEA (Europe, Middle East and Africa) and APAC (Asia-Pacific) regions and Canada.