0001628280-22-028651 | 10-Q | XBRL Viewer

Cover - shares shares in Millions	9 Months Ended
Cover - shares shares in Millions	Sep. 30, 2022	Nov. 07, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	333-266494
Entity Registrant Name	Leonardo DRS, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	13-2632319
Entity Address, Address Line One	2345 Crystal Drive
Entity Address, Address Line Two	Suite 1000
Entity Address, City or Town	Arlington
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	22202
City Area Code	703
Local Phone Number	416-8000
Title of 12(b) Security
Trading Symbol
Security Exchange Name
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		145
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001833756
Current Fiscal Year End Date	--12-31

Consolidated Statements of Earnings (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Revenues:
Total revenues	$ 634	$ 720	$ 1,873	$ 2,059
Cost of revenues:
Total cost of revenues	(504)	(589)	(1,482)	(1,665)
Gross profit	130	131	391	394
General and administrative expenses	(101)	(73)	(261)	(225)
Amortization of intangibles	(3)	(3)	(7)	(7)
Other operating income (expenses), net	350	(2)	351	(7)
Operating earnings	376	53	474	155
Interest expense	(9)	(9)	(27)	(27)
Other, net	0	(1)	0	(1)
Earnings before taxes	367	43	447	127
Income tax provision	88	8	107	31
Net earnings	$ 279	$ 35	$ 340	$ 96
Net earnings per share from common stock:
Basic earnings per share (in dollars per share)	$ 1.92	$ 0.24	$ 2.34	$ 0.66
Diluted earnings per share (in dollars per share)	$ 1.92	$ 0.24	$ 2.34	$ 0.66
Products
Revenues:
Total revenues	$ 580	$ 606	$ 1,670	$ 1,738
Cost of revenues:
Total cost of revenues	(461)	(495)	(1,328)	(1,425)
Services
Revenues:
Total revenues	54	114	203	321
Cost of revenues:
Total cost of revenues	$ (43)	$ (94)	$ (154)	$ (240)

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Statement of Comprehensive Income [Abstract]
Net earnings	$ 279	$ 35	$ 340	$ 96
Other comprehensive income (loss):
Foreign currency translation gain (loss), net of income taxes	(3)	(3)	(3)	0
Net unrecognized gain (loss) on postretirement obligations, net of income taxes	0	(2)	1	7
Gain from pension settlements	0	0	3	0
Other comprehensive income (loss), net of income tax	(3)	(5)	1	7
Total comprehensive income	$ 276	$ 30	$ 341	$ 103

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

Consolidated Balance Sheets - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 63	$ 240
Accounts receivable, net	170	156
Contract assets	913	743
Inventories	246	205
Other current assets	39	45
Total current assets	1,431	1,389
Noncurrent assets:
Property, plant and equipment, net	362	364
Intangible assets, net	45	52
Goodwill	952	1,071
Deferred tax assets, net	49	56
Other noncurrent assets	92	137
Total noncurrent assets	1,500	1,680
Total assets	2,931	3,069
Current liabilities:
Short-term borrowings and current portion of long-term debt	67	41
Accounts payable	285	479
Contract liabilities	195	174
Other current liabilities	365	295
Total current liabilities	912	989
Noncurrent liabilities:
Long-term debt	350	352
Pension and other postretirement benefit plan liabilities	56	61
Other noncurrent liabilities	75	74
Total noncurrent liabilities	481	487
Shareholder's equity:
Preferred stock, $0.01 par value: 10,000,000 shares authorized; none issued	0	0
Common stock, $0.01 par value: 300,000,000 shares authorized; 145,000,000 shares issued and outstanding	1	1
Additional paid-in capital	4,633	4,633
Accumulated deficit	(3,039)	(2,983)
Accumulated other comprehensive loss	(57)	(58)
Total shareholder's equity	1,538	1,593
Total liabilities and shareholder's equity	$ 2,931	$ 3,069

Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2022	Dec. 31, 2021
Shareholder's equity:
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	10,000,000	10,000,000
Preferred stock, issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	300,000,000	300,000,000
Common stock, issued (in shares)	145,000,000	145,000,000
Common stock, outstanding (in shares)	145,000,000	145,000,000

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Operating activities
Net earnings	$ 340	$ 96
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization	48	44
Deferred income taxes	10	33
Gain from sale of business	(350)	0
Other	0	(1)
Changes in assets and liabilities:
Accounts receivable	(17)	6
Contract assets	(174)	(116)
Inventories	(43)	32
Other current assets	(2)	23
Other noncurrent assets	10	19
Defined benefit obligations	(4)	(12)
Other current liabilities	83	(7)
Other noncurrent liabilities	(3)	(18)
Accounts payable	(180)	(193)
Contract liabilities	36	(17)
Net cash used in operating activities	(246)	(111)
Investing activities
Capital expenditures	(35)	(42)
Business acquisitions, net of cash acquired	0	(14)
Proceeds from sales of businesses	483	0
Repayments received on related party note receivable	0	115
Investment in unconsolidated affiliate	0	(1)
Net cash provided by investing activities	448	58
Financing activities
Net decrease in third party borrowings (maturities of 90 days or less)	(12)	(4)
Repayment of related party debt	(640)	(725)
Borrowings from related parties	675	800
Dividend to US Holding	(396)	0
Other	(6)	(1)
Net cash provided by financing activities	(379)	70
Effect of exchange rate changes on cash and cash equivalents	0	0
Net change in cash and cash equivalents	(177)	17
Cash and cash equivalents at beginning of year	240	61
Cash and cash equivalents at end of period	$ 63	$ 78

Consolidated Statements of Shareholder's Equity (Unaudited) - USD ($) $ in Millions	Total	Common stock	Additional paid- in capital	Accumulated other comprehensive loss	Accumulated deficit
Balance at beginning of period at Dec. 31, 2020	$ 1,427	$ 1	$ 4,633	$ (70)	$ (3,137)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income	103			7	96
Balance at end of period at Sep. 30, 2021	1,530	1	4,633	(63)	(3,041)
Balance at beginning of period at Dec. 31, 2021	1,593	1	4,633	(58)	(2,983)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income	341			1	340
Dividend to US Holding	(396)				(396)
Balance at end of period at Sep. 30, 2022	$ 1,538	$ 1	$ 4,633	$ (57)	$ (3,039)

- Definition

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

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+ Details

Summary of Significant Accounting Policies	9 Months Ended
Summary of Significant Accounting Policies	Sep. 30, 2022
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	Summary of Significant Accounting Policies A.Organization Leonardo DRS, Inc., together with its wholly owned subsidiaries (hereinafter, “DRS,” “the Company,” “us,” “our,” or “we”) is a supplier of defense electronics products, systems and military support services. The Company is controlled by Leonardo S.p.A (hereinafter, “Leonardo S.p.A.,” or “the Parent”), an Italian multi-national aerospace, defense and security company headquartered in Rome, Italy, through its ownership of Leonardo US Holding, LLC (“US Holding”). US Holding is the direct and sole shareholder of the Company. DRS is a provider of defense products and technologies that are used across land, air, sea, space and cyber domains. Our diverse array of defense systems and solutions are offered to all branches of the U.S. military, major aerospace and defense prime contractors, government intelligence agencies, international military customers and industrial markets for deployment on a wide range of military platforms. We focus our capabilities in areas of critical importance to the U.S. military, such as advanced sensing, network computing, force protection and electrical power and propulsion. These capabilities directly align with our two reportable segments: Advanced Sensing and Computing and Integrated Mission Systems. The U.S. Department of Defense (“DoD”) is our largest customer and accounts for approximately 83% and 82% of our total revenues as an end-user for the third quarter and nine months of 2022, respectively, and 84% and 85% for the third quarter and nine months of 2021, respectively. Specific international and commercial market opportunities exist within these segments and make up approximately 17% and 18% of our total revenues for the third quarter and nine months of 2022, respectively, and 16% and 15% for the third quarter and nine months of 2021, respectively. Our two reportable segments reflect the way performance is assessed and resources are allocated by our Chief Executive Officer, who is our chief operating decision maker (“CODM”). Advanced Sensing and Computing (“ASC”) The ASC segment provides sensing and computing system and subsystem solutions to the U.S. military and allied nations focused on solving the most complex threat dynamics facing our service men and women today. We provide world class sensing products in all warfighting domains along with the computation systems to provide situational understanding. Our technologies and products are deployed on nearly all military platforms across land, sea, air, cyberspace, and space on individual soldiers, ground vehicles, ships, aircraft, and satellites. We have market leading capabilities in electro-optic and infrared imaging, advanced lasers, electronic warfare and cyber, communications, and computing in these domains. Integrated Mission Systems (“IMS”) The IMS segment provides critical force protection, platform integration, transportation and logistics and power conversion and propulsion systems to the U.S. military and its allies. Our force protection systems provide much needed protection for our service members and military assets from evolving and proliferating threats and include advanced solutions for counter-unmanned aerial systems, short-range air defense systems and active protection systems on ground vehicles. Additionally, we provide power conversion and propulsion systems for the U.S. Navy’s top priority shipbuilding programs, building on our legacy of providing power components and systems for nearly all naval combat vessels for three decades, positioning us to continue as a leading provider of electrical ship propulsion systems and components for the U.S. Navy and its allies. Other The Company separately presents the unallocable costs associated with corporate functions and certain non-operating subsidiaries of the Company as Corporate & Eliminations. See Note 15: Segment Information for further information regarding our business segments. B.Basis of presentation The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of DRS, its wholly owned subsidiaries and its controlling interests. Interests in joint ventures that are controlled by the Company, or for which the Company is otherwise deemed to be the primary beneficiary, are consolidated. For joint ventures in which the Company does not have a controlling interest, but exerts significant influence, the Company applies the equity method of accounting. All intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to current year presentation. Interim Financial Statements. The unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These rules and regulations permit some of the information and footnote disclosures included in financial statements prepared in accordance with U.S. GAAP to be condensed or omitted. These unaudited Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements as of and for the year ended December 31, 2021 filed as Exhibit 99.1 to the Current Report on Form 8-K filed on August 2, 2022. C.Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant of these estimates and assumptions relate to the recognition of contract revenues and estimated costs to complete contracts in process, recoverability of reported amounts of goodwill, long-lived assets and intangible assets, valuation of pensions and other postretirement benefits, the valuation of deferred tax assets and liabilities and the valuation of unrecognized tax benefits. Actual results could differ from these estimates. D.Revenue Recognition Our revenues consist of sales of products (tangible goods) and sales of services to customers. We recognize the majority of our revenue from contracts with customers using an over time, cost-to-cost method of accounting measured by the ratio of cumulative costs incurred to date to estimated total contract costs at completion (the "cost-to-cost method"). On certain other contracts, primarily time and material (“T&M”) and cost-plus contracts, revenue is recognized using the right-to-invoice practical expedient as we are contractually able to bill our customer based on control transferred to the customer. See Note 2. Revenue from Contracts with Customers for additional information regarding revenue recognition. E.Cost of Revenues Cost of revenues includes materials, labor and overhead costs incurred in the manufacturing, design, and provision of products and services sold in the period as well as warranty costs. Material costs include raw materials, purchased components and sub-assemblies, outside processing and inbound freight costs. Labor and overhead costs consist of direct and indirect manufacturing costs, including wages and fringe benefits, operating supplies, depreciation and amortization, occupancy costs, and purchasing, receiving and inspection costs. F.Research and Development Expenses We conduct research and development (“R&D”) activities using our own funds (referred to as company-funded R&D or independent research and development (“IR&D”)) and under contractual arrangements with our customers (referred to as customer-funded R&D) to enhance existing products and services and to develop future products, solutions, and technologies. R&D costs include basic research, applied research, concept formulation studies, design, development, and related test activities. IR&D costs are allocated to customer contracts as part of the general and administrative overhead costs and generally recoverable on our customer contracts with the U.S. Government. Customer-funded R&D costs are charged directly to the related customer contract. Substantially all R&D costs are charged to cost of revenues as incurred. G.Foreign Currency Significant transactions in foreign currencies are translated into U.S. dollars at the approximate prevailing rate at the time of the transaction. Foreign exchange transaction gains and losses in the third quarter and first nine months of 2022 and 2021 were immaterial to the Company's results of operations. The operations of the Company's foreign subsidiaries are translated from the local (functional) currencies into U.S. dollars using weighted average rates of exchange during each monthly period. The rates of exchange at each balance sheet date are used for translating certain balance sheet accounts and gains or losses resulting from these translation adjustments are included in the accompanying Consolidated Balance Sheets as a component of other comprehensive earnings. H.Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits with banks or other short-term, highly liquid investments with original maturities of three months or less. I.Accounts Receivable Accounts receivable consist of amounts billed and currently due from customers. We maintain an allowance recorded in the Allowance for Credit Losses account that is estimated and recorded utilizing relevant information about past events, including historical experience, current conditions and a reasonable and supportable forecast that affects the collectability of the related financial asset. See Note 3: Accounts Receivable for additional information regarding accounts receivable. J.Inventories Inventories are recorded at the lower of cost (determined by either actual, weighted average or first-in, first-out methods) or net realizable value, and include direct production costs as well as indirect costs, such as factory overhead. The net realizable value is calculated as the expected sales price in the course of normal operations net of estimated costs to finish and sell the goods. See Note 4: Inventories for additional information regarding inventories. K.Property, Plant and Equipment Property, plant and equipment is carried at cost less accumulated depreciation. Depreciation is calculated on the straight-line method. The estimated useful lives of plant, machinery and equipment and building and building improvements generally range from 3 to 10 years and 15 to 40 years, respectively. Leasehold improvements are amortized over the shorter of the estimated useful life of the improvements or the remaining life of the lease. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the Consolidated Balance Sheets, and the net gain or loss is included in the determination of net earnings. Maintenance and repairs are charged to operations as incurred and renewals and improvements are capitalized. See Note 5: Property, Plant and Equipment for additional information regarding property, plant and equipment. L.Goodwill Goodwill is assigned to reporting units and is reviewed for impairment at the reporting unit level on an annual basis, or whenever changes in circumstances indicate that the carrying amount may not be recoverable. A reporting unit is an operating segment, or one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by the segment manager. Two or more components of an operating segment may be aggregated and deemed a single reporting unit if the components have similar economic characteristics. Based upon the aggregation criteria, the Company concluded it had six and seven reporting units at September 30, 2022 and December 31, 2021, respectively. The annual impairment test is conducted as of December 31. The Company did not identify any triggering events during the nine months ended September 30, 2022 or September 30, 2021. See Note 7: Goodwill for additional information regarding goodwill. M.Long-Lived Assets and Acquired Identifiable Intangible Assets Identifiable intangible assets represent assets acquired as part of the Company's business acquisitions and include customer and program/contract-related assets. The values assigned to acquired identifiable intangible assets are determined as of the date of acquisition based on estimates and judgments regarding expectations for the estimated future after-tax cash flows from those assets over their lives, including the probability of expected future contract renewals and revenues, all of which are discounted to present value. The Company assesses the recoverability of the carrying value of its long-lived assets and intangible assets with finite useful lives whenever events or changes in circumstances indicate that the carrying amount of the assets or asset group may not be recoverable. If there are any indicators of impairment present, the Company then evaluates the recoverability of the potentially impaired long-lived assets and acquired identifiable intangible assets based upon expectations of undiscounted net cash flows from such assets. If the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset or asset group, a loss is recognized for the difference between the estimated fair value and the carrying amount of the assets. Assets to be disposed of, including those of discontinued operations, are reported at the lower of the carrying amount or fair value, less the costs to sell. See Note 5: Property, Plant and Equipment and Note 8: Intangible Assets for additional information regarding long-lived assets and intangible assets. N.Derivative Financial Instruments The Company does not use derivative financial instruments for trading purposes. All derivative instruments are carried on the Consolidated Balance Sheets as either assets or liabilities at fair value. The classification of gains and losses resulting from changes in the fair values of derivatives depends on the intended use of the derivative and its resultant designation. The Company had no significant derivative or hedging instruments for the periods presented. O.Pension and Other Postretirement Benefits The obligations for the Company's pension plans and postretirement benefit plans and the related annual costs of employee benefits are calculated based on several long-term assumptions, including discount rates for employee benefit liabilities, rates of return on plan assets, expected annual rates of salary increases for employee participants in the case of pension plans and expected annual increases in the costs of medical and other health care benefits in the case of postretirement benefit plans. These long-term assumptions are subject to revision based on changes in interest rates, financial market conditions, expected versus actual returns on plan assets, participant mortality rates and other actuarial assumptions, including future rates of salary increases, benefit formulas and levels, and rates of increase in the costs of benefits. Changes in these assumptions, if significant, can materially affect the amount of annual net periodic benefit costs recognized in the Company's results of operations from one year to the next, the liabilities for the pension plans and postretirement benefit plans and the Company's annual cash requirements to fund these plans. See Note 11: Pension and Other Postretirement Benefits for further information regarding our pension and postretirement plans. P.Income Taxes We and US Holding have entered into a Tax Allocation Agreement (“Tax Allocation Agreement”), dated as of November 16, 2020, with members of an affiliated group, as defined in Section 1504(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Tax Code”), members of one or more consolidated, combined, unitary or similar state tax groups and additional parties who are part of an “expanded affiliated group” for certain tax purposes. The agreement provides for the method of computing and allocating the consolidated U.S. federal tax liability of the affiliated group among its members and of allocating any state group tax liabilities among the state members for the taxable year ending December 31, 2020 and each subsequent year in which the parties are members of a group (whether federal or state). The agreement also provides for reimbursement of US Holding and/or DRS for payment of such tax liabilities, for compensation of any member for use of its “net operating loss” or “tax credits” in arriving at such tax liabilities and the allocation and payment of any refund arising from a carryback of net operating losses or tax credits from subsequent taxable years. Under the agreement, the parties have agreed to calculate and allocate their respective tax liabilities and other tax attributes for taxable years beginning with the first consolidated taxable year that included DRS (i.e., the taxable year ended December 31, 2008) as if the agreement was then in effect. We calculate the provision for incomes taxes during interim periods by applying an estimate of our annual effective tax rate for the full year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items). The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Income taxes as presented attribute deferred income taxes of US Holding to DRS in a manner that is systematic, rational and consistent with the asset and liability method and the governing Tax Allocation Agreement which allocates the tax liability amongst the entities, including DRS. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of DRS’ assets and liabilities and are adjusted for changes in tax rates and tax laws when such changes are enacted. In general, the taxable income of DRS is included in the consolidated U.S. federal and state tax returns of US Holding. Where applicable, US Holding’s current portion of U.S. federal income taxes payable were offset against DRS’ net operating loss carryforwards in the period the related tax expense was recorded. Consequently, our net operating loss carryforwards are deemed to have been settled with US Holding in each year in an amount commensurate with the carrying value of the tax effected net operating loss utilized. If management determines that some portion or all of a deferred tax asset is not “more likely than not” to be realized, a valuation allowance is recorded as a component of the income tax provision to reduce the deferred tax asset to the amounts expected to be realized. In determining whether the Company’s deferred tax assets are realizable, management considers all evidence, both positive and negative, including the history of financial reporting earnings, existing taxable temporary differences and their projected reversals, as well as projected future income and tax planning strategies. We believe it is more likely than not that we will generate sufficient taxable income in future periods to realize our deferred tax assets, subject to the valuation allowances recognized. The Company assesses its tax positions for all periods open to examination by tax authorities based on the latest available information. Those positions are evaluated to determine whether they will more likely than not be sustained upon examination by the relevant taxing authorities. Liabilities for unrecognized tax benefits are measured based on the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. These unrecognized tax benefits are recorded as a component of income tax expense. Interest and penalties related to unrecognized tax benefits are not material. See Note 9: Income Taxes for additional information regarding income taxes. Q.Earnings Per Share Basic earnings per share (“EPS”) is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during each period. The computation of diluted EPS includes the dilutive effect of outstanding stock-based compensation awards, only in periods in which such effect would have been dilutive for the period. In February 2021, the Company completed a forward stock split of 1,450,000 - for- 1 share of common stock. The consolidated financial statements have been adjusted to reflect the forward stock split for all periods presented. There were 100 shares and 145 million basic and diluted common shares outstanding before and after the forward stock split, respectively, for all periods presented. R.Fair Value Measurements Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant on the measurement date. We are required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value, and to utilize a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three hierarchical levels used to measure fair value are as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices that are directly or indirectly observable. Level 3 — Significant inputs to the valuation model are unobservable. In certain instances, fair value is determined through information obtained from third parties using the latest available market data. In obtaining such data from third parties, we have evaluated the methodologies used to develop the estimate of fair value in order to assess whether such valuations are representative of fair value. The Company categorizes plan assets for disclosure purposes in accordance with this fair value hierarchy. Certain plan investments are measured at fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient and are therefore not categorized as Level 1, 2, or 3. NAV is defined as the total value of the fund divided by the number of the fund’s shares outstanding. See Note 12: Pension and Other Postretirement Benefits for further information regarding our pension and postretirement plans. S.Financial Instruments Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities. Financial instruments are reported in the Consolidated Balance Sheets at carrying value, which other than the 7.5% Term loan due November 30, 2023, approximate fair value. See Note 11: Debt for further information regarding our debt. T.Acquisitions, Investments and Variable Interest Entities Acquisitions Our consolidated financial statements include the operations of acquired businesses from the date of acquisition. We account for acquired businesses using the acquisition method of accounting, which requires that any assets acquired and liabilities assumed be measured at their respective fair values on the acquisition date. The accounting for business combinations requires the Company to make significant judgments and estimates. Any excess of the fair value of consideration transferred over the assigned values of the net assets acquired is recognized as goodwill. As previously announced, on June 21, 2022, we entered into the Agreement and Plan of Merger, dated as of June 21, 2022 (the “merger agreement”), by and among the Company, RADA Electronic Industries Ltd (“RADA”) and Blackstart Ltd, a company organized under the laws of the State of Israel and a wholly owned subsidiary of DRS (“Merger Sub”). Upon the terms and subject to the conditions of the merger agreement, and in accordance with the Companies Law, 5759-1999, of the State of Israel, at the effective time of the merger contemplated by the merger agreement (the “merger”), Merger Sub will be merged with and into RADA, with RADA as the surviving company of the merger and thereby becoming a wholly owned subsidiary of DRS. At the effective time of the merger (the “effective time”), each ordinary share of RADA, par value New Israeli Shekel 0.03 per share (“RADA shares”), issued and outstanding immediately prior to the effective time will be converted into and become exchangeable for one share of common stock of DRS, par value $0.01 per share (“DRS common stock”). Immediately prior to the effective time, the shares of DRS common stock held by US Holding, the current sole stockholder of DRS, will be split (rounded up to the nearest whole share), as necessary, such that, immediately following the effective time and the issuance of the shares of DRS common stock to holders of RADA shares and the treatment of options to purchase RADA shares: (A) US Holding will hold 80.5% of the issued and outstanding shares of DRS common stock on a fully diluted basis (with US Holding’s ownership percentage including 50% of any awards or other equity interests that DRS may issue pursuant to entitlements under any grants of certain one-time special awards of restricted stock units (the “One-Time Awards”) and the foregoing percentage calculation excluding any awards or other equity interests that DRS may issue pursuant to entitlements under the DRS’s long term incentive plan and 50% of any awards or other equity interests that DRS may issue pursuant to entitlements in connection with any grants of One-Time Awards, and such foregoing percentage will assume a reference price for RADA options equal to the volume-weighted average price of the RADA shares on the NASDAQ for the ten trading days immediately prior to the closing date); and (B) the holders of RADA shares, RADA vested options and RADA unvested options (or DRS options issued pursuant to the provisions of the merger agreement) will hold or have entitlements to 19.5% of the issued and outstanding shares of DRS common stock on a fully diluted basis (the foregoing percentage calculation excluding any awards or other equity interests that DRS may issue pursuant to entitlements under the DRS long-term incentive plan or the issuance of any One-Time Awards). Each of DRS’s and RADA’s obligation to consummate the merger is subject to the satisfaction or waiver of a number of conditions specified in the merger agreement. On August 3, 2022, we filed a registration statement on Form S-4 with the SEC for the shares of DRS common stock to be issued in the merger, which (as amended) was declared effective by the SEC on September 13, 2022. On October 19, 2022, RADA’s shareholders voted to approve the transaction, and on October 24, 2022, we received the required approval from the Committee on Foreign Investment in the United States (CFIUS). We anticipate closing near the end of November or early December 2022. Investments Investments where we have the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in other noncurrent assets on our Consolidated Balance Sheets. Significant influence typically exists if we have a 20% to 50% ownership interest in the investee. Under this method of accounting, our share of the net earnings or losses of the investee is included in operating profit in other income, net on our Consolidated Statements of Earnings since the activities of the investee are closely aligned with the operations of the business segment holding the investment. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is therefore recorded during the current period. The Company sold its interest in its only investment accounted for under the equity method on July 8, 2022. The Company’s cost method investment consists of an investment in a private company in which we do not have the ability to exercise significant influence over its operating and financial activities. Management evaluates this investment for possible impairment quarterly. Variable Interest Entities The Company occasionally forms joint ventures and/or enters into arrangements with special purpose limited liability companies for the purpose of bidding and executing on specific projects. The Company analyzes each such arrangement to determine whether it represents a variable interest entity (“VIE”). If the arrangement is determined to be a VIE, the Company assesses whether it is the primary beneficiary of the VIE and if it is, consequently required to consolidate the VIE. The Company did not have any investment in VIEs for the periods presented. Divestitures On March 21, 2022, the Company entered into a definitive agreement to sell its Global Enterprise Solutions (“GES”) business to SES Government Solutions, Inc., a wholly-owned subsidiary of SES S.A., for a selling price of $450 million subject to certain working capital adjustments. The transaction was completed on August 1, 2022 and resulted in cash proceeds of $427 million after net working capital adjustments. The transaction netted an aggregate pretax gain net of transaction costs of $305 million ($234 million after tax) of which $319 million, was included in Other operating income (expense) net partially reduced by aggregate transaction costs of $14 million included in Selling, General & Administrative costs and tax expenses of $71 million. GES, which was part of the ASC segment, provides commercial satellite communications to the U.S. Government and delivers satellite communications and security solutions to customers worldwide. SES S.A. has guaranteed the payment of the purchase price and performance of all other obligations of SES Government Solutions, Inc. under the agreement. The company recorded operating income for the GES business of $13 million and $23 million for the nine months ended September 30, 2022 and the nine months ended September 30, 2021, respectively. In February 2022, the Company’s Board of Directors approved the strategic initiative to divest of the Company’s interest in Advanced Acoustic Concepts (“AAC”). On April 19, 2022, we entered into a definitive sales agreement to divest our share of our equity investment in AAC for $56 million to Thales Defense & Security, Inc., the minority partner in the joint venture. The transaction was completed on July 8, 2022 and resulted in proceeds of $56 million. The transaction netted an aggregate pretax gain of $31 million ($22 million net of taxes), The aggregate gain of $31 million is included in Other Operating income (expense) net offset by tax expense of $9 million.The proceeds generated from the GES and AAC divestitures resulted in a $396 million dividend to US Holding, our sole shareholder. The $396 million represents the proceeds generated net of our costs to sell and estimated tax obligations. The dividend was issued on August 5, 2022

Revenue from Contracts with Customers

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

The Company recognizes revenue for each separately identifiable performance obligation in a contract representing an obligation to transfer a distinct good or service to a customer. In most cases, goods and services provided under the Company’s contracts are accounted for as single performance obligations due to the complex and integrated nature of our products and services. These contracts generally require significant integration of a group of goods and/or services to deliver a combined output. In some contracts, the Company provides multiple distinct goods or services to a customer. In those cases, the Company accounts for the distinct contract deliverables as separate performance obligations and allocates the transaction price to each performance obligation based on its relative standalone selling price, which is generally estimated using cost plus a reasonable margin. We classify revenues as products or services on our Consolidated Statements of Earnings based on the predominant attributes of the performance obligations. While the Company provides warranties on certain contracts, we typically do not provide for services beyond standard assurances and therefore do not consider warranties to be separate performance obligations. Generally, we enter into three types of contracts: fixed-price contracts, cost-plus contracts and T&M contracts (cost-plus contracts and T&M contracts are aggregated below as flexibly priced contracts). The majority of our total revenues are derived from fixed-price contracts; refer to the revenue disaggregation disclosures that follow.

For fixed-price contracts, customers agree to pay a fixed amount, negotiated in advanced for a specified scope of work.

For cost-plus contracts typically we are reimbursed for allowable or otherwise defined total costs (defined as cost of revenues plus allowable general and administrative expenses) incurred, plus a fee. The contracts may also include incentives for various performance criteria, including quality, timeliness and cost-effectiveness. In addition, costs are generally subject to review by clients and regulatory audit agencies, and such reviews could result in costs being disputed as non-reimbursable under the terms of the contract.

T&M contracts provide for reimbursement of labor hours expended at a contractual fixed labor rate per hour, plus the actual costs of material and other direct non-labor costs. The fixed labor rates on T&M contracts include amounts for the cost of direct labor, indirect contract costs and profit.

Estimating the transaction price for an arrangement requires judgment and is based on expected results which are determined using the Company’s historical data. We estimate that the revenue that we expect to be entitled to receive from a customer to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur.

Revenue from contracts with customers is recognized when the performance obligations are satisfied through the transfer of control over the good or service to the customer, which may occur either over time or at a point in time.

Revenues for the majority of our contracts are measured using the cost-to-cost method. We believe this is an appropriate measure of progress toward satisfaction of performance obligations as this measure most accurately depicts the progress of our work and transfer of control to our customers. Due to the long-term nature of many of our contracts, developing the estimated total cost at completion and total transaction price often requires judgment. Factors that must be considered in estimating the cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance.

After establishing the estimated total cost at completion, we follow a standard Estimate at Completion (“EAC”) process in which we review the progress and performance on our ongoing contracts at least quarterly. Adjustments to original estimates for a contract's revenue, estimated costs at completion and estimated profit or loss often are required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change and are also required if contract modifications occur. When adjustments in estimated total costs at completion or in estimated total transaction price are determined, the related impact on revenue and operating income are recognized using the cumulative catch-up method, which recognizes in the current period the cumulative effect of such adjustments for all prior periods. Any anticipated losses on these contracts are fully recognized in the period in which the losses become evident.

EAC adjustments had the following impacts to revenue for the periods presented:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in millions)	2022			2021			2022			2021
Revenue	$	(11)		$	(11)		$	(22)		$	(20)
Total % of Revenue	1.8		%	1.6		%	1.2		%	1.0		%

The impacts noted above are attributed primarily to changes in our firm-fixed-price development type programs as well as the impacts of inflation on certain fixed price production programs. They consist of changes in the designs required to achieve contractual specifications for fixed priced development programs and inflationary cost increases on certain naval production programs that resulted in a change in the programs’ estimate and related profitability. The reduction to revenue for the three and nine month periods ended September 30, 2022 and September 30, 2021 was attributed primarily to certain cost impacts on surface ship programs within our IMS segment and inflationary pressures on naval programs within our ASC segment.

Conversely, if the requirements for the recognition of contracts over time are not met, revenue is recognized at a point in time when control transfers to the customer, which is generally upon transfer of title. In such cases, the production that is in progress and costs that will be recognized at a future point in time are reported within "inventories".

Costs to obtain a contract are incremental direct costs incurred to obtain a contract with a customer, including sales commissions and dealer fees, and are capitalized if material. Costs to fulfill a contract include costs directly related to a contract or specific anticipated contract (e.g., certain design costs) that generate or enhance our ability to satisfy our performance obligations under these contracts. These costs are capitalized to the extent they are expected to be recovered from the associated contract.

Contract Assets and Liabilities

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities.


(Dollars in millions)	September 30, 2022		December 31, 2021
Contract assets	$	913	$	743
Contract liabilities	195		174
Net contract assets	$	718	$	569

Revenue recognized in the three and nine month periods ended September 30, 2022 that was included in the contract liability balance at the beginning of each period was $14 million and $121 million, respectively. Revenue

recognized in the three and nine month periods ended September 30, 2021 that was included in the contract liability balance at the beginning of each period was $11 million and $100 million, respectively.

The change in the balances of the Company’s contract assets and liabilities primarily results from timing differences between revenue recognition and customer billings and/or payments.

Contract assets related to amounts withheld by customers until contract completion are not considered a significant financing component of our contracts because the intent is to protect the customers from our failure to satisfactorily complete our performance obligations. Payments received from customers in advance of revenue recognition (contract liabilities) are not considered a significant financing component of our contracts because they are utilized to pay for contract costs within a one-year period or are requested by us to ensure the customers meet their payment obligations.

Value of Remaining Performance Obligations

The value of remaining performance obligations, which we also refer to as total backlog, includes the funded and unfunded components. Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts. Unfunded backlog represents the revenue value of firm orders for products and services under existing contracts for which funding has not yet been appropriated less funding previously recognized on these contracts.

The following table summarizes the value of our total backlog as of September 30, 2022, incorporating both funded and unfunded components:


Backlog:	September 30, 2022
(Dollars in millions)
Total Backlog	$	3,138

We expect to recognize approximately 21% of our September 30, 2022 backlog as revenue over the next three months, with the remainder to be recognized thereafter.

Disaggregation of Revenue

ASC: ASC revenue is primarily derived from U.S. government development and production contracts and is generally recognized over time using the cost-to-cost method. We disaggregate ASC revenue by geographical

region, customer relationship and contract type. We believe these categories best depict how the nature, amount, timing and uncertainty of ASC revenue and cash flows are affected by economic factors:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
Revenue by Geographical Region
United States	$	364	$	484	$	1,103	$	1,385
International	41		27		137		90
Intersegment Sales	3		6		8		13
Total	$	408	$	517	$	1,248	$	1,488
Revenue by Customer Relationship
Prime contractor	$	216	$	346	$	664	$	901
Subcontractor	189		165		576		574
Intersegment Sales	3		6		8		13
Total	$	408	$	517	$	1,248	$	1,488
Revenue by Contract Type
Firm Fixed Price	$	349	$	438	$	1,085	$	1,283
Flexibly Priced(1)	56		73		155		192
Intersegment Sales	3		6		8		13
Total	$	408	$	517	$	1,248	$	1,488

________________

(1)Includes revenue derived from time-and-materials contracts.

IMS: IMS revenue is primarily derived from U.S. government development and production contracts and is generally recognized over time using the cost-to-cost method. We disaggregate IMS revenue by geographical region, customer relationship and contract type

We believe these categories best depict how the nature, amount, timing and uncertainty of IMS revenue and cash flows are affected by economic factors:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
Revenue by Geographical Region
United States	$	222	$	198	$	612	$	547
International	7		11		21		37
Intersegment Sales	—		—		1		—
Total	$	229	$	209	$	634	$	584
Revenue by Customer Relationship
Prime contractor	$	41	$	41	$	110	$	127
Subcontractor	188		168		523		457
Intersegment Sales	—		—		1		—
Total	$	229	$	209	$	634	$	584
Revenue by Contract Type
Firm Fixed Price	$	195	$	179	$	542	$	495
Flexibly Priced(1)	34		30		91		89
Intersegment Sales	—		—		1		—
Total	$	229	$	209	$	634	$	584

________________

(1)Includes revenue derived from time-and-materials contracts.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI https://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-Name Accounting Standards Codification
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+ Details

Accounts Receivable

9 Months Ended

Sep. 30, 2022

Receivables [Abstract]

Accounts Receivable

Accounts receivable represent amounts billed and currently due from customers. Payment is typically received from our customers either at periodic intervals (e.g., biweekly, or monthly) or upon achievement of contractual milestones.

Accounts receivable consist of the following:


(Dollars in millions)	September 30, 2022		December 31, 2021
Accounts receivable	$	171	$	157
Less allowance for credit losses	(1)		(1)
Accounts receivable, net	$	170	$	156

The Company maintains certain agreements with financial institutions to sell certain trade receivables. Receivables are derecognized in their entirety when sold, and the Company’s continuing involvement in the sold receivables is limited to their servicing, for which the Company receives a fee commensurate with the service provided. Pursuant to the servicing agreements, the Company collected approximately $3 million and $15 million at September 30, 2022 and December 31, 2021, respectively, of these sold receivables that had not yet been remitted to the financial institutions. These unremitted amounts collected on behalf of the financial institutions are included within short-term borrowings and current portion of long-term debt in the Consolidated Balance Sheets.

Inventories

9 Months Ended

Sep. 30, 2022

Inventory Disclosure [Abstract]

Inventories

Inventories consists of the following:


(Dollars in millions)	September 30, 2022		December 31, 2021
Raw materials	$	50	$	43
Work in progress	194		161
Finished goods	2		1
Total	$	246	$	205

Property, Plant and Equipment

9 Months Ended

Sep. 30, 2022

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, plant and equipment by major asset class consists of the following:


(Dollars in millions)	September 30, 2022		December 31, 2021
Land, buildings and improvements	$	321	$	312
Plant and machinery	190		191
Equipment and other	317		298
Total property, plant and equipment, at cost	828		801
Less accumulated depreciation	(466)		(437)
Total property, plant and equipment, net	$	362	$	364

Depreciation expense related to property, plant and equipment was $14 million and $41 million for the three and nine month periods ended September 30, 2022, and $13 million and $37 million for the three and nine month periods ended September 30, 2021, respectively.

Other Liabilities

9 Months Ended

Sep. 30, 2022

Other Liabilities Disclosure [Abstract]

Other Liabilities

A summary of significant other liabilities by balance sheet caption follows:


(Dollars in millions)	September 30, 2022		December 31, 2021
Salaries, wages and accrued bonuses	$	63	$	70
Fringe benefits	68		74
Litigation	10		10
Restructuring costs	1		4
Provision for contract losses	55		48
Operating lease liabilities	25		24
Taxes Payable	87		—
Other(1)	56		65
Total other current liabilities	$	365	$	295
Operating lease liabilities	$	61	$	73
Other	14		1
Total other noncurrent liabilities	$	75	$	74

________________

(1)Consists primarily of environmental remediation reserves and warranty reserves. See Note 15: Commitments and Contingencies for more information regarding the warranty provision.

Goodwill

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Changes in the carrying amount of goodwill by reportable segment are as follows:


(Dollars in millions)	ASC		IMS		Total
Balance as of December 31, 2021	$	652	$	419	$	1,071
Reduction for Divestitures	(117)				(117)
Acquisition adjustment	(2)		—		(2)
Balance as of September 30, 2022	533		419		952

Intangible Assets

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Other intangible assets mainly refer to the fair value of existing customer contractual relationships attributable to the acquired business and patents which are being amortized over their respective lives. The fair value of intangible assets typically is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows (including cash flows for working capital) arising from backlog and follow-on sales to the customer over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory assets charge, all of which is discounted to present value.

The following disclosure presents certain information regarding the Company's intangible assets as of September 30, 2022 and December 31, 2021. All intangible assets are being amortized over their estimated useful lives, as indicated below, with no estimated residual values.


	September 30, 2022						December 31, 2021
(Dollars in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	957	$	(915)	$	42	$	957	$	(908)	$	49
Patents and licenses	9		(6)		3		9		(6)		3
Total intangible assets	$	966	$	(921)	$	45	$	966	$	(914)	$	52

Amortization expense related to intangible assets was $3 million and $7 million for the three and nine month periods ended September 30, 2022 and was $3 million and $7 million for the three and nine month periods ended September 30, 2021.

Customer relationships are amortized on a straight-line basis over their estimated useful lives of 10 to 15 years. Patents and licenses are amortized on a straight-line basis over their estimated useful lives of 5 to 10 years.

Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at September 30, 2021 and December 31, 2020 is as follows:


(Dollars in millions)	September 30, 2022		December 31, 2021
Gross deferred tax assets	$	110	$	120
Less valuation allowance	10		10
Deferred tax assets	100		110
Deferred tax liabilities	51		54
Deferred tax assets, net	$	49	$	56

Our deferred tax balance associated with our retirement benefit plans includes a deferred tax asset of $11 million and $11 million as September 30, 2022 and December 31, 2021, respectively, that are recorded in accumulated other comprehensive loss to recognize the funded status of our retirement plans. See Note 11: Pension and Other Postretirement Benefits for additional details.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

Debt

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt

The Company’s debt consists of the following:


(Dollars in millions)	September 30, 2022		December 31, 2021

7.5% Term loan due November 30, 2023(1)	$	139	$	139
5.0% Daylight term loan due October 15, 2024(1)	78		78
Borrowings under revolving credit facility(1)	35		—
Finance lease and other	162		161
Short-term borrowings	3		15
Total debt principal	417		393
Less unamortized debt issuance costs and discounts	—		—
Total debt, net	417		393
Less short-term borrowings and current portion of long-term debt	(67)		(41)
Total long-term debt	$	350	$	352

________________

(1)The Company’s debt with related parties consists of two term loans and a working capital credit facility with US Holding, as described below.

Term Loans

In January 2009, the Company entered into a credit agreement with its ultimate parent company, Finmeccanica S.p.A. (presently Leonardo S.p.A.) in the amount of $2 billion (the “2009 Credit Agreement”). The 2009 Credit Agreement was subsequently assigned to US Holding and has a maturity of November 30, 2023. The 2009 Credit Agreement provides for a term loan bearing interest at a rate of 7.5%, with interest payments due semi-annually on June 20 and December 20 in each year (the “7.5% Term loan”). The outstanding balance of the 7.5% Term loan at September 30, 2022 and December 31, 2021 was $139 million. The fair value of this term loan at September 30, 2022 and December 31, 2021 was $129 million and $182 million, respectively; however, the Company has the ability to prepay the outstanding principal balance at the carrying amount without penalty.

In June 2017, the Company entered into an unsecured term loan with US Holding in the principal amount of $137.5 million, the proceeds of which were used to finance the acquisition of Daylight Solutions, Inc. (the “Daylight Term Loan”). The Daylight Term Loan had an outstanding balance of $78 million and $78 million at September 30, 2022 and December 31, 2021, respectively, which approximates its fair value. The Daylight Term Loan matures on October 15, 2024. The Daylight Term Loan has an interest rate of 5.0%, with interest payments due semi-annually on April 15 and October 15.

Credit Facilities

The 2009 Credit Agreement provides for a revolving credit facility available for working capital needs of the Company (the “Revolving Credit Facility”). As of September 30, 2022 and December 31, 2021, the Revolving Credit Facility had a credit limit of $450 million and an interest rate of LIBOR plus 3.5%. There is a commitment fee of 0.25% applied to the unused balance of the Revolving Credit Facility and there are no compensating balance requirements. The outstanding balance as of September 30, 2022 was $35 million and there was no balance on the Revolving Credit Facility as of December 31, 2021.

The Company also maintains uncommitted working capital credit facilities with certain financial institutions in the aggregate of $75 million and $65 million at September 30, 2022 and December 31, 2021, respectively (the “Financial Institution Credit Facilities”). The Financial Institution Credit Facilities are guaranteed by Leonardo S.p.A. The primary purpose of the Financial Institution Credit Facilities is to support standby letter of credit issuances on contracts with customers and also includes a revolving facility with a maximum borrowing limit of $15 million, which bears interest at LIBOR plus 0.5%. At September 30, 2022 and December 31, 2021, there was no

balance outstanding on the revolving facility. The Company had letters of credit outstanding of approximately $31 million and $35 million as of September 30, 2022, and December 31, 2021, which reduces the available capacity of the Financial Institution Credit Facilities by an equal amount.

Short-term Borrowings

As of September 30, 2022 and December 31, 2021, the Company recognized $3 million and $15 million, respectively, collected on behalf of the buyers of our trade receivables pursuant to our factoring arrangements as short-term borrowings and current portion of long-term debt in the Consolidated Balance Sheets, which approximates its fair value. Refer to Note 3: Accounts Receivable for more information.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI https://asc.fasb.org/topic&trid=2208564

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Pension and Other Postretirement Benefits

9 Months Ended

Sep. 30, 2022

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefits

Retirement Plan Summary Information

The Company maintains multiple pension plans, both contributory and non-contributory, covering employees at certain locations. Eligibility requirements for participation in the plans vary, and benefits generally are based on the participant's compensation and years of service, as defined in the respective plan. The Company's funding policy generally is to contribute in accordance with cost accounting standards that affect government contractors, subject to the Tax Code and regulations thereunder. Plan assets are invested primarily in equities, bonds (both corporate and U.S. government), U.S. government-sponsored entity instruments, cash and cash equivalents and real estate.

The Company also provides postretirement medical benefits for certain retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company's postretirement benefit plans. The Company's contractual arrangements with the U.S. government provide for the recovery of contributions to a Voluntary Employees' Beneficiary Association (“VEBA”) trust and, for non-funded plans, recovery of claims on a pay-as-you-go basis, subject to the Tax Code and regulations thereunder, with the retiree generally paying a portion of the costs through contributions, deductibles and coinsurance provisions.

The Company also maintains certain non-contributory and unfunded supplemental retirement plans. Eligibility for participation in the supplemental retirement plans is limited, and benefits generally are based on the participant's compensation and/or years of service.

The following table summarizes the components of net periodic benefit cost for the Company's pension, postretirement and supplemental retirement plans for the three months ended September 30:


	Defined Benefit Pension Plans				Postretirement Benefit Plan				Supplemental Retirement Plans
(Dollars in millions)	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Three Months Ended September 30, 2022		Three Months Ended September 30, 2021
Service cost	$	—	$	—	$	—	$	—	$	—	$	—
Interest cost	1		1		—		—		—		—
Less Expected return on plan assets	(1)		(2)		—		—		—		—
Amortization of net actuarial loss (gain)	—		—		—		—		—		—
Amortization of prior service cost	—		—		—		—		—		—
Settlement expense (income)	—		—		—		—		—		—
Net periodic benefit cost	$	—	$	(1)	$	—	$	—	$	—	$	—

The following table summarizes the components of net periodic benefit cost for the Company's pension, postretirement and supplemental retirement plans for the nine months ended September 30,:


	Defined Benefit Pension Plans				Postretirement Benefit Plan				Supplemental Retirement Plans
(Dollars in millions)	Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Service cost	$	—	$	—	$	—	$	—	$	—	$	—
Interest cost	$	4	$	4	—		—		1		—
Less Expected return on plan assets	$	(5)	$	(6)	—		—		—		—
Amortization of net actuarial loss (gain)	$	1	$	1	—		(1)		—		—
Amortization of prior service cost	$	—	$	—	—		—		—		—
Settlement expense (income)	$	1	$	—	—		—		—		—
Net periodic benefit cost	$	1	$	(1)	$	—	$	(1)	$	1	$	—

The expected long-term return on plan assets assumption represents the average rate that the Company expects to earn over the long-term on the assets of the Company's benefit plans, including those from dividends, interest income and capital appreciation. The assumption has been determined based on expectations regarding future rates of return for the plans' investment portfolio, with consideration given to the allocation of investments by asset class and historical rates of return for each individual asset class.

Pension related expenses are reflected in the Costs of revenues and General and administrative expenses on the Consolidated Statement of Earnings (unaudited).

A one percentage increase or decrease in healthcare trend rates in the table above would have an insignificant impact to our service and interest cost and the postretirement medical obligations.

Share-based compensation plans	9 Months Ended
Share-based compensation plans	Sep. 30, 2022
Share-Based Payment Arrangement [Abstract]
Share-based compensation plans	Share-based compensation plansThe Company does not have any share-based compensation plans. See Note 6: Other Liabilities, for information regarding cash compensation.

Commitment and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments

The Company’s commitments are primarily related to our lease and credit agreements.

Contingencies

From time to time, we are subject to certain legal proceedings and claims in the ordinary course of business. These matters are subject to many uncertainties and it is possible that some of these matters ultimately could be decided, resolved or settled in a manner adverse to us. Although the precise amount of liability that may result from these matters is not ascertainable, the Company believes that any amounts exceeding the Company's recorded accruals should not materially adversely affect the Company's financial condition or liquidity. It is possible, however, that the ultimate resolution of those matters could result in a material adverse effect on the Company's

results of operations and/or cash flows from operating activities for a particular reporting period. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable.

Some environmental laws, such as the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (also known as “CERCLA” or the “Superfund law”) and similar state statutes, can impose liability upon former owners or operators for the entire cost of investigating and remediating contaminated sites regardless of the lawfulness of the original activities that led to the contamination. In July 2000, an entity which later became a subsidiary of the Company received a Section 104(e) Request for Information (“RFI”) from the National Park Service (“NPS”), pursuant to CERCLA, regarding the presence of radioactive material at a site within a national park, which site was operated by an alleged predecessor to our subsidiary over 50 years ago. Following the subsidiary’s response to the RFI, the NPS directed it and another alleged former operator to perform an Engineering Evaluation and Cost Analysis (“EE/CA”) of a portion of the site. The Company’s subsidiary made a good faith offer to conduct an alternative EE/CA work plan, but the NPS rejected this offer and opted to perform the EE/CA itself. The NPS previously posted its intention to open a formal public comment period regarding the EE/CA at the end of 2019. To the Company’s knowledge, the EE/CA has not been released and a public comment period has yet to be opened.

Following completion of the EE/CA, the NPS may seek reimbursement for its investigative and remedial efforts to date, or direct one or more of the potentially responsible parties to perform any remediation that may be required by CERCLA or may enter an alternative dispute resolution proceeding to attempt to resolve each party’s share. In addition, the NPS may seek to recover damages for loss of use of certain natural resources. The Company believes that it has legitimate defenses to its subsidiary’s potential liability and that there are other potentially responsible parties for the environmental conditions at the site, including the U.S. government as owner, operator and arranger at the site. The potential liability associated with this matter could change substantially due to such factors as additional information on the nature or extent of contamination, methods of remediation that might be recommended or required, changes in the apportionment of costs among the responsible parties, whether the NPS seeks to recover additional damages, whether the NPS’s plans to investigate additional areas to identify a need for further remedial action for which the Company may be identified as a potentially responsible party and other actions by governmental agencies or private parties.

The Company has recorded its best estimate of damages and its share of remediation costs related to the site to reflect what we and our advisors reasonably believe we would be liable for based on the current information and circumstances of the claim, exclusive of other potential liabilities that may be asserted in the future.

In the performance of our contracts, we routinely request contract modifications that require additional funding from the customer. Most often, these requests are due to customer-directed changes in the scope of work. While we are entitled to recovery of these costs under our contracts, the administrative process with our customer may be protracted. Based on the circumstances, we periodically file requests for equitable adjustment (“REAs”) that are sometimes converted into claims. In some cases, these requests are disputed by our customer. We believe our outstanding modifications, REAs and other claims will be resolved without material impact to our results of operations, financial condition or cash flows.

As a government contractor, with customers including the U.S. government as well as various state and local government entities, the Company may be subject to audits, investigations and claims with respect to its contract performance, pricing, costs, cost allocations and procurement practices. Additionally, amounts billed under such contracts, including direct and indirect costs, are subject to potential adjustments before final settlement.

Management believes that adequate provisions for such potential audits, investigations, claims and contract adjustments, if any, have been made in the financial statements.

Product Warranties

Product warranty costs generally are accrued in proportion to product revenue realized in conjunction with our over-time revenue recognition policy. Product warranty expense is recognized based on the term of the product warranty, generally one year to three years, and the related estimated costs, considering historical claims expense.

Accrued warranty costs are reduced as these costs are incurred and as the warranty period expires, and otherwise may be modified as specific product performance issues are identified and resolved. The following is a summary of changes in the product warranty balances during the period ended September 30, 2022:


(Dollars in millions)
Balance as of December 31, 2021	$	19
Additional provision	8
Reversal and utilization	(8)
Balance as of September 30, 2022	19

Related Party Transactions	9 Months Ended
Related Party Transactions	Sep. 30, 2022
Related Party Transactions [Abstract]
Related Party Transactions	Related Party Transactions The Company provides services related to certain of the U.S. operations of our parent and certain other of its affiliates. These services include financial, tax, trade compliance, marketing and communications and legal. The Company also has related-party sales with the Parent and its other affiliates that occur in the regular course of business. Related-party sales for these transactions are included in revenues and were $63 million and $7 million for the nine-month periods ended September 30, 2022 and September 30, 2021, respectively and $9 million and $3 million for the three-month periods ended September 30, 2022 and September 30, 2021, respectively. The Company has related-party purchases with the Parent and its other affiliates that occur in the regular course of business. Related-party purchases for these transactions are included in cost of revenues and were $20 million and $22 million for the nine-month periods ended September 30, 2022 and September 30, 2021, respectively and related-party purchases for these transactions are included in cost of revenues for the three -month periods ended September 30, 2022 and September 30, 2021 were $2 million and $16 million, respectively. The receivables related to these transactions with the Parent and its other affiliates of $33 million and $2 million, respectively, and payables of $7 million and $1 million , respectively, are included in accounts receivable and accounts payable in our Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021. In addition there was a related party balance in contract assets of $8 million and $0 million at September 30, 2022 and December 31, 2021, respectively. The Company entered into a Surplus Treasury Agreement with US Holding (the “Surplus Agreement”) in December 2019. The Surplus Agreement allows the Company to advance excess funds to US Holding when funds are available. The advances bear interest at LIBOR plus between 5 and 20 basis points depending on the tenor of the advance. As of September 30, 2022 and December 31, 2021 the Company did not advance any amount to US Holding. The Company entered into Tax Allocation Agreement with US Holding, dated as of November 16, 2020. Refer to Note 1: Summary of Significant Accounting Policies and Note 16: Subsequent Events more information.

Segment Information

9 Months Ended

Sep. 30, 2022

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

Certain information related to our segments for the three and nine month periods ended September 30, 2022 and September 30, 2021 is presented in the following tables. Consistent accounting policies have been applied by all segments within the Company, within all reporting periods. A description of our reportable segments as of September 30, 2022 and September 30, 2021 has been included in Note 1: Summary of Significant Accounting Policies. Transactions between segments generally are negotiated and accounted for under terms and conditions that are similar to other government and commercial contracts; however, these intercompany transactions are eliminated in consolidation.

Total revenues and intersegment revenues by segment for the three and nine month periods ended September 30, 2022 and, September 30, 2021 consists of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
ASC	$	408	$	517	$	1,248	$	1,488
IMS	229		209		634		584
Corporate & Eliminations	(3)		(6)		(9)		(13)
Total revenue	$	634	$	720	$	1,873	$	2,059


(Dollars in millions)	2022		2021		2022		2021
ASC	$	3	$	6	$	8	$	13
IMS	—		—		1		—
Total intersegment revenue	$	3	$	6	$	9	$	13

Depreciation by segment for the three and nine month periods ended September 30, 2022 and September 30, 2021 consists of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
ASC	$	9	$	9	$	27	$	25
IMS	5		4		14		12
Total depreciation	$	14	$	13	$	41	$	37

Total assets by segment as of September 30, 2022 and December 31, 2021 consist of the following:


(Dollars in millions)	September 30, 2022		December 31, 2021
ASC	$	1,661	$	1,545
IMS	1,121		1,145
Corporate & Eliminations	149		379
Total assets	$	2,931	$	3,069

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
Adjusted EBITDA
ASC	$	36	$	56	$	125	$	171
IMS	22		14		73		39
Corporate & Eliminations	—		—		—		—
Total Adjusted EBITDA	58		70		198		210
Amortization of intangibles	(3)		(3)		(7)		(7)
Depreciation	(14)		(13)		(41)		(37)
Interest expense	(9)		(9)		(27)		(27)
Deal related transaction costs	(16)		—		(26)		(4)
Gain on sale of business	350		—		350		—
COVID-19 response costs	—		(1)		—		(6)
Other non-operational events	1		(1)		—		(2)
Income tax (provision) benefit	(88)		(8)		(107)		(31)
Net earnings	$	279	$	35	$	340	$	96

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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+ Details

Subsequent Events	9 Months Ended
Subsequent Events	Sep. 30, 2022
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events The Company has evaluated subsequent events through November 7, 2022, which represents the date on which the Consolidated Financial Statements were issued. On October 3, 2022, US Holding converted from a Corporation to a Limited Liability Company under Delaware law. Accordingly, US Holding will be taxed as a partnership and the Company will no longer be included in the US Consolidated tax filings of US Holding. Prospectively, the Company will file a consolidated return with Leonardo DRS, Inc. as the parent company and will include the US Subsidiaries of Leonardo DRS, Inc. As previously announced, on June 21, 2022, we entered into the Agreement and Plan of Merger, dated as of June 21, 2022 (the “merger agreement”), by and among the Company, RADA Electronic Industries Ltd (“RADA”) and Blackstart Ltd, a company organized under the laws of the State of Israel and a wholly owned subsidiary of DRS (“Merger Sub”). In connection with this transaction, which is detailed in Note 1 Summary of Significant Accounting Policies,on October 19, 2022, RADA’s shareholders voted to approve the transaction, and on October 24, 2022, we received the required approval from the Committee on Foreign Investment in the United States (CFIUS). We anticipate closing near the end of November or early December 2022.

Summary of Significant Accounting Policies (Policies)	9 Months Ended
Summary of Significant Accounting Policies (Policies)	Sep. 30, 2022
Accounting Policies [Abstract]
Segment Reporting	Our two reportable segments reflect the way performance is assessed and resources are allocated by our Chief Executive Officer, who is our chief operating decision maker (“CODM”). Advanced Sensing and Computing (“ASC”) The ASC segment provides sensing and computing system and subsystem solutions to the U.S. military and allied nations focused on solving the most complex threat dynamics facing our service men and women today. We provide world class sensing products in all warfighting domains along with the computation systems to provide situational understanding. Our technologies and products are deployed on nearly all military platforms across land, sea, air, cyberspace, and space on individual soldiers, ground vehicles, ships, aircraft, and satellites. We have market leading capabilities in electro-optic and infrared imaging, advanced lasers, electronic warfare and cyber, communications, and computing in these domains. Integrated Mission Systems (“IMS”) The IMS segment provides critical force protection, platform integration, transportation and logistics and power conversion and propulsion systems to the U.S. military and its allies. Our force protection systems provide much needed protection for our service members and military assets from evolving and proliferating threats and include advanced solutions for counter-unmanned aerial systems, short-range air defense systems and active protection systems on ground vehicles. Additionally, we provide power conversion and propulsion systems for the U.S. Navy’s top priority shipbuilding programs, building on our legacy of providing power components and systems for nearly all naval combat vessels for three decades, positioning us to continue as a leading provider of electrical ship propulsion systems and components for the U.S. Navy and its allies. Other The Company separately presents the unallocable costs associated with corporate functions and certain non-operating subsidiaries of the Company as Corporate & Eliminations.
Basis of Presentation	Basis of presentation The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of DRS, its wholly owned subsidiaries and its controlling interests. Interests in joint ventures that are controlled by the Company, or for which the Company is otherwise deemed to be the primary beneficiary, are consolidated. For joint ventures in which the Company does not have a controlling interest, but exerts significant influence, the Company applies the equity method of accounting. All intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to current year presentation. Interim Financial Statements. The unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These rules and regulations permit some of the information and footnote disclosures included in financial statements prepared in accordance with U.S. GAAP to be condensed or omitted. These unaudited Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements as of and for the year ended December 31, 2021 filed as Exhibit 99.1 to the Current Report on Form 8-K filed on August 2, 2022.
Use of Estimates	Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant of these estimates and assumptions relate to the recognition of contract revenues and estimated costs to complete contracts in process, recoverability of reported amounts of goodwill, long-lived assets and intangible assets, valuation of pensions and other postretirement benefits, the valuation of deferred tax assets and liabilities and the valuation of unrecognized tax benefits. Actual results could differ from these estimates.
Revenue Recognition and Cost of Revenues	Revenue RecognitionOur revenues consist of sales of products (tangible goods) and sales of services to customers. We recognize the majority of our revenue from contracts with customers using an over time, cost-to-cost method of accounting measured by the ratio of cumulative costs incurred to date to estimated total contract costs at completion (the "cost-to-cost method"). On certain other contracts, primarily time and material (“T&M”) and cost-plus contracts, revenue is recognized using the right-to-invoice practical expedient as we are contractually able to bill our customer based on control transferred to the customer. Cost of RevenuesCost of revenues includes materials, labor and overhead costs incurred in the manufacturing, design, and provision of products and services sold in the period as well as warranty costs. Material costs include raw materials, purchased components and sub-assemblies, outside processing and inbound freight costs. Labor and overhead costs consist of direct and indirect manufacturing costs, including wages and fringe benefits, operating supplies, depreciation and amortization, occupancy costs, and purchasing, receiving and inspection costs. The Company recognizes revenue for each separately identifiable performance obligation in a contract representing an obligation to transfer a distinct good or service to a customer. In most cases, goods and services provided under the Company’s contracts are accounted for as single performance obligations due to the complex and integrated nature of our products and services. These contracts generally require significant integration of a group of goods and/or services to deliver a combined output. In some contracts, the Company provides multiple distinct goods or services to a customer. In those cases, the Company accounts for the distinct contract deliverables as separate performance obligations and allocates the transaction price to each performance obligation based on its relative standalone selling price, which is generally estimated using cost plus a reasonable margin. We classify revenues as products or services on our Consolidated Statements of Earnings based on the predominant attributes of the performance obligations. While the Company provides warranties on certain contracts, we typically do not provide for services beyond standard assurances and therefore do not consider warranties to be separate performance obligations. Generally, we enter into three types of contracts: fixed-price contracts, cost-plus contracts and T&M contracts (cost-plus contracts and T&M contracts are aggregated below as flexibly priced contracts). The majority of our total revenues are derived from fixed-price contracts; refer to the revenue disaggregation disclosures that follow. For fixed-price contracts, customers agree to pay a fixed amount, negotiated in advanced for a specified scope of work. For cost-plus contracts typically we are reimbursed for allowable or otherwise defined total costs (defined as cost of revenues plus allowable general and administrative expenses) incurred, plus a fee. The contracts may also include incentives for various performance criteria, including quality, timeliness and cost-effectiveness. In addition, costs are generally subject to review by clients and regulatory audit agencies, and such reviews could result in costs being disputed as non-reimbursable under the terms of the contract. T&M contracts provide for reimbursement of labor hours expended at a contractual fixed labor rate per hour, plus the actual costs of material and other direct non-labor costs. The fixed labor rates on T&M contracts include amounts for the cost of direct labor, indirect contract costs and profit. Estimating the transaction price for an arrangement requires judgment and is based on expected results which are determined using the Company’s historical data. We estimate that the revenue that we expect to be entitled to receive from a customer to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. Revenue from contracts with customers is recognized when the performance obligations are satisfied through the transfer of control over the good or service to the customer, which may occur either over time or at a point in time. Revenues for the majority of our contracts are measured using the cost-to-cost method. We believe this is an appropriate measure of progress toward satisfaction of performance obligations as this measure most accurately depicts the progress of our work and transfer of control to our customers. Due to the long-term nature of many of our contracts, developing the estimated total cost at completion and total transaction price often requires judgment. Factors that must be considered in estimating the cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance. After establishing the estimated total cost at completion, we follow a standard Estimate at Completion (“EAC”) process in which we review the progress and performance on our ongoing contracts at least quarterly. Adjustments to original estimates for a contract's revenue, estimated costs at completion and estimated profit or loss often are required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change and are also required if contract modifications occur. When adjustments in estimated total costs at completion or in estimated total transaction price are determined, the related impact on revenue and operating income are recognized using the cumulative catch-up method, which recognizes in the current period the cumulative effect of such adjustments for all prior periods. Any anticipated losses on these contracts are fully recognized in the period in which the losses become evident. Conversely, if the requirements for the recognition of contracts over time are not met, revenue is recognized at a point in time when control transfers to the customer, which is generally upon transfer of title. In such cases, the production that is in progress and costs that will be recognized at a future point in time are reported within "inventories". Costs to obtain a contract are incremental direct costs incurred to obtain a contract with a customer, including sales commissions and dealer fees, and are capitalized if material. Costs to fulfill a contract include costs directly related to a contract or specific anticipated contract (e.g., certain design costs) that generate or enhance our ability to satisfy our performance obligations under these contracts. These costs are capitalized to the extent they are expected to be recovered from the associated contract. Contract Assets and Liabilities The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities. The change in the balances of the Company’s contract assets and liabilities primarily results from timing differences between revenue recognition and customer billings and/or payments. Contract assets related to amounts withheld by customers until contract completion are not considered a significant financing component of our contracts because the intent is to protect the customers from our failure to satisfactorily complete our performance obligations. Payments received from customers in advance of revenue recognition (contract liabilities) are not considered a significant financing component of our contracts because they are utilized to pay for contract costs within a one-year period or are requested by us to ensure the customers meet their payment obligations. Value of Remaining Performance Obligations The value of remaining performance obligations, which we also refer to as total backlog, includes the funded and unfunded components. Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts. Unfunded backlog represents the revenue value of firm orders for products and services under existing contracts for which funding has not yet been appropriated less funding previously recognized on these contracts.
Research and Development Expenses	Research and Development ExpensesWe conduct research and development (“R&D”) activities using our own funds (referred to as company-funded R&D or independent research and development (“IR&D”)) and under contractual arrangements with our customers (referred to as customer-funded R&D) to enhance existing products and services and to develop future products, solutions, and technologies. R&D costs include basic research, applied research, concept formulation studies, design, development, and related test activities. IR&D costs are allocated to customer contracts as part of the general and administrative overhead costs and generally recoverable on our customer contracts with the U.S. Government. Customer-funded R&D costs are charged directly to the related customer contract. Substantially all R&D costs are charged to cost of revenues as incurred.
Foreign Currency	Foreign CurrencySignificant transactions in foreign currencies are translated into U.S. dollars at the approximate prevailing rate at the time of the transaction. Foreign exchange transaction gains and losses in the third quarter and first nine months of 2022 and 2021 were immaterial to the Company's results of operations. The operations of the Company's foreign subsidiaries are translated from the local (functional) currencies into U.S. dollars using weighted average rates of exchange during each monthly period. The rates of exchange at each balance sheet date are used for translating certain balance sheet accounts and gains or losses resulting from these translation adjustments are included in the accompanying Consolidated Balance Sheets as a component of other comprehensive earnings.
Cash and Cash Equivalents	Cash and Cash EquivalentsCash and cash equivalents include cash on hand, deposits with banks or other short-term, highly liquid investments with original maturities of three months or less.
Accounts Receivable	Accounts ReceivableAccounts receivable consist of amounts billed and currently due from customers. We maintain an allowance recorded in the Allowance for Credit Losses account that is estimated and recorded utilizing relevant information about past events, including historical experience, current conditions and a reasonable and supportable forecast that affects the collectability of the related financial asset.
Inventories	InventoriesInventories are recorded at the lower of cost (determined by either actual, weighted average or first-in, first-out methods) or net realizable value, and include direct production costs as well as indirect costs, such as factory overhead. The net realizable value is calculated as the expected sales price in the course of normal operations net of estimated costs to finish and sell the goods.
Property, Plant and Equipment	Property, Plant and EquipmentProperty, plant and equipment is carried at cost less accumulated depreciation. Depreciation is calculated on the straight-line method. The estimated useful lives of plant, machinery and equipment and building and building improvements generally range from 3 to 10 years and 15 to 40 years, respectively. Leasehold improvements are amortized over the shorter of the estimated useful life of the improvements or the remaining life of the lease.When assets are retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the Consolidated Balance Sheets, and the net gain or loss is included in the determination of net earnings. Maintenance and repairs are charged to operations as incurred and renewals and improvements are capitalized.
Goodwill	Goodwill Goodwill is assigned to reporting units and is reviewed for impairment at the reporting unit level on an annual basis, or whenever changes in circumstances indicate that the carrying amount may not be recoverable. A reporting unit is an operating segment, or one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by the segment manager. Two or more components of an operating segment may be aggregated and deemed a single reporting unit if the components have similar economic characteristics. Based upon the aggregation criteria, the Company concluded it had six and seven reporting units at September 30, 2022 and December 31, 2021, respectively. The annual impairment test is conducted as of December 31. The Company did not identify any triggering events during the nine months ended September 30, 2022 or September 30, 2021.
Acquired Identifiable Intangible Assets	Identifiable intangible assets represent assets acquired as part of the Company's business acquisitions and include customer and program/contract-related assets. The values assigned to acquired identifiable intangible assets are determined as of the date of acquisition based on estimates and judgments regarding expectations for the estimated future after-tax cash flows from those assets over their lives, including the probability of expected future contract renewals and revenues, all of which are discounted to present value.Other intangible assets mainly refer to the fair value of existing customer contractual relationships attributable to the acquired business and patents which are being amortized over their respective lives. The fair value of intangible assets typically is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows (including cash flows for working capital) arising from backlog and follow-on sales to the customer over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory assets charge, all of which is discounted to present value.
Long-Lived Assets	The Company assesses the recoverability of the carrying value of its long-lived assets and intangible assets with finite useful lives whenever events or changes in circumstances indicate that the carrying amount of the assets or asset group may not be recoverable. If there are any indicators of impairment present, the Company then evaluates the recoverability of the potentially impaired long-lived assets and acquired identifiable intangible assets based upon expectations of undiscounted net cash flows from such assets. If the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset or asset group, a loss is recognized for the difference between the estimated fair value and the carrying amount of the assets. Assets to be disposed of, including those of discontinued operations, are reported at the lower of the carrying amount or fair value, less the costs to sell.
Derivative Financial Instruments	Derivative Financial InstrumentsThe Company does not use derivative financial instruments for trading purposes. All derivative instruments are carried on the Consolidated Balance Sheets as either assets or liabilities at fair value. The classification of gains and losses resulting from changes in the fair values of derivatives depends on the intended use of the derivative and its resultant designation. The Company had no significant derivative or hedging instruments for the periods presented.
Pension and Other Postretirement Benefits	Pension and Other Postretirement BenefitsThe obligations for the Company's pension plans and postretirement benefit plans and the related annual costs of employee benefits are calculated based on several long-term assumptions, including discount rates for employee benefit liabilities, rates of return on plan assets, expected annual rates of salary increases for employee participants in the case of pension plans and expected annual increases in the costs of medical and other health care benefits in the case of postretirement benefit plans. These long-term assumptions are subject to revision based on changes in interest rates, financial market conditions, expected versus actual returns on plan assets, participant mortality rates and other actuarial assumptions, including future rates of salary increases, benefit formulas and levels, and rates of increase in the costs of benefits. Changes in these assumptions, if significant, can materially affect the amount of annual net periodic benefit costs recognized in the Company's results of operations from one year to the next, the liabilities for the pension plans and postretirement benefit plans and the Company's annual cash requirements to fund these plans. The Company maintains multiple pension plans, both contributory and non-contributory, covering employees at certain locations. Eligibility requirements for participation in the plans vary, and benefits generally are based on the participant's compensation and years of service, as defined in the respective plan. The Company's funding policy generally is to contribute in accordance with cost accounting standards that affect government contractors, subject to the Tax Code and regulations thereunder. Plan assets are invested primarily in equities, bonds (both corporate and U.S. government), U.S. government-sponsored entity instruments, cash and cash equivalents and real estate. The Company also provides postretirement medical benefits for certain retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company's postretirement benefit plans. The Company's contractual arrangements with the U.S. government provide for the recovery of contributions to a Voluntary Employees' Beneficiary Association (“VEBA”) trust and, for non-funded plans, recovery of claims on a pay-as-you-go basis, subject to the Tax Code and regulations thereunder, with the retiree generally paying a portion of the costs through contributions, deductibles and coinsurance provisions. The Company also maintains certain non-contributory and unfunded supplemental retirement plans. Eligibility for participation in the supplemental retirement plans is limited, and benefits generally are based on the participant's compensation and/or years of service. The expected long-term return on plan assets assumption represents the average rate that the Company expects to earn over the long-term on the assets of the Company's benefit plans, including those from dividends, interest income and capital appreciation. The assumption has been determined based on expectations regarding future rates of return for the plans' investment portfolio, with consideration given to the allocation of investments by asset class and historical rates of return for each individual asset class.Pension related expenses are reflected in the Costs of revenues and General and administrative expenses on the Consolidated Statement of Earnings (unaudited).
Income Taxes	Income TaxesWe and US Holding have entered into a Tax Allocation Agreement (“Tax Allocation Agreement”), dated as of November 16, 2020, with members of an affiliated group, as defined in Section 1504(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Tax Code”), members of one or more consolidated, combined, unitary or similar state tax groups and additional parties who are part of an “expanded affiliated group” for certain tax purposes. The agreement provides for the method of computing and allocating the consolidated U.S. federal tax liability of the affiliated group among its members and of allocating any state group tax liabilities among the state members for the taxable year ending December 31, 2020 and each subsequent year in which the parties are members of a group (whether federal or state). The agreement also provides for reimbursement of US Holding and/or DRS for payment of such tax liabilities, for compensation of any member for use of its “net operating loss” or “tax credits” in arriving at such tax liabilities and the allocation and payment of any refund arising from a carryback of net operating losses or tax credits from subsequent taxable years. Under the agreement, the parties have agreed to calculate and allocate their respective tax liabilities and other tax attributes for taxable years beginning with the first consolidated taxable year that included DRS (i.e., the taxable year ended December 31, 2008) as if the agreement was then in effect. We calculate the provision for incomes taxes during interim periods by applying an estimate of our annual effective tax rate for the full year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items). The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Income taxes as presented attribute deferred income taxes of US Holding to DRS in a manner that is systematic, rational and consistent with the asset and liability method and the governing Tax Allocation Agreement which allocates the tax liability amongst the entities, including DRS. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of DRS’ assets and liabilities and are adjusted for changes in tax rates and tax laws when such changes are enacted. In general, the taxable income of DRS is included in the consolidated U.S. federal and state tax returns of US Holding. Where applicable, US Holding’s current portion of U.S. federal income taxes payable were offset against DRS’ net operating loss carryforwards in the period the related tax expense was recorded. Consequently, our net operating loss carryforwards are deemed to have been settled with US Holding in each year in an amount commensurate with the carrying value of the tax effected net operating loss utilized. If management determines that some portion or all of a deferred tax asset is not “more likely than not” to be realized, a valuation allowance is recorded as a component of the income tax provision to reduce the deferred tax asset to the amounts expected to be realized. In determining whether the Company’s deferred tax assets are realizable, management considers all evidence, both positive and negative, including the history of financial reporting earnings, existing taxable temporary differences and their projected reversals, as well as projected future income and tax planning strategies. We believe it is more likely than not that we will generate sufficient taxable income in future periods to realize our deferred tax assets, subject to the valuation allowances recognized. The Company assesses its tax positions for all periods open to examination by tax authorities based on the latest available information. Those positions are evaluated to determine whether they will more likely than not be sustained upon examination by the relevant taxing authorities. Liabilities for unrecognized tax benefits are measured based on the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. These unrecognized tax benefits are recorded as a component of income tax expense. Interest and penalties related to unrecognized tax benefits are not material.
Earnings Per Share	Earnings Per ShareBasic earnings per share (“EPS”) is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during each period. The computation of diluted EPS includes the dilutive effect of outstanding stock-based compensation awards, only in periods in which such effect would have been dilutive for the period. In February 2021, the Company completed a forward stock split of 1,450,000 - for- 1 share of common stock. The consolidated financial statements have been adjusted to reflect the forward stock split for all periods presented. There were 100 shares and 145 million basic and diluted common shares outstanding before and after the forward stock split, respectively, for all periods presented.
Fair Value Measurements	Fair Value MeasurementsFair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant on the measurement date. We are required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value, and to utilize a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three hierarchical levels used to measure fair value are as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices that are directly or indirectly observable. Level 3 — Significant inputs to the valuation model are unobservable. In certain instances, fair value is determined through information obtained from third parties using the latest available market data. In obtaining such data from third parties, we have evaluated the methodologies used to develop the estimate of fair value in order to assess whether such valuations are representative of fair value. The Company categorizes plan assets for disclosure purposes in accordance with this fair value hierarchy. Certain plan investments are measured at fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient and are therefore not categorized as Level 1, 2, or 3. NAV is defined as the total value of the fund divided by the number of the fund’s shares outstanding.
Financial Instruments	Financial InstrumentsOur financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities. Financial instruments are reported in the Consolidated Balance Sheets at carrying value, which other than the 7.5% Term loan due November 30, 2023, approximate fair value.
Acquisitions	AcquisitionsOur consolidated financial statements include the operations of acquired businesses from the date of acquisition. We account for acquired businesses using the acquisition method of accounting, which requires that any assets acquired and liabilities assumed be measured at their respective fair values on the acquisition date. The accounting for business combinations requires the Company to make significant judgments and estimates. Any excess of the fair value of consideration transferred over the assigned values of the net assets acquired is recognized as goodwill.
Investments	Investments Investments where we have the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in other noncurrent assets on our Consolidated Balance Sheets. Significant influence typically exists if we have a 20% to 50% ownership interest in the investee. Under this method of accounting, our share of the net earnings or losses of the investee is included in operating profit in other income, net on our Consolidated Statements of Earnings since the activities of the investee are closely aligned with the operations of the business segment holding the investment. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is therefore recorded during the current period. The Company sold its interest in its only investment accounted for under the equity method on July 8, 2022. The Company’s cost method investment consists of an investment in a private company in which we do not have the ability to exercise significant influence over its operating and financial activities. Management evaluates this investment for possible impairment quarterly.
Variable Interest Entities	Variable Interest Entities The Company occasionally forms joint ventures and/or enters into arrangements with special purpose limited liability companies for the purpose of bidding and executing on specific projects. The Company analyzes each such arrangement to determine whether it represents a variable interest entity (“VIE”). If the arrangement is determined to be a VIE, the Company assesses whether it is the primary beneficiary of the VIE and if it is, consequently required to consolidate the VIE. The Company did not have any investment in VIEs for the periods presented.

Revenue from Contracts with Customers (Tables)

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Schedule of Change in Estimate at Completion Adjustments

EAC adjustments had the following impacts to revenue for the periods presented:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in millions)	2022			2021			2022			2021
Revenue	$	(11)		$	(11)		$	(22)		$	(20)
Total % of Revenue	1.8		%	1.6		%	1.2		%	1.0		%

Schedule of Contract Assets and Contract Liabilities


(Dollars in millions)	September 30, 2022		December 31, 2021
Contract assets	$	913	$	743
Contract liabilities	195		174
Net contract assets	$	718	$	569

Schedule of Remaining Performance Obligations, Expected Timing of Satisfaction

The following table summarizes the value of our total backlog as of September 30, 2022, incorporating both funded and unfunded components:


Backlog:	September 30, 2022
(Dollars in millions)
Total Backlog	$	3,138

Schedule of Disaggregation of Revenue

We believe these categories best depict how the nature, amount, timing and uncertainty of ASC revenue and cash flows are affected by economic factors:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
Revenue by Geographical Region
United States	$	364	$	484	$	1,103	$	1,385
International	41		27		137		90
Intersegment Sales	3		6		8		13
Total	$	408	$	517	$	1,248	$	1,488
Revenue by Customer Relationship
Prime contractor	$	216	$	346	$	664	$	901
Subcontractor	189		165		576		574
Intersegment Sales	3		6		8		13
Total	$	408	$	517	$	1,248	$	1,488
Revenue by Contract Type
Firm Fixed Price	$	349	$	438	$	1,085	$	1,283
Flexibly Priced(1)	56		73		155		192
Intersegment Sales	3		6		8		13
Total	$	408	$	517	$	1,248	$	1,488

________________

(1)Includes revenue derived from time-and-materials contracts.

We believe these categories best depict how the nature, amount, timing and uncertainty of IMS revenue and cash flows are affected by economic factors:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
Revenue by Geographical Region
United States	$	222	$	198	$	612	$	547
International	7		11		21		37
Intersegment Sales	—		—		1		—
Total	$	229	$	209	$	634	$	584
Revenue by Customer Relationship
Prime contractor	$	41	$	41	$	110	$	127
Subcontractor	188		168		523		457
Intersegment Sales	—		—		1		—
Total	$	229	$	209	$	634	$	584
Revenue by Contract Type
Firm Fixed Price	$	195	$	179	$	542	$	495
Flexibly Priced(1)	34		30		91		89
Intersegment Sales	—		—		1		—
Total	$	229	$	209	$	634	$	584

________________

(1)Includes revenue derived from time-and-materials contracts.

Accounts Receivable (Tables)

9 Months Ended

Sep. 30, 2022

Receivables [Abstract]

Schedule of Accounts Receivable

Accounts receivable consist of the following:


(Dollars in millions)	September 30, 2022		December 31, 2021
Accounts receivable	$	171	$	157
Less allowance for credit losses	(1)		(1)
Accounts receivable, net	$	170	$	156

Inventories (Tables)

9 Months Ended

Sep. 30, 2022

Inventory Disclosure [Abstract]

Schedule of Inventory, Current

Inventories consists of the following:


(Dollars in millions)	September 30, 2022		December 31, 2021
Raw materials	$	50	$	43
Work in progress	194		161
Finished goods	2		1
Total	$	246	$	205

Property, Plant and Equipment (Tables)

9 Months Ended

Sep. 30, 2022

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment

Property, plant and equipment by major asset class consists of the following:


(Dollars in millions)	September 30, 2022		December 31, 2021
Land, buildings and improvements	$	321	$	312
Plant and machinery	190		191
Equipment and other	317		298
Total property, plant and equipment, at cost	828		801
Less accumulated depreciation	(466)		(437)
Total property, plant and equipment, net	$	362	$	364

Other Liabilities (Tables)

9 Months Ended

Sep. 30, 2022

Other Liabilities Disclosure [Abstract]

Other Liabilities

A summary of significant other liabilities by balance sheet caption follows:


(Dollars in millions)	September 30, 2022		December 31, 2021
Salaries, wages and accrued bonuses	$	63	$	70
Fringe benefits	68		74
Litigation	10		10
Restructuring costs	1		4
Provision for contract losses	55		48
Operating lease liabilities	25		24
Taxes Payable	87		—
Other(1)	56		65
Total other current liabilities	$	365	$	295
Operating lease liabilities	$	61	$	73
Other	14		1
Total other noncurrent liabilities	$	75	$	74

________________

(1)Consists primarily of environmental remediation reserves and warranty reserves. See Note 15: Commitments and Contingencies for more information regarding the warranty provision.

Goodwill (Tables)

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

Changes in the carrying amount of goodwill by reportable segment are as follows:


(Dollars in millions)	ASC		IMS		Total
Balance as of December 31, 2021	$	652	$	419	$	1,071
Reduction for Divestitures	(117)				(117)
Acquisition adjustment	(2)		—		(2)
Balance as of September 30, 2022	533		419		952

- Definition

Tabular disclosure of goodwill by reportable segment and in total which includes a rollforward schedule.

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
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-Section 50
-Paragraph 1
-Subparagraph (h)
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Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
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-Name Accounting Standards Codification
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Reference 3: http://www.xbrl.org/2009/role/commonPracticeRef
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-Name Accounting Standards Codification
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-Subparagraph (g)
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Reference 4: http://www.xbrl.org/2009/role/commonPracticeRef
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-Name Accounting Standards Codification
-Topic 350
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-Section 50
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-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 50
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Reference 6: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 7: http://www.xbrl.org/2009/role/commonPracticeRef
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Reference 8: http://www.xbrl.org/2009/role/commonPracticeRef
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-Name Accounting Standards Codification
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Reference 9: http://www.xbrl.org/2009/role/commonPracticeRef
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-Name Accounting Standards Codification
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Reference 11: http://www.xbrl.org/2003/role/exampleRef
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-Name Accounting Standards Codification
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Reference 12: http://www.xbrl.org/2009/role/commonPracticeRef
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-Name Accounting Standards Codification
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-Paragraph 1
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-URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13816-109267

+ Details

Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets


	September 30, 2022						December 31, 2021
(Dollars in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	957	$	(915)	$	42	$	957	$	(908)	$	49
Patents and licenses	9		(6)		3		9		(6)		3
Total intangible assets	$	966	$	(921)	$	45	$	966	$	(914)	$	52

Income Taxes (Tables)

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Schedule of Deferred Tax Assets and Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at September 30, 2021 and December 31, 2020 is as follows:


(Dollars in millions)	September 30, 2022		December 31, 2021
Gross deferred tax assets	$	110	$	120
Less valuation allowance	10		10
Deferred tax assets	100		110
Deferred tax liabilities	51		54
Deferred tax assets, net	$	49	$	56

Debt (Tables)

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Schedule of Debt

The Company’s debt consists of the following:


(Dollars in millions)	September 30, 2022		December 31, 2021

7.5% Term loan due November 30, 2023(1)	$	139	$	139
5.0% Daylight term loan due October 15, 2024(1)	78		78
Borrowings under revolving credit facility(1)	35		—
Finance lease and other	162		161
Short-term borrowings	3		15
Total debt principal	417		393
Less unamortized debt issuance costs and discounts	—		—
Total debt, net	417		393
Less short-term borrowings and current portion of long-term debt	(67)		(41)
Total long-term debt	$	350	$	352

________________

(1)The Company’s debt with related parties consists of two term loans and a working capital credit facility with US Holding, as described below.

Pension and Other Postretirement Benefits (Tables)

9 Months Ended

Sep. 30, 2022

Retirement Benefits [Abstract]

Schedule of Net Benefit Costs

The following table summarizes the components of net periodic benefit cost for the Company's pension, postretirement and supplemental retirement plans for the three months ended September 30:


	Defined Benefit Pension Plans				Postretirement Benefit Plan				Supplemental Retirement Plans
(Dollars in millions)	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Three Months Ended September 30, 2022		Three Months Ended September 30, 2021
Service cost	$	—	$	—	$	—	$	—	$	—	$	—
Interest cost	1		1		—		—		—		—
Less Expected return on plan assets	(1)		(2)		—		—		—		—
Amortization of net actuarial loss (gain)	—		—		—		—		—		—
Amortization of prior service cost	—		—		—		—		—		—
Settlement expense (income)	—		—		—		—		—		—
Net periodic benefit cost	$	—	$	(1)	$	—	$	—	$	—	$	—

The following table summarizes the components of net periodic benefit cost for the Company's pension, postretirement and supplemental retirement plans for the nine months ended September 30,:


	Defined Benefit Pension Plans				Postretirement Benefit Plan				Supplemental Retirement Plans
(Dollars in millions)	Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Service cost	$	—	$	—	$	—	$	—	$	—	$	—
Interest cost	$	4	$	4	—		—		1		—
Less Expected return on plan assets	$	(5)	$	(6)	—		—		—		—
Amortization of net actuarial loss (gain)	$	1	$	1	—		(1)		—		—
Amortization of prior service cost	$	—	$	—	—		—		—		—
Settlement expense (income)	$	1	$	—	—		—		—		—
Net periodic benefit cost	$	1	$	(1)	$	—	$	(1)	$	1	$	—

Commitment and Contingencies (Tables)

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Schedule of Product Warranty Liability

The following is a summary of changes in the product warranty balances during the period ended September 30, 2022:


(Dollars in millions)
Balance as of December 31, 2021	$	19
Additional provision	8
Reversal and utilization	(8)
Balance as of September 30, 2022	19

Segment Information (Tables)

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Schedule of Total Revenues and Intersegment Revenues by Segment

Total revenues and intersegment revenues by segment for the three and nine month periods ended September 30, 2022 and, September 30, 2021 consists of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
ASC	$	408	$	517	$	1,248	$	1,488
IMS	229		209		634		584
Corporate & Eliminations	(3)		(6)		(9)		(13)
Total revenue	$	634	$	720	$	1,873	$	2,059


(Dollars in millions)	2022		2021		2022		2021
ASC	$	3	$	6	$	8	$	13
IMS	—		—		1		—
Total intersegment revenue	$	3	$	6	$	9	$	13

Schedule of Depreciation, Assets by Segment and EBITDA Reconciliation to Net Earnings

Depreciation by segment for the three and nine month periods ended September 30, 2022 and September 30, 2021 consists of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
ASC	$	9	$	9	$	27	$	25
IMS	5		4		14		12
Total depreciation	$	14	$	13	$	41	$	37

Total assets by segment as of September 30, 2022 and December 31, 2021 consist of the following:


(Dollars in millions)	September 30, 2022		December 31, 2021
ASC	$	1,661	$	1,545
IMS	1,121		1,145
Corporate & Eliminations	149		379
Total assets	$	2,931	$	3,069

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
Adjusted EBITDA
ASC	$	36	$	56	$	125	$	171
IMS	22		14		73		39
Corporate & Eliminations	—		—		—		—
Total Adjusted EBITDA	58		70		198		210
Amortization of intangibles	(3)		(3)		(7)		(7)
Depreciation	(14)		(13)		(41)		(37)
Interest expense	(9)		(9)		(27)		(27)
Deal related transaction costs	(16)		—		(26)		(4)
Gain on sale of business	350		—		350		—
COVID-19 response costs	—		(1)		—		(6)
Other non-operational events	1		(1)		—		(2)
Income tax (provision) benefit	(88)		(8)		(107)		(31)
Net earnings	$	279	$	35	$	340	$	96

Summary of Significant Accounting Policies - Concentration Risk (Details) - segment	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Concentration Risk [Line Items]
Number of reportable segments			2
U.S. Department Of Defense \| Revenue from Contract with Customer Benchmark \| Government Contracts Concentration Risk
Concentration Risk [Line Items]
Concentration risk, percentage	83.00%	85.00%	82.00%	84.00%
International And Commercial Customers \| Revenue from Contract with Customer Benchmark \| Customer Concentration Risk
Concentration Risk [Line Items]
Concentration risk, percentage	17.00%	16.00%	18.00%	15.00%

Summary of Significant Accounting Policies - Property, Plant and Equipment (Details)	9 Months Ended
	Sep. 30, 2022
Plant and machinery \| Minimum
Property, Plant and Equipment [Line Items]
Useful life (in years)	3 years
Plant and machinery \| Maximum
Property, Plant and Equipment [Line Items]
Useful life (in years)	10 years
Building and Building Improvements \| Minimum
Property, Plant and Equipment [Line Items]
Useful life (in years)	15 years
Building and Building Improvements \| Maximum
Property, Plant and Equipment [Line Items]
Useful life (in years)	40 years

Summary of Significant Accounting Policies - Goodwill (Details) - reporting_unit	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Accounting Policies [Abstract]
Number of reporting units	6	7

Summary of Significant Accounting Policies - Earnings Per Share (Details)	1 Months Ended
	Feb. 28, 2021 shares	Sep. 30, 2022 shares	Dec. 31, 2021 shares	Jan. 31, 2021 shares
Accounting Policies [Abstract]
Stockholders' Equity Note, Stock Split, Conversion Ratio	1,450,000
Basic and Diluted common shares outstanding (in shares)	145,000,000	145,000,000	145,000,000	100

Summary of Significant Accounting Policies - Financial Instruments (Details)	Sep. 30, 2022
Term Loan \| Line of Credit
Debt Instrument [Line Items]
Stated interest rate (as percent)	7.50%

Summary of Significant Accounting Policies - Acquisitions (Details)	Sep. 30, 2022 $ / shares	Jun. 21, 2022 $ / shares	Jun. 21, 2022 ₪ / shares	Dec. 31, 2021 $ / shares
Business Acquisition [Line Items]
Common stock, par value (in monetary per share) \| $ / shares	$ 0.01	$ 0.01		$ 0.01
Common stock, exchange ratio		1	1
Holders Of RADA's Equity Interests
Business Acquisition [Line Items]
Business combination, percent of ownership after transaction		19.50%	19.50%
RADA Electronic Industries Ltd
Business Acquisition [Line Items]
Common stock, par value (in monetary per share) \| ₪ / shares			₪ 0.03
US Holdings
Business Acquisition [Line Items]
Business combination, percent of ownership after transaction		80.50%	80.50%
Business combination, percent of ownership of one time awards		50.00%	50.00%

Summary of Significant Accounting Policies - Divestitures (Details) - USD ($) $ in Millions			3 Months Ended		9 Months Ended
	Aug. 01, 2022	Jul. 08, 2022	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Mar. 21, 2022
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain (loss) on disposition of business, before transaction cost			$ 350	$ 0	$ 350	$ 0
Advanced Acoustic Concepts
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from sale of equity investments		$ 56
Gain (loss) on sale of equity investments		31
Gain (loss) on sale of equity investments, net of tax		22
Gain (loss) on sale of equity investments, income tax		9
US Holdings
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Dividends payable		$ 396
Global Enterprise Solutions \| Disposal Group, Disposed of by Sale, Not Discontinued Operations
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sale of business, consideration to be received							$ 450
Proceeds from divestiture of businesses	$ 427
Gain (loss) on disposition of business	305
Gain (loss) on disposition of business, net of tax	234
Gain (loss) on disposition of business, before transaction cost	319
Disposal group, including discontinued operation, transaction cost	14
Gain (loss) on disposition of business, income tax expense	$ (71)
Operating income from disposed business					$ 13	$ 23

Revenue from Contracts with Customers - Estimate at Completion Adjustments (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Change in Accounting Estimate [Line Items]
Revenue	$ 634	$ 720	$ 1,873	$ 2,059
Contracts Accounted for under Percentage of Completion
Change in Accounting Estimate [Line Items]
Revenue	$ (11)	$ (11)	$ (22)	$ (20)
Total % of Revenue	1.80%	1.60%	1.20%	1.00%

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 30
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8906-108599

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 40
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9031-108599

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 41
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9038-108599

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 4
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130543-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 42
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9054-108599

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 5
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130545-203045

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 924
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB Topic 11.L)
-URI https://asc.fasb.org/extlink&oid=6472922&loc=d3e499488-122856

+ Details

Revenue from Contracts with Customers - Contract Assets and Liabilities (Details) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Revenue from Contract with Customer [Abstract]
Contract assets	$ 913	$ 743
Contract liabilities	195	174
Net contract assets	$ 718	$ 569

Revenue from Contracts with Customers - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Revenue from Contract with Customer [Abstract]
Contract with customer, liability, revenue recognized	$ 14	$ 11	$ 121	$ 100

Revenue from Contracts with Customers - Remaining Performance Obligations, Backlog Schedule (Details) $ in Millions	Sep. 30, 2022 USD ($)
Revenue from Contract with Customer [Abstract]
Total Backlog	$ 3,138

Revenue from Contracts with Customers - Remaining Performance Obligations, Narrative (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01	Sep. 30, 2022
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, percentage	21.00%
Revenue, remaining performance obligation, expected timing of satisfaction, period	3 months

Revenue from Contracts with Customers - Disaggregation of Revenue (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation of Revenue [Line Items]
Total revenues	$ 634	$ 720	$ 1,873	$ 2,059
Intersegment Sales
Disaggregation of Revenue [Line Items]
Total revenues	(3)	(6)	(9)	(13)
ASC \| Prime contractor
Disaggregation of Revenue [Line Items]
Total revenues	216	346	664	901
ASC \| Subcontractor
Disaggregation of Revenue [Line Items]
Total revenues	189	165	576	574
ASC \| Firm Fixed Price
Disaggregation of Revenue [Line Items]
Total revenues	349	438	1,085	1,283
ASC \| Flexibly Priced
Disaggregation of Revenue [Line Items]
Total revenues	56	73	155	192
ASC \| Intersegment Sales
Disaggregation of Revenue [Line Items]
Total revenues	3	6	8	13
ASC \| Operating Segments
Disaggregation of Revenue [Line Items]
Total revenues	408	517	1,248	1,488
IMS \| Prime contractor
Disaggregation of Revenue [Line Items]
Total revenues	41	41	110	127
IMS \| Subcontractor
Disaggregation of Revenue [Line Items]
Total revenues	188	168	523	457
IMS \| Firm Fixed Price
Disaggregation of Revenue [Line Items]
Total revenues	195	179	542	495
IMS \| Flexibly Priced
Disaggregation of Revenue [Line Items]
Total revenues	34	30	91	89
IMS \| Intersegment Sales
Disaggregation of Revenue [Line Items]
Total revenues	0	0	1	0
IMS \| Operating Segments
Disaggregation of Revenue [Line Items]
Total revenues	229	209	634	584
United States \| ASC
Disaggregation of Revenue [Line Items]
Total revenues	364	484	1,103	1,385
United States \| IMS
Disaggregation of Revenue [Line Items]
Total revenues	222	198	612	547
International \| ASC
Disaggregation of Revenue [Line Items]
Total revenues	41	27	137	90
International \| IMS
Disaggregation of Revenue [Line Items]
Total revenues	$ 7	$ 11	$ 21	$ 37

Accounts Receivable (Details) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Receivables [Abstract]
Accounts receivable	$ 171	$ 157
Less allowance for credit losses	(1)	(1)
Accounts receivable, net	$ 170	$ 156

Accounts Receivable - Narrative (Details) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Receivables [Abstract]
Collection of sold receivables	$ 3	$ 15

Inventories (Details) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Raw materials	$ 50	$ 43
Work in progress	194	161
Finished goods	2	1
Total	$ 246	$ 205

Property, Plant and Equipment - Components of Property, Plant and Equipment (Details) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, at cost	$ 828	$ 801
Less accumulated depreciation	(466)	(437)
Total property, plant and equipment, net	362	364
Land, buildings and improvements
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, at cost	321	312
Plant and machinery
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, at cost	190	191
Equipment and other
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, at cost	$ 317	$ 298

Property, Plant and Equipment - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Property, Plant and Equipment [Abstract]
Depreciation	$ 14	$ 13	$ 41	$ 37

Other Liabilities (Details) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Other Liabilities Disclosure [Abstract]
Salaries, wages and accrued bonuses	$ 63	$ 70
Fringe benefits	68	74
Litigation	10	10
Restructuring costs	1	4
Provision for contract losses	55	48
Operating lease liabilities	25	24
Taxes Payable	87	0
Other	$ 56	$ 65
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]	Total other current liabilities	Total other current liabilities
Total other current liabilities	$ 365	$ 295
Operating lease liabilities	61	73
Other	$ 14	$ 1
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration]	Total other noncurrent liabilities	Total other noncurrent liabilities
Total other noncurrent liabilities	$ 75	$ 74

Goodwill - Schedule of Goodwill (Details) $ in Millions	9 Months Ended
Goodwill - Schedule of Goodwill (Details) $ in Millions	Sep. 30, 2022 USD ($)
Goodwill [Roll Forward]
Beginning balance	$ 1,071
Reduction for Divestitures	(117)
Acquisition adjustment	(2)
Ending balance	952
ASC
Goodwill [Roll Forward]
Beginning balance	652
Reduction for Divestitures	(117)
Acquisition adjustment	(2)
Ending balance	533
IMS
Goodwill [Roll Forward]
Beginning balance	419
Reduction for Divestitures
Acquisition adjustment	0
Ending balance	$ 419

- Definition

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

+ References + Details

Intangible Assets (Details) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 966	$ 966
Accumulated Amortization	(921)	(914)
Net Carrying Amount	45	52
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	957	957
Accumulated Amortization	(915)	(908)
Net Carrying Amount	42	49
Patents and licenses
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	9	9
Accumulated Amortization	(6)	(6)
Net Carrying Amount	$ 3	$ 3

Intangible Assets - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Finite-Lived Intangible Assets [Line Items]
Amortization of intangibles	$ (3)	$ (3)	$ (7)	$ (7)
Minimum \| Customer relationships
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life			10 years
Minimum \| Patents and licenses
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life			5 years
Maximum \| Customer relationships
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life			15 years
Maximum \| Patents and licenses
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life			10 years

Income Taxes - Deferred Tax Assets and Deferred Tax Liabilities (Details) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Income Tax Disclosure [Abstract]
Gross deferred tax assets	$ 110	$ 120
Less valuation allowance	10	10
Deferred tax assets	100	110
Deferred tax liabilities	51	54
Deferred tax assets, net	$ 49	$ 56

Income Taxes - Narrative (Details) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Income Tax Disclosure [Abstract]
Tax deferred asset	$ 11	$ 11

Debt - Schedule of Long-Term Debt (Details) $ in Millions	Sep. 30, 2022 USD ($) loan	Dec. 31, 2021 USD ($)	Jan. 31, 2009
Debt Instrument [Line Items]
Finance lease and other	$ 162	$ 161
Short-term borrowings	3	15
Total debt principal	417	393
Less unamortized debt issuance costs and discounts	0	0
Total debt, net	417	393
Less short-term borrowings and current portion of long-term debt	(67)	(41)
Total long-term debt	$ 350	352
7.5% Term Loan due November 30, 2023 \| Notes Payable, Other Payables
Debt Instrument [Line Items]
Stated interest rate (as percent)	7.50%		7.50%
Long-term debt, gross	$ 139	139
5.0% Daylight Term Loan due October 15, 2024 \| Notes Payable, Other Payables
Debt Instrument [Line Items]
Stated interest rate (as percent)	5.00%
Long-term debt, gross	$ 78	78
Revolving Credit Facility \| Line of Credit
Debt Instrument [Line Items]
Long-term debt, gross	$ 35	$ 0
Term Loan \| Notes Payable, Other Payables \| Affiliated Entity \| US Holdings
Debt Instrument [Line Items]
Number of term loans \| loan	2
Term Loan \| Line of Credit
Debt Instrument [Line Items]
Stated interest rate (as percent)	7.50%

Debt - Narrative (Details) - USD ($)	9 Months Ended	12 Months Ended
Debt - Narrative (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021	Jun. 30, 2017	Jan. 31, 2009
Debt Instrument [Line Items]
Collection of sold receivables	$ 3,000,000	$ 15,000,000
Line of Credit \| Revolving Credit Facility
Debt Instrument [Line Items]
Credit limit	450,000,000	450,000,000
Line of credit outstanding	$ 35,000,000	$ 0
Line of Credit \| Revolving Credit Facility \| LIBOR
Debt Instrument [Line Items]
Variable rate percentage	3.50%	3.50%
Commitment fee percentage	0.25%
7.5% Term Loan due November 30, 2023 \| Notes Payable, Other Payables
Debt Instrument [Line Items]
Principal amount				$ 2,000,000,000
Stated interest rate (as percent)	7.50%			7.50%
Long-term debt, gross	$ 139,000,000	$ 139,000,000
Fair value of long-term debt	$ 129,000,000	182,000,000
5.0% Daylight Term Loan due October 15, 2024 \| Notes Payable, Other Payables
Debt Instrument [Line Items]
Principal amount			$ 137,500,000
Stated interest rate (as percent)	5.00%
Long-term debt, gross	$ 78,000,000	78,000,000
Financial Institution Credit Facilities \| Line of Credit
Debt Instrument [Line Items]
Credit limit	75,000,000	65,000,000
Letters of credit outstanding	31,000,000	35,000,000
Financial Institution Credit Facilities \| Line of Credit \| Revolving Credit Facility
Debt Instrument [Line Items]
Credit limit	15,000,000
Line of credit outstanding	$ 0	$ 0
Financial Institution Credit Facilities \| Line of Credit \| Revolving Credit Facility \| LIBOR
Debt Instrument [Line Items]
Variable rate percentage	0.50%

Pension and Other Postretirement Benefits (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Defined Benefit Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 0	$ 0	$ 0	$ 0
Interest cost	1	1	4	4
Less Expected return on plan assets	(1)	(2)	(5)	(6)
Amortization of net actuarial loss (gain)	0	0	1	1
Amortization of prior service cost	0	0	0	0
Settlement expense (income)	0	0	1	0
Net periodic benefit cost	0	(1)	1	(1)
Postretirement Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Service cost	0	0	0	0
Interest cost	0	0	0	0
Less Expected return on plan assets	0	0	0	0
Amortization of net actuarial loss (gain)	0	0	0	(1)
Amortization of prior service cost	0	0	0	0
Settlement expense (income)	0	0	0	0
Net periodic benefit cost	0	0	0	(1)
Supplemental Retirement Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	0	0	0	0
Interest cost	0	0	1	0
Less Expected return on plan assets	0	0	0	0
Amortization of net actuarial loss (gain)	0	0	0	0
Amortization of prior service cost	0	0	0	0
Settlement expense (income)	0	0	0	0
Net periodic benefit cost	$ 0	$ 0	$ 1	$ 0

Commitment and Contingencies - Product Warranties (Details) $ in Millions	9 Months Ended
	Sep. 30, 2022 USD ($)
Movement in Standard Product Warranty Accrual [Roll Forward]
Beginning balance	$ 19
Additional provision	8
Reversal and utilization	(8)
Ending balance	$ 19
Minimum
Product Warranty Liability [Line Items]
Product warranty term	1 year
Maximum
Product Warranty Liability [Line Items]
Product warranty term	3 years

Related Party Transactions (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Related Party Transaction [Line Items]
Contract assets		$ 913		$ 913		$ 743
Affiliated Entity \| Leonardo S.p.A.
Related Party Transaction [Line Items]
Revenue from related parties		9	$ 3	63	$ 7
Related parties amount in cost of sales		2	$ 16	20	$ 22
Receivables		33		33		2
Payables		7		7		1
Contract assets		$ 8		$ 8		$ 0
Affiliated Entity \| US Holdings \| Minimum \| Surplus Agreement Receivable
Related Party Transaction [Line Items]
Variable rate spread	0.05%
Affiliated Entity \| US Holdings \| Maximum \| Surplus Agreement Receivable
Related Party Transaction [Line Items]
Variable rate spread	0.20%

Segment Information - Narrative (Details)	9 Months Ended
Segment Information - Narrative (Details)	Sep. 30, 2022 segment
Segment Reporting [Abstract]
Number of reportable segments	2

Segment Information - Revenues and Intersegment Revenues (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Segment Reporting Information [Line Items]
Revenue	$ 634	$ 720	$ 1,873	$ 2,059
Operating Segments \| ASC
Segment Reporting Information [Line Items]
Revenue	408	517	1,248	1,488
Operating Segments \| IMS
Segment Reporting Information [Line Items]
Revenue	229	209	634	584
Total intersegment revenue
Segment Reporting Information [Line Items]
Revenue	(3)	(6)	(9)	(13)
Total intersegment revenue \| ASC
Segment Reporting Information [Line Items]
Revenue	3	6	8	13
Total intersegment revenue \| IMS
Segment Reporting Information [Line Items]
Revenue	$ 0	$ 0	$ 1	$ 0

- Definition

+ References

+ Details

Segment Information - Depreciation and Assets (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Segment Reporting Information [Line Items]
Depreciation	$ 14	$ 13	$ 41	$ 37
Assets	2,931		2,931		$ 3,069
ASC
Segment Reporting Information [Line Items]
Depreciation	9	9	27	25
IMS
Segment Reporting Information [Line Items]
Depreciation	5	$ 4	14	$ 12
Operating Segments \| ASC
Segment Reporting Information [Line Items]
Assets	1,661		1,661		1,545
Operating Segments \| IMS
Segment Reporting Information [Line Items]
Assets	1,121		1,121		1,145
Corporate & Eliminations
Segment Reporting Information [Line Items]
Assets	$ 149		$ 149		$ 379

- Definition

Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-03(11))
-URI https://asc.fasb.org/extlink&oid=126897435&loc=d3e534808-122878

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 852
-SubTopic 10
-Section 55
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=84165509&loc=d3e56426-112766

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(4)(iii)(A))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442552-122756

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(4)(iv))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-03(a)(12))
-URI https://asc.fasb.org/extlink&oid=126734703&loc=d3e572229-122910

Reference 7: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 852
-SubTopic 10
-Section 50
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-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=124433192&loc=SL2890621-112765

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442552-122756

Reference 9: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 14: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 15: http://www.xbrl.org/2003/role/disclosureRef
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Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 17: http://www.xbrl.org/2003/role/disclosureRef
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Reference 18: http://www.xbrl.org/2003/role/disclosureRef
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Reference 21: http://www.xbrl.org/2003/role/disclosureRef
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Reference 22: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 23: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 24: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8906-108599

+ Details

Segment Information - EBITDA Reconciliation to Net Earnings (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Adjusted EBITDA
Adjusted EBITDA	$ 58	$ 70	$ 198	$ 210
Amortization of intangibles	(3)	(3)	(7)	(7)
Depreciation	(14)	(13)	(41)	(37)
Interest expense	(9)	(9)	(27)	(27)
Deal Related Transaction Costs	(16)	0	(26)	(4)
Gain on sale of business	350	0	350	0
COVID-19 response costs	0	(1)	0	(6)
Other non-operational events	1	(1)	0	(2)
Income tax (provision) benefit	(88)	(8)	(107)	(31)
Net earnings	279	35	340	96
ASC
Adjusted EBITDA
Depreciation	(9)	(9)	(27)	(25)
IMS
Adjusted EBITDA
Depreciation	(5)	(4)	(14)	(12)
Operating Segments \| ASC
Adjusted EBITDA
Adjusted EBITDA	36	56	125	171
Operating Segments \| IMS
Adjusted EBITDA
Adjusted EBITDA	22	14	73	39
Corporate & Eliminations
Adjusted EBITDA
Adjusted EBITDA	$ 0	$ 0	$ 0	$ 0