0001628280-24-044314 | 10-Q | XBRL Viewer

Material Terms of Trading Arrangement

During the three months ended September 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" as such terms are defined under Item 408 of Regulation S-K, except as follows(1):

Name and title

Date of adoption of 10b5-1 Plan(2)

Scheduled expiration date of 10b5-1 Plan(3)

Aggregate number of shares of common stock to be purchased or sold(4)(5)

William J. Lynn III, Chief Executive Officer

8/27/2024

8/29/2025

Up to 180,000 shares

John Baylouny, Executive Vice President, Chief Operating Officer

8/13/2024

4/30/2025

Up to 40,715 shares

Michael D. Dippold, Executive Vice President, Chief Financial Officer

8/13/2024

6/30/2025

Up to 76,863 shares

Mark A. Dorfman, Executive Vice President, General Counsel & Secretary

8/21/2024

6/30/2025

Up to 67,268 shares

Sally Wallace, Executive Vice President Operations

8/29/2024

4/30/2025

Up to 8,393 shares

Pamela Morrow, Senior Vice President Controller

8/29/2024

6/30/2025

Up to 31,093 shares

________________

(1)Each trading arrangement listed is a “Rule 10b5-1 Trading Arrangement” and is intended to satisfy the affirmative defense of Rule 10b5-1(c), as amended.

(2)Transactions under each Rule 10b5-1 Plan commence no earlier than 90 days after adoption, or such later date as required by Rule 10b5-1.

(3)Each Rule 10b5-1 Plan may expire on the earlier of the scheduled expiration date or such earlier date as all shares under the plan are sold.

(4)Each Rule 10b5-1 Plan provides for shares to be sold on multiple predetermined dates.

(5)The actual number of shares under each Rule 10b5-1 Plan may be different than the aggregate number of shares listed based on tax withholdings and performance and vesting conditions of performance-based stock units and restricted stock units (as applicable).

Non-Rule 10b5-1 Arrangement Adopted

false

Rule 10b5-1 Arrangement Terminated

false

Non-Rule 10b5-1 Arrangement Terminated

false

William J. Lynn III [Member]

William J. Lynn III

Chief Executive Officer

true

8/27/2024

8/29/2025

367 days

180,000

John Baylouny [Member]

John Baylouny

Executive Vice President, Chief Operating Officer

Michael D. Dippold [Member]

true

8/13/2024

4/30/2025

260 days

40,715

Michael D. Dippold

Executive Vice President, Chief Financial Officer

true

8/13/2024

6/30/2025

321 days

76,863

Mark A. Dorfman [Member]

Mark A. Dorfman

Executive Vice President, General Counsel & Secretary

true

8/21/2024

6/30/2025

313 days

67,268

Sally Wallace [Member]

Sally Wallace

Executive Vice President Operations

true

8/29/2024

4/30/2025

244 days

8,393

Pamela Morrow [Member]

Pamela Morrow

Senior Vice President Controller

true

8/29/2024

6/30/2025

305 days

31,093

Income Taxes - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
Income Taxes - Narrative (Details) - USD ($) $ in Millions	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Income Tax Disclosure [Abstract]
Effective income tax rate	17.40%	2.10%	19.00%	3.10%
Inflation Reduction Act Of 2022, income tax credits purchased	$ 25		$ 25
Inflation Reduction Act Of 2022, payment to acquire income tax credit	$ 23		$ 23

Commitments and Contingencies - Narrative (Details)	9 Months Ended
Commitments and Contingencies - Narrative (Details)	Sep. 30, 2024
Minimum
Product Warranty Liability [Line Items]
Product warranty term	1 year
Maximum
Product Warranty Liability [Line Items]
Product warranty term	3 years

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Operating activities
Net earnings	$ 124	$ 94
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization	68	63
Deferred income taxes	1	(13)
Share-based compensation expense	16	12
Other	1	1
Changes in assets and liabilities:
Accounts receivable	(86)	(34)
Contract assets	(89)	(189)
Inventories	(34)	(64)
Prepaid expenses	(8)	3
Other current assets	6	(8)
Other noncurrent assets	14	13
Defined benefit obligations	(2)	(8)
Other current liabilities	(36)	(82)
Other noncurrent liabilities	(21)	6
Accounts payable	(106)	(129)
Contract liabilities	(20)	25
Net cash used in operating activities	(172)	(310)
Investing activities
Capital expenditures	(56)	(42)
Proceeds from sales of assets	1	0
Net cash used in investing activities	(55)	(42)
Financing activities
Net decrease in third party borrowings (maturities of 90 days or less)	(35)	(11)
Repayment of third party debt	(238)	(454)
Borrowings of third party debt	230	555
Proceeds from stock issuance	13	8
Cash outlay to reacquire equity instruments	(4)	(1)
Other	(8)	(4)
Net cash (used in) provided by financing activities	(42)	93
Effect of exchange rate changes on cash and cash equivalents	0	0
Net decrease in cash and cash equivalents	(269)	(259)
Cash and cash equivalents at beginning of year	467	306
Cash and cash equivalents at end of period	$ 198	$ 47

Related Party Transactions	9 Months Ended
Related Party Transactions	Sep. 30, 2024
Related Party Transactions [Abstract]
Related Party Transactions	Related Party Transactions The Company has related party sales with the ultimate majority stockholder and its other affiliates that occur in the regular course of business. Related party sales for these transactions included in revenues were $6 million and $17 million for the three and nine months ended September 30, 2024, respectively, and $8 million and $19 million for the three and nine months ended September 30, 2023, respectively. The Company also has related party purchases with the ultimate majority stockholder 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 $3 million and $5 million for the three and nine months ended September 30, 2024, respectively, and $2 million and $3 million for the three and nine months ended September 30, 2023, respectively. The receivables related to these transactions with the ultimate majority stockholder and its other affiliates of $7 million and $8 million, respectively, and payables of $4 million and $4 million, respectively, as of September 30, 2024 and December 31, 2023, are included in accounts receivable, net and accounts payable in our Consolidated Balance Sheets. In addition, there was a related party balance in contract assets of $12 million at September 30, 2024.

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

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Pension and Other Postretirement Benefits

Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Income Tax Disclosure [Abstract]
Gross deferred tax assets	$ 257	$ 258
Less valuation allowance	23	21
Deferred tax assets	234	237
Deferred tax liabilities	116	118
Net deferred tax asset	$ 118	$ 119

Debt (Tables)

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

Schedule of Debt

The Company’s debt consists of the following:


(Dollars in millions)	September 30, 2024		December 31, 2023
2022 Term Loan A	$	205	$	214
Outstanding revolver	—		—
Finance lease and other	162		158
Short-term borrowings	1		35
Total debt principal	368		407
Less unamortized debt issuance costs and discounts	(1)		(1)
Total debt, net	367		406
Less short-term borrowings and current portion of long-term debt	(22)		(57)
Total long-term debt	$	345	$	349

Segment Information - EBITDA Reconciliation to Net Earnings (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Adjusted EBITDA
Adjusted EBITDA	$ 100	$ 82	$ 252	$ 193
Amortization of intangibles	(6)	(5)	(17)	(16)
Depreciation	(17)	(16)	(51)	(47)
Restructuring costs	0	(2)	(5)	(10)
Interest expense	(5)	(10)	(17)	(27)
Deal-related transaction costs	(1)	(1)	(5)	(4)
Other one-time non-operational events	(2)	0	(4)	8
Income tax provision	(12)	(1)	(29)	(3)
Net earnings	57	47	124	94
Operating Segments \| ASC
Adjusted EBITDA
Adjusted EBITDA	64	48	160	121
Operating Segments \| IMS
Adjusted EBITDA
Adjusted EBITDA	36	34	92	72
Corporate & Eliminations
Adjusted EBITDA
Adjusted EBITDA	$ 0	$ 0	$ 0	$ 0

Pension and Other Postretirement Benefits

9 Months Ended

Sep. 30, 2024

Retirement Benefits [Abstract]

The following tables provide certain information regarding the Company's pension, postretirement and supplemental retirement plans for the periods presented:


	Defined Benefit Pension Plans				Postretirement Benefit Plans				Supplemental Retirement Plans
	Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,
(Dollars in millions)	2024		2023		2024		2023		2024		2023

Interest cost	$	1	$	2	$	—	$	—	$	—	$	1
Expected return on plan assets	(1)		(2)		—		—		—		—


Settlement expense	1		—		—		—		—		—
Net periodic benefit cost	$	1	$	—	$	—	$	—	$	—	$	1


	Defined Benefit Pension Plans				Postretirement Benefit Plans				Supplemental Retirement Plans
	Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2024		2023		2024		2023		2024		2023

Interest cost	$	5	$	6	$	—	$	—	$	1	$	1
Expected return on plan assets	(4)		(5)		—		—		—		—
Amortization of net actuarial gain	—		1		—		—		—		—

Settlement expense	1		—		—		—		—		—
Net periodic benefit cost	$	2	$	2	$	—	$	—	$	1	$	1

Pension related expenses are reflected in cost of revenues and general and administrative expenses on the Consolidated Statements of Earnings.

Revenue from Contracts with Customers - Contract Assets and Liabilities (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Revenue from Contract with Customer [Abstract]
Contract assets	$ 997	$ 908
Contract liabilities	$ 315	$ 335

Other Liabilities

9 Months Ended

Sep. 30, 2024

Other Liabilities Disclosure [Abstract]

Other Liabilities

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


(Dollars in millions)	September 30, 2024		December 31, 2023
Salaries, wages and accrued bonuses	$	70	$	73
Fringe benefits	66		63
Litigation	—		2
Restructuring costs	1		10
Provision for contract losses	39		36
Operating lease liabilities	27		23
Taxes payable	9		46
Other(1)	39		35
Total other current liabilities	$	251	$	288
Operating lease liabilities	$	66	$	68
Unrecognized tax benefits	37		36
Other(1)	19		25
Total other noncurrent liabilities	$	122	$	129

________________

(1)Consists primarily of warranty reserves and provision for an acquired onerous contract. See Note 13: Commitments and Contingencies for more information regarding the warranty provision.

Intangible Assets - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangibles	$ 6	$ 5	$ 17	$ 16

Property, Plant and Equipment (Tables)

9 Months Ended

Sep. 30, 2024

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, 2024		December 31, 2023
Land, buildings and improvements	$	372	$	342
Plant and machinery	198		197
Equipment and other	354		334
Total property, plant and equipment, at cost	924		873
Less accumulated depreciation	(509)		(471)
Total property, plant and equipment, net	$	415	$	402

Accounts Receivable (Tables)

9 Months Ended

Sep. 30, 2024

Receivables [Abstract]

Schedule of Accounts Receivable

Accounts receivable consist of the following:


(Dollars in millions)	September 30, 2024		December 31, 2023
Accounts receivable	$	238	$	152
Less allowance for credit losses	(1)		(1)
Accounts receivable, net	$	237	$	151

Revenue from Contracts with Customers

9 Months Ended

Sep. 30, 2024

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

Contract Estimates

Revenues for the majority of our contracts are measured using the over time, percentage of completion cost-to-cost method of accounting to calculate percentage of completion. 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 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 on a routine basis. 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 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.

Net EAC adjustments had the following impacts for the periods presented:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in millions, except per share amounts)	2024			2023			2024			2023
Revenue and operating earnings	$	(10)		$	6		$	(29)		$	(14)
Total % of revenue	1		%	1		%	1		%	1		%
Net earnings	$	(8)		$	5		$	(23)		$	(11)
Impact on diluted earnings per share	$	(0.03)		$	0.02		$	(0.09)		$	(0.04)

The impacts noted above are attributed primarily to changes in our firm-fixed price development type programs. As changes happen in the design required to achieve contractual specifications, those changes often result in a change in the programs’ estimates and related profitability.

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. Contract assets and contract liabilities as of the dates presented were:


(Dollars in millions)	September 30, 2024		December 31, 2023
Contract assets	$	997	$	908
Contract liabilities	315		335

Revenue recognized in the nine months ended September 30, 2024 and 2023, that was included in the contract liability balance at the beginning of each period was $275 million and $157 million, respectively.

Value of Remaining Performance Obligations

The value of remaining performance obligations, which we also refer to as total backlog, includes the following components:

•Funded - 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 - 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.

As of September 30, 2024, our total backlog was $8,264 million. We expect to recognize approximately 12% of our September 30, 2024 backlog as revenue over the next three months, with the remainder to be recognized thereafter. Approximately 50% of our total backlog relates to long-term contracts on electric power and propulsion programs with the U.S. Navy, which are expected to be recognized as revenue over a span of up to 15 years.

Disaggregation of Revenue

ASC: ASC revenue is primarily derived from U.S. government development and production contracts and is generally recognized using the over time, percentage of completion cost-to-cost method of accounting. 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)	2024		2023		2024		2023
Revenue by Geographical Region
United States	$	426	$	376	$	1,159	$	1,046
International	101		50		282		162
Intersegment Sales	6		5		17		18
Total	$	533	$	431	$	1,458	$	1,226
Revenue by Customer Relationship
Prime contractor	$	200	$	227	$	616	$	570
Subcontractor	327		199		825		638
Intersegment Sales	6		5		17		18
Total	$	533	$	431	$	1,458	$	1,226
Revenue by Contract Type
Firm-Fixed Price	$	446	$	356	$	1,198	$	1,015
Flexibly Priced(1)	81		70		243		193
Intersegment Sales	6		5		17		18
Total	$	533	$	431	$	1,458	$	1,226

________________

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

IMS: IMS revenue is primarily derived from U.S. government development and production contracts and is generally recognized using the over time, percentage of completion cost-to-cost method of accounting. 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)	2024		2023		2024		2023
Revenue by Geographical Region
United States	$	277	$	272	$	796	$	680
International	8		5		16		12
Intersegment Sales	—		—		—		—
Total	$	285	$	277	$	812	$	692
Revenue by Customer Relationship
Prime contractor	$	58	$	62	$	182	$	156
Subcontractor	227		215		630		536
Intersegment Sales	—		—		—		—
Total	$	285	$	277	$	812	$	692
Revenue by Contract Type
Firm-Fixed Price	$	238	$	234	$	670	$	572
Flexibly Priced(1)	47		43		142		120
Intersegment Sales	—		—		—		—
Total	$	285	$	277	$	812	$	692

________________

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

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.

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Schedule of Net Benefit Costs

Revenue from Contracts with Customers - Disaggregation of Revenue (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Disaggregation of Revenue [Line Items]
Total revenues	$ 812	$ 703	$ 2,253	$ 1,900
Intersegment Sales
Disaggregation of Revenue [Line Items]
Total revenues	(6)	(5)	(17)	(18)
ASC \| Firm-Fixed Price
Disaggregation of Revenue [Line Items]
Total revenues	446	356	1,198	1,015
ASC \| Flexibly Priced
Disaggregation of Revenue [Line Items]
Total revenues	81	70	243	193
ASC \| Prime contractor
Disaggregation of Revenue [Line Items]
Total revenues	200	227	616	570
ASC \| Subcontractor
Disaggregation of Revenue [Line Items]
Total revenues	327	199	825	638
ASC \| Intersegment Sales
Disaggregation of Revenue [Line Items]
Total revenues	(6)	(5)	(17)	(18)
ASC \| Operating Segments
Disaggregation of Revenue [Line Items]
Total revenues	533	431	1,458	1,226
ASC \| United States
Disaggregation of Revenue [Line Items]
Total revenues	426	376	1,159	1,046
ASC \| International
Disaggregation of Revenue [Line Items]
Total revenues	101	50	282	162
IMS \| Firm-Fixed Price
Disaggregation of Revenue [Line Items]
Total revenues	238	234	670	572
IMS \| Flexibly Priced
Disaggregation of Revenue [Line Items]
Total revenues	47	43	142	120
IMS \| Prime contractor
Disaggregation of Revenue [Line Items]
Total revenues	58	62	182	156
IMS \| Subcontractor
Disaggregation of Revenue [Line Items]
Total revenues	227	215	630	536
IMS \| Intersegment Sales
Disaggregation of Revenue [Line Items]
Total revenues	0	0	0	0
IMS \| Operating Segments
Disaggregation of Revenue [Line Items]
Total revenues	285	277	812	692
IMS \| United States
Disaggregation of Revenue [Line Items]
Total revenues	277	272	796	680
IMS \| International
Disaggregation of Revenue [Line Items]
Total revenues	$ 8	$ 5	$ 16	$ 12

Commitments and Contingencies - Schedule of Product Warranty Liability (Details) $ in Millions	9 Months Ended
	Sep. 30, 2024 USD ($)
Movement in Standard Product Warranty Accrual [Roll Forward]
Beginning balance	$ 26
Additional provision	12
Reversal and utilization	(10)
Ending balance	$ 28

Pension and Other Postretirement Benefits (Tables)

9 Months Ended

Sep. 30, 2024

Retirement Benefits [Abstract]

The following tables provide certain information regarding the Company's pension, postretirement and supplemental retirement plans for the periods presented:


	Defined Benefit Pension Plans				Postretirement Benefit Plans				Supplemental Retirement Plans
	Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,
(Dollars in millions)	2024		2023		2024		2023		2024		2023

Interest cost	$	1	$	2	$	—	$	—	$	—	$	1
Expected return on plan assets	(1)		(2)		—		—		—		—


Settlement expense	1		—		—		—		—		—
Net periodic benefit cost	$	1	$	—	$	—	$	—	$	—	$	1


	Defined Benefit Pension Plans				Postretirement Benefit Plans				Supplemental Retirement Plans
	Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2024		2023		2024		2023		2024		2023

Interest cost	$	5	$	6	$	—	$	—	$	1	$	1
Expected return on plan assets	(4)		(5)		—		—		—		—
Amortization of net actuarial gain	—		1		—		—		—		—

Settlement expense	1		—		—		—		—		—
Net periodic benefit cost	$	2	$	2	$	—	$	—	$	1	$	1

Revenue from Contracts with Customers - Narrative (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Revenue from Contract with Customer [Abstract]
Contract with customer, liability, revenue recognized	$ 275	$ 157

Sale of Receivables (Tables)

9 Months Ended

Sep. 30, 2024

Transfers and Servicing [Abstract]

Schedule of Sale of Receivables

The table below summarizes the activity under the factoring facilities:


	Nine Months Ended September 30,
(Dollars in millions)	2024		2023
Beginning balance	$	192	$	243
Sales of receivables	60		110
Cash returned to purchasers	(241)		(332)
Outstanding balance sold to purchasers	11		21
Cash collected, not remitted to purchasers(1)	(1)		(1)
Remaining sold receivables	$	10	$	20

________________

(1)Represents cash collected on behalf of purchasers and not yet remitted. This balance is included within short-term borrowings and current portion of long-term debt in the Consolidated Balance Sheets. See Note 10: Debt for further information.

Inventories

9 Months Ended

Sep. 30, 2024

Inventory Disclosure [Abstract]

Inventories

Inventories consists of the following:


(Dollars in millions)	September 30, 2024		December 31, 2023
Raw materials	$	90	$	66
Work in progress	267		254
Finished goods	6		9
Total inventories	$	363	$	329

Other Liabilities (Tables)

9 Months Ended

Sep. 30, 2024

Other Liabilities Disclosure [Abstract]

Schedule of Other Liabilities

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


(Dollars in millions)	September 30, 2024		December 31, 2023
Salaries, wages and accrued bonuses	$	70	$	73
Fringe benefits	66		63
Litigation	—		2
Restructuring costs	1		10
Provision for contract losses	39		36
Operating lease liabilities	27		23
Taxes payable	9		46
Other(1)	39		35
Total other current liabilities	$	251	$	288
Operating lease liabilities	$	66	$	68
Unrecognized tax benefits	37		36
Other(1)	19		25
Total other noncurrent liabilities	$	122	$	129

________________

(1)Consists primarily of warranty reserves and provision for an acquired onerous contract. See Note 13: Commitments and Contingencies for more information regarding the warranty provision.

Inventories (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Inventory Disclosure [Abstract]
Raw materials	$ 90	$ 66
Work in progress	267	254
Finished goods	6	9
Total inventories	$ 363	$ 329

Earnings Per Share (“EPS”) - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Earnings Per Share [Abstract]
Net earnings, basic	$ 57	$ 47	$ 124	$ 94
Net earnings, diluted	$ 57	$ 47	$ 124	$ 94
Basic weighted average number of shares outstanding (in shares)	264	262	263	261
Impact of dilutive share-based awards (in shares)	4	3	4	3
Diluted weighted average number of shares outstanding (in shares)	268	265	267	264
Earnings per share attributable to common shareholders - basic (in dollars per share)	$ 0.22	$ 0.18	$ 0.47	$ 0.36
Earnings per share attributable to common shareholders - diluted (in dollars per share)	$ 0.21	$ 0.18	$ 0.46	$ 0.36

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

Amount, after deduction of tax, noncontrolling interests, dividends on preferred stock and participating securities; of income (loss) available to common shareholders.

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Amount, after deduction of tax, noncontrolling interests, dividends on preferred stock and participating securities, and addition from assumption of issuance of common shares for dilutive potential common shares; of income (loss) available to common shareholders.

Segment Information

9 Months Ended

Sep. 30, 2024

Segment Reporting [Abstract]

Segment Information

Operating 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. The Company’s operating and reportable segments consist of ASC and IMS. All other operations, which consists primarily of DRS corporate headquarters and certain non-operating subsidiaries of the Company, are grouped in Corporate & Eliminations.

We primarily use adjusted EBITDA, a non-GAAP financial measure, to manage the Company and allocate resources. Adjusted EBITDA of our business segments includes our net earnings before income taxes, amortization of acquired intangible assets, depreciation, restructuring costs, interest, deal-related transaction costs, other non-operating expenses such as foreign exchange, non-service pension expenditures, legal liability accrual reversals, and other one-time non-operational events as well as gains (losses) on business disposals. Adjusted EBITDA is used to facilitate a comparison of the ordinary, ongoing and customary course of our operations on a consistent basis from period to period and provide an additional understanding of factors and trends affecting our business segments. This measure assists the CODM in assessing segment operating performance consistently over time without the impact of our

capital structure, asset base and items outside the control of the management team and expenses that do not relate to our core operations.

Certain information related to our segments for the periods ended September 30, 2024 and 2023 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, 2024 and 2023 has been included in Note 1: Summary of Significant Accounting Policies. Intersegment sales are generally transferred at cost to the buying segment, and the sourcing segment does not recognize a profit. Such intercompany operating income is eliminated in consolidation, so that the Company’s total revenues and operating earnings reflect only those transactions with external customers.

Total revenues and intersegment revenues by segment for the periods ended September 30, 2024 and 2023 consists of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2024		2023		2024		2023
ASC	$	533	$	431	$	1,458	$	1,226
IMS	285		277		812		692
Corporate & Eliminations	(6)		(5)		(17)		(18)
Total revenues	$	812	$	703	$	2,253	$	1,900


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2024		2023		2024		2023
ASC	$	6	$	5	$	17	$	18
IMS	—		—		—		—
Total intersegment revenues	$	6	$	5	$	17	$	18

Reconciliation of reportable segment adjusted EBITDA to net earnings consists of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2024		2023		2024		2023
Adjusted EBITDA
ASC	$	64	$	48	$	160	$	121
IMS	36		34		92		72
Corporate & Eliminations	—		—		—		—
Total adjusted EBITDA	$	100	$	82	$	252	$	193
Amortization of intangibles	(6)		(5)		(17)		(16)
Depreciation	(17)		(16)		(51)		(47)
Restructuring costs	—		(2)		(5)		(10)
Interest expense	(5)		(10)		(17)		(27)
Deal-related transaction costs	(1)		(1)		(5)		(4)

Other one-time non-operational events	(2)		—		(4)		8
Income tax provision	(12)		(1)		(29)		(3)
Net earnings	$	57	$	47	$	124	$	94

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.

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Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Statement of Comprehensive Income [Abstract]
Net earnings	$ 57	$ 47	$ 124	$ 94
Other comprehensive income (loss):
Foreign currency translation loss, net of income taxes	0	(1)	(1)	0
Pension and other postretirement benefit plan adjustments, net of income taxes	0	1	1	2
Other comprehensive income (loss), net of income taxes	0	0	0	2
Total comprehensive income	$ 57	$ 47	$ 124	$ 96

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income, attributable to parent entity. Excludes changes in equity resulting from investments by owners and distributions to owners.

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

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Goodwill and Intangible Assets Disclosure [Abstract]

Other Liabilities (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Other Liabilities Disclosure [Abstract]
Salaries, wages and accrued bonuses	$ 70	$ 73
Fringe benefits	66	63
Litigation	0	2
Restructuring costs	1	10
Provision for contract losses	39	36
Operating lease liabilities	27	23
Taxes payable	9	46
Other	$ 39	$ 35
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]	Total other current liabilities	Total other current liabilities
Total other current liabilities	$ 251	$ 288
Operating lease liabilities	66	68
Unrecognized tax benefits	37	36
Other	$ 19	$ 25
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration]	Total other noncurrent liabilities	Total other noncurrent liabilities
Total other noncurrent liabilities	$ 122	$ 129

Consolidated Balance Sheets - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 198	$ 467
Accounts receivable, net	237	151
Contract assets	997	908
Inventories	363	329
Prepaid expenses	29	21
Other current assets	36	42
Total current assets	1,860	1,918
Noncurrent assets:
Property, plant and equipment, net	415	402
Intangible assets, net	138	151
Goodwill	1,238	1,238
Deferred tax assets	124	123
Other noncurrent assets	86	89
Total noncurrent assets	2,001	2,003
Total assets	3,861	3,921
Current liabilities:
Short-term borrowings and current portion of long-term debt	22	57
Accounts payable	292	398
Contract liabilities	315	335
Other current liabilities	251	288
Total current liabilities	880	1,078
Noncurrent liabilities:
Long-term debt	345	349
Pension and other postretirement benefit plan liabilities	34	36
Deferred tax liabilities	6	4
Other noncurrent liabilities	122	129
Total noncurrent liabilities	507	518
Commitments and contingencies (Note 13)
Shareholders' equity:
Preferred stock, $0.01 par value: 10,000,000 shares authorized; none issued	0	0
Common stock, $0.01 par value: 350,000,000 shares authorized; 264,308,455 and 262,525,390 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	3	3
Additional paid-in capital	5,200	5,175
Accumulated deficit	(2,682)	(2,806)
Accumulated other comprehensive loss	(47)	(47)
Total shareholders' equity	2,474	2,325
Total liabilities and shareholders' equity	$ 3,861	$ 3,921

Sale of Receivables - Schedule of Sale of Receivables (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Transfer of Financial Assets Accounted for as Sales [Roll Forward]
Beginning balance	$ 192	$ 243
Sales of receivables	60	110
Cash returned to purchasers	(241)	(332)
Outstanding balance sold to purchasers	11	21
Cash collected, not remitted to purchasers	(1)	(1)
Remaining sold receivables	$ 10	$ 20

Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2024

Schedule of Finite-Lived Intangible Assets

Intangible assets consists of the following:


	September 30, 2024						December 31, 2023
(Dollars in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Acquired intangible assets	$	1,087	$	(956)	$	131	$	1,087	$	(940)	$	147
Patents and licenses	14		(7)		7		10		(6)		4
Total intangible assets	$	1,101	$	(963)	$	138	$	1,097	$	(946)	$	151

Segment Information - Revenues and Intersegment Revenues (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Segment Reporting Information [Line Items]
Total revenues	$ 812	$ 703	$ 2,253	$ 1,900
Operating Segments \| ASC
Segment Reporting Information [Line Items]
Total revenues	533	431	1,458	1,226
Operating Segments \| IMS
Segment Reporting Information [Line Items]
Total revenues	285	277	812	692
Corporate & Eliminations
Segment Reporting Information [Line Items]
Total revenues	(6)	(5)	(17)	(18)
Corporate & Eliminations \| ASC
Segment Reporting Information [Line Items]
Total revenues	(6)	(5)	(17)	(18)
Corporate & Eliminations \| IMS
Segment Reporting Information [Line Items]
Total revenues	$ 0	$ 0	$ 0	$ 0

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.

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Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2024

Schedule of Product Warranty Liability

The following is a summary of changes in the product warranty balances during the nine months ended September 30, 2024:


(Dollars in millions)
Balance at December 31, 2023	$	26
Additional provision	12
Reversal and utilization	(10)
Balance at September 30, 2024	$	28

Property, Plant and Equipment - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Property, Plant and Equipment [Abstract]
Depreciation	$ 17	$ 16	$ 51	$ 47

Cover - shares	9 Months Ended
Cover - shares	Sep. 30, 2024	Oct. 29, 2024
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2024
Document Transition Report	false
Entity File Number	001-41565
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	Common stock, $0.01 par value
Trading Symbol	DRS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		264,397,059
Amendment Flag	false
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001833756
Current Fiscal Year End Date	--12-31

Commitments and Contingencies

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments

The Company’s commitments are primarily related to our lease agreements, purchase obligations, 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. The Company reviews the developments in contingencies that could affect the amount of the reserves that have been previously recorded. The Company adjusts provisions and changes to disclosures accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. Significant judgment is required to determine both the probability and the estimated amount of any potential losses.

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 nine months ended September 30, 2024:


(Dollars in millions)
Balance at December 31, 2023	$	26
Additional provision	12
Reversal and utilization	(10)
Balance at September 30, 2024	$	28

Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Our effective tax rate was 17.4% and 19.0% for the three and nine months ended September 30, 2024, respectively, and 2.1% and 3.1% for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended September 30, 2023, the effective tax rate was lower than the statutory rate primarily due to the recognition of discrete tax benefits associated with historic research and development credits.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at September 30, 2024 and December 31, 2023 are as follows:


(Dollars in millions)	September 30, 2024		December 31, 2023

Gross deferred tax assets	$	257	$	258
Less valuation allowance	23		21
Deferred tax assets	234		237
Deferred tax liabilities	116		118
Net deferred tax asset	$	118	$	119

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IRA”) which, among other items, allows a company to purchase transferable tax credits. During the three and nine months ended September 30, 2024, the Company purchased $25 million in tax credits for approximately $23 million in cash. These credits were used to offset the Company’s federal tax liability for 2023.

The entire disclosure for income tax.

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Reference 12: http://www.xbrl.org/2003/role/disclosureRef
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
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Pay vs Performance Disclosure - USD ($) $ in Millions	3 Months Ended		9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Millions	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure
Net earnings	$ 57	$ 47	$ 124	$ 94

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

Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Debt Instrument [Line Items]
Finance lease and other	$ 162	$ 158
Short-term borrowings	1	35
Total debt principal	368	407
Less unamortized debt issuance costs and discounts	(1)	(1)
Total debt, net	367	406
Less short-term borrowings and current portion of long-term debt	(22)	(57)
Total long-term debt	345	349
2022 Term Loan A \| Notes Payable, Other Payables
Debt Instrument [Line Items]
Long-term debt, gross	205	214
Outstanding revolver \| Notes Payable, Other Payables
Debt Instrument [Line Items]
Long-term debt, gross	$ 0	$ 0

Consolidated Statements of Shareholders' 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, 2022	$ 2,127	$ 3	$ 5,147	$ (49)	$ (2,974)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income	96			2	94
Share-based compensation activity	19		19
Balance at end of period at Sep. 30, 2023	2,242	3	5,166	(47)	(2,880)
Balance at beginning of period at Jun. 30, 2023	2,189	3	5,160	(47)	(2,927)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income	47				47
Share-based compensation activity	6		6
Balance at end of period at Sep. 30, 2023	2,242	3	5,166	(47)	(2,880)
Balance at beginning of period at Dec. 31, 2023	2,325	3	5,175	(47)	(2,806)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income	124				124
Share-based compensation activity	25		25
Balance at end of period at Sep. 30, 2024	2,474	3	5,200	(47)	(2,682)
Balance at beginning of period at Jun. 30, 2024	2,406	3	5,189	(47)	(2,739)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income	57				57
Share-based compensation activity	11		11
Balance at end of period at Sep. 30, 2024	$ 2,474	$ 3	$ 5,200	$ (47)	$ (2,682)

Amount of equity (deficit) attributable to parent. Excludes temporary equity and equity attributable to noncontrolling interest.

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Schedule of Earnings Per Share, Basic and Diluted

Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, at cost	$ 924	$ 873
Less accumulated depreciation	(509)	(471)
Total property, plant and equipment, net	415	402
Land, buildings and improvements
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, at cost	372	342
Plant and machinery
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, at cost	198	197
Equipment and other
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, at cost	$ 354	$ 334

Debt - Narrative (Details) - USD ($) $ in Millions	1 Months Ended	9 Months Ended
Debt - Narrative (Details) - USD ($) $ in Millions	Nov. 30, 2022	Sep. 30, 2024	Dec. 31, 2023
Debt Instrument [Line Items]
Collection of sold receivables		$ 1	$ 35
2022 Credit Agreement \| Notes Payable, Other Payables
Debt Instrument [Line Items]
Credit limit	$ 500
2022 Term Loan A \| Notes Payable, Other Payables
Debt Instrument [Line Items]
Principal amount	$ 225
Long-term debt, gross		205	214
Fair value of long-term debt		201
2022 Term Loan A \| Notes Payable, Other Payables \| Minimum
Debt Instrument [Line Items]
Variable rate percentage	1.48%
2022 Term Loan A \| Notes Payable, Other Payables \| Maximum
Debt Instrument [Line Items]
Variable rate percentage	2.10%
Outstanding revolver \| Notes Payable, Other Payables
Debt Instrument [Line Items]
Credit limit		275	275
Long-term debt, gross		$ 0	0
Weighted average interest rate		6.78%
Outstanding revolver \| Notes Payable, Other Payables \| Minimum
Debt Instrument [Line Items]
Variable rate percentage		1.48%
Commitment fee percentage		0.20%
Outstanding revolver \| Notes Payable, Other Payables \| Maximum
Debt Instrument [Line Items]
Variable rate percentage		2.10%
Commitment fee percentage		0.35%
Financial Institution Credit Facilities \| Line of Credit
Debt Instrument [Line Items]
Credit limit		$ 130	65
Letters of credit outstanding		$ 47	$ 41

Accounts Receivable (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Receivables [Abstract]
Accounts receivable	$ 238	$ 152
Less allowance for credit losses	(1)	(1)
Accounts receivable, net	$ 237	$ 151

Earnings Per Share (“EPS”) (Tables)

9 Months Ended

Sep. 30, 2024

Earnings Per Share [Abstract]


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share amounts)	2024		2023		2024		2023
Net earnings	$	57	$	47	$	124	$	94
Basic weighted average number of shares outstanding	264		262		263		261
Impact of dilutive share-based awards	4		3		4		3
Diluted weighted average number of shares outstanding	268		265		267		264
Earnings per share attributable to common shareholders - basic	$	0.22	$	0.18	$	0.47	$	0.36
Earnings per share attributable to common shareholders - diluted	$	0.21	$	0.18	$	0.46	$	0.36

Income Taxes (Tables)

9 Months Ended

Sep. 30, 2024

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, 2024 and December 31, 2023 are as follows:


(Dollars in millions)	September 30, 2024		December 31, 2023

Gross deferred tax assets	$	257	$	258
Less valuation allowance	23		21
Deferred tax assets	234		237
Deferred tax liabilities	116		118
Net deferred tax asset	$	118	$	119

Consolidated Statements of Earnings (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenues:
Total revenues	$ 812	$ 703	$ 2,253	$ 1,900
Cost of revenues:
Total cost of revenues	(633)	(541)	(1,752)	(1,462)
Gross profit	179	162	501	438
General and administrative expenses	(98)	(96)	(306)	(286)
Amortization of intangibles	(6)	(5)	(17)	(16)
Other operating expenses, net	0	(2)	(5)	(10)
Operating earnings	75	59	173	126
Interest expense	(5)	(10)	(17)	(27)
Other, net	(1)	(1)	(3)	(2)
Earnings before taxes	69	48	153	97
Income tax provision	12	1	29	3
Net earnings	$ 57	$ 47	$ 124	$ 94
Net earnings per share from common stock:
Basic earnings per share (in dollars per share)	$ 0.22	$ 0.18	$ 0.47	$ 0.36
Diluted earnings per share (in dollars per share)	$ 0.21	$ 0.18	$ 0.46	$ 0.36
Products
Revenues:
Total revenues	$ 762	$ 651	$ 2,116	$ 1,761
Cost of revenues:
Total cost of revenues	(601)	(504)	(1,661)	(1,365)
Services
Revenues:
Total revenues	50	52	137	139
Cost of revenues:
Total cost of revenues	$ (32)	$ (37)	$ (91)	$ (97)

Revenue from Contracts with Customers - Remaining Performance Obligations, Narrative (Details) $ in Millions	Sep. 30, 2024 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Total backlog	$ 8,264
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-10-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, percentage	12.00%
Revenue, remaining performance obligation, expected timing of satisfaction, period	3 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 \| Long-Term Contracts on Electric Power and Propulsion Programs
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, percentage	50.00%
Revenue, remaining performance obligation, expected timing of satisfaction, period	15 years

Segment Information (Tables)

9 Months Ended

Sep. 30, 2024

Segment Reporting [Abstract]

Schedule of Total Revenues and Intersegment Revenues by Segment

Total revenues and intersegment revenues by segment for the periods ended September 30, 2024 and 2023 consists of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2024		2023		2024		2023
ASC	$	533	$	431	$	1,458	$	1,226
IMS	285		277		812		692
Corporate & Eliminations	(6)		(5)		(17)		(18)
Total revenues	$	812	$	703	$	2,253	$	1,900


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2024		2023		2024		2023
ASC	$	6	$	5	$	17	$	18
IMS	—		—		—		—
Total intersegment revenues	$	6	$	5	$	17	$	18

Schedule of Reconciliation of Reportable Segment Adjusted EBITDA to Net Earnings

Reconciliation of reportable segment adjusted EBITDA to net earnings consists of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2024		2023		2024		2023
Adjusted EBITDA
ASC	$	64	$	48	$	160	$	121
IMS	36		34		92		72
Corporate & Eliminations	—		—		—		—
Total adjusted EBITDA	$	100	$	82	$	252	$	193
Amortization of intangibles	(6)		(5)		(17)		(16)
Depreciation	(17)		(16)		(51)		(47)
Restructuring costs	—		(2)		(5)		(10)
Interest expense	(5)		(10)		(17)		(27)
Deal-related transaction costs	(1)		(1)		(5)		(4)

Other one-time non-operational events	(2)		—		(4)		8
Income tax provision	(12)		(1)		(29)		(3)
Net earnings	$	57	$	47	$	124	$	94

Sale of Receivables - Narrative (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Transfers and Servicing [Abstract]
Sale of receivable, aggregate capacity	$ 225		$ 275
Sale of receivables, purchase discount fees	$ 0	$ 0

Property, Plant and Equipment

9 Months Ended

Sep. 30, 2024

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, 2024		December 31, 2023
Land, buildings and improvements	$	372	$	342
Plant and machinery	198		197
Equipment and other	354		334
Total property, plant and equipment, at cost	924		873
Less accumulated depreciation	(509)		(471)
Total property, plant and equipment, net	$	415	$	402

Depreciation expense related to property, plant and equipment was $17 million and $51 million for the three and nine months ended September 30, 2024, respectively, and $16 million and $47 million for the three and nine months ended September 30, 2023, respectively.

Intangible Assets - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,101	$ 1,097
Accumulated Amortization	(963)	(946)
Net Carrying Amount	138	151
Acquired intangible assets
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,087	1,087
Accumulated Amortization	(956)	(940)
Net Carrying Amount	131	147
Patents and licenses
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	14	10
Accumulated Amortization	(7)	(6)
Net Carrying Amount	$ 7	$ 4

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

Revenue from Contract with Customer [Abstract]

Pension and Other Postretirement Benefits (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Defined Benefit Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Interest cost	$ 1	$ 2	$ 5	$ 6
Expected return on plan assets	(1)	(2)	(4)	(5)
Amortization of net actuarial gain			0	1
Settlement expense	1	0	1	0
Net periodic benefit cost	1	0	2	2
Postretirement Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Interest cost	0	0	0	0
Expected return on plan assets	0	0	0	0
Amortization of net actuarial gain			0	0
Settlement expense	0	0	0	0
Net periodic benefit cost	0	0	0	0
Supplemental Retirement Plans
Defined Benefit Plan Disclosure [Line Items]
Interest cost	0	1	1	1
Expected return on plan assets	0	0	0	0
Amortization of net actuarial gain			0	0
Settlement expense	0	0	0	0
Net periodic benefit cost	$ 0	$ 1	$ 1	$ 1

Revenue from Contracts with Customers (Tables)

9 Months Ended

Sep. 30, 2024

Schedule of Change in Estimate at Completion Adjustments

Net EAC adjustments had the following impacts for the periods presented:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in millions, except per share amounts)	2024			2023			2024			2023
Revenue and operating earnings	$	(10)		$	6		$	(29)		$	(14)
Total % of revenue	1		%	1		%	1		%	1		%
Net earnings	$	(8)		$	5		$	(23)		$	(11)
Impact on diluted earnings per share	$	(0.03)		$	0.02		$	(0.09)		$	(0.04)

Schedule of Contract Assets and Contract Liabilities

Contract assets and contract liabilities as of the dates presented were:


(Dollars in millions)	September 30, 2024		December 31, 2023
Contract assets	$	997	$	908
Contract liabilities	315		335

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)	2024		2023		2024		2023
Revenue by Geographical Region
United States	$	426	$	376	$	1,159	$	1,046
International	101		50		282		162
Intersegment Sales	6		5		17		18
Total	$	533	$	431	$	1,458	$	1,226
Revenue by Customer Relationship
Prime contractor	$	200	$	227	$	616	$	570
Subcontractor	327		199		825		638
Intersegment Sales	6		5		17		18
Total	$	533	$	431	$	1,458	$	1,226
Revenue by Contract Type
Firm-Fixed Price	$	446	$	356	$	1,198	$	1,015
Flexibly Priced(1)	81		70		243		193
Intersegment Sales	6		5		17		18
Total	$	533	$	431	$	1,458	$	1,226

________________

(1)Includes revenue derived from cost-plus and 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)	2024		2023		2024		2023
Revenue by Geographical Region
United States	$	277	$	272	$	796	$	680
International	8		5		16		12
Intersegment Sales	—		—		—		—
Total	$	285	$	277	$	812	$	692
Revenue by Customer Relationship
Prime contractor	$	58	$	62	$	182	$	156
Subcontractor	227		215		630		536
Intersegment Sales	—		—		—		—
Total	$	285	$	277	$	812	$	692
Revenue by Contract Type
Firm-Fixed Price	$	238	$	234	$	670	$	572
Flexibly Priced(1)	47		43		142		120
Intersegment Sales	—		—		—		—
Total	$	285	$	277	$	812	$	692

________________

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

Summary of Significant Accounting Policies (Details) - segment	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
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	81.00%	80.00%
International and Commercial Customers \| Revenue from Contract with Customer Benchmark \| Customer Concentration Risk
Concentration Risk [Line Items]
Concentration risk, percentage	19.00%	20.00%

Revenue from Contracts with Customers - Estimate at Completion Adjustments (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Change in Accounting Estimate [Line Items]
Net earnings	$ 57	$ 47	$ 124	$ 94
Impact on diluted earnings per share (in dollars per share)	$ 0.21	$ 0.18	$ 0.46	$ 0.36
Contracts Accounted for under Percentage of Completion
Change in Accounting Estimate [Line Items]
Revenue and operating earnings	$ (10)	$ 6	$ (29)	$ (14)
Total % of revenue	1.00%	1.00%	1.00%	1.00%
Net earnings	$ (8)	$ 5	$ (23)	$ (11)
Impact on diluted earnings per share (in dollars per share)	$ (0.03)	$ 0.02	$ (0.09)	$ (0.04)

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

Summary of Significant Accounting Policies	9 Months Ended
Summary of Significant Accounting Policies	Sep. 30, 2024
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’s largest shareholder is Leonardo S.p.A (hereinafter, “Leonardo S.p.A.”), an Italian multi-national aerospace, defense and security company headquartered in Rome, Italy, through its ultimate sole ownership of Leonardo US Holding, LLC (“US Holding”). US Holding is the majority stockholder 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 electric power and propulsion. These capabilities directly align with our two reportable operating segments: Advanced Sensing and Computing and Integrated Mission Systems. The U.S. Department of Defense (the “DoD”) is our largest customer and accounts for approximately 81% and 80% of our total revenues as an end-user for the nine months ended September 30, 2024 and 2023, respectively. Specific international and commercial market opportunities exist within these segments and comprise approximately 19% and 20% of our total revenues for the nine months ended September 30, 2024 and 2023, 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 Our Advanced Sensing and Computing (“ASC”) segment designs, develops and manufactures sensing and network computing technology that enables real-time situational awareness required for enhanced operational decision making and execution by our customers. Our leading sensing capabilities span applications including missions requiring advanced passive and active detection, precision targeting and surveillance sensing, long range electro-optic/infrared (“EO/IR”), signals intelligence (“SIGINT”) and other intelligence systems, electronic warfare (“EW”), ground vehicle sensing, next generation active electronically scanned array tactical radars, dismounted soldier sensing and space sensing. Across our offerings, we are focused on advancing sensor distance, precision, clarity, definition, spectral depth and effectiveness. Furthermore, we seek to leverage our multi-decade experience to optimize size, weight, power and cost tailored to our customers’ specific mission requirements, including in space-based applications for earth surveillance and missile tracking. Our sensing capabilities are complemented by our rugged, trusted and cyber resilient network computing products. Our network computing offering is utilized across a broad range of mission applications including platform computing on ground and shipboard (both surface ship and submarine) for advanced battle management, combat systems, radar, command and control (“C2”), tactical networks, tactical computing and communications. Our network computing products support the DoD’s need for greater situational understanding at the tactical edge and permits data to be rapidly transmitted securely from command centers to forward-positioned defense assets. Integrated Mission Systems Our Integrated Mission Systems (“IMS”) segment designs, develops, manufactures and integrates power conversion, control and distribution systems, ship propulsion systems, motors and variable frequency drives, force protection systems, transportation and logistics systems for the U.S. and allied defense customers. Our naval power and propulsion systems are providing next-generation power capabilities for the future fleet. DRS is currently a leading provider of next-generation electrical propulsion systems for the U.S. Navy. We provide power conversion, control, distribution and propulsion systems for the U.S. Navy’s top priority shipbuilding programs, including the Columbia Class ballistic missile submarine, the first modern U.S. electric drive submarine. We believe DRS is well positioned to meet the needs of an increasingly electrified fleet with our high-efficiency, power dense permanent magnet motors, energy storage systems and associated efficient, rugged and compact power conversion, electrical actuation systems, and advanced cooling technologies. DRS has a long history of providing a number of other critical products to the U.S. Navy with a significant installed base on submarines, aircraft carriers and other surface ships including motor controllers, instrumentation and control equipment, electrical actuation systems, and thermal management systems for electronics and ship stores refrigeration. Our technologies and systems help protect U.S. forces and assets against increasingly sophisticated and proliferating threats. DRS is an integrator of systems in ground vehicles for short-range air defense, counter-unmanned aerial systems (“C-UAS”), and vehicle survivability and protection. This integrator role includes utilizing radars, EW equipment, reconnaissance and surveillance systems, modular combat vehicle turrets, and stabilized sensor suites, and kinetic countermeasures for short-range air defense. Our force protection systems, including solutions for C-UAS, short-range air defense systems and active protection systems used to defend ground combat vehicles, help protect personnel and defense assets from these growing threats. See Note 15: Segment Information for further information regarding our operating 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 and contain all adjustments, which are of a normal and recurring nature, considered necessary by management to present fairly the financial position, results of operations and cash flows for the periods presented. Interests in 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. 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 included in our Annual Report on Form 10-K for the year ended December 31, 2023. C.New Accounting Pronouncements Improvements to Reportable Segment Disclosures In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about significant segment expenses. The new standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis. We are currently evaluating the impact of adopting this new pronouncement and will adopt the amendments for annual disclosures in fiscal 2024. Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires additional disclosures regarding rate reconciliation, income taxes paid, and other income tax disclosures. The new standard is effective for fiscal years beginning after December 15, 2024, on a prospective basis. We are currently evaluating the impact of adopting this new pronouncement and plan to adopt these amendments using the prospective approach for annual disclosures in fiscal 2025.

Related Party Transactions (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Related Party Transaction [Line Items]
Revenue from related party	$ 812	$ 703	$ 2,253	$ 1,900
Cost of revenue	633	541	1,752	1,462
Accounts receivable, net	237		237		$ 151
Accounts payable	292		292		398
Contract assets	997		997		908
Related Party \| Leonardo S.p.A.
Related Party Transaction [Line Items]
Revenue from related party	6	8	17	19
Cost of revenue	3	$ 2	5	$ 3
Accounts receivable, net	7		7		8
Accounts payable	4		4		$ 4
Contract assets	$ 12		$ 12

The aggregate cost of goods produced and sold and services rendered during the reporting period.

Summary of Significant Accounting Policies (Policies)	9 Months Ended
Summary of Significant Accounting Policies (Policies)	Sep. 30, 2024
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 Our Advanced Sensing and Computing (“ASC”) segment designs, develops and manufactures sensing and network computing technology that enables real-time situational awareness required for enhanced operational decision making and execution by our customers. Our leading sensing capabilities span applications including missions requiring advanced passive and active detection, precision targeting and surveillance sensing, long range electro-optic/infrared (“EO/IR”), signals intelligence (“SIGINT”) and other intelligence systems, electronic warfare (“EW”), ground vehicle sensing, next generation active electronically scanned array tactical radars, dismounted soldier sensing and space sensing. Across our offerings, we are focused on advancing sensor distance, precision, clarity, definition, spectral depth and effectiveness. Furthermore, we seek to leverage our multi-decade experience to optimize size, weight, power and cost tailored to our customers’ specific mission requirements, including in space-based applications for earth surveillance and missile tracking. Our sensing capabilities are complemented by our rugged, trusted and cyber resilient network computing products. Our network computing offering is utilized across a broad range of mission applications including platform computing on ground and shipboard (both surface ship and submarine) for advanced battle management, combat systems, radar, command and control (“C2”), tactical networks, tactical computing and communications. Our network computing products support the DoD’s need for greater situational understanding at the tactical edge and permits data to be rapidly transmitted securely from command centers to forward-positioned defense assets. Integrated Mission Systems Our Integrated Mission Systems (“IMS”) segment designs, develops, manufactures and integrates power conversion, control and distribution systems, ship propulsion systems, motors and variable frequency drives, force protection systems, transportation and logistics systems for the U.S. and allied defense customers. Our naval power and propulsion systems are providing next-generation power capabilities for the future fleet. DRS is currently a leading provider of next-generation electrical propulsion systems for the U.S. Navy. We provide power conversion, control, distribution and propulsion systems for the U.S. Navy’s top priority shipbuilding programs, including the Columbia Class ballistic missile submarine, the first modern U.S. electric drive submarine. We believe DRS is well positioned to meet the needs of an increasingly electrified fleet with our high-efficiency, power dense permanent magnet motors, energy storage systems and associated efficient, rugged and compact power conversion, electrical actuation systems, and advanced cooling technologies. DRS has a long history of providing a number of other critical products to the U.S. Navy with a significant installed base on submarines, aircraft carriers and other surface ships including motor controllers, instrumentation and control equipment, electrical actuation systems, and thermal management systems for electronics and ship stores refrigeration. Our technologies and systems help protect U.S. forces and assets against increasingly sophisticated and proliferating threats. DRS is an integrator of systems in ground vehicles for short-range air defense, counter-unmanned aerial systems (“C-UAS”), and vehicle survivability and protection. This integrator role includes utilizing radars, EW equipment, reconnaissance and surveillance systems, modular combat vehicle turrets, and stabilized sensor suites, and kinetic countermeasures for short-range air defense. Our force protection systems, including solutions for C-UAS, short-range air defense systems and active protection systems used to defend ground combat vehicles, help protect personnel and defense assets from these growing threats.
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 and contain all adjustments, which are of a normal and recurring nature, considered necessary by management to present fairly the financial position, results of operations and cash flows for the periods presented. Interests in 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. 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 included in our Annual Report on Form 10-K for the year ended December 31, 2023.
New Accounting Pronouncements	New Accounting Pronouncements Improvements to Reportable Segment Disclosures In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about significant segment expenses. The new standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis. We are currently evaluating the impact of adopting this new pronouncement and will adopt the amendments for annual disclosures in fiscal 2024. Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires additional disclosures regarding rate reconciliation, income taxes paid, and other income tax disclosures. The new standard is effective for fiscal years beginning after December 15, 2024, on a prospective basis. We are currently evaluating the impact of adopting this new pronouncement and plan to adopt these amendments using the prospective approach for annual disclosures in fiscal 2025.
Revenue from Contracts with Customers	Contract Estimates Revenues for the majority of our contracts are measured using the over time, percentage of completion cost-to-cost method of accounting to calculate percentage of completion. 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 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 on a routine basis. 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 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. 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. Value of Remaining Performance Obligations The value of remaining performance obligations, which we also refer to as total backlog, includes the following components: •Funded - 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 - 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.
Pension and Other Postretirement Benefits	Pension related expenses are reflected in cost of revenues and general and administrative expenses on the Consolidated Statements of Earnings.
Earnings Per Share	Basic 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 share-based compensation awards (which primarily consist of employee stock options, restricted stock units, and performance-based restricted stock units). The computation of diluted EPS excludes the effect of the potential exercise of stock awards when the average market price of the common stock is lower than the exercise price of the stock awards during the period because the effect would be anti-dilutive. In addition, the computation of diluted EPS excludes stock awards whose issuance is contingent upon the satisfaction of certain performance vesting conditions that have not yet been achieved.

Disclosure of accounting policy for revenue from contract with customer.

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Earnings Per Share (“EPS”)

Earnings Per Share (“EPS”)

9 Months Ended

Sep. 30, 2024

Earnings Per Share [Abstract]


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share amounts)	2024		2023		2024		2023
Net earnings	$	57	$	47	$	124	$	94
Basic weighted average number of shares outstanding	264		262		263		261
Impact of dilutive share-based awards	4		3		4		3
Diluted weighted average number of shares outstanding	268		265		267		264
Earnings per share attributable to common shareholders - basic	$	0.22	$	0.18	$	0.47	$	0.36
Earnings per share attributable to common shareholders - diluted	$	0.21	$	0.18	$	0.46	$	0.36

Basic 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 share-based compensation awards (which primarily consist of employee stock options, restricted stock units, and performance-based restricted stock units).

The computation of diluted EPS excludes the effect of the potential exercise of stock awards when the average market price of the common stock is lower than the exercise price of the stock awards during the period because the effect would be anti-dilutive. In addition, the computation of diluted EPS excludes stock awards whose issuance is contingent upon the satisfaction of certain performance vesting conditions that have not yet been achieved.

Inventories (Tables)

9 Months Ended

Sep. 30, 2024

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consists of the following:


(Dollars in millions)	September 30, 2024		December 31, 2023
Raw materials	$	90	$	66
Work in progress	267		254
Finished goods	6		9
Total inventories	$	363	$	329

Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2024	Dec. 31, 2023
Shareholders' 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)	350,000,000	350,000,000
Common stock, issued (in shares)	264,308,455	262,525,390
Common stock, outstanding (in shares)	264,308,455	262,525,390

Accounts Receivable

9 Months Ended

Sep. 30, 2024

Receivables [Abstract]

Accounts Receivable

Accounts receivable consist of the following:


(Dollars in millions)	September 30, 2024		December 31, 2023
Accounts receivable	$	238	$	152
Less allowance for credit losses	(1)		(1)
Accounts receivable, net	$	237	$	151

The Company maintains certain agreements with financial institutions to sell certain trade receivables. See Note 4: Sale of Receivables for more information.

Debt

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

Debt

The Company’s debt consists of the following:


(Dollars in millions)	September 30, 2024		December 31, 2023
2022 Term Loan A	$	205	$	214
Outstanding revolver	—		—
Finance lease and other	162		158
Short-term borrowings	1		35
Total debt principal	368		407
Less unamortized debt issuance costs and discounts	(1)		(1)
Total debt, net	367		406
Less short-term borrowings and current portion of long-term debt	(22)		(57)
Total long-term debt	$	345	$	349

Term Loans

In November 2022, the Company entered into a senior unsecured credit agreement with Bank of America in the amount of $500 million (the “2022 Credit Agreement”) with a maturity of November 29, 2027. The 2022 Credit Agreement provides for a term loan of $225 million bearing interest at a variable rate generally based on the Secured Overnight Financing Rate (“SOFR”), plus a spread ranging from 1.48% to 2.10% depending on the leverage ratio, as defined in the 2022 Credit Agreement, or an alternative variable rate based on the higher of the Bank of America prime rate, the federal funds rate, or a rate generally based on the SOFR, in each case subject to an additional basis point spread as defined in the 2022 Credit Agreement (“2022 Term Loan A”). Interest is payable quarterly in arrears. The outstanding balance of the 2022 Term Loan A at September 30, 2024 was $205 million. The fair value of the 2022 Term Loan A at September 30, 2024 was approximately $201 million; however, the Company has the ability to prepay the outstanding principal balance without penalty. The fair value of the Company’s outstanding debt obligations is calculated using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements.

Credit Facilities

The 2022 Credit Agreement provides for a revolving credit facility available for working capital needs of the Company (the “2022 Revolving Credit Facility”). As of September 30, 2024 and December 31, 2023, the 2022 Revolving Credit Facility had a limit of $275 million. Loans under the 2022 Revolving Credit Facility bear interest at a variable rate generally based on the SOFR, plus a spread ranging from 1.48% to 2.10% depending on the leverage ratio, as defined in the 2022 Credit Agreement, or an alternative variable rate based on the higher of the Bank of America prime rate, the federal funds rate, or a rate generally based on the SOFR, in each case subject to an additional basis point spread as defined in the 2022 Credit Agreement. The Company also pays a commitment fee ranging between 0.20% and 0.35% depending on the Company’s leverage ratio applied to the unused balance of the 2022 Revolving Credit Facility. There was no outstanding balance on the 2022 Revolving Credit Facility as of September 30, 2024 and December 31, 2023. The weighted average interest rate on the 2022 Revolving Credit Facility as of September 30, 2024 was 6.78%.

The Company also maintains uncommitted working capital credit facilities with certain financial institutions in the aggregate of $130 million and $65 million at September 30, 2024 and December 31, 2023, respectively (the “Financial Institution Credit Facilities”). The sole purpose of the Financial Institution Credit Facilities is to support standby letter of credit issuances on contracts with customers. The Company had letters of credit outstanding of approximately $47 million and $41 million as of September 30, 2024 and December 31, 2023, respectively, which reduces the available capacity of the Financial Institution Credit Facilities by an equal amount.

Short-term Borrowings

As of September 30, 2024 and December 31, 2023, the Company recognized $1 million and $35 million, respectively, collected on behalf of the purchasers 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 4: Sale of Receivables for more information.

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.

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Sale of Receivables

9 Months Ended

Sep. 30, 2024

Transfers and Servicing [Abstract]

Sale of Receivables

The Company is party to factoring facilities with various financial institutions (the “purchasers”) with an aggregate capacity of $225 million and $275 million as of September 30, 2024 and December 31, 2023, respectively.

During the nine months ended September 30, 2024 and 2023, the Company incurred immaterial purchase discount fees which are presented in general and administrative expenses on the Consolidated Statements of Earnings.

The table below summarizes the activity under the factoring facilities:


	Nine Months Ended September 30,
(Dollars in millions)	2024		2023
Beginning balance	$	192	$	243
Sales of receivables	60		110
Cash returned to purchasers	(241)		(332)
Outstanding balance sold to purchasers	11		21
Cash collected, not remitted to purchasers(1)	(1)		(1)
Remaining sold receivables	$	10	$	20

________________

The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

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