UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2016
For the year ended December 31, 2017
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-10582

ORBITAL ATK, INC.

(Exact name of Registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)		41-1672694 (I.R.S. Employer Identification No.)
45101 Warp Drive
Dulles, Virginia		20166
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (703) 406-5000

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Common Stock, par value $.01		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

____________________________________________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes oý No ýo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes oý No ýo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer ý	Accelerated Filer o	Non-Accelerated Filer o (Do not check if a smaller reporting company)	Smaller Reporting Company o	Emerging Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

At ~~July~~June 130, ~~2016~~2017, the aggregate market value of the registrant's voting common stock held by non-affiliates was approximately $45.~~924~~611 billion (based upon the closing price of the common stock on the New York Stock Exchange on ~~July~~June 130, ~~2016~~2017).

At ~~April~~February 2115, ~~2017~~2018, there were 57,~~721~~798,~~899~~076 shares of the registrant's voting common stock outstanding.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	1112
Item 1B.	Unresolved Staff Comments	2123
Item 2.	Properties	2123
Item 3.	Legal Proceedings	2224
Item 4.	Mine Safety Disclosures	2326
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2427
Item 6.	Selected Financial Data	2831
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2932
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	4650
Item 8.	Financial Statements and Supplementary Data	4751
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	97
Item 9A.	Controls and Procedures	97
Item 9B.	Other Information	9998
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	~~100~~99
Item 11.	Executive Compensation	~~103~~102
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~137~~145
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~141~~147
Item 14.	Principal Accountant Fees and Services	~~142~~148
PART IV
Item 15.	Exhibits and Financial Statement Schedules	~~143~~149
Item 16.	Form 10-K Summary	~~144~~154
SIGNATURES		~~144~~154
EXHIBIT INDEX		146

PART I

EXPLANATORY NOTE REGARDING THIS ANNUAL REPORT

~~Our~~In ~~prior~~March 2015, we changed our fiscal year ~~was~~from athe ~~nine-month~~period ~~transition~~beginning on April 1 and ending on March 31 to the period ~~from~~beginning ~~April~~on January 1, ~~2015~~and ~~through~~ending on December 31,. ~~2015~~We asrefer ain ~~result~~this ofreport ~~changing~~to ~~our~~the ~~fiscal~~nine-month ~~year~~period ~~end~~beginning ~~date~~on ~~from~~April ~~March~~1, 312015 toand ending on December 31, 2015 as the "2015 transition period." All fiscal years after December 31, 2015 are for the calendar ~~twelve~~year ~~months~~ ended December 31. We sometimes refer in this report to the period beginning January 1, ~~2016~~2017 and ending on December 31, ~~2016~~2017 as “"calendar ~~2016~~2017" or "~~2016.”~~2017" Weand ~~refer in this report to~~ the period beginning on ~~April~~January 1, ~~2015~~2016 and ending on December 31, ~~2015~~2016 as ~~the~~"calendar ~~“2015~~2016" ~~transition~~or ~~period~~"2016.”" We refer in this report to the period beginning on April 1, 2014 and ending on March 31, 2015 as “fiscal 2015,” and the period beginning on April 1, 2013 and ending on March 31, 2014 as “fiscal 2014,.” ~~and the period beginning on April 1, 2012 and ending on March 31, 2013 as “fiscal 2013."~~

ITEM 1. BUSINESS

Orbital ATK, Inc. (the "Company," "we," "us" or "our") is an aerospace and defense systems company and supplier of related products to the U.S. Government, allied nations, prime contractors and other customers. Our main products include launch vehicles and related propulsion systems; satellites and associated components and services; composite aerospace structures; tactical missiles, subsystems and defense electronics; and precision weapons, armament systems and ammunition. We are headquartered in Dulles, Virginia and have operating locations throughout the United States. We were incorporated in Delaware in 1990.

On ~~February~~September 917, ~~2015~~2017, wethe ~~completed~~Company aentered ~~tax-free~~into ~~spin-off~~an Agreement and ~~distribution~~Plan of ~~our~~Merger ~~former Sporting Group to our stockholders~~ (the "~~Distribution~~Merger Agreement") aswith aNorthrop ~~new~~Grumman ~~public~~Corporation ~~company called Vista Outdoor Inc.~~ ("~~Vista~~Northrop ~~Outdoor~~Grumman"). ~~Immediately~~and ~~following~~Neptune ~~the~~Merger, ~~Distribution~~Inc., wea ~~combined~~wholly ~~with~~owned ~~Orbital~~subsidiary ~~Sciences~~of ~~Corporation~~Northrop Grumman ("~~Orbital~~Sub"), ~~through~~pursuant ~~the~~to ~~merger~~which ofNorthrop aGrumman ~~Company~~will ~~subsidiary~~acquire ~~with Orbital (~~the ~~"Merger").~~Company ~~Following~~for ~~the~~a ~~Distribution~~purchase ~~and~~price ~~Merger,~~of we$134.50 ~~changed~~per ~~our~~share ~~name~~in ~~from~~cash ~~Alliant Techsystems Inc.~~ (the "~~ATK~~Merger") ~~to Orbital ATK, Inc~~.

Closing of the Merger is expected to occur during the first half of 2018, subject to customary closing conditions and obtaining required regulatory approvals. At the effective time of the Merger, each outstanding share of the Company’s common stock, other than shares owned by the Company, Northrop Grumman or Sub (which will be canceled) and appraisal shares, will be converted into the right to receive $134.50 in cash, without interest and less any applicable withholding taxes.

On February 9, 2015, we completed the spin-off and distribution (the "Distribution") of our former Sporting Group to our stockholders as a new public company called Vista Outdoor Inc. ("Vista Outdoor"). Immediately following the Distribution of our former Sporting Group, we combined with Orbital Sciences Corporation ("Orbital") through the merger of a company subsidiary with Orbital (the "Orbital-ATK Merger").

We conduct business in three segments: Flight Systems Group, Defense Systems Group and Space Systems Group, which are described in greater detail below. These Groups are further comprised of smaller operating units that we refer to as "divisions."

Flight Systems Group is well-positioned in its markets, as follows:


•	leading provider of small- and medium-class space launch vehicles for civil, military and commercial missions,


•	major supplier of interceptor boosters and target vehicles for missile defense applications,


•	premier producer of solid rocket propulsion systems and specialty energetic products, and


•	manufacturer of composite structures for commercial and military aircraft and launch vehicles.

Defense Systems Group is also well-positioned in its markets, as follows:


•	leader in propulsion and controls for air-, sea- and land-based tactical missiles and missile defense interceptors, as well as fuzing and warheads for tactical missiles and munitions,


•	supplier of advanced defense electronics for next-generation strike weapon systems, missile-warning and aircraft survivability systems and special-mission aircraft,

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•	leading producer of medium- and large-caliber ammunition, medium-caliber gun systems and precision munitions guidance kits, and


•	leading U.S. producer of small-caliber ammunition.

Space Systems Group is also well-positioned in its markets, as follows:

• leading provider of small- and medium-class commercial satellites used for global communications and high-resolution ~~Earth~~earth imaging,


•	leading provider of small- and medium-class spacecraft that perform scientific research and national security missions for government customers,

1• provider of commercial cargo delivery to the International Space Station ("ISS") and developer of advanced space systems, and

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• provider of commercial cargo delivery services to the International Space Station ("ISS") and developer of advanced space systems, and


•	premier provider of spacecraft components and subsystems and specialized technical services.

Sales; income ~~(loss)~~ from continuing operations, before interest, income taxes, and noncontrolling interest; and other financial data for each segment for the year ended December 31, ~~2016~~2017, ~~nine~~the ~~months~~year ended December 31, ~~2015,~~2016 and ~~year~~the nine months ended ~~March~~December 31, 2015, respectively, are set forth in Note 1918, Operating Segment Information, to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this report.

Flight Systems Group

Flight Systems Group develops launch vehicles that are used as small- and medium-class space launch vehicles to place satellites into ~~Earth~~earth orbit and escape trajectories, interceptor and target vehicles for missile defense systems and suborbital launch vehicles that place payloads into a variety of high-altitude trajectories. The Group also develops and produces medium- and large-class rocket propulsion systems for human and cargo launch vehicles, strategic missiles, missile defense interceptors and target vehicles. Additionally, the Group operates in the military and commercial aircraft and launch structures markets.

The following is a description of the ~~operating units ("~~divisions") within Flight Systems Group:

Launch Vehicles Division

The Launch Vehicles division includes both small- and medium-class rockets for government, civil and commercial payloads. Our innovative Pegasus® rocket is launched from our "Stargazer" L-1011 carrier aircraft and has proven to be the small space-launch workhorse for U.S. ~~government~~Government and commercial customers. Our ~~Minotaur-C~~Taurus launch vehicle combines our Pegasus upper-stage motors with a commercially-provided first stage propulsion system for increased performance. Our Minotaur I, IV and V rockets combine decommissioned Minuteman and Peacekeeper rocket motors with our proven upper stage motors, avionics and fairings to provide increased lifting capacity for government-sponsored payloads.

The division's Antares rocket is a two-stage vehicle (with optional third stage) that provides low-~~Earth~~earth orbit ~~("LEO")~~ launch capability for payloads weighing ~~over~~up to 7,000 kg. The Antares rocket has been used in the execution of our Commercial Resupply Services ("CRS-1") contract with the National Aeronautics and Space Administration ("NASA") to deliver cargo to the ~~International Space Station~~ISS. The Antares design has been upgraded with RD-181 first stage engines to provide greater payload performance and increased reliability, and ~~we currently have one confirmed launch of~~ the reconfigured Antares rocket successfully flew in 2016 and 2017, with atwo ~~potential~~launches ~~for~~scheduled ~~a second launch late~~ in ~~2017~~2018, both in connection with the CRS-1 contract,. ~~and~~Additional ~~additional~~ missions through 2024 under the CRS-1 contract and the follow-on CRS-2 contract are planned.

The division also is an industry-leading provider of suborbital launch vehicles for the nation's missile defense systems for the U.S. Missile Defense Agency, the U.S. Air Force, Army and Navy, and allied nations. Additionally, the division is the sole provider of interceptor boosters for the U.S. Missile Defense Agency's Ground-based Midcourse Defense ("GMD") system designed to intercept and destroy long-range enemy missiles. We are also a primary supplier of highly-reliable target vehicles that serve as "threat simulators" to provide high-fidelity facsimiles of enemy missile threats in the testing and verification of missile defense systems.

Propulsion Systems Division

The Propulsion Systems division is the development and production center for solid rocket motors for NASA's current and planned human spaceflight programs, including the Space Launch System ("SLS") heavy lift vehicle and the launch abort system ("LAS") motor for the Orion crew capsule that is designed to safely pull the crew capsule away from the launch vehicle in the event of an emergency during launch.

The division also produces medium-class solid rocket motors for the U.S. Navy's Trident II ("D5") Fleet Ballistic Missile program and conducts solid rocket propulsion sustainment activities for the U.S. Air Force's Minuteman III Intercontinental Ballistic Missile. These two programs provide the backbone of the United States' strategic deterrence program. Additional solid rocket motors being produced by the division include GEM 60 motors for the Delta IV, Orion® motors for our Pegasus and Minotaur launch vehicles and U.S. Missile Defense Agency targets, and CASTOR® motors for our Antares rocket and Minotaur-C rocket. The division supplies Orion® motors for all three stages of the GMD system, as well as other Orbital ATK launch vehicles. In addition, the division produces advanced flares and decoys that provide illumination for search and rescue missions and countermeasures against missile attacks.

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Propulsion Systems Division

The Propulsion Systems division is the development and production center for solid rocket motors for NASA's current and planned human spaceflight programs, including the Space Launch System ("SLS") heavy lift vehicle and the launch abort system motor for the Orion^® crew capsule that is designed to safely pull the crew capsule away from the launch vehicle in the event of an emergency during launch.

The division also produces medium-class solid rocket motors for the U.S. Navy's Trident II Fleet Ballistic Missile program and conducts solid rocket propulsion sustainment activities for the U.S. Air Force's Minuteman III Intercontinental Ballistic Missile. These two programs provide the backbone of the United States' strategic deterrence program. Additional solid rocket motors being produced by the division include Graphite Epoxy Motors for the Delta IV, Atlas and Vulcan, Orion motors for our Pegasus and Minotaur launch vehicles and U.S. Missile Defense Agency targets, and CASTOR^® motors for our Antares rocket and Taurus rocket. The division supplies Orion motors for all three stages of the GMD system, as well as other Orbital ATK launch vehicles and is in the process of developing the Next Generation Launcher for the U.S. Government. In addition, the division produces advanced flares and decoys that provide illumination for search and rescue missions and countermeasures against missile attacks.

Aerospace Structures Division

The Aerospace Structures division is a provider of advanced composite aircraft ~~components~~structures for military and commercial aircraft manufacturers, using highly automated composite fabrication techniques, including automated fiber placement and stiffener forming processes. The division provides a wide variety of composite parts for the F-35 Lightning II Joint Strike Fighter, a fifth-generation fighter aircraft for the U.S. military and its allies. It also provides composite radomes and apertures for a number of military aircraft and provides wing stiffeners for the A400M military transport aircraft. The division provides very large fiber-placed and hand lay-up structures for the Antares, Atlas and Delta launch vehicles, and filament-wound composite cases for solid rocket motors and composite overwrapped pressure vessels.

The division has a commercial aerospace composites center of excellence facility in Clearfield, Utah to support its commercial aerospace customers, including Airbus, Rolls Royce and Boeing. The division is under contract to produce the majority of the composite fuselage stringers and frames for the Airbus A350 XWB wide-body passenger jetliner. Additional major commercial programs include a contract with Rolls Royce to produce the aft fan case for the Trent XWB engine, which is used to power the Airbus A350 aircraft, and a contract to produce composite frames for the Boeing 787-9 and 787-10 commercial aircraft.

Defense Systems Group

Defense Systems Group develops and produces small-, medium- and large-caliber ammunition, precision weapons and munitions, high-performance gun systems, and propellant and energetic materials. It operates the Lake City Army Ammunition Plant in Independence, Missouri and a Naval Sea Systems Command facility in Rocket Center, West Virginia. Defense Systems Group is also a leader in tactical solid rocket motor development and production for a variety of air-, sea- and land-based missile systems. The Group serves a variety of domestic and international customers in the defense and security markets in a prime contractor, partner or supplier role. Defense Systems Group also provides propulsion control systems that support U.S. Missile Defense Agency and NASA programs, airborne missile warning systems, advanced fuzes and defense electronics. The Group produces the U.S. Navy's Advanced Anti-Radiation Guided Missile ("AARGM") and has developed advanced air-breathing propulsion systems and special-mission aircraft for defense applications.

The following is a description of the divisions within Defense Systems Group:

Armament Systems Division

The Armament Systems division is home to our precision weapons and medium- and large-caliber ammunition programs, including advanced precision munition programs. The division is under contract to develop the U.S. Army's new multi-purpose tank round and currently produces the Precision Guidance Kit for 155mm artillery. The division also produces the family of medium-caliber Bushmaster® chain guns and is a global systems designer and producer of medium-caliber ammunition for integrated gun systems. These gun systems are used on a variety of ground combat vehicles, helicopters and naval vessels, including the Bradley Fighting Vehicle, the Light Armored Vehicle, coastal patrol craft and Apache helicopters. New products include a link-fed variant of the Apache gun system for ground and naval applications. Armament Systems also leads Defense Systems Group's international co-production efforts and provides munitions support to allied nations.

Defense Electronic Division

The Defense Electronic division provides customers with advanced capabilities for offensive and defensive electronic warfare and specializes in weaponized airborne intelligence, surveillance and reconnaissance platforms and advanced anti-radiation homing missile systems, special-mission aircraft, missile warning systems and mission support equipment. Key programs include the AARGM missile used by the U.S. Navy and NATO militaries, and AAR-47 missile warning system used by U.S. and allied fixed and rotor-wing aircraft to defeat incoming missile threats. The division also provides special-mission aircraft that integrate sensors, fire control software, gun systems and air-to-ground weapons capability for use in counterinsurgency, border/coastal surveillance and security missions.

Missile Products Division

The Missile Products division provides customers with high-performance tactical solid rocket motor propulsion for a variety of surface- and air-launched missile systems including Hellfire, Maverick, Advanced Medium-Range Air-to-Air Missile and Sidewinder. The division also produces warheads, fuzing and sensors for various artillery, mortar, grenade and air-dropped weapons, including the Hard Target Void Sensing Fuze. The division produces metal components for various medium-caliber ammunition and 120mm tank ammunition, and also produces specialty composite and ceramic structures used on military platforms ~~and in energy applications~~. The division provides customers with the third-stage ~~propulsion on the Standard Missile~~

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propulsion on the Standard Missile defense interceptor. Additional capabilities include the STAR™ family of satellite orbit insertion motors, high performance rocket boosters, and advanced air-breathing propulsion for platforms designed for Mach 3+ flight. It also continues to operate our New River Energetics facility located on the Radford Army Ammunition Plant in Radford, Virginia, which provides load, assembly, and pack of medium caliber munitions; and propellants and powders for the canister and commercial markets, individual re-loaders, and ~~original~~ammunition ~~equipment~~ manufacturers.

Armament Systems Division

The Armament Systems division is home to our precision weapons and medium- and large-caliber ammunition programs, including advanced precision munition programs. The division is under contract to develop the U.S. Army's new multi-purpose tank round and currently produces the Precision Guidance Kit for 155mm artillery. The division also produces the family of medium-caliber Bushmaster^® chain guns and is a global systems designer and producer of medium-caliber ammunition for integrated gun systems. These gun systems are used on a variety of ground combat vehicles, helicopters and naval vessels, including the Bradley Fighting Vehicle, the Light Armored Vehicle, coastal patrol craft and Apache helicopters. New products include a link-fed variant of the Apache gun system for ground and naval applications. Armament Systems also leads Defense Systems Group's international co-production efforts and provides munitions support to allied nations.

Defense Electronics Division

The Defense Electronics division provides customers with advanced capabilities for offensive and defensive electronic warfare and specializes in weaponized airborne intelligence, surveillance and reconnaissance platforms and advanced anti-radiation homing missile systems, special-mission aircraft, missile warning systems and mission support equipment. Key programs include the AARGM missile used by the U.S. Navy and North Atlantic Treaty Organization militaries, and the AAR-47 missile warning system used by U.S. and allied fixed- and rotor-wing aircraft to defeat incoming missile threats. The division also provides special-mission aircraft that integrate sensors, fire control software, gun systems and air-to-ground weapons capability for use in counterinsurgency, border/coastal surveillance and security missions.

Small Caliber Systems Division

The Small Caliber Systems division via operating the ~~U.S. Army~~ Lake City Army Ammunition Plant is the largest producer of small-caliber ammunition in the U.S., covering 5.56, 7.62 and .50 caliber rounds. The division also provides non-NATO ammunition to the U.S. Army for use by allied forces. The division also provides commercial ammunition to Vista Outdoor. Since 2000, the Company has operated and modernized the Lake City Army Ammunition Plant.

Space Systems Group

Space Systems Group offers a broad portfolio of products for commercial, military, scientific and international customers. The Group develops and produces small- and medium- class satellites that are used to enable global and regional communications and broadcasting, conduct space-related scientific research and perform ~~other~~ activities related to national security. In addition, the Space Systems Group develops and produces human-rated space systems for ~~Earth-~~earth orbit and deep-space exploration, including delivering cargo to the ~~International Space Station ("~~ISS"). This Group is also a provider of spacecraft components and subsystems ~~and~~as well as specialized engineering and operations services to U.S. ~~government~~Government agencies.

The following is a description of the divisions within Space Systems Group:

~~Commercial~~Satellite ~~Satellites~~Systems Division

The ~~Commercial~~Satellite ~~Satellites~~Systems division ~~develops~~designs and produces small- and medium- class satellites ~~that are~~ used tofor ~~enable~~various ~~global~~activities ~~and~~including: ~~regional~~national ~~communications~~security ~~and~~space ~~broadcasting~~programs, ~~and~~geosynchronous ~~to collect imagery and other remotely-sensed data about the Earth. Our GEOStar™ -2 and -3 geostationary Earth orbit~~ ("GEO") satellites ~~are~~used ~~among~~for ~~the~~global ~~industry's best-selling small-~~ and ~~medium-class~~regional communications/broadcasting, ~~satellites~~commercial ~~for~~imaging 2and toremote 8sensing ~~kilowatt missions~~satellites. The ~~world's~~division ~~leading~~also ~~satellite~~conducts ~~communications~~space-related ~~service~~scientific ~~providers~~research, ~~rely~~including ~~on our lower-cost~~astrophysics, ~~highly~~earth ~~reliable~~science/remote ~~GEOStar~~sensing ~~satellites~~and ~~for~~heliophysics, ~~their~~interplanetary ~~broadband,~~and ~~television~~other ~~broadcasting,~~deep-space ~~mobile~~exploration ~~communications~~missions, ~~business~~including ~~data~~the ~~networks~~demonstration ~~and~~of ~~other~~new ~~telecommunications~~space ~~missions~~technologies. WeIn ~~are~~addition, ~~also an industry pioneer in~~ the ~~design~~division designs and ~~production~~manufacturers ofsatellite ~~commercial~~buses ~~imaging~~tailored ~~satellites,~~to asaccommodate ~~well~~a asvariety ~~in the incorporation~~ of ~~civil~~payloads and ~~military~~ hosted payloads onfor ~~our~~various ~~commercial~~orbits ~~spacecraft~~or interplanetary missions.

~~Government Satellites Division~~4

~~The~~Table ~~Government~~of Satellites division develops and produces small- and medium-class satellites that conduct space-related scientific research, including astrophysics, earth science/remote sensing and heliophysics, carry out interplanetary and other deep-space exploration missions, and demonstrate new space technologies. The division also designs and produces small- and medium-class satellites used for national security space programs. The division also provides human-rated space systems for Earth-orbit and deep-space exploration, including cargo missions to the ISS under the CRS-1 program using the Cygnus spacecraft. We are currently under contract to deliver cargo to the ISS through 2019, and were awarded a follow-on CRS-2 contract to provide additional cargo missions starting in 2019. Contents

Advanced Programs Division

The Advanced Programs division consists of two main business areas: human space systems and space robotics and logistics. In the human space systems business area, the division provides human-rated space systems for low-earth orbit and deep-space exploration, including cargo missions to the ISS under the CRS-1 and CRS-2 programs using the Cygnus spacecraft. The division is also working in partnership with NASA on various programs, including the Deep Space Gateway, Power Propulsion Element, as well as NextSTEP-2 which focuses on the development of deep space habitat prototypes. In the space robotics and logistics business area, the division is working to develop and build Mission Extension Vehicles to provide in-orbit GEO satellite life extension. Additional areas of focus include space robotics capabilities development to support areas such as in-orbit satellite assembly and repair.

Space Components Division

The Space Components division is a major supplier of satellite mechanical components and structural assemblies for a wide variety of commercial, civil and defense spacecraft. As a leader in the industry, we believe that products manufactured by the division have flown aboard virtually every U.S. satellite built in the last 20 years. The division has strong market positions in spacecraft composite primary and secondary structures, satellite fuel and oxidizer tanks, precision payload structures, solar power arrays, deployable structures and thermal control systems.

Technical Services Division

The Technical Services division provides a full spectrum of cost-effective engineering, manufacturing and program management services to NASA and other civil government and military space agencies. The division also manages high-profile NASA science programs, including its scientific sounding rocket and high- altitude balloon activities.

Customers

Our sales have come primarily from contracts with agencies of the U.S. Government and its prime contractors and subcontractors, and from major domestic and international commercial satellite operators, international customers including foreign military sales contracted through the U.S. Government and aircraft manufacturers. As the various U.S. Government customers, including the U.S. Navy, U.S. Army, NASA and the U.S. Air Force, make independent purchasing decisions, we do not generally regard the U.S. Government as one customer. Instead, we view each agency as a separate customer.

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foreign military sales contracted through the U.S. Government and aircraft manufacturers. As the various U.S. Government customers, including the U.S. Navy, U.S. Army, NASA and the U.S. Air Force, make independent purchasing decisions, we do not generally regard the U.S. Government as one customer. Instead, we view each agency as a separate customer.

Sales by customer, as a percentage of total sales, were as follows:

	Percentage of Sales
	Year Ended		Nine Months Ended		Year Ended
	December 31, 2016		December 31, 2015		March 31, 2015
Sales to:
U.S. Army	17	%	15	%	26	%
U.S. Navy	12		11		15
NASA	27		23		13
U.S. Air Force	4		4		7
Other U.S. Government customers	16		17		14
Total U.S. Government customers	76		70		75
Commercial and foreign customers	24		30		25
Total	100	%	100	%	100	%

Sales to the U.S. Government and its prime contractors were as follows (dollars in millions):

Period	U.S. GovernmentSales		Percentage ofSales
Year ended December 31, 2016	$	3,368	76	%
Nine months ended December 31, 2015	$	2,359	70	%
Year ended March 31, 2015	$	2,332	75	%

The Company's CRS contracts with NASA, which are reported within its Flight Systems Group and Space Systems Group, comprised 5% and 10% of total sales in the year ended December 31, 2016 and the 2015 transition period, respectively. The Company's small-caliber ammunition contract with the U.S. Army, which is reported within its Defense Systems Group, comprised 6%, 6% and 12% of total sales in calendar 2016, the 2015 transition period, and fiscal 2015, respectively. No other single contract accounted for more than 10% of the Company's sales in the year ended December 31, 2016, the 2015 transition period or fiscal 2015.

Other than the U.S. Government customers listed above, no single customer accounted for more than 10% of our sales in the year ended December 31, 2016.

International sales were as follows (dollars in millions):

	International Sales		Percentage ofSales
Year ended December 31, 2016	$	778	17	%
Nine months ended December 31, 2015	$	766	23	%
Year ended March 31, 2015	$	608	20	%

Sales to foreign governments and other international customers may require approval by the U.S. Department of Defense ("DoD") and the U.S. State Department or the U.S. Commerce Department. Our products are sold to U.S. allies directly, as well as through the U.S. Government. During the year ended December 31, 2016, approximately 19% of these sales were in Flight Systems Group, 56% were in Defense Systems Group, and 25% were in Space Systems Group. No sales to an individual country outside the United States accounted for more than 4% of our sales in the year ended December 31, 2016.

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Sales by customer, as a percentage of total sales, were as follows:



	Percentage of Sales
	Year Ended		Year Ended		Nine Months Ended
	December 31, 2017		December 31, 2016		December 31, 2015
Sales to:
U.S. Army	15	%	17	%	15	%
U.S. Navy	11		12		11
U.S. Air Force	4		4		4
NASA	22		27		23
Other U.S. Government customers	21		16		17
Total U.S. Government customers	73		76		70
Commercial and foreign customers	27		24		30
Total	100	%	100	%	100	%

Sales to the U.S. Government and its prime contractors were as follows (in millions):



	U.S. Government Sales		Percentage of Sales
Year ended December 31, 2017	$	3,489	73	%
Year ended December 31, 2016	$	3,368	76	%
Nine months ended December 31, 2015	$	2,359	70	%

The Company's CRS contracts with NASA, which are reported within its Flight Systems Group and Space Systems Group, comprised 9%, 13% and 10% of total sales in the years ended December 31, 2017 and 2016 and in the 2015 transition period, respectively. No other single contract accounted for more than 10% of the Company's sales in the years ended December 31, 2017 and 2016 or in the 2015 transition period.

Other than the U.S. Government customers listed above, no single customer accounted for more than 10% of our sales in the year ended December 31, 2017, the year ended December 31, 2016 or in the 2015 transition period.

International sales were as follows (in millions):



	International Sales		Percentage of Sales
Year ended December 31, 2017	$	878	18	%
Year ended December 31, 2016	$	778	17	%
Nine months ended December 31, 2015	$	766	23	%

Sales to foreign governments and other international customers may require approval by the U.S. Department of Defense ("DoD") and the U.S. Department of State or the U.S. Department of Commerce. Our products are sold to U.S. allies directly, as well as through the U.S. Government. During the year ended December 31, 2017, approximately 20% of these sales were in Flight Systems Group, 66% were in Defense Systems Group, and 14% were in Space Systems Group. No sales to an individual country outside the United States accounted for more than 5% of our sales in the year ended December 31, 2017.

Backlog

Firm backlog is the estimated value of contracts for which orders have been recorded, but for which revenue has not yet been recognized. The total amount of firm backlog was approximately $910.32 billion at December 31, ~~2016~~2017 and $89.3 billion at December 31, ~~2015~~2016. Approximately $23.4 billion of firm backlog was not yet funded at December 31, ~~2016~~2017. We expect that approximately 4043% of the December 31, ~~2016~~2017 firm backlog will be recognized as revenue in calendar ~~2017~~year 2018.

~~Total backlog, which includes firm backlog plus the value of unexercised options, was approximately $14.4 billion at December 31, 2016 and $13.0 billion at December 31, 2015.~~6

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Total backlog, which includes firm backlog plus the value of unexercised options, was approximately $16.0 billion at December 31, 2017 and $14.4 billion at December 31, 2016.

Seasonality

Our business is not seasonal.

Competition

We compete against other U.S. and foreign prime contractors and subcontractors, many of which have substantially more resources to deploy than we do in the pursuit of government and industry contracts. Our ability to compete successfully in this environment depends on a number of factors, including the creativity and effectiveness of research and development programs, our ability to offer better program performance than our competitors and/or at a lower cost, our readiness with respect to facilities, equipment and personnel to undertake the programs for which we compete, and our past performance and demonstrated capabilities.

Additional information on the risks related to competition can be found ~~under~~in Item 1A, "Risk Factors" ~~in Item 1A.~~ of this report.

We generally face competition from a number of competitors in each business area, although no single competitor competes along all of our segments. Our principal competitors in each of our segments are as follows:

Flight Systems Group: Aerojet-Rocketdyne Holdings, Inc.; Arianespace SA; Coleman Aerospace, a division of Aerojet-Rocketdyne Holdings, Inc.; ~~Daher Group;~~ GKN Aerospace Company; ~~Harris Corporation Aerostructures; HITCO Aerostructures; Kilgore Flares Company, LLC, a subsidiary of Chemring North America; Kratos Defense & Security Solutions, Inc.;~~ Lockheed Martin Corporation; ~~Northrop Grumman Aerospace Systems;~~ Space Exploration Technologies Corporation; Spirit Aerosystems Company; United Launch Alliance (a joint venture between Lockheed Martin Corporation and The Boeing Company); and Vought Aircraft, a division of Triumph Aerostructures.

Defense Systems Group: Aerojet-Rocketdyne Holdings, Inc.; BAE Systems,; Chemring Group; General Dynamics Corporation; ~~L3 Technologies;~~ Lockheed Martin Corporation; Nammo AS; ~~Northrop~~Nexter ~~Grumman~~SA; Winchester Ammunition Division of Olin Corporation; Raytheon Company; Rheinmetall AG; and various other international ~~producers of ammunition and guns~~competitors.

Space Systems Group: Airbus Defense and Space; Ball Aerospace and Technologies Corp.; Lockheed Martin Corporation; ~~Mitsubishi~~Maxar ~~Electric Corp.~~Technologies; ~~Reshetnev~~Millenium ~~Company~~Space ~~- Information Satellite~~ Systems; Sierra Nevada Corporation; Space Exploration Technologies Corporation; ~~Space Systems/Loral, a subsidiary of MacDonald, Dettwiler and Associates Ltd.; Surrey Satellite Technology Limited, a subsidiary of Airbus Group;~~ Thales Alenia Space; and The Boeing Company.

Research and Development

We conduct extensive research and development ("R&D") activities. Company-funded R&D is primarily for the improvement of current products and for development of next-generation technology. Customer-funded R&D is comprised primarily of activities we conduct under contracts with the U.S. Government and its prime contractors. R&D expenditures were as follows (in millions):

	Company-funded		Customer-funded
Year ended December 31, 2016	$	116	$	396
Year ended December 31, 2017	$	115	$	536
Nine months ended December 31, 2015	$	83	$	359
Year ended December 31, 2016	$	116	$	429
Year ended March 31, 2015	$	49	$	499
Nine months ended December 31, 2015	$	83	$	376

Raw Materials and Components

We use a broad range of raw materials in manufacturing our products, including aluminum, steel, copper, lead, ammonium perchlorate, graphite fiber, epoxy resins, zinc and adhesives. We monitor the sources from which we purchase raw materials in an attempt to ensure there are adequate supplies to support our operations. We monitor the price of materials, particularly commodity metals like copper, which have fluctuated dramatically over the past several years.

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there are adequate supplies to support our operations. We monitor the price of materials, particularly commodity metals like copper, which have fluctuated dramatically over the past several years.

We also use sub-assemblies and instruments in our products and obtain parts and equipment that are used in the production of our products or in the provision of our services from domestic and foreign suppliers and the U.S. Government. Generally, we have not experienced material difficulty in obtaining product components or necessary parts and equipment, and we believe that alternatives to our existing sources of supply are available in most cases.

We procure materials and components from a variety of sources. In the case of our government contracts, we are often required to purchase from sources approved by the DoD. When our suppliers choose to eliminate certain materials or components we require from their product offering, we attempt to qualify other suppliers or replacement materials to ensure there are no disruptions to our operations. 7

WeTable ~~rely upon sole-source suppliers for many~~ of our satellite and launch vehicle components, including our liquid-propellant rocket engines. The inability of our current suppliers to provide us with key components could result in significant contract delays, cost increases and loss of revenues due to the time, resources and effort that would be required to develop or adapt other engines or components for use in our products. Contents

We procure materials and components from a variety of sources. In the case of our U.S. Government contracts, we are often required to purchase from sources approved by the DoD. When our suppliers choose to eliminate certain materials or components we require from their product offering, we attempt to qualify other suppliers or replacement materials to ensure there are no disruptions to our operations.

We rely upon sole-source suppliers for many of our satellite and launch vehicle components, including our liquid-propellant rocket engines and cores. The inability of our current suppliers to provide us with key components could result in significant contract delays, cost increases and loss of revenues due to the time, resources and effort that would be required to develop or adapt other engines or components for use in our products.

Additional information on the risks related to raw materials and components can be found in Item 1A, "Risk Factors" of this report.

Intellectual Property

At December 31, 2016, we owned 441 U.S. patents and 320 foreign patents. We also had approximately 102 U.S. patent applications and approximately 125 foreign patent applications pending.

Although we manufacture various products covered by patents, we do not believe that any single existing patent, license or group of patents is material to our success. We believe that unpatented research, development and engineering skills also make an important contribution to our business. The U.S. Government typically receives royalty-free licenses to inventions made under U.S. Government contracts. Consistent with our policy to protect proprietary information from unauthorized disclosure, we ordinarily require employees to sign confidentiality agreements as a condition of employment.

As many of our products are complex and involve patented and other proprietary technologies, we face a risk of claims alleging that we have infringed upon third-party intellectual property rights. Such claims could result in costly and time-consuming litigation, the invalidation of our intellectual property rights and/or increased licensing costs.

Regulatory Matters

U.S. Governmental Contracts

We are subject to the procurement policies and procedures set forth in the Federal Acquisition Regulation ("FAR"). The FAR governs all aspects of government contracting, including competition and acquisition planning; contracting methods and contract types; contractor qualifications; and acquisition procedures. Every ~~government~~U.S. Government contract contains a list of FAR provisions that must be complied with in order for the contract to be awarded. The FAR provides for regular audits and reviews of contract procurement, performance and administration. Failure to comply with the provisions of the FAR could result in contract termination.

The U.S. Government may terminate its contracts with its suppliers, either for convenience or in the event of a default as a result of our failure to perform under the applicable contract. If a cost-plus contract is terminated for convenience, we are entitled to reimbursement of our approved costs and payment of a total fee proportionate to the percentage of the work completed under the contract. If a fixed-price contract is terminated for convenience, we are entitled to payment for items delivered to and accepted by the U.S. Government, and fair compensation for work performed plus the costs of settling and paying claims by terminated subcontractors, other settlement expenses and a reasonable profit on the costs incurred or committed. If a contract termination is for default, we are paid an amount agreed upon for completed and partially completed products and services accepted by the U.S. Government, and may be liable to the U.S. Government for repayment of any advance payments and progress payments related to the terminated portions of the contract, as well as excess costs incurred by the U.S. Government in procuring undelivered items from another source.

Additional information on the risks related to government contracts can be found in Item 1A,"Risk Factors" of this report.

7Laws Relating to Import-Export

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We also must comply with U.S. and foreign laws governing the export of munitions and other controlled products and commodities. These include regulations relating to import-export control, exchange controls, the Foreign Corrupt Practices Act and the anti-boycott provisions of the U.S. Export Administration Act.

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U.S. Government Contract Security Restrictions

Certain programs with the U.S. Government are prohibited by the customer from being publicly discussed. The consolidated financial statements and financial information in this Annual Report on Form 10-K reflect the operating results of our entire company, including restricted programs, under accounting principles generally accepted in the United States of America (GAAP).

Environmental

Our operations are subject to a number of federal, state and local environmental laws and regulations, as well as applicable foreign laws and regulations that govern the discharge, treatment, storage, remediation and disposal of certain materials and wastes, and restoration of damages to the environment. Compliance with these laws and regulations is a responsibility we take seriously. We believe that forward-looking, proper and cost-effective management of air, land and water resources is vital to the long-term success of our business. Our environmental policy identifies key objectives for implementing this commitment throughout our operations. Additional information on the risks related to environmental matters can be found in Item 1A, "Risk Factors" of this report.

Employees

At December 31, ~~2016~~2017, we had approximately 1213,~~700~~900 employees. We have union-represented employees at five locations, comprising less than 20% of our total workforce. One location has two separate bargaining units, each with its own collective bargaining agreement (“CBA”). The Company’s current CBAs expire in 2018, 2019, 2021, and 2022.

Executive Officers

The following table sets forth certain information with respect to our executive officers at December 31, ~~2016~~2017:

Name	Age	Title
David W. Thompson	6263	President and Chief Executive Officer
Blake E. Larson	5758	Chief Operating Officer
Garrett E. Pierce	7273	Chief Financial Officer
Antonio L. Elias	6768	Executive Vice President and Chief Technical Officer
Frank L. Culbertson, Jr.	6768	Executive Vice President and President, Space Systems Group
Michael A. Kahn	5758	Executive Vice President and President, Defense Systems Group
Scott L. Lehr	5657	Executive Vice President and President, Flight Systems Group
Thomas E. McCabe	6263	Senior Vice President, General Counsel and Secretary
Christine A. Wolf	5657	Senior Vice President, Human Resources

Each of the above individuals serves at the pleasure of the Board of Directors ~~and is subject to reelection annually on the date of the Annual Meeting of Stockholders~~. No family relationship exists among any of the executive officers or among any of them and our directors. There are no outstanding loans from our company to any of these individuals. Information regarding the employment history (in each case with our Company unless otherwise indicated) of each of the executive officers is set forth below.

David W. Thompson has served in his present position since the Orbital-ATK Merger on February 9, 2015. Mr. Thompson has also been a director of our Company since the Orbital-ATK Merger. He co-founded Orbital and served as Chairman of the Board and Chief Executive Officer of Orbital from 1982 until the Orbital-ATK Merger. From 1982 until October 1999, he also served as President of Orbital, a role he resumed in mid-2011. Prior to founding Orbital, Mr. Thompson was employed by Hughes Electronics Corporation as special assistant to the President of its Missile Systems Group and by NASA at the Marshall Space Flight Center as a project manager and engineer, and also worked on the Space Shuttle's autopilot design at the Charles Stark Draper Laboratory. Mr. Thompson is an Honorary Fellow of the American Institute of Aeronautics and Astronautics, a Fellow of the American Astronautical Society and the Royal Aeronautical Society, and is a member of the U.S. National Academy ~~of Engineering. He also serves as a member of the Board of Trustees of the California Institute of Technology.~~

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Blake E. Larson has served in his present position since the Merger on February 9, 2015. From April 2010 until February 9, 2015, he served as our Senior Vice President and President, Aerospace Group. From 2009 to March 2010, he was Senior Vice President and President, Space Systems. From 2008 to 2009, he was Executive Vice President, Space Systems, and also General Manager, Spacecraft Systems from August 2008 to January 2009. From 2006 to 2008, he was Executive Vice President of Mission Systems Group. Prior to that, Mr. Larson held a variety of key leadership positions in operations of several businesses within our aerospace and defense portfolio.

Garrett E. Pierce has served in his present position since the Merger on February 9, 2015. He was Vice Chairman and Chief Financial Officer of Orbital from 2002 until the Merger, and was Executive Vice President and Chief Financial Officer of Orbital from 2000 to 2002. From 1996 until 2000, he was Executive Vice President and Chief Financial Officer of Sensormatic Electronics Corp., a supplier of electronic security systems, where he was also named Chief Administrative Officer in July 1998. Prior to joining Sensormatic, Mr. Pierce was the Executive Vice President and Chief Financial Officer of California Microwave, Inc., a supplier of microwave, radio frequency, and satellite systems and products for communications and wireless networks. From 1980 to 1993, Mr. Pierce was employed by Materials Research Corporation, a provider of thin film equipment and high purity materials to the semiconductor, telecommunications and media storage industries, where he progressed from Chief Financial Officer to President and Chief Executive Officer. Materials Research Corporation was acquired by Sony Corporation in 1989. From 1972 to 1980, Mr. Pierce held various management positions with The Signal Companies. Mr. Pierce is a Director of Kulicke and Soffa Industries, Inc.

Antonio L. Elias has served in his present position since the Merger on February 9, 2015. He was Executive Vice President and Chief Technical Officer of Orbital from September 2012 until the Merger. From October 2001 to September 2012, he served as Orbital's Executive Vice President and General Manager, Advanced Programs Group, and was Orbital's Senior Vice President and General Manager, Advanced Programs Group from 1997 to 2001. From 1996 until 1997, Dr. Elias served as Senior Vice President and Chief Technical Officer of Orbital. From 1993 through 1995, he was Orbital's Senior Vice President for Advanced Projects, and was Orbital's Senior Vice President, Space Systems Division from 1990 to 1993. He was Vice President, Engineering of Orbital from 1989 to 1990 and was Orbital's Chief Engineer from 1986 to 1989. From 1980 to 1986, Dr. Elias was an Assistant Professor of Aeronautics and Astronautics at Massachusetts Institute of Technology. He was elected to the National Academy of Engineering in 2001.

Frank L. Culbertson, Jr. has served in his present position since the Merger on February 9, 2015. He was Orbital's Executive Vice President and General Manager, Advanced Programs Group from September 2012 until the Merger. From 2008 to 2012, he served as a Senior Vice President in Orbital's Advanced Program Group, where he headed human space systems efforts. Prior to joining Orbital, Mr. Culbertson was a Senior Vice President at Science Applications International Corporation from 2002 to 2008. Before entering the private sector, Mr. Culbertson served as a NASA astronaut for 18 years, flying three Space Shuttle missions, and began his career as a pilot in the U.S. Navy.

Michael A. Kahn has served in his present position since the Merger on February 9, 2015. From April 2012 until February 9, 2015, he served as our Senior Vice President and President, Defense Group. From August 2010 through March 2012, he was Senior Vice President and President, Missile Products Group. From 2009 to August 2010, he was Executive Vice President, Aerospace Systems. From 2008 to 2009, he was Vice President and General Manager, Launch Systems, and from 2001 to 2008, he was Vice President, Space Launch Systems. From 1997 to 2001, he was Vice President, Operations, and played a key role in the integration of Thiokol and ATK. From 1989 to 1997, he held a number of senior leadership positions across a variety of programs and operations of our company. Prior to that he was with Rockwell International, Rocketdyne Division, and held a number of positions across engineering, quality and reliability assurance, launch site operations and rocket engine testing.

Scott L. Lehr has held his present position since July 1, 2015. From April 2015 through June 2015, he was Senior Vice President, Flight Systems Group. From April 2009 through March 2015, he served as Vice President and General Manager of Defense and Commercial Systems in the Aerospace Group. From 2007 to 2009, he was Vice President, Operations, and from 2004 to 2007, he was Vice President, Air Force Programs within the Launch Systems Group. Prior to that, he held a number of senior leadership positions in engineering and program management as part of our propulsion business. He joined the company in 1984 and has more than 30 years of experience in the aerospace industry.

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~~Thomas~~of EEngineering. ~~McCabe has served in his present position since the Merger on February 9, 2015.~~ He ~~was~~also ~~Senior~~serves ~~Vice President, General Counsel and Corporate Secretary of Orbital from January 2014 until the Merger. Before joining Orbital, he served from 2010 to 2014~~ as ~~Senior Vice President, General Counsel and Secretary of Alion Science and Technology Corporation,~~ a ~~provider~~member of ~~advanced engineering and technology solutions. From 2008 to 2010, he served as Executive Vice President and General Counsel, and President of~~ the ~~Federal~~Board ~~business~~ of ~~Braintech,~~Trustees ~~Inc., which provided automated vision systems for industrial and military robots. Earlier in his career, he was Vice President and Deputy General Counsel~~ of XMthe ~~Satellite~~California ~~Radio~~Institute ~~from 2005 through its merger with Sirius Satellite Radio in 2008. He also served as President, CEO and a director~~ of ~~software~~Technology ~~provider MicroBanx Systems from 2001 to 2005,~~ and President, CEO and a director of its parent company, COBIS Corporation, from 2004 to 2005. From 1992 to 2000, he was a senior executive at GRC International, Inc., a provider of advanced software and technology solutions, serving as Senior Vice President, General Counsel, Secretary and Director of Corporate Development through its sale to AT&T in 2000. He was an attorney in private practice from 1982 to 1991. He began his career as judicial clerk for Judge Charles R. Richey at the ~~United~~Carnegie ~~States~~Institution ~~District Court~~ for ~~the District of Columbia from 1981 to 1982~~Science.

Blake E. Larson has served in his present position since the Orbital-ATK Merger on February 9, 2015. From April 2010 until February 9, 2015, he served as our Senior Vice President and President, Aerospace Group. From 2009 to March 2010, he was Senior Vice President and President, Space Systems. From 2008 to 2009, he was Executive Vice President, Space Systems, and also General Manager, Spacecraft Systems from August 2008 to January 2009. From 2006 to 2008, he was Executive Vice President of Mission Systems Group. Prior to that, Mr. Larson held a variety of key leadership positions in operations of several businesses within our aerospace and defense portfolio.

Garrett E. Pierce has served in his present position since the Orbital-ATK Merger on February 9, 2015. He was Vice Chairman and Chief Financial Officer of Orbital from 2002 until the Orbital-ATK Merger, and was Executive Vice President and Chief Financial Officer of Orbital from 2000 to 2002. From 1996 until 2000, he was Executive Vice President and Chief Financial Officer of Sensormatic Electronics Corp., a supplier of electronic security systems, where he was also named Chief Administrative Officer in July 1998. Prior to joining Sensormatic, Mr. Pierce was the Executive Vice President and Chief Financial Officer of California Microwave, Inc., a supplier of microwave, radio frequency, and satellite systems and products for communications and wireless networks. From 1980 to 1993, Mr. Pierce was employed by Materials Research Corporation, a provider of thin film equipment and high purity materials to the semiconductor, telecommunications and media storage industries, where he progressed from Chief Financial Officer to President and Chief Executive Officer. Materials Research Corporation was acquired by Sony Corporation in 1989. From 1972 to 1980, Mr. Pierce held various management positions with The Signal Companies. Mr. Pierce is a Director of Kulicke and Soffa Industries, Inc.

Antonio L. Elias has served in his present position since the Orbital-ATK Merger on February 9, 2015. He was Executive Vice President and Chief Technical Officer of Orbital from September 2012 until the Orbital-ATK Merger. From October 2001 to September 2012, he served as Orbital's Executive Vice President and General Manager, Advanced Programs Group, and was Orbital's Senior Vice President and General Manager, Advanced Programs Group from 1997 to 2001. From 1996 until 1997, Dr. Elias served as Senior Vice President and Chief Technical Officer of Orbital. From 1993 through 1995, he was Orbital's Senior Vice President for Advanced Projects, and was Orbital's Senior Vice President, Space Systems Division from 1990 to 1993. He was Vice President, Engineering of Orbital from 1989 to 1990 and was Orbital's Chief Engineer from 1986 to 1989. From 1980 to 1986, Dr. Elias was an Assistant Professor of Aeronautics and Astronautics at Massachusetts Institute of Technology. He was elected to the National Academy of Engineering in 2001.

Frank L. Culbertson, Jr. has served in his present position since the Orbital-ATK Merger on February 9, 2015. He was Orbital's Executive Vice President and General Manager, Advanced Programs Group from September 2012 until the Orbital-ATK Merger. From 2008 to 2012, he served as a Senior Vice President in Orbital's Advanced Program Group, where he headed human space systems efforts. Prior to joining Orbital, Mr. Culbertson was a Senior Vice President at Science Applications International Corporation from 2002 to 2008. Before entering the private sector, Mr. Culbertson served as a NASA astronaut for 18 years, flying three Space Shuttle missions, and began his career as a pilot in the U.S. Navy.

Michael A. Kahn has served in his present position since the Orbital-ATK Merger on February 9, 2015. From April 2012 until February 9, 2015, he served as our Senior Vice President and President, Defense Group. From August 2010 through March 2012, he was Senior Vice President and President, Missile Products Group. From 2009 to August 2010, he was Executive Vice President, Aerospace Systems. From 2008 to 2009, he was Vice President and General Manager, Launch Systems, and from 2001 to 2008, he was Vice President, Space Launch Systems. From 1997 to 2001, he was Vice President, Operations, and played a key role in the integration of Thiokol and ATK. From 1989 to 1997, he held a number of senior leadership positions across a variety of programs and operations of our company. Prior to that he was with Rockwell International, Rocketdyne Division, and held a number of positions across engineering, quality and reliability assurance, launch site operations and rocket engine testing.

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Thomas E. McCabe has served in his present position since the Orbital-ATK Merger on February 9, 2015. He was Senior Vice President, General Counsel and Corporate Secretary of Orbital from January 2014 until the Orbital-ATK Merger. Before joining Orbital, he served from 2010 to 2014 as Senior Vice President, General Counsel and Secretary of Alion Science and Technology Corporation, a provider of advanced engineering and technology solutions. From 2008 to 2010, he served as Executive Vice President and General Counsel, and President of the Federal business of Braintech, Inc., which provided automated vision systems for industrial and military robots. Earlier in his career, he was Vice President and Deputy General Counsel of XM Satellite Radio from 2005 through its merger with Sirius Satellite Radio in 2008. He also served as President, CEO and a director of software provider MicroBanx Systems from 2001 to 2005, and President, CEO and a director of its parent company, COBIS Corporation, from 2004 to 2005. From 1992 to 2000, he was a senior executive at GRC International, Inc., a provider of advanced software and technology solutions, serving as Senior Vice President, General Counsel, Secretary and Director of Corporate Development through its sale to AT&T in 2000. He was an attorney in private practice from 1982 to 1991. He began his career as judicial clerk for Judge Charles R. Richey at the United States District Court for the District of Columbia from 1981 to 1982.

Christine A. Wolf has held her present position since joining the company in March 2011. She has more than 30 years of experience in the Human Resources field. Prior to joining the company, she was the Senior Vice President and Chief Human Resources Officer for Fannie Mae from 2008 to March 2011. Prior to that, she was the Chief Human Resources Officer for E*Trade from 2004 to 2008.

Available Information

Our reports filed with the Securities and Exchange Commission ("SEC") can be found on our Internet site at www.orbitalatk.com under the "Investors" heading free of charge. These include our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. We make these reports available as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

You can also obtain these reports from the SEC's Public Reference Room, which is located at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room is available by phone (1-800-SEC-0330) or on the Internet (www.sec.gov). This site contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

The content on any website referred to in this Form 10-K is not incorporated by reference into this Form 10-K unless expressly noted.

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ITEM 1A. RISK FACTORS

We are subject to a number of risks, including those related to the proposed Northrop Grumman acquisition, to those related to being a U.S. Government contractor and those related to domestic and international commercial sales. The material risks we are subject to are discussed below.

~~Our~~Failure ~~business~~to complete the Merger could benegatively ~~adversely~~impact ~~impacted~~the byprice ~~reductions~~of orour ~~changes~~common instock, ~~NASA~~as orwell ~~U.S.~~as ~~Government~~our ~~military~~future ~~spending~~business and financial results.

WeOn ~~depend~~September on17, ~~contracts with the U.S. Government and its prime contractors for a substantial portion of our sales. In addition~~2017, awe ~~significant~~entered ~~portion~~into ofan ~~such~~Agreement ~~sales~~and ~~come~~Plan ~~from a small number~~ of ~~contracts.~~Merger ~~Our CRS contracts~~ with ~~NASA,~~Northrop ~~which~~Grumman ~~are reported within Flight Systems Group~~ and ~~Space~~Neptune ~~Systems Group~~Merger, ~~comprised 5% of our sales in the year ended December 31, 2016~~Inc. ~~Our small-caliber ammunition contract with the U.S. Army~~, ~~which~~a iswholly ~~reported~~owned ~~within~~subsidiary ~~Defense Systems Group, comprised 6% , 6%, and 12%~~ of ~~our~~Northrop ~~sales in calendar 2016~~Grumman, ~~the~~pursuant ~~2015~~to ~~transition period, and fiscal 2015, respectively. The loss or significant reduction of a material U.S. Government program in~~ which weNorthrop ~~participate~~Grumman ~~could~~will ~~have~~acquire ~~a material adverse effect on our operating results, financial condition or cash flows~~us.

The Merger Agreement contains a number of conditions that must be satisfied or waived prior to the completion of the Merger. We cannot assure you that all of the conditions to the Merger will be so satisfied or waived on a timely basis. If the conditions to the Merger are not satisfied or waived on a timely basis, we may be unable to complete the Merger as quickly as expected or at all.

If the Merger is not completed, our ongoing business may be adversely affected as follows: (i) we may experience negative reactions from the financial markets, including negative impacts on the market price of our common stock; (ii) some of management's attention will have been directed to the Merger instead of being directed to our own operations and the pursuit of other opportunities that could have been beneficial to us; (iii) the manner in which customers, suppliers and other third parties perceive us may be negatively impacted, which in turn could affect our ability to compete for business; (iv) we may experience negative reactions from employees; (v) we will have expended time and resources that could otherwise have been spent on our business; and (vi) we may be required, in certain circumstances, to pay a termination fee of $275 million, as provided in the Merger Agreement. In addition, any significant delay in consummating the Merger could have a material adverse effect on our operating results and adversely affect our relationships with customers and suppliers and would likely lead to a significant diversion of management and employee attention.

Additionally, in approving the Merger Agreement, the Board of Directors considered a number of factors and potential benefits, including the fact that the Merger consideration to be received by holders of our common stock represented a 22.2% premium to the closing price of our common stock on September 15, 2017. If the Merger is not completed, neither the Company nor the holders of our common stock will realize this benefit of the Merger. Moreover, we would also have nevertheless incurred substantial transaction-related fees and costs and the loss of management time and resources.

Expenses related to the pending Merger are significant and will adversely affect our operating results.

We have incurred and expect to continue to incur significant expenses in connection with the pending Merger, including legal and investment banking fees. We expect these costs to have an adverse effect on our operating results. If the Merger is not consummated, we may under certain circumstances be required to pay to Northrop Grumman a termination fee of $275 million. Our financial position and results of operations would be adversely affected if we were required to pay the termination fee to Northrop Grumman.

We are subject to business uncertainties and contractual restrictions while the Merger is pending, which could adversely affect our business.

The Merger Agreement requires us to act in the ordinary course of business and restricts us, without the consent of Northrop Grumman, from taking certain specified actions until the pending Merger occurs or the Merger Agreement terminates. These restrictions may prevent us from pursuing otherwise attractive business opportunities and making other changes to our business before completion of the Merger or, if the Merger is not completed, termination of the Merger Agreement.

Uncertainties associated with the Merger may cause a loss of management and other key employees and disrupt our business relationships, which could adversely affect our business.

Uncertainty about the effect of the Merger on our employees, customers and suppliers may have an adverse effect on our business. These uncertainties may impair our ability to attract, retain and motivate key personnel until the Merger is completed and for a period of time thereafter. Employee retention may be particularly challenging during the pendency of the Merger. If key employees depart and as we face additional uncertainties relating to the Merger, our business relationships may be subject to disruption as customers, suppliers and other third parties attempt to

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negotiate changes in existing business relationships or consider entering into business relationships with parties other than the Company. If key employees depart or if our existing business relationships suffer, our results of operations may be adversely affected. The adverse effects of such disruptions could be further exacerbated by any delay in the completion of the Merger.

Our business could be adversely impacted by reductions or changes in U.S. Government military or NASA spending.

We depend on contracts with the U.S. Government and its prime contractors for a substantial portion of our sales. In addition, a significant portion of such sales come from a small number of contracts. Our CRS contracts with NASA, which are reported within Flight Systems Group and Space Systems Group, comprised 9%, 13% and 10% of our sales in calendar year 2017, calendar year 2016 and the 2015 transition period, respectively. Our small-caliber ammunition contract with the U.S. Army, which is reported within Defense Systems Group, comprised 5%, 6%, and 6% of our sales in calendar 2017, calendar 2016 and the 2015 transition period, respectively. The loss or significant reduction of a material U.S. Government program in which we participate could have a material adverse effect on our operating results, financial condition or cash flows.

U.S. Government contracts are dependent on the continuing availability of Congressional appropriations. Congress usually appropriates funds for a given program on a fiscal year basis even though contract performance may take more than one year. As a result, at the outset of a major program, the contract is usually incrementally funded, and additional monies are normally committed to the contract by the procuring agency only as Congress makes appropriations for future fiscal years. In addition, most U.S. Government contracts are subject to modification if funding is changed. Key programs in which we participate must compete with other programs for consideration during the federal budgeting and appropriation process, and support and funding for any U.S. Government program may be influenced by general economic conditions, political considerations and other factors. A decline in U.S. Government support and funding for programs in which we participate could result in contract terminations, delays in contract awards, the failure to exercise contract options, the cancellation of planned procurements and fewer new business opportunities, any of which could have a material adverse effect on our operating results, financial condition or cash flows.

We are subject to intense competition for U.S. Government contracts and programs and therefore may not be able to compete successfully.

We encounter competition for ~~most~~many contracts and programs, including in particular, U.S. ~~government~~Government contracts. Some of our competitors have substantially greater financial, technical, marketing, manufacturing, distribution and other resources. Our ability to compete for these contracts depends to a large extent upon:


•	the creativity and effectiveness of our research and development programs,


•	our ability to offer better program performance and/or at a lower cost than our competitors,


•	the readiness of our facilities, equipment and personnel to undertake the programs for which we compete, and


•	our past performance and demonstrated capabilities.

In some instances, the U.S. Government directs a program to a single supplier. In these cases, there may be other suppliers who have the capability to compete for the programs involved, but they can only enter or reenter the market if the U.S. Government chooses to open the particular program to competition and, as such, these types of programs are subject to risk of the U.S. Government providing new awards to other suppliers. Our sole-source contracts accounted for 47% of our U.S. Government sales in the year ended December 31, ~~2016~~2017.

We may not be able to react to increases in our costs due to the nature of our U.S. Government contracts.

Our U.S. Government contracts can be categorized as either "cost-plus" or "fixed-price."

Cost-Plus Contracts. Cost-plus contracts are cost-plus-fixed-fee, cost-plus-incentive-fee or cost-plus-award-fee contracts. Cost-plus-fixed-fee contracts allow us to recover approved costs plus a fixed fee. Cost-plus-incentive-fee contracts and cost-plus-award-fee contracts allow us to recover approved costs plus a fee that can fluctuate based on actual results as compared to contractual targets for factors such as cost, quality, schedule and performance. The award or incentive fees that are typically associated with these programs are subject to uncertainty and may be earned over extended periods. In these cases, the associated financial risks for cost-plus contracts are primarily in lower profit rates or program cancellation if cost, schedule or technical performance issues arise.

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Fixed-Price Contracts. Fixed-price contracts are firm-fixed-price, fixed-price-incentive or fixed-price-level-of-effort contracts. Under firm-fixed-price contracts, we agree to perform certain work for a fixed price and absorb any cost overruns. Fixed-price-incentive contracts are fixed-price contracts under which the final contract price may be adjusted based on total final costs compared to total target cost, and may be affected by schedule and performance. Fixed-price-level-of-effort contracts allow for a fixed price per labor hour, subject to a contract cap. All fixed-price contracts present the inherent risk of unreimbursed cost overruns. If the initial estimates used to calculate the contract price and the cost to perform the work prove to be incorrect, there could be a material adverse effect on operating results, financial condition or cash flows. The Lake City Army Ammunition Plant ammunition contract is a fixed-price contract, and ~~as discussed elsewhere in this report,~~ is expected to result in a net loss over the term of the contract. In addition, some contracts have specific provisions relating to cost, schedule and performance. If we fail to meet the terms specified in those contracts, the cost to perform the work could increase or our price could be reduced, which would adversely affect our financial condition. The U.S. Government also regulates the accounting methods under which costs are allocated to U.S. Government contracts.

The following table identifies the amount contributed to our U.S. Government business by contract type in the year ended December 31, ~~2016~~2017:

Cost-plus contracts	3236	%
Fixed-price contracts	6864	%
Total	100	%

We use estimates in accounting for our programs. Changes in estimates have affected our financial results and could affect them in the future.

Contract accounting requires judgment relative to assessing risks, estimating contract revenues, including the impact of scope change negotiations, estimating program costs, and making assumptions for schedule and technical issues. Due to the size and nature of many of our contracts, the estimation of total revenues and cost at completion is complex and subject to many variables. Assumptions are made regarding the length of time to complete the contract because costs also include expected increases in wages and prices for materials. Similarly, many assumptions are made regarding the future impact of such things as the business base, efficiency initiatives, cost reduction efforts, contract changes and claim recovery. Incentives or penalties related to performance on contracts are considered in estimating revenue and profit rates, and are recorded when there is sufficient information to assess anticipated performance. Estimates of award and incentive fees are also used in estimating revenue and profit rates based on actual and anticipated awards.

Because of the significance of the judgments and estimation processes described above, it is possible that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. For example, we have concluded that the Company’s costs will exceed expected revenues under its long-term contract with the U.S. Army to manufacture and supply small -caliber ammunition at the Lake City Army Ammunition Plant, resulting in a material net loss over the contract’'s term. Changes in underlying assumptions, circumstances or estimates may adversely affect future period financial performance. Additional information on our accounting policies for revenue recognition can be found in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the section titled "Critical Accounting Policies" of this report.

Our U.S. Government contracts are subject to termination at any time, with or without cause.

Our direct and indirect contracts with the U.S. Government or its prime contractors may be terminated or suspended at any time, with or without cause, for the convenience of the ~~government~~U.S. Government or in the event of a default by the contractor. If a cost-plus contract is terminated, the contractor is entitled to reimbursement of its approved costs. If the contractor would have incurred a loss had the entire contract been performed, then no profit is allowed by the U.S. Government.

If the termination is for convenience, the contractor is also entitled to receive payment of a total fee proportionate to the percentage of the work completed under the contract. If a fixed-price contract is terminated, the contractor is entitled to receive payment for items delivered to and accepted by the U.S. Government. If the termination is for convenience, the contractor is also entitled to receive fair compensation for work performed plus the costs of settling and paying claims by terminated subcontractors, other settlement expenses and a reasonable profit on the costs incurred or committed. While the contractor is entitled to these claims under either type of contract, there can be no assurance that these amounts will be recovered.

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If a contract termination is for default:


•	the contractor is paid an amount agreed upon for completed and partially completed products and services accepted by the U.S. Government,


•	the U.S. Government is not liable for the contractor's costs for unaccepted items, and is entitled to repayment of any advance payments and progress payments related to the terminated portions of the contract, and

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•	the contractor may be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source.

One of our major programs is as the provider of solid rocket motors for NASA's SLS program. In the event NASA were to cancel the SLS program, we believe that we will be reimbursed for certain amounts previously incurred by us, as well as amounts to be incurred by us, as part of that termination, (e.g., severance, environmental liabilities and termination administration). There can be no assurance, however, that we would be successful in collecting reimbursement of any termination liability costs.

Our contracts with NASA to deliver cargo to the ISS isare a significant part of our business within Flight Systems Group and Space Systems Group. NASA could cancel ~~this~~these ~~contract~~contracts for any reason, including as a result of reductions in appropriations or our failure to achieve milestones due to technical issues or delays similar to those that occurred when we experienced an Antares launch failure in 2014. A cancellation of our NASA contracts could have a material adverse effect on our operating results, financial condition and cash flows.

Our small-caliber ammunition operations for the U.S. military and U.S. allies are conducted at the Lake City Army Ammunition Plant in Independence, Missouri. The Lake City Army Ammunition Plant is the U.S. Army's principal small-caliber ammunition production facility and is the primary supplier of the U.S. military's small-caliber ammunition needs. We took over operation of this facility in 2000 and are responsible for the operation and management. In September 2012, we were awarded new contracts for the continued production of ammunition and continued operation and maintenance of the Lake City Army Ammunition Plant. The production contract has an initial term of seven years. The ~~plus~~contract also had the possibility of an award term extension of an additional three years, ifbut the Company ~~does~~provided ~~not provide~~ written notice of rejection of the extension to the U.S. Army. Wein ~~presently~~2017, ~~believe~~which ~~that it is probable that~~ we believe will ~~provide written notice of rejection of the additional three-year award term, which would~~ result in materially lower sales for the Company should we not win the re-compete.

Other risks associated with U.S. Government contracts may expose us to adverse consequences.

Like all U.S. Government contractors, we are subject to possible losses on contracts due to risks associated with uncertain cost factors related to:


•	scarce technological skills and components,


•	the frequent need to bid on programs in advance of design completion, which may result in unforeseen technological difficulties and/or cost overruns,


•	the substantial time and effort required for design and development,


•	design complexity,


•	rapid obsolescence, and


•	the potential need for design improvement.

Such factors can increase the costs associated with a program and delay performance, reducing our profitability and adversely impacting our customer relationships.

We manufacture and provide commercial aircraft components which could subject us to exposure unique to the commercial aircraft industry.

Airbus and Boeing have the contractual right to cancel their contracts with us for convenience, which could include the termination of one or more aircraft models or programs for which we supply products. Although Airbus and Boeing would be required to reimburse us in certain situations for expenses, there can be no assurance these payments would adequately cover our expenses or lost profits resulting from the termination. Furthermore, if Airbus or Boeing experiences a decrease in requirements for the products which we supply to it, a major ~~disruptions~~disruption in its business, such as a strike, work stoppage or slowdown, fails to perform on its contractual obligations under its ~~agreements with us or we cannot meet the expected production rate increases our business, results of operations, financial position and cash flows could be materially adversely affected.~~

~~We are subject to procurement and other related laws and regulations, and non-compliance may expose us to adverse consequences.~~15

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~~routinely~~agreements ~~audit~~with ~~and~~us ~~investigate~~or ~~government~~we ~~contractors.~~cannot Inmeet ~~particular,~~the ~~these~~expected ~~agencies~~production ~~often~~rate ~~investigate~~increases, our ~~launch vehicle failures and other material occurrences relating to our products~~business, ~~including~~results ~~an ongoing DoJ/NASA investigation~~ of ~~the 2009 OCO and 2011 Glory failures involving the Taurus XL launch vehicle. These agencies review a contractor's performance under its contracts~~operations, ~~cost~~financial ~~structure~~position and ~~compliance~~cash ~~with~~flows ~~applicable~~could ~~laws,~~be ~~regulations~~materially ~~and~~adversely ~~standards, including procurement integrity laws and the False Claims Act~~affected.

We are subject to procurement and other related laws and regulations, and non-compliance may expose us to adverse consequences.

We are subject to extensive and complex U.S. Government procurement laws and regulations, along with ongoing U.S. Government audits and reviews of contract procurement, performance and administration. As a result, U.S. Government agencies, including the Defense Contract Audit Agency, various agency Inspectors General and the U.S. Department of Justice ("DoJ"), routinely audit and investigate government contractors. In particular, these agencies often investigate our launch vehicle failures and other material occurrences relating to our products, including an ongoing DoJ/NASA investigation of the 2009 OCO and 2011 Glory failures involving the Taurus XL launch vehicle. These agencies review a contractor's performance under its contracts, cost structure and compliance with applicable laws, regulations and standards, including procurement integrity laws and the False Claims Act.

Charging practices relating to labor, research and development, and other costs that may be charged directly or indirectly to U.S. Government contracts are often scrutinized to determine that such costs are allowable under U.S. Government contracts and furthermore that such costs are reasonable. Any costs determined to be unallowable or unreasonable may not be reimbursed, and such costs already reimbursed may be subject to repayment. If the amount of such costs were significant, our results of operations, financial condition and cash flow could be materially adversely affected. We expect to recover a significant portion of our research and development expenses through billings under certain of our U.S. Government contracts in accordance with applicable regulations, but such billings could be reversed or rejected by the U.S. Government. Our inability to recover a significant portion of such expenses could materially adversely affect our operating results, financial condition or cash flows.

U.S. Government agencies also review the adequacy of, and a contractor's compliance with, its internal control systems and policies, including the contractor's purchasing, property, estimating, earned value, material management and accounting systems. Adverse findings relating to our systems could result in the U.S. Government customer withholding a percentage of payments and also could impact our ability to win new U.S. Government contracts or exercise contract options.

Responding to government audits, inquiries or investigations may involve significant expense and divert management attention. Also, if an audit or investigation were to uncover improper or illegal activities, we could be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. Government. In addition, we could suffer serious harm to our reputation if allegations of impropriety were to be made against us.

Changes in demand for military and commercial ammunition could adversely affect our financial performance.

We sell military ammunition to the DoD and commercial ammunition to Vista Outdoor under an ammunition supply agreement. Both the commercial and military markets for ammunition are subject to a number of risks and uncertainties that can cause demand to fluctuate unpredictably. Decreases in the demand for ammunition in either market could result in excess manufacturing capacity and increased overhead rates as a result, which could have a negative impact on our operating results. Further, since our Lake City Ammunition Contract with the U.S. Army is in a loss position, increases in demand by the DoD could adversely affect our financial performance, including profitability and cash flow. In addition, manufacturing costs for ammunition could rise as a result of a number of factors, including increases in commodity prices and other raw materials and increases in labor costs at ~~our~~the Lake City Army Ammunition Plant, which could also have an adverse effect on our operating results and further increase our net loss under that contract.

We manufacture and sell products that create exposure to potential product liability, warranty liability or personal injury claims and litigation.

Our products may expose us to potential product liability, warranty liability or personal injury claims relating to the use of those products. Our reputation may be adversely affected by such claims, whether or not successful, including potential negative publicity about ~~its~~our products.

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We are exposed to risks associated with expansion into new and adjacent commercial markets.

Our long-term business growth strategy includes further expansion into new and adjacent markets. For example, we currently are investing in several new growth initiatives, including new cutting-edge satellite servicing technologies. Such efforts involve a number of risks, including increased capital expenditures, market uncertainties, market acceptance of new technologies, schedule delays, performance risk, extended payment terms, diversion of management attention, additional credit risk associated with new customers, and costs incurred in competing with companies with strong brand names and market positions. An unfavorable event or trend in any one or more of these factors could adversely affect our operating results, financial condition or cash flows.

International sales are subject to greater risks that sometimes are associated with doing business in foreign countries.

A portion of our business is derived from international markets. In the year ended December 31, ~~2016~~2017, approximately 1718% of our sales were to foreign customers, compared to 2317% in the ~~2015~~year ~~transition~~ended ~~period~~December 31, 2016. We also procure certain key components from non-U.S. vendors. Our international business may pose greater risks than our business in the United States due to changes in economic, legal and political environments, as well as foreign government priorities and budgets. International transactions frequently involve increased financial and legal risks arising from differing legal systems and customs in other countries. In addition, some international customers require contractors to agree to offset programs that may require in-country purchases or manufacturing or financial support arrangements as a condition to awarding contracts. The contracts may include penalties in the event a company fails to perform in accordance with the offset requirements. Furthermore, international business may create difficulties and risks with respect to the maintenance of an integrated supply chain network. An unfavorable event or trend in any one or more of these factors could adversely affect our operating results, financial condition or cash flows. Foreign sales subject us to numerous stringent U.S. and foreign laws and regulations, including Congressional review and approval of certain foreign arms sales, regulations relating to import-export control, exchange controls, the Foreign Corrupt Practices Act and certain other anti-corruption laws, and the anti-boycott provisions of the U.S. Export Administration Act. Failure to comply with these laws and regulations could result in material adverse consequences to us.

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International transactions frequently involve increased financial and legal risks arising from differing legal systems and customs in other countries. In addition, some international customers require contractors to agree to offset programs that may require in-country purchases or manufacturing or financial support arrangements as a condition to awarding contracts. The contracts may include penalties in the event a company fails to perform in accordance with the offset requirements. Furthermore, international business may create difficulties and risks with respect to the maintenance of an integrated supply chain network. An unfavorable event or trend in any one or more of these factors could adversely affect our operating results, financial condition or cash flows. Foreign sales subject us to numerous stringent U.S. and foreign laws and regulations, including regulations relating to import-export control, exchange controls, the Foreign Corrupt Practices Act and certain other anti-corruption laws, and the anti-boycott provisions of the U.S. Export Administration Act. Failure to comply with these laws and regulations could result in material adverse consequences to us.

Our products are subject to extensive regulation.

We are required to comply with extensive regulation of our products, including those rules and regulations administered by the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Department of Homeland Security, the U.S. Department of State and the U.S. Department of Commerce. These laws include, but are not limited to, the Foreign Corrupt Practices Act, International Traffic in Arms Regulations, and the Chemical Facility Anti-Terrorism Standards. Compliance with these laws is costly and time consuming. A violation of these laws could result in significant fines and penalties and could have a material adverse effect on our business.

We are exposed to market risk from changes in foreign currency exchange rates which could negatively impact profitability.

Sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar and may adversely affect our results of operations. Currency fluctuations may affect product demand and prices we pay for materials and, as a result, our operating margins may be negatively impacted. Fluctuations in exchange rates may give rise to translation gains or losses when financial statements of our non-U.S. businesses are translated into U.S. dollars. While we monitor our exchange rate exposures and seek to reduce the risk of volatility through hedging activities, such activities bear a financial cost and are not always available or successful in mitigating such volatility.

We have restated our prior consolidated financial statements twice recently, which may lead to adverse determinations in legal proceedings, additional risks and uncertainties, including loss of investor confidence and negative impacts on our stock price.

As a result of our recent restatements, we have become subject to a number of additional costs and risks, including unanticipated costs for accounting and legal fees in connection with or related to the restatements and the remediation of our ineffective disclosure controls and procedures and material weaknesses in internal control over financial reporting. We are also the subject of a non-public investigation by the ~~Securities and Exchange Commission~~SEC, securities class action litigation and shareholder demands and potentially other actions as a result of the restatements. ~~In addition, the attention of our management team has been diverted by these efforts.~~ We could be subject to additional shareholder, governmental, or other actions in connection with the restatements and related matters. Any ~~such~~current or future legal proceedings will, regardless of the outcome, continue to consume a significant amount of management’'s time and attention and may result in additional legal, accounting, insurance and other costs. IfWhile we do not prevail in any such proceedings, we could be required to pay substantial damages or settlement costs. In addition, the restatements and related matters could impair our reputation or could cause our counterparties to lose confidence in us. Any of these occurrences could have a material adverse effect on our business, results of operations, financial condition and stock price.

We have identified material weaknesses in our internal control over financial reporting which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.17

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. In Part II, Item 9A, "Controls and Procedures" of this Form 10-K, our management identified several material weaknesses in our internal control over financial reporting.

As a result of the material weaknesses, our management concluded that our internal control over financial reporting was not effective as of December 31, 2016. The assessment was based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. We have developed a remediation plan designed to address the material weaknesses, but our remediation efforts are not complete and are ongoing. If our remedial measures are insufficient to address the material weaknesses, or if additional material weaknesses in our internal control are discovered or occur in the future, it may materially adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner. If we are unable to report our results in a timely and accurate manner, we may not be able to comply with the applicable covenants in our financing arrangements, and may be required to seek additional

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~~waivers~~we orcannot ~~repay~~estimate ~~amounts~~our ~~under~~potential exposure in these ~~financing~~proceedings ~~arrangements~~at ~~earlier~~this ~~than~~time, ~~anticipated~~we expect to expend significant amounts defending the litigation and responding to the SEC investigation. If we do not prevail in any such proceedings, ~~which~~we could ~~adversely~~be ~~impact~~required ~~our~~to ~~liquidity~~pay substantial damages or settlement costs. In addition, the restatements and related matters could impair our reputation or could cause our counterparties to lose confidence in us. Any of these occurrences could have a material adverse effect on our business, results of operations, financial condition. and stock price.

Although we review and evaluate internal control systems to allow management to report on the sufficiency of our internal controls, we cannot assure you that we will not discover additional material weaknesses in our internal control over financial reporting. The next time we evaluate our internal control over financial reporting, if we identify one or more new material weaknesses or are unable to timely remediate our existing weaknesses, we may be unable to assert that our internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the price of our common stock.

Our failure to prepare and timely file our periodic reports with the SEC limits our access to the public markets to raise debt or equity capital.

We did not file this Annual Report on Form 10-K for the year ended December 31, 2016 and our Quarterly Reports on Form 10-Q for the quarters ended July 3, 2016 and October 2, 2016 within the timeframe required by the SEC. Because we have not remained current in our reporting requirements with the SEC, we are limited in our ability to access the public markets to raise debt or equity capital. Our limited ability to access the public markets could prevent us from pursuing transactions or implementing business strategies that we might otherwise believe are beneficial to our business. Even if we maintain compliance with our SEC reporting obligations, we will be ineligible to use shorter and less costly registration forms, such as Form S-3, to register our securities for sale until approximately one year from the date of this filing. Until then, we may use Form S-1 to register a sale of our stock to raise capital or complete acquisitions, but doing so would likely take significantly longer than using a Form S-3, increase transaction costs and adversely impact our ability to raise capital or complete acquisitions of other companies using our common stock in a timely manner.

The restatement of our previously issued financial results could result in government enforcement actions and adverse determinations in litigation that could have a material adverse impact on our results of operations, financial condition, liquidity and cash flows.

We are subject to a non-public investigation by the SEC, securities class action litigation and shareholder demands relating to the restatements. For additional discussion of legal proceedings related to the restatements, see Part I, Item 3 "Legal Proceedings" of this Form 10-K. We could also become subject to other investigations or litigation, or one or more government enforcement actions, arising out of the misstatements in our previously issued financial statements. Our management may be required to devote significant time and attention to these matters, and these and any additional matters that arise could have a material adverse impact on our results of operations, financial condition, liquidity and cash flows. While we cannot estimate our potential exposure in these matters at this time, we expect to expend significant amounts defending the litigation and responding to the SEC investigation.

We have a substantial amount of debt, and the cost of servicing that debt could adversely affect our business and hinder our ability to make payments on our debt.

At December 31, ~~2016~~2017, we had total debt of $1,~~450~~410 million. In addition, we had $~~182~~240 million of outstanding but undrawn letters of credit and, taking into account these letters of credit, an additional $~~818~~760 million of availability under our revolving credit facility. Additional information on our debt can be found in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the section titled "Liquidity and Capital Resources" of this report.

We have demands on our cash resources in addition to interest and principal payments on our debt including, among others, operating expenses. These significant demands on our cash resources could:


•	make it more difficult for us to satisfy obligations,


•	require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the amount of cash flow available for working capital, capital expenditures, acquisitions, share repurchases, dividends and other general corporate purposes,


•	limit our flexibility in planning for, or reacting to, changes in the defense and aerospace industries,


•	place us at a competitive disadvantage compared to competitors that have lower debt service obligations and significantly greater operating and financing flexibility,


•	limit, along with the financial and other restrictive covenants applicable to our indebtedness, among other things, our ability to borrow additional funds,

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•	increase our vulnerability to general adverse economic and industry conditions, and


•	result in a default event upon a failure to comply with financial covenants contained in our senior credit facilities which, if not cured or waived, could have a material adverse effect on our business, financial condition or results of operations.

Our ability to pay interest on and repay our long-term debt and to satisfy our other liabilities will depend upon future operating performance and our ability to refinance our debt as it becomes due. Our future operating performance and ability to refinance will be affected by prevailing economic conditions at that time and financial, business and other factors, many of which are beyond our control.

If we are unable to service our indebtedness and fund operating costs, we will be forced to adopt alternative strategies that may include:


•	reducing or delaying expenditures for capital equipment and/or share repurchases,


•	seeking additional debt financing or equity capital,


•	foregoing attractive acquisition opportunities,


•	selling assets, or


•	restructuring or refinancing debt.

There can be no assurance that any such strategies could be implemented on satisfactory terms, if at all.

The level of returns on pension and postretirement plan assets, changes in interest rates and other factors could affect our earnings and cash flows.

Our earnings may be impacted by the amount of expense or income recorded for employee benefit plans, primarily pension plans and other postretirement plans. U.S. ~~generally accepted accounting principles ("~~GAAP") ~~require~~requires us to calculate income or expense for the plans using actuarial valuations. These valuations are based on assumptions made relating to financial market and other economic conditions. Changes in key economic indicators can result in changes in these assumptions. The key year-end assumptions used to estimate pension and postretirement benefit expense or income for the following year are the discount rate, the expected long-term rate of return on plan assets, the rate of increase in future compensation levels, mortality rates and the health care cost trend rate. We are required to remeasure our plan assets and benefit obligations annually, which may result in a significant change to equity through other comprehensive income (loss). Our pension and other postretirement benefit income or expense can also be affected by legislation or other regulatory actions. Additional information on how our financial statements can be affected by pension plan accounting policies can be found in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the section titled "Critical Accounting Policies" of this report.

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economic conditions. Changes in key economic indicators can result in changes in these assumptions. The key year-end assumptions used to estimate pension and postretirement benefit expense or income for the following year are the discount rate, the expected long-term rate of return on plan assets, the rate of increase in future compensation levels, mortality rates and the health care cost trend rate. We are required to remeasure our plan assets and benefit obligations annually, which may result in a significant change to equity through other comprehensive income (loss). Our pension and other postretirement benefit income or expense can also be affected by legislation or other regulatory actions. Additional information on how our financial statements can be affected by pension plan accounting policies can be found in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the section titled "Critical Accounting Policies" of this report.

Our business could be negatively impacted by security threats, including cyber security and other industrial, insider and physical security threats, and other disruptions.

As a U.S. defense contractor, we face cyber security threats, threats to the physical security of our facilities and employees, and terrorist acts, as well as the potential for business disruptions associated with information technology failures, natural disasters or public health crises. We also face the risk of economic espionage, which involves the targeting or acquisition of sensitive financial, trade, proprietary or technological information.

We routinely experience cyber security threats, threats to our information technology infrastructure and attempts to gain access to sensitive information, as do our customers, suppliers, subcontractors and joint venture partners. We may experience similar security threats at customer sites that we operate and manage.

Prior cyber- attacks directed at us have not had a material impact on our financial results, and we believe that our threat detection and mitigation processes and procedures are generally adequate. The threats we face vary from attacks common to most industries to more advanced and persistent threats from highly-organized adversaries who target us because we protect national security information. If we are unable to protect sensitive information, our customers or governmental authorities could question the adequacy of our threat mitigation and detection processes and procedures and, as a result, our present and future business could be negatively impacted.

Although we work cooperatively with our customers, suppliers, subcontractors and joint venture partners to minimize the impact of cyber threats, other security threats or business disruptions, we must rely on the safeguards put in place by these entities, which may in turn affect the security of our own information and that of other parties. The entities we work with have varying levels of cyber security expertise and safeguards and their relationships with government contractors, such as us, may increase the likelihood that they are targeted by the same cyber threats we face.

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varying levels of cyber security expertise and safeguards and their relationships with government contractors, such as us, may increase the likelihood that they are targeted by the same cyber threats we face.

The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Occurrence of any of these events could adversely affect our internal operations, the services we provide to customers, loss of competitive advantages derived from our research and development efforts or other intellectual property, the obsolescence of our products and services, our financial results, our reputation and our stock price.

Disruptions in the supply of key raw materials or components and difficulties in the supplier qualification process, as well as increases in prices of raw materials, could adversely impact us.

Key raw materials used in our operations include aluminum, steel, steel alloys, copper, zinc, lead, graphite fiber, prepreg, hydroxy terminated polybutadiene, epoxy resins and adhesives, ethylene propylene diene monomer rubbers, diethylether, x-ray film, plasticizers and nitrate esters, impregnated ablative materials, various natural and synthetic rubber compounds, polybutadiene, acrylonitrile and ammonium perchlorate. We also purchase chemicals; electronic, electro-mechanical and mechanical components; subassemblies; and subsystems that are integrated with the manufactured parts for final assembly into finished products and systems.

We monitor sources of supply to attempt to assure that adequate raw materials and other supplies needed in manufacturing processes are available. As a U.S. Government contractor, we are frequently limited to procuring materials and components from sources of supply approved by the DoD. In addition, as changes occur in business conditions, the DoD budget, and Congressional allocations, suppliers of specialty chemicals and materials sometimes consider dropping low volume items from their product lines, which may require, as it has in the past, qualification of new suppliers for raw materials on key programs. The supply of ammonium perchlorate, a principal raw material used in our operations, is limited to a single source that supplies the entire domestic solid propellant industry. This single source, however, maintains two separate manufacturing lines a reasonable distance apart, which mitigates the likelihood of a fire, explosion or other problem impacting all production. We may also rely on one primary supplier for other production materials. Although other suppliers of the same materials may exist, the addition of a new supplier may require us to qualify the new source for use. The qualification process may impact our profitability or ability to meet contract deliveries.

We also rely on sole source suppliers for a number of key components, including the rocket motors and engines we use on our launch vehicles. If we are unable to obtain such components in the future, due to a supplier's financial difficulties or a supplier's failure to perform as expected, we could have difficulty procuring such components in a timely or cost effective manner. A disruption in the procurement of key components could result in substantial cost increases, significant delays in the execution of certain contracts or our inability to complete certain contracts, any of which could result in a materially adverse impact on our financial results.19

~~For~~Table ~~example, as a result~~ of the failure of Orbital's Antares launch vehicle in October 2014 and prior engine test failures, we ceased using the AJ-26 rocket engine in our Antares product line and transitioned to a sole-sourced replacement engine, the RD-181. The time, expense and effort associated with our recovery plan resulted in additional costs and delays. Contents

We also rely on sole-source suppliers for a number of key components, including the rocket motors and engines we use on our launch vehicles. If we are unable to obtain such components in the future, due to a supplier's financial difficulties or a supplier's failure to perform as expected, we could have difficulty procuring such components in a timely or cost effective manner. Although other suppliers of the same materials may exist, the addition of a new supplier may require us to qualify the new source for use. The qualification process may impact our profitability or ability to meet contract deliveries. A disruption in the procurement of key components could result in substantial cost increases, significant delays in the execution of certain contracts or our inability to complete certain contracts, any of which could result in a materially adverse impact on our financial results.

For example, as a result of the failure of our Antares launch vehicle in October 2014 and prior engine test failures, we ceased using the AJ-26 rocket engine in our Antares product line and transitioned to a sole-sourced replacement engine, the RD-181. The time, expense and effort associated with our recovery plan resulted in additional costs and delays.

Certain suppliers of materials used in the manufacturing of rocket motors have discontinued the production of some materials. These materials include certain insulation and resin materials for rocket motor cases and aerospace-grade rayon for nozzles. We have qualified new replacement materials for some programs. For other programs, we or our customers have procured sufficient inventory to cover current program requirements and are in the process of qualifying new replacement materials to be qualified in time to meet future production needs. Our profitability may be affected if unforeseen difficulties in developing and qualifying replacement materials occur.

We are also impacted by increases in the prices of raw materials used in production on commercial and fixed-price business. We have seen a significant fluctuation in the prices of commodity metals, including copper, lead, steel and zinc. The fluctuating costs of natural gas and electricity also have an impact on the cost of operating our factories.

Prolonged disruptions in the supply of any of our key raw materials or components, difficulty completing qualification of new sources of supply, implementing use of replacement materials, components or new sources of supply, or a continuing increase in the prices of raw materials, energy or components could have a material adverse effect on our operating results, financial condition or cash flows.

Failure of our subcontractors to perform their contractual obligations could materially and adversely impact our prime contract performance and ability to obtain future business.

We rely on subcontracts with other companies to perform a portion of the services we provide our customers on many of our contracts. There is a risk that we may have disputes with our subcontractors, including disputes regarding the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontract, our failure to extend existing task orders or issue new task orders under a subcontract or our hiring of personnel of a subcontractor. A failure by one or more of our subcontractors to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed-upon services may materially and adversely impact our ability to perform our obligations as the prime contractor. Subcontractor performance deficiencies could result in a customer limiting payments or terminating a contract for default. A default termination could expose us to liability and have a material adverse effect on the ability to compete for future contracts and orders.

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timeliness of work performed by the subcontractor, customer concerns about the subcontract, our failure to extend existing task orders or issue new task orders under a subcontract or our hiring of personnel of a subcontractor. A failure by one or more of our subcontractors to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed-upon services may materially and adversely impact our ability to perform our obligations as the prime contractor. Subcontractor performance deficiencies could result in a customer limiting payments or terminating a contract for default. A default termination could expose us to liability and have a material adverse effect on the ability to compete for future contracts and orders.

Failure to successfully negotiate or renew collective bargaining agreements, or strikes, slow-downs or other labor-related disruptions, could adversely affect our operations and could result in increased costs that impair our financial performance.

A significant number of our employees are covered by collective bargaining agreements, which expire on various dates. Strikes, slow-downs or other labor-related disruptions could occur if we are unable to either negotiate or renew these agreements on satisfactory terms, which could adversely impact our operating results. The terms and conditions of new or renegotiated agreements could also increase our costs or otherwise affect our ability to fully implement future operational changes to enhance our efficiency. In certain instances, we may not be able to pass increased costs from new or renegotiated agreements on to our customers due to the fixed-price nature of many of our contracts, including our small-caliber ammunition contract with the U.S. Army that is performed at the Lake City Army Ammunition Plant.

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Our future success and growth will depend significantly on our ability to develop new technologies and products that achieve market acceptance within acceptable margins while maintaining a qualified workforce to meet the needs of our customers.

Virtually all of the products produced and sold by us are highly engineered and require sophisticated manufacturing and system integration techniques and capabilities. Our commercial and government businesses both operate in global markets that are characterized by rapidly changing technologies, industry standards, market trends and customer demands. The product and program needs of our government and commercial customers change and evolve regularly. Accordingly, our future performance depends on ~~its~~our ability to identify emerging technological trends, develop and manufacture competitive products, enhance our products by adding innovative features that differentiate our products from those of our competitors, and bring those products to market quickly at cost-effective prices.

Our ability to develop new products based on technological innovation can affect our competitive position and requires the investment of significant resources. These development efforts divert resources from other potential investments in our businesses, and they may not lead to the development of new technologies or products on a timely basis or ~~that~~meets ~~meet~~ the needs of our customers as fully as other competitive offerings. In addition, the markets for our products may not develop or grow as we anticipate. The failure of our technologies or products to gain market acceptance due to more attractive offerings by our competitors could significantly reduce our revenues and adversely affect our competitive standing and prospects.

In addition, because of the highly specialized nature of our business, we must be able to hire and retain the skilled and appropriately qualified personnel necessary to perform the services required by our customers. Our operating results, financial condition or cash flows may be adversely affected if we are unable to develop new products that meet customers' changing needs or successfully attract and retain qualified personnel.

There can be no assurance that our products will be successfully developed or manufactured or that they will perform as intended.

Most of the products we develop and manufacture are technologically advanced and sometimes include novel systems that must function under highly demanding operating conditions. From time to time, we experience product failures, cost overruns in developing and manufacturing our products, delays in delivery and other operational problems. We have experienced product and service failures, schedule delays and other problems in connection with certain of our launch vehicles, including the Antares launch vehicle, satellites, advanced space systems and other products. We may have similar occurrences in the future.

Some of our satellite and launch services contracts impose monetary penalties on us for delays and for performance failures, which penalties could be significant. In addition to any costs resulting from product warranties or required remedial action, product failures or significant delays may result in increased costs or loss of revenues due to the postponement or cancellation of subsequently scheduled operations or product deliveries and may have a material adverse effect on our operating results, financial condition or cash flows. Negative publicity from a product failure could damage our reputation and impair our ability to win new contracts.

Due to the volatile and flammable nature of our products, fires or explosions may disrupt our business.

Many of our products involve the manufacture and/or handling of a variety of explosive and flammable materials. From time to time, these activities have resulted in incidents, ~~which~~such as an explosion at the Lake City Army Ammunition Plant in 2017, that have ~~temporarily~~caused workplace injuries and fatalities, the temporary shut down or other disruption of our manufacturing process, production delays, and related expense, fines and liability to third parties. We have safety and loss prevention programs which require detailed pre-construction reviews of process changes and new operations, along with routine safety audits of operations involving explosive materials, to mitigate such incidents, as well as insurance coverage for such incidents. We may experience similar or more serious incidents in the future which could result in production delays or otherwise ~~disrupted~~have ~~some~~a material adverse effect on our operating results, financial condition or cash flows.

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manufacturing processes, causing production delays and resulting in liability for workplace injuries and fatalities. We have safety and loss prevention programs which require detailed pre-construction reviews of process changes and new operations, along with routine safety audits of operations involving explosive materials, to mitigate such incidents, as well as a variety of insurance policies. However, we cannot ensure that we will not experience similar incidents in the future or that any similar incidents will not result in production delays or otherwise have a material adverse effect on our operating results, financial condition or cash flows.

We are subject to environmental laws and regulations that govern both past practices and current compliance which may expose us to adverse consequences.

Our operations and ownership or use of real property are subject to a number of federal, state and local environmental laws and regulations, as well as applicable foreign laws and regulations, including those for discharge of hazardous materials, remediation of contaminated sites and restoration of damage to the environment. At certain sites that we own or operate or formerly owned or operated, there is known or potential contamination that we are required to investigate, remediate or provide resource restoration. We could incur substantial costs, including remediation costs, resource restoration costs, fines and penalties, or third party property damage or personal injury claims, as a result of liabilities associated with past practices or violations of environmental laws or non-compliance with environmental permits.

We expect that a portion of our environmental compliance and remediation costs will be recoverable under U.S. Government contracts. Some of the remediation costs that are not recoverable from the U.S. Government that are associated with facilities purchased in a business acquisition may be covered by various indemnification agreements.21

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that we are required to investigate, remediate or provide resource restoration. We could incur substantial costs, including remediation costs, resource restoration costs, fines and penalties, or third party property damage or personal injury claims, as a result of liabilities associated with past practices or violations of environmental laws or non-compliance with environmental permits.

Although we have environmental management programs in place to mitigate risks, and environmental laws and regulations have not had a material adverse effect on our operating results, financial condition or cash flows in the past, it is difficult to predict whether they will have a material impact in the future.

Capital market volatility could adversely impact our earnings because of our capital structure.

We are exposed to the risk of fluctuation in interest rates. If interest rates increase, we may incur increased interest expense on variable interest-rate debt or short-term borrowings, which could have an adverse impact on our operating results and cash flows.

We may pursue or complete acquisitions, or other strategic transactions, which represent additional risk and could impact future financial results.

Our business strategy includes the potential for future acquisitions or other similar strategic transactions. Acquisitions involve a number of risks including negotiating an appropriate price, successfully integrating the acquired company with our operations, and unanticipated liabilities or contingencies related to the acquired company. We cannot ensure that the expected benefits of any future acquisitions or other transactions will be realized. Costs could be incurred on pursuits or proposed acquisitions that have not yet or may not close which could significantly impact our operating results, financial condition or cash flows. Additionally, after the acquisition, unforeseen issues could arise which adversely affect the anticipated returns or which are otherwise not recoverable as an adjustment to the purchase price. Even after careful integration efforts, actual operating results may vary significantly from initial estimates. Furthermore, we may engage in other strategic business transactions, such as joint ventures or mergers. Such transactions could cause unanticipated costs and difficulties, may not achieve intended results, and may require significant time and attention from management which could have an adverse impact on our business, operating results, financial condition or cash flows.

Our profitability could be impacted by unanticipated changes in our tax provisions or exposure to additional income tax liabilities.

Our business operates in many locations under government jurisdictions that impose income taxes. Changes in domestic or foreign income tax laws and regulations, or their interpretation, could result in higher or lower income tax rates assessed or changes in the taxability of certain revenues or the deductibility of certain expenses, thereby affecting income tax expense and profitability. In addition, audits by income tax authorities could result in unanticipated increases in income tax expense.

~~Proposals~~In ~~for~~connection ~~broad~~with ~~reform~~the Tax Cuts and Jobs Act (the "Tax Act") signed into law on December 22, 2017, the U.S. Treasury is expected to issue rules, regulations and guidance in connection with the Tax Act which may alter interpretations of its provisions and change our preliminary analysis and conclusions. Any Treasury rules, regulations and guidance may materially impact the ~~existing~~company's ~~United~~operating ~~States~~results, ~~corporate~~including ~~tax~~our ~~system~~provision ~~are~~for ~~under~~income ~~evaluation~~taxes, bythe ~~various~~amount ~~legislative~~of our net deferred tax assets and ~~administrative~~our ~~bodies~~estimated effective tax rate. We cannot currently predict the overall impact ~~that~~of ~~such~~the ~~proposals~~Tax ~~may~~Act ~~have~~ on our business and results of operations. There could be unforeseen adverse tax consequences that arise as a result of the Tax Act. In addition, further changes in the tax laws of foreign jurisdictions could arise. These contemplated changes could increase tax uncertainty and may adversely affect our provision for income taxes.

We are involved in a number of legal proceedings. We cannot predict the outcome of litigation and other contingencies with certainty.

20We are subject to lawsuits, investigations and disputes (some involving substantial amounts) that arise out of the conduct of our business including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employment, employee benefits plans, intellectual property, import and export matters, and environmental, health and safety matters. As noted in Part I, Item 3, "Legal Proceedings" of this Form 10-K, we are also subject to various claims related to the restatements. Resolution of these matters can be prolonged and costly, and our business may be adversely affected by the ultimate outcome of these matters that cannot be predicted with certainty. Moreover, our potential liabilities are subject to change over time due to new developments, changes in settlement strategy or the impact of evidentiary issues, and we may become subject to or be required to pay damage awards or settlements that could have a material adverse effect on our operating results, financial condition or cash flows.

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We are subject to lawsuits, investigations and disputes (some involving substantial amounts) that arise out of the conduct of our business including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employment, employee benefits plans, intellectual property, import and export matters, and environmental, health and safety matters. As noted in Part I, Item 3, "Legal Proceedings" of this Form 10-K, we are also subject to various claims related to the restatements. Resolution of these matters can be prolonged and costly, and our business may be adversely affected by the ultimate outcome of these matters that cannot be predicted with certainty. Moreover, our potential liabilities are subject to change over time due to new developments, changes in settlement strategy or the impact of evidentiary issues, and we may become subject to or be required to pay damage awards or settlements that could have a material adverse effect on our results of operations, cash flows and financial condition.

If the Distribution does not qualify as a tax-free spin-off under Section 355 of the Internal Revenue Code (the "Code"), including as a result of subsequent acquisitions of our stock or Vista Outdoor, then we or our stockholders immediately prior to the Distribution may be required to pay substantial U.S. federal income taxes and we may be obligated to indemnify Vista Outdoor for such taxes imposed on Vista Outdoor.

The Distribution and the Orbital-ATK Merger are intended to qualify as tax-free to us, our stockholders, Vista Outdoor and Orbital for U.S. federal income tax purposes. However, there can be no assurance that the IRS or the courts will agree with the conclusion of the parties and their counsel regarding the tax treatment of the Distribution and Orbital-ATK Merger. If the Distribution or certain related transactions were taxable, our stockholders would recognize income on their receipt of Vista Outdoor stock in the Distribution, and we would be considered to have made a taxable sale of certain of our assets to Vista Outdoor.

The Distribution will be taxable to us pursuant to Section 355(e) of the Code if there is a 50% or more change in ownership of either us or Vista Outdoor, directly or indirectly, as part of a plan or series of related transactions that include the Distribution. Because our stockholders collectively owned more than 50% of our common stock following the Orbital-ATK Merger, the Orbital-ATK Merger alone will not cause the Distribution to be taxable to us under Section 355(e). However, Section 355(e) could apply if other acquisitions of our stock before or after the Orbital-ATK Merger, or of Vista Outdoor after the Orbital-ATK Merger, are considered to be part of a plan or series of related transactions that include the Distribution. If Section 355(e) were to apply, we would be considered to have made a taxable sale of certain assets to Vista Outdoor and could recognize a substantial taxable gain.

Under the tax matters agreement between us and Vista Outdoor (the "Tax Matters Agreement"), in certain circumstances, and subject to certain limitations, Vista Outdoor is required to indemnify us against taxes on the Distribution that arise as a result of actions or failures to act by Vista Outdoor, or as a result of Section 355(e) applying due to acquisitions of Vista Outdoor stock after the Distribution. In other cases, however, we might recognize taxable gain on the Distribution without being entitled to an indemnification payment under the Tax Matters Agreement. If such tax is imposed on Vista Outdoor, then we generally will be required to indemnify Vista Outdoor for that tax.

ITEM 1B. UNRESOLVED STAFF COMMENTS

There are no unresolved staff comments at the date of this report.

ITEM 2. PROPERTIES

Facilities. At December 31, ~~2016~~2017, we occupied ~~manufacturing~~research, ~~assembly~~development, ~~warehouse~~manufacturing, ~~test~~assembly, ~~research~~test, ~~development~~warehouse and office facilities having a total floor space of approximately 1617.85 million square feet. These facilities are either owned or leased, or are occupied under facilities-use contracts with the U.S. Government.

At December 31, ~~2016~~2017, our operating segments had significant operations at the following locations(1):



Flight Systems Group		Brigham City/Promontory, UT; Clearfield, UT; Magna, UT; Chandler, AZ; Dulles, VA; Iuka, MS; Dayton, OH; Vandenberg Air Force Base, CA; Wallops Island, VA; Huntsville, AL
Defense Systems Group		Mesa, AZ; Northridge, CA; Elkton, MD; Elk River, MN; Plymouth, MN; Independence, MO; Fort Worth, TX; Radford, VA; Rocket Center, WV
Space Systems Group		Dulles, VA; Beltsville, MD; Gilbert, AZ; Greenbelt, MD; Commerce, CA; Goleta, CA; San Diego, CA; Wallops Island, VA; Palestine, TX; Pasadena, CA
Corporate		Dulles, VA; Plymouth, MN; Minnetonka, MN

(1) We occupy a number of small facilities in countries around the world, which are not included above.

Land. We also use land that we own or lease for assembly, test and evaluation in Brigham City, Corrine and Magna, UT, which is used by Flight Systems Group; and in Elk River, MN, and Socorro, NM, which ~~are~~is used by Defense Systems Group.

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Our personnel operate in certain other facilities that are not owned or operated by us, including: Kennedy Space Center, Cape Canaveral, FL and Picatinny Arsenal, Picatinny, NJ. The square footage of these facilities is not included in the table below.

Our properties are well maintained and in good operating condition and are sufficient to meet our near-term operating requirements.

~~The following table summarizes the floor space, in thousands of square feet, occupied by each operating segment as of December 31, 2016:~~23

	Owned		Leased		GovernmentOwned (1)		Total
Flight Systems Group	5,236		3,593		590		9,419
Defense Systems Group	647		793		4,365		5,805
Space Systems Group	270		1,139		37		1,446
Corporate	—		80		—		80
Total	6,153		5,605		4,992		16,750
Percentage of total	37	%	33	%	30	%	100	%

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The following table summarizes the floor space, in thousands of square feet, occupied by each operating segment as of December 31, 2017:



	Owned		Leased		Government Owned ⁽¹⁾		Total
Flight Systems Group	5,237		3,609		536		9,382
Defense Systems Group	655		1,175		4,766		6,596
Space Systems Group	270		1,141		23		1,434
Corporate	—		46		—		46
Total	6,162		5,971		5,325		17,458
Percentage of total	35	%	34	%	31	%	100	%

⁽¹⁾These facilities are occupied under facilities contracts that generally require us to pay for all utilities, services and maintenance costs.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are subject to various legal proceedings, including lawsuits, which arise out of, and are incidental to, the conduct of our business. We do not consider any of such proceedings that are currently pending, individually or in the aggregate, to be material to our business or likely to result in a material adverse effect on our future operating results, financial condition or cash flows, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings in any particular quarter.

~~Putative~~On ~~class~~April ~~action~~29, ~~and~~2016, ~~derivative~~US ~~lawsuits~~Space ~~challenging~~LLC ~~the~~filed ~~merger~~a ofcomplaint ~~Orbital~~against the Company and ~~our~~its ~~company~~subsidiary, ~~were~~ATK ~~filed~~Space Systems Inc. in ~~the~~New York Supreme Court, ofalleging ~~Chancery~~breach of ~~the~~contract ~~State~~and ofvarious ~~Delaware~~other inclaims, ~~May~~and ~~2014~~seeking unspecified damages, ~~naming~~all ~~Orbital~~related to ViviSat LLC, ~~our~~a ~~company~~former ~~and~~joint ~~Orbital'~~venture between the parties. The Company believes US Space’s ~~directors~~claims are without merit. On ~~November~~May 1427, ~~2014~~2016, the ~~lawsuits~~Company ~~were~~filed ~~consolidated~~a bycountersuit ~~the~~in ~~court~~Loudoun ~~under~~County Circuit Court in the ~~caption~~Commonwealth Inof ReVirginia (ATK Space Systems, Inc. and Orbital ~~Corporation~~ATK, ~~Stockholder~~Inc. ~~Litigation~~v. U.S. Space LLC, Case No. CL-101847) asserting claims for declaratory and injunctive relief against US Space LLC relating to ViviSat. The ~~plaintiffs~~Company’s Virginia complaint alleged, ~~among~~a ~~other~~failure ~~things~~of US Space to perform contractual obligations relating to obtaining financing for ViviSat, ~~that~~triggering ~~the~~certain ~~directors~~rights of ~~Orbital~~the ~~breached~~Company ~~their~~that ~~fiduciary~~led ~~duties~~to inthe ~~connection~~dissolution ~~with~~of the ~~Merger~~venture. On November 11, ~~and~~2016, ~~alleged~~the ~~that~~New weYork ~~aided~~Supreme ~~and~~Court ~~abetted~~dismissed ~~such~~US ~~breaches~~Space’s ofNew ~~fiduciary~~York ~~duty~~case in its entirety. On January 166, ~~2015~~2017, US Space filed counterclaims against the ~~parties~~Company, ~~entered~~similar ~~into~~to aits ~~memorandum~~previous ofclaims ~~understanding~~in ~~(the~~its ~~"MOU")~~now-dismissed ~~regarding~~New York lawsuit. US Space’s initial counterclaims in the ~~settlement~~Virginia case sought damages of ~~this~~at ~~matter. Pursuant~~least $125 million, but increased its damages demand to $385 million in the ~~terms~~fourth quarter of ~~the~~2017. ~~MOU,~~A wejury ~~and~~trial ~~Orbital~~is ~~made~~currently ~~additional~~ongoing. ~~information~~While ~~available~~the Company continues to ~~Orbital'~~believe that US Space’s ~~stockholders~~counterclaims inare ~~connection~~without ~~with~~merit, the ~~Merger~~amount ~~vote.~~of Onthe ~~February~~damages 2sought, ~~2016~~if ever awarded, ~~the~~could ~~case~~be ~~was~~material ~~dismissed~~to our cash flows and results of operations.

~~Environmental~~Securities ~~Liabilities~~Class Action. ~~Our~~ Seven ~~operations~~purported ~~and~~class ~~ownership~~actions orchallenging ~~use~~the ofMerger ~~real~~were ~~property~~filed ~~are~~in ~~subject~~the toUnited aStates ~~number~~District Court for the Eastern District of ~~federal~~Virginia, ~~state~~captioned Lickteig v. Orbital ATK, ~~and~~Inc., ~~local~~et ~~laws~~al., ~~and~~filed ~~regulations~~October 11, ~~including~~2017 ~~those~~(the ~~for~~"Lickteig ~~discharge~~Action"), ofAyzin ~~hazardous~~v. ~~materials~~Orbital ATK, ~~remediation~~Inc., ofet ~~contaminated~~al., ~~sites~~filed ~~and~~October ~~restoration~~13, of2017 ~~damage~~(the to"Ayzin Action"), Sedon v. Orbital ATK, Inc., et al., filed October 16, 2017 (the ~~environment~~"Sedon Action"), Berg v. ~~Due~~Orbital inATK, ~~part~~Inc., toet ~~their~~al., ~~complexity~~filed ~~and~~October ~~pervasiveness~~16, ~~such~~2017 ~~laws~~(the ~~and~~"Berg ~~regulations~~Action"), ~~have~~Simnowitz ~~resulted~~v. inOrbital ~~our~~ATK, ~~being~~Inc., ~~involved~~et ~~with~~al., afiled ~~number~~October of18, ~~related~~2017 ~~legal~~(the ~~proceedings~~"Simnowitz Action"), ~~claims~~Cramer v. Orbital ATK, Inc., et al., filed October 25, 2017 (the "Cramer Action"), and ~~remediation~~Donato ~~obligations~~v. WeOrbital ~~routinely~~ATK, ~~assess~~Inc., ~~based~~et al., filed on ~~in-depth~~November ~~studies~~7, ~~expert~~2017 ~~analyses~~(the "Donato Action" and ~~legal~~collectively ~~reviews,~~with ~~our~~the ~~contingencies~~Lickteig Action, ~~obligations~~Ayzin ~~and~~Action, ~~commitments~~Sedon ~~for~~Action, ~~remediation~~Berg ofAction, ~~contaminated~~Simnowitz ~~sites~~Action and ~~past~~Cramer ~~practices~~Action, ~~including~~the ~~assessments~~"Actions"). The Actions alleged certain violations of ~~ranges~~the Securities and ~~probabilities~~Exchange Act of ~~recoveries~~1934 ~~from~~(the "Exchange Act"), as amended, and sought, among other ~~responsible~~things, ~~parties.~~damages, ~~Our~~attorneys' ~~policy~~fees isand injunctive relief to ~~accrue~~prevent the Merger from closing. While the Company believed that the Actions lacked merit and ~~charge~~that the disclosures set forth in the proxy statement complied fully with applicable law, in order to moot plaintiffs' unmeritorious disclosure claims, avoid nuisance and possible expense and provide additional information to our stockholders, the Company determined to voluntarily supplement the proxy statement, as set forth in the ~~current~~Company's ~~period~~Schedule ~~any~~14A ~~identified~~filed ~~exposures~~with ~~related~~the SEC on November 20, 2017. On November 20, 2017, the Ayzin Action, Sedon Action, Berg Action, Cramer Action and Donato Action were each voluntarily dismissed with prejudice as to ~~environmental~~the ~~liabilities~~plaintiffs. ~~based~~On December 8, 2017, the Simnowitz Action was voluntarily dismissed with prejudice as to the plaintiff and on ~~estimates~~January of12, ~~investigation~~2018, ~~cleanup~~the Lickteig Action was voluntarily dismissed with prejudice as to the plaintiff. While each of the Actions have been voluntarily dismissed with prejudice as to the plaintiffs, ~~monitoring~~additional plaintiffs may file lawsuits against the Company and/or ~~resource~~its ~~restoration~~directors ~~costs~~and toofficers bein ~~incurred~~connection with the Merger.

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On August 12, 2016, a putative class action complaint, naming the Company, our Chief Executive Officer and our Chief Financial Officer as defendants, was filed in the United States District Court for the Eastern District of Virginia (Steven Knurr, et al. v. Orbital ATK, Inc., No. 16-cv-01031 (TSE-MSN)). The class action complaint asserts claims on behalf of purchasers of Orbital ATK securities for violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder, arising out of allegedly false and misleading statements and the failure to disclose that: (i) the Company lacked effective control over financial reporting; and (ii) as a result, the Company failed to record an anticipated loss on its long-term contract with the U.S. Army to manufacture and supply small-caliber ammunition at the U.S. Army's Lake City Army Ammunition Plant. On April 24, 2017 and October 10, 2017, the plaintiffs filed amended complaints naming additional defendants and asserting claims for violations of additional sections of the Exchange Act and alleged false and misleading statements in the Company’s Form S-4 filed with the SEC relating to the Orbital-ATK Merger. The complaint seeks an award of damages, an award of reasonable costs and expenses at trial, including counsel and expert fees, and an award of such other relief as deemed appropriate by the Court.

SEC Investigation. The SEC is conducting a non-public investigation relating to our historical accounting practices as a result of the prior restatement of the Company's unaudited condensed consolidated financial statements for the quarterly periods ended July 5, 2015 and October 4, 2015 as described in the Company's Amendment to the Transition Report on Form 10-K for the nine-month transition period ending December 31, 2015 filed with the SEC on March 15, 2016. The Company has also voluntarily self-reported to the SEC regarding matters pertaining to the Restatement described in the Company's Amendment to the Transition Report on Form 10-K for the nine-month transition period ending December 31, 2015 filed on February 24, 2017. The Company is cooperating fully with the SEC in connection with these matters.

Other U.S. Government Investigations. We are also subject to U.S. Government investigations from which civil, criminal or administrative proceedings could result. Such proceedings could involve claims by the U.S. Government for fines, penalties, compensatory and treble damages, restitution and/or forfeitures. Under government regulations, a company, or one or more of its operating divisions or subdivisions, can also be suspended or debarred from government contracts, or lose its export privileges, based on the results of investigations. We believe, based upon all available information, that the outcome of any such pending government investigations will not have a material adverse effect on our operating results, financial condition or cash flows.

Environmental Liabilities. Our operations and ownership or use of real property are subject to a number of federal, state and local laws and regulations, including those for discharge of hazardous materials, remediation of contaminated sites and restoration of damage to the environment. Due in part to their complexity and pervasiveness, such laws and regulations have resulted in our being involved with a number of related legal proceedings, claims and remediation obligations. We routinely assess, based on in-depth studies, expert analyses and legal reviews, our contingencies, obligations and commitments for remediation of contaminated sites and past practices, including assessments of ranges and probabilities of recoveries from other responsible parties. Our policy is to accrue and charge to expense in the current period any identified exposures related to environmental liabilities based on estimates of investigation, cleanup, monitoring and resource restoration costs to be incurred.

We have been identified as a potentially responsible party ("PRP"), along with other parties, in several regulatory agency actions associated with hazardous waste sites. As a PRP, we may be required to pay a share of the costs of the investigation and clean-up of these sites. While uncertainties exist with respect to the amounts and timing of the ultimate environmental liabilities, based on currently available information, we have concluded that these matters, individually or in the aggregate, will not have a material adverse effect on our operating results, financial condition or cash flows.

We could incur substantial costs, including cleanup costs, resource restoration, fines and penalties or third-party property damage or personal injury claims, as a result of violations or liabilities under environmental laws or non-compliance with environmental permits. While environmental laws and regulations have not had a material adverse effect on our operating results, financial condition or cash flows in the past, and we have environmental management programs in place to mitigate these risks, it is difficult to predict whether they will have a material impact in the future.

The description of certain environmental matters contained in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Contingencies" is incorporated herein by reference.

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periods ended July 5, 2015 and October 4, 2015 described in the Transition Report on Form 10-K for the nine-month period ending December 31, 2015 previously filed on March 15, 2016, and the Company also has voluntarily self-reported to the SEC regarding matters pertaining to the restatement described in the Form 10-K/A filed on February 24, 2017. The Company is cooperating fully with the SEC in connection with these matters.

Other U.S. Government Investigations. We are also subject to other U.S. Government investigations from which civil, criminal or administrative proceedings could result. Such proceedings could involve claims by the U.S. Government for fines, penalties, compensatory and treble damages, restitution and/or forfeitures. Under government regulations, a company, or one or more of its operating divisions or subdivisions, can also be suspended or debarred from government contracts, or lose its export privileges, based on the results of investigations. We believe, based upon all available information, that the outcome of any such pending government investigations will not have a material adverse effect on our operating results, financial condition or cash flows.

Securities Class Action. On August 12, 2016, a putative class action complaint, naming the Company, our Chief Executive Officer and our Chief Financial Officer as defendants, was filed in the United States District Court for the Eastern District of Virginia (Steven Knurr, et al. v. Orbital ATK, Inc., No. 16-cv-01031 (TSE-MSN)). The class action complaint asserts claims on behalf of purchasers of Orbital ATK securities for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder, arising out of allegedly false and misleading statements and the failure to disclose that: (i) the Company lacked effective control over financial reporting; and (ii) as a result, the Company failed to record an anticipated loss on its long-term contract with the U.S. Army to manufacture and supply small caliber ammunition at the U.S. Army's Lake City Army Ammunition Plant. On April 24, 2017, the plaintiffs filed an amended complaint adding our Chief Operating Officer and a former Chief Executive Officer/Director as defendants and asserting claims for violations of additional sections of the Exchange Act. The amended complaint also alleges false and misleading statements in the Company’s Form S-4 filed with the SEC relating to the merger between the Company and Orbital Sciences Corporation. The complaint seeks an award of damages, an award of reasonable costs and expenses at trial, including counsel and expert fees, and an award of such other relief as deemed appropriate by the Court. The Company intends to defend this action vigorously.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed and traded on the New York Stock Exchange under the symbol "OA." The following table presents the high and low sales prices of the common stock for the periods indicated:

Period	High		Low
Year ended December 31, 2017
Quarter ended December 31, 2017	$	134.57	$	131.50
Quarter ended October 1, 2017	$	133.16	$	99.79
Quarter ended July 2, 2017	$	104.32	$	95.31
Quarter ended April 2, 2017	$	102.11	$	86.82
Year ended December 31, 2016
Quarter ended December 31, 2016	$	89.39	$	71.52
Quarter ended October 2, 2016	$	89.43	$	67.04
Quarter ended July 3, 2016	$	90.98	$	82.11
Quarter ended April 3, 2016	$	94.92	$	74.31
Nine months ended December 31, 2015
Quarter ended December 31, 2015	$	92.99	$	74.50
Quarter ended October 4, 2015	$	81.06	$	56.06
Quarter ended July 5, 2015	$	78.06	$	71.78

The number of holders of record of our common stock at ~~April 21~~February 16, ~~2017~~2018 was 4,~~744~~596. This does not include 452 former holders of record of Orbital Sciences Corporation common stock who had not yet exercised their right to receive our common stock pursuant to the Transaction Agreement relating to the Merger.

During the year ended December 31, ~~2016~~2017, ~~Orbital~~the ~~ATK~~Company paid four quarterly dividends of $0.3032 per share, totaling approximately $7074 million. In ~~February~~January ~~2017~~2018, our Board of Directors approved a quarterly dividend to be paid in the first quarter of ~~2017~~2018 of $0.32 per share, totaling approximately $18 million. During the ~~2015~~year ~~nine-month~~ended ~~transition period, April 1, 2015 to~~ December 31, ~~2015~~2016, ~~Orbital~~the ~~ATK~~Company paid ~~three~~four quarterly dividends of $0.2630 per share, totaling approximately $4670 million. WeUnder ~~cannot~~the beterms ~~certain~~of ~~that we will continue to declare dividends in~~ the ~~future~~Merger ~~and~~Agreement, aswe ~~such, the amount and timing of any future dividends~~ are ~~not~~permitted ~~determinable. Our dividend policy is reviewed by our Board of Directors in light of relevant factors~~to, ~~including~~and ~~our~~intend ~~earnings~~to, ~~liquidity~~continue ~~position,~~paying ~~financial~~a ~~condition,~~$0.32 ~~capital~~per ~~requirements~~share ~~and~~quarterly ~~credit~~cash ~~ratings,~~dividend asuntil ~~well as~~ the ~~extent~~closing toof ~~which~~ the ~~payment of cash dividends may be restricted by covenants contained in our instruments, including our 5~~transaction.~~25%~~ ~~Senior Notes due 2021~~However, ~~5.50%~~we ~~Senior~~are ~~Notes~~not ~~due~~permitted ~~2023~~to ~~and~~increase ~~Senior~~the ~~Credit~~per ~~Facility~~share ~~(as~~dividend ~~described~~amount under ~~"Liquidity~~the ~~and~~terms ~~Capital Resources" in Item 7, "Management's Discussion and Analysis~~ of ~~Financial~~the ~~Condition~~Merger ~~and Results of Operations" of this report)~~Agreement.

24We cannot be certain that we will continue to declare dividends in the future and, as such, the amount and timing of any future dividends are not determinable. Our dividend policy is reviewed by our Board of Directors in light of relevant factors, including our earnings, liquidity position, financial condition, capital requirements and credit ratings, as well as the extent to which the payment of cash dividends may be restricted by covenants contained in our instruments, including our 5.25% Senior Notes due 2021, 5.50% Senior Notes due 2023 and Senior Credit Facility (as described under "Liquidity and Capital Resources" in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this report).

The discussion of limitations upon the payment of dividends as a result of the indentures governing our debt instruments as discussed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Long-term Debt and Credit Facilities" is incorporated herein by reference.

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Equity Compensation Plan Information

The following table gives information about our common stock that may be issued upon the exercise of options, warrants and rights under each of our existing equity compensation plans at December 31, ~~2016~~2017:

Plan category	Number of securities tobe issued upon exercise ofoutstanding options, warrants and rights (a)	Weighted-average exercise price of outstandingoptions, warrantsand rights (b)		Number of securitiesremaining available forfuture issuance under equitycompensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders:
1990 Equity Incentive Plan (1)
Deferred Compensation (2)	1613,~~136~~269
Non-Employee Director Restricted Stock Plan (1)
Deferred Compensation (2)	6,924
2005 Stock Incentive Plan (1)
Stock Options	~~199~~116,~~651~~405	$	5057.8086
Restricted Stock Units	53,449
Performance Awards (4)	151,656
Performance Awards (4)	156,563
Deferred Compensation (2)	55,309
Deferred Compensation (2)	63,819
2015 Stock Incentive Plan (3)				2,084,273
2015 Stock Incentive Plan (3)				2,811,466
Stock Options	129,464	$	85.79
Stock Options	72,328	$	79.43
Performance Awards (4)	265,974
Performance Awards (4)	154,418
Deferred Compensation (2)	17,774
Deferred Compensation (2)	16,220
2016 Employee Stock Purchase Plan (5)				1,781,318
Equity compensation plans not approved by security holders:
Total	756,775	$	72.56	3,865,591
Orbital Sciences Amended and Restated 2005 Stock Incentive Plan (1) (5)
Restricted Stock Units	48,878
Total	788,386	$	58.41	2,811,466

_________________________________________


⁽¹⁾	No additional awards may be granted under this plan.


⁽²⁾	Shares reserved for payment of deferred stock units in accordance with the terms of the plan.

⁽³⁾

Under the 2015 Stock Incentive Plan, a total of 3,750,000 shares were authorized for awards. However, the plan includes a fungible share counting provision, under which "full-value awards" (i.e., awards other than stock options and stock appreciation rights) are counted against the reserve of shares available for issuance under the plan as 2.5 shares for every one share actually issued in connection with the award. No more than 5% of the shares available for awards under the plan may be granted to our non-employee directors in the aggregate.


⁽⁴⁾	Shares reserved for issuance in connection with outstanding performance awards. The amount shown assumes the maximum payout of the performance shares based on achievement of the highest level of performance. The actual number of shares to be issued depends on the performance levels achieved for the respective performance periods.

(5) ~~This~~Under ~~plan~~the ~~was~~2016 ~~approved~~Employee byStock ~~the~~Purchase ~~stockholders~~Plan of("ESPP"), ~~Orbital~~a ~~prior~~total toof ~~the~~2,000,000 ~~Merger.~~shares ~~Pursuant~~were toauthorized ~~the~~for ~~Transaction~~issuance. ~~Agreement~~In ~~relating~~connection towith the Merger, ~~we assumed~~ the ~~obligation~~ESPP towas ~~issue~~suspended ~~shares~~as ~~under the terms~~ of ~~this~~October ~~plan~~1, 2017.

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ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Numberof SharesPurchased (1)	AveragePrice Paidper Share		Total Number of Shares Purchased as Part of Publicly Announced Program (2)	~~Maximum~~Amount ~~Number~~Available offor ~~Additional~~Future ~~Shares~~Share ~~that~~Repurchases ~~May Be Purchased~~ Under the ~~Program~~Plans or Programs (3in millions)
October 3 - October 30	290,072	$	75.05	290,000
October 2 - October 29	319	$	133.21	—
October 31 - November 27	140,641	$	77.84	140,232
October 30 - November 26	196	$	132.93	—
November 28 - December 31	36,990	$	86.55	35,590
November 27 - December 31	—	$	—	—
Quarter ended December 31, 2016	467,703	$	76.80	465,822	1,144,998
Quarter ended December 31, 2017	515	$	133.10	—	$	227

_________________________________________

(1) ~~Includes~~Represents shares ~~repurchased during the quarter (see (2) below) and shares~~ withheld to pay taxes upon vesting of shares of restricted stock and restricted stock units, or payment of performance shares that were granted under our incentive compensation plans.

(2) During ~~the year ended December 31~~2015, ~~2016,~~ the Board ~~approved~~of anDirectors ~~increase~~approved toa ~~the~~ stock repurchase program tothat ~~authorize~~authorized the repurchase of up to the lesser of $250 million or 3.25 million shares through December 31, 2016, which was subsequently increased during 2016 to the lesser of $300 million or 4.0 million shares through March ~~31,~~ 2017. OnIn February ~~27,~~ 2017, the Board of Directors further increased the amount authorized for repurchase to $450 million, removed the share quantity limitation and extended the repurchase period through March 31, 2018. We repurchased 1230,~~570,333~~918 shares for $~~124~~23 million during the year ended December 31, ~~2016~~2017. In connection with the Merger, the Company halted its share repurchase program.

~~(3) The maximum number of shares that may yet be repurchased under the program was calculated using our closing stock price of $87.73 on December 31, 2016.~~29

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STOCKHOLDER RETURN PERFORMANCE GRAPH

The graph below compares the cumulative total stockholder return on the Company's common stock during the period from March 31, ~~2012~~2013 through December 31, ~~2016~~2017, with the Standard & Poor's Composite 500 Index, (a broad equity market index) and the Dow Jones U.S. Aerospace and Defense Index (a published industry index) for the same period.

The comparison assumes that on April 1, ~~2012~~2013, $100 was invested in the Company's common stock (at the closing price on the previous trading day) and in each of the indexes. The comparison assumes that all cash dividends were reinvested and takes into account the value of the Vista Outdoor shares distributed to stockholders in the Distribution as if it occurred prior to March 31, ~~2012~~2013. The graph indicates the dollar value of each hypothetical $100 investment at March 31, ~~2013,~~ 2014, and 2015, and at December 31, 2015, 2016 and ~~2016~~2017.

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ITEM 6. SELECTED FINANCIAL DATA

Results for the ~~year~~periods ~~ended~~after ~~December~~fiscal ~~31,~~2014 ~~2016, the nine months ended December 31, 2015 and the year ended March 31, 2015~~ are not comparable to ~~prior~~fiscal ~~periods~~2014 due to the Orbital-ATK Merger and Distribution, as described in Note 4, ~~Merger~~Mergers and Divestiture, to the accompanying consolidated financial statements in Part II, Item 8.

	Year Ended		Nine Months Ended		Year Ended March 31,
	Year Ended December 31,				Nine Months Ended		Year Ended March 31,
(in millions, except per share data)	~~December 31, 2016~~2017		~~December 31, 2015~~2016		December 31, 2015		~~2014~~2015			~~2013~~2014
	(1)		~~(1)~~		(2)		(3)			(4)
Results of Operations:
Sales	$	4,~~455~~764	$	34,~~391~~455	$	3,~~113~~391	$	23,~~891~~113		$	32,~~206~~891
Gross profit	~~985~~1,065		~~674~~985		~~701~~674		~~290~~701			~~650~~290
Income (loss) from continuing operations, before interest, income taxes and noncontrolling interest	~~472~~529		~~333~~472		~~223~~333		~~(59~~223		)	~~303~~(59		)
Income (loss) from continuing operations of Orbital ATK, Inc.	~~293~~310		~~185~~293		70185		~~(64~~70		)	~~165~~(64		)
Income from discontinued operations	—		1—		~~125~~1		~~181~~125			85181
Net income attributable to Orbital ATK, Inc.	$	~~293~~310	$	~~186~~293	$	~~195~~186	$	~~117~~195		$	~~250~~117
Earnings per common share attributable to Orbital ATK, Inc.:
Basic:
Income (loss) from continuing operations	$	5.0539	$	35.1205	$	13.9612	$	(21.0396	)	$	5(2.1003	)
Income from discontinued operations	$	—	$	~~0.02~~—	$	30.5302	$	53.7353		$	25.6273
Diluted:
Income (loss) from continuing operations	$	5.0134	$	35.0901	$	13.9309	$	(1.9793	)	$	5(1.0797	)
Income from discontinued operations	$	—	$	~~0.02~~—	$	30.4602	$	53.5546		$	25.6155
Cash dividends per common share	$	1.2028	$	01.7820	$	10.2878	$	1.1028		$	01.9210
Consolidated Balance Sheet Data:
Total assets	$	5,~~418~~666	$	5,~~324~~418	$	5,~~478~~324	$	5,~~925~~478		$	45,~~482~~925
Long-term debt (including current portion)	$	1,~~438~~401	$	1,~~476~~438	$	1,~~572~~476	$	21,~~069~~572		$	12,~~061~~069

(1) ~~The~~Calendar ~~nine~~2017 ~~months period ended December 31, 2015~~ results ~~include~~included a $5010 million ~~gain on settlement~~ of aacquisition ~~dispute~~transaction ~~with~~expenses arelated ~~supplier pertaining~~ to the ~~Antares~~pending ~~rocket~~acquisition ~~used~~by inNorthrop ~~the CRS I contract~~Grumman.

(2) ~~Fiscal~~The ~~2015~~nine ~~results~~month ~~includes~~period ~~$35~~ended ~~million~~December ~~of transaction fees for advisory~~31, ~~legal~~2015 ~~and~~results ~~accounting~~include ~~services~~a in$50 ~~connection~~million ~~with~~gain ~~the~~on ~~Distribution~~settlement ~~and~~of ~~Merger and~~ a ~~$25~~dispute ~~million~~with ~~litigation~~a ~~charge~~supplier pertaining to athe ~~Raytheon~~Antares ~~lawsuit~~rocket ~~settlement~~used in the CRS-1 contract.

(3) Fiscal ~~2014~~2015 results include a $~~342~~35 million ~~forward~~of ~~loss~~transaction ~~contract~~fees ~~reserve~~for ~~recorded~~advisory, inlegal ~~the~~and ~~second~~accounting ~~quarter~~services ~~related~~in toconnection ~~our~~with ~~long-term contract (~~the ~~"Lake~~Distribution ~~City~~and ~~Contract") with~~ the ~~U.S.~~Orbital-ATK ~~Army~~Merger ~~to manufacture~~ and ~~supply~~a ~~small~~$25 ~~caliber~~million ~~ammunition~~litigation atcharge ~~the~~pertaining ~~U.S.~~to ~~Army’s~~a ~~Lake~~Raytheon ~~City~~lawsuit ~~Army Ammunition Plant~~settlement.

(4) Fiscal ~~2013~~2014 results include a $32342 million forward loss contract reserve recorded in the second quarter related to our long-term contract (the "Lake City Contract") with the U.S. Army to manufacture and supply small-caliber ammunition at the U.S. Army’s Lake City Army Ammunition Plant.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(amounts in millions except share and per share data or unless otherwise indicated)

Forward-Looking Information is Subject to Risk and Uncertainty

Some of the statements made and information contained in this report, excluding historical information, are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current expectations or forecasts of future events. Words such as "may," "will," "expected," "intend," "estimate," "anticipate," "believe," "project" or "continue," and similar expressions are used to identify forward-looking statements. From time to time, we also may provide oral or written forward-looking statements in other materials released to the public. Any or all forward-looking statements in this report and in any public statements we make could be materially different. They can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and you should not consider the following list to be a complete statement of all potential risks and uncertainties. Any change in the following factors may impact the achievement of results:

• the ~~effect~~risk ofthat the ~~restatements~~pending ofacquisition ~~our~~by ~~previously~~Northrop ~~issued~~Grumman ~~financial~~may ~~results~~not ~~for~~be ~~the~~completed ~~first~~in ~~quarter~~a ~~2016,~~timely ~~the~~manner ~~2015~~or ~~transition~~at ~~period~~all, ~~fiscal~~which ~~2015~~may ~~and~~adversely ~~fiscal~~affect ~~2014~~our business and ~~any~~the ~~actual~~price ~~or unasserted claims, investigations or proceedings as a result~~ of ~~the~~our ~~restatements~~common stock,

• ~~our~~the ~~ability~~failure to ~~remediate~~satisfy ~~the~~any ~~material~~of ~~weaknesses~~the inconditions ~~our~~to ~~internal~~the ~~control~~consummation ~~over~~of ~~financial~~the ~~reporting~~pending ~~described~~acquisition inon ~~Item~~a 9Atimely basis, ~~"Control~~including ~~and~~the ~~Procedures"~~receipt of ~~this~~certain ~~Annual~~governmental ~~Report~~and regulatory approvals,


•	the occurrence of any circumstance that could give rise to the termination of the Merger Agreement,


•	reductions or changes in programs administered by the National Aeronautics and Space Administration ("NASA") or in U.S. Government military spending, timing of payments and budgetary policies, including impacts of sequestration under the Budget Control Act of 2011, and sourcing strategies,


•	intense competition for U.S. Government contracts and programs,


•	increases in costs, which we may not be able to react to due to the nature of our U.S. Government contracts,


•	changes in cost and revenue estimates and/or timing of programs,


•	the potential termination of U.S. Government contracts and the potential inability to recover termination costs,


•	other risks associated with U.S. Government contracts that might expose us to adverse consequences,

• ~~government~~ laws, ~~and other~~ rules and regulations applicable to us, including procurement and import-export control,

• reduction or change in demand and manufacturing costs for ~~commercial~~ ammunition,


•	the manufacture and sale of products that create exposure to potential product liability, warranty liability or personal injury claims and litigation,

• risks associated with expansion into new and adjacent ~~commercial~~ markets,

• results of the Merger or other acquisitions or transactions, including our ability to successfully integrate acquired businesses and realize anticipated synergies, cost savings and other benefits, and costs incurred for pursuits and proposed acquisitions,


•	greater risk associated with international business, including foreign currency exchange rates and fluctuations in those rates,


•	federal and state regulation of defense products and ammunition,


•	costs of servicing our debt, including cash requirements and interest rate fluctuations,


•	actual pension and other postretirement plan asset returns and assumptions regarding future returns, discount rates, service costs, mortality rates and health care cost trend rates,


•	security threats, including cybersecurity and other industrial and physical security threats, and other disruptions,

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•	supply, availability and costs of raw materials and components, including commodity price fluctuations,


•	performance of our subcontractors,


•	development of key technologies and retention of a qualified workforce,


•	the performance of our products,


•	fires or explosions at any of our facilities,


•	government investigations and audits,

• environmental laws that govern current and past practices and rules and regulations, noncompliance with which may expose us to adverse consequences,


•	impacts of financial market disruptions or volatility to our customers and vendors,

• unanticipated changes in the tax provision or exposure to additional tax liabilities, including as a result of the recent tax law legislation, the Tax Cuts and Jobs Act (the "Tax Act") signed into law in December 2017 and

• the costs and ultimate outcome of litigation matters, government investigations and other legal proceedings, including those related to the restatement of our previously issued financial results.

This list of factors is not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that would impact our business. Additional information regarding these and other factors is contained in Part I, Item 1A, "Risk Factors"," of this report and may also be contained in our filings with the Securities and Exchange Commission on Forms 10-Q and 8-K. All such risk factors are difficult to predict, contain material uncertainties that may affect actual results and may be beyond our control.

Executive Summary

We are an aerospace and defense products company and supplier of products to the U.S. Government, allied nations, prime contractors and other customers. Our main products include launch vehicles and related propulsion systems, satellites and associated components and services, composite aerospace structures, tactical missiles, subsystems and defense electronics and precision weapons, armament systems and ammunition. We are headquartered in Dulles, Virginia and have operating locations throughout the United States.

On ~~February~~September 917, ~~2015~~2017, we ~~completed~~entered ainto ~~tax-free~~an ~~spin-off~~Agreement and ~~distribution~~Plan of ~~our~~Merger ~~former Sporting Group to our stockholders~~ (the "~~Distribution~~Merger Agreement") aswith aNorthrop ~~new~~Grumman ~~public~~Corporation ~~company called Vista Outdoor Inc.~~ ("~~Vista~~Northrop ~~Outdoor~~Grumman"). ~~Immediately~~and ~~following~~Neptune ~~the~~Merger, ~~Distribution~~Inc., wea ~~combined~~wholly ~~with~~owned ~~Orbital~~subsidiary ~~Sciences~~of ~~Corporation~~Northrop Grumman ("~~Orbital~~Sub"), ~~through~~pursuant ~~the~~to ~~merger~~which ofNorthrop aGrumman ~~Company~~will ~~subsidiary~~acquire ~~with Orbital (~~the ~~"Merger").~~Company ~~Following~~for ~~the~~a ~~Distribution~~purchase ~~and~~price ~~Merger,~~of we$134.50 ~~changed~~per ~~our~~share ~~name~~in ~~from~~cash ~~Alliant~~(the ~~Techsystems, Inc~~"Merger"). ~~to Orbital ATK, Inc.~~

Closing of the Merger is expected to occur during the first half of 2018, subject to customary closing conditions and obtaining required regulatory approvals. The stockholders of the Company voted in favor of approving the Merger Agreement at a special meeting held on November 29, 2017. In February 2018, the European Commission informed the parties that it would not oppose the Merger and declared it compatible with the European Union internal market under the applicable regulation. This is one of two required regulatory approvals.

The other required regulatory approval is the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act (the "HSR Act"). On December 6, 2017, the Company received a request for additional information (the "second request") from the Federal Trade Commission ("FTC"). The effect of the second request is to extend the waiting period imposed by the HSR Act until 30 days after both the Company and Northrop Grumman have substantially complied with the request, unless that period is extended voluntarily by the parties or terminated sooner by the FTC.

At the effective time of the Merger, each outstanding share of the Company's common stock, other than shares owned by the Company, Northrop Grumman or Sub (which will be canceled) and appraisal shares, will be converted into the right to receive $134.50 in cash, without interest and less any applicable withholding taxes.

On February 9, 2015, we completed the spin-off and distribution (the "Distribution") of our former Sporting Group to our stockholders as a new public company called Vista Outdoor Inc. ("Vista Outdoor"). As a result, the Sporting Group is reported as discontinued operations. Immediately following the distribution of our former Sporting Group, we combined with Orbital through the merger of a company subsidiary with Orbital.

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We conduct business in three segments:

• Flight Systems Group develops ~~rockets~~launch vehicles that are used as small- and medium-class space launch vehicles to place satellites into ~~Earth~~earth orbit and escape trajectories, interceptor and target vehicles for missile defense systems and suborbital launch vehicles that place payloads into a variety of high-altitude trajectories. The group also develops and produces medium- and large-class rocket propulsion systems for human and cargo launch vehicles, strategic missiles, missile defense interceptors and target vehicles. Additionally, Flight Systems Group operates in the military and commercial aircraft and launch structures markets. ~~In addition, the group produces advanced flares and decoys that provide illumination for search and rescue missions and countermeasures against missile attacks.~~


•	Defense Systems Group develops and produces small-, medium- and large-caliber military ammunition, propulsion systems for tactical missiles and missile defense applications, strike weapons, precision weapons and munitions, high-performance gun systems, aircraft survivability systems, fuzes and warheads, energetic materials and special mission aircraft.

• Space Systems Group develops and produces small- and medium-class ~~commercial~~ satellites that are used to enable global and regional communications and broadcasting, conduct space-related scientific research and perform ~~other~~ activities related to national security. In addition, Space Systems Group develops and produces human-rated space systems for ~~Earth-~~earth orbit and deep- space exploration, including cargo delivery to the International Space Station ~~("ISS")~~. This group is also a provider of spacecraft components and subsystems ~~and~~as well as specialized engineering and operations services to U.S. government agencies.

30Below is a table that represents each segment's earnings and respective operating margins that contribute to the overall performance of the Company:

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	Year Ended December 31, 2017
	Flight Systems Group			Defense Systems Group			Space Systems Group
Sales⁽¹⁾	$	1,681		$	1,968		$	1,284
Income From Operations Before Interest, Income Taxes and Noncontrolling Interest⁽¹⁾	$	211		$	193		$	142
Operating Margin	13		%	10		%	11		%
⁽¹⁾ Sales and total income from operations before interest, income taxes and noncontrolling interest listed above does not include the corporate segment intercompany elimination of sales of ($169) million and intercompany profit elimination and certain costs including unallowables retained in the corporate segment of ($17) million.

Operating margins differ among the Company's three operating segments due to several factors, including, but not limited to, the mix of contract types, competitive positioning and pricing, complexity of our deliverables and the impact of program execution. The operating margin in our Defense Systems Group is lower than the operating margins of the Space Systems Group and Flight Systems Group primarily due to the Company's small-caliber ammunition contract with the U.S. Army which operates in a forward loss position. As a result, this contract has no margin, which, given the size of the contract, lowers the overall Defense Systems Group's margin.

Fiscal Year

~~Our~~In ~~prior~~March ~~fiscal year was a nine-month transition period from April 1,~~ 2015 ~~through December 31~~, ~~2015~~we aschanged ~~a result of changing~~ our fiscal year ~~end date~~ from ~~March~~the 31period tobeginning ~~December~~on ~~31.~~April ~~All~~1 ~~fiscal~~and ~~years~~ending ~~after~~on ~~December~~March 31, ~~2015~~to ~~are~~the ~~for~~period ~~the~~beginning ~~calendar~~on ~~twelve~~January ~~months~~1 ~~ended~~and ending on December 31. We refer in this report to the nine-month period beginning ~~January~~on April 1, ~~2016~~2015 and ending on December 31, ~~2016~~2015 as the "~~calendar~~2015 ~~2016~~transition period." All fiscal years after December 31, 2015 are for the calendar twelve months ended December 31. We refer in this report to the period beginning on ~~April~~January 1, ~~2015~~2017 and ending on December 31, ~~2015~~2017 as ~~the~~"calendar 2017"~~2015~~ ~~transition~~or ~~period.~~"2017" Weand ~~refer in this report to~~ the period beginning on ~~April~~January 1, ~~2014~~2016 and ending on ~~March~~December 31, ~~2015~~2016 as "~~fiscal~~calendar ~~2015~~2016". or "2016."

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Outlook

U.S Government Business — - Our business with the U.S. Government comprised approximately 7673% of our sales in ~~2016~~2017. U.S. Government contracts are dependent on the continuing availability of Congressional appropriations. Congress usually appropriates funds for a given program on a government fiscal year ("GFY") basis even though contract performance may take more than one year. As a result, at the outset of a major program, the contract is usually incrementally funded, and additional monies are normally committed to the contract by the procuring agency only as Congress makes appropriations for future GFYs. In addition, most U.S. Government contracts are subject to modification if funding is changed. Any failure by Congress to appropriate additional funds to any program in which we participate, or any contract modification as a result of funding changes, could materially delay or terminate the program. This could have a material adverse effect on our operating results, financial condition or cash flows.

The government budget structure ~~remains~~has been constrained by the 2011 Budget Control Act, which provided for a reduction of the U.S. Department of Defense ("DoD") topline budget by approximately $490 billion over 10 years starting in GFY 2012, and subsequent amendments that continue to limit DoD spending. Over the past few years, including during the current fiscal year, the U.S. Government frequently has been operating under continuing resolutions rather than approved budgets. During such periods when regular appropriation bills have not yet been passed, we could experience delays in orders due to reduced funding; however, our key programs have continued to be supported and funded.

~~President~~The ~~Trump's~~recent ~~Administration~~agreement ~~GFY~~in ~~2018~~Congress ~~budget~~and ~~provides~~President ~~for~~Trump’s aAdministration ~~meaningful~~on ~~increase~~a totwo-year ~~the DoD~~ budget, aspackage ~~part~~is ofexpected ato ~~proposed~~lift ~~buildup~~caps inon ~~military~~defense spending ~~that we believe could present opportunities~~ for ~~the~~GFY ~~Company~~2018 ~~over~~and ~~the~~2019 ~~next~~and ~~several~~provide ~~years. However,~~a wesignificant ~~expect~~increase ~~there~~in ~~to be considerable negotiation regarding~~ defense spending ~~and~~during sothat itperiod, iswhich ~~unclear~~could ~~what~~present ~~the~~opportunities ~~actual outlook will be~~ for the ~~DoD budget~~Company. ~~Compared to other agencies, President Trump's Administration proposed only minimal cuts to~~ NASA’s ~~budget~~budgets in ~~GFY~~the ~~2018.~~near ~~Although~~term ~~there~~may ~~are~~include material cuts ~~proposed~~ to proposed earth science programs, but we ~~do not~~ expect ~~the~~support ~~reductions,~~for ~~if they materialize, to affect the Company’s~~ existing ~~NASA~~ programs, ~~including~~and ~~science~~that ~~satellite programs. Importantly, we expect~~ NASA’'s commitment to the International Space Station and related CRS ~~program~~programs towill continue. In We ~~addition,~~also ~~the~~expect ~~President’s~~funding ~~budget, as well as the NASA Authorization Transition Act, reflect solid support~~ for the Space Launch System and Orion Programs ~~with~~to ~~the~~be ~~overall theme of constancy of purpose and stability for the agency~~maintained.

Commercial and International Business — Our commercial businesses, consisting primarily of communication satellite and aircraft structure sales, as well as ammunition sales to Vista Outdoor, were mixed in ~~2016~~2017, with ammunition sales up and ~~our~~ commercial ~~satellite~~satellites continuing a downward trend and aircraft structures sales ~~down~~up. Industry-wide, new orders for geosynchronous satellites continued ato ~~downward~~be ~~trend.~~soft ~~We expect the weakness~~ in ~~the~~2017, ~~commercial~~a ~~geosynchronous~~trend ~~satellite~~that ~~market~~is expected to ~~continue~~persist ~~but believe there may be increased opportunities~~ in ~~our~~the ~~addressable~~near ~~market during 2017~~term. This weakness, ~~has~~however, ~~been~~continues ~~mostly~~to be offset byto ~~stronger~~a large extent by demand in the NASA and DoD satellite markets. We ~~also~~continue ~~believe~~to ~~that~~emphasize ~~commercial~~international ~~ammunition~~business ~~sales~~as ~~will~~a bekey ~~somewhat~~element ~~weaker~~of growth in ~~the~~our ~~near~~Defense ~~term~~Systems ~~but~~segment, ~~that~~as ~~sales~~defense ofspending ~~military~~by ~~ammunition~~U.S. ~~may~~allies ~~increase~~continues ~~this~~to ~~year~~present opportunities for us.

WeThe ~~continue~~U.S. toaerospace ~~emphasize~~and ~~international~~defense ~~business~~industry ashas aexperienced ~~key~~significant ~~element~~changes ofover ~~growth~~recent inyears. Our management believes that the key to our ~~Defense~~continued ~~Systems~~success ~~segment~~is to focus on providing innovative, asreliable and affordable space, defense ~~spending~~and byaviation Usystems.S. ~~allies~~We ~~continues~~continue to ~~present~~position ~~opportunities~~ourselves ~~for~~where ~~us.~~management Webelieves ~~are~~there ~~targeting~~will ~~certain~~be ~~key~~strong ~~international~~defense ~~pursuits~~and incivil ~~2017,~~government funding and ~~believe~~commercial ~~both~~interest, including an emphasis on international defense business and ~~commercial~~other ~~orders~~potential ~~may~~growth ~~increase in 2017~~areas.

The U.S. aerospace and defense industry has experienced significant changes over the years. Our management believes that the key to our continued success is to focus on providing innovative, reliable and affordable space, defense and aviation systems. We are positioning ourselves where management believes there will be continued strong defense and civil government funding and commercial interest, even as pressures mount on research and development and procurement accounts, including an emphasis on international defense business and other potential growth areas.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with ~~U.S.~~accounting principles generally accepted in the United States of America ("GAAP"). In preparing the consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

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make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following are our critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

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Revenue Recognition

A substantial portion of our sales come from contracts with agencies of the U.S. Government and its prime contractors and subcontractors. As the various U.S. Government customers, including the U.S. Navy, U.S. Army, NASA and the U.S. Air Force make independent purchasing decisions, we do not generally regard the U.S. Government as one customer. Instead, we view each agency as a separate customer.

Long-term Contracts — ~~Substantially~~The ~~all~~majority of our sales are ~~accounted~~from ~~for as~~ long-term contracts., ~~Sales~~which ~~under~~are ~~long-term~~accounted ~~contracts~~for ~~are~~using ~~accounted~~the percentage-of-completion method. Accounting for contracts under the percentage-of-completion method ~~and~~requires ~~include~~judgment ~~cost-plus~~relative to assessing risks and ~~fixed-price~~estimating ~~contracts~~contract revenues and costs. ~~Sales~~Profits ~~under~~expected ~~cost-plus~~to be realized on contracts are ~~recognized~~based ason management's estimates of total contract value and costs ~~are~~at ~~incurred~~completion. ~~Sales~~Changes ~~under~~in ~~fixed-price~~estimates ~~contracts~~of ~~are~~contract ~~either~~sales, costs or profits are recognized asusing the ~~actual~~cumulative ~~cost~~catch-up method of ~~work~~accounting. ~~performed~~The ~~relates~~cumulative toeffect of a change in estimate is recognized in the period a change in estimate atoccurs. ~~completion~~The ~~("cost-to-cost")~~effect orof ~~based~~the changes on ~~results~~future ~~achieved~~periods of contract performance is recognized as if the revised estimate had been used since contract inception or, ~~which~~in ~~usually~~the ~~coincides~~case ~~with~~of ~~customer~~contracts ~~acceptance~~acquired ~~("units-~~in business combinations, from the date of~~-delivery")~~ acquisition. ~~The~~In ~~majority~~the ofperiod ~~our~~in ~~total~~which ~~revenue~~it is ~~accounted~~determined ~~for~~that ~~using~~a loss will be incurred on a contract, the ~~cost-~~entire amount of the estimated loss, based on gross profit along with general and administrative costs, is charged to- cost ~~method~~ of ~~accounting~~sales.

~~Profits~~Changes ~~expected~~in tocontract beestimates ~~realized~~occur onfor ~~contracts~~a ~~are~~variety ~~based on management's estimates~~ of ~~total~~reasons, ~~contract~~including ~~sales~~changes ~~value~~in ~~and costs at completion. Estimated amounts for~~ contract ~~changes, including~~ scope ~~and claims~~, ~~are~~unforeseen ~~included~~changes in contract ~~sales~~cost ~~only~~estimates ~~when~~due ~~realization is estimated~~ to beunanticipated ~~probable.~~cost ~~Assumptions~~growth ~~used~~or ~~for~~risks ~~recording~~affecting ~~sales~~contract costs and/or ~~earnings are adjusted in~~ the ~~period~~resolution of ~~change to reflect revisions in~~ contract ~~value~~risks ~~and~~at ~~estimated~~lower costs. Inthan ~~the period in which it is determined that a loss will be incurred on a contract~~anticipated, ~~the~~as ~~entire~~well ~~amount~~as ofchanges ~~the estimated loss, based on gross profit along with general and administrative costs, is charged to cost of sales. Changes~~ in ~~estimates of~~ contract ~~sales,~~overhead costs orover ~~profits are recognized using~~ the ~~cumulative~~performance ~~catch-up method of accounting~~period. ~~The~~Changes ~~cumulative effect of a change~~ in ~~estimate~~estimates iscould ~~recognized~~have ~~in the period~~ a ~~change~~material ~~in estimate occurs. The~~ effect ~~of the changes~~ on ~~future periods of contract performance is recognized as if~~ the ~~revised~~Company's ~~estimate~~consolidated ~~had~~financial ~~been~~position ~~used since contract inception~~ or, inresults ~~the case~~ of ~~contracts acquired in business combinations, from the date of acquisition~~operations.

~~Changes in contract estimates occur for a variety of reasons including changes in contract scope~~Generally, ~~unforeseen~~favorable changes in contract ~~cost~~ estimates due to unanticipated cost growth or risks affecting contract costs and/or the resolution of contract risks at lower costs than anticipated, as well as changes in contract overhead costs over the performance period. Changes in estimates could have a material effect on our consolidated financial position or annual results of operations. Aggregate net changes in contract estimates recognized using the cumulative catch-up method of accounting ~~increased~~represent ~~operating~~margin ~~income~~improvement byon ~~approximately~~programs ~~$81~~where ~~million~~either inestimated ~~the~~cost ~~year~~at ~~ended~~completion ~~December~~was ~~31,~~lower ~~2016,~~than ~~approximately~~previously ~~$38~~estimated ~~million~~or ina ~~the~~change ~~2015 transition period and approximately $92 million~~ in ~~fiscal~~contract ~~2015.~~scope ~~The~~on ~~adjustments~~a ~~recorded~~program ~~during~~caused ~~fiscal~~a ~~2016 were primarily driven by~~ higher profit ~~expectations in the Launch Vehicle and Civil and Defense divisions~~rate. ~~The~~Conversely, ~~adjustments recorded during~~ the ~~2015~~unfavorable ~~transition~~changes ~~period were primarily driven by higher profit expectations~~ in ~~the~~contract ~~Propulsion~~estimates ~~Systems~~represent ~~and~~margin ~~Aerospace~~declines ~~Structures~~on ~~divisions.~~programs ~~The~~where ~~adjustments~~either ~~recorded~~estimated ~~during~~cost ~~fiscal~~at ~~2015~~completion ~~were~~was ~~primarily driven by~~ higher ~~profit~~than ~~expectations~~previously inestimated ~~the~~or ~~Defense~~a ~~Electronic,~~change ~~Armament~~in ~~Systems,~~contract ~~Missile~~scope ~~Products,~~on ~~Propulsion~~a ~~Systems~~program ~~and~~caused ~~Small~~a ~~Caliber~~lower ~~Systems~~profit ~~divisions~~rate.

The favorable and unfavorable changes in contract estimates recognized using the cumulative catch-up method of accounting are as follows (in millions):



	Year Ended						Nine Months Ended
	December 31, 2017			December 31, 2016			December 31, 2015
Gross favorable adjustments	$	250		$	247		$	136
Gross unfavorable adjustments	(145		)	(166		)	(98		)
Net adjustments	$	105		$	81		$	38

For the year ended December 31, 2017, the Company recognized favorable cumulative catch-up adjustments due to higher profit expectations on programs in the Aerospace Structures division, the Propulsion Systems division and the Launch Vehicles division, within our Flight Systems Group; the Space Components division, the Satellite Systems division and the Advanced Programs division, within our Space Systems Group; and the Armament Systems division and the Missile Products division, within our Defense Systems Group, due to better performance resulting from risk retirement and lower cost than had previously been estimated. The Company recognized unfavorable cumulative catch-up adjustments in the Aerospace Structures division and the Propulsion Systems division, within our Flight Systems Group; the Satellite Systems division, within our Space Systems Group; and the Armament Systems division within our Defense Systems Group, primarily due to higher costs than had previously been estimated.

For the year ended December 31, 2016, the Company recognized favorable cumulative catch-up adjustments due to higher profit expectations on programs in the Launch Vehicles division, within our Flight Systems Group, and the Advanced Programs division, within our Space Systems Group, due to better performance resulting from risk retirement and lower costs than had previously been estimated. The Company recognized unfavorable cumulative catch-up adjustments primarily due to (i) in the Aerospace Structures division, within our Flight Systems Group, an increase in estimated costs at completion, (ii) in the Satellite Systems division, within our Space Systems Group, higher costs than had previously been estimated, and (iii) in the Defense Electronics division, within our Defense Systems Group, a reduction in a program's estimated revenue.

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For the nine months ended December 31, 2015, the Company recognized favorable cumulative catch-up adjustments due to higher profit expectations on programs in the Aerospace Structures and Propulsion Systems divisions, within our Flight Systems Group, and the Armament Systems and Missile Products divisions, within our Defense Systems Group, due to better performance resulting from risk retirement and lower costs than had previously been estimated. The Company recognized unfavorable cumulative catch-up adjustments in the Aerospace Structures division, within our Flight Systems Group, and the Armament Systems, Missile Products and Defense Electronics divisions, within our Defense Systems Group, due to higher costs than had previously been estimated.

Contracts may contain provisions to earn incentive and award fees if specified targets are achieved as well as penalty provisions related to performance. Incentive and award fees and penalties that can be reasonably estimated and are probable are recorded over the performance period of the contract. Incentive and award fees that cannot be reasonably estimated are recorded when awarded.

Other — Sales not recognized under the long-term contract method are recognized when persuasive evidence of an arrangement exists, the product has been delivered and legal title and all risks of ownership have been transferred, written contract and sales terms are complete, customer acceptance has occurred and payment is reasonably assured. Sales are reduced for allowances and price discounts.

Employee Benefit Plans

Defined Benefit Pension Plans. Our noncontributory defined benefit pension plans include the following legacy Alliant Techsystems Inc. plans: "Alliant Techsystems Inc. Pension and Retirement Plan" and "Thiokol Propulsion Pension Plan" (the “"ATK Plans") and the legacy Orbital plans: "Fairchild Bargained Plan" and "Fairchild Space and Defense Plan" (the "Orbital Plans"). The Orbital Plans were merged into the Alliant Techsystems Inc. Pension and Retirement Plan on December 31, 2015 and the combined plan's name was changed to the Orbital ATK, Inc. Pension and Retirement Plan. The Company's ongoing defined benefit pension plans are the "Orbital ATK, Inc. Pension and Retirement Plan" and the "Thiokol Propulsion Pension Plan" (the "Orbital ATK Plans").

32ATK Plans — The ATK Plans are noncontributory defined benefit pension plans that cover substantially all legacy ATK employees hired prior to January 1, 2007. Eligible legacy ATK non-union employees hired on or after January 1, 2007 and certain union employees are not covered by a defined benefit plan but receive an employer contribution through a defined contribution plan. Prior to July 1, 2013 (January 1, 2014, January 1, 2015 and April 1, 2016 for certain union groups), the ATK Plans provided either pension benefits based on employee annual pay levels and years of credited service or stated amounts for each year of credited service. Effective July 1, 2013 and at later dates for certain collective bargaining agreements, pension benefits were frozen and a new cash balance formula applicable to pay and service was implemented. The cash balance formula provides each impacted employee with pay credits based on the sum of that employee's age plus years of pension service as of December 31 of each calendar year, plus 4% annual interest credits. The Orbital Plans were frozen in 1994 and no pension benefits are being accrued by those employees. The Company funds the Orbital ATK Plans in accordance with federal requirements calculated using appropriate actuarial methods. Depending on the plan they are covered by, employees generally vest after three or five years. Plan assets are held in a trust and are invested in a diversified portfolio of equity investments, fixed income investments, real estate, timber, energy investments, hedge funds, private equity and cash. For certain plan assets where the fair market value is not readily determinable, estimates of the fair value are determined using the best available information including the most recent audited financial statements.

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defined benefit pension plans are the "Orbital ATK Inc. Pension and Retirement Plan" and the "Thiokol Propulsion Pension Plan" (the "Orbital ATK Plan").

ATK Plans - The ATK Plans are noncontributory defined benefit pension plans that cover substantially all legacy ATK employees hired prior to January 1, 2007. Eligible legacy ATK non-union employees hired on or after January 1, 2007 and certain union employees are not covered by a defined benefit plan but receive an employer contribution through a defined contribution plan. Prior to July 1, 2013 (January 1, 2014, January 1, 2015 and April 1, 2016 for certain union groups), the ATK Plans provided either pension benefits based on employee annual pay levels and years of credited service or stated amounts for each year of credited service. Effective July 1, 2013 and at later dates for certain collective bargaining agreements, pension benefits were frozen and a new cash balance formula applicable to pay and service was implemented. The cash balance formula provides each impacted employee with pay credits based on the sum of that employee's age plus years of pension service as of December 31 of each calendar year, plus 4% annual interest credits. As a result of the latest plan amendment for certain collective bargaining agreements effective April 1, 2016, the projected benefit obligation was reduced by $2.3 million. The Orbital Plans were frozen in 1994 and no pension benefits are being accrued by those employees. The Company funds the Orbital ATK Plans in accordance with federal requirements calculated using appropriate actuarial methods. Depending on the plan they are covered by, employees generally vest after three or five years. Plan assets are held in a trust and are invested in a diversified portfolio of equity investments, fixed income investments, real estate, timber, energy investments, hedge funds, private equity and cash. For certain Plan assets where the fair market value is not readily determinable, estimates of the fair value are determined using the best available information including the most recent audited financial statements.

We also sponsor nonqualified supplemental executive retirement plans which provide certain executives and highly compensated employees the opportunity to receive pension benefits in excess of those payable through tax-qualified pension plans. We implemented similar changes as those noted above to our nonqualified supplemental executive retirement plans for certain highly compensated employees.

We recorded pension expense for the Orbital ATK Plans of $6469 million infor the year ended December 31, ~~2016~~2017, compared to $8264 million for the ~~2015~~year ~~transition~~ended ~~period~~December 31, a2016, ~~decrease~~an increase of $185 million. The expense related to these Orbital ATK Plans is calculated based upon a number of actuarial assumptions, including the expected long-term rate of return on ~~Plan~~plan assets, the discount rate and the rate of compensation increase. The following table sets forth our assumptions used in determining pension expense:

	Projected 2017		Year Ended December 31, 2016		Nine Months Ended December 31, 2015		Year Ended March 31, 2015
Expected long-term rate of return on Plan assets	7.00	%	7.25	%	7.25	%	7.25	%
Discount rate	4.14	%	4.40	%	3.90	%	4.50	%
Rate of compensation increase:
Union	3.11	%	3.13	%	3.66	%	3.22	%
Salaried	3.56	%	3.60	%	3.14	%	3.47	%

In developing the expected long-term rate of return assumption, we consider input from our actuaries and other advisors, annualized returns of various major indices over a long-term time horizon and our own historical 5-year and 10-year compounded investment returns. The expected long-term rate of return of 7.25% used in the year ended December 31, 2016 for the plans was based on an asset allocation range of 20 - 45% in public equity investments, 35 - 50% in fixed income investments, 0 - 10% in real estate investments, 15 - 30% collectively in hedge fund and private investments and 0 - 6% in cash investments. The actual return in any fiscal year will likely differ from our assumption, but our estimate of its return is based on long-term projections and historical results. Therefore, any variance in a given year does not necessarily indicate that the assumption should be changed.

We calculate the equivalent weighted average discount rate as the singular interest rate that results in the same total present value from the stream of future cash flows as the PBO. The weighted average discount rate was 4.14%, 4.40% and 3.90% at December 31, 2016 December 31, 2015 and March 31, 2015 respectively for the qualified plans, and 3.63%, 3.85% and 3.90% for the supplemental plan. The yield curve used to determine the PBO at year end impacts the following year's pension expense, through the calculation of interest cost and service cost items.

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approximately $5 million; each 0.25% change in the rate of compensation increase would change 2017 pension expense by an immaterial amount; and each 0.25% change in the expected rate of return on Plan assets would change 2017 pension expense by approximately $6 million.



	Projected 2018		Year Ended December 31, 2017		Year Ended December 31, 2016		Nine Months Ended December 31, 2015
	Projected 2018		Year Ended December 31, 2017		Year Ended December 31, 2016		Nine Months Ended December 31, 2015
Expected long-term rate of return on plan assets	7.00	%	7.00	%	7.25	%	7.25	%
Discount rate	3.65	%	4.14	%	4.40	%	3.90	%
Rate of compensation increase:
Union	2.90	%	3.11	%	3.13	%	3.66	%
Salaried	3.51	%	3.56	%	3.60	%	3.14	%

In developing the expected long-term rate of return assumption, we consider input from our actuaries and other advisors, annualized returns of various major indices over a long-term time horizon and our own historical 5-year and 10-year compounded investment returns. The expected long-term rate of return of 7.00% used in the year ended December 31, 2017 for the Orbital ATK Plans was based on an asset allocation range of 20 - 45% in public equity investments, 35 - 50% in fixed income investments, 0 - 10% in real estate investments,15 - 30% collectively in hedge fund and private investments and 0 - 6% in cash investments. The actual return in any fiscal year will likely differ from our assumption, but our estimate of its return is based on long-term projections and historical results. Therefore, any variance in a given year does not necessarily indicate that the assumption should be changed.

We calculate the equivalent weighted average discount rate as the singular interest rate that results in the same total present value from the stream of future cash flows as the projected benefit obligation ("PBO") at December 31, 2017. The weighted average discount rate was 3.65%, 4.14% and 4.40% at December 31, 2017, December 31, 2016 and December 31, 2015, respectively, for the qualified plans, and 3.33%, 3.63% and 3.85% for the nonqualified supplemental executive retirement plan. The yield curve used to determine the PBO at year end impacts the following year's pension expense, through the calculation of interest cost and service cost items.

Future actual pension expense could vary significantly depending on future investment performance, changes in future discount rates, legally required plan changes and various other factors related to the populations participating in the Orbital ATK Plans. If the assumptions of the discount rate, compensation increase and/or expected rate of return for 2018 were different, the impact on 2018 expense would be as follows: each 0.25% change in the discount rate would change 2018 pension expense by approximately $6 million; each 0.25% change in the rate of compensation increase would change 2018 pension expense by an immaterial amount; and each 0.25% change in the expected rate of return on plan assets would change 2018 pension expense by approximately $6 million.

We base our determination of pension expense or income on a market-related valuation of assets, which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recorded.

Effective January 1, 2016, the Company changed the approach used to measure service and interest costs for pension and other postretirement benefits. Prior to January 1, 2016, the Company measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. ~~For~~The ~~2016, the~~ Company ~~has~~ elected to measure service and interest costs by applying the specific spot rates along that yield curve to the plans' liability cash flows. The Company believes ~~the~~this ~~new~~ approach provides a more precise measurement of service and interest costs by aligning the timing of the plans' forecasted cash flows to the corresponding spot rates on the yield curve. This change does not affect the measurement of plan obligations. The Company accounted for this change on a prospective basis as a change in accounting estimate, resulting in lower pension expense compared to the method used prior to January 1, 2016.

We made contributions to the qualified pension trust of $~~114~~115 million during the year ended December 31, ~~2016~~2017. ~~and~~We are not required to ~~contribute~~make ~~$24~~any ~~million~~contributions into ~~2017~~meet the legally required minimum for 2018. We distributed $63 million under our supplemental executive retirement plans during the year ended December 31, ~~2016~~2017, and expect to make distributions directly to retirees of $34 million in ~~2017~~2018. A substantial portion of our ~~Plan~~plan contributions are recoverable from the U.S. Government as allowable indirect contract costs at amounts generally equal to the pension plan contributions, although not necessarily in the same year the contribution is made. Our funded pension status was approximately 7578% at December 31, ~~2016~~2017.

Other Postretirement Benefits. We also provide postretirement health care benefits and life insurance coverage to certain employees and retirees. During the year ending December 31, 2016 the Company amended its retiree health care plan to provide coverage through a private exchange effective January 1, 2017. The exchange offers the retiree a broad choice of health care plans from which to choose. The company will contribute fixed payments to a Health Retirement Account (HRA), when applicable, for those retirees that previously had subsidized health care coverage through the Company. The company's contributions to the HRA's are retirees' funds to be spent on qualified health care premiums and eligible out-of-pocket expenses. This plan amendment caused a remeasurement that increased the Company's funded status by $39 million and will reduce expenses recorded in future periods. 38

	Projected 2017		Year Ended December 31, 2016		Nine Months Ended December 31, 2015		Year Ended March 31, 2015
Expected long-term rate of return on Plan assets:
Held solely in fixed income investments	4.00	%	4.00	%	5.00% / 6.25%		5.00% / 6.25%
Held in pension master trust and fixed income investments	6.00	%	6.00	%	6.25	%	6.25	%
Discount rate	3.62	%	3.98	%	3.55	%	3.95	%
Weighted-average initial health care cost trend rate	N/A		6.10	%	6.10	%	6.10	%

Health care cost trend rates are set specifically for each benefit plan and design. Health care cost trend rates used to determine the net periodic benefit cost for employees during the year ended December 31, 2016 were as follows: under age 65 was 6.5%; over age 65 was 5.5%; and the prescription drug portion was 10%. The health care cost ultimate trend rates, do not apply in future expense calculations since the company will be contributing fixed payments to the retirees' HRA.

In developing the expected long-term rate of return assumption for other PRB plans, we consider input from actuaries, historical returns and annualized returns of various major indices over long periods. At December 31, 2016 approximately 47% of the assets were held in a 401(h) account held within the pension master trust and are invested in the same manner as the pension assets. The expected long-term rates of returns are based on the weighted average asset allocation between the assets held within the 401(h) and those held in fixed income investments.

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Other Postretirement Benefits. We ~~made~~also ~~other~~provide ~~PRB~~postretirement ~~plan~~health ~~contributions~~care ofbenefits $7and ~~million~~life ininsurance coverage to certain employees and retirees. During the year ~~ended~~ending December 31, 2016, ~~and~~the ~~expect~~Company amended its retiree health care plan to ~~make~~provide ~~contributions~~coverage ofthrough ~~approximately~~a $5private ~~million~~exchange ineffective January 1, 2017. AThe ~~substantial~~exchange ~~portion~~offers ofthe ~~our~~retiree ~~PRB~~a ~~plan~~broad ~~contributions~~choice ~~are~~of ~~recoverable~~health care plans from ~~the~~which Uto choose.S. ~~Government~~The asCompany ~~allowable~~will ~~indirect~~contribute ~~costs~~fixed atpayments ~~amounts~~to ~~generally~~a ~~equal~~Health Retirement Account (HRA), when applicable, for those retirees that previously had subsidized health care coverage through the Company. The Company's contributions to the HRAs are retirees' funds to be spent on qualified health care premiums and eligible out-of-pocket expenses. This plan ~~contributions,~~amendment ~~although~~caused ~~not~~a ~~necessarily~~remeasurement inthat increased the ~~same~~Company's ~~year~~funded ~~the~~status ~~contribution~~by is$39 ~~made~~million at December 31, 2016 and will reduce expenses recorded in future periods.

The following table sets forth our assumptions used to determine net periodic benefit cost for other postretirement benefit ("PRB") plans:



	Projected 2018		Year Ended December 31, 2017		Year Ended December 31, 2016		Nine Months Ended December 31, 2015
	Projected 2018		Year Ended December 31, 2017		Year Ended December 31, 2016		Nine Months Ended December 31, 2015
Expected long-term rate of return on Plan assets:
Held solely in fixed income investments	4.00	%	4.00	%	4.00	%	5.00% / 6.25%
Held in pension master trust and fixed income investments	6.00	%	6.00	%	6.00	%	6.25	%
Discount rate	3.36	%	3.63	%	3.98	%	3.55	%
Weighted-average initial health care cost trend rate	N/A		N/A		6.10	%	6.10	%

Health care cost trend rates are set specifically for each benefit plan and design. Health care cost trend rates used to determine the net periodic benefit cost for employees during the year ended December 31, 2017, and health care cost ultimate trend rates used to determine future expense calculations, do not apply since we contribute fixed payments to the retiree HRA.

In developing the expected long-term rate of return assumption for other PRB plans, we consider input from actuaries, historical returns and annualized returns of various major indices over long periods. At December 31, 2017, approximately 52% of the assets were held in a 401(h) account held within the pension master trust and are invested in the same manner as the pension assets. The expected long-term rates of returns are based on the weighted average asset allocation between the assets held within the 401(h) and those held in fixed income investments.

We made other PRB plan contributions of $3 million in the year ended December 31, 2017 and expect to make contributions of approximately $4 million in 2018. A substantial portion of our PRB plan contributions are recoverable from the U.S. Government as allowable indirect costs at amounts generally equal to the plan contributions, although not necessarily in the same year the contribution is made.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") reduced our accumulated projected benefit obligation ("APBO") measured at December 31, 2005. One of our other PRB plans is actuarially equivalent to Medicare, but we do not believe that the subsidies it will receive under the Act will be significant. Because we believe that participation levels in our other PRB plans will decline, the impact to our results of operations in any period has not been and is not expected to be significant.

Income Taxes

Provisions for federal, state and foreign income taxes are calculated based on reported pre-tax earnings and current tax law. Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. Significant judgment is required in determining income tax provisions and evaluating tax positions. We periodically assess our liabilities and contingencies for all periods that are currently open to examination or have not been effectively settled based on the most current available information. Where it is not more likely than not that our tax position will be sustained, we record the entire resulting tax liability and when it is more likely than not of being sustained, we record our best estimate of the resulting tax liability. Any applicable interest and penalties related to these positions are also recorded in the consolidated financial statements. To the extent our assessment of the tax outcome of these matters changes, such change in estimate will impact the income tax provision in the period of the change. It is our policy to record any interest and penalties related to income taxes as part of the income tax expense for financial reporting purposes. Deferred tax assets related to carryforwards are reduced by a valuation allowance when it is not more likely than not that the amount will be realized before expiration of the carryforward period. As part of this analysis, we take into account the amount and character to determine if the carryforwards will be realized. Significant estimates are required for this analysis. Changes in the amounts of valuation allowance are recorded in the tax provision in the period when the change occurs.

~~Mergers and Acquisitions~~39

The results of merged or acquired businesses are included in our consolidated financial statements from the date of merger or acquisition. We allocate the purchase price to the underlying tangible and intangible assets acquired and liabilities assumed based on their fair value. Estimates are used in determining the fair value and estimated remaining lives of intangible assets until the final purchase price allocation is completed. Actual fair values and remaining lives of intangible assets may vary from those estimates. The excess purchase price over the estimated fair value of the net assets acquired is recorded as goodwill.

On April 28, 2014, we entered into a Transaction Agreement (the "Transaction Agreement") with Orbital, Vista SpinCo Inc., a wholly-owned Company subsidiary, and Vista Merger Sub Inc., a wholly-owned subsidiary of ours, providing for the Distribution of our Sporting Group as a new public company, Vista Outdoor, followed by our Merger with Orbital. The Distribution and Merger were completed on February 9, 2015, immediately following which we changed our name to Orbital ATK, Inc. Pursuant to the Distribution and Merger, our stockholders received two shares of Vista Outdoor for each share of our common stock held and Orbital stockholders received 0.449 shares of our stock for each share of Orbital common stock held. Both transactions were structured to be tax-free to our U.S. stockholders for U.S. federal income tax purposes. Immediately following the Merger, Orbital stockholders owned 46.2% of our common stock and our existing stockholders owned 53.8%. The Merger was accounted for using the purchase method of accounting with the Company as the accounting acquirer.

As noted, we divested the Sporting Group segment in the Distribution. Accordingly, the divested business is presented as a discontinued operation in the accompanying consolidated financial statements for all prior periods presented.

Accounting for Goodwill

During 2015, we changed our fiscal year end to December 31st and as a result, have changed the timing of impairment testing primarily in order to better align the timing with our annual operating plan, forecasting and budgeting process. In 2016 and in future years, we test goodwill for impairment on the first day of the fourth quarter and upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired. We determined that the reporting units for our goodwill impairment review are our operating segments, or components of an operating segment, that constitute a business for which discrete financial information is available, and for which segment management regularly reviews the operating results. We aggregate certain components or reporting units based upon an evaluation of the facts and circumstances, including the nature of products and services and the extent of shared assets and resources. As a result, we have seven reporting units.

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expense for financial reporting purposes. Deferred tax assets related to carryforwards are reduced by a valuation allowance when it is not more likely than not that the amount will be realized before expiration of the carryforward period. As part of this analysis, we take into account the amount and character to determine if the carryforwards will be realized. Significant estimates are required for this analysis. Changes in the amounts of valuation allowance are recorded in the tax provision in the period when the change occurs. For information on the effect of the Tax Act, see Note 14, Income Taxes, to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this report.

Accounting for Goodwill

We test goodwill for impairment on the first day of the fourth quarter and upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired. We determined that the reporting units for our goodwill impairment review are our operating segments, or components of an operating segment, that constitute a business for which discrete financial information is available, and for which segment management regularly reviews the operating results. We aggregate certain components or reporting units based upon an evaluation of the facts and circumstances, including the nature of products and services and the extent of shared assets and resources. As a result, we have seven reporting units.

The goodwill impairment test is performed using a two-step process. In the first step, we determine the estimated fair value of each reporting unit and compare it to the carrying value of the reporting unit, including goodwill. If the carrying amount of a reporting unit is higher than its estimated fair value, an indication of impairment exists and the second step must be performed in order to determine the amount of the impairment. In the second step, we must determine the implied fair value of the reporting unit's goodwill which is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The implied fair value is compared to the carrying amount and if the carrying amount of the reporting unit's goodwill exceeds the implied fair value of its goodwill, an impairment loss must be recognized for the excess.

The estimated fair value of each reporting unit was determined using both an income and market approach. The value estimated using a discounted cash flow model was generally weighted equally against the estimated value derived from a market approach that considers the guideline company and transaction methods if recent transactions were available for one of our seven reporting units. These market approach methods estimate the price reasonably expected to be realized from the sale of the company based on comparable companies and recent transactional data. The estimated fair value for each reporting unit substantially exceeded its respective carrying value.

In developing a discounted cash flow analysis, our assumptions about future revenues and expenses, capital expenditures and changes in working capital are based on our three-year plan, as approved by our Board of Directors, and assumes a terminal growth rate thereafter. A separate discount rate is determined for each reporting unit and these cash flows are then discounted to determine the fair value of the reporting unit.

Projecting discounted future cash flows requires us to make significant estimates regarding future revenues and expenses, projected capital expenditures, changes in working capital and the appropriate discount rate. The projections also take into account several factors including current and estimated economic trends and outlook, costs of raw materials, consideration of our market capitalization in comparison to the estimated fair values of our reporting units and other factors which are beyond our control. If the current economic conditions were to deteriorate, or if we were to lose a significant contract or business, causing a reduction in estimated discounted cash flows, it is possible that the estimated fair value of certain reporting units could fall below their carrying value resulting in the necessity to conduct additional goodwill impairment tests in future periods. We continually monitor the reporting units for impairment indicators and update assumptions used in the most recent calculation of the estimated fair value of a reporting unit as appropriate.

Results of Operations

In March 2015, we changed our fiscal year from the period beginning on April 1 and ending on March 31 to the period beginning on January 1 and ending on December 31. We believe that a reader’s understanding of our results of operations will be enhanced by review of a comparison between our audited results for the fiscal year ended December 31, 2016, referred to as calendar year 2016, and our unaudited results for the fiscal year ended December 31, 2015, referred to as calendar year 2015. Accordingly, we present our discussion and analysis under “"Results of Operations”" below based on comparisons of the results for such periods~~, as well as based on a comparison of the results of the nine month period ended December 31, 2015 compared to nine months ended December 28, 2014 (unaudited)~~.

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The following information should be read in conjunction with our consolidated financial statements. The key performance indicators that management uses in managing the business are sales, income before interest and income taxes, and cash flows.

Group Sales and Cost of Sales include intergroup sales and profit. Corporate and Eliminations includes intergroup sales and profit eliminations and corporate expenses.

The information presented in the Results of Operations compares the audited results for the calendar year ended December 31, ~~2016~~2017 to the ~~unaudited~~audited results for the calendar year ended December 31, ~~2015~~2016, and compares the audited results for the ~~nine-month~~calendar ~~transition~~year ~~period~~ ended December 31, ~~2015~~2016 to the unaudited results for the ~~nine-month~~calendar ~~period~~year ended December 2831, ~~2014 so as to maintain a consistent comparison between periods~~2015.

36Calendar Year Ended December 31, 2017 Compared to Calendar Year Ended December 31, 2016

Sales



	Year Ended December 31,
	2017			2016			$ Change			% Change
Flight Systems Group	$	1,681		$	1,496		$	185		12.4	%
Defense Systems Group	1,968			1,823			145			8.0
Space Systems Group	1,284			1,238			46			3.7
Corporate and Eliminations	(169		)	(102		)	(67		)	(65.7	)
Total sales	$	4,764		$	4,455		$	309		6.9	%

The fluctuation in sales was driven by the program-related changes within the operating segments as described below.

Flight Systems Group. The increase in sales was driven by higher sales of $126 million in Aerospace Structures due to increased production on composite aircraft structures. The increase was also driven by higher sales in Launch Vehicles of $57 million due to a new medium range ballistic target program and increased activity on small space launch programs.

Defense Systems Group. The increase in sales was due to an increase of $75 million in Armament Systems driven by international sales, $57 million in Defense Electronics due to higher strike weapons and light attack aircraft production, and $37 million in Missile Products due to higher production level on tactical propulsion and missile defense. These increases were partially offset by a decrease of $25 million in Small Caliber Systems primarily attributable to production delays resulting from an industrial accident that occurred in April 2017 at our Lake City Army Ammunition Plant.

Space Systems Group. The increase was due to higher sales of $130 million in Satellite Systems driven by an increase of $162 million on new and existing programs in defense satellites and $38 million in higher product sales for scientific and environmental satellites, partially offset by a decrease of $71 million in commercial satellites. The increase was also due to higher sales of $12 million in Space Components as a result of increased activity on existing programs and $3 million in Technical Services driven by activities on our U.S. Navy contracts. These increases were offset by a decrease of $99 million in Advanced Programs driven by a decrease of $169 million for Commercial Resupply Services ("CRS") activity partially offset by a $70 million increase in Mission Extension Vehicles ("MEV") activity.

Corporate and Eliminations. The change in Corporate and Eliminations was primarily due to an increase in intercompany activity, which are eliminated in consolidation.

Cost of Sales



	Year Ended December 31,
	2017			2016			$ Change			% Change
Flight Systems Group	$	1,292		$	1,117		$	175		15.7	%
Defense Systems Group	1,571			1,471			100			6.8
Space Systems Group	1,048			1,010			38			3.8
Corporate and Eliminations	(212		)	(128		)	(84		)	(65.6	)
Total cost of sales	$	3,699		$	3,470		$	229		6.6	%

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~~Calendar~~The ~~Year~~fluctuation ~~Ended~~in ~~December~~cost ~~31,~~of ~~2016~~sales ~~Compared~~was todriven ~~Calendar~~by ~~Year~~the ~~December~~program-related ~~31,~~changes ~~2015~~within ~~(Unaudited)~~the operating segments as described below.

	Year Ended December 31,
	2016			2015			$ Change			% Change
(in millions)				(Unaudited)
Flight Systems Group	$	1,496		$	1,470		$	26		1.8	%
Defense Systems Group	1,823			1,820			3			0.2
Space Systems Group	1,238			1,165			73			6.3
Corporate and Eliminations	(102		)	(92		)	(10		)	(10.9	)
Total sales	$	4,455		$	4,363		$	92		2.1	%

Flight Systems Group. The increase was due to higher cost of sales of $103 million in Aerospace Structures due to increased production on composite aircraft structures. The increase was also driven by higher cost of sales in Launch Vehicles of $62 million due to a new medium range ballistic target program and activity related to additional missions on Antares, offset by reduced production on existing missile defense programs. Cost of sales also increased $11 million in Propulsion Systems due to production timing on existing programs.

Defense Systems Group. The increase was due to higher cost of sales of $54 million in Armament Systems due to increased international sales, $42 million in Defense Electronics due to higher volume of strike weapons and light attack aircraft production and $16 million in Missile Products due to increased tactical propulsion production and missile defense. These increases were partially offset by a decrease of $14 million in Small Caliber Systems primarily attributable to production delays resulting from an industrial accident that occurred in the Lake City Army Ammunition Plant in April 2017.

Space Systems Group. The increase was due to higher cost of sales of $91 million in Satellite Systems driven by increased activity in defense satellites and scientific and environmental satellites, partially offset by decreases in commercial satellites. In addition, Space Components increased $13 million due to increased activity on existing programs. These increases were offset by a decrease of $66 million in Advanced Programs due to decreased CRS activity, offset by increased MEV activity.

Corporate and Eliminations. The change in Corporate and Eliminations was primarily due to an increase in intercompany activity, which are eliminated in consolidation.

Operating Expenses



	Year Ended December 31,
	2017		As a % of Sales		2016		As a % of Sales		Change
Research and development	$	115	2.4	%	$	116	2.6	%	$	(1	)
Selling	115		2.4		107		2.4		8
General and administrative	306		6.4		290		6.5		16
Total	$	536	11.2	%	$	513	11.5	%	$	23

Operating expenses increased $23 million primarily due to increased general and administrative costs to support our growth initiatives, mainly in our Defense Systems Group, and incremental costs for acquisition transaction expenses offset by lower expenses in the current year for legal and audit fees related to the restatement of our financial statements. Additionally, selling expenses increased due to higher bid and proposal expenses in Flight Systems Group and Defense Systems Group.

Net Interest Expense

Net interest expense for the year ended December 31, 2017 was $67 million, which was relatively flat compared to $68 million during the year ended December 31, 2016.

Income Taxes (from Continuing Operations)



	Year Ended December 31,
	2017		Effective Rate		2016		Effective Rate		Change
Income taxes	$	152	33.0	%	$	111	27.5	%	$	41

The increase in the current year tax rate is due to tax expense increases as a result of the Tax Act and state taxes, decreased benefits from the Domestic Manufacturing Deduction ("DMD") and the research and development ("R&D") tax credit, partially offset by increased benefits from the true-up of prior year taxes and a decrease in valuation allowance.

Our provision for income taxes includes both federal and state income taxes. The effective tax rate for the year ended December 31, 2017 of 33.0% differs from the federal statutory rate of 35.0% due to the write-down of net deferred tax assets as a result of the Tax Act, the DMD, the R&D tax credit, true-up of prior year taxes, partially offset by the change in valuation allowance and state income taxes, which increased the rate.

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The effective tax rate for December 31, 2016 of 27.5% differs from the federal statutory rate of 35.0% due to the DMD, the R&D tax credit, true-up of prior year taxes and the settlement of the examination by the IRS of the fiscal 2013 and 2014 tax returns, partially offset by the change in valuation allowance and state income taxes, which increased the tax rate.

Calendar Year Ended December 31, 2016 Compared to Calendar Year Ended December 31, 2015 (Unaudited)

Sales



	Year Ended December 31,
	2016			2015			$ Change			% Change
				(Unaudited)
Flight Systems Group	$	1,496		$	1,470		$	26		1.8	%
Defense Systems Group	1,823			1,820			3			0.2
Space Systems Group	1,238			1,165			73			6.3
Corporate and Eliminations	(102		)	(92		)	(10		)	(10.9	)
Total sales	$	4,455		$	4,363		$	92		2.1	%

The fluctuation in sales was driven by the program-related changes within the operating segments as described below.

Flight Systems Group. The increase in sales was primarily due to the Antares return to flight, added missions, and inclusion of a full year of Orbital's results in the year ended December 31, 2016, whereas the year ended December 31, 2015 only included ~~the~~ Orbital's results after February 9, 2015 (the ~~Merger~~ date of the Orbital-ATK Merger). Additionally, growth in Aerospace Structures programs was partly offset by a decrease in tactical missile volume and a favorable contract close out adjustment in the year ended December 31, 2015 that did not reoccur in the year ended December 31, 2016.

Defense Systems Group. Sales were relatively flat for the year ended December 31, 2016 compared to the year ended December 31, 2015. ~~The~~ Missile ~~Products~~Product's ~~Division~~ contracts experienced an increase in activity , which was offset by a decline in non-standard ammunition sales during the year within ~~the~~ Small Caliber Systems ~~Division~~.

Space Systems Group. The increase in sales for the year ended December 31, 2016 was primarily due to including a full year of Orbital's results whereas the year ended December 31, 2015 only included Orbital's results after the ~~Merger~~ date of the Orbital-ATK Merger. Additionally, the year ended December 31, 2015 included unfavorable profit adjustments related to ~~the~~Satellite ~~Commercial~~Systems ~~Satellites Division~~ that did not reoccur in the year ended December 31, 2016.

Corporate and Eliminations. The change in Corporate and Eliminations was primarily due to an increase in intercompany activity, which are eliminated in consolidation.

Cost of Sales

	Year Ended December 31,
	2016			2015			$ Change			% Change
(in millions)				(unaudited)
				(unaudited)
Flight Systems Group	$	1,117		$	1,119		$	(2	)	(0.2	)%
Defense Systems Group	1,471			1,460			11			0.8
Space Systems Group	1,010			969			41			4.2
Corporate and Eliminations	(128		)	(83		)	(45		)	(54.2	)
Total cost of sales	$	3,470		$	3,465		$	5		0.1	%

The fluctuation in cost of sales was driven by the program-related changes within the operating segments as described below.

Flight Systems Group. Cost of sales remained relatively flat.

Defense Systems Group. The slight increase for the year ended December 31, 2016 was primarily driven by higher costs associated with certain Armament Systems and Missile Products ~~Divisions~~ contracts.

~~Space Systems Group. The increase in cost of sales for the year ended December 31, 2016 was primarily due to including a full year of activity of the Orbital Sciences business.~~43

Corporate and Eliminations. The change in Corporate and Eliminations was primarily due to an increase in intercompany activity, which are eliminated in consolidation.

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	Years Ended
	December 31, 2016		As a % of Sales		December 31, 2015		As a % of Sales		Change
					(Unaudited)
Research and development	$	116	2.6	%	$	109	2.5	%	$	7
Selling	107		2.4		109		2.5		(2		)
General and administrative	290		6.5		359		8.2		(69		)
Goodwill impairment	—		—		34		0.8		(34		)
Total	$	513	11.5	%	$	611	14.0	%	$	(98	)

Space Systems Group. The increase in cost of sales for the year ended December 31, 2016 was primarily due to including a full year of activity of the Orbital business.

~~Operating~~Corporate ~~expenses decreased $98 million primarily due to transaction fees for advisory, legal~~ and ~~accounting~~Eliminations. The ~~services~~change in ~~connection~~Corporate ~~with the Distribution~~ and ~~Merger~~Eliminations ~~during~~was ~~the~~primarily ~~year~~due ~~ended December 31, 2015 that did not reoccur in the year ended December 31, 2016. During the first quarter of calendar 2015, we recorded a goodwill impairment charge of $34 million pertaining~~ to ~~our~~an ~~Space~~increase ~~Components division~~ in ~~our~~intercompany ~~Space Systems Group~~activity, inwhich ~~connection~~are ~~with~~eliminated ~~our annual goodwill impairment test. Additional reductions~~ in ~~general and administrative costs in the Propulsion Systems Division lowered general and administrative costs overall, as a percentage of revenue~~consolidation.

Operating Expenses



	Year Ended December 31,
	2016		As a % of Sales		2015		As a % of Sales		Change
					(Unaudited)
Research and development	$	116	2.6	%	$	109	2.5	%	$	7
Selling	107		2.4		109		2.5		(2		)
General and administrative	290		6.5		359		8.2		(69		)
Goodwill impairment	—		—		34		0.8		(34		)
Total	$	513	11.5	%	$	611	14.0	%	$	(98	)

Operating expenses decreased $98 million primarily due to transaction fees for advisory, legal and accounting services in connection with the Distribution and Orbital-ATK Merger during the year ended December 31, 2015 that did not reoccur in the year ended December 31, 2016. During the first quarter of calendar 2015, we recorded a goodwill impairment charge of $34 million pertaining to Space Components in our Space Systems Group, in connection with our annual goodwill impairment test. Additional reductions in general and administrative costs in Propulsion Systems lowered general and administrative costs overall, as a percentage of revenue.

Net Interest Expense

Net interest expense for the year ended December 31, 2016 was $68 million, a decrease of $13 million compared to $81 million during the year ended December 31, 2015. The decrease was primarily due to accelerated amortization of deferred debt issuance costs related to refinancing our debt during the year ended December 31, 2015 that did not reoccur in the year ended December 31, 2016.

Income Taxes (from Continuing Operations)

	Years Ended
	Year Ended December 31,
	December 31, 2016		Effective Rate		December 31, 2015		Effective Rate		Change
	2016		Effective Rate		2015		Effective Rate		Change
					(Unaudited)
Income taxes	$	111	27.5	%	$	83	36.4	%	$	28

The decrease in the current year tax rate is due to increased benefits from the ~~Domestic Manufacturing Deduction ("~~DMD") and the ~~research and development ("~~R&D") tax credit, the true-up of prior year taxes, the settlement of the examination by the IRS of the fiscal 2013 and 2014 tax returns and the absence of goodwill impairment and non-deductible transaction costs which increased the tax rate in the prior period, partially offset by an increase in valuation allowance.

Our provision for income taxes includes both federal and state income taxes. The effective tax rate for December 31, 2016 of 27.5% differs from the federal statutory rate of 35.0% due to the DMD, the R&D tax credit, true-up of prior year taxes and the settlement of the examination by the IRS of the fiscal 2013 and 2014 tax returns, partially offset by the change in valuation allowance and state income taxes, which increased the tax rate.

The effective tax rate for the year ended December 31, 2015 of 36.4% differs from the federal statutory rate of 35.0% due to the impact of goodwill impairment, non-deductible transaction costs, and state income taxes offset by the DMD, the R&D tax credit, and true-up of prior year taxes.

Nine Months Ended December 31, 2015 Compared to Nine Months Ended December 28, 2014 (Unaudited)

As a general note, the increases in the results of Flight Systems Group and Space Systems Group discussed below for the nine months ended December 31, 2015 were primarily attributable to the inclusion of Orbital's results following the Merger. Our results for the nine months ended December 31, 2015 include Orbital; however, the results for the nine months ended December 28, 2014 do not include the results of Orbital since the Merger occurred after that period.

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	Nine Months Ended
	December 31, 2015			December 28, 2014			$ Change			% Change
				(unaudited)
Flight Systems Group	$	1,142		$	766		$	376		49.1	%
Defense Systems Group	1,320			1,333			(13		)	(1.0	)
Space Systems Group	977			223			754			338.8
Corporate and Eliminations	(48		)	(180		)	132			73.3
Total sales	$	3,391		$	2,142		$	1,249		58.4	%

The fluctuation in sales was driven by program-related changes within the groups and the impact of the Merger as described below.

Flight Systems Group. The increase in sales was primarily due to the inclusion of Orbital's former Launch Vehicles segment, now referred to as the Launch Vehicles Division, in our sales for the nine months ended December 31, 2015, as a result of the Merger. Launch Vehicles Division sales were approximately $430 million in the nine months ended December 31, 2015. Intragroup revenue eliminations increased $48 million primarily attributable to contract activity between the Launch Vehicles Division and the other divisions in Flight Systems Group.

Defense Systems Group. The decrease in sales was driven primarily by reduced sales of $11 million in the Small Caliber Systems, $5 million in Defense Electronic Division and $34 million in Missile Products largely due to lower sales volumes. The decrease in sales was offset by an increase of $45 million in Armament Systems revenues that reflected increased foreign sales.

Space Systems Group. The increase in sales was primarily due to the inclusion of Orbital's former Advanced Programs Group and Satellite and Space Systems segments in our sales for the nine months ended December 31, 2015, as a result of the Merger. The legacy Orbital Advanced Programs Group and Satellite and Space and Systems Group businesses generated sales of approximately $811 million in the nine months ended December 31, 2015.

Corporate and Eliminations. The change in corporate and eliminations was driven primarily by lower intergroup sales from Defense Systems Group, due to the spin-off of Vista Outdoor as a result of the Distribution.

	Nine Months Ended
	December 31, 2015			December 28, 2014			$ Change			% Change
				(unaudited)
Flight Systems Group	$	875		$	599		$	276		46.1	%
Defense Systems Group	1,068			1,079			(11		)	(1.0	)
Space Systems Group	811			183			628			342.4
Corporate and Eliminations	(37		)	(197		)	160			81.3
Total cost of sales	$	2,717		$	1,664		$	1,053		63.3	%

The fluctuation in cost of sales was driven by program-related changes within the groups and the impact of the Merger as described below.

Flight Systems Group. The increase in cost of sales was primarily due to the inclusion of Orbital's former Launch Vehicles segment in our cost of sales for the nine months ended December 31, 2015, as a result of the Merger.

Defense Systems Group. The decrease in cost of sales was driven primarily by lower sales volume in the Small Caliber Systems Division, partially offset by an increase in Armament Systems Division cost of sales that reflected increased foreign sales.

Space Systems Group. The increase in cost of sales was primarily due to the inclusion of Orbital's former Advanced Programs and Satellite and Space Systems segments in our cost of sales for the nine months ended December 31, 2015, as a result of the Merger.

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Corporate and Eliminations. The change in Corporate and Eliminations was driven primarily by lower intergroup sales from Defense Systems Group, due to the spin-off of Vista Outdoor as a result of the Distribution.

	Nine Months Ended
	December 31, 2015		As a % of Sales		December 28, 2014		As a % of Sales		Change
					(unaudited)
Research and development	$	83	2.5	%	$	24	1.1	%	$	59
Selling	88		2.6		69		3.2		19
General and administrative	220		6.5		165		7.8		55
Total	$	391	11.6	%	$	258	12.1	%	$	133

Operating expenses increased by $133 million in the nine months ended December 31, 2015 compared to the nine months ended December 28, 2014 primarily due to inclusion of Orbital's research and development costs, selling expenses and general and administrative expenses in the nine months ended December 31, 2015. Additionally, we recorded restructuring costs of $28 million in the 2015 transition period principally in connection with the consolidation of corporate facilities.

Net Interest Expense

Net interest expense for the 2015 transition period was $61 million, a decrease of $7 million compared to the 2014 comparable nine-month period. The decrease was primarily due to the impact of a decrease in outstanding debt as a result of the repayment of certain indebtedness in connection with the Distribution and Merger, partially offset by accelerated amortization of deferred debt issuance costs related to refinancing our debt during the nine months ended December 31, 2015.

	Nine Months Ended
	December 31, 2015		Effective Rate		December 28, 2014		Effective Rate		Change
					(unaudited)
Income taxes	$	87	31.9	%	$	42	27.5	%	$	45

The increase in the current period tax rate is primarily due to the absence of favorable true-ups of prior year taxes in the prior-year period, partially offset by a discrete revaluation of deferred tax liabilities resulting from a change in state tax apportionment method in the current-year period.

Our provision for income taxes includes both federal and state income taxes. The effective tax rate for the 2015 transition period of 31.9% differs from the federal statutory rate of 35.0% due to the DMD, the R&D tax credit and true-up of prior year taxes, partially offset by the change in valuation allowance, state income taxes and changes in prior-year contingent tax liabilities, which increased the rate.

The effective tax rate for the 2014 comparable period of 27.5% differs from the federal statutory rate of 35.0% due to DMD, the R&D tax credit, a true-up to prior year taxes and changes in prior year contingent tax liabilities, partially offset by state income taxes, which increased the tax rate.

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Liquidity and Capital Resources

We manage our business to maximize operating cash flows as the primary source of liquidity. In addition to cash on hand and cash generated by operations, sources of liquidity include a credit facility, long-term borrowings, and access to the public debt and equity markets. We use our cash to fund investments in our existing core businesses and for debt repayment, cash dividends, share repurchases and acquisition or other activities.

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Cash Flows Summary

Our cash flows from continuing operations for operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flows are summarized as follows:

	Years Ended						Nine Months Ended
	Year Ended December 31,
	December 31, 2016			December 31, 2015			December 31, 2015			December 28, 2014
	2017			2016			2015
Cash provided by operating activities of continuing operations	$	519		$	450		$	303		$	44
							(unaudited)
Cash (used in) provided by investing activities of continuing operations	(183		)	280			(111		)	(59		)
Cash provided by operating activities of continuing operations	$	520		$	519		$	450
Cash used in financing activities of continuing operations	(240		)	(748		)	(227		)	(216		)
Cash (used in) provided by investing activities of continuing operations	(245		)	(183		)	280
Net cash flows provided by (used in) continuing operations	$	96		$	(18	)	$	(35	)	$	(231	)
Cash used in financing activities of continuing operations	(129		)	(240		)	(748		)
Net cash flows provided by (used in) continuing operations	$	146		$	96		$	(18	)

Operating Activities

~~During~~Net ~~the year ended December 31, 2016, net~~ cash provided by operating activities of continuing ~~operation was $519 million, compared to $450 million in 2015. The increase in operating cash flows resulted primarily from the net effect of a $147 million improvement in income from continuing~~ operations ~~partially~~during ~~offset by changes in working capital and other assets and liabilities. During~~ the year ended December 31, ~~2016,~~2017 ~~changes~~was inconsistent ~~working~~with ~~capital~~2016. The ~~and~~positive ~~other~~drivers ~~assets~~of ~~and~~the ~~liabilities~~changes ~~used~~in ~~$18 million of~~ cash, ~~comprised~~flows ofwere ~~an $88 million increase in~~ net ~~receivables~~earnings, adeferred ~~$71~~taxes ~~million decrease in pension~~ and ~~postemployment~~changes ~~benefits, a $26 million decrease~~ in ~~contract loss reserve, a $9 million increase in inventories, a $5 million decrease in accrued compensation and a $7 million change in~~ other assets and liabilities, ~~offset by a~~ ($6197 million). ~~increase~~These inchanges ~~contract~~were ~~advances~~partially ~~and~~offset ~~allowances,~~by aan ~~$50 million decrease in income taxes receivable, a $39 million~~ increase in ~~contract~~the ~~related~~use ~~liabilities~~of ~~and~~working acapital ($38103 million ~~increase in accounts payable~~).

~~During~~Net ~~the~~cash ~~year~~provided ~~ended~~by ~~December~~operating ~~31,~~activities ~~2015,~~of ~~changes~~continuing inoperations ~~working~~increased ~~capital~~during ~~and~~the ~~other~~year ~~assets~~ended ~~and~~December ~~liabilities used $14 million of cash~~31, ~~comprised~~2016 aresulting ~~$61~~primarily ~~million~~from ~~decrease~~the innet ~~accounts~~effect ~~payable,~~of a $44147 million ~~decrease~~improvement in ~~contract~~income ~~loss~~from ~~reserve,~~continuing aoperations ~~$19~~partially ~~million~~offset ~~decrease~~by inpositive ~~pension~~non-cash ~~and~~net ~~postemployment~~income ~~benefits,~~adjustments anin ~~$18~~the ~~million~~prior ~~decrease~~year infor ~~accrued~~goodwill ~~compensation,~~impairment aand ~~$14~~loss ~~million~~on ~~increase~~extinguishment inof ~~income~~debt ~~tax~~that ~~receivable,~~did annot ~~$11~~occur ~~million~~in ~~decrease~~the inyear ~~contract~~ended ~~advance~~December ~~and~~31, ~~allowances~~2016 and achanges ~~$52~~in ~~million~~working ~~change~~capital inand other assets and liabilities, ~~offset by an~~ ($~~130~~4 million ~~decrease in net receivables and a $75 million~~ increase in ~~contract~~the ~~related~~use ~~liabilities~~of cash).

Net cash provided by operating activities of continuing operations increased $259 million in the 2015 transition period compared to the 2014 comparable period. This increase was primarily driven by the inclusion of Orbital's operating activities due to the Merger.

Investing Activities

~~Investing~~Cash used in investing activities of continuing operations ~~used~~was ~~cash of~~ $~~183~~245 million during the year ended December 31, ~~2016~~2017 ~~compared~~an toincrease ~~cash provided by investing activities~~ of ~~continuing~~$62 ~~operations~~million offrom $~~280~~183 million ~~during~~for the year ended December 31, ~~2015~~2016. This ~~decrease~~increase was driven by ~~the~~higher ~~receipt~~capital ofexpenditures ~~cash acquired in the Merger of $254 million and a cash dividend of $214 million paid by Vista Outdoor to us, less cash distributed to Vista Outdoor of $32 million in connection with the Distribution~~ during the ~~twelve~~year ~~months~~ ended December 31, ~~2015.~~2017 ~~The~~related ~~decrease~~to ~~was~~our ~~also~~self-constructed ~~driven~~Mission byExtension ~~higher~~Vehicles, ~~capital~~which ~~expenditures~~will ofprovide ~~$31 million~~ in-orbit ~~the~~satellite ~~year~~life ~~ended~~extension ~~December~~services ~~31,~~when ~~2016~~completed. ~~offset~~We byexpended ~~proceeds of~~ $4101 million ~~from~~in the ~~sale~~current ~~of land during the~~ year ~~ended~~for ~~December~~these ~~31, 2016~~assets.

~~Net~~Investing ~~cash~~activities of continuing operations used incash of $183 million during the year ended December 31, 2016 compared to cash provided by investing activities of continuing operations ~~increased~~of $52280 million induring the year ended December 31, 2015. ~~transition~~This ~~period~~decrease ~~compared~~was driven by the receipt of cash acquired in the Orbital-ATK Merger of $254 million and a cash dividend of $214 million paid by Vista Outdoor to us, less cash distributed to Vista Outdoor of $32 million in connection with the ~~2014~~Distribution ~~comparable~~during ~~period~~the year ended December 31, ~~primarily~~2015. The decrease was also driven by higher capital expenditures of $31 million in the ~~inclusion~~year ended December 31, 2016 offset by proceeds of ~~Orbital's~~$4 ~~capital~~million ~~expenditure~~from ~~due~~the tosale of land during the ~~Merger~~year ended December 31, 2016.

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Financing Activities

Net cash used in financing activities ~~decreased~~of ~~$508~~continuing ~~million~~operations ~~primarily~~during ~~due~~the toyear ~~higher~~ended ~~debt~~December ~~payments~~31, ~~net,~~2017 ofdecreased by $~~1,761~~111 million ~~related~~primarily due to ~~our~~lower ~~credit~~share ~~facility~~repurchases ~~offset by proceeds~~ of $~~1,200~~102 million ~~from~~and ~~the~~higher ~~issuance~~proceeds offrom ~~long-term~~employee ~~debt~~stock incompensation ~~the~~plans ~~twelve~~of ~~months~~$13 ~~ended~~million. ~~December~~In ~~31,~~connection ~~2015,~~with ~~partially offset by higher dividends paid and share repurchases during~~ the ~~twelve months ended December 31~~Merger, ~~2016~~the ofCompany ~~$13~~halted ~~million~~its ~~and~~share ~~$45~~repurchase ~~million, respectively~~program.

Net cash used in financing activities ~~increased~~of ~~$11~~continuing ~~million~~operations induring the ~~2015~~year ~~transition~~ended ~~period~~December ~~compared~~31, to2016 ~~the~~decreased ~~2014~~$508 ~~comparable~~million ~~period.~~primarily ~~This~~due ~~increase~~to ~~was~~higher ~~due~~debt topayments, ~~increased~~net ~~share~~of ~~repurchases~~$1,761 ~~dividends~~million ~~paid~~related ~~and~~to ~~higher~~our ~~debt~~credit ~~payments~~facility offset by proceeds of $1,~~063~~200 million from the issuance of long-term debt in the year ended December 31, 2015, partially offset by ~~additional~~higher ~~proceeds~~dividends ~~from~~paid ~~issuance~~and ofshare ~~debt~~repurchases induring the ~~2015~~year ~~transition~~ended ~~period~~December 31, 2016 of $~~1,050~~13 million and $45 million, respectively.

Liquidity

In addition to our normal operating cash requirements, our principal future cash requirements will be to fund capital expenditures, repay debt, satisfy employee benefit obligations, ~~repurchase~~and ~~shares,~~ pay dividends ~~and complete any strategic acquisitions~~. ~~Our~~As ~~short-term~~a ~~cash~~result ~~requirements for operations are expected to consist mainly~~ of ~~capital expenditures to maintain and expand production facilities and working capital requirements. Our debt service requirements over~~ the ~~next~~pending ~~two~~Merger, ~~years~~we ~~consist~~halted ofour ~~principal~~share ~~payments~~repurchase ~~due~~program ~~under~~and ~~the~~do ~~Term~~not ~~Loan~~expect Ato ofcomplete ~~the~~any ~~Senior~~strategic ~~Credit Facility, as discussed further below~~acquisitions. ~~Our~~If ~~other~~the ~~debt~~Merger ~~service requirements consist of interest expense on outstanding debt.~~

During the year ended December 31, 2016, we paid quarterly dividends of $0.30 per share for all four quarters totaling approximately $70 million. On February 28, 2017, the Board of Directors declared a quarterly cash dividend of $0.32 per share. The payment and amount of any future dividends are at the discretion of the Board of Directors and will be based on a number of factors, including our earnings, liquidity position, financial condition, capital requirements, credit ratings and the availability and cost of obtaining new debt. We cannot be certain that we will continue to declare dividends in the future and, as such, the amount and timing of any future dividends are not determinable.45

InTable ~~September 2015, we issued $400 million aggregate principal amount~~ of our 5.50% Senior Notes due 2023 and we refinanced our then-existing senior credit facility (the "Former Credit Facility") with a new senior credit facility (the "Senior Credit Facility"), extending debt maturities and increasing our revolving debt capacity, which increased our liquidity. Based on our current financial condition, management believes that our cash position, combined with anticipated generation of cash flows and the availability of funding, if needed, through our revolving credit facilities, access to debt and equity markets, as well as potential future sources of funding, including additional bank financing and debt markets, will be adequate to fund future growth as well as to service our currently anticipated long-term debt and pension obligations, make capital expenditures and payment of dividends over the next 12 months.Contents

were not completed for any reason, we would expect to consider resuming our share repurchase program and exploring possible strategic acquisitions. Our short-term cash requirements for operations are expected to consist mainly of capital expenditures to maintain and expand production facilities and working capital requirements. Our debt service requirements over the next two years consist of principal payments due under the Term Loan A of the Senior Credit Facility, as discussed further below. Our other debt service requirements consist of interest expense on outstanding debt.

During the year ended December 31, 2017, we paid quarterly dividends of $0.32 per share for all four quarters totaling approximately $74 million. On January 31, 2018, the Board of Directors declared a quarterly cash dividend of $0.32 per share. The payment and amount of any future dividends are at the discretion of the Board of Directors and will be based on a number of factors, including our earnings, liquidity position, financial condition, capital requirements, credit ratings and the availability and cost of obtaining new debt. Under the terms of the Merger Agreement, we are permitted to, and intend to, continue paying a $0.32 per share quarterly cash dividend until the closing of the transaction. However, we are not permitted to increase the per share dividend amount under the terms of the Merger Agreement.

In September 2015, we issued $400 million aggregate principal amount of 5.50% Senior Notes due 2023 and we refinanced our then-existing senior credit facility (the "Former Credit Facility") with a new senior credit facility (the "Senior Credit Facility"), extending debt maturities and increasing our revolving debt capacity, which increased our liquidity. Based on our current financial condition, management believes that our cash position, combined with anticipated generation of cash flows and the availability of funding, if needed, through our revolving credit facilities, as well as potential future sources of funding, including additional bank financing and debt markets, will be adequate to fund future growth as well as to service our currently anticipated long-term debt and pension obligations, make capital expenditures and payment of dividends over the next 12 months.

We do not expect that our access to liquidity sources will be materially impacted in the near future. There can be no assurance, however, that the cost or availability of future borrowings, if any, will not be materially impacted by capital market conditions.

Long-term Debt and Credit Facilities

At December 31, ~~2016~~2017, we had actual total indebtedness of $1,~~450~~410 million, and a $1,000 million revolving credit facility that provided for the potential of additional borrowings up to $~~818~~760 million reduced ~~for~~by outstanding letters of credit of $~~182~~240 million. There were no outstanding borrowings under the revolving credit facility at December 31, ~~2016~~2017.

Our indebtedness consisted of the following:



	December 31, 2017		December 31, 2016
Senior Credit Facility:
Term Loan A due 2020	$	710	$	750
Revolving Credit Facility due 2020	—		—
5.25% Senior Notes due 2021	300		300
5.50% Senior Notes due 2023	400		400
Carrying amount of long-term debt	1,410		1,450
Unamortized debt issuance costs:
Senior Credit Facility	4		5
5.25% Senior Notes due 2021	1		2
5.50% Senior Notes due 2023	4		5
Unamortized debt issuance costs	9		12
Long-term debt less unamortized debt issuance costs	1,401		1,438
Less: Current portion of long-term debt	40		40
Long-term debt	$	1,361	$	1,398

See Note 10, Long-term Debt, to the consolidated financial statements in Part II, Item 8, "Financial Statements and Supplementary Data" for a detailed discussion of these borrowings.

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	December 31, 2016		December 31, 2015
Senior Credit Facility:
Term Loan A due 2020	$	750	$	790
Revolving Credit Facility due 2020	—		—
5.25% Senior Notes due 2021	300		300
5.50% Senior Notes due 2023	400		400
Carrying amount of long-term debt	1,450		1,490
Unamortized debt issuance costs:
Senior Credit Facility	5		6
5.25% Senior Notes due 2021	2		2
5.50% Senior Notes due 2013	5		6
Unamortized debt issuance costs	12		14
Long-term debt less unamortized debt issuance costs	1,438		1,476
Less: Current portion of long-term debt	40		40
Long-term debt	$	1,398	$	1,436

See Note 10, "Long-term Debt," to the consolidated financial statements in Part II, Item 8, "Financial Statements and Supplementary Data" for a detailed discussion of these borrowings.

Covenants

Our Senior Credit Facility imposes restrictions on us, including limitations on our ability to incur additional debt, enter into capital leases, grant liens, pay dividends and make certain other payments, sell assets, or merge or consolidate with or into another entity. In addition, the Senior Credit Facility limits our ability to enter into sale-and-leaseback transactions. The Senior Credit Facility also requires that we meet and maintain the following financial ratios:

	Total LeverageRatio (1)	Interest CoverageRatio (2)
Requirement	4.00	3.00
Actual at December 31, 2016	2.11	10.55
Actual at December 31, 2017	1.86	11.92

_________________________________________


⁽¹⁾	Not to exceed the required financial ratio.


⁽²⁾	Not to be below the required financial ratio.

The Total Leverage Ratio is the sum of our total debt plus financial letters of credit, net of up to $100 million of cash, divided by Covenant Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") (which includes adjustments for items such as non-recurring or extraordinary non-cash items, non-cash charges related to stock-based compensation, and intangible asset impairment charges, as well as inclusion of EBITDA of acquired companies on a pro forma basis) for the past four fiscal quarters.

The Interest Coverage Ratio is Covenant EBITDA divided by ~~interest~~cash ~~expense~~payments ~~(excluding~~for ~~non-cash~~interest ~~charges)~~expense.

Our debt agreements contain cross-default provisions so that non-compliance with the covenants within one debt agreement that would give rise to the right to accelerate repayment of any outstanding indebtedness could cause a default under other debt agreements as well. Our ability to comply with these covenants and to meet and maintain the requisite financial ratios may be affected by events beyond our control. Borrowings under the Senior Credit Facility are subject to compliance with these covenants. The indentures governing the 5.25% Notes and the 5.50% Notes impose restrictions on us, including limitations on our ability to incur additional debt, enter into capital leases, grant liens, pay dividends and make certain other payments, sell assets, or merge or consolidate with or into another entity.

At December 31, ~~2016~~2017, we were in compliance with the covenants in all of our debt agreements.

Impact of the Restatement on Covenants

We entered into an extension agreement with our credit agreement lenders to extend, until June 30, 2017, the deadline under our credit agreement for filing with the Securities and Exchange Commission our Annual Report on Form 10-K for the

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fiscal year ended December 31, 2016 and Form 10-Q for the first quarter of 2017. As a result of this extension, we are in compliance with our financial covenants as of the date of this filing.

Share Repurchases

OnDuring ~~November 1,~~ 2016, ~~our~~the Board of Directors authorized an increase to the amount for repurchase of the Company's common stock to the lesser of $300 million or 4~~,000,000~~ million shares ~~and~~through ~~extended the repurchase period to~~ March 31, 2017. On February 27, 2017, the Board of Directors further increased the amount authorized for repurchase to $450 million, removed the share quantity limitation and extended the repurchase period through March 31, 2018. Under the authorized repurchase program, shares of our common stock may be purchased from time to time in the open market, subject to compliance with applicable laws and regulations and our debt covenants, depending upon market conditions and other factors. We repurchased 230,918 shares for $23 million during the year ended December 31, 2017, 1,570,333 shares for $124 million ~~during~~in the year ended December 31, 2016, and 1,008,445 shares for $76 million in the 2015 transition period. In connection with the Merger, the Company halted its share repurchase program.

InAuthorized ~~accordance~~repurchases of our shares are also subject to market conditions, our compliance with our debt covenants and the ~~Transaction~~limitations imposed by the Merger Agreement. ~~entered~~Our ~~into~~5.25% Senior Notes and 5.50% Senior Notes limit the aggregate sum of dividends, share repurchases and other designated restricted payments to an amount based on our net income, stock issuance proceeds and certain other items since April 281, ~~2014~~2001, less restricted payments made since that date. At December 31, 2017, the Senior Credit Facility allows us to make unlimited "restricted payments" (as defined in the Credit Agreement), which, among other items, allows payments for future share repurchases, as long as we ~~did~~maintain a certain amount of liquidity and maintain certain senior secured debt limits. When those requirements are not ~~repurchase~~met, ~~any~~the ~~outstanding~~limit ~~shares~~is ~~prior~~equal to ~~the~~$250 ~~closing~~million plus proceeds of any equity issuances plus 50% of net income since October 7, 2010. The Credit Agreement also prohibits dividend payments if loan defaults exist or the ~~Distribution~~financial ~~and~~covenants ~~Merger~~contained ~~during~~in ~~fiscal~~the ~~2015~~agreement are not met, subject to certain limited exceptions.

Authorized repurchases of our shares are subject to market conditions, our compliance with our debt covenants and the limitations imposed by the tax treatment of the Distribution and the related Tax Matters Agreement between us and Vista Outdoor. Our 5.25% Senior Notes and 5.50% Senior Notes limit the aggregate sum of dividends, share repurchases and other designated restricted payments to an amount based on our net income, stock issuance proceeds and certain other items since April 1, 2001, less restricted payments made since that date. At December 31, 2016, the Senior Credit Facility allows us to make unlimited "restricted payments" (as defined in the Credit Agreement), which, among other items, allows payments for future share repurchases, as long as we maintain a certain amount of liquidity and maintain certain senior secured debt limits. When those requirements are not met, the limit is equal to $250 million plus proceeds of any equity issuances plus 50% of net income since October 7, 2010. The Credit Agreement also prohibits dividend payments if loan defaults exist or the financial covenants contained in the agreement are not met, subject to certain limited exceptions. 47

Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations and commercial commitments at December 31, 2016:

	Total		1 Year		2 - 3 Years		4 - 5 Years		More than5 Years
Contractual obligations - by payment period:
Long-term debt	$	1,450	$	40	$	80	$	930	$	400
Interest on debt (1)	268		50		93		81		44
Operating leases	385		77		136		106		66
Environmental remediation costs, net	24		2		—		5		17
Pension and other postretirement plan contributions	514		36		156		191		131
Total contractual obligations, net	$	2,641	$	205	$	465	$	1,313	$	658
Other commercial commitments - by expiration period:
Letters of credit	$	182	$	75	$	43	$	28	$	36

(1) Includes interest on variable rate debt calculated based on the minimum required rate for LIBOR based loans under the Credit Agreement as of December 31, 2016. Variable rate debt was 52% of our total debt at December 31, 2016.

The total liability for uncertain tax positions at December 31, 2016 was $121 million (see Note 14, Income Taxes), $11 million of which could be paid within 12 months. We are not able to provide a reasonably reliable estimate of the timing of future payments relating to the noncurrent uncertain tax position obligations.

Pension plan contributions are an estimate of our minimum funding requirements through 2026 to provide pension benefits for employees based on expected actuarial estimated service accruals through 2026 pursuant to the Employee Retirement Income Security Act, although we may make additional discretionary contributions. These estimates may change significantly depending on the actual rate of return on plan assets, discount rates, discretionary pension contributions and regulations. A substantial portion of our Plan contributions are recoverable from the U.S. Government as allowable indirect contract costs at amounts generally equal to the pension plan contributions, although not necessarily in the same year the contribution is made.

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Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations and commercial commitments at December 31, 2017:



	Total		1 Year		2 - 3 Years		4 - 5 Years		More than 5 Years
Contractual obligations - by payment period:
Long-term debt	$	1,410	$	40	$	670	$	300	$	400
Interest on debt ⁽¹⁾	219		47		90		60		22
Operating leases	400		85		148		107		60
Environmental remediation costs, net	20		2		1		4		13
Purchase obligations ⁽²⁾	75		40		34		1		—
Pension and other postretirement plan contributions	302		11		152		92		47
Total contractual obligations, net	$	2,426	$	225	$	1,095	$	564	$	542
Other commercial commitments - by expiration period:
Letters of credit ⁽³⁾	$	240	$	74	$	116	$	40	$	10

_________________________________________


⁽¹⁾	Includes interest on variable rate debt calculated based on the minimum required rate for LIBOR based loans under the Credit Agreement as of December 31, 2017. Variable rate debt was 50% of our total debt at December 31, 2017.


⁽²⁾	Purchase obligations are comprised primarily of open purchase order commitments to suppliers, primarily for materials, in which the commitment is binding and specifies all the significant terms including fixed or minimum quantities to be purchased.


⁽³⁾	Approximately $24 million of standby letters of credit in the "1 Year" category are expected to renew for additional periods until completion of the contractual obligation.

The total liability for unrecognized tax benefits at December 31, 2017 was $137 million (see Note 14, Income Taxes) and it is reasonably possible that a $30 million reduction of the unrecognized tax benefit will occur in the next 12 months. We are not able to provide a reasonably reliable estimate of the timing of future payments relating to the noncurrent unrecognized tax benefits and therefore this amount is not included in the table above.

Pension plan contributions are an estimate of our minimum funding requirements through 2027 to provide pension benefits for employees based on expected actuarial estimated service accruals through 2027 pursuant to the Employee Retirement Income Security Act, although we may make additional discretionary contributions. These estimates may change significantly depending on the actual rate of return on plan assets, discount rates, discretionary pension contributions and regulations. A substantial portion of our Plan contributions are recoverable from the U.S. Government as allowable indirect contract costs at amounts generally equal to the pension plan contributions, although not necessarily in the same year the contribution is made.

Contingencies

Litigation. From time to time, we are subject to various legal proceedings, including lawsuits, which arise out of, and are incidental to, the conduct of our business. We do not consider any of such proceedings that are currently pending, individually or in the aggregate, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings in any particular quarter, to be material to our business or likely to result in a material adverse effect on our future operating results, financial condition or cash flows. See Item 3, "Legal Proceedings" and Note 16, Contingencies, to the consolidated financial statements in Item 8, "Financial Statements and Supplementary Data" of this report for additional information.

Environmental Liabilities. Our operations and ownership or use of real property are subject to a number of federal, state, and local environmental laws and regulations, as well as applicable foreign laws and regulations, including those for discharge of hazardous materials, remediation of contaminated sites and restoration of damage to the environment. At certain sites that we own or operate or formerly owned or operated, there is known or potential contamination that we are required to investigate or remediate. We could incur substantial costs, including remediation costs, resource restoration costs, fines and penalties, or third party property damage or personal injury claims, as a result of liabilities associated with past practices or violations of environmental laws or non-compliance with environmental permits.

The liability for environmental remediation represents management's best estimate of the present value of the probable and reasonably estimable costs related to known remediation obligations. The receivable represents the present value of the amount that we expect to recover. Both the liability and receivable have been discounted to reflect the present value of the expected future cash flows. We expect that a portion of the environmental compliance and remediation costs will be recoverable under U.S. Government contracts. Some of the remediation costs that are not recoverable from the U.S. Government that are associated with facilities purchased in a business acquisition may be covered by various indemnification agreements. There were no material insurance recoveries related to environmental remediation during any of the periods presented.48

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contamination that we are required to investigate or remediate. We could incur substantial costs, including remediation costs, resource restoration costs, fines and penalties, or third party property damage or personal injury claims, as a result of liabilities associated with past practices or violations of environmental laws or non-compliance with environmental permits.

The liability for environmental remediation represents management's best estimate of the probable and reasonably estimable costs related to known remediation obligations. The receivable represents the amount that we expect to recover. We expect that a portion of the environmental compliance and remediation costs will be recoverable under U.S. Government contracts. Some of the remediation costs that are not recoverable from the U.S. Government that are associated with facilities purchased in a business acquisition may be covered by various indemnification agreements. There were no material insurance recoveries related to environmental remediation during any of the periods presented.

Factors that could significantly change the estimates on environmental liabilities include:


•	the adoption, implementation and interpretation of new laws, regulations or cleanup standards,


•	advances in technologies,


•	outcomes of negotiations or litigation with regulatory authorities and other parties,


•	additional information about the ultimate remedy selected at new and existing sites,


•	adjustment of our share of the cost of such remedies,


•	changes in the extent and type of site utilization,


•	the discovery of new contamination,


•	the number of parties found liable at each site and their ability to pay,


•	more current estimates of liabilities for these contingencies, or


•	liabilities associated with resource restoration as a result of contamination from past practices.

See Note 16, Contingencies, to the consolidated financial statements in Item 8, "Financial Statements and Supplementary Data" of this report for additional information.

New Accounting Pronouncements

See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements in Item 8, "Financial Statements and Supplementary Data" of this report for discussion of new accounting pronouncements.

Inflation

In management's opinion, inflation has not had a significant impact upon the results of our operations. The selling prices under contracts, the majority of which are long term, generally include estimated costs to be incurred in future periods. These cost projections can generally be negotiated into new buys under fixed-price government contracts, while actual cost increases are recoverable on cost-type contracts.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk exposure primarily relates to changes in interest rates, foreign currency exchange rates and certain commodity prices. To mitigate the risks from interest rate exposure, we occasionally enter into hedging transactions, mainly interest rate swaps, through derivative financial instruments that have been authorized pursuant to corporate policies. We also use derivatives to hedge foreign currency exchange rates and commodity price risks, but do not use derivative financial instruments for trading or other speculative purposes, and we are not a party to leveraged financial instruments. Additional information regarding financial instruments is contained in ~~Notes~~Note 1, Summary of Significant Accounting Policies, and Note 3, Derivative Financial Instruments, to the consolidated financial statements.

Currently, our primary interest rate exposures relate to variable rate debt. We measure market risk related to changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in fair values, cash flows and earnings based on a hypothetical change (increase and decrease) in interest rates. We use current market rates on our debt portfolio to perform the sensitivity analysis. The potential change in fair values is based on an assumed immediate change in the net present values of interest rate-sensitive exposures resulting from a 100 basis point change in interest rates. The potential change in cash flows and earnings is based on the change in the net interest income/expense over a one-year period due to the change in rates. Based on our analysis, a 100 basis point change in interest rates would not have a material impact on the fair values or our results of operations or cash flows at December 31, 2017.

~~With~~We ~~respect~~use derivatives to hedge our ~~ammunition~~exposure ~~business,~~to wemarket ~~have~~risks afrom ~~strategic~~changes ~~sourcing~~in ~~and~~foreign ~~price~~currency ~~strategy~~exchange ~~to mitigate risk from commodity price fluctuation~~rates. We ~~will~~transact ~~continue~~business toglobally ~~evaluate~~and ~~the~~are ~~need~~subject ~~for~~to ~~future~~risks ~~price~~associated ~~changes~~with inchanging ~~light~~foreign ofcurrency ~~these~~exchange ~~trends,~~rates. ~~our~~Based ~~competitive~~on ~~landscape and~~ our ~~financial results. If commodity costs increase~~analysis, ~~and~~a if10 wepercent ~~are~~unfavorable ~~unable~~foreign toexchange ~~offset~~rate ~~these~~movement ~~increases~~would ~~with~~not ~~ongoing~~have ~~manufacturing~~a ~~efficiencies~~material ~~and~~impact ~~price~~on ~~increases,~~ our ~~future~~financial positions, results ~~from~~of operations ~~and~~or cash flows ~~would~~at beDecember ~~materially~~31, ~~impacted~~2017.

With respect to our ammunition business, we have a strategic sourcing and price strategy to mitigate risk from commodity price fluctuation. We will continue to evaluate the need for future price changes in light of these trends, our competitive landscape and our financial results. If commodity costs increase, and if we are unable to offset these increases with ongoing manufacturing efficiencies and price increases, our future results from operations and cash flows could be materially impacted.

Significant increases in commodities prices can negatively impact operating results with respect to our firm fixed-price contract to supply the DoD's small-caliber ammunition needs and our sales within commercial ammunition. Accordingly, we have entered into futures contracts in order to reduce the impact of metal price fluctuations. The majority of the impact has been mitigated on the contract with the U.S. Army by the terms within that contract. We have entered into futures contracts and purchase orders for the current expected production requirements for both the small-caliber ammunition supply contract and the production of commercial ammunition, thereby mitigating near term market risk; however, if metal prices exceed pre-determined levels, Defense Systems Group's operating results could be adversely impacted.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Orbital ATK, Inc.

InOpinions our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income (loss), of equity, and of cash flows for the year ended December 31, 2016 and for the nine months ended December 31, 2015 present fairly, in all material respects, the financial position of Orbital ATK, Inc. and its subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for the year ended December 31, 2016 and for the nine months ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on ~~criteria established in Internal Control - Integrated Framework (2013) issued by~~ the ~~Committee~~Financial ofStatements Sponsoring Organizations of the Treadway Commission (COSO) because material weaknesses in internal control over financial reporting existed as of that date related to (i) an ineffective control environment, as the Company did not establish and maintain accounting policies and procedures related to complex transactions, (ii) not maintaining a sufficient complement of personnel with appropriate levels of accounting and controls knowledge, experience, and training, (iii) not maintaining controls over the integration of accounting operations of combined businesses including the preparation, analysis and review of accounts, (iv) an ineffective control environment at its Defense Systems Group and its Small Caliber Systems Division, and (v) not designing and maintaining controls at the Small Caliber Systems Division related to the preparation, review and approval of costs incurred and contract estimates used to determine revenue recognition. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2016 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

AsWe ~~discussed~~have inaudited ~~Note~~the 1accompanying toconsolidated ~~the~~balance ~~consolidated~~sheet ~~financial~~of ~~statements~~Orbital ATK, Inc. and subsidiaries (the "Company") ~~changed~~as of December 31, 2017, the ~~date~~related onconsolidated ~~which~~statements itof ~~conducts~~operations, ~~its~~comprehensive ~~annual~~income, ~~goodwill~~equity, ~~impairment~~and ~~test~~cash flows, for the year ended December 31, 2017, and the ~~manner~~related innotes ~~which~~(collectively itreferred ~~classifies~~to ~~debt~~as ~~issue~~the ~~costs~~"financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in ~~2016~~Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

AIn ~~company’s~~our ~~internal~~opinion, ~~control~~the ~~over~~ financial ~~reporting~~statements isreferred ato ~~process~~above ~~designed~~present tofairly, ~~provide~~in ~~reasonable~~all ~~assurance~~material ~~regarding~~respects, the ~~reliability of~~ financial ~~reporting~~position ~~and the preparation~~ of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the ~~maintenance~~Company as of ~~records~~December ~~that~~31, ~~in reasonable detail~~2017, ~~accurately~~ and ~~fairly reflect~~ the ~~transactions~~results ~~and dispositions~~ of ~~the~~its ~~assets~~operations ofand ~~the~~its ~~company;~~cash ~~(ii) provide~~flows ~~reasonable~~for ~~assurance~~the ~~that~~period ~~transactions~~ended ~~are~~December ~~recorded~~31, as2017, ~~necessary to permit preparation of financial statements~~ in ~~accordance~~conformity with ~~generally accepted~~ accounting principles, ~~and~~generally ~~that~~accepted ~~receipts~~in ~~and expenditures of~~ the ~~company~~United ~~are~~States ~~being~~of ~~made~~America. ~~only~~Also, in ~~accordance~~our ~~with~~opinion, ~~authorizations~~the ofCompany ~~management~~maintained, ~~and~~in ~~directors~~all ofmaterial ~~the~~respects, ~~company;~~effective ~~and~~internal ~~(iii) provide~~control ~~reasonable~~over ~~assurance~~financial ~~regarding~~reporting ~~prevention~~as ~~or timely detection~~ of ~~unauthorized~~December ~~acquisition~~31, ~~use~~2017, orbased ~~disposition~~on ofcriteria ~~the~~established ~~company’s~~in ~~assets~~Internal ~~that~~Control ~~could~~- ~~have~~Integrated aFramework ~~material~~(2013) ~~effect~~issued onby ~~the financial statements~~COSO.

47Basis for Opinions

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable

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assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ ~~PricewaterhouseCoopers~~DELOITTE & TOUCHE LLP

McLean, Virginia

~~April~~February 2821, ~~2017~~2018

48We have served as the Company's auditor since 2017.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Orbital ATK, Inc.:

WeIn ~~have~~our ~~audited~~opinion, the ~~accompanying~~consolidated balance sheet as of December 31, 2016 and the related consolidated statements of operations, of comprehensive income, ~~(loss)~~of equity, and of cash flows for the year ended December 31, 2016 and ~~equity~~for the nine months ended December 31, 2015 present fairly, in all material respects, the financial position of Orbital ATK, Inc. and its subsidiaries (as of December 31, 2016, and the ~~"Company")~~results of their operations and their cash flows for the year ended ~~March~~December 31, 2016 and for the nine months ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

We/s/ ~~conducted~~PricewaterhouseCoopers our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.LLP

In our opinion, such consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of Orbital ATK, Inc. and subsidiaries for the year ended March 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the accompanying financial statements have been restated to correct misstatements.

/s/ DELOITTE & TOUCHE LLP

McLean, Virginia

~~May~~April 2928, ~~2015 (February 23,~~ 2017 ~~as to the effects of the restatement discussed in Note 1)~~

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ORBITAL ATK, INC.

CONSOLIDATED BALANCE SHEETS



	As of December 31,
(Amounts in millions, except share data)	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	346		$	200
Net receivables	1,893			1,741
Net inventories	221			215
Other current assets	82			79
Total current assets	2,542			2,235
Net property, plant and equipment	934			816
Goodwill	1,832			1,832
Net intangibles	61			98
Deferred income taxes	155			254
Other noncurrent assets	142			183
Total assets	$	5,666		$	5,418
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	40		$	40
Accounts payable	216			175
Contract-related liabilities	375			394
Contract loss reserve	152			197
Contract advances and allowances	330			233
Accrued compensation	137			120
Other current liabilities	210			183
Total current liabilities	1,460			1,342
Long-term debt	1,361			1,398
Pension and postemployment benefits	693			744
Other noncurrent liabilities	107			117
Total liabilities	3,621			3,601
Commitments and contingencies (Notes 13, 15 and 16)
Stockholders' Equity
Common stock—$.01 par value: authorized—180,000,000 shares; issued and outstanding— 57,686,214 shares held at December 31, 2017 and 57,487,466 shares held at December 31, 2016	1			1
Additional paid-in-capital	2,175			2,175
Retained earnings	1,502			1,266
Accumulated other comprehensive loss	(780		)	(764		)
Common stock in treasury, at cost— 11,248,810 shares held at December 31, 2017 and 11,447,558 shares held at December 31, 2016	(864		)	(872		)
Total Orbital ATK, Inc. stockholders' equity	2,034			1,806
Noncontrolling interest	11			11
Total equity	2,045			1,817
Total liabilities and equity	$	5,666		$	5,418

See Notes to the Consolidated Financial Statements.

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ORBITAL ATK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in millions, except per share data)	Year Ended December 31, ~~2016~~2017			~~Nine~~Year ~~Months~~ Ended December 31, ~~2015~~2016			~~Year~~Nine Months Ended ~~March~~December 31, 2015
Sales	$	4,~~455~~764		$	34,~~391~~455		$	3,~~113~~391
Cost of sales	3,~~470~~699			23,~~717~~470			2,~~412~~717
Gross profit	~~985~~1,065			~~674~~985			~~701~~674
Operating expenses:
Research and development	~~116~~115			83116			4983
Selling	~~107~~115			88107			9088
General and administrative	~~290~~306			~~220~~290			~~305~~220
Goodwill impairment	—			—			34
Gain on settlement	—			—			50
Gain on settlement	—			50			—
Income from continuing operations, before interest, income taxes and noncontrolling interest	529			472			333
Income (loss) from continuing operations, before interest, income taxes and noncontrolling interest	472			333			223
Interest expense, net	(67		)	(68		)	(61		)
Interest expense, net	(68		)	(61		)	(89		)
Income from continuing operations, before income taxes and noncontrolling interest	462			404			272
Loss on extinguishment of debt	—			—			(27		)
Income taxes	152			111			87
Income (loss) from continuing operations, before income taxes and noncontrolling interest	404			272			107
Income from continuing operations, before noncontrolling interest	310			293			185
Income taxes	111			87			37
Income (loss) from continuing operations, before noncontrolling interest	293			185			70
Less net income attributable to noncontrolling interest	—			—			—
Income (loss) from continuing operations of Orbital ATK, Inc.	293			185			70
Income from continuing operations of Orbital ATK, Inc.	310			293			185
Discontinued operations:
Income from discontinued operations, before income taxes	—			—			~~205~~—
Income taxes	—			(1—		)	80(1		)
Income from discontinued operations	—			1—			~~125~~1
Net income attributable to Orbital ATK, Inc.	$	~~293~~310		$	~~186~~293		$	~~195~~186
Basic earnings (loss) per common share from:
Basic earnings per common share from:
Continuing operations	$	5.0539		$	35.1205		$	13.9612
Discontinued operations	—			~~0.02~~—			30.5302
Net income attributable to Orbital ATK, Inc.	$	5.0539		$	35.1405		$	53.4914
Weighted-average number of common shares outstanding	5857			5958			3559
Diluted earnings (loss) per common share from:
Diluted earnings per common share from:
Continuing operations	$	5.0134		$	35.0901		$	13.9309
Discontinued operations	—			~~0.02~~—			30.4602
Net income attributable to Orbital ATK, Inc.	$	5.0134		$	35.1101		$	53.3911
Weighted-average number of diluted common shares outstanding	58			6058			3660
Cash dividends per common share	$	1.2028		$	01.7820		$	10.2878

Note: earnings per share amounts may not recalculate due to rounding.

See Notes to the Consolidated Financial Statements.

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ORBITAL ATK, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ~~(LOSS)~~

(Amounts in millions, except per share data)	Year Ended December 31, 2016			Nine Months Ended December 31, 2015			Year Ended March 31, 2015
(Amounts in millions)	Year Ended December 31, 2017			Year Ended December 31, 2016			Nine Months Ended December 31, 2015
Net income (loss)	$	293		$	186		$	195
Net income	$	310		$	293		$	186
Other comprehensive income
Other comprehensive (loss) income
Pension and other postretirement benefits:
Prior service credits for pension and postretirement benefit plans recorded to net income	(27		)	(21		)	(30		)
Prior service credits for pension and postretirement benefit plans recorded to net income, net of taxes of $10, $10 and $8, respectively	(17		)	(17		)	(13		)
Net actuarial loss for pension and postretirement benefit plans recorded to net income	127			114			22
Net actuarial loss for pension and postretirement benefit plans recorded to net income, net of taxes of$(51), $(48) and $(44), respectively	82			79			70
Valuation adjustment for pension and postretirement benefit plans	(79		)	8			(364		)
Valuation adjustment for pension and postretirement benefit plans, net of taxes of $28, $30 and $(3), respectively	(83		)	(49		)	5
Change in fair value of derivatives	12			(2		)	5
Change in derivatives, net of taxes of $(1), $(4) and $1, respectively	2			8			(1		)
Other	2			1			—
Other, net of taxes of $0, $(1) and $0, respectively	—			1			1
Realization of cumulative translation adjustment	—			—			(37		)
Other comprehensive (loss) income, net of tax	(16		)	22			62
Income tax expense (benefit)	(13		)	(38		)	141
Comprehensive income attributable to Orbital ATK, Inc.	294			315			248
Other comprehensive income (loss), net of tax	22			62			(263		)
Comprehensive income (loss)	315			248			(68		)
Comprehensive income attributable to non-controlling interests in Orbital ATK, Inc.	—			—			—
Comprehensive income (loss) attributable to Orbital ATK, Inc.	$	315		$	248		$	(68	)

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ORBITAL ATK, INC.

	As of December 31,
(Amounts in millions, except share data)	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	200		$	104
Net receivables	1,741			1,671
Net inventories	215			213
Income taxes receivable	—			51
Other current assets	79			90
Total current assets	2,235			2,129
Net property, plant and equipment	816			762
Goodwill	1,832			1,828
Net intangibles	98			147
Deferred income taxes	254			319
Other noncurrent assets	183			139
Total assets	$	5,418		$	5,324
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	40		$	40
Accounts payable	175			131
Contract-related liabilities	394			381
Contract loss reserve	197			236
Contract advances and allowances	233			172
Accrued compensation	120			128
Other current liabilities	183			166
Total current liabilities	1,342			1,254
Long-term debt	1,398			1,436
Pension and postemployment benefits	744			821
Other noncurrent liabilities	117			127
Total liabilities	3,601			3,638
Commitments and contingencies (Notes 13, 15 and 16)
Stockholders' Equity
Common stock—$.01 par value: authorized—180,000,000 shares; issued and outstanding— 57,487,466 shares held at December 31, 2016 and 58,729,995 shares held at December 31, 2015	1			1
Additional paid-in-capital	2,175			2,188
Retained earnings	1,266			1,043
Accumulated other comprehensive loss	(764		)	(786		)
Common stock in treasury, at cost— 11,447,558 shares held at December 31, 2016 and 10,205,029 shares held at December 31, 2015	(872		)	(771		)
Total Orbital ATK, Inc. stockholders' equity	1,806			1,675
Noncontrolling interest	11			11
Total equity	1,817			1,686
Total liabilities and equity	$	5,418		$	5,324

See Notes to the Consolidated Financial Statements.

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ORBITAL ATK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	~~Year Ended~~	Year Ended			~~Nine Months Ended~~	Year Ended			~~Year Ended~~	Nine Months Ended
(Amounts in millions)	~~December 31, 2016~~	December 31, 2017			~~December 31, 2015~~	December 31, 2016			~~March 31, 2015~~	December 31, 2015
Operating Activities
Continuing operations:
Net income	$	~~293~~$	310		$	~~186~~$	293		$	~~195~~$	186
Net income from discontinued operations	—	—			(1	—	)		~~(125~~	(1	)	)
Income from continuing operations	~~293~~	310			~~185~~	293			70	185
Adjustments to reconcile income from continuing operations to cash provided by operating activities of continuing operations:
Depreciation	~~116~~	118			89	116			73	89
Amortization of intangible assets	43	37			33	43			9	33
Amortization of debt discount	—				—				3
Amortization and write-off of deferred financing costs		2				2				13
Amortization and write-off of deferred financing costs	2				13				5
Fixed asset impairment		8				10				8
Goodwill impairment	—				—				34
Deferred income taxes		68				42				58
Fixed asset impairment	10				8				17
Loss on disposal of property		2				6				11
Loss on the extinguishment of debt	—				—				27
Share-based plans expense		23				21				19
Deferred income taxes	42				58				12
Excess tax benefits from share-based plans		—				—				(5		)
Loss on disposal of property	6				11				2
Other		5				4				—
Share-based plans expense	21				19				25
Changes in assets and liabilities:
Excess tax benefits from share-based plans	—				(5		)		(7		)
Net receivables		(122		)		(88		)		17
Other	4				—				—
Net inventories		18				(9		)		(16		)
Changes in assets and liabilities:
Income taxes receivable		—				50				(19		)
Net receivables	(88		)		17				10
Accounts payable		10				38				(29		)
Net inventories	(9		)		(16		)		14
Contract advances and allowances		97				61				(1		)
Income taxes receivable	50				(19		)		(31		)
Contract loss reserve		(45		)		(26		)		(27		)
Accounts payable	38				(29		)		56
Accrued compensation		18				(5		)		(10		)
Contract advances and allowances	61				(1		)		(6		)
Contract-related liabilities		(19		)		39				(19		)
Contract loss reserve	(26		)		(27		)		(74		)
Pension and postemployment benefits		(57		)		(71		)		(4		)
Accrued compensation	(5		)		(10		)		(31		)
Other assets and liabilities		47				(7		)		—
Contract-related liabilities	39				(19		)		95
Cash provided by operating activities of continuing operations		520				519				303
Pension and postemployment benefits	(71		)		(4		)		(42		)
Cash provided by operating activities of discontinued operations		—				—				—
Other assets and liabilities	(7		)		—				(70		)
Cash provided by operating activities		520				519				303
Cash provided by operating activities of continuing operations	519				303				191
Investing Activities
Cash provided by operating activities of discontinued operations	—				—				120
Capital expenditures		(245		)		(187		)		(105		)
Cash provided by operating activities	519				303				311
Cash dividend (refunded to) Vista Outdoor, net of cash transferred to Vista Outdoor in conjunction with the Distribution of Sporting Group		—				—				(6		)
Investing Activities
Proceeds from the disposition of property, plant and equipment		—				4				—
Continuing operations:
Cash used in investing activities		(245		)		(183		)		(111		)
Capital expenditures	(187		)		(105		)		(113		)
Financing Activities
Cash acquired in Merger with Orbital	—				—				254
Credit facility borrowings		505				930				745
Cash dividend (refunded to) received from Vista Outdoor, net of cash transferred to Vista Outdoor in conjunction with the Distribution of Sporting Group	—				(6		)		189
Credit facility payments		(505		)		(930		)		(745		)
Proceeds from the disposition of property, plant and equipment	4				—				2
Payments made on bank debt		(40		)		(40		)		(25		)
Cash (used in) provided by investing activities of continuing operations	(183		)		(111		)		332
Payments made to extinguish debt		—				—				(1,274		)
Cash used in investing activities of discontinued operations	—				—				(31		)
Proceeds from issuance of long-term debt		—				—				1,200
Cash (used in) provided by investing activities	(183		)		(111		)		301
Payments made for debt issuance costs		—				—				(10		)
Financing Activities
Purchase of treasury shares		(32		)		(134		)		(81		)
Continuing operations:
Dividends paid		(74		)		(70		)		(46		)
Credit facility borrowings	930				745				878
Proceeds from employee stock compensation plans		17				4				4
Credit facility payments	(930		)		(745		)		(878		)
Excess tax benefits from share-based plans		—				—				5
Payments made on bank debt	(40		)		(25		)		(58		)
Cash used in financing activities		(129		)		(240		)		(227		)
Payments made to extinguish debt	—				(1,274		)		(777		)
Proceeds from issuance of long-term debt	—				1,200				150
Payments made for debt issue costs	—				(10		)		(1		)

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Purchase of treasury shares	(134		)	(81		)	(17		)
Increase (decrease) in cash and cash equivalents		146			96			(35		)
Dividends paid	(70		)	(46		)	(41		)
Cash and cash equivalents at beginning of period		200			104			139
Proceeds from employee stock compensation plans	4			4			—
Cash and cash equivalents at end of period		$	346		$	200		$	104
Excess tax benefits from share-based plans	—			5			7
Supplemental Cash Flow Disclosures
Cash used in financing activities of continuing operations	(240		)	(227		)	(737		)
Cash paid for interest, net		$	60		$	62		$	41
Effect of foreign currency exchange rate fluctuations on cash	—			—			(3		)
Cash paid for income taxes, net		$	24		$	36		$	26
Increase (Decrease) in cash and cash equivalents	96			(35		)	(128		)
Noncash investing activity:
Cash and cash equivalents at beginning of period	104			139			267
Capital expenditures included in accounts payable of continuing operations		$	12		$	7		$	5
Cash and cash equivalents at end of period	$	200		$	104		$	139
Supplemental Cash Flow Disclosures
Cash paid for interest, net	$	62		$	41		$	78
Cash paid for income taxes, net	$	36		$	26		$	143
Noncash financing activity:
Issuance of shares for noncash assets and liabilities of Orbital	$	—		$	—		$	1,504
Noncash investing activity:
Capital expenditures included in accounts payable of continuing operations	$	7		$	5		$	3

See Notes to the Consolidated Financial Statements.

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ORBITAL ATK, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Amounts in millions except share data)	Common Stock $.01 Par Value				AdditionalPaid-in-capital			RetainedEarnings			AccumulatedOtherComprehensive Loss			TreasuryStock			NoncontrollingInterest		TotalEquity
	Shares		Amount
Balance, March 31, 2014	31,842,642		$	1	$	534		$	2,544		$	(681	)	$	(732	)	$	11	$	1,677
Balance, March 31, 2015	59,427,942		$	1	$	2,182		$	894		$	(848	)	$	(719	)	$	11	$	1,521
Comprehensive income (loss)	—		—		—			195			(263		)	—			—		(68		)
Restricted stock grants	128,316		—		(11		)	—			—			11			—		—
Share-based compensation	—		—		25			—			—			—			—		25
Shares issued net of treasury stock withheld	150,658		—		(19		)	—			—			9			—		(10		)
Tax benefit related to share based plans and other	—		—		6			—			—			—			—		6
Dividends	—		—		—			(57		)	—			—			—		(57		)
Employee benefit plans and other	(73,179	)	—		1			—			—			(7		)	—		(6		)
Convertible debt premium, net of tax of $43	20,678		—		(112		)	—			—			—			—		(112		)
Distribution of Sporting Group	—		—		—			(1,788		)	96			—			—		(1,692		)
Merger with Orbital	27,358,827		—		1,758			—			—			—			—		1,758
Balance, March 31, 2015	59,427,942		1		2,182			894			(848		)	(719		)	11		1,521
Comprehensive income	—		—		—			186			62			—			—		248
Exercise of stock options	121,477		—		(5		)	—			—			9			—		4
Restricted stock grants	67,529		—		(7		)	—			—			7			—		—
Share-based compensation	—		—		20			—			—			—			—		20
Treasury stock purchased	(1,008,445	)	—		—			—			—			(76		)	—		(76		)
Shares issued net of treasury stock withheld	125,717		—		(15		)	—			—			10			—		(5		)
Tax benefit related to share based plans and other	—		—		11			—			—			—			—		11
Distribution of Sporting Group	—		—		—			(6		)	—			—			—		(6		)
Dividends	—		—		—			(31		)	—			—			—		(31		)
Employee benefit plans and other	(4,225	)	—		2			—			—			(2		)	—		—
Balance, December 31, 2015	58,729,995		1		2,188			1,043			(786		)	(771		)	11		1,686
Comprehensive income	—		—		—			293			22			—			—		315
Exercise of stock options	32,175		—		(2		)	—			—			2			—		—
Restricted stock grants	176,800		—		(13		)	—			—			13			—		—
Share-based compensation	—		—		21			—			—			—			—		21
Treasury stock purchased	(1,570,333	)	—		—			—			—			(124		)	—		(124		)
Shares issued net of treasury stock withheld	172,582		—		(16		)	—			—			12			—		(4		)
Tax adjustments and benefit related to share based plans	—		—		(4		)	—			—			—			—		(4		)
Tax benefit related to share based plans and other	—		—		(4		)	—			—			—			—		(4		)
Dividends	—		—		—			(70		)	—			—			—		(70		)
Employee benefit plans and other	(53,753	)	—		1			—			—			(4		)	—		(3		)
Balance, December 31, 2016	57,487,466		$1	1	$2,175	~~2,175~~		$1,266	~~1,266~~		$(764	~~(764~~	)	$(872	~~(872~~	)	$11	11	$1,817	~~1,817~~
Comprehensive income	—		—		—			310			(16		)	—			—		294
Exercise of stock options	84,544		—		(3		)	—			—			6			—		3
Restricted stock grants	156,675		—		(12		)	—			—			12			—		—
Share-based compensation	—		—		23			—			—			—			—		23
Treasury stock purchased	(230,918	)	—		—			—			—			(23		)	—		(23		)
Shares issued net of treasury stock withheld	247,977		—		(8		)	—			—			18			—		10
Dividends	—		—		—			(74		)	—			—			—		(74		)
Employee benefit plans and other	(59,530	)	—		—			—			—			(5		)	—		(5		)
Balance, December 31, 2017	57,686,214		$	1	$	2,175		$	1,502		$	(780	)	$	(864	)	$	11	$	2,045

See Notes to the Consolidated Financial Statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in millions except share and per share data and unless otherwise indicated)

1. Summary of Significant Accounting Policies

Nature of Operations. Orbital ATK, Inc. (the "Company") is an aerospace and defense systems company and supplier of related products to the U.S. Government, allied nations and prime contractors. The Company is headquartered in Dulles, Virginia and has operating locations throughout the United States. The Company was incorporated in Delaware in 1990.

On February 9, 2015, the Company completed a tax-free spin-off of and distribution (the "Distribution") of its former Sporting Group to its stockholders ~~(the "Distribution")~~ as a new public company called Vista Outdoor Inc. ("Vista Outdoor"). Immediately following the Distribution, the Company combined with Orbital Sciences Corporation ("Orbital") through the merger of a ~~Company~~company subsidiary with Orbital (the "Orbital-ATK Merger"). ~~These~~As ~~transactions~~a ~~are~~result ~~discussed~~of ~~in greater detail in Note 4, Merger and Divestiture. Following~~ the Distribution ~~and Merger~~, the ~~Company~~Sporting ~~changed~~Group ~~its~~is ~~name~~reported ~~from~~as ~~Alliant~~a ~~Techsystems~~discontinued ~~Inc.~~operation tofor ~~Orbital~~all ~~ATK,~~prior ~~Inc~~periods presented.

AsBasis ~~a result~~ of ~~the Distribution, the Sporting Group is reported as a discontinued operation for all prior periods presented~~Presentation. The ~~Company~~consolidated ~~used~~financial ~~the~~statements ~~acquisition method to account for the Merger; accordingly, the results~~ of ~~Orbital are included in~~ the Company's ~~consolidated~~include ~~financial~~all ~~statements~~majority-owned ~~since~~affiliates. ~~the~~Intercompany ~~date~~transactions ofand ~~the~~accounts ~~Merger~~have been eliminated.

~~Basis~~Fiscal ~~of Presentation~~Year. ~~The~~ Beginning ~~consolidated~~January ~~financial~~1, ~~statements~~2016, of the Company ~~include~~changed ~~all~~its ~~majority-owned~~fiscal ~~affiliates.~~year ~~Intercompany~~from ~~transactions~~the ~~and~~period ~~accounts~~beginning ~~have~~on ~~been~~April ~~eliminated.~~1 ~~The~~and ~~business~~ending ~~formerly~~on ~~comprising~~March ~~Sporting~~31 ~~Group~~to ~~is presented as discontinued operations - See Note 4. Certain amounts in~~ the ~~prior~~period ~~year~~beginning ~~financial~~on ~~statements~~January ~~have~~1 ~~been~~and ~~reclassified~~ending toon ~~conform~~December to31. ~~the~~As ~~current~~a ~~year presentation~~result, ~~specifically~~for ~~"Postretirement~~the ~~and~~fiscal ~~postemployment~~period ~~benefits"~~ended ~~was~~December ~~aggregated~~31, ~~into~~2015, ~~"Pension~~in ~~and~~these ~~postemployment~~consolidated ~~benefits"~~statements, inincluding the ~~Company's~~notes ~~consolidated~~thereto, ~~balance~~the ~~sheets. The consolidated~~ financial ~~statements~~results are for ~~the~~a nine-month transition period ended December 31, 2015 ("2015 transition period"). ~~and~~Audited ~~the~~results ~~fiscal~~for the year ended ~~March~~December 31, ~~2015~~2017 ~~(see below for discussion of fiscal year) were previously restated~~ and ~~included~~2016 inare ~~Amendment No. 1 to the Company’s Transition Report on Form 10-K/A~~ for ~~the~~a ~~nine~~twelve-month period ~~ending December 31, 2015 filed with the Securities and Exchange Commission on February 24, 2017~~.

~~Fiscal~~Use ~~Year. Beginning~~of ~~January 1, 2016, the Company changed its fiscal year from the period beginning on April 1 and ending on March 31 to the period beginning on January 1 and ending on December 31~~Estimates. The Aspreparation aof ~~result, for the previous fiscal period ended December 31, 2015, in these~~ consolidated ~~statements, including the notes thereto, the~~ financial ~~results~~statements ~~are~~in ~~for~~conformity awith ~~nine-month transition period ended December 31, 2015~~U.S. ~~Audited~~generally ~~results~~accepted ~~for~~accounting ~~the~~principles ~~twelve~~requires ~~months~~("GAAP") ~~ended~~management ~~December~~to ~~31,~~make ~~2016~~estimates and ~~March~~assumptions ~~31,~~that ~~2015~~affect ~~are~~amounts ~~for~~reported ~~a twelve-month period~~therein. ~~All~~Due ~~references herein~~ to athe ~~fiscal~~inherent ~~year~~uncertainty ~~prior~~involved toin ~~December~~making 31estimates, ~~2015~~actual ~~refer~~results toreported ~~the~~in ~~twelve~~future ~~months~~periods ~~ended~~may ~~March~~differ 31from ofthose ~~such year~~estimates.

Use of Estimates. The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ from those estimates.

Revenue Recognition. The Company's sales come primarily from contracts with agencies of the U.S. Government and its prime contractors and subcontractors. The various U.S. Government customers, including the U.S. Navy, U.S. Army, NASA and the U.S. Air Force, make independent purchasing decisions. Consequently, each agency is regarded as a separate customer.

Contracts — Substantially all of the Company's sales are accounted for as long-term contracts. Sales under long-term contracts are accounted for under the percentage-of-completion method and include cost-plus and fixed-price contracts. Sales under cost-plus contracts are recognized as costs are incurred. Sales under fixed-price contracts are either recognized as the actual cost of work performed relates to the estimate at completion ("cost-to-cost") or based on results achieved, which usually coincides with customer acceptance ("units-of-delivery"). The majority of the Company's total revenue is accounted for using the cost-to-cost method of accounting.

Profits expected to be realized on contracts are based on management's estimates of total contract sales value and costs at completion. Estimated amounts for contract changes, including scope and claims, are included in contract sales only when realization is estimated to be probable. Assumptions used for recording sales and earnings are adjusted in the period of change to reflect revisions in contract value and estimated costs that include an allocation of overhead costs. In the period in which it is determined that a loss will be incurred on a contract, the entire amount of the estimated loss, based on gross profit along with general and administrative costs, is charged to cost of sales. Changes in estimates of contract sales, costs or profits are recognized using the cumulative catch-up method of accounting. The cumulative effect of a change in estimate is recognized in the period a change in estimate occurs. The effect of the changes on future periods of contract performance is recognized as if the revised estimate had been used since contract inception or, in the case of contracts acquired in business combinations, from the date of acquisition.

56Changes in contract estimates occur for a variety of reasons including changes in contract scope, unforeseen changes in contract cost estimates due to unanticipated cost growth or risks affecting contract costs and/or the resolution of contract risks at lower costs than anticipated, termination of commercial contracts in the event of a lack of end user demand, as well as changes in contract overhead costs over the performance period. Changes in estimates could have a material effect on the Company's consolidated financial position or results of operations.

Generally, favorable changes in contract estimates recognized using the cumulative catch-up method of accounting represent margin improvement on programs where either estimated cost at completion was lower than previously

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Changes~~estimated inor ~~contract estimates occur for~~ a ~~variety~~change ~~of reasons including changes~~ in contract scope, ~~unforeseen~~on ~~changes~~a inprogram ~~contract~~caused ~~cost~~a ~~estimates~~higher ~~due~~profit torate. ~~unanticipated cost growth or risks affecting contract costs and/or the resolution of contract risks at lower costs than anticipated~~Conversely, ~~termination of commercial contracts in~~ the ~~event~~unfavorable ~~of a lack of end user demand, as well as~~ changes in contract ~~overhead~~estimates ~~costs~~represent ~~over~~margin ~~the~~declines ~~performance~~on ~~period.~~programs ~~Changes~~where ineither ~~estimates~~estimated ~~could~~cost ~~have~~at acompletion ~~material~~was ~~effect~~higher onthan ~~the~~previously ~~Company's~~estimated ~~consolidated financial position~~ or ~~annual~~a ~~results~~change ~~of operations. Aggregate net changes~~ in contract ~~estimates~~scope recognized using the cumulative catch-up method of accounting increased operating income by approximately $81 million for the year ended December 31, 2016, approximately $38 million in the 2015 transition period, and approximately $92 million in fiscal 2015. Estimated costs to complete on ~~loss~~a ~~contracts~~program atcaused ~~December~~a ~~31,~~lower ~~2016~~profit ~~and 2015 are $1,333 million and $1,392 million, respectively~~rate.

Aggregate net changes in contract estimates recognized increased income before income taxes and noncontrolling interest by approximately $105 million ($1.22 per diluted share) for the year ended December 31, 2017, approximately $81 million ($1.00 per diluted share) for the year ended December 31, 2016, and approximately $38 million ($0.43 per diluted share) in the 2015 transition period. Estimated costs to complete on loss contracts at December 31, 2017 and 2016 are $1,108 million and $1,333 million, respectively.

Operating Expenses. Research and development, selling and general and administrative costs are expensed in the period incurred. Research and development ("R&D") costs include costs incurred for experimentation and design testing. Company-funded R&D is primarily for the improvement of current products and for development of next-generation technology. Customer-funded R&D is comprised primarily of activities we conduct under contracts with the U.S. Government and its prime contractors. Selling costs include bid and proposal efforts related to products and services. Costs that are incurred pursuant to contractual arrangements are recorded over the period that revenue is recognized, consistent with the Company's contract accounting policy.

Environmental Remediation and Compliance. Costs associated with environmental compliance, restoration and preventing future contamination that are estimable and probable are accrued and expensed, or capitalized as appropriate. Expected remediation, restoration and monitoring costs relating to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are accrued and expensed in the period that such costs become estimable. Liabilities are recognized for remedial and resource restoration activities when they are probable and the cost can be reasonably estimated. The Company expects that a portion of its environmental remediation costs will be recoverable under U.S. Government contracts and has recorded a receivable equal to the ~~present value of the~~ amounts the Company expects to recover.

The Company's engineering, financial and legal specialists estimate, based on current law and existing technologies, the cost of each environmental liability. Such estimates are based primarily upon the estimated cost of investigation and remediation required and the likelihood that other potentially responsible parties ("PRPs") will be able to fulfill their commitments at the sites where the Company may be jointly and severally liable. The Company's estimates for environmental obligations are dependent on, and affected by, the nature and extent of historical information and physical data relating to a contaminated site, the complexity of the site, methods of remediation available, the technology that will be required, the outcome of discussions with regulatory agencies and other PRPs at multi-party sites, the number and financial viability of other PRPs, changes in environmental laws and regulations, future technological developments, and the timing of expenditures; accordingly, the Company periodically evaluates and revises such estimates based on expenditures against established reserves and the availability of additional information.

Cash Equivalents. Cash equivalents are all highly liquid cash investments purchased with original maturities of three months or less.

Marketable Securities. Investments in a common collective trust that primarily invests in fixed income securities are classified as available-for-sale securities and are recorded at fair value within other ~~current assets and deferred charges and other~~ noncurrent assets on the consolidated balance sheet. Unrealized gains and losses are recorded in other comprehensive ~~(loss)~~ income ("OCI"). When such investments are sold, the unrealized gains or losses are reversed from OCI and recognized in the consolidated income statement.

Net Inventories. Inventories are stated at the lower of cost or market. Inventoried costs relating to contracts in progress are stated at actual production costs, including factory overhead, initial tooling and other related costs incurred to date, reduced by amounts associated with recognized sales. Recorded amounts for raw materials, work in process and finished goods are generally determined using the average cost method.61

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Net ~~Property~~Inventories. Inventories are stated at the lower of cost or market. Inventoried costs relating to contracts in progress are stated at actual production costs, ~~Plant~~including factory overhead, initial tooling and ~~Equipment~~other related costs incurred to date, reduced by amounts associated with recognized sales. Recorded amounts for raw materials, work in process and finished goods are generally determined using the average cost method.

Net Property, Plant and Equipment. Property, plant and equipment is stated at cost and depreciated over estimated useful lives. Machinery and equipment is depreciated using the double declining balance method at most of the Company's facilities, and using the straight-line method at other Company facilities. Other depreciable property is depreciated using the straight-line method. Machinery and equipment is depreciated over 1 to 30 years and buildings and improvements is depreciated over 1 to 45 years. Leasehold improvements are depreciated over the shorter of the useful life of the asset or the length of the lease.

Property, plant and equipment is reviewed for impairment when indicators of potential impairment are present. When such impairment is identified, it is recorded as a loss in that period. Maintenance and repairs are charged to expense as incurred. Major improvements that extend useful lives are capitalized and depreciated. The cost and accumulated depreciation of property, plant and equipment retired or otherwise disposed of are removed from the related accounts, and any residual values are charged or credited to income.

Accounting for Goodwill and Identifiable Intangible Assets.

Goodwill — Historically, the Company has tested goodwill for impairment on January 1 or upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired. During 2015, the Company changed its fiscal year end to December 31st and as a result, has changed the timing of impairment testing, primarily in order to better align the timing with our annual operating plan, forecasting and budgeting process, to the first day of the fourth quarter and whenever events or circumstances indicate that the carrying value of goodwill may not be recoverable. The ~~2016~~2017 impairment analysis date was on October 2nd and the 2016 impairment analysis was October 3rd. The Company determined that the reporting units for its goodwill impairment review are its operating segments, or components of an operating segment, that constitute a business for which discrete financial information is available, and for which segment management regularly reviews the operating results.

The impairment test is performed using a two-step process. In the first step, the Company estimates the fair value of each reporting unit and compares it to the carrying value of the reporting unit, including goodwill. If the carrying amount of a reporting unit is higher than its fair value, an indication of goodwill impairment exists and the second step is performed in order to determine the amount of the goodwill impairment. In the second step, the Company determines the implied fair value of the reporting unit's goodwill which it determines by allocating the estimated fair value of the reporting unit in a manner similar to a purchase price allocation. The implied fair value is compared to the carrying amount and if the carrying amount of the reporting unit's goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized for the excess.

Identifiable Intangible Assets — The Company's primary identifiable intangible assets consist of contract backlog intangible assets recorded as part of the Orbital-ATK ~~merger transaction, discussed in Note 4,~~ Merger ~~and Divestiture~~. Identifiable intangible assets with finite lives are amortized and evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Identifiable intangibles with indefinite lives are not amortized, if applicable, and are tested for impairment annually on the first day of the fourth quarter, or more frequently if events warrant.

~~Dividends~~Treasury ~~Payable~~Stock. On Shares ~~February~~of ~~27,~~Company ~~2017,~~common ~~the~~stock ~~Board~~repurchased ofunder ~~Directors~~the ~~declared~~Company’s ashare ~~quarterly~~repurchase ~~cash~~program ~~dividend~~are ofheld $0as treasury stock.32 ~~per~~Treasury ~~share~~stock is accounted for using the cost method. ~~The~~Shares ~~dividend~~held ~~was~~in ~~paid~~treasury ~~March~~may ~~24,~~be ~~2017~~reissued to ~~stockholders~~satisfy (i) the vesting of ~~record~~performance atawards, ~~March~~total 9stockholder return performance awards ("TSR awards") and restricted stock units, ~~2017~~(ii) the grant of restricted stock and (iii) the exercise of stock options. When treasury stock is reissued, the value is determined using a weighted-average basis.

~~Treasury~~ Stock-based Compensation. ~~Under~~ The ~~the~~ Company's ~~share~~stock-based ~~repurchase~~compensation ~~program~~plans, ~~the~~which ~~Company~~are ~~can~~described ~~repurchase~~more ~~common~~fully ~~stock to be held~~ in ~~treasury.~~Note 17, ~~Treasury~~Stock ~~stock~~Based isCompensation, ~~accounted~~provide for ~~using~~ the ~~cost~~grant ~~method.~~of ~~Shares~~various ~~held~~types inof ~~treasury~~stock-based ~~may~~incentive beawards, ~~reissued~~including ~~to satisfy (i) the payment of~~ performance awards, total stockholder return performance awards ("TSR awards"), ~~and~~ restricted stock ~~units,~~and ~~(ii)~~options ~~the~~to ~~grant~~purchase ofcommon ~~restricted~~ stock. ~~and~~The ~~(iii)~~types ~~the~~and ~~exercise~~mix of stock-based ~~options.~~incentive ~~When~~awards ~~treasury~~are ~~stock~~evaluated ison ~~reissued~~an ongoing basis and may vary based on the Company's overall strategy regarding compensation, including consideration of the ~~value~~impact isof ~~determined~~expensing ~~using~~stock aawards ~~weighted-average~~on ~~basis~~the Company's results of operations.

Stock-based Compensation. The Company's stock-based compensation plans, which are described more fully in Note 17, Stock Based Compensation, provide for the grant of various types of stock-based incentive awards, including performance awards, TSR awards, restricted stock and options to purchase common stock. The types and mix of stock-based incentive awards are evaluated on an ongoing basis and may vary based on the Company's overall strategy regarding compensation, including consideration of the impact of expensing stock awards on the Company's results of operations.62

Performance awards are valued at the fair value of the Company stock at the grant date and expense is recognized based on the number of shares expected to vest under the terms of the award under which they are granted. The Company uses an integrated Monte Carlo simulation model to determine the fair value of the TSR awards and the calculated fair value is recognized in income over the vesting period, which approximates the service period. Restricted stock issued vests over periods ranging from one to three years and is valued based on the market value of the Company stock on the grant date. The estimated

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Income~~Restructuring ~~Taxes~~Costs. ~~Provisions~~ In ~~for~~fiscal ~~federal,~~2015 ~~state~~ and ~~foreign~~during ~~income~~the ~~taxes~~2015 ~~are~~transition ~~calculated~~period, ~~based~~the onCompany ~~reported~~executed ~~pre-tax~~business ~~earnings~~restructuring ~~and~~initiatives ~~current~~aimed ~~tax~~at ~~law.~~reducing ~~Such provisions differ from~~ the ~~amounts~~Company's ~~currently~~fixed ~~receivable~~cost ~~or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes~~structure. ~~Significant judgment is required in determining income taxes and evaluating tax positions.~~ The ~~Company~~remaining ~~periodically~~restructuring ~~assesses~~liability ~~its liabilities and contingencies~~ for ~~all~~these ~~periods~~actions ~~that~~relates ~~are~~primarily ~~currently open~~ to ~~examination~~lease orlosses ~~have not been effectively settled based~~ on ~~the~~terminated ~~most~~leases ~~current~~and ~~available~~was ~~information.~~$16 ~~Where~~million itat isDecember ~~not more likely than not that the Company's tax position will be sustained~~31, ~~the~~2017 ~~Company records the entire resulting tax liability~~ and ~~when~~$20 itmillion isat ~~more~~December ~~likely than not of being sustained~~31, ~~the Company records its best estimate of the resulting tax liability~~2016. ~~Any~~The applicable interest and penalties related to those positions are also recorded in the consolidated financial statements. To the extent the Company's assessment of the tax outcome of these matters changes, such change in ~~estimate will impact income taxes in~~ the ~~period~~liability ofwas ~~the~~primarily ~~change.~~due ~~It is the Company's policy~~ to ~~record~~cash ~~any interest and penalties related to income taxes as part of the income taxes for financial reporting purposes~~payments. ~~Deferred~~No ~~tax~~additional ~~assets~~charges ~~related to carryforwards~~ are ~~reduced~~expected by a valuation allowance when it is not more likely than not that the amount will be realized before expiration of the carryforward period. As part of this analysis the Company takes into account the amount and character of the income to determine if the carryforwards will be realized. Significant estimates and judgments are required for ~~this~~these ~~analysis~~actions. ~~Changes in the amounts of valuation allowance are recorded in tax expense in the period when the change occurs.~~

Income Taxes. Provisions for federal, state and foreign income taxes are calculated based on reported pre-tax earnings and current tax law. Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. Significant judgment is required in determining income taxes and evaluating tax positions. The Company periodically assesses its liabilities and contingencies for all periods that are currently open to examination or have not been effectively settled based on the most current available information. Where it is not more likely than not that the Company's tax position will be sustained, the Company records the entire resulting tax liability and when it is more likely than not of being sustained, the Company records its best estimate of the resulting tax liability. Any applicable interest and penalties related to those positions are also recorded in the consolidated financial statements. To the extent the Company's assessment of the tax outcome of these matters changes, such change in estimate will impact income taxes in the period of the change. It is the Company's policy to record any interest and penalties related to income taxes as part of the income taxes for financial reporting purposes. Deferred tax assets related to carryforwards are reduced by a valuation allowance when it is not more likely than not that the amount will be realized before expiration of the carryforward period. As part of this analysis, the Company takes into account the amount and character of the income to determine if the carryforwards will be realized. Significant estimates and judgments are required for this analysis. Changes in the amounts of valuation allowance are recorded in tax expense in the period when the change occurs. For information on the effect of the Tax Cuts and Jobs Act (the "Tax Act") that was signed into law in December 2017, see Note 14, Income Taxes.

Derivative Instruments and Hedging Activities. From time to time, the Company uses derivative instruments, consisting mainly of commodity forward contracts to hedge forecasted purchases of certain commodities, foreign currency exchange contracts to hedge forecasted transactions denominated in a foreign currency and interest rate swaps to manage interest rate risk on debt. The Company does not hold or issue derivatives for trading purposes. At the inception of each derivative instrument, the Company documents the relationship between the derivative instrument and the hedged item, as well as its risk-management objectives and strategy for undertaking the hedge transaction. The Company assesses, both at the derivative's inception and on an ongoing basis, whether the derivative instrument is highly effective in offsetting changes in the fair value of the hedged item. Derivatives are recognized on the balance sheet at fair value. The effective portion of changes in fair value of derivatives designated as cash flow hedges are recorded to accumulated OCI and recognized in earnings in the same account in which the hedged item is recognized when the hedged item impacts earnings, and the cash flows from the effective portion of cash flow hedges are classified in the same section of the cash flows as the hedged item. The ineffective portion of derivatives designated as cash flow hedges and changes in fair value of derivative instruments not designated in a qualifying hedging relationship are reflected in current earnings, and the cash flows from the ineffective portion of cash flow hedges are classified as investing activities. The Company's current derivatives are designated as cash flow hedges. See Note 3, Derivative Financial Instruments for further details.

Earnings Per Share Data. Basic earnings per share ("EPS") is computed based upon the weighted-average number of common shares outstanding for each period. Diluted EPS is computed based on the weighted-average number of common shares and common equivalent shares outstanding for each period. Common equivalent shares represent the effect of stock-based awards (see Note 17, Stock-Based Compensation) during each period presented, which, if exercised or earned, would have a dilutive effect on earnings per share.

Fair Value of Non-financial Instruments. The carrying amounts of receivables, inventory, accounts payable, accrued liabilities and other current assets and liabilities, approximate fair values due to the short maturity of these instruments. See Note 2, Fair Value of Financial Instruments, for additional disclosure regarding fair value of financial instruments.63

Accounting Standards Updates Adopted

During calendar year 2016, the Company adopted the following Accounting Standard Updates (ASUs):

In February 2015, the Financial Accounting Standards Board ("FASB") issued ASU 2015-02, Amendments to the Consolidation Analysis, which simplifies the consolidation evaluation process by placing more emphasis on risk of loss when determining a controlling financial interest. This new standard is effective for interim and annual periods beginning after December 15, 2015. The ASU became effective for the Company in the quarter ended April 3, 2016 and the adoption did not have a material impact on the Company's consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, and in August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. These ASUs more closely align the treatment of debt issuance costs with debt discounts and premiums and requires debt issuance costs to be presented as a direct deduction from the carrying amount of the related debt. The

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~amendments~~Fair inValue ~~these~~of ~~ASUs~~Non-financial ~~became effective retrospectively for the Company in the quarter ended April 3, 2016~~Instruments. The ~~adoption~~carrying ofamounts ~~these new standards impacted the presentation~~ of ~~the~~receivables, ~~net~~inventory, ~~debt~~accounts ~~issuance costs included in Note 10~~payable, ~~Long-term~~accrued ~~Debt.~~liabilities ~~This~~and ~~resulted~~other incurrent aassets ~~reclassification~~and ofliabilities, ~~debt~~approximate ~~issuance~~fair ~~costs~~values ~~related~~due to the ~~Company's~~short ~~notes~~maturity of ~~$14~~these ~~million~~instruments. ~~from~~See ~~"Other~~Note 2, ~~noncurrent~~Fair ~~assets"~~Value toof ~~"Long-term~~Financial ~~debt~~Instruments, ~~net~~for ofadditional ~~current~~disclosure ~~portion"~~regarding infair ~~the~~value ~~Company's consolidated balance sheets as~~ of ~~December~~financial ~~31, 2015~~instruments.

InAccounting ~~May~~Standards ~~2015,~~Updates the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedientAdopted. During ~~Such investments should be disclosed separate from~~ the ~~fair~~year ~~value hierarchy. This ASU became effective retrospectively for the Company beginning in the quarter~~ ended ~~April~~December 331, ~~2016.~~2017, ~~The adoption of this new standard did not have an impact on~~ the Company's ~~consolidated~~adopted ~~financial statements but impacted certain disclosures reflected in~~ the ~~notes~~following toAccounting ~~the~~Standard ~~accompanying consolidated financial statements. The new standard removed the fair value hierarchy disclosure for the Company's investment in marketable securities.~~Updates:

In ~~March~~October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-0917, ~~Compensation-Stock~~Consolidation ~~Compensation~~ (Topic ~~718~~810), ~~Improvements~~Interests toHeld ~~Employee~~through ~~Share-Based~~Related ~~Payment~~Parties ~~Accounting,~~That ~~which~~Are ~~requires~~under ~~the~~Common ~~recognition~~Control of("ASU 2016-17"). This ASU amends the ~~income~~consolidation ~~tax~~guidance ~~effects~~issued ofunder ~~awards~~ASU in2015-02, ~~the~~Consolidation ~~income~~(Topic ~~statement~~810) ~~when~~Amendments to the ~~awards~~Consolidation ~~vest~~Analysis, orfor those entities that are ~~settled,~~the ~~thus~~single ~~eliminating~~decision ~~additional~~maker ~~paid~~of ina ~~capital~~variable ~~pools.~~interest ~~The~~entity ~~guidance~~("VIE") ~~also~~such ~~allows~~that ~~for~~a ~~the~~single ~~employer~~decision maker is not required to ~~repurchase~~consider aindirect ~~greater~~interests ~~number~~held ofthrough anrelated ~~employee's~~parties ~~shares~~that ~~for~~are ~~tax~~under ~~withholding~~common ~~purposes~~control ~~without~~with ~~triggering~~the ~~liability~~single ~~accounting.~~decision Inmaker ~~addition,~~to be the ~~guidance~~equivalent ~~allows~~of ~~for~~direct ainterest ~~policy~~in ~~election~~their toentirety. ~~account~~Instead, ~~for~~they ~~forfeitures~~are asrequired ~~they~~to ~~occur~~include ~~rather~~those ~~than~~interests on ana ~~estimated~~proportionate basis consistent with indirect interests held through other related parties. The ~~guidance~~amendments isin this ASU were effective for annual reporting periods beginning after December 15, 2016, ~~with~~and ~~early~~interim ~~adoption~~periods ~~permitted.~~within ~~The~~that ~~Company~~reporting ~~elected to early adopt this ASU in the quarter ended April 3, 2016~~period. The adoption of this ~~new~~ standard did not have a material impact on the Company'’s consolidated financial statements.

Accounting Standards Updates Issued But Not Yet Adopted.

In ~~May~~August ~~2014~~2017, the FASB issued ASU ~~2014~~2017-0912, ~~Revenue~~Targeted ~~from~~Improvements ~~Contracts~~to ~~with~~Accounting ~~Customers~~for Hedging Activities (~~Topic~~"ASU ~~606~~2017-12"),. ~~which~~The ~~will~~ASU ~~replace~~amends ~~numerous~~Accounting ~~requirements~~Standard inCodification ~~U.S.~~("ASC") ~~GAAP~~Topic 815, ~~including~~Derivatives ~~industry-specific~~and ~~requirements~~Hedging, ~~and~~in ~~provide~~order ~~companies~~to ~~with~~simplify ahedge ~~single~~accounting ~~revenue~~by ~~recognition~~better ~~model~~aligning ~~for~~an ~~recognizing~~entity's ~~revenue~~financial ~~from~~reporting ~~contracts~~for hedging relationships with ~~customers.~~its Inrisk ~~July~~management ~~2015,~~activities. ~~the~~The ~~FASB~~ASU ~~approved~~also simplifies the ~~deferral~~application of the ~~new~~hedge ~~standard's~~accounting ~~effective date by one year~~guidance. ~~The~~ASU ~~new~~2017-12 ~~standard~~is ~~now will be~~ effective for annual ~~reporting~~ periods beginning after December 15, ~~2017.~~2018, ~~The~~and ~~core~~interim ~~principle~~periods oftherein. ~~the~~The ~~new~~ASU ~~standard~~will isbe ~~that~~applied utilizing a ~~company~~modified ~~should~~retrospective ~~recognize~~approach ~~revenue~~ to ~~depict~~existing ~~the~~hedging ~~transfer~~relationships as of ~~promised goods or services to customers in an amount that reflects~~ the ~~consideration~~adoption ~~to which the company expects to be entitled in exchange for those goods or services~~date. The Company ~~commenced~~does ~~their~~not ~~evaluation~~expect of the ~~impact~~provisions of ~~the~~ ASU in2017-12 ~~2016,~~to byhave ~~evaluating~~a ~~its~~material impact on ~~selected contracts at each of~~ the ~~business segments. With this baseline understanding, the~~ Company's ~~developed~~consolidated afinancial ~~project plan to evaluate the portfolio of contracts across business segments~~position, ~~develop processes and tools to report financial~~ results ~~under~~of ~~the~~operations ~~ASU,~~ and ~~assess~~cash ~~the internal control structure in order to adopt the ASU on January 1, 2018~~flows. Under the new standard, the Company expects to continue using the cost-to-cost percentage of completion method to recognize revenue for most of its long-term contracts. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company has not yet quantified the impact of the new standard or selected a transition method.

In ~~February~~May ~~2016~~2017, the FASB issued ASU ~~2016~~2017-0209, ~~Leases~~Modification Accounting for Share-Based Payment Arrangements (~~Topic~~"ASU ~~842~~2017-09"), which ~~requires~~identifies ~~leasees~~and toprovides ~~recognize~~guidance ~~lease~~on ~~assets~~the ~~and~~types ~~lease~~of ~~liabilities~~changes ~~for~~to ~~those~~share-based ~~leases~~payment ~~classified~~awards asthat ~~operating~~an ~~leases~~entity ~~under~~would ~~previous~~be ~~generally~~required ~~accepted~~to apply modification accounting ~~principles~~under inASU ~~the~~2016-09, ~~United~~Stock ~~States~~Compensation (~~"U.S.~~Topic ~~GAAP"~~718). ~~The~~Specifically, ~~new~~an ~~standard~~entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. ASU 2017-09 is effective for annual ~~reporting~~ periods beginning after December 15, ~~2018~~2017 ~~with~~and ~~early~~will ~~adoption~~be ~~permitted~~applied prospectively to awards modified on or after the effective date. The Company ~~currently~~does isnot ~~evaluating~~expect the provisions of ASU ~~2016~~2017-0209 ~~and~~to ~~its~~have a material impact on the Company's consolidated financial position, results of operations and cash flows.

In ~~August~~March ~~2016~~2017, the FASB issued ASU ~~2016~~2017-1507, ~~Statement~~Improving the Presentation of ~~Cash~~Net ~~Flows~~Periodic ~~(Topic~~Pension ~~230),~~Cost ~~Classification~~and ofNet ~~Certain~~Periodic ~~Cash~~Postretirement ~~Receipts~~Benefit ~~and~~Cost ~~Cash~~("ASU ~~Payments~~2017-07"). The ~~guidance~~ASU ~~clarifies~~amends ~~how~~ASC ~~entities~~Topic ~~should~~715, ~~classify~~Compensation—Retirement ~~certain~~Benefits, ~~cash~~to ~~receipts~~require ~~and~~employers ~~cash~~that ~~payments~~present ona ~~the~~measure of operating income in their statement of ~~cash~~income ~~flows.~~to Itinclude ~~addresses~~only ~~eight~~the ~~specific~~service ~~cash~~cost ~~flows~~component ~~where~~of ~~there~~net ~~currently~~periodic ~~exists~~pension ~~diversity~~costs inand ~~the~~net ~~way~~periodic ~~these~~postretirement ~~cash~~benefit ~~flows~~cost ~~are~~in ~~reported~~operating expenses. ~~They~~The ~~are:~~ASU ~~(1)~~also ~~Debt~~stipulates ~~Prepayment~~that oronly ~~Debt~~the ~~Extinguishment~~service ~~Costs;~~cost ~~(2)~~component ~~Settlement~~ of ~~Zero-Coupon~~net ~~Debt~~benefit ~~Instruments;~~cost ~~(3)~~is ~~Contingent~~eligible ~~Consideration~~for ~~Payments~~capitalization. ~~Made~~This ~~after~~guidance ais ~~Business~~effective ~~Combination;~~for ~~(4)~~fiscal ~~Proceeds~~years ~~from~~beginning ~~the~~after ~~Settlement~~December of15, ~~Insurance~~2017. ~~Claims;~~Early ~~(5)~~adoption ~~Proceeds~~is ~~from~~permitted as of the ~~Settlement~~beginning of ~~Corporate-Owned~~an ~~Life~~annual ~~Insurance~~period ~~(COLI)~~for ~~Policies~~which ~~including~~financial ~~Bank-Owned~~statements ~~Life~~have ~~Insurance~~not ~~Policies;~~been ~~(6)~~issued ~~Distributions~~or ~~Received~~made ~~from~~available ~~Equity~~for ~~Method~~issuance. ~~Investees;~~Disclosures ~~(7)~~of ~~Beneficial~~the ~~Interests~~nature inof ~~Securitization~~and ~~Transactions;~~reason ~~and~~for ~~(8)~~the ~~Separately~~change ~~Identifiable~~in ~~Cash~~accounting ~~Flows~~principle ~~and~~are ~~Application~~required ofin the ~~Predominance~~first ~~Principle.~~interim Inand ~~the~~annual ~~absence~~periods of ~~specific~~adoption. ~~guidance,~~The anCompany ~~entity~~is ~~should~~currently ~~classify~~evaluating ~~each~~the ~~separately~~provisions ~~identifiable~~of ~~cash~~ASU ~~source~~2017-07 and ~~use~~its impact on the ~~basis~~Company's ofconsolidated ~~the~~financial ~~nature~~position, results of ~~the~~operations ~~underlying~~and cash flows.

60In February 2017, the FASB issued ASU 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965), Employee Benefit Plan Master Trust Reporting (“ASU 2017-06”). The ASU relates primarily to the reporting by an employee benefit plan for its interest in a master trust. The amendments in ASU 2017-06 are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. An entity should apply the amendments in ASU 2017-06 retrospectively to each period for which financial statements are presented. The Company does not expect the provisions of ASU 2017-06 to have a material impact on the Company's consolidated financial position, results of operations and cash flows.

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~The~~In ~~guidance~~January ~~also~~2017, ~~clarifies~~the ~~how~~FASB issued ASU 2017-04, Simplifying the ~~predominance~~Test ~~principle~~for ~~should~~Goodwill beImpairment ~~applied~~("ASU ~~when~~2017-04"), ~~cash~~which ~~receipts~~simplifies ~~and~~the ~~cash~~accounting ~~payments~~for ~~have~~goodwill ~~aspects~~impairments ofby ~~more~~eliminating ~~than~~Step ~~one~~2 ~~class~~from ofthe ~~cash~~goodwill ~~flows~~impairment test. AsIf anthe ~~example,~~carrying ~~for~~amount ~~item~~of ~~(1)~~a ~~the~~reporting ~~cash~~unit ~~flows~~exceeds ~~will~~its befair ~~classified~~value, asan ~~financing~~impairment ~~activities;~~loss ~~for~~shall ~~item~~be ~~(3)~~recognized ~~contingent~~in ~~payments~~an ~~made~~amount ~~soon~~equal ~~after~~to ~~the~~that ~~acquisition~~excess, ~~will~~versus bedetermining ~~classified~~an asimplied ~~investing~~fair ~~activities~~value ~~and~~in ~~financing~~Step ~~activities~~2 ifto ~~made~~measure ~~thereafter;~~the ~~and~~impairment loss. ASU 2017-04 is effective for ~~item~~annual ~~(5)~~periods ~~cash~~beginning ~~payments~~after ~~made~~December to15, ~~settle~~2019. ~~COLI~~The ~~policies~~Company ~~will~~does benot ~~classified~~expect asthe ~~investing~~provisions ~~activities~~of ~~and~~ASU ~~premium~~2017-04 ~~payments~~to ~~may~~have bea ~~classified~~material asimpact ~~cash~~on ~~outflows~~the ~~for~~Company's ~~investing~~consolidated financial position, ~~operating~~results orof aoperations ~~combination~~and ofcash ~~both~~flows.

~~The~~In ~~standard~~February is2016, ~~effective~~the ~~for~~FASB ~~financial statements~~ issued ~~for~~ASU ~~fiscal~~2016-02, ~~years~~Leases ~~beginning~~(Topic ~~after December 15~~842), ~~2017,~~which ~~and~~requires ~~interim~~recognition ~~periods~~of ~~within~~lease ~~those~~assets ~~fiscal~~and ~~years.~~lease ~~Early~~liabilities ~~adoption~~for isthose ~~permitted,~~leases ~~provided~~classified ~~that~~as ~~all~~operating ofleases ~~the~~under ~~amendments~~previous ~~are~~U.S. ~~adopted in the same period~~GAAP. The ~~guidance~~new ~~requires~~standard ~~retrospective application but if it~~ is ~~impracticable~~effective ~~to do so~~ for anannual ~~issue,~~reporting ~~the~~periods ~~amendments~~beginning ~~related~~after toDecember ~~that~~15, ~~issue~~2018 ~~will~~with beearly ~~applied~~adoption ~~prospectively~~permitted. The Company currently is ~~still~~ evaluating the ~~provisions~~potential ofchanges ~~ASU~~from ~~2016-15~~this ~~and~~ASU to its ~~impact~~future onfinancial ~~the~~reporting ~~consolidated~~and ~~statement of cash flows~~disclosures.

InDuring ~~October~~ 2016, the FASB issued ASU 2016-1715, ~~Consolidation~~Statement of Cash Flows (Topic ~~810~~230), ~~Interests~~Classification ~~Held~~of ~~through~~Certain ~~Related~~Cash ~~Parties~~Receipts ~~That~~and ~~Are~~Cash ~~under~~Payments ~~Common~~and ~~Control. This~~ ASU ~~amends~~2016-18, ~~the~~Statement ~~consolidation~~of ~~guidance~~Cash ~~issued~~Flows ~~under ASU 2015-02: Consolidation~~ (Topic ~~810~~230):, ~~Amendments~~Restricted toCash. ~~the~~These ~~Consolidation~~ASUs ~~Analysis~~clarify ~~for~~how ~~those~~ entities ~~that~~should ~~are~~classify ~~the~~certain ~~single~~cash ~~decision~~receipts ~~maker~~and ofcash apayments ~~VIE~~on ~~such~~the ~~that~~statement aof ~~single~~cash ~~decision~~flows ~~marker~~and isrequires ~~not required to consider indirect interests held through related parties~~ that ~~are under common control with~~ the ~~single~~statement ~~decision~~of ~~maker~~cash toflows beexplain the ~~equivalent~~change ofduring ~~direct~~the ~~interest~~period in ~~their~~the ~~entirety.~~total ~~Instead~~cash, ~~they~~cash ~~are~~equivalents required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. Effective for annual reporting periods beginning after December 15, 2016, and ~~interim~~amounts ~~periods~~generally ~~within~~described ~~that~~as ~~reporting~~restricted ~~period.~~cash ~~The~~or ~~adoption~~restricted ~~method~~cash ~~varies depending on which aspect is relevant/being adopted~~equivalents. ~~This~~These ~~ASU~~standards iswill ~~required to~~ be adopted inon ~~conjunction~~January ~~with~~1, ~~ASU~~2018 ~~2015-02~~ and ~~those entities that have already adopted ASU 2015-02~~ are ~~required to apply the amendments in this update retrospectively through initial adoption. The adoption of this standard is~~ not expected to have a material impact on the Company’'s consolidated ~~financial~~statement ~~statements~~of cash flows.

In ~~November~~May ~~2016~~2014, the FASB issued ASU ~~2016~~2014-1809, ~~Statement~~Revenue offrom ~~Cash~~Contracts ~~Flows~~with Customers (Topic ~~230~~606), ~~Restricted~~which ~~Cash~~will replace numerous requirements in U.S. ~~The~~GAAP, ~~guidance~~including ~~requires~~industry-specific ~~that~~requirements, aand ~~statement~~provide ofcompanies ~~cash~~with ~~flows~~a ~~explain~~single ~~the~~revenue ~~change~~recognition ~~during~~model ~~the~~for ~~period~~recognizing inrevenue ~~the~~from ~~total~~contracts ~~cash,~~with ~~cash~~customers. ~~equivalents~~The ~~and~~new ~~amounts~~standard ~~generally~~is ~~described~~effective asfor ~~restricted~~annual ~~cash~~reporting orperiods ~~restricted~~beginning ~~cash~~after ~~equivalents.~~December ~~Therefore~~15, ~~amounts~~2017. ~~generally~~The ~~described~~core asprinciple ~~restricted~~of ~~cash~~the ornew ~~restricted~~standard ~~cash~~is ~~equivalents~~that a company should berecognize ~~included~~revenue ~~with~~to ~~cash~~depict ~~and~~the ~~cash~~transfer ~~equivalents~~of ~~when~~promised ~~reconciling~~goods ~~the~~or ~~beginning-of-period~~services ~~and~~to ~~end-of-period~~customers ~~total~~in ~~amounts~~an ~~shown~~amount onthat reflects the ~~statement~~consideration ofto ~~cash~~which ~~flows~~such company expects to be entitled in exchange for those goods or services. The two permitted transition methods under the new standard isare ~~effective~~the ~~for~~full ~~annual~~retrospective ~~reporting~~method, ~~periods~~in ~~beginning~~which ~~after~~case ~~December~~the ~~15,~~standard ~~2017~~would ~~with~~be ~~early~~applied ~~adoption~~to ~~permitted.~~each ~~The~~prior ~~Company~~reporting isperiod ~~still~~presented, ~~evaluating~~or the ~~provisions~~modified ofretrospective ~~ASU~~method, ~~2016-18~~in ~~and~~which ~~its~~case ~~impact~~the oncumulative effect of applying the ~~consolidated~~standard ~~statement~~would be recognized at the date of ~~cash~~initial ~~flows~~application.

~~Other~~The ~~new~~Company ~~pronouncements~~will ~~issued~~adopt ~~but~~the ~~not~~standard ~~effective~~on ~~for~~January 1, 2018 and apply the modified retrospective method. The Company ~~until~~has ~~after~~completed ~~December 31~~its analysis of ASU 2014-09, ~~2016~~and ~~are~~the associated impact on the Company's business processes, systems and internal controls. As part of this analysis, the Company compared existing policies and procedures to the requirements of the standard and prepared modifications to ensure appropriate application of the standard. Additionally, the Company has designed and implemented specific controls over the adoption of the new standard. The Company did not ~~expected~~experience significant changes to ~~have~~current acontrols. ~~material~~The Company is finalizing its assessment of the quantitative impact onof adopting ASU 2014-09. The current anticipated financial impact of adoption is a reduction to retained earnings of approximately $325 million, a reduction to unbilled accounts receivable of approximately $475 million and increases in inventory and other current assets of approximately $150 million. The primary area of anticipated change relates to the determination of performance obligations in a contract. While not impacting the total amount of revenue recognized over the life of a contract, this determination will alter the timing of revenue recognition for certain contracts in the Company's ~~continuing~~portfolio. ~~financial~~In ~~position~~addition, ~~results~~the ofCompany ~~operations~~will orpresent ~~liquidity~~expanded disclosures related to revenues and contracts with customers as required by ASU 2014-09.

Under ASU 2014-09, revenue is recognized as the Company satisfies a performance obligation by transferring control to the customer. For performance obligations satisfied over time, the objective is to measure progress in a manner which depicts the performance of transferring control to the customer. As such, the Company expects contract revenue will generally be recognized over time using a cost incurred input measure. This is consistent with the percentage of completion cost-to-cost revenue recognition model currently used for the majority of the Company's contracts.

Other new pronouncements issued but not effective for the Company until after December 31, 2017 are not expected to have a material impact on the Company's continuing financial position, results of operations and cash flows.

2. Fair Value of Financial Instruments

The current authoritative guidance on fair value clarifies the definition of fair value, prescribes a framework for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about the use of fair value measurements. Fair value is defined as the price that would be

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The valuation techniques required by the current authoritative literature are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3—Significant inputs to the valuation model are unobservable.

The following section describes the valuation methodologies used by the Company to measure its financial instruments at fair value.

Derivative financial instruments and hedging activities — In order to manage its exposure to commodity pricing and foreign currency risk, the Company periodically utilizes commodity and foreign currency derivatives, which are considered Level 2 instruments. As discussed further in Note 3, Derivative Financial Instruments, the Company has outstanding commodity forward contracts that were entered into to hedge forecasted purchases of copper and zinc, as well as outstanding foreign currency forward contracts that were entered into to hedge forecasted transactions denominated in a foreign currency. Commodity derivatives are valued based on prices of futures exchanges and recently reported transactions in the marketplace. The Company currently holds ~~three~~one interest rate ~~swaps~~swap with a total notional value of $~~250~~100 million. ~~These~~The ~~swaps~~swap is valued based on future LIBOR, and the established fixed rate is based primarily on quotes from banks. Foreign currency derivatives are valued based on observable market transactions of spot currency rates and forward currency prices.

61Long-term Debt — The fair value of the variable rate long-term debt is calculated based on current market rates for debt of the same risk and maturities. The fair value of the fixed rate debt is based on market quotes for each issuance. The Company considers these to be Level 2 instruments.

The Company's non-financial instruments measured at fair value on a non-recurring basis include goodwill, indefinite-lived intangible assets and long-lived tangible assets. The valuation methods used to determine fair value require a significant degree of management judgment to determine the key assumptions. As such, the Company generally classifies non-financial instruments as either Level 2 or Level 3 fair value measurements. At December 31, 2017 and 2016, the Company did not have any non-financial instruments measured at fair value on a non-recurring basis.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

based on future LIBOR, and the established fixed rate is based primarily on quotes from banks. Foreign currency derivatives are valued based on observable market transactions of spot currency rates and forward currency prices.

Long-term Debt — The fair value of the variable-rate long-term debt is calculated based on current market rates for debt of the same risk and maturities. The fair value of the fixed-rate debt is based on market quotes for each issuance. The Company considers these to be Level 2 instruments.

The Company’s non-financial instruments measured at fair value on a non-recurring basis include goodwill, indefinite-lived intangible assets and long-lived tangible assets. The valuation methods used to determine fair value require a significant degree of management judgment to determine the key assumptions. As such, the Company generally classifies non-financial instruments as either Level 2 or Level 3 fair value measurements. At December 31, 2016 and 2015, the Company did not have any non-financial instruments measured at fair value on a non-recurring basis.

The following tables set forth, by level within the fair value hierarchy, the Company's financial assets and liabilities that are measured at fair value on a recurring basis (in millions):



	December 31, 2017
	Fair Value Measurements Using Inputs Considered as
	Level 1		Level 2		Level 3
Assets:
Derivatives	$	—	$	13	$	—
Liabilities:
Derivatives	$	—	$	2	$	—



	December 31, 2016
	Fair Value Measurements Using Inputs Considered as
	Level 1		Level 2		Level 3
Assets:
Derivatives	$	—	$	9	$	—
Liabilities:
Derivatives	$	—	$	1	$	—

	December 31, 2015
	Fair Value MeasurementsUsing Inputs Considered as
	Level 1		Level 2		Level 3
Assets:
Derivatives	$	—	$	4	$	—
Liabilities:
Derivatives	$	—	$	8	$	—

Recorded carrying amount and fair value of debt was as follows (in millions):

December 31, 2016

December 31, 2015

December 31, 2017

December 31, 2016

CarryingAmount

FairValue

CarryingAmount

FairValue

Fixed rate debt

700

~~727~~732

700

~~713~~727

Variable rate debt

~~750~~710

~~746~~706

~~790~~750

~~788~~746

Investments in marketable securities — The Company's has investments in marketable securities ~~represent investments~~ held in a common collective trust ("CCT") that are primarily ~~invests in~~ fixed income securities ~~which are~~ used to pay benefits under a nonqualified supplemental executive retirement plan for certain executives and highly compensated employees. Investments in a collective investment vehicle are valued by multiplying the investee company's net asset value per share, as determined by the investee company, with the number of units or shares owned at the valuation date ~~as determined by the investee company~~. Net asset value per share is determined by the investee company's custodian or fund administrator by deducting from the value of the assets of the investee company all its liabilities and the resulting number is divided by the outstanding number of shares or units. Investments held by the CCT, including collateral invested for securities on loan, are valued on the basis of valuations furnished by a pricing service approved by the CCT's investment manager, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the CCT's investment manager. The fair value of these securities, not subject to leveling, is included within other noncurrent assets on the Company's consolidated balance sheet. The fair value of these securities is measured on a recurring basis and was $1315 million and $1213 million at December 31, ~~2016~~2017 and ~~2015~~2016, respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. Derivative Financial Instruments

The Company entered into interest rate swaps during fiscal 2014 requiring fixed rate payments on a total notional amount of $400 million, of which $250 million remains outstanding, and receive one-month LIBOR. The fair value of interest rate swap agreements approximates the amount at which they could be settled, based on future LIBOR, and the established fixed rate is based primarily on quotes from banks. The Company performs assessments of the effectiveness of hedge instruments on a quarterly basis and has determined the hedges to be highly effective. The counterparties to the interest rate swap agreements expose the Company to credit risk in the event of nonperformance. However, at December 31, 2016, the outstanding swap agreements were in a net liability position which would require the Company to make the net settlement payments to the counterparties. The Company does not anticipate nonperformance by counterparties and does not hold or issue derivative financial instruments for trading purposes. The Company is exposed to market risks arising from adverse changes in commodity prices affecting the cost of raw materials and energy;, interest rates and foreign exchange risks. In the normal course of business, these risks are managed through a variety of strategies, including the use of derivative instruments. Commodity forward contracts are periodically used to hedge forecasted purchases of certain commodities, foreign currency exchange contracts are used to hedge forecasted transactions denominated in a foreign currency, and the Company periodically uses interest rate swaps to hedge forecasted interest payments and the risk associated with variable interest rates on long-term debt.

~~The~~Cash ~~Company~~Flow enters into forward contracts for copper and zinc. The contracts essentially establish a fixed price for the underlying commodity and are designated and qualify as effective cash flow hedges of purchases of the commodity. Ineffectiveness is calculated as the amount by which the change in the fair value of the derivatives exceeds the change in the fair value of the anticipated commodity purchases.Hedges

The Company ~~enters~~periodically ~~into~~uses ~~foreign~~interest ~~currency~~rate ~~forward~~swaps ~~contracts~~ to hedge forecasted ~~transactions,~~interest ~~denominated~~payments ~~in foreign currencies. These transactions qualify as effective cash flow hedges~~ and ~~are~~the ~~designated~~risk asassociated ~~such. Ineffectiveness~~ with ~~respect~~variable tointerest ~~forecasted~~rates ~~transactions is calculated based~~ on ~~changes~~long-term in the forward rate until the anticipated purchase or cash receipt occurs; ineffectiveness of the hedge of the accounts payable is evaluated based on the change in fair value of its anticipated settlementdebt.

The fair value of the commodity and foreign currency forward contracts is recorded within other assets or liabilities, as appropriate, and the effective portion is reflected in accumulated other comprehensive income (loss) in the financial statements. The gains or losses on the commodity forward contracts are recorded in inventory as the commodities are purchased and in cost of sales when the related inventory is sold. The gains or losses on the foreign currency forward contracts are recorded in earnings when the related inventory is sold or customer cash receipts are received.67

	Notional		Fair Value		Pay Fixed		Receive Floating		Maturity Date
	(in millions)
Non-amortizing swap	$	100	—		1.29	%	0.77	%	August 2017
Non-amortizing swap	$	100	(1	)	1.69	%	0.77	%	August 2018
Non-amortizing swap	$	50	—		1.10	%	0.77	%	November 2017

The amount to be paid or received under these swaps is recorded as an adjustment to interest expense.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company entered into interest rate swaps during fiscal 2014 requiring fixed rate payments on a total notional amount of $400 million, of which $100 million remains outstanding, and receives one-month LIBOR. The fair value of interest rate swap agreements approximates the amount at which they could be settled, based on future LIBOR, and the established fixed rate is based primarily on quotes from banks.

Interest rate swap agreements entered into to manage interest costs and risk associated with variable interest rates outstanding at December 31, 2017 were as follows (in millions):

			Asset DerivativesFair Value								Liability DerivativesFair Value
	Notional				Fair Value				Pay Fixed			Receive Floating		Maturity Date
	Location		December 31, 2016				December 31, 2015				December 31, 2016			December 31, 2015
Non-amortizing swap	$	100			$	—			1.69	%		1.57	%	August 2018
			(in millions)
Commodity forward contracts	Other current assets /Other current liabilities		$	5			$	—			$	—		$	4
Foreign currency forward contracts	Other current assets /Other current liabilities		3				3				—			1
Foreign currency forward contracts	Other noncurrent assets /Other noncurrent liabilities		1				1				—			—
Interest rate swap contracts	Other noncurrent assets /Other noncurrent liabilities		—				—				1			3
Total			$	9			$	4			$	1		$	8

The amount to be paid or received under these swaps is recorded as an adjustment to interest expense.

The counterparties to the interest rate swap agreements expose the Company to credit risk in the event of nonperformance. However, at December 31, 2017, the outstanding swap agreements were in a net liability position which would require the Company to make the net settlement payments to the counterparties if the agreements were settled as of that date. The Company does not anticipate nonperformance by counterparties and does not hold or issue derivative financial instruments for trading purposes.

Commodity forward contracts are periodically used to hedge forecasted purchases of certain commodities. The contracts essentially establish a fixed price for the underlying commodity and are designated and qualify as effective cash flow hedges of purchases of the commodity. Ineffectiveness is calculated as the amount by which the change in the fair value of the derivatives exceeds the change in the fair value of the anticipated commodity purchases.

Commodity forward contracts outstanding that hedge forecasted commodity purchases were as follows:

Due to the customer contract requirements, the benefits associated with the commodity contracts may be passed on to the customer and not realized by the Company.

~~Gains~~The ~~and~~Company ~~losses~~enters ~~reclassified~~into ~~from~~foreign ~~AOCI~~currency forward contracts to hedge forecasted transactions, denominated in ~~the~~foreign ~~condensed~~currencies. ~~consolidated~~These ~~statements~~transactions ofqualify ~~comprehensive~~as ~~income~~effective ~~related~~cash toflow ~~derivative~~hedges ~~instruments~~and ~~were~~are designated as ~~follows:~~such.

	Gain (Loss) Reclassified from AOCI
	Location	Amount
	(in millions)
Year Ended December 31, 2016
Commodity forward contracts	Cost of sales	$	(3	)
Interest rate swap contracts	Interest expense	(3		)
Foreign currency forward contracts	Cost of sales	—
Nine Months Ended December 31, 2015
Commodity forward contracts	Cost of sales	(3		)
Interest rate swap contracts	Interest expense	(3		)
Foreign currency forward contracts	Cost of sales	(2		)

Ineffectiveness with respect to forecasted transactions is calculated based on changes in the forward rate until the anticipated purchase or cash receipt occurs; ineffectiveness of the hedge of the accounts payable is evaluated based on the change in fair value of its anticipated settlement.

As of December 31, 2017, the Company had the following outstanding Euro currency forward contracts in place:

There was no ineffective portion of derivative instruments and no derivatives were excluded from effectiveness testing during the year ended December 31, 2016 and the 2015 transition period; accordingly, the Company did not recognize any related gains or losses in the income statement.



(Amounts in millions of Euros)	December 31,
	2017		2016
Euros Sold	€	7	€	33
Euros Purchased	36		45

~~All~~The ~~derivatives~~gains ~~used~~or bylosses on the ~~Company~~commodity ~~during~~forward ~~the~~contracts ~~periods~~are ~~presented~~recorded ~~were~~in ~~designated~~inventory as ~~hedging~~the ~~instruments~~commodities are purchased and in cost of sales when the related inventory is sold. The gains or losses on the foreign currency forward contracts are recorded in earnings when the related inventory is sold or customer cash receipts are received.

The ~~Company~~fair ~~expects~~values of the ~~remaining~~commodity ~~unrealized~~and ~~losses~~foreign ~~will~~currency beforward ~~realized~~contracts ~~and~~are ~~reported~~recorded in ~~cost~~other ofassets ~~sales~~ or ~~interest~~liabilities, ~~expense~~as ~~depending~~appropriate, onand the ~~type~~effective ofportion ~~contract~~is ~~consistent~~reflected ~~with~~in ~~realized~~accumulated ~~gains~~other ~~and~~comprehensive ~~losses~~income ~~noted~~(loss) in the ~~table~~financial ~~above~~statements. ~~Estimated and actual gains or losses will change as market prices change.~~

6468

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4.Fair ~~Merger~~values ~~and~~in ~~Divestiture~~the consolidated balance sheets related to derivative instruments designated as hedging instruments were as follows (in millions):

On February 9, 2015, the Company completed the spin-off and Distribution of its former Sporting Group to its



	Asset Derivatives Fair Value				Liability Derivatives Fair Value
	December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016
Commodity forward contracts⁽¹⁾	$	11	$	5	$	—	$	—
Foreign currency forward contracts⁽¹⁾	2		3		2		—
Foreign currency forward contracts⁽²⁾	—		1		—		—
Interest rate swap contracts⁽²⁾	—		—		—		1
Total	$	13	$	9	$	2	$	1

stockholders and merged with Orbital pursuant to a transaction agreement dated April 28, 2014 (the "Transaction Agreement"). The Company completed the Merger with Orbital in order to create a global aerospace and defense company with greater technical and industrial capabilities and increased financial resources. Both the Distribution and Merger were structured to be tax-free to U.S. stockholders for U.S. federal income tax purposes. Under the Transaction Agreement, a subsidiary of the Company merged with and into Orbital, with Orbital continuing as a wholly-owned subsidiary of the Company. ____________________________________________________________

Pursuant to the Distribution, Company stockholders received two shares of Vista Outdoor for each share of Company common stock held. The Company distributed a total of approximately 63.9 million shares of Vista Outdoor common stock to its stockholders of record as of the close of business on February 2, 2015 the record date for the Distribution. As a result of the Distribution, Sporting Group is no longer reported within the Company’s results from continuing operations but is reported as a discontinued operation for all prior periods presented in accordance with ASC Topic 205, "Presentation of Financial Statements." Sales reported as discontinued operations were $(1.8) ~~billion~~Location ~~for~~- ~~the~~Other ~~year~~current ~~ended~~assets/Other ~~March~~current ~~31, 2015.~~ liabilities

In connection with the Merger, each outstanding share of Orbital common stock was converted into the right to receive 0.449 shares of Company common stock. The Company issued approximately 27.4 million shares of common stock to Orbital stockholders. Immediately following the Merger, Orbital stockholders owned 46.(2%) ofLocation ~~the~~- ~~common~~Other ~~stock~~noncurrent ofassets/Other ~~the~~noncurrent Company and existing stockholders owned 53.8%. Based on the closing price of the Company's common stock following the Distribution on February 9, 2015 as reported on the New York Stock Exchange, the aggregate value of the consideration paid or payable to former holders of Orbital common stock was approximately $1.8 billion. The Company used the acquisition method to account for the Merger; accordingly, the results of Orbital have been included in the Company's consolidated financial statements since the date of the Merger.liabilities

~~Valuation~~Gains and (losses) reclassified from Accumulated Other Comprehensive Loss to the consolidated statements of ~~Net~~comprehensive ~~Assets~~income ~~Acquired~~related to derivative instruments were as follows (in millions):

Purchase Price:	(in millions)
	Location		Year Ended December 31, 2017			Year Ended December 31, 2016
Value of common shares issued to Orbital shareholders (1)	$	1,749
Commodity forward contracts	Cost of sales		$	2		$	(3	)
Value of replacement equity-based awards to holders of Orbital equity-based awards (2)	9
Interest rate swap contracts	Interest expense		(1		)	(3		)
Total purchase price	$	1,758
Foreign currency forward contracts	Cost of sales		4			—
Value of assets acquired and liabilities assumed:
Cash	$	254
Net receivables	559
Net inventories	75
Intangibles	173
Property, plant and equipment	277
Deferred tax assets, net	65
Other assets	37
Goodwill	826
Accounts payable	(52		)
Contract fair value liabilities	(131		)
Other liabilities	(325		)
Total purchase price	$	1,758

~~(1)~~The ~~Equals~~Company 27expects ~~million~~the ~~Orbital~~remaining ~~ATK~~unrealized ~~shares~~losses ~~issued~~will tobe ~~Orbital~~realized ~~shareholders~~and ~~multiplied~~reported byin ~~the~~cost ~~Company's~~of ~~Merger-date~~sales ~~share~~or ~~price~~interest ofexpense ~~$63.94.(2)~~depending ~~The~~on ~~fair~~the ~~value~~type of ~~replacement~~contract ~~equity-based~~consistent ~~awards~~with ~~attributable~~realized togains ~~pre-Merger~~and ~~service~~losses ~~was~~noted ~~recorded~~in asthe ~~part~~table ofabove. ~~the~~Estimated ~~consideration~~and ~~transferred~~actual ingains ~~the~~or ~~Merger~~losses will change as market prices change.

65The Company performs assessments of the effectiveness of hedge instruments on a quarterly basis and determined the hedges to be highly effective.

~~Table~~There was no ineffective portion of ~~Contents~~derivative instruments and no derivatives were excluded from effectiveness testing during the years ended December 31, 2017 and December 31, 2016; accordingly, the Company did not recognize any related gains or losses in the income statement.

~~NOTES~~All TOderivatives ~~THE~~used ~~CONSOLIDATED~~by ~~FINANCIAL~~the ~~STATEMENTS~~Company during the periods presented were designated as hedging instruments for accounting purposes.

~~The~~4. ~~consideration~~Mergers ~~paid for Orbital's assets~~ and ~~liabilities~~Divestiture ~~was determined using the fair market value of the Company stock issued at the date of the Merger along with restricted stock awards granted to certain employees of Orbital.~~

~~Goodwill~~Northrop ~~recognized~~Grumman. ~~from~~On ~~the~~September ~~Merger~~17, ~~primarily~~2017, ~~relates to~~ the ~~expanded~~Company ~~market~~entered ~~opportunities,~~into ~~expected~~an ~~synergies~~Agreement and ~~benefits~~Plan of ~~increased~~Merger ~~scale~~(the ~~and~~“Merger ~~scope~~Agreement”) ofwith ~~combined~~Northrop ~~human,~~Grumman ~~physical~~Corporation ~~and~~(“Northrop ~~financial~~Grumman”) ~~resources~~and ~~attributable~~Neptune toMerger, ~~merging the operations of the two companies~~Inc. ~~As stated above~~, ~~the~~a ~~Merger~~wholly ~~was~~owned asubsidiary ~~tax-free~~of ~~transaction~~Northrop ~~and~~Grumman ~~as such~~(“Sub”), ~~there~~under iswhich noSub ~~goodwill~~will ~~that~~merge iswith ~~deductible~~and ~~for~~into ~~tax~~the ~~purposes.~~Company,

Inwith ~~determining~~ the ~~fair~~Company ~~value~~continuing ofas ~~identifiable~~the ~~assets~~surviving ~~acquired~~corporation and ~~liabilities assumed,~~ a ~~review~~wholly-owned ~~was~~subsidiary ~~conducted~~of ~~for~~Northrop ~~any~~Grumman ~~significant contingent assets or liabilities existing at~~ (the “Merger ~~date~~”). ~~There were no significant contingencies identified related to any legal or government action.~~

~~Measurement~~Upon ~~Period~~the ~~Adjustments~~closing of the Merger, each outstanding share of Company common stock, other than shares owned by the Company, Northrop Grumman or Sub (which will be canceled) and appraisal shares, will automatically be converted into the right to receive $134.50 in cash, without interest and less any applicable withholding taxes.

InThe ~~accordance~~stockholders ~~with~~of the Company's ~~adoption~~voted ofin ~~ASU~~favor ~~2015-16,~~of ~~measurement~~approving ~~period adjustments pertaining to~~ the Merger ~~were~~Agreement ~~recorded~~at ~~within~~a ~~the~~special ~~year~~meeting ~~ended~~held ~~December~~on 31November 29, ~~2016~~2017. ~~and~~Closing ~~the~~remains ~~2015~~subject ~~transition~~to ~~period~~customary ~~and~~closing ~~were~~conditions, ~~not~~including ~~retroactively~~obtaining ~~reclassified~~required toregulatory ~~prior periods~~approvals. ~~Such~~The ~~measurement~~Company ~~period~~received ~~adjustment~~a ~~amounts~~request ~~that~~for ~~were~~additional ~~included~~information infrom the ~~aforementioned~~Federal ~~periods~~Trade ~~were~~Commission ~~not~~("FTC") ~~material.~~on December 6, 2017.

~~Supplemental~~Orbital. ~~Pro~~On ~~Forma~~February ~~Data~~9, 2015, the Company completed the spin-off and Distribution of its former Sporting Group to its stockholders and merged with Orbital pursuant to a transaction agreement dated April 28, 2014 (the "Transaction Agreement"). Both the Distribution and Orbital-ATK Merger were structured to be tax-free to U.S. stockholders for U.S. federal income tax purposes. Under the Transaction Agreement, a subsidiary of the Company merged with and into Orbital, with Orbital continuing as a wholly-owned subsidiary of the Company.

(amounts in millions)	Year Ended March 31, 2015
Sales	$	4,167
Income (loss) from continuing operations	155
Basic earnings (loss) per common share from continuing operations	$	2.46
Diluted earnings (loss) per common share from continuing operations	2.43

(amounts in millions)	Year Ended March 31, 2015
Amortization of acquired Orbital intangible assets (1)	$	27
Interest expense adjustment (2)	(26		)
Transaction fees for advisory, legal and accounting services (3)	(37		)

(1) Added the amortization of acquired Orbital intangible assets recognized at fair value in purchase accounting and eliminated historical Orbital intangible asset amortization expense.

(2) Reduced interest expense for the net reduction in debt of the Company and Orbital.

(3) Added transaction fees for advisory, legal and accounting services to the first quarter of fiscal 2014. Costs were recorded in general and administrative expense.

The unaudited supplemental pro forma data above does not reflect the potential realization of cost savings related to the integration of the two companies. Further, the pro forma data should not be considered indicative of the results that would have occurred if the Merger had been completed on April 1, 2013, nor are they indicative of future results.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Ongoing Business with Vista Outdoor

In conjunction with the Distribution of the Company's former Sporting Group, the Company entered into two supply agreements and one Transition Services Agreement ("TSA") with Vista Outdoor. The supply agreements call for Vista Outdoor to purchase certain minimum quantities of ammunition and gun powder from the Company through ~~2017~~2018 or ~~2018~~2017, as applicable. The supply agreements, which are priced at arms-length, expire in ~~2017~~2018 (for the ammunition agreement with the gun powder) ~~and~~agreement ~~2018~~expiring ~~(ammunition)~~in ~~and~~2017. ~~may~~The supply agreements had an option to be extended in one-to-three year increments. The agreements were not extended and expired or will expire according to their original terms. Under the terms of the TSA, the Company provided Vista ~~Outdoors~~Outdoor with administrative services for 12 months following the Distribution and provided tax-related services for 18 months following the Distribution, extendable to 30 months. At the option of Vista Outdoor, the Company is currently providing tax-audit related services. Fees for services under the TSA are charged to Vista Outdoor.

Sales to Vista Outdoor under the two supply agreements, reported within Defense Systems Group, were $~~238~~181 million for the year ended December 31, ~~2016~~2017, $~~138~~238 million for the ~~2015~~year ~~transition~~ended ~~period~~December ~~and $19 million for the period from the date of the Distribution to March~~ 31, ~~2015.~~2016 ~~Sales to Sporting Group, previously reported as intercompany sales~~ and ~~eliminated in consolidation (see Note 19, Operating Segment Information) were~~ $~~171~~138 million for the ~~period~~2015 ~~April~~transition ~~1, 2014 through February 8, 2015~~period.

5. Net Receivables

Net receivables, including amounts due under long-term contracts, consisted of the following:

	December 31,
	2016			2015
	2017			2016
	(in millions)
Billed receivables
U.S. Government contracts	$	~~132~~159		$	~~122~~132
Commercial and other	~~112~~92			96112
Unbilled receivables
U.S. Government contracts	~~806~~850			~~808~~806
Commercial and other	~~691~~793			~~646~~691
Less allowance for doubtful accounts	—(1		)	(1—		)
Net receivables	$	1,~~741~~893		$	1,~~671~~741

Receivable balances are shown net of customer progress payments received of $~~601~~697 million at December 31, ~~2016~~2017 and $~~584~~601 million at December 31, ~~2015~~2016.

Unbilled receivables represent the balance of recoverable costs and accrued profit, comprised principally of revenue recognized on contracts for which billings have not been presented to the customer because the amounts were earned but not contractually billable at the balance sheet date. These amounts include expected additional billable general overhead costs and fees on flexibly priced contracts awaiting final rate negotiations.

Progress payments received from customers relating to the uncompleted portions of contracts are offset against unbilled receivable balances or applicable inventories. Any remaining progress payment balances are classified as contract advances.

At December 31, ~~2016~~2017 and ~~2015~~2016, the aggregate amount of contract-related unbilled receivables the Company does not expect to collect within the next 12 months was $~~287~~275 million and $~~312~~287 million, respectively.

The Company records an allowance for doubtful accounts, reducing the receivables balance to an amount the Company estimates is collectible from customers. Estimates used in determining the allowance for doubtful accounts are based on current trends, aging of accounts receivable, periodic credit evaluations of customers’' financial condition and historical collection experience.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. Net Inventories

Net inventories consisted of the following:

	December 31,
	2016		2015
	2017		2016
	(in millions)
Raw materials	$	9389	$	8893
Work/contracts in process	~~121~~113		~~124~~121
Finished goods	119		1
Net inventories	$	~~215~~221	$	~~213~~215

Changes in allowances for excess and obsolete inventory were as follows:

Balance, March 31, 2015	$	17
Expense	3
Write-offs	—
Other adjustments	4
Balance, December 31, 2015	$	24
Expense	—
Write-offs	(1		)
Other adjustments	1
Balance, December 31, 2016	$	24

7. Net Property, Plant and Equipment

Net property, plant and equipment consisted of the following:

	December 31,
	2016			2015
	2017			2016
	(in millions)
Land	$	29		$	3429
Buildings and other improvements	~~383~~412			~~370~~383
Machinery, equipment and other	1,~~313~~432			1,~~290~~313
Property not yet in service	~~212~~280			~~134~~212
Gross property, plant and equipment	12,~~937~~153			1,~~828~~937
Less accumulated depreciation	(1,~~121~~219		)	(1,~~066~~121		)
Net property, plant and equipment	$	~~816~~934		$	~~762~~816

Depreciation expense was $~~116~~118 million for the year ended December 31, ~~2016~~2017, $89116 million in the ~~2015~~year ~~transition~~ended ~~period~~December 31, 2016 and $7389 million in ~~fiscal~~the 2015 transition period.

688. Goodwill and Net Intangibles

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8. Goodwill, Net Intangibles and Other Noncurrent Assets

Changes in goodwill by segment were as follows:

	Flight Systems Group		Defense Systems Group		Space Systems Group			Total
	(in millions)
Balance, March 31, 2015	$	798	$	363	$	701		$	1,862
Balance, December 31, 2015	$	923	$	363	$	542		$	1,828
Measurement period adjustments	125		—		(159		)	(34		)
Balance, December 31, 2015	923		363		542			1,828
Measurement period adjustments	6		—		(2		)	4
Balance, December 31, 2016	$929	~~929~~	$363	~~363~~	$540	~~540~~		$1,832	~~1,832~~
Adjustments	—		—		—			—
Balance at December 31, 2017	$	929	$	363	$	540		$	1,832

The ~~results of the Company's annual~~ goodwill impairment ~~test~~analysis inconducted ~~fiscal~~for ~~2015 indicated that~~ the ~~net~~years ~~book~~ended ~~value~~December ~~of Space Systems Group's~~31, ~~Space~~2017 Components division exceeded the implied fair market value. The Company recorded an impairment of $34 million in the fourth quarter of fiscal 2015. The impairment was primarily driven by a reduction in near-term estimated cash flows compared to the prior year forecast, resulting from, among other things, government budget constraints and ~~increased~~2016 ~~competitive pressures in the satellite~~ and ~~spacecraft~~for ~~manufacturing market. In~~ the 2015 transition period, ~~the Company did not identify any indications of goodwill impairment. The goodwill impairment analysis conducted for the year ended December 31, 2016~~ concluded there were no impairments.

Goodwill recorded within Defense Systems Group and Space Systems Group is presented net of accumulated impairment losses totaling $4 million and $143 million, respectively, at December 31, ~~2016~~2017.

	December 31, 2016							December 31, 2015
	GrossCarryingAmount		AccumulatedAmortization			Total		GrossCarryingAmount		AccumulatedAmortization			Total
	(in millions)
Contract Backlog	$	173	$	(79	)	$	94	$	179	$	(37	)	$	142
Patented technology	11		(7		)	4		11		(6		)	5
Customer relationships and other	2		(2		)	—		24		(24		)	—
Net intangibles	$	186	$	(88	)	$	98	$	214	$	(67	)	$	147

Net intangibles consisted of the following amortizing intangibles:

The contract backlog asset in the table above is being amortized as underlying costs are recognized under the contract. The other assets in the table above are being amortized using a straight-line method. Amortization expense related to these assets was $43 million for the year ended December 31, 2016, $33 million in the 2015 transition period and $9 million in fiscal 2015.

	Contract Backlog		Patents and Customer Relationships		Total
	(in millions)
2017	$	36	$	1	$	37
2018	25		1		26
2019	22		1		23
2020	11		1		12
2021	—		—		—
Total	$	94	$	4	$	98

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Other noncurrent assets consisted of the following:



	December 31, 2017							December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Total		Gross Carrying Amount		Accumulated Amortization			Total
	(in millions)
Contract backlog	$	173	$	(115	)	$	58	$	173	$	(79	)	$	94
Patented technology	11		(8		)	3		11		(7		)	4
Customer relationships and other	—

(Amounts in millions of pounds)

December 31,

Filing Compare · Northrop Grumman Innovation Systems, Inc.