falsedesktopHRS2019-09-27000020205819000103{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "\tPage No.\nPart I. Financial Information:\t\nItem 1. Financial Statements (Unaudited):\t\nCondensed Consolidated Statement of Income for the Quarter Ended September 27 2019 and September 28 2018\t1\nCondensed Consolidated Statement of Comprehensive Income for the Quarter Ended September 27 2019 and September 28 2018\t2\nCondensed Consolidated Balance Sheet at September 27 2019 and June 28 2019\t3\nCondensed Consolidated Statement of Cash Flows for the Quarter Ended September 27 2019 and September 28 2018\t4\nCondensed Consolidated Statement of Equity for the Quarter Ended September 27 2019 and September 28 2018\t5\nNotes to Condensed Consolidated Financial Statements\t6\nReport of Independent Registered Public Accounting Firm\t31\nItem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations\t32\nItem 3. Quantitative and Qualitative Disclosures About Market Risk\t49\nItem 4. Controls and Procedures\t51\nPart II. Other Information:\t\nItem 1. Legal Proceedings\t52\nItem 1A. Risk Factors\t52\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds\t52\nItem 3. Defaults Upon Senior Securities\t53\nItem 4. Mine Safety Disclosures\t53\nItem 5. Other Information\t53\nItem 6. Exhibits\t54\nSignature\t55\n", "q10k_tbl_1": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions except per share amounts)\t\nRevenue from product sales and services\t4431\t1542\nCost of product sales and services\t(3242)\t(1010)\nEngineering selling and administrative expenses\t(999)\t(279)\nGain on sale of business\t229\t0\nNon-operating income\t79\t47\nInterest income\t9\t1\nInterest expense\t(67)\t(44)\nIncome from continuing operations before income taxes\t440\t257\nIncome taxes\t(5)\t(41)\nIncome from continuing operations\t435\t216\nDiscontinued operations net of income taxes\t0\t(3)\nNet income\t435\t213\nNoncontrolling interests net of income taxes\t(6)\t0\nNet income attributable to L3Harris Technologies Inc.\t429\t213\nAmounts attributable to L3Harris Technologies Inc. common shareholders\t\t\nIncome from continuing operations\t429\t216\nDiscontinued operations net of income taxes\t0\t(3)\nNet income\t429\t213\nNet income per common share attributable to L3Harris Technologies Inc. common shareholders\t\t\nBasic\t\t\nContinuing operations\t1.93\t1.82\nDiscontinued operations\t0\t(0.01)\n\t1.93\t1.81\nDiluted\t\t\nContinuing operations\t1.90\t1.78\nDiscontinued operations\t0\t(0.01)\n\t1.90\t1.77\nBasic weighted average common shares outstanding\t222.6\t117.9\nDiluted weighted average common shares outstanding\t225.4\t120.6\n", "q10k_tbl_2": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions)\t\nNet income\t435\t213\nOther comprehensive loss:\t\t\nForeign currency translation loss net of income taxes\t(25)\t0\nNet unrealized gain (loss) on hedging derivatives net of income taxes\t(38)\t1\nNet unrecognized loss on postretirement obligations net of income taxes\t0\t(1)\nOther comprehensive loss net of income taxes\t(63)\t0\nTotal comprehensive income\t372\t213\nComprehensive income attributable to noncontrolling interests\t(6)\t0\nTotal comprehensive income attributable to L3Harris Technologies Inc.\t366\t213\n", "q10k_tbl_3": "\tSeptember 27 2019\tJune 28 2019\n\t(In millions except shares)\t\nAssets\t\t\nCurrent Assets\t\t\nCash and cash equivalents\t1001\t530\nReceivables\t1275\t457\nContract assets\t2625\t807\nInventories\t1339\t360\nIncome taxes receivable\t291\t191\nOther current assets\t496\t100\nAssets of disposal group held for sale\t0\t133\nTotal current assets\t7027\t2578\nNon-current Assets\t\t\nProperty plant and equipment\t2073\t894\nOperating lease right-of-use assets\t934\t0\nGoodwill\t20749\t5340\nOther intangible assets\t7516\t870\nDeferred income taxes\t124\t173\nOther non-current assets\t524\t262\nTotal non-current assets\t31920\t7539\n\t38947\t10117\nLiabilities and Equity\t\t\nCurrent Liabilities\t\t\nShort-term debt\t3\t103\nAccounts payable\t1423\t525\nContract liabilities\t1210\t496\nCompensation and benefits\t521\t161\nOther accrued items\t881\t283\nIncome taxes payable\t24\t8\nCurrent portion of long-term debt net\t656\t656\nLiabilities of disposal group held for sale\t0\t36\nTotal current liabilities\t4718\t2268\nNon-current Liabilities\t\t\nDefined benefit plans\t2145\t1174\nOperating lease liabilities\t831\t0\nLong-term debt net\t6307\t2763\nDeferred income taxes\t1192\t12\nOther long-term liabilities\t829\t537\nTotal non-current liabilities\t11304\t4486\nEquity\t\t\nShareholders' Equity:\t\t\nPreferred stock without par value; 1000000 shares authorized; none issued\t0\t0\nCommon stock $1.00 par value; 500000000 shares authorized; issued and outstanding 221568390 shares at September 27 2019 and 118552599 shares at June 28 2019\t222\t119\nOther capital\t21288\t1778\nRetained earnings\t2019\t2173\nAccumulated other comprehensive loss\t(756)\t(707)\nTotal shareholders' equity\t22773\t3363\nNoncontrolling interests\t152\t0\nTotal equity\t22925\t3363\n\t38947\t10117\n", "q10k_tbl_4": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions)\t\nOperating Activities\t\t\nNet income\t435\t213\nAdjustments to reconcile net income to net cash provided by operating activities:\t\t\nDepreciation and amortization\t201\t65\nShare-based compensation\t143\t38\nQualified pension plan contributions\t(327)\t0\nPension and other postretirement benefit plan income\t(58)\t(38)\nGain on sale of business net\t(229)\t0\nGain on sale of asset group\t(12)\t0\nDeferred income taxes\t0\t9\n(Increase) decrease in:\t\t\nAccounts receivable\t31\t34\nContract assets\t(110)\t(88)\nInventories\t75\t(3)\nIncrease (decrease) in:\t\t\nAccounts payable\t0\t(141)\nContract liabilities\t(7)\t38\nCompensation and benefits\t37\t(16)\nIncome taxes\t(28)\t28\nOther accrued items\t7\t(6)\nOther\t(77)\t(16)\nNet cash provided by operating activities\t81\t117\nInvesting Activities\t\t\nNet additions of property plant and equipment\t(84)\t(31)\nProceeds from sale of business net\t346\t0\nNet cash acquired in L3Harris Merger\t1132\t0\nProceeds from sale of asset group\t20\t0\nNet cash provided by (used in) investing activities\t1414\t(31)\nFinancing Activities\t\t\nNet proceeds from borrowings\t3\t216\nRepayments of borrowings\t(100)\t0\nProceeds from exercises of employee stock options\t95\t15\nRepurchases of common stock\t(750)\t(200)\nCash dividends\t(177)\t(82)\nOther financing activities\t(85)\t(18)\nNet cash used in financing activities\t(1014)\t(69)\nEffect of exchange rate changes on cash and cash equivalents\t(10)\t0\nNet increase in cash and cash equivalents\t471\t17\nCash and cash equivalents beginning of year\t530\t288\nCash and cash equivalents end of quarter\t1001\t305\n", "q10k_tbl_5": "\tCommon Stock\tOther Capital\tRetained Earnings\tAccumulated Other Comprehensive Loss\tNon-controlling Interests\tTotal Equity\n\t(In millions except per share amounts)\t\t\t\t\t\nBalance at June 28 2019\t119\t1778\t2173\t(707)\t0\t3363\nNet income\t0\t0\t429\t0\t6\t435\nOther comprehensive loss\t0\t0\t0\t(63)\t0\t(63)\nShares issued for L3Harris Merger\t104\t19696\t0\t0\t0\t19800\nEquity issuance costs\t0\t(2)\t0\t0\t0\t(2)\nNet loss from postretirement obligations and hedging derivatives reclassified to earnings\t0\t0\t0\t14\t0\t14\nShares issued under stock incentive plans\t2\t93\t0\t0\t0\t95\nShares issued under defined contribution plans\t0\t48\t0\t0\t0\t48\nShare-based compensation expense\t0\t94\t0\t0\t0\t94\nRepurchases and retirement of common stock\t(3)\t(419)\t(411)\t0\t0\t(833)\nCash dividends ($.75 per share)\t0\t0\t(172)\t0\t0\t(172)\nDistributions to noncontrolling interests\t0\t0\t0\t0\t(5)\t(5)\nFair value of noncontrolling interests recognized in purchase accounting\t0\t0\t0\t0\t151\t151\nBalance at September 27 2019\t222\t21288\t2019\t(756)\t152\t22925\nBalance at June 29 2018\t118\t1714\t1648\t(202)\t0\t3278\nNet income\t0\t0\t213\t0\t0\t213\nShares issued under stock incentive plans\t1\t15\t0\t0\t0\t16\nShares issued under defined contribution plans\t0\t23\t0\t0\t0\t23\nShare-based compensation expense\t0\t14\t0\t0\t0\t14\nRepurchases and retirement of common stock\t(1)\t(118)\t(99)\t0\t0\t(218)\nCash dividends ($.685 per share)\t0\t0\t(82)\t0\t0\t(82)\nBalance at September 28 2018\t118\t1648\t1680\t(202)\t0\t3244\n", "q10k_tbl_6": "\t(In millions except exchange ratio and per share amounts)\nOutstanding shares of L3 common stock as of June 28 2019\t79.63\nL3 restricted stock unit awards settled in shares of L3Harris common stock\t0.41\nL3 performance unit awards settled in shares of L3Harris common stock\t0.04\n\t80.08\nExchange Ratio\t1.30\nShares of L3Harris common stock issued for L3 outstanding common stock\t104.10\nPrice per share of L3Harris common stock as of June 28 2019\t189.13\nFair value of L3Harris common stock issued for L3 outstanding common stock\t19689\nFair value of replacement RSUs attributable to merger consideration\t10\nFair value of L3Harris stock options issued for L3 outstanding stock options\t101\nWithholding tax liability incurred for converted L3 share-based awards\t45\nFair value of replacement award consideration\t156\nFair value of total consideration\t19845\nLess cash acquired\t(1195)\nTotal net consideration transferred\t18650\n", "q10k_tbl_7": "\t(In millions)\nReceivables\t849\nContract assets\t1708\nInventories\t1056\nOther current assets\t517\nProperty plant and equipment\t1176\nOperating lease right-of-use assets\t704\nGoodwill\t15423\nOther intangible assets\t6768\nOther non-current assets\t327\nTotal assets acquired\t28528\nAccounts payable\t898\nContract liabilities\t722\nOther current liabilities\t772\nOperating lease liabilities\t715\nDefined benefit plans\t1411\nLong-term debt net\t3548\nOther long-term liabilities\t1661\nTotal liabilities assumed\t9727\nNet assets acquired\t18801\nNoncontrolling interests\t(151)\nTotal net consideration transferred\t18650\n", "q10k_tbl_8": "\tWeighted Average Amortization Period\tTotal\n\t(In years)\t(In millions)\nIdentifiable intangible assets acquired:\t\t\nCustomer relationships (Government)\t15\t3549\nCustomer relationships (Commercial)\t16\t561\nTrade names - Divisions\t10\t162\nDeveloped technology\t8\t630\nTotal identifiable intangible assets subject to amortization\t14\t4902\nTrade names - Corporate\tindefinite\t1803\nIn-process research and development\tn/a\t63\nTotal identifiable intangible assets\t\t6768\n", "q10k_tbl_9": "\tSeptember 28 2018\n\t(In millions)\nRevenue from product sales and services - as reported\t1542\nRevenue from product sales and services - pro forma\t4018\nIncome from continuing operations - as reported\t216\nIncome from continuing operations - pro forma\t373\n", "q10k_tbl_10": "\tJune 28 2019\n\t(In millions)\nReceivables\t18\nInventories\t52\nProperty plant and equipment\t29\nGoodwill\t30\nOther intangible assets\t4\nAssets of disposal group held for sale\t133\nAccounts payable\t13\nContract liabilities\t1\nCompensation and benefits\t3\nOther accrued items\t3\nDefined benefit plans\t16\nLiabilities of disposal group held for sale\t36\n", "q10k_tbl_11": "\tEmployee severance-related costs\tFacilities consolidation and other exit costs\tTotal\n\t(In millions)\t\t\nBalance at June 28 2019\t0\t16\t16\nAdditional provisions\t111\t0\t111\nPayments\t(37)\t(3)\t(40)\nBalance at September 27 2019\t74\t13\t87\n", "q10k_tbl_12": "\tForeign currency translation(1)\tNet unrealized (losses) gains on hedging derivatives(2)\tUnrecognized postretirement obligations(3)\tTotal AOCI\n\t(In millions)\t\t\t\nBalance at June 28 2019\t(106)\t(38)\t(563)\t(707)\nOther comprehensive loss\t(25)\t(38)\t0\t(63)\nAmounts reclassified to earnings from AOCI\t0\t1\t13\t14\nBalance at September 27 2019\t(131)\t(75)\t(550)\t(756)\nBalance at June 29 2018\t(99)\t(20)\t(83)\t(202)\nOther comprehensive income (loss)\t0\t1\t(1)\t0\nAmounts reclassified to earnings from AOCI\t0\t0\t0\t0\nBalance at September 28 2018\t(99)\t(19)\t(84)\t(202)\n", "q10k_tbl_13": "\tSeptember 27 2019\tJune 28 2019\n\t(In millions)\t\nAccounts receivable\t1283\t459\nLess allowances for collection losses\t(8)\t(2)\n\t1275\t457\n", "q10k_tbl_14": "\tSeptember 27 2019\tJune 28 2019\n\t(In millions)\t\nContract assets\t2625\t807\nContract liabilities current\t(1210)\t(496)\nContract liabilities non-current(1)\t(80)\t(42)\nNet contract assets\t1335\t269\n", "q10k_tbl_15": "\tSeptember 27 2019\tJune 28 2019\n\t(In millions)\t\nUnbilled contract receivables gross\t3969\t916\nProgress payments and advances\t(1344)\t(109)\n\t2625\t807\n", "q10k_tbl_16": "\tSeptember 27 2019\tJune 28 2019\n\t(In millions)\t\nFinished products\t273\t77\nWork in process\t430\t90\nRaw materials and supplies\t636\t193\n\t1339\t360\n", "q10k_tbl_17": "\tSeptember 27 2019\tJune 28 2019\n\t(In millions)\t\nLand\t71\t40\nSoftware capitalized for internal use\t326\t187\nBuildings\t1019\t631\nMachinery and equipment\t2120\t1429\n\t3536\t2287\nLess accumulated depreciation and amortization\t(1463)\t(1393)\n\t2073\t894\n", "q10k_tbl_18": "\tIntegrated Mission Systems\tSpace and Airborne Systems\tCommunication Systems\tAviation Systems\tTotal\n\t(In millions)\t\t\t\t\nBalance at June 28 2019\t63\t3707\t924\t646\t5340\nGoodwill acquired\t6297\t1320\t2475\t5331\t15423\nCurrency translation adjustments\t0\t(3)\t0\t(11)\t(14)\nBalance at September 27 2019\t6360\t5024\t3399\t5966\t20749\n", "q10k_tbl_19": "\tSeptember 27 2019\t\t\tJune 28 2019\t\t\n\tGross Carrying Amount\tAccumulated Amortization\tNet Carrying Amount\tGross Carrying Amount\tAccumulated Amortization\tNet Carrying Amount\n\t(In millions)\t\t\t\t\t\nCustomer relationships\t5314\t518\t4796\t1203\t419\t784\nDeveloped technologies\t837\t159\t678\t206\t136\t70\nTrade names\t204\t30\t174\t42\t26\t16\nOther\t5\t3\t2\t2\t2\t0\nTotal intangible assets subject to amortization\t6360\t710\t5650\t1453\t583\t870\nIPR&D\t63\t0\t63\t0\t0\t0\nL3 trade name\t1803\t0\t1803\t0\t0\t0\nTotal intangibles assets\t8226\t710\t7516\t1453\t583\t870\n", "q10k_tbl_20": "\t(In millions)\nYear 1\t575\nYear 2\t586\nYear 3\t553\nYear 4\t522\nYear 5\t490\nThereafter\t2924\nTotal\t5650\n", "q10k_tbl_21": "\t(In millions)\nBalance at June 28 2019\t25\nAcquisitions during the period\t83\nAccruals for product warranties issued during the period\t16\nSettlements made during the period\t(14)\nOther including foreign currency translation adjustments\t(1)\nBalance at September 27 2019\t109\n", "q10k_tbl_22": "\tSeptember 27 2019\tJune 28 2019\n\t(In millions)\t\nVariable-rate debt:\t\t\nFloating rate notes due April 30 2020\t250\t250\nTotal variable-rate debt\t250\t250\nFixed-rate debt:\t\t\n2.7% notes due April 27 2020\t400\t400\n4.95% notes due February 15 2021\t650\t0\n3.85% notes due June 15 2023\t800\t0\n3.95% notes due May 28 2024\t350\t0\n3.832% notes due April 27 2025\t600\t600\n7.0% debentures due January 15 2026\t100\t100\n3.85% notes due December 15 2026\t550\t0\n6.35% debentures due February 1 2028\t26\t26\n4.40% notes due June 15 2028\t1850\t850\n4.854% notes due April 27 2035\t400\t400\n6.15% notes due December 15 2040\t300\t300\n5.054% notes due April 27 2045\t500\t500\nOther\t50\t17\nTotal fixed-rate debt\t6576\t3193\nTotal debt\t6826\t3443\nPlus: unamortized bond premium\t163\t0\nLess: unamortized discounts and issuance costs\t(26)\t(24)\nTotal debt net\t6963\t3419\nLess: current portion of long-term debt net\t(656)\t(656)\nTotal long-term debt net\t6307\t2763\n", "q10k_tbl_23": "\tAggregate Principal Amount of L3 Notes (prior to debt exchange)\tAggregate Principal Amount of New L3Harris Notes Issued\tAggregate Principal Amount of Remaining L3 Notes\n\t(In millions)\t\t\n4.95% notes due February 15 2021 (\"4.95% 2021 Notes\")\t650\t501\t149\n3.85% notes due June 15 2023 (\"3.85% 2023 Notes\")\t800\t741\t59\n3.95% notes due May 28 2024 (\"3.95% 2024 Notes\")\t350\t326\t24\n3.85% notes due December 15 2026 (\"3.85% 2026 Notes\")\t550\t535\t15\n4.40% notes due June 15 2028 (\"4.40% 2028 Notes\")\t1000\t918\t82\nTotal\t3350\t3021\t329\n", "q10k_tbl_24": "\tQuarter Ended September 27 2019\t\n\tPension\tOther Benefits\n\t(In millions)\t\nNet periodic benefit income\t\t\nService cost\t21\t1\nInterest cost\t76\t2\nExpected return on plan assets\t(157)\t(5)\nAmortization of net actuarial gain\t0\t(1)\nNet periodic benefit income\t(60)\t(3)\nEffect of curtailments or settlements(1)\t5\t0\nTotal net periodic benefit income\t(55)\t(3)\n", "q10k_tbl_25": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions except per share amounts)\t\nIncome from continuing operations\t429\t216\nAdjustments for participating securities outstanding\t0\t(1)\nIncome from continuing operations used in per basic and diluted common share calculations (A)\t429\t215\nBasic weighted average common shares outstanding (B)\t222.6\t117.9\nImpact of dilutive share-based awards\t2.8\t2.7\nDiluted weighted average common shares outstanding (C)\t225.4\t120.6\nIncome from continuing operations per basic common share (A)/(B)\t1.93\t1.82\nIncome from continuing operations per diluted common share (A)/(C)\t1.90\t1.78\n", "q10k_tbl_26": "\t(In millions)\nQuarter ended January 3 2020\t49\nYear 1\t162\nYear 2\t135\nYear 3\t124\nYear 4\t104\nThereafter\t548\nTotal future lease payments required\t1122\nLess: imputed interest\t162\nTotal\t960\n", "q10k_tbl_27": "\t(In millions)\nYear 1\t68\nYear 2\t62\nYear 3\t47\nYear 4\t40\nYear 5\t32\nThereafter\t64\nTotal minimum lease payments required\t313\n", "q10k_tbl_28": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions)\t\nPension adjustment(1)\t80\t47\nOther\t(1)\t0\n\t79\t47\n", "q10k_tbl_29": "\tSeptember 27 2019\n\t(In millions)\nBalance at beginning of period\t204\nAdditions based on tax positions taken during the period\t12\nAdditions based on tax positions taken during prior periods\t11\nAdditions for tax positions related to acquired entities\t169\nDecreases based on tax positions taken during prior periods\t0\nDecreases from lapse in statutes of limitations\t(12)\nBalance at end of period\t384\n", "q10k_tbl_30": "\tSeptember 27 2019\t\t\tJune 28 2019\t\t\n\tTotal\tLevel 1\tLevel 2\tTotal\tLevel 1\tLevel 2\n\t(In millions)\t\t\t\t\t\nAssets\t\t\t\t\t\t\nDeferred compensation plan assets:(1)\t\t\t\t\t\t\nEquity and fixed income securities\t0\t0\t0\t38\t38\t0\nInvestments measured at NAV:\t\t\t\t\t\t\nEquity and fixed income funds\t26\t\t\t61\t\t\nCorporate-owned life insurance\t28\t\t\t28\t\t\nTotal investments measured at NAV\t54\t\t\t89\t\t\nTotal fair value of deferred compensation plan assets\t54\t0\t0\t127\t38\t0\nDerivatives (foreign currency forward contracts)\t4\t0\t4\t0\t0\t0\nTotal assets measured at fair value\t58\t0\t4\t127\t38\t0\nLiabilities\t\t\t\t\t\t\nDeferred compensation plan liabilities:(2)\t\t\t\t\t\t\nEquity securities and mutual funds\t3\t3\t0\t25\t25\t0\nInvestments measured at NAV:\t\t\t\t\t\t\nCommon/collective trusts and guaranteed investment contracts\t56\t\t\t132\t\t\nTotal fair value of deferred compensation plan liabilities\t59\t3\t0\t157\t25\t0\nDerivatives (foreign currency forward contracts)\t12\t0\t12\t0\t0\t0\nDerivatives (treasury lock contracts)\t107\t0\t107\t26\t0\t26\nTotal liabilities measured at fair value\t178\t3\t119\t183\t25\t26\n", "q10k_tbl_31": "\tSeptember 27 2019\t\tJune 28 2019\t\n\tCarrying Amount\tFair Value\tCarrying Amount\tFair Value\n\t(In millions)\t\t\t\nLong-term debt (including current portion)(1)\t6963\t7536\t3419\t3802\n", "q10k_tbl_32": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions)\t\nRevenue\t\t\nIntegrated Mission Systems\t1303\t12\nSpace and Airborne Systems\t1162\t840\nCommunication Systems\t1032\t480\nAviation Systems\t948\t172\nOther non-reportable business segments(1)\t23\t39\nCorporate eliminations\t(37)\t(1)\n\t4431\t1542\nIncome From Continuing Operations Before Income Taxes\t\t\nSegment Operating Income:\t\t\nIntegrated Mission Systems\t180\t2\nSpace and Airborne Systems\t226\t156\nCommunication Systems\t234\t137\nAviation Systems\t127\t24\nOther business activities and non-reportable business segments(2)\t(93)\t6\nMerger acquisition and divestiture-related expenses and losses\t(281)\t0\nAmortization of acquisition-related intangibles(3)\t(123)\t(25)\nGain on sale of business\t229\t0\nPension adjustment\t(80)\t(47)\nNon-operating income\t79\t47\nNet interest expense\t(58)\t(43)\n\t440\t257\n", "q10k_tbl_33": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions)\t\nRevenue By Customer Relationship\t\t\nPrime contractor\t890\t6\nSubcontractor\t413\t6\n\t1303\t12\nRevenue By Contract Type\t\t\nFixed-price(1)\t1021\t12\nCost-reimbursable\t282\t0\n\t1303\t12\nRevenue By Geographical Region\t\t\nUnited States\t1074\t9\nInternational\t229\t3\n\t1303\t12\n", "q10k_tbl_34": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions)\t\nRevenue By Customer Relationship\t\t\nPrime contractor\t697\t510\nSubcontractor\t465\t330\n\t1162\t840\nRevenue By Contract Type\t\t\nFixed-price(1)\t691\t473\nCost-reimbursable\t471\t367\n\t1162\t840\nRevenue By Geographical Region\t\t\nUnited States\t1015\t714\nInternational\t147\t126\n\t1162\t840\n", "q10k_tbl_35": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions)\t\nRevenue By Customer Relationship(1)\t\t\nPrime contractor\t679\t\nSubcontractor\t353\t\n\t1032\t\nRevenue By Contract Type(1)\t\t\nFixed-price(2)\t875\t\nCost-reimbursable\t157\t\n\t1032\t\nRevenue by Geographical Region\t\t\nUnited States\t721\t221\nInternational\t311\t259\n\t1032\t480\n", "q10k_tbl_36": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions)\t\nRevenue By Customer Relationship\t\t\nPrime contractor\t584\t168\nSubcontractor\t364\t4\n\t948\t172\nRevenue By Contract Type\t\t\nFixed-price(1)\t784\t152\nCost-reimbursable\t164\t20\n\t948\t172\nRevenue By Geographical Region\t\t\nUnited States\t724\t162\nInternational\t224\t10\n\t948\t172\n", "q10k_tbl_37": "\tSeptember 27 2019\tJune 28 2019\n\t(In millions)\t\nTotal Assets\t\t\nIntegrated Mission Systems\t8666\t87\nSpace and Airborne Systems\t6767\t5027\nCommunication Systems\t5145\t1683\nAviation Systems\t8723\t1036\nCorporate(1)\t9646\t2284\n\t38947\t10117\n", "q10k_tbl_38": "\tReported\t\t\tPro Forma\t\t\n\tQuarter Ended\t\t\tQuarter Ended\t\t\n\tSeptember 27 2019\tSeptember 28 2018\t% Inc/(Dec)\tSeptember 27 2019\tSeptember 28 2018\t% Inc/(Dec)\n\t(Dollars in millions except per share amounts)\t\t\t\t\t\nRevenue:\t\t\t\t\t\t\nIntegrated Mission Systems\t1303\t12\t*\t1303\t1187\t10%\nSpace and Airborne Systems\t1162\t840\t38%\t1162\t971\t20%\nCommunication Systems\t1032\t480\t115%\t1032\t933\t11%\nAviation Systems\t948\t172\t451%\t948\t953\t(1)%\nOther non-reportable business segments\t23\t39\t(41)%\t23\t8\t188%\nCorporate eliminations\t(37)\t(1)\t*\t(37)\t(34)\t*\nTotal revenue\t4431\t1542\t187%\t4431\t4018\t10%\nCost of product sales and services\t(3242)\t(1010)\t221%\t(3242)\t(2831)\t15%\nGross margin\t1189\t532\t123%\t1189\t1187\t0\n% of total revenue\t27%\t35%\t\t27%\t30%\t\nEngineering selling and administrative expenses\t(999)\t(279)\t258%\t(999)\t(750)\t33%\n% of total revenue\t23%\t18%\t\t23%\t19%\t\nGain (loss) on sales of businesses\t229\t0\t*\t229\t(4)\t*\nNon-operating income\t79\t47\t68%\t79\t52\t52%\nNet interest expense\t(58)\t(43)\t35%\t(58)\t(68)\t(15)%\nIncome from continuing operations before income taxes\t440\t257\t71%\t440\t417\t6%\nIncome taxes\t(5)\t(41)\t(88)%\t(5)\t(44)\t(89)%\nEffective tax rate\t1%\t16%\t\t1%\t11%\t\nIncome from continuing operations\t435\t216\t101%\t435\t373\t17%\nNoncontrolling interests net of income taxes\t(6)\t0\t*\t(6)\t(6)\t0\nIncome from continuing operations attributable to L3Harris Technologies Inc. common shareholders\t429\t216\t99%\t429\t367\t17%\n% of total revenue\t10%\t14%\t\t10%\t9%\t\nIncome from continuing operations per diluted common share attributable to L3Harris Technologies Inc. common shareholders\t1.90\t1.78\t7%\t1.90\t1.63\t17%\n", "q10k_tbl_39": "Unaudited Pro Forma Condensed Combined Statement of Income\t\t\t\t\t\nFor the quarter ended September 28 2018\t\t\t\t\t\n\tHistorical Harris\tHistorical L3\tPro Forma Adjustments\tNote References\tPro Forma Combined\n\t(In millions except per share amounts)\t\t\t\t\nRevenue from product sales and services\t1542\t2519\t(4)\ta\t4018\n\t\t\t(39)\tb\t\nCost of product sales and services\t(1010)\t(1842)\t4\ta\t(2831)\n\t\t\t27\tb\t\n\t\t\t(10)\tc\t\nEngineering selling and administrative expenses\t(279)\t(396)\t2\td\t(750)\n\t\t\t6\tb\t\n\t\t\t(78)\tc\t\n\t\t\t(2)\te\t\n\t\t\t2\tf\t\n\t\t\t(5)\tj\t\nLoss on sale of businesses\t0\t0\t(4)\tj\t(4)\nLoss on sale of Crestview Aerospace and TCS businesses\t0\t(4)\t4\tj\t0\nMerger acquisition and divestiture related expenses\t0\t(5)\t5\tj\t0\nNon-operating income\t47\t0\t16\tg\t52\n\t\t\t(11)\tj\t\nInterest and other income net\t0\t15\t(15)\tj\t0\nDebt retirement charge\t0\t(21)\t21\tj\t0\nInterest income\t1\t0\t5\tj\t6\nInterest expense\t(44)\t(40)\t1\th\t(74)\n\t\t\t9\ti\t\nIncome from continuing operations before income taxes\t257\t226\t(66)\t\t417\nIncome taxes\t(41)\t(18)\t15\tk\t(44)\nIncome from continuing operations\t216\t208\t(51)\t\t373\nIncome from continuing operations attributable to noncontrolling interests\t0\t(6)\t0\t\t(6)\nIncome from continuing operations attributable to common shareholders\t216\t202\t(51)\t\t367\nIncome from continuing operations per basic common share attributable to common shareholders\t1.82\t\t\t\t1.65\nIncome from continuing operations per diluted common share attributable to common shareholders\t1.78\t\t\t\t1.63\nBasic weighted average common shares outstanding\t117.9\t\t104.1\tl\t222.0\nDiluted weighted average common shares outstanding\t120.6\t\t104.6\tl\t225.2\n", "q10k_tbl_40": "\tWeighted Average Amortization Period\tFair Value\tQuarter ended September 28 2018\n\t(In years)\t(In millions)\t\nIdentifiable Intangible Assets Acquired:\t\t\t\nCustomer relationships (Government)\t15\t3549\t70\nCustomer relationships (Commercial)\t16\t561\t4\nTrade names - Divisions\t10\t162\t4\nAdjustment to engineering selling and administrative expenses\t\t\t78\nDeveloped technology\t8\t630\t20\nLess: L3 historical amortization\t\t\t(10)\nAdjustment to cost of product sales and services\t\t\t10\nTotal net adjustment to amortization expense\t\t\t88\n", "q10k_tbl_41": "\tQuarter Ended\t\t\n\tSeptember 27 2019\tSeptember 28 2018\t% Inc/(Dec)\n\t(Dollars in millions)\t\t\nRevenue\t1303\t12\t*\nSegment operating income\t180\t2\t*\n% of revenue\t14%\t17%\t\n", "q10k_tbl_42": "\tQuarter Ended\t\t\n\tSeptember 27 2019\tSeptember 28 2018\t% Inc/(Dec)\n\t(Dollars in millions)\t\t\nRevenue\t1162\t840\t38%\nSegment operating income\t226\t156\t45%\n% of revenue\t19%\t19%\t\n", "q10k_tbl_43": "\tQuarter Ended\t\t\n\tSeptember 27 2019\tSeptember 28 2018\t% Inc/(Dec)\n\t(Dollars in millions)\t\t\nRevenue\t1032\t480\t115%\nSegment operating income\t234\t137\t71%\n% of revenue\t23%\t29%\t\n", "q10k_tbl_44": "\tQuarter Ended\t\t\n\tSeptember 27 2019\tSeptember 28 2018\t% Inc/(Dec)\n\t(Dollars in millions)\t\t\nRevenue\t948\t172\t*\nSegment operating income\t127\t24\t*\n% of revenue\t13%\t14%\t\n", "q10k_tbl_45": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions)\t\nNet cash provided by operating activities\t81\t117\nNet cash provided by (used in) investing activities\t1414\t(31)\nNet cash used in financing activities\t(1014)\t(69)\nEffect of exchange rate changes on cash and cash equivalents\t(10)\t0\nNet increase in cash and cash equivalents\t471\t17\nCash and cash equivalents beginning of period\t530\t288\nCash and cash equivalents end of period\t1001\t305\n", "q10k_tbl_46": "\tQuarter Ended\t\n\tSeptember 27 2019\tSeptember 28 2018\n\t(In millions)\t\nFavorable adjustments\t138\t32\nUnfavorable adjustments\t(76)\t(35)\nNet operating income adjustments\t62\t(3)\n", "q10k_tbl_47": "Period*\tTotal number of shares purchased\tAverage price paid per share\tTotal number of shares purchased as part of publicly announced plans or programs (1)\tMaximum approximate dollar value of shares that may yet be purchased under the plans or programs (1)\nMonth No. 1\t\t\t\t\n(June 29 2019 - July 26 2019)\t\t\t\t\nRepurchase program(1)\t0\t0\t0\t4000000000\nEmployee transactions(2)\t780853\t189.37\t0\t0\nMonth No. 2\t\t\t\t\n(July 27 2019 - August 30 2019)\t\t\t\t\nRepurchase program(1)\t1550000\t207.74\t1550000\t3678008770\nEmployee transactions(2)\t8186\t208.81\t0\t0\nMonth No. 3\t\t\t\t\n(August 31 2019 - September 27 2019)\t\t\t\t\nRepurchase program(1)\t2032500\t210.63\t2032500\t3249903843\nEmployee transactions(2)\t19450\t211.13\t0\t0\nTotal\t4390989\t\t3582500\t3249903843\n", "q10k_tbl_48": "(3)\t(a) Restated Certificate of Incorporation of L3Harris Technologies Inc. (1995) as amended incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on July 1 2019. (Commission File Number 1-3863)\n\t(b) Amended and Restated By-Laws of L3Harris Technologies Inc. incorporated herein by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the SEC on July 1 2019. (Commission File Number 1-3863)\n(10.1)\tSummary of Annual Compensation of Non-Employee Directors of L3Harris Technologies Inc. effective as of June 29 2019 incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on July 1 2019 (Commission File Number 1-3863).*\n(10.2)\tForm of Director and Officer Indemnification Agreement for use on or after June 29 2019 incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed with the SEC on July 1 2019 (Commission File Number 1-3863).*\n(10.3)\tL3Harris Technologies Inc. Performance Unit Award Agreement Terms and Conditions (August 1 2019 CEO-COO Award).*\n(10.4)\tL3Harris Technologies Inc. Performance Unit Award Agreement Terms and Conditions (August 1 2019 Momentum Award).*\n(10.5)\tL3Harris Technologies Inc. Performance Stock Option Award Agreement Terms and Conditions (August 1 2019 CEO-COO Award).*\n(10.6)\tL3Harris Technologies Inc. Performance Stock Option Award Agreement Terms and Conditions (August 1 2019 Momentum Award).*\n(10.7)\tL3Harris Technologies Inc. Performance Stock Option Award Agreement Terms and Conditions (August 1 2019 Integration Award).*\n(10.8)\tL3Harris Technologies Inc. Restricted Unit Award Agreement Terms and Conditions (August 1 2019 Integration/Retention/Fiscal Transition Period Award).*\n(10.9)\tL3Harris Technologies Inc. Restricted Unit Award Agreement Terms and Conditions (New Hire/Other Award as of August 1 2019).*\n(15)\tLetter Regarding Unaudited Interim Financial Information.\n(31.1)\tRule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.\n(31.2)\tRule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.\n(32.1)\tSection 1350 Certification of Chief Executive Officer.\n(32.2)\tSection 1350 Certification of Chief Financial Officer.\n(101)\tThe financial information from the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 27 2019 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Statement of Income (ii) the Condensed Consolidated Statement of Comprehensive Income (iii) the Condensed Consolidated Balance Sheet (iv) the Condensed Consolidated Statement of Cash Flows (v) the Condensed Consolidated Statement of Equity and (vi) the Notes to the Condensed Consolidated Financial Statements.\n(104)\tCover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101.\n"}{"bs": "q10k_tbl_3", "is": "q10k_tbl_39", "cf": "q10k_tbl_4"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2019
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to _
Commission File Number: 1-3863
L3HARRIS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
34-0276860
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1025 West NASA Boulevard
Melbourne,
Florida
32919
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (321) 727-9100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $1.00 per share
LHX
New York Stock Exchange
Indicate by check mark whether the registrant (l) 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. þYeso No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þYeso No
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
þ
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
☐
Emerging growth company
☐
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 þ No
The number of shares outstanding of the registrant’s common stock as of October 25, 2019 was 221,064,649 shares.
L3HARRIS TECHNOLOGIES, INC.
FORM 10-Q
For the Quarter Ended September 27, 2019
TABLE OF CONTENTS
Page
No.
Part I. Financial Information:
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statement of Income for the Quarter Ended September 27, 2019 and September 28, 2018
This Report contains trademarks, service marks and registered marks of L3Harris Technologies, Inc. and its subsidiaries. All other trademarks are the property of their respective owners.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Quarter Ended
September 27, 2019
September 28, 2018
(In millions, except per share amounts)
Revenue from product sales and services
$
4,431
$
1,542
Cost of product sales and services
(3,242
)
(1,010
)
Engineering, selling and administrative expenses
(999
)
(279
)
Gain on sale of business
229
—
Non-operating income
79
47
Interest income
9
1
Interest expense
(67
)
(44
)
Income from continuing operations before income taxes
440
257
Income taxes
(5
)
(41
)
Income from continuing operations
435
216
Discontinued operations, net of income taxes
—
(3
)
Net income
435
213
Noncontrolling interests, net of income taxes
(6
)
—
Net income attributable to L3Harris Technologies, Inc.
$
429
$
213
Amounts attributable to L3Harris Technologies, Inc. common shareholders
Income from continuing operations
$
429
$
216
Discontinued operations, net of income taxes
—
(3
)
Net income
$
429
$
213
Net income per common share attributable to L3Harris Technologies, Inc. common shareholders
Basic
Continuing operations
$
1.93
$
1.82
Discontinued operations
—
(0.01
)
$
1.93
$
1.81
Diluted
Continuing operations
$
1.90
$
1.78
Discontinued operations
—
(0.01
)
$
1.90
$
1.77
Basic weighted average common shares outstanding
222.6
117.9
Diluted weighted average common shares outstanding
225.4
120.6
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
1
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
Quarter Ended
September 27, 2019
September 28, 2018
(In millions)
Net income
$
435
$
213
Other comprehensive loss:
Foreign currency translation loss, net of income taxes
(25
)
—
Net unrealized gain (loss) on hedging derivatives, net of income taxes
(38
)
1
Net unrecognized loss on postretirement obligations, net of income taxes
—
(1
)
Other comprehensive loss, net of income taxes
(63
)
—
Total comprehensive income
372
213
Comprehensive income attributable to noncontrolling interests
(6
)
—
Total comprehensive income attributable to L3Harris Technologies, Inc.
$
366
$
213
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
2
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
September 27, 2019
June 28, 2019
(In millions, except shares)
Assets
Current Assets
Cash and cash equivalents
$
1,001
$
530
Receivables
1,275
457
Contract assets
2,625
807
Inventories
1,339
360
Income taxes receivable
291
191
Other current assets
496
100
Assets of disposal group held for sale
—
133
Total current assets
7,027
2,578
Non-current Assets
Property, plant and equipment
2,073
894
Operating lease right-of-use assets
934
—
Goodwill
20,749
5,340
Other intangible assets
7,516
870
Deferred income taxes
124
173
Other non-current assets
524
262
Total non-current assets
31,920
7,539
$
38,947
$
10,117
Liabilities and Equity
Current Liabilities
Short-term debt
$
3
$
103
Accounts payable
1,423
525
Contract liabilities
1,210
496
Compensation and benefits
521
161
Other accrued items
881
283
Income taxes payable
24
8
Current portion of long-term debt, net
656
656
Liabilities of disposal group held for sale
—
36
Total current liabilities
4,718
2,268
Non-current Liabilities
Defined benefit plans
2,145
1,174
Operating lease liabilities
831
—
Long-term debt, net
6,307
2,763
Deferred income taxes
1,192
12
Other long-term liabilities
829
537
Total non-current liabilities
11,304
4,486
Equity
Shareholders’ Equity:
Preferred stock, without par value; 1,000,000 shares authorized; none issued
—
—
Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 221,568,390 shares at September 27, 2019 and 118,552,599 shares at June 28, 2019
222
119
Other capital
21,288
1,778
Retained earnings
2,019
2,173
Accumulated other comprehensive loss
(756
)
(707
)
Total shareholders’ equity
22,773
3,363
Noncontrolling interests
152
—
Total equity
22,925
3,363
$
38,947
$
10,117
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
3
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Quarter Ended
September 27, 2019
September 28, 2018
(In millions)
Operating Activities
Net income
$
435
$
213
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
201
65
Share-based compensation
143
38
Qualified pension plan contributions
(327
)
—
Pension and other postretirement benefit plan income
(58
)
(38
)
Gain on sale of business, net
(229
)
—
Gain on sale of asset group
(12
)
—
Deferred income taxes
—
9
(Increase) decrease in:
Accounts receivable
31
34
Contract assets
(110
)
(88
)
Inventories
75
(3
)
Increase (decrease) in:
Accounts payable
—
(141
)
Contract liabilities
(7
)
38
Compensation and benefits
37
(16
)
Income taxes
(28
)
28
Other accrued items
7
(6
)
Other
(77
)
(16
)
Net cash provided by operating activities
81
117
Investing Activities
Net additions of property, plant and equipment
(84
)
(31
)
Proceeds from sale of business, net
346
—
Net cash acquired in L3Harris Merger
1,132
—
Proceeds from sale of asset group
20
—
Net cash provided by (used in) investing activities
1,414
(31
)
Financing Activities
Net proceeds from borrowings
3
216
Repayments of borrowings
(100
)
—
Proceeds from exercises of employee stock options
95
15
Repurchases of common stock
(750
)
(200
)
Cash dividends
(177
)
(82
)
Other financing activities
(85
)
(18
)
Net cash used in financing activities
(1,014
)
(69
)
Effect of exchange rate changes on cash and cash equivalents
(10
)
—
Net increase in cash and cash equivalents
471
17
Cash and cash equivalents, beginning of year
530
288
Cash and cash equivalents, end of quarter
$
1,001
$
305
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
4
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
Common
Stock
Other
Capital
Retained
Earnings
Accumulated Other
Comprehensive Loss
Non-controlling
Interests
Total
Equity
(In millions, except per share amounts)
Balance at June 28, 2019
$
119
$
1,778
$
2,173
$
(707
)
$
—
$
3,363
Net income
—
—
429
—
6
435
Other comprehensive loss
—
—
—
(63
)
—
(63
)
Shares issued for L3Harris Merger
104
19,696
—
—
—
19,800
Equity issuance costs
—
(2
)
—
—
—
(2
)
Net loss from postretirement obligations and hedging derivatives reclassified to earnings
—
—
—
14
—
14
Shares issued under stock incentive plans
2
93
—
—
—
95
Shares issued under defined contribution plans
—
48
—
—
—
48
Share-based compensation expense
—
94
—
—
—
94
Repurchases and retirement of common stock
(3
)
(419
)
(411
)
—
—
(833
)
Cash dividends ($.75 per share)
—
—
(172
)
—
—
(172
)
Distributions to noncontrolling interests
—
—
—
—
(5
)
(5
)
Fair value of noncontrolling interests recognized in purchase accounting
—
—
—
—
151
151
Balance at September 27, 2019
$
222
$
21,288
$
2,019
$
(756
)
$
152
$
22,925
Balance at June 29, 2018
$
118
$
1,714
$
1,648
$
(202
)
$
—
$
3,278
Net income
—
—
213
—
—
213
Shares issued under stock incentive plans
1
15
—
—
—
16
Shares issued under defined contribution plans
—
23
—
—
—
23
Share-based compensation expense
—
14
—
—
—
14
Repurchases and retirement of common stock
(1
)
(118
)
(99
)
—
—
(218
)
Cash dividends ($.685 per share)
—
—
(82
)
—
—
(82
)
Balance at September 28, 2018
$
118
$
1,648
$
1,680
$
(202
)
$
—
$
3,244
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A — Significant Accounting Policies and Recent Accounting Standards
Basis of Presentation
On October 12, 2018, Harris Corporation, a Delaware corporation (“Harris”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with L3 Technologies, Inc., a Delaware corporation (“L3”), and Leopard Merger Sub Inc., a Delaware corporation and a newly formed, direct wholly owned subsidiary of Harris (“Merger Sub”), pursuant to which Harris and L3 agreed to combine their respective businesses in an all-stock merger, at the closing of which Merger Sub would merge with and into L3, with L3 continuing as the surviving corporation and a direct wholly owned subsidiary of Harris (the “L3Harris Merger”).
The closing of the L3Harris Merger occurred on June 29, 2019 (“Closing Date”), the day after Harris’ fiscal 2019 ended and the first day of the quarter ended September 27, 2019. Upon completion of the L3Harris Merger, Harris was renamed “L3Harris Technologies, Inc.” (“L3Harris”), and each share of L3 common stock converted into the right to receive 1.30 shares (“Exchange Ratio”) of L3Harris common stock. Shares of L3Harris common stock, which previously traded under ticker symbol “HRS” on the New York Stock Exchange (“NYSE”) prior to completion of the L3Harris Merger, are traded under ticker symbol “LHX” following completion of the L3Harris Merger. L3Harris was owned on a fully diluted basis approximately 54 percent by Harris shareholders and 46 percent by L3 shareholders immediately following the completion of the L3Harris Merger.
The preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) requires that the accompanying Condensed Consolidated Financial Statements (Unaudited) and most of the disclosures in these Notes to Consolidated Financial Statements (Unaudited) (these “Notes”) be presented on a historical basis for periods prior to the closing of the L3Harris Merger. Unless the context otherwise requires, the terms “we,” “our,” “us,” “Company” and “L3Harris” as used in this Quarterly Report on Form 10-Q (this “Report”) mean Harris and its subsidiaries when referring to periods prior to the end of fiscal 2019 (prior to the L3Harris Merger) and to the combined company L3Harris Technologies, Inc. and its consolidated subsidiaries when referring to periods after the end of fiscal 2019 (after the L3Harris Merger).
We are accounting for the L3Harris Merger under the acquisition method of accounting. Under the acquisition method of accounting, we are required to measure identifiable assets acquired, liabilities assumed and any noncontrolling interests in the acquiree at their fair values as of the Closing Date. The excess of the consideration transferred over those fair values is recorded as goodwill. See Note B — Business Combination in these Notes for additional information related to the L3Harris Merger.
The accompanying Condensed Consolidated Financial Statements (Unaudited) have been prepared by L3Harris, without an audit, in accordance with GAAP for interim financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all information and footnotes necessary for a complete presentation of financial condition, results of operations, cash flows and equity in conformity with GAAP for annual financial statements. In the opinion of management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of our financial condition, results of operations and cash flows for the periods presented therein. The results for the quarter ended September 27, 2019 are not necessarily indicative of the results that may be expected for the Fiscal Transition Period (as defined below) or any subsequent period. The balance sheet at June 28, 2019 has been derived from our audited financial statements, but does not include all of the information and footnotes required by GAAP for annual financial statements. We provide complete, audited financial statements in our Annual Report on Form 10-K, which includes information and footnotes required by the rules and regulations of the SEC. The information included in this Report should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 28, 2019 (our “Fiscal 2019 Form 10-K”).
We implemented a new organizational structure effective on June 29, 2019, which resulted in changes to our operating segments, which are also reportable segments and referred to as our business segments. The historical results, discussion and presentation of our business segments as set forth in the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes reflect the impact of these changes for all periods presented in order to present segment information on a comparable basis. There is no impact on our previously reported consolidated statements of income, balance sheets, statements of cash flows or statements of equity resulting from these changes.
On September 13, 2019, we completed the sale of the Harris Night Vision business to Elbit Systems of America, LLC, a subsidiary of Elbit Systems Ltd., for $350 million (net cash proceeds of $346 million after selling costs and estimated purchase price adjustments), subject to final customary purchase price adjustments as set forth in the definitive agreement. The Harris Night Vision business was not included in any of the operating segments in our new organizational structure and the operating
6
results of the Harris Night Vision business through the date of the divestiture are discussed and presented as part of “Other non-reportable business segments” in this Report.
See Note C — Business Divestitures and Asset Sales in these Notes for more information regarding the divestiture of the Harris Night Vision business.
Amounts contained in this Report may not always add to totals due to rounding.
Change in Fiscal Year
Through fiscal 2019, our fiscal year ended on the Friday nearest June 30. Commencing June 29, 2019, our fiscal year will end on the Friday nearest December 31, and the period commencing on June 29, 2019 will be a fiscal transition period ending on January 3, 2020 (the “Fiscal Transition Period”). We will file a transition report on Form 10-KT containing audited financial statements for the Fiscal Transition Period.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes and related disclosures. These estimates and assumptions are based on experience and other information available prior to issuance of the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes. Materially different results can occur as circumstances change and additional information becomes known.
Significant Accounting Policies Update
There have been no material changes to our significant accounting policies described in our Fiscal 2019 Form 10-K, except as described in “Adoption of New Accounting Standards” below.
Adoption of New Accounting Standards
Effective June 29, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), as amended (“ASC 842”) using the optional transition method. We initially applied ASC 842 for leases existing as of June 29, 2019 and recognized $270 million of right-of-use (“ROU”) assets and $289 million of lease liabilities in our Condensed Consolidated Balance Sheet (Unaudited). See Note B — Business Combination in these Notes for ROU assets and lease liabilities assumed as part of the L3Harris Merger.
In accordance with ASC 842, we recognized ROU assets and liabilities in our balance sheet for operating and finance leases under which we are the lessee, except for equipment leases and, as permitted by a practical expedient under ASC 842, leases with a term of 12 months or less. Equipment leases were not material at September 27, 2019 and June 29, 2019. We also elected the package of practical expedients permitted under ASC 842 and did not reassess lease classification for existing or expired leases, whether expired or existing contracts contain a lease under the new definition of a lease or whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.
Operating lease assets are classified as operating ROU assets, operating lease liabilities for obligations due within 12 months are classified as other current liabilities and operating lease liabilities for obligations due longer than 12 months are classified as other long-term liabilities. Finance lease assets are classified as property, plant and equipment. Finance lease liabilities are classified as other current liabilities or other long-term liabilities depending on when the obligation is due.
Lease assets and liabilities are recognized based on the present value of future lease payments. Lease payments primarily include base rent. We have some lease payments that are based on an index and changes to the index are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. Our leases also include non-lease components such as real estate taxes and common-area maintenance costs. We elected the practical expedient to account for lease and non-lease components as a single component. In certain of our leases, the non-lease components are variable and are therefore excluded from lease payments to determine the lease asset. The present value of future lease payments is determined using our incremental borrowing rate at lease commencement over the expected lease term. We use our incremental borrowing rate because our lessee leases do not provide an implicit lease rate. The expected lease term represents the number of years we expect to lease the property, including options to extend or terminate the lease when it is reasonably certain that we will exercise such option.
Operating lease expense is recognized as an operating cost on a straight-line basis over the expected lease term in our Condensed Consolidated Statement of Income (Unaudited). For finance leases, the asset is amortized on a straight-line basis over the lease term, and interest on the lease liability is recognized in interest expense. The amortization of lease assets for our finance leases and interest expense was not material for the quarter ended September 27, 2019.
We are a lessor for certain arrangements for flight simulators. These leases meet the criteria for operating lease classification. Lease income associated with these leases was not material for the quarter ended September 27, 2019.
7
Adoption of ASC 842 did not have a material effect on our results of operations or cash flows.
Effective June 29, 2019, we adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in this update are intended to better align companies’ risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedge relationships and the presentation of hedge results. The amendments in this update require companies to present the earnings effect of the hedging instrument in the same income statement line in which the earnings effect of the hedged item is reported. Prior to the adoption of this update, GAAP provided hedge accounting for only the portion of the hedge deemed to be highly effective and required companies to separately reflect the amount by which the hedging instrument did not offset the hedged item, which is referred to as the ineffective amount. The amendments in this update include, among other items, removal of the requirement that companies separately measure and recognize in earnings the ineffective amount for highly effective hedges. Adoption of this standard did not have a material effect on our financial condition, results of operations or cash flows.
Note B — Business Combination
On October 12, 2018, Harris entered into the Merger Agreement with L3 and Merger Sub, pursuant to which Harris and L3 agreed to combine their respective businesses in an all-stock merger, at the closing of which Merger Sub would merge with and into L3, with L3 continuing as the surviving corporation and a direct wholly owned subsidiary of Harris.
The closing of the L3Harris Merger occurred on June 29, 2019, the first day of the quarter ended September 27, 2019. Upon completion of the L3Harris Merger, Harris was renamed “L3Harris Technologies, Inc.” and each share of L3 common stock converted into the right to receive 1.30 shares of L3Harris common stock. L3Harris was owned on a fully diluted basis approximately 54 percent by Harris shareholders and 46 percent by L3 shareholders immediately following the completion of the L3Harris Merger.
L3 was a prime contractor in intelligence, surveillance and reconnaissance (“ISR”) systems, aircraft sustainment (including modifications and fleet management of special mission aircraft), simulation and training, night vision and image intensification equipment, and security and detection systems. L3 also was a leading provider of a broad range of communication, electronic and sensor systems used on military, homeland security and commercial platforms. L3 employed approximately 31,000 employees and its customers included the U.S. Department of Defense and its prime contractors, the U.S. Intelligence Community, the U.S. Department of Homeland Security, foreign governments and domestic and foreign commercial customers. L3 generated calendar 2018 revenue of approximately $10 billion.
As a result of the L3Harris Merger, L3Harris is an agile global aerospace and defense technology innovator, delivering end-to-end solutions that meet customers’ mission-critical needs, with approximately 50,000 employees and customers in 130 countries. We provide advanced defense and commercial technologies across air, land, sea, space and cyber domain.
Approximately 104 million shares of L3Harris common stock were issued to L3 shareholders following the completion of the L3Harris Merger. The trading price of L3Harris common stock was $189.13 per share as of the Closing Date. In addition, replacement L3Harris share-based awards were issued for certain outstanding L3 share-based awards.
We are accounting for the L3Harris Merger under the acquisition method of accounting. Under the acquisition method of accounting, we are required to measure identifiable assets acquired, liabilities assumed and any noncontrolling interests in the acquiree at their fair values as of the Closing Date. Due to the timing of the L3Harris Merger relative to its size and complexity, our accounting for the L3Harris Merger is preliminary. The acquisition-date fair value estimates for consideration transferred, identifiable assets acquired, liabilities assumed and noncontrolling interests are based on preliminary calculations and our estimates and assumptions are subject to change as we obtain additional information during the measurement period (up to one year from the Closing Date).
8
Our preliminary calculation of estimated consideration transferred is summarized below:
(In millions, except exchange ratio and per share amounts)
Outstanding shares of L3 common stock as of June 28, 2019
79.63
L3 restricted stock unit awards settled in shares of L3Harris common stock
0.41
L3 performance unit awards settled in shares of L3Harris common stock
0.04
80.08
Exchange Ratio
1.30
Shares of L3Harris common stock issued for L3 outstanding common stock
104.10
Price per share of L3Harris common stock as of June 28, 2019
$
189.13
Fair value of L3Harris common stock issued for L3 outstanding common stock
$
19,689
Fair value of replacement RSUs attributable to merger consideration
10
Fair value of L3Harris stock options issued for L3 outstanding stock options
101
Withholding tax liability incurred for converted L3 share-based awards
45
Fair value of replacement award consideration
156
Fair value of total consideration
19,845
Less cash acquired
(1,195
)
Total net consideration transferred
$
18,650
Our preliminary measurement of assets acquired, liabilities assumed and nonconrolling interests is summarized below:
(In millions)
Receivables
$
849
Contract assets
1,708
Inventories
1,056
Other current assets
517
Property, plant and equipment
1,176
Operating lease right-of-use assets
704
Goodwill
15,423
Other intangible assets
6,768
Other non-current assets
327
Total assets acquired
$
28,528
Accounts payable
$
898
Contract liabilities
722
Other current liabilities
772
Operating lease liabilities
715
Defined benefit plans
1,411
Long-term debt, net
3,548
Other long-term liabilities
1,661
Total liabilities assumed
9,727
Net assets acquired
18,801
Noncontrolling interests
(151
)
Total net consideration transferred
$
18,650
The goodwill resulting from the L3Harris Merger was primarily associated with L3’s market presence and leading positions, growth opportunities in the markets in which L3 businesses operate, experienced work force and established operating infrastructures. Most of the goodwill related to the L3Harris Merger is nondeductible for tax purposes. As described in more detail in Note X — Business Segment Information in these Notes, we adjusted our segment reporting to reflect our new organizational structure commencing with the quarter ended September 27, 2019. Under the revised reporting structure, our Integrated Mission Systems segment is comprised almost entirely of L3 operating businesses, as of the acquisition date, whereas our other segments are comprised of both L3 and Harris operating businesses.
9
See Note K — Goodwill and Other Intangible Assets in these Notes for more information regarding the preliminary allocation of goodwill by reportable business segment under the revised reporting structure.
The following table provides further detail of the fair value and weighted-average amortization period of identified intangible assets acquired by major intangible asset class:
Weighted Average Amortization Period
Total
(In years)
(In millions)
Identifiable intangible assets acquired:
Customer relationships (Government)
15
$
3,549
Customer relationships (Commercial)
16
561
Trade names — Divisions
10
162
Developed technology
8
630
Total identifiable intangible assets subject to amortization
14
4,902
Trade names — Corporate
indefinite
1,803
In-process research and development
n/a
63
Total identifiable intangible assets
$
6,768
During the quarter ended September 27, 2019, we recorded $373 million of L3Harris Merger-related charges, consisting of restructuring, integration, transaction and other costs as follows:
•
$74 million of transaction costs, recognized as incurred;
•
$35 million of integration costs, recognized as incurred;
•
$61 million of equity award acceleration charges, recognized upon change in control;
•
$92 million of additional cost of sales related to the fair value step-up in inventory sold; and
•
$111 million of restructuring costs as discussed in Note E — Restructuring and Other Exit Costsin these Notes.
Because the L3Harris Merger benefited the entire Company as opposed to any individual business segment, the above costs were not allocated to any business segment. All of the costs above were recorded in the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited), except for the $92 million of additional cost of sales related to the fair value step-up in inventory sold, which is included in the “Cost of product sales and services” line item in our Condensed Consolidated Statement of Income (Unaudited).
Pro Forma Results
The following summary, prepared on a pro forma basis, presents our unaudited consolidated results of operations for the quarter ended September 28, 2018 as if the L3Harris Merger had been completed as of the beginning of the quarter ended September 28, 2018, after including any post-acquisition adjustments directly attributable to the acquisition, such as the sale of Harris’ Night Vision business, and after including the impact of adjustments such as amortization of intangible assets as well as the related income tax effects. This pro forma presentation does not include any impact of transaction synergies. The pro forma results are not necessarily indicative of our results of operations that actually would have been obtained had the combination of Harris and L3 been completed on the assumed date or for the period presented, or which may be realized in the future.
September 28, 2018
(In millions)
Revenue from product sales and services — as reported
$
1,542
Revenue from product sales and services — pro forma
$
4,018
Income from continuing operations — as reported
$
216
Income from continuing operations — pro forma
$
373
For the quarter ended September 27, 2019, our Condensed Consolidated Statement of Income (Unaudited) includes the results of L3 operating businesses from the Closing Date, with total revenue of approximately $2.67 billion (net of intercompany sales between L3 operating businesses) and income from continuing operations before income taxes of approximately $0.19 billion (including $92 million of additional cost of sales related to the fair value step-up in inventory sold and $101 million of restructuring charges for workforce reductions associated with the L3Harris Merger).
Note C — Business Divestitures and Asset Sales
Harris Night Vision. On September 13, 2019, we completed the sale of the Harris Night Vision business, a global supplier of high-performance, vision-enhancing products for U.S. and allied military and security forces and commercial customers, for
10
$350 million (net cash proceeds of $346 million after selling costs and estimated purchase price adjustments), subject to final customary purchase price adjustments pursuant to a definitive agreement we entered into on April 4, 2019 as part of the regulatory process in connection with the L3Harris Merger and recognized a pre-tax gain of $229 million.
Through fiscal 2019, the Harris Night Vision business was reported as part of our former Communication Systems segment. As a result of the then-pending divestiture, the Harris Night Vision business was not included in any of our new business segments and, consequently, the operating results of the business are included in “Other non-reportable business segments” for the quarters ended September 27, 2019 and September 28, 2018 in this Report.
Income before income taxes for the Harris Night Vision business was not material for the quarter endedSeptember 27, 2019 and was $6 million for the quarter ended September 28, 2018. The carrying amounts of the major classes of assets and liabilities of the Harris Night Vision business classified as held for sale at June 28, 2019 are summarized below:
June 28, 2019
(In millions)
Receivables
$
18
Inventories
52
Property, plant and equipment
29
Goodwill
30
Other intangible assets
4
Assets of disposal group held for sale
$
133
Accounts payable
$
13
Contract liabilities
1
Compensation and benefits
3
Other accrued items
3
Defined benefit plans
16
Liabilities of disposal group held for sale
$
36
Stormscope. On August 30, 2019, we completed the sale of the Stormscope product line for $20 million in cash and recorded a pre-tax gain of $12 million in the “Engineering, selling and administrative expenses” line item of our Condensed Consolidated Statement of Income (Unaudited).
Note D — Stock Options and Other Share-Based Compensation
As of September 27, 2019, we had options or other share-based compensation outstanding under two Harris shareholder-approved employee stock incentive plans (“SIPs”), the Harris Corporation 2005 Equity Incentive Plan (As Amended and Restated Effective August 27, 2010) and the Harris Corporation 2015 Equity Incentive Plan (the “2015 EIP”), as well as under employee stock incentive plans of L3 assumed by L3Harris (collectively, “L3Harris SIPs”).
Harris equity awards granted prior to October 12, 2018, in accordance with the terms and conditions that were applicable to such awards prior to the L3Harris Merger, generally automatically vested upon closing of the L3Harris Merger and settled in L3Harris Common Stock, except stock options which automatically vested and remained outstanding. Harris equity awards granted on or after October 12, 2018 did not automatically vest upon closing of the L3Harris Merger, and instead remained outstanding as an award with respect to L3Harris Common Stock in accordance with the terms that were applicable to such award prior to the L3Harris Merger.
L3’s equity awards granted prior to October 12, 2018, in accordance with the terms and conditions that were applicable to such awards prior to the L3Harris Merger, generally automatically vested upon closing of the L3Harris Merger and settled in L3Harris Common Stock (except stock options automatically converted into stock options with respect to L3Harris Common Stock and remained outstanding), in each case, after giving effect to the Exchange Ratio and appropriate adjustments to reflect the consummation of the L3Harris Merger and the terms and conditions applicable to such awards prior to the L3Harris Merger. Any L3 restricted stock unit or L3 restricted stock award granted on or after October 12, 2018 was converted into a corresponding award with respect to L3Harris Common Stock, with the number of shares underlying such award adjusted based on the Exchange Ratio, and remained outstanding in accordance with the terms that were applicable to such award prior to the L3Harris Merger. Pursuant to the Merger Agreement, L3Harris assumed the converted L3 equity awards.
The compensation cost related to our share-based awards that was charged against income was $95 million, including acceleration expense recognized in connection with the L3Harris Merger, and $14 million for the quarters ended September 27, 2019 and September 28, 2018, respectively.
11
The aggregate number of shares of our common stock that we issued under the terms of L3Harris SIPs (including shares issued as merger consideration to settle pre-merger L3 share-based awards), net of shares withheld for tax purposes, was 2,837,153 and 403,953 for the quarters ended September 27, 2019 and September 28, 2018, respectively.
Awards granted to participants under L3Harris SIPs during the quarter endedSeptember 27, 2019 consisted of 245,991 restricted stock units, 738,956 stock options and 55,020 performance stock units. The fair value as of the grant date of each stock option award was determined using the Black-Scholes-Merton option-pricing model and the following assumptions: expected dividend yield of 1.70 percent; expected volatility of 22.18 percent; risk-free interest rates averaging 1.68 percent; and expected term of 5.65 years.
The fair value as of the grant date of each restricted stock unit award and performance stock unit award was based on the closing price of our common stock on the grant date.
Note E — Restructuring and Other Exit Costs
We record charges for restructuring and other exit activities related to sales or terminations of product lines, closures or relocations of business activities, changes in management structure and fundamental reorganizations that affect the nature and focus of operations. Such charges include termination benefits, contract termination costs and costs to consolidate facilities or relocate employees. We record these charges at their fair value when incurred. In cases where employees are required to render service until they are terminated in order to receive the termination benefits and will be retained beyond the minimum retention period, we record the expense ratably over the future service period. These charges are included as a component of the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited).
L3Harris Merger-Related Restructuring Costs
During the quarter endedSeptember 27, 2019, we recorded $111 million of restructuring charges for workforce reductions (including severance and other employee-related exit costs) in connection with the L3Harris Merger. At September 27, 2019, we had recorded liabilities of $74 million associated with these restructuring actions, of which substantially all will be paid in the next twelve months. At this time, we are unable to reasonably estimate the total amount of cost expected to be incurred in connection with L3Harris Merger-related restructuring activities because we are still formulating plans for facility consolidations. We will disclose the total amount of cost expected to be incurred in connection with L3Harris Merger-related activities in future filings once the amount can be reasonably estimated.
Previous Restructuring and Other Exit Costs
Prior to the L3Harris Merger, we had liabilities of $16 million for lease obligations associated with exited facilities with remaining terms of four years or less, of which $13 million remained outstanding at September 27, 2019.
The following table summarizes our restructuring and other exit activities during the quarter ended September 27, 2019:
Employee severance-related costs
Facilities consolidation and other exit costs
Total
(In millions)
Balance at June 28, 2019
$
—
$
16
$
16
Additional provisions
111
—
111
Payments
(37
)
(3
)
(40
)
Balance at September 27, 2019
$
74
$
13
$
87
12
Note F — Accumulated Other Comprehensive Income (Loss) (“AOCI”)
The components of AOCI are summarized below:
Foreign currency translation(1)
Net unrealized (losses) gains on hedging derivatives(2)