Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Apr. 01, 2016 | Apr. 29, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | HARRIS CORP /DE/ | |
Trading Symbol | HRS | |
Entity Central Index Key | 202,058 | |
Document Type | 10-Q | |
Document Period End Date | Apr. 1, 2016 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --07-01 | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 124,725,874 |
Condensed Consolidated Statemen
Condensed Consolidated Statement of Income (Unaudited) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 01, 2016 | Apr. 03, 2015 | Apr. 01, 2016 | Apr. 03, 2015 | |
Income Statement [Abstract] | ||||
Revenue from product sales and services | $ 1,909 | $ 1,187 | $ 5,563 | $ 3,548 |
Cost of product sales and services | (1,312) | (754) | (3,813) | (2,324) |
Engineering, selling and administrative expenses | (309) | (220) | (877) | (603) |
Impairment of goodwill and other assets | 0 | 0 | (367) | 0 |
Non-operating loss | (1) | 0 | 0 | 0 |
Interest income | 0 | 0 | 1 | 2 |
Interest expense | (46) | (34) | (139) | (79) |
Income from continuing operations before income taxes | 241 | 179 | 368 | 544 |
Income taxes | (71) | (53) | (185) | (154) |
Income from continuing operations | 170 | 126 | 183 | 390 |
Discontinued operations, net of income taxes | (2) | 0 | (19) | 0 |
Net income | $ 168 | $ 126 | $ 164 | $ 390 |
Basic | ||||
Continuing operations (in usd per share) | $ 1.37 | $ 1.21 | $ 1.47 | $ 3.73 |
Discontinued operations (in usd per share) | (0.02) | 0 | (0.15) | 0 |
Total basic net income per common share | 1.35 | 1.21 | 1.32 | 3.73 |
Diluted | ||||
Cash dividends paid per common share (in usd per share) | $ 0.50 | $ 0.47 | $ 1.50 | $ 1.41 |
Basic weighted average common shares outstanding (in shares) | 124 | 103.7 | 123.7 | 104.1 |
Diluted weighted average common shares outstanding (in shares) | 125.1 | 104.8 | 124.8 | 105.2 |
Continuing operations (in usd per share) | $ 1.36 | $ 1.20 | $ 1.46 | $ 3.69 |
Discontinued operations (in usd per share) | (0.02) | 0 | (0.15) | 0 |
Total diluted net income per common share | $ 1.34 | $ 1.20 | $ 1.31 | $ 3.69 |
Condensed Consolidated Stateme3
Condensed Consolidated Statement of Comprehensive Income (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 01, 2016 | Apr. 03, 2015 | Apr. 01, 2016 | Apr. 03, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 168 | $ 126 | $ 164 | $ 390 |
Other comprehensive loss: | ||||
Foreign currency translation loss, net of income taxes | (5) | (37) | (52) | (111) |
Net unrealized gain (loss) on hedging derivatives, net of income taxes | 0 | (24) | 1 | (25) |
Net unrecognized gain (loss) on postretirement obligations, net of income taxes | 1 | 0 | (3) | 12 |
Other comprehensive loss, net of income taxes | (4) | (61) | (54) | (124) |
Total comprehensive income | $ 164 | $ 65 | $ 110 | $ 266 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheet (Unaudited) - USD ($) $ in Millions | Apr. 01, 2016 | Jul. 03, 2015 |
Current Assets | ||
Cash and cash equivalents | $ 302 | $ 481 |
Receivables | 1,054 | 1,168 |
Inventories | 992 | 1,015 |
Income taxes receivable | 144 | 87 |
Deferred compensation plan investments | 14 | 267 |
Other current assets | 139 | 165 |
Assets of disposal group held for sale | 221 | 0 |
Total current assets | 2,866 | 3,183 |
Non-current Assets | ||
Property, plant and equipment | 1,007 | 1,165 |
Goodwill | 5,940 | 6,348 |
Other intangible assets | 1,576 | 1,775 |
Non-current deferred income taxes | 362 | 502 |
Other non-current assets | 149 | 154 |
Total non-current assets | 9,034 | 9,944 |
Total assets | 11,900 | 13,127 |
Current Liabilities | ||
Short-term debt | 91 | 33 |
Accounts payable | 529 | 581 |
Compensation and benefits | 187 | 255 |
Other accrued items | 387 | 490 |
Advance payments and unearned income | 328 | 433 |
Income taxes payable | 14 | 57 |
Deferred compensation plan liabilities | 7 | 267 |
Current portion of long-term debt | 383 | 130 |
Liabilities of disposal group held for sale | 30 | 28 |
Liabilities of disposal group held for sale | 56 | 0 |
Total current liabilities | 2,012 | 2,274 |
Non-current Liabilities | ||
Defined benefit plans | 1,716 | 1,943 |
Long-term debt | 4,319 | 5,053 |
Non-current deferred income taxes | 8 | 12 |
Other long-term liabilities | 478 | 443 |
Total non-current liabilities | 6,521 | 7,451 |
Shareholders’ Equity: | ||
Preferred stock, without par value; 1,000,000 shares authorized; none issued | 0 | 0 |
Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 124,481,216 shares at April 1, 2016 and 123,675,756 shares at July 3, 2015 | 124 | 124 |
Other capital | 2,080 | 2,031 |
Retained earnings | 1,232 | 1,258 |
Accumulated other comprehensive loss | (70) | (16) |
Total shareholders’ equity | 3,366 | 3,397 |
Noncontrolling interests | 1 | 5 |
Total equity | 3,367 | 3,402 |
Total liabilities and equity | $ 11,900 | $ 13,127 |
Condensed Consolidated Balance5
Condensed Consolidated Balance Sheet (Unaudited) (Parenthetical) - $ / shares | Apr. 01, 2016 | Jul. 03, 2015 |
Shareholders’ Equity: | ||
Preferred shares, par value (in usd per share) | $ 0 | $ 0 |
Preferred shares, authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred shares, issued (in shares) | 0 | 0 |
Common shares, par value (in usd per share) | $ 1 | $ 1 |
Common shares, authorized (in shares) | 500,000,000 | 500,000,000 |
Common shares, issued (in shares) | 124,481,216 | 123,675,756 |
Common shares, outstanding (in shares) | 124,481,216 | 123,675,756 |
Condensed Consolidated Stateme6
Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($) $ in Millions | 9 Months Ended | |
Apr. 01, 2016 | Apr. 03, 2015 | |
Operating Activities | ||
Net income | $ 164 | $ 390 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 163 | 164 |
Amortization of intangible assets from Exelis Inc. acquisition | 99 | 0 |
Share-based compensation | 29 | 26 |
Pension contributions | (134) | 0 |
Pension income | (17) | 0 |
Net liability reduction for certain post-employment benefit plans | (101) | 0 |
Impairment of goodwill and other assets | 367 | 0 |
Adjustment to loss on sales of businesses, net | 20 | 0 |
(Increase) decrease in: | ||
Accounts receivable | 102 | (87) |
Inventories | (22) | (17) |
Increase (decrease) in: | ||
Accounts payable and accrued expenses | (175) | (111) |
Advance payments and unearned income | (87) | (25) |
Income taxes | 70 | 46 |
Other | 29 | 9 |
Net cash provided by operating activities | 507 | 395 |
Investing Activities | ||
Cash paid for fixed income securities | (19) | 0 |
Additions of property, plant and equipment | (84) | (102) |
Proceeds from sale of property, plant and equipment | 2 | 0 |
Proceeds from sale of Cyber Integration Center | 0 | 7 |
Adjustment to proceeds from sales of businesses, net | (11) | 0 |
Net cash used in investing activities | (112) | (95) |
Proceeds from borrowings | ||
Proceeds from borrowings | 118 | 14 |
Repayments of borrowings | (510) | (46) |
Proceeds from exercises of employee stock options | 36 | 34 |
Repurchases of common stock | 0 | (150) |
Cash dividends | (189) | (149) |
Other financing activities | (15) | (39) |
Net cash used in financing activities | (560) | (336) |
Effect of exchange rate changes on cash and cash equivalents | (14) | (37) |
Net decrease in cash and cash equivalents | (179) | (73) |
Cash and cash equivalents, beginning of year | 481 | 561 |
Cash and cash equivalents, end of quarter | $ 302 | $ 488 |
Significant Accounting Policies
Significant Accounting Policies and Recent Accounting Standards | 9 Months Ended |
Apr. 01, 2016 | |
Significant Accounting Policies and Recent Accounting Standards [Abstract] | |
Significant Accounting Policies and Recent Accounting Standards | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Significant Accounting Policies and Recent Accounting Standards Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of Harris Corporation and its consolidated subsidiaries. As used in these Notes to Condensed Consolidated Financial Statements (Unaudited) (these “Notes”), the terms “Harris,” “Company,” “we,” “our” and “us” refer to Harris Corporation and its consolidated subsidiaries. Intracompany transactions and accounts have been eliminated in consolidation. The accompanying condensed consolidated financial statements have been prepared by Harris, without an audit, in accordance with U.S. generally accepted accounting principles (“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 position, results of operations and cash flows 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 position, results of operations and cash flows for the periods presented therein. The results for the third quarter and first three quarters of fiscal 2016 are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period. The balance sheet at July 3, 2015 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 Quarterly Report on Form 10-Q (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 July 3, 2015 (our “Fiscal 2015 Form 10-K”). As further discussed in Note B — Discontinued Operations and Divestitures in these Notes, we recorded a loss in discontinued operations in the second quarter of fiscal 2016 based on a final determination rendered in a dispute over the amount of the post-closing working capital adjustment to the purchase price for our former broadcast communications operation (“Broadcast Communications”), which we sold on February 4, 2013. We did not restate our historical financial results of operations to account for Broadcast Communications as discontinued operations for the periods prior to the second quarter of fiscal 2016 presented in this Report because the amounts were not material. Unless otherwise specified, disclosures in these Notes relate solely to our continuing operations. 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 and these Notes. These estimates and assumptions are based on experience and other information available prior to issuance of the accompanying condensed consolidated financial statements and these Notes. Materially different results can occur as circumstances change and additional information becomes known. Reclassifications Certain prior year amounts have been reclassified in our Condensed Consolidated Financial Statements (Unaudited) to conform to current year classifications. Adoption of New Accounting Standards In the first quarter of fiscal 2016 , we adopted an accounting standard issued by the Financial Accounting Standards Board (“FASB”) that eliminates the requirement for an acquirer in a business combination to retrospectively account for measurement-period adjustments. Instead, the new guidance requires that the cumulative impact of a measurement-period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. This standard is to be applied prospectively. The adoption of this standard did not have a material impact on our financial position, results of operations or cash flows. In the second quarter of fiscal 2016 , we adopted an accounting standard issued by the FASB that simplifies the presentation of deferred income taxes by requiring entities to classify all deferred tax assets and liabilities as non-current in a classified statement of financial position instead of separating deferred tax assets and liabilities into current and non-current amounts. Consequently, entities may no longer allocate valuation allowances between current and non-current deferred tax assets because those allowances also will be classified as non-current. This standard was applied retrospectively, and as a result, we reclassified certain prior-period amounts in the accompanying Condensed Consolidated Financial Statements (Unaudited) to conform with current-period classifications as follows: • In the accompanying Condensed Consolidated Balance Sheet (Unaudited), we reclassified $341 million of current deferred income tax assets from the “Current deferred income taxes” line item in the assets section and $7 million of current deferred income tax liabilities from the "Current deferred income taxes" line item in the liabilities and equity section, which resulted in an increase of $339 million to the “Non-current deferred income taxes” line item in the assets section and a net increase of $5 million to the "Non-current deferred income taxes" line item in the liabilities and equity section. • In the accompanying Condensed Consolidated Statement of Cash Flows (Unaudited), we reclassified $20 million from the “Non-current deferred income taxes” line item to the “Income taxes” line item in the operating activities section. Other than those reclassifications, the adoption of this standard did not have any impact on our financial position, results of operations or cash flows. Accounting Standards Issued But Not Yet Effective In May 2014, the FASB issued a comprehensive new revenue recognition standard that supersedes nearly all revenue recognition guidance under GAAP and International Financial Reporting Standards and supersedes some cost guidance for construction-type and production-type contracts. The guidance in this standard is principles-based, and consequently, entities will be required to use more judgment and make more estimates than under prior guidance, including identifying contract performance obligations, estimating variable consideration to include in the contract price and allocating the transaction price to separate performance obligations. The guidance in this standard is applicable to all contracts with customers, regardless of industry-specific or transaction-specific fact patterns. Additionally, this standard provides guidance for transactions that were not previously addressed comprehensively (e.g., service revenue, contract modifications and licenses of intellectual property) and modifies guidance for multiple-element arrangements. The core principle of this standard is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. To help financial statement users better understand the nature, amount, timing and potential uncertainty of the revenue that is recognized, this standard requires significantly more interim and annual disclosures. This standard allows for either “full retrospective” adoption (application to all periods presented) or “modified retrospective” adoption (application to only the most current period presented in the financial statements, as well as certain additional required footnote disclosures). In August 2015, the FASB issued an accounting standards update that defers the effective date of this standard by one year, while permitting entities to elect to adopt one year earlier on the original effective date. As a result, this standard is now effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2017, which for us is our fiscal 2019. In March 2016 and April 2016, the FASB issued two accounting standards updates that clarify its new revenue recognition guidance on accounting for licenses of intellectual property and identifying performance obligations as well as principal versus agent guidance. We are currently evaluating the impact the new revenue recognition standard will have on our financial position, results of operations and cash flows. In February 2016, the FASB issued a new lease standard that supersedes existing lease guidance under GAAP. This standard requires lessees to record most leases on their balance sheets but recognize expenses on their income statements in a manner similar to existing lease guidance under GAAP. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with the option to use certain relief. Full retrospective application is prohibited. This standard is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2018, which for us is our fiscal 2020. We are currently evaluating the impact this standard will have on our financial position, results of operations and cash flows. In March 2016, the FASB issued an accounting standards update making final targeted amendments to the accounting for employee share-based payments. These amendments will require entities to recognize the income tax effects of awards when the awards vest or are settled, will change an employer's accounting for an employee's use of shares to satisfy the employer's statutory income tax withholding obligation and will require entities to elect whether to account for forfeitures of share-based payments by either recognizing forfeitures of awards as they occur or estimating the number of awards expected to be forfeited as is currently required. The required method of adoption varies by amendment. This accounting standards update is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2016, which for us is our fiscal 2018. Early adoption is permitted in any annual or interim period, but all of the guidance is required to be adopted in the same period and any adjustments must be reflected as of the beginning of the fiscal year. We are currently evaluating the impact this accounting standards update will have on our financial position, results of operations and cash flows. |
Discontinued Operations and Div
Discontinued Operations and Divestitures | 9 Months Ended |
Apr. 01, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations and Divestitures | Discontinued Operations and Divestitures In the third quarter of fiscal 2016, we entered into a definitive agreement for the divestiture of our composite aerostructures business ("Aerostructures"), which is part of our Electronic Systems segment, for $187 million in cash at closing and the assumption of a $23 million capitalized lease, and determined the business met the held for sale criteria under GAAP. Aerostructures had income before income taxes of $3 million and $4 million for the quarter and three quarters ended April 1, 2016, respectively, and is not strategic to our business. We acquired Aerostructures as part of our acquisition of Exelis Inc. and its subsidiaries (collectively, "Exelis") in May 2015. We completed the divestiture on April 8, 2016, during the fourth quarter of fiscal 2016. Summarized balance sheet information for Aerostructures is as follows: April 1, 2016 (In millions) Receivables $ 12 Inventories 35 Other current assets 1 Total current assets 48 Property, plant and equipment 84 Goodwill 61 Other intangible assets 24 Other non-current assets 4 Total non-current assets 173 Assets of disposal group held for sale $ 221 Current liabilities $ 12 Non-current liabilities 44 Liabilities of disposal group held for sale $ 56 On February 4, 2013, we completed the sale of Broadcast Communications to an affiliate of The Gores Group, LLC (the “Buyer”) pursuant to a definitive Asset Sale Agreement entered into December 5, 2012 for $225 million , including $160 million in cash, subject to customary adjustments (including a post-closing working capital adjustment), a $15 million subordinated promissory note (which was collected in fiscal 2014) and an earnout of up to $50 million based on future performance. Broadcast Communications was recorded as discontinued operations in connection with the sale. Based on a dispute between us and the Buyer over the amount of the post-closing working capital adjustment, we and the Buyer previously appointed a nationally recognized accounting firm to render a final determination of such dispute. On January 29, 2016, the accounting firm rendered its final determination as to the disputed items, in which it concluded substantially in our favor and partly in the Buyer’s favor. As a result of such determination, we recorded a loss in discontinued operations in the second quarter of fiscal 2016 of $21 million ( $17 million after-tax or $0.14 per diluted share) and adjusted current liabilities of discontinued operations to $43 million . In the third quarter of fiscal 2016, discontinued operations consisted of a $2 million ( $2 million after-tax) increase in the loss on discontinued operations due to third-party costs related to the dispute. We did not restate our historical financial results of operations to account for Broadcast Communications as discontinued operations for the periods prior to the second quarter of fiscal 2016 presented in this Report because the amounts were not material. Unless otherwise specified, the information set forth in these Notes, other than this Note B — Discontinued Operations and Divestitures , relates solely to our continuing operations. |
Stock Options and Other Share-B
Stock Options and Other Share-Based Compensation | 9 Months Ended |
Apr. 01, 2016 | |
Stock Options and Other Share Based Compensation (Details) [Abstract] | |
Stock Options and Other Share-Based Compensation | Stock Options and Other Share-Based Compensation During the three quarters ended April 1, 2016 , we had options or other share-based compensation outstanding under two shareholder-approved 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. We have granted the following types of share-based awards under these SIPs: stock options, restricted stock awards, restricted stock unit awards, performance share awards, performance share unit awards and awards of immediately vested shares of our common stock. We believe that such awards more closely align the interests of participants with those of shareholders. Certain share-based awards provide for accelerated vesting if there is a change in control (as defined under our SIPs). The compensation cost related to our share-based awards that was charged against income was $10 million and $29 million for the quarter and three quarters ended April 1, 2016 , respectively. The compensation cost related to our share-based awards that was charged against income was $9 million and $26 million for the quarter and three quarters ended April 3, 2015 , respectively. Grants to participants under our SIPs during the third quarter ended April 1, 2016 consisted of 14,000 restricted stock awards. Grants to participants under our SIPs during the three quarters ended April 1, 2016 consisted of 1,658,000 stock options, 114,270 restricted stock awards and 292,665 performance share unit awards. The fair value as of the grant date of each stock option award was determined using the Black-Scholes-Merton option-pricing model, which used the following assumptions: expected dividend yield of 2.50 percent ; expected volatility of 23.01 percent ; risk-free interest rates averaging 1.52 percent ; and expected term in years of 5.05 . The fair value as of the grant date of each restricted stock award was based on the closing price of our common stock on the grant date. The fair value as of the grant date of each performance share unit award was determined based on the fair value from a multifactor Monte Carlo valuation model that simulates our stock price and total shareholder return (“TSR”) relative to other companies in our TSR peer group, less a discount to reflect the delay in payments of cash dividend-equivalents that are made only upon vesting. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 9 Months Ended |
Apr. 01, 2016 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss are summarized below: April 1, July 3, (In millions) Foreign currency translation, net of income taxes of $29 million and $15 million at April 1, 2016 and July 3, 2015, respectively $ (114 ) $ (62 ) Net unrealized loss on hedging derivatives, net of income taxes of $11 million and $12 million at April 1, 2016 and July 3, 2015, respectively (18 ) (19 ) Unrecognized postretirement obligations, net of income taxes of $41 million and $42 million at April 1, 2016 and July 3, 2015, respectively 62 65 $ (70 ) $ (16 ) (1) Reclassifications out of accumulated other comprehensive loss to earnings were not material for the three quarters ended April 1, 2016 or April 3, 2015 . |
Receivables
Receivables | 9 Months Ended |
Apr. 01, 2016 | |
Receivables [Abstract] | |
Receivables | Receivables Receivables are summarized below: April 1, July 3, (In millions) Accounts receivable $ 732 $ 837 Unbilled costs and accrued earnings on cost-plus contracts 331 343 1,063 1,180 Less allowances for collection losses (9 ) (12 ) $ 1,054 $ 1,168 |
Inventories
Inventories | 9 Months Ended |
Apr. 01, 2016 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories are summarized below: April 1, July 3, (In millions) Unbilled costs and accrued earnings on fixed-price contracts $ 524 $ 463 Finished products 119 100 Work in process 154 256 Raw materials and supplies 195 196 $ 992 $ 1,015 Unbilled costs and accrued earnings on fixed-price contracts were net of progress payments of $65 million at April 1, 2016 and $85 million at July 3, 2015 . |
Property, Plant and Equipment
Property, Plant and Equipment | 9 Months Ended |
Apr. 01, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are summarized below: April 1, July 3, (In millions) Land $ 45 $ 45 Software capitalized for internal use 138 155 Buildings 608 587 Machinery and equipment 1,336 1,526 2,127 2,313 Less accumulated depreciation and amortization (1,120 ) (1,148 ) $ 1,007 $ 1,165 Depreciation and amortization expense related to property, plant and equipment was $42 million and $141 million for the quarter and three quarters ended April 1, 2016 , respectively. Depreciation and amortization expense related to property, plant and equipment was $36 million and $109 million for the quarter and three quarters ended April 3, 2015 , respectively. |
Goodwill
Goodwill | 9 Months Ended |
Apr. 01, 2016 | |
Goodwill [Abstract] | |
Goodwill | Goodwill As discussed in Note R — Business Segments , we adjusted our segment reporting in the first quarter of fiscal 2016 to reflect our new organizational structure that was effective at the beginning of fiscal 2016 , which resulted in changes to our operating segments, which are also our reportable segments and are referred to as our business segments. In accordance with GAAP, we have reassigned goodwill using a relative fair value approach. Because our accounting for our acquisition of Exelis in the fourth quarter of fiscal 2015 is still preliminary, we assigned the goodwill acquired as a result of the acquisition on a provisional basis. Immediately before and after our goodwill assignments, we completed an assessment of any potential goodwill impairment under our former and new segment reporting structure and determined that no impairment existed. In addition, we test our goodwill for impairment annually, or under certain circumstances, more frequently, such as when events or circumstances indicate there may be an impairment. See Note N — Impairment of Goodwill and Other Assets in these Notes for information regarding a non-cash charge for impairment of goodwill and other assets related to Harris CapRock Communications recorded in the second quarter of fiscal 2016 in our Critical Networks segment. The assignment of goodwill by business segment, and changes in the carrying amount of goodwill for the three quarters ended April 1, 2016 by business segment, were as follows: Communication Systems Space and Intelligence Systems Electronic Systems Critical Networks Total (In millions) Balance at July 3, 2015 $ 760 $ 1,446 $ 1,718 $ 2,424 $ 6,348 Impairment of goodwill — — — (290 ) (290 ) Decrease from reclassification to held for sale asset (1) — — (61 ) — (61 ) Currency translation adjustments — (7 ) (2 ) (39 ) (48 ) Other (including true-ups of previously estimated purchase price allocations) (2) 17 (12 ) 26 (40 ) (9 ) Balance at April 1, 2016 $ 777 $ 1,427 $ 1,681 $ 2,055 $ 5,940 (1) During the third quarter of fiscal 2016, we determined Aerostructures met the held for sale criteria and reclassified Aerostructures' assets to current assets in accordance with GAAP. We included Aerostructures' assets in the "Assets of disposal group held for sale" line item in the accompanying Condensed Consolidated Balance Sheet (Unaudited) as of April 1, 2016. See Note B — Discontinued Operations and Divestitures and Note T — Subsequent Events in these Notes for additional information. (2) Our accounting for the Exelis acquisition is still preliminary. The fair value estimates for the assets acquired and liabilities assumed were based on preliminary calculations, and our estimates and assumptions are subject to change as we obtain additional information for our estimates during the measurement period (up to one year from the acquisition date). The primary areas of these preliminary estimates that are not yet finalized relate to certain tangible assets, liabilities acquired (including environmental reserves), and tax-related items. During the three quarters ended April 1, 2016 , we recorded several purchase price adjustments which impacted goodwill, the largest of which reduced current liabilities by $82 million related to previously unrecognized tax benefits and to deferred revenue based on the fair value of a customer contract. |
Accrued Warranties
Accrued Warranties | 9 Months Ended |
Apr. 01, 2016 | |
Product Warranties Disclosures [Abstract] | |
Accrued Warranties | Accrued Warranties Changes in our liability for standard product warranties, which is included as a component of the “Other accrued items” and “Other long-term liabilities” line items in the accompanying Condensed Consolidated Balance Sheet (Unaudited), during the three quarters ended April 1, 2016 were as follows: (In millions) Balance at July 3, 2015 $ 36 Warranty provision for sales 15 Settlements (14 ) Other adjustments to warranty liability, including those for foreign currency translation (2 ) Balance at April 1, 2016 $ 35 We also sell extended product warranties and recognize revenue from these arrangements over the warranty period. Costs of warranty services under these arrangements are recognized as incurred. Deferred revenue associated with extended product warranties was $28 million at April 1, 2016 and $36 million at July 3, 2015 and is included as a component of the “Advance payments and unearned income” and “Other long-term liabilities” line items in the accompanying Condensed Consolidated Balance Sheet (Unaudited). |
Long-Term Debt
Long-Term Debt | 9 Months Ended |
Apr. 01, 2016 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt As disclosed in Note 13: “Long-Term Debt” in our Notes to Consolidated Financial Statements in our Fiscal 2015 Form 10-K, in connection with our acquisition of Exelis, Harris Corporation fully and unconditionally guaranteed all of the long-term fixed-rate debt securities issued by Exelis Inc. outstanding at the time of the acquisition, consisting of $250 million in aggregate principal amount of 4.25% senior notes due October 1, 2016 and $400 million in aggregate principal amount of 5.55% senior notes due October 1, 2021 (together, the “Exelis Notes”), as indicated in the table in Note 13: “Long-Term Debt” in our Notes to Consolidated Financial Statements in our Fiscal 2015 Form 10-K. In addition, Exelis Inc. fully and unconditionally guaranteed all of the long-term fixed-rate debt securities issued by Harris Corporation outstanding at the time of the acquisition, consisting of the nine other series of fixed-rate debt securities listed in the “2015” column in the table in Note 13: “Long-Term Debt” in our Notes to Consolidated Financial Statements in our Fiscal 2015 Form 10-K, in an aggregate principal amount of $3.226 billion . On December 31, 2015, Exelis Inc. merged with and into Harris Corporation, with Harris Corporation being the surviving corporation in the merger, the separate existence of Exelis Inc. ceased, Harris Corporation assumed the obligations of Exelis Inc. under the Exelis Notes, and the cross guarantees of our outstanding long-term fixed-rate debt securities as described above terminated. |
Postretirement Benefit Plans
Postretirement Benefit Plans | 9 Months Ended |
Apr. 01, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Postretirement Benefit Plans | Postretirement Benefit Plans The following table provides the components of our net periodic benefit cost (income) for our defined benefit plans, including defined benefit pension plans and other postretirement defined benefit plans: Quarter Ended April 1, 2016 Three Quarters Ended April 1, 2016 Pension Other Benefits Total Pension Other Benefits Total (In millions) Net periodic benefit cost (income) Service cost $ 18 $ 1 $ 19 $ 56 $ 4 $ 60 Interest cost 63 3 66 186 10 196 Expected return on plan assets (87 ) (4 ) (91 ) (258 ) (13 ) (271 ) Amortization of net actuarial loss — — — — 2 2 Amortization of prior service cost — — — — (7 ) (7 ) Net periodic benefit income $ (6 ) $ — $ (6 ) $ (16 ) $ (4 ) $ (20 ) Effect of curtailments or settlements (1) — — — — (121 ) (121 ) Total net periodic benefit income $ (6 ) $ — $ (6 ) $ (16 ) $ (125 ) $ (141 ) (1) We discontinued certain significantly underfunded post-employment benefit plans effective December 31, 2015. Under GAAP, this resulted in a negative plan amendment and curtailment during the quarter ended January 1, 2016, a settlement as of December 31, 2015, and a net liability reduction of $101 million . We contributed $134 million to our qualified defined benefit pension plans during the three quarters ended April 1, 2016 . We currently anticipate making additional contributions to our qualified defined benefit pension plans of approximately $40 million during the remainder of fiscal 2016 . |
Income From Continuing Operatio
Income From Continuing Operations Per Common Share | 9 Months Ended |
Apr. 01, 2016 | |
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent [Abstract] | |
Net income per common share | Income From Continuing Operations Per Common Share The computations of income from continuing operations per common share are as follows: Quarter Ended Three Quarters Ended April 1, April 3, April 1, April 3, (In millions, except per share amounts) Income from continuing operations $ 170 $ 126 $ 183 $ 390 Adjustments for participating securities outstanding — (1 ) (1 ) (2 ) Income from continuing operations used in per basic and diluted common share calculations (A) $ 170 $ 125 $ 182 $ 388 Basic weighted average common shares outstanding (B) 124.0 103.7 123.7 104.1 Impact of dilutive share-based awards 1.1 1.1 1.1 1.1 Diluted weighted average common shares outstanding (C) 125.1 104.8 124.8 105.2 Income from continuing operations per basic common share (A)/(B) $ 1.37 $ 1.21 $ 1.47 $ 3.73 Income from continuing operations per diluted common share (A)/(C) $ 1.36 $ 1.20 $ 1.46 $ 3.69 Potential dilutive common shares primarily consist of employee stock options and performance share unit awards. Employee stock options to purchase approximately 1,618,558 and 765,438 shares of our common stock were outstanding at April 1, 2016 and April 3, 2015 , respectively, but were not included as dilutive stock options in the computations of income from continuing operations per diluted common share because the effect would have been antidilutive. |
Income Taxes
Income Taxes | 9 Months Ended |
Apr. 01, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Our effective tax rate (income taxes as a percentage of income from continuing operations before income taxes) was 29.5 percent in the third quarter of fiscal 2016 compared with 29.6 percent in the third quarter of fiscal 2015 . In the third quarter of fiscal 2016 , our effective tax rate benefited from the favorable impact of: • Amounts recorded in respect of our expected near-term recognition of a tax loss for the divestiture of Aerostructures, net of valuation allowance, following our classification of Aerostructures as held for sale as of the end of the third quarter of fiscal 2016; • Additional deductions and additional research credits claimed on our fiscal 2015 tax return compared with our recorded estimates at the end of fiscal 2015; and • State tax reductions resulting from our integration of Exelis operations. This favorable impact was partially offset by the non-deductibility for tax purposes of additional portions of the impairment charge recorded in the second quarter of fiscal 2016 described in Note N — Impairment of Goodwill and Other Assets in these Notes, as that charge was finalized during the third quarter of fiscal 2016. In the third quarter of fiscal 2015 , our effective tax rate benefited from additional deductions (primarily related to manufacturing) and additional research credits claimed on our fiscal 2014 tax return compared with our recorded estimates at the end of fiscal 2014, as well as from finalizing issues with tax authorities. Our effective tax rate was 50.3 percent in the first three quarters of fiscal 2016 compared with 28.3 percent in the first three quarters of fiscal 2015 . In the first three quarters of fiscal 2016, our effective tax rate was negatively impacted by the non-deductibility for tax purposes of portions of the impairment charge recorded in the second quarter of fiscal 2016 described in Note N — Impairment of Goodwill and Other Assets in these Notes. This negative impact was partially offset by the favorable impact of: • The discrete items noted above favorably impacting the third quarter of fiscal 2016; • The effect of legislation enacted in the second quarter of fiscal 2016 that restored the U.S. Federal income tax credit for qualifying research and development (“R&D”) expenses for calendar year 2015 and made the credit permanent for the periods following December 31, 2015; • The settlement of a state tax issue for an amount lower than the previously recorded estimate; and • Several differences between GAAP and tax accounting for investments. In the first three quarters of fiscal 2015, our effective tax rate benefited from: • The discrete items noted above favorably impacting the third quarter of fiscal 2015; • The effect of legislation enacted in the second quarter of fiscal 2015 that restored the U.S. Federal income tax credit for qualifying R&D expenses for calendar year 2014 ; • Finalizing issues with Canadian and U.S. tax authorities for amounts lower than previously recorded estimates; and • The recognition of foreign tax credits resulting from a dividend paid by a foreign subsidiary during fiscal 2013 that exceeded the U.S. tax liability in respect of the dividend. See Note B — Discontinued Operations and Divestitures and Note T — Subsequent Events in these Notes for additional information. |
Impairment of Goodwill and Othe
Impairment of Goodwill and Other Assets | 9 Months Ended |
Apr. 01, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Impairment of Goodwill and Other Assets | Impairment of Goodwill and Other Assets We test our goodwill and other indefinite-lived intangible assets for impairment annually, or under certain circumstances, more frequently, such as when events or circumstances indicate there may be impairment. Indications of potential impairment of goodwill related to Harris CapRock Communications (which is part of our Critical Networks segment) were present at the end of the quarter ended January 1, 2016 due to the downturn in the energy market and its impact on customer operations, which also resulted in a decrease in the fiscal 2016 outlook for Harris CapRock Communications. Consequently, in connection with the preparation of our financial statements for the quarter ended January 1, 2016, we performed an interim test of Harris CapRock Communications’ goodwill for impairment as of the end of the quarter ended January 1, 2016. To test for potential impairment of goodwill related to Harris CapRock Communications, we prepared an estimate of the fair value of the reporting unit based on projected discounted cash flows. The current carrying value of the Harris CapRock Communications reporting unit exceeded its estimated fair value, and accordingly, we allocated the estimated fair value to the assets and liabilities of the Harris CapRock Communications reporting unit to estimate the implied fair value of goodwill. In conjunction with the above-described impairment test, we also conducted a test for impairment of other assets related to Harris CapRock Communications, including amortizable intangible assets and fixed assets, and impairment of these assets was considered prior to the conclusion of the goodwill impairment test. The estimated fair value of these other assets related to Harris CapRock Communications was determined based, in part, on an analysis of projected cash flows. As a result of these impairment tests, we concluded that goodwill and other assets related to Harris CapRock Communications were impaired as of January 1, 2016 , and we recorded an estimated non-cash impairment charge of $367 million , of which $290 million related to goodwill, in the quarter ended January 1, 2016. Due to the length of time necessary to measure the impairment of goodwill and other assets, our impairment analysis as of January 1, 2016 was preliminary. During the quarter ended April 1, 2016, we completed our impairment analysis which indicated that no adjustment was necessary to the impairment charge recorded during the quarter ended January 1, 2016. Most of the $367 million impairment charge is not deductible for tax purposes. See Note M — Income Taxes in these Notes for the tax impact related to this impairment charge. The impairment does not cause us to be in noncompliance with the covenants under our credit arrangements, and we do not expect the impairment to impact our ongoing financial performance, although no assurances can be given. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Apr. 01, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal market (or most advantageous market, in the absence of a principal market) for the asset or liability in an orderly transaction between market participants at the measurement date. Entities are required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value, and to utilize a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows: • Level 1 — Quoted prices in active markets for identical assets or liabilities. • Level 2 — Observable inputs other than quoted prices included within Level 1, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices that are observable or are derived principally from, or corroborated by, observable market data by correlation or other means. • Level 3 — Unobservable inputs that are supported by little or no market activity, are significant to the fair value of the assets or liabilities, and reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability developed using the best information available in the circumstances. The following table presents the fair value hierarchy of our assets and liabilities measured at fair value on a recurring basis (at least annually) as of April 1, 2016 : Level 1 Level 2 Level 3 Total (In millions) Assets Deferred compensation plan investments: (1) Corporate-owned life insurance $ — $ 17 $ — $ 17 Stock fund 56 — — 56 Equity security 36 — — 36 Fixed income securities (2) 19 — — 19 Liabilities Deferred compensation plans (3) 42 71 — 113 (1) Represents investments held in a “Rabbi Trust” associated with our non-qualified deferred compensation plans, which we include in the “Deferred compensation plan investments” and “Other non-current assets” line items in the accompanying Condensed Consolidated Balance Sheet (Unaudited). (2) Represents an investment in sovereign bonds, which we include in the "Other current assets" line item in the accompanying Condensed Consolidated Balance Sheet (Unaudited). (3) Primarily represents obligations to pay benefits under certain non-qualified deferred compensation plans, which we include in the “Deferred compensation plan liabilities” and “Other long-term liabilities” line items in the accompanying Condensed Consolidated Balance Sheet (Unaudited). Under these plans, participants designate investment options (including money market, stock and fixed-income funds), which serve as the basis for measurement of the notional value of their accounts. We had certain assets measured and recorded at fair value on a nonrecurring basis using level 3 inputs during the three quarters ended April 1, 2016. Goodwill and other assets held and used related to Harris CapRock Communications with a carrying amount of $714 million were written down to their fair value of $347 million , resulting in a $367 million non-cash impairment charge, which was included in income (loss) from continuing operations for the quarter and two quarters ended January 1, 2016. See Note N — Impairment of Goodwill and Other Assets in these Notes for additional information. The following table presents the carrying amounts and estimated fair values of our significant financial instruments that were not measured at fair value (carrying amounts of other financial instruments not listed in the table below approximate fair value due to the short-term nature of those items): April 1, 2016 July 3, 2015 Carrying Amount Fair Value Carrying Amount Fair Value (In millions) Financial Liabilities Long-term debt (including current portion) (1) $ 4,702 $ 4,940 $ 5,183 $ 5,230 (1) The fair value was estimated using a market approach based on quoted market prices for our debt traded in the secondary market. If our long-term debt in our balance sheet were measured at fair value, it would be categorized in Level 2 of the fair value hierarchy. |
Derivative Instruments and Hedg
Derivative Instruments and Hedging Activities | 9 Months Ended |
Apr. 01, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities In the normal course of doing business, we are exposed to global market risks, including the effect of changes in foreign currency exchange rates. We use derivative instruments to manage our exposure to such risks and formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking hedge transactions. We recognize all derivatives in the accompanying Condensed Consolidated Balance Sheet (Unaudited) at fair value. We do not hold or issue derivatives for speculative trading purposes. At April 1, 2016 , we had open foreign currency forward contracts with an aggregate notional amount of $72 million , of which $68 million were classified as fair value hedges and $4 million were classified as cash flow hedges. This compares with open foreign currency forward contracts with an aggregate notional amount of $74 million at July 3, 2015 , of which $73 million were classified as fair value hedges and $1 million were classified as cash flow hedges. At April 1, 2016 , contract expiration dates ranged from less than 1 month to 23 months with a weighted average contract life of 1 month . Exchange-Rate Risk — Balance Sheet Hedges To manage the exposure in our balance sheet to risks from changes in foreign currency exchange rates, we implement fair value hedges. More specifically, we use foreign currency forward contracts and options to hedge certain balance sheet items, including foreign currency denominated accounts receivable and inventory. Changes in the value of the derivatives and the related hedged items are reflected in earnings in the “Cost of product sales and services” line item in the accompanying Condensed Consolidated Statement of Income (Unaudited). As of April 1, 2016 , we had outstanding foreign currency forward contracts denominated in the British Pound, Australian Dollar, Singapore Dollar, Norwegian Krone, Brazilian Real, Mexican Peso and Canadian Dollar to hedge certain balance sheet items. The net gains or losses on foreign currency forward contracts designated as fair value hedges were not material in the quarter and three quarters ended April 1, 2016 or in the quarter and three quarters ended April 3, 2015 . In addition, no amounts were recognized in earnings in the quarter and three quarters ended April 1, 2016 or in the quarter and three quarters ended April 3, 2015 related to hedged firm commitments that no longer qualify as fair value hedges. Exchange-Rate Risk — Cash Flow Hedges To manage our exposure to currency risk and market fluctuation risk associated with anticipated cash flows that are probable of occurring in the future, we implement cash flow hedges. More specifically, we use foreign currency forward contracts and options to hedge off-balance sheet future foreign currency commitments, including purchase commitments to suppliers, future committed sales to customers and intersegment transactions. These derivatives are being used to hedge currency exposures from cash flows anticipated across our business segments. We also have hedged U.S. Dollar payments to suppliers to maintain our anticipated profit margins in our international operations. As of April 1, 2016 , we had outstanding foreign currency forward contracts denominated in the British Pound and Australian Dollar to hedge certain forecasted transactions. These derivatives have only nominal intrinsic value at the time of purchase and have a high degree of correlation to the anticipated cash flows they are designated to hedge. Hedge effectiveness is determined by the correlation of the anticipated cash flows from the hedging instruments and the anticipated cash flows from the future foreign currency commitments through the maturity dates of the derivatives used to hedge these cash flows. These financial instruments are marked-to-market using forward prices and fair value quotes with the offset to accumulated other comprehensive loss, net of hedge ineffectiveness. Gains and losses from other comprehensive loss are reclassified to earnings when the related hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings. The cash flow impact of our derivatives is included in the same category in the accompanying Condensed Consolidated Statement of Cash Flows (Unaudited) as the cash flows of the related hedged items. The net gains or losses from cash flow hedges recognized in earnings or recorded in other comprehensive loss, including gains or losses related to hedge ineffectiveness, were not material in the quarter and three quarters ended April 1, 2016 or in the quarter and three quarters ended April 3, 2015 . We do not expect the net gains or losses included in the “Accumulated other comprehensive loss” line item in the accompanying Condensed Consolidated Balance Sheet (Unaudited) as of April 1, 2016 that will be reclassified to earnings within the next 12 months to be material. Credit Risk We are exposed to the risk of credit losses from non-performance by counterparties to the financial instruments discussed above, but we do not expect any of the counterparties to fail to meet their obligations. To manage credit risks, we select counterparties based on credit ratings, limit our exposure to any single counterparty under defined guidelines and monitor the market position with each counterparty. The amount of assets and liabilities related to foreign currency forward contracts in the accompanying Condensed Consolidated Balance Sheet (Unaudited) as of April 1, 2016 was not material. |
Changes in Estimates
Changes in Estimates | 9 Months Ended |
Apr. 01, 2016 | |
Change in Accounting Estimate [Abstract] | |
Changes in Estimates | Changes in Estimates Estimates and assumptions, and changes therein, are important in connection with, among others, our segments’ revenue recognition policies related to development and production contracts. Revenue and profits related to development and production contracts are recognized using the percentage-of-completion method, generally based on the ratio of costs incurred to estimated total costs at completion (i.e., the “cost-to-cost” method) or the ratio of actual units delivered to estimated total units to be delivered under the contract (i.e., the “units-of-delivery” method) with consideration given for risk of performance and estimated profit. Development and production contracts are combined when specific aggregation criteria are met. Criteria generally include closely interrelated activities performed for a single customer within the same economic environment. Development and production contracts are generally not segmented. If development and production contracts are segmented, we have determined that they meet specific segmenting criteria. Change orders, claims or other items that may change the scope of a development and production contract are included in contract value only when the value can be reliably estimated and realization is probable. Possible incentives or penalties and award fees applicable to performance on development and production contracts are considered in estimating contract value and profit rates and are recorded when there is sufficient information to assess anticipated contract performance. Incentive provisions that increase earnings based solely on a single significant event are generally not recognized until the event occurs. Under the percentage-of-completion method of accounting, a single estimated total profit margin is used to recognize profit for each development and production contract over its period of performance. Recognition of profit on development and production fixed-price contracts requires estimates of the total cost at completion and the measurement of progress toward completion. The estimated profit or loss on a development and production contract is equal to the difference between the estimated contract value and the estimated total cost at completion. Due to the long-term nature of many of our programs, developing the estimated total cost at completion often requires judgment. Factors that must be considered in estimating the cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor performance, the risk and impact of delayed performance, availability and timing of funding from the customer and the recoverability of any claims outside the original development and production contract included in the estimate to complete. At the outset of each contract, we gauge its complexity and perceived risks and establish an estimated total cost at completion in line with these expectations. After establishing the estimated total cost at completion, we follow a standard estimate at completion (“EAC”) process in which management reviews the progress and performance on our ongoing development and production contracts at least quarterly and, in many cases, more frequently. If we successfully retire risks associated with the technical, schedule and cost aspects of a contract, we may lower our estimated total cost at completion commensurate with the retirement of these risks. Conversely, if we are not successful in retiring these risks, we may increase our estimated total cost at completion. Additionally, at the outset of a cost-reimbursable contract (for example, contracts containing award or incentive fees), we establish an estimated total contract value, or revenue, based on our expectation of performance on the contract. As the cost-reimbursable contract progresses, our estimated total contract value may increase or decrease if, for example, we receive higher or lower than expected award fees. When adjustments in estimated total costs at completion or in estimated total contract value are determined, the related impact to operating income is recognized using the cumulative catch-up method, which recognizes in the current period the cumulative effect of such adjustments for all prior periods. Anticipated losses on development and production contracts or programs in progress are charged to operating income when identified. Net EAC adjustments resulting from changes in estimates favorably impacted our operating income by $11 million ( $0.05 per diluted share) and $52 million ( $0.25 per diluted share) in the quarter and three quarters ended April 1, 2016 , respectively, and by $11 million ( $0.07 per diluted share) and $49 million ( $0.33 per diluted share) in the quarter and three quarters ended April 3, 2015 , respectively. |
Business Segments
Business Segments | 9 Months Ended |
Apr. 01, 2016 | |
Segment Reporting [Abstract] | |
Business Segments | Business Segments We adjusted our segment reporting in the first quarter of fiscal 2016 to reflect our new organizational structure that was effective at the beginning of fiscal 2016 . We structure our operations primarily around the products and services we sell and the markets we serve, and commencing with the first quarter of fiscal 2016 , we report the financial results of our operations in the following four operating segments, which are also our reportable segments and are referred to as our business segments: • Communication Systems, serving markets in tactical and airborne radios, night vision technology, and defense and public safety networks; • Space and Intelligence Systems, providing complete earth observation, environmental, geospatial, space protection, and intelligence solutions from advanced sensors and payloads, as well as ground processing and information analytics; • Electronic Systems, offering an extensive portfolio of solutions in electronic warfare, avionics, wireless technology, command, control, communications, computers and intelligence (“C4I”), undersea systems and aerostructures (this business was classified as held for sale as of the end of the third quarter of fiscal 2016); and • Critical Networks, providing managed services supporting air traffic management, energy and maritime communications, and ground network operation and sustainment, as well as high-value information technology (“IT”) and engineering services. The historical results, discussion and presentation of our business segments as set forth in this Report reflect the impact of these adjustments for all periods presented. There is no impact on our previously reported consolidated statements of income, balance sheets or statements of cash flows resulting from these adjustments. The accounting policies of our business segments are the same as those described in Note 1: “Significant Accounting Policies” in our Notes to Consolidated Financial Statements in our Fiscal 2015 Form 10-K. We evaluate each segment’s performance based on its operating income or loss, which we define as profit or loss from operations before income taxes excluding interest income and expense, royalties and related intellectual property expenses, equity method investment income or loss and gains or losses from securities and other investments. Intersegment sales are generally transferred at cost to the buying segment, and the sourcing segment recognizes a profit that is eliminated. The “Corporate eliminations” line items in the tables below represent the elimination of intersegment sales and their related profits. The “Unallocated corporate expense” line item in the tables below represents the portion of corporate expenses not allocated to our business segments. Total assets by business segment are summarized below: April 1, July 3, (In millions) Total Assets Communication Systems $ 1,757 $ 1,906 Space and Intelligence Systems 2,114 2,096 Electronic Systems 2,549 2,513 Critical Networks 2,972 3,492 Corporate (1) 2,508 3,120 $ 11,900 $ 13,127 (1) Identifiable intangible assets acquired in connection with acquisition of Exelis in the fourth quarter of fiscal 2015 were recorded as Corporate assets because they benefit the entire Company as opposed to any individual segments. Exelis identifiable intangible asset balances recorded as Corporate assets were $1.5 billion and $1.6 billion as of April 1, 2016 and July 3, 2015, respectively. Segment revenue, segment operating income and a reconciliation of segment operating income to total income from continuing operations before income taxes follow: Quarter Ended Three Quarters Ended April 1, April 3, April 1, April 3, (In millions) Revenue Communication Systems $ 485 $ 458 $ 1,428 $ 1,282 Space and Intelligence Systems 489 228 1,370 702 Electronic Systems 393 126 1,149 363 Critical Networks 551 379 1,658 1,209 Corporate eliminations (9 ) (4 ) (42 ) (8 ) $ 1,909 $ 1,187 $ 5,563 $ 3,548 Income From Continuing Operations Before Income Taxes Segment Operating Income (Loss): Communication Systems (1) $ 154 $ 153 $ 413 $ 395 Space and Intelligence Systems 76 36 211 107 Electronic Systems 75 26 207 72 Critical Networks (2) 59 29 (186 ) 121 Unallocated corporate expense (3) (75 ) (29 ) (136 ) (67 ) Corporate eliminations (1 ) (2 ) (3 ) (7 ) Non-operating loss (1 ) — — — Net interest expense (46 ) (34 ) (138 ) (77 ) $ 241 $ 179 $ 368 $ 544 (1) Communication Systems operating income in the three quarters ended April 1, 2016 included $17 million of charges recorded in the quarter ended January 1, 2016, primarily related to workforce reductions, facility consolidation and other items. We recorded $14 million of these charges in the “Cost of product sales and services” line item and the remaining $3 million of these charges in the “Engineering, selling and administrative expenses” line item in the accompanying Condensed Consolidated Statement of Income (Unaudited). (2) Critical Networks operating loss in the three quarters ended April 1, 2016 was primarily due to a $367 million non-cash impairment charge recorded in the quarter ended January 1, 2016 to write down goodwill and other assets related to Harris CapRock Communications. We recorded this charge in the “Impairment of goodwill and other assets” line item in the accompanying Condensed Consolidated Statement of Income (Unaudited). Additionally, operating loss in the three quarters ended April 1, 2016 included $12 million of charges in the quarter ended January 1, 2016, primarily related to workforce reductions and facility consolidation. We recorded these charges in the “Engineering, selling and administrative expenses” line item in the accompanying Condensed Consolidated Statement of Income (Unaudited). (3) Unallocated corporate expense included: (i) the impact of a net liability reduction of $101 million in the three quarters ended April 1, 2016 for certain post-employment benefit plans, (ii) charges of $23 million and $92 million in the quarter and three quarters ended April 1, 2016 , respectively, for integration and other costs associated with our acquisition of Exelis in the fourth quarter of fiscal 2015 (which included charges of $3 million and $8 million in the quarter and three quarters ended April 1, 2016, respectively, for amortization of a step up in inventory), and (iii) $33 million and $99 million of expense in the quarter and three quarters ended April 1, 2016 , respectively, for amortization of intangible assets acquired as a result of our acquisition of Exelis. Because the acquisition of Exelis benefited the entire Company as opposed to any individual segments, the amortization of identifiable intangible assets acquired in the Exelis acquisition was recorded as unallocated corporate expense. |
Legal Proceedings and Contingen
Legal Proceedings and Contingencies | 9 Months Ended |
Apr. 01, 2016 | |
Legal Proceedings And Contingencies [Abstract] | |
Legal Proceedings and Contingencies | Legal Proceedings and Contingencies From time to time, as a normal incident of the nature and kind of businesses in which we are, and were, engaged, various claims or charges are asserted and litigation or arbitration is commenced by or against us arising from or related to matters, including but not limited to: product liability; personal injury; patents, trademarks, trade secrets or other intellectual property; labor and employee disputes; commercial or contractual disputes; strategic acquisitions or divestitures; the prior sale or use of former products allegedly containing asbestos or other restricted materials; breach of warranty; or environmental matters. Claimed amounts against us may be substantial but may not bear any reasonable relationship to the merits of the claim or the extent of any real risk of court or arbitral awards. We record accruals for losses related to those matters against us that we consider to be probable and that can be reasonably estimated. Gain contingencies, if any, are recognized when they are realized and legal costs generally are expensed when incurred. At April 1, 2016 , our accrual for the potential resolution of lawsuits, claims or proceedings that we consider probable of being decided unfavorably to us is not material. Although it is not feasible to predict the outcome of these matters with certainty, it is reasonably possible that some lawsuits, claims or proceedings may be disposed of or decided unfavorably to us and in excess of the amounts currently accrued. Based on available information, in the opinion of management, settlements, arbitration awards and final judgments, if any, which are considered probable of being rendered against us in litigation or arbitration in existence at April 1, 2016 are reserved against or would not have a material adverse effect on our financial condition, results of operations or cash flows. Legal Proceedings On February 4, 2013, we completed the sale of Broadcast Communications to the Buyer pursuant to a definitive Asset Sale Agreement entered into December 5, 2012 for $225 million , including $160 million in cash, subject to customary adjustments (including a post-closing working capital adjustment), a $15 million subordinated promissory note (which was collected in fiscal 2014) and an earnout of up to $50 million based on future performance. Based on a dispute between us and the Buyer over the amount of the post-closing working capital adjustment, we and the Buyer previously appointed a nationally recognized accounting firm to render a final determination of such dispute. On January 29, 2016, the accounting firm rendered its final determination as to the disputed items, in which it concluded substantially in our favor and partly in the Buyer’s favor. As further discussed in Note B — Discontinued Operations and Divestitures in these Notes, as a result of such determination we recorded a loss in discontinued operations of $21 million ( $17 million after-tax) in the second quarter of fiscal 2016 . International As an international company, we are, from time to time, the subject of investigations relating to our international operations, including under U.S. export control laws and the Foreign Corrupt Practices Act (“FCPA”) and other similar U.S. and international laws. On April 4, 2011, we completed the acquisition of Carefx Corporation (“Carefx”) and thereby also acquired its subsidiaries, including in China (“Carefx China”). Following the closing, we became aware that certain entertainment, travel and other expenses in connection with the Carefx China operations may have been incurred or recorded improperly. In response, we initiated an internal investigation and learned that certain employees of the Carefx China operations had provided pre-paid gift cards and other gifts and payments to certain customers, potential customers, consultants, and government regulators, after which we took certain remedial actions. The results of the investigation have been disclosed to our Audit Committee, Board of Directors and auditors, and voluntarily to the U.S. Department of Justice (“DOJ”) and the SEC. The SEC and DOJ initiated investigations with respect to this matter. During the second quarter of fiscal 2016 , the DOJ advised us that they have determined not to take any action against us related to this matter. The DOJ further advised us that its decision was based on its overall view of the evidence as to our level of acquisition due diligence and integration efforts, our voluntary disclosure to the DOJ and SEC, our remediation efforts and our cooperation throughout the investigation, which is continuing. At this time we also are continuing to cooperate with the SEC regarding its investigation. We cannot predict at this time the duration or scope of, developments in, results of, or any regulatory action or other potential consequences from, such investigation or otherwise in connection with this matter. However, based on the information available to date, we do not believe that this matter will have a material adverse effect on our financial condition, results of operations or cash flows. Environmental Matters We are subject to numerous U.S. Federal, state, local and international environmental laws and regulatory requirements and are involved from time to time in investigations or litigation of various potential environmental issues. We are responsible, or are alleged to be responsible, for ongoing environmental investigation and remediation of multiple sites, including as a result of our acquisition of Exelis. These sites are in various stages of investigation and/or remediation and in some of these proceedings our liability is considered de minimis. We have received notices from the U.S. Environmental Protection Agency (the “EPA”) or equivalent state or international environmental agencies that a number of sites formerly or currently owned and/or operated by us or companies we have acquired, and other properties or water supplies that may be or have been impacted from those operations, contain disposed or recycled materials or wastes and require environmental investigation and/or remediation. These sites include instances where we have been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as the “Superfund Act”) and/or equivalent state and international laws. For example, Exelis received notice in June 2014 from the Department of Justice, Environment and Natural Resources Division, that it may be potentially responsible for contribution to the environmental investigation and remediation of multiple locations in Alaska. In addition, the EPA issued on March 4, 2016, a record of decision selecting a remedy for the lower 8.3 miles stretch of the Lower Passaic River. The EPA’s selected remedy includes dredging the river bank to bank, installing an engineered cap and long-term monitoring. The EPA estimates the cost of the cleanup project will be $1.38 billion . On March 31, 2016, the EPA notified over 100 potentially responsible parties, including Exelis, of their potential liability for the cost of the cleanup project but their respective allocations have not been determined. We have found no evidence that Exelis contributed any of the primary contaminants of concern to the Passaic River. We intend to vigorously defend ourselves in this matter and we believe our ultimate costs will not be material. Although it is not feasible to predict the outcome of these environmental claims, based on available information, in the opinion of our management, any payments we may be required to make as a result of environmental claims in existence at April 1, 2016 are reserved against, covered by insurance or would not have a material adverse effect on our financial condition, results of operations or cash flows. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Apr. 01, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events As further discussed in Note B - Discontinued Operations and Divestitures in these Notes, we completed the divestiture of Aerostructures on April 8, 2016 for $187 million in cash at closing and the assumption of a $23 million capitalized lease. Aerostructures was classified as held for sale as of the end of the third quarter of fiscal 2016. |
Significant Accounting Polici27
Significant Accounting Policies and Recent Accounting Standards (Policies) | 9 Months Ended |
Apr. 01, 2016 | |
Significant Accounting Policies and Recent Accounting Standards [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of Harris Corporation and its consolidated subsidiaries. As used in these Notes to Condensed Consolidated Financial Statements (Unaudited) (these “Notes”), the terms “Harris,” “Company,” “we,” “our” and “us” refer to Harris Corporation and its consolidated subsidiaries. Intracompany transactions and accounts have been eliminated in consolidation. The accompanying condensed consolidated financial statements have been prepared by Harris, without an audit, in accordance with U.S. generally accepted accounting principles (“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 position, results of operations and cash flows 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 position, results of operations and cash flows for the periods presented therein. The results for the third quarter and first three quarters of fiscal 2016 are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period. The balance sheet at July 3, 2015 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 Quarterly Report on Form 10-Q (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 July 3, 2015 (our “Fiscal 2015 Form 10-K”). As further discussed in Note B — Discontinued Operations and Divestitures in these Notes, we recorded a loss in discontinued operations in the second quarter of fiscal 2016 based on a final determination rendered in a dispute over the amount of the post-closing working capital adjustment to the purchase price for our former broadcast communications operation (“Broadcast Communications”), which we sold on February 4, 2013. We did not restate our historical financial results of operations to account for Broadcast Communications as discontinued operations for the periods prior to the second quarter of fiscal 2016 presented in this Report because the amounts were not material. Unless otherwise specified, disclosures in these Notes relate solely to our continuing operations. |
Use of Estimates | 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 and these Notes. These estimates and assumptions are based on experience and other information available prior to issuance of the accompanying condensed consolidated financial statements and these Notes. Materially different results can occur as circumstances change and additional information becomes known. |
Adoption of New Accounting Standards | Adoption of New Accounting Standards In the first quarter of fiscal 2016 , we adopted an accounting standard issued by the Financial Accounting Standards Board (“FASB”) that eliminates the requirement for an acquirer in a business combination to retrospectively account for measurement-period adjustments. Instead, the new guidance requires that the cumulative impact of a measurement-period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. This standard is to be applied prospectively. The adoption of this standard did not have a material impact on our financial position, results of operations or cash flows. In the second quarter of fiscal 2016 , we adopted an accounting standard issued by the FASB that simplifies the presentation of deferred income taxes by requiring entities to classify all deferred tax assets and liabilities as non-current in a classified statement of financial position instead of separating deferred tax assets and liabilities into current and non-current amounts. Consequently, entities may no longer allocate valuation allowances between current and non-current deferred tax assets because those allowances also will be classified as non-current. This standard was applied retrospectively, and as a result, we reclassified certain prior-period amounts in the accompanying Condensed Consolidated Financial Statements (Unaudited) to conform with current-period classifications as follows: • In the accompanying Condensed Consolidated Balance Sheet (Unaudited), we reclassified $341 million of current deferred income tax assets from the “Current deferred income taxes” line item in the assets section and $7 million of current deferred income tax liabilities from the "Current deferred income taxes" line item in the liabilities and equity section, which resulted in an increase of $339 million to the “Non-current deferred income taxes” line item in the assets section and a net increase of $5 million to the "Non-current deferred income taxes" line item in the liabilities and equity section. • In the accompanying Condensed Consolidated Statement of Cash Flows (Unaudited), we reclassified $20 million from the “Non-current deferred income taxes” line item to the “Income taxes” line item in the operating activities section. Other than those reclassifications, the adoption of this standard did not have any impact on our financial position, results of operations or cash flows. Accounting Standards Issued But Not Yet Effective In May 2014, the FASB issued a comprehensive new revenue recognition standard that supersedes nearly all revenue recognition guidance under GAAP and International Financial Reporting Standards and supersedes some cost guidance for construction-type and production-type contracts. The guidance in this standard is principles-based, and consequently, entities will be required to use more judgment and make more estimates than under prior guidance, including identifying contract performance obligations, estimating variable consideration to include in the contract price and allocating the transaction price to separate performance obligations. The guidance in this standard is applicable to all contracts with customers, regardless of industry-specific or transaction-specific fact patterns. Additionally, this standard provides guidance for transactions that were not previously addressed comprehensively (e.g., service revenue, contract modifications and licenses of intellectual property) and modifies guidance for multiple-element arrangements. The core principle of this standard is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. To help financial statement users better understand the nature, amount, timing and potential uncertainty of the revenue that is recognized, this standard requires significantly more interim and annual disclosures. This standard allows for either “full retrospective” adoption (application to all periods presented) or “modified retrospective” adoption (application to only the most current period presented in the financial statements, as well as certain additional required footnote disclosures). In August 2015, the FASB issued an accounting standards update that defers the effective date of this standard by one year, while permitting entities to elect to adopt one year earlier on the original effective date. As a result, this standard is now effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2017, which for us is our fiscal 2019. In March 2016 and April 2016, the FASB issued two accounting standards updates that clarify its new revenue recognition guidance on accounting for licenses of intellectual property and identifying performance obligations as well as principal versus agent guidance. We are currently evaluating the impact the new revenue recognition standard will have on our financial position, results of operations and cash flows. In February 2016, the FASB issued a new lease standard that supersedes existing lease guidance under GAAP. This standard requires lessees to record most leases on their balance sheets but recognize expenses on their income statements in a manner similar to existing lease guidance under GAAP. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with the option to use certain relief. Full retrospective application is prohibited. This standard is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2018, which for us is our fiscal 2020. We are currently evaluating the impact this standard will have on our financial position, results of operations and cash flows. In March 2016, the FASB issued an accounting standards update making final targeted amendments to the accounting for employee share-based payments. These amendments will require entities to recognize the income tax effects of awards when the awards vest or are settled, will change an employer's accounting for an employee's use of shares to satisfy the employer's statutory income tax withholding obligation and will require entities to elect whether to account for forfeitures of share-based payments by either recognizing forfeitures of awards as they occur or estimating the number of awards expected to be forfeited as is currently required. The required method of adoption varies by amendment. This accounting standards update is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2016, which for us is our fiscal 2018. Early adoption is permitted in any annual or interim period, but all of the guidance is required to be adopted in the same period and any adjustments must be reflected as of the beginning of the fiscal year. We are currently evaluating the impact this accounting standards update will have on our financial position, results of operations and cash flows. |
Stock Options and Other Share-Based Compensation | The fair value as of the grant date of each performance share unit award was determined based on the fair value from a multifactor Monte Carlo valuation model that simulates our stock price and total shareholder return (“TSR”) relative to other companies in our TSR peer group, less a discount to reflect the delay in payments of cash dividend-equivalents that are made only upon vesting. |
Goodwill | In accordance with GAAP, we have reassigned goodwill using a relative fair value approach. Because our accounting for our acquisition of Exelis in the fourth quarter of fiscal 2015 is still preliminary, we assigned the goodwill acquired as a result of the acquisition on a provisional basis. Immediately before and after our goodwill assignments, we completed an assessment of any potential goodwill impairment under our former and new segment reporting structure and determined that no impairment existed. |
Extended Product Warranty | We also sell extended product warranties and recognize revenue from these arrangements over the warranty period. Costs of warranty services under these arrangements are recognized as incurred. |
Impairment of Goodwill and Other Assets | We test our goodwill and other indefinite-lived intangible assets for impairment annually, or under certain circumstances, more frequently, such as when events or circumstances indicate there may be impairment. |
Fair Value Measurements | Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal market (or most advantageous market, in the absence of a principal market) for the asset or liability in an orderly transaction between market participants at the measurement date. Entities are required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value, and to utilize a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows: • Level 1 — Quoted prices in active markets for identical assets or liabilities. • Level 2 — Observable inputs other than quoted prices included within Level 1, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices that are observable or are derived principally from, or corroborated by, observable market data by correlation or other means. • Level 3 — Unobservable inputs that are supported by little or no market activity, are significant to the fair value of the assets or liabilities, and reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability developed using the best information available in the circumstances. |
Changes in Estimates | Estimates and assumptions, and changes therein, are important in connection with, among others, our segments’ revenue recognition policies related to development and production contracts. Revenue and profits related to development and production contracts are recognized using the percentage-of-completion method, generally based on the ratio of costs incurred to estimated total costs at completion (i.e., the “cost-to-cost” method) or the ratio of actual units delivered to estimated total units to be delivered under the contract (i.e., the “units-of-delivery” method) with consideration given for risk of performance and estimated profit. Development and production contracts are combined when specific aggregation criteria are met. Criteria generally include closely interrelated activities performed for a single customer within the same economic environment. Development and production contracts are generally not segmented. If development and production contracts are segmented, we have determined that they meet specific segmenting criteria. Change orders, claims or other items that may change the scope of a development and production contract are included in contract value only when the value can be reliably estimated and realization is probable. Possible incentives or penalties and award fees applicable to performance on development and production contracts are considered in estimating contract value and profit rates and are recorded when there is sufficient information to assess anticipated contract performance. Incentive provisions that increase earnings based solely on a single significant event are generally not recognized until the event occurs. Under the percentage-of-completion method of accounting, a single estimated total profit margin is used to recognize profit for each development and production contract over its period of performance. Recognition of profit on development and production fixed-price contracts requires estimates of the total cost at completion and the measurement of progress toward completion. The estimated profit or loss on a development and production contract is equal to the difference between the estimated contract value and the estimated total cost at completion. Due to the long-term nature of many of our programs, developing the estimated total cost at completion often requires judgment. Factors that must be considered in estimating the cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor performance, the risk and impact of delayed performance, availability and timing of funding from the customer and the recoverability of any claims outside the original development and production contract included in the estimate to complete. At the outset of each contract, we gauge its complexity and perceived risks and establish an estimated total cost at completion in line with these expectations. After establishing the estimated total cost at completion, we follow a standard estimate at completion (“EAC”) process in which management reviews the progress and performance on our ongoing development and production contracts at least quarterly and, in many cases, more frequently. If we successfully retire risks associated with the technical, schedule and cost aspects of a contract, we may lower our estimated total cost at completion commensurate with the retirement of these risks. Conversely, if we are not successful in retiring these risks, we may increase our estimated total cost at completion. Additionally, at the outset of a cost-reimbursable contract (for example, contracts containing award or incentive fees), we establish an estimated total contract value, or revenue, based on our expectation of performance on the contract. As the cost-reimbursable contract progresses, our estimated total contract value may increase or decrease if, for example, we receive higher or lower than expected award fees. When adjustments in estimated total costs at completion or in estimated total contract value are determined, the related impact to operating income is recognized using the cumulative catch-up method, which recognizes in the current period the cumulative effect of such adjustments for all prior periods. Anticipated losses on development and production contracts or programs in progress are charged to operating income when identified. |
Evaluation of Performance and Intersegment Sales Policy | We evaluate each segment’s performance based on its operating income or loss, which we define as profit or loss from operations before income taxes excluding interest income and expense, royalties and related intellectual property expenses, equity method investment income or loss and gains or losses from securities and other investments. Intersegment sales are generally transferred at cost to the buying segment, and the sourcing segment recognizes a profit that is eliminated. The “Corporate eliminations” line items in the tables below represent the elimination of intersegment sales and their related profits. |
Discontinued Operations and D28
Discontinued Operations and Divestitures Discountinued Operations and Divestitures (Tables) | 9 Months Ended |
Apr. 01, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Summarized Balance Sheet for Aerostructures | Summarized balance sheet information for Aerostructures is as follows: April 1, 2016 (In millions) Receivables $ 12 Inventories 35 Other current assets 1 Total current assets 48 Property, plant and equipment 84 Goodwill 61 Other intangible assets 24 Other non-current assets 4 Total non-current assets 173 Assets of disposal group held for sale $ 221 Current liabilities $ 12 Non-current liabilities 44 Liabilities of disposal group held for sale $ 56 |
Accumulated Other Comprehensi29
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended |
Apr. 01, 2016 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Components of accumulated other comprehensive loss | The components of accumulated other comprehensive loss are summarized below: April 1, July 3, (In millions) Foreign currency translation, net of income taxes of $29 million and $15 million at April 1, 2016 and July 3, 2015, respectively $ (114 ) $ (62 ) Net unrealized loss on hedging derivatives, net of income taxes of $11 million and $12 million at April 1, 2016 and July 3, 2015, respectively (18 ) (19 ) Unrecognized postretirement obligations, net of income taxes of $41 million and $42 million at April 1, 2016 and July 3, 2015, respectively 62 65 $ (70 ) $ (16 ) (1) Reclassifications out of accumulated other comprehensive loss to earnings were not material for the three quarters ended April 1, 2016 or April 3, 2015 . |
Receivables (Tables)
Receivables (Tables) | 9 Months Ended |
Apr. 01, 2016 | |
Receivables [Abstract] | |
Receivables | Receivables are summarized below: April 1, July 3, (In millions) Accounts receivable $ 732 $ 837 Unbilled costs and accrued earnings on cost-plus contracts 331 343 1,063 1,180 Less allowances for collection losses (9 ) (12 ) $ 1,054 $ 1,168 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Apr. 01, 2016 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories are summarized below: April 1, July 3, (In millions) Unbilled costs and accrued earnings on fixed-price contracts $ 524 $ 463 Finished products 119 100 Work in process 154 256 Raw materials and supplies 195 196 $ 992 $ 1,015 |
Property Plant and Equipment (T
Property Plant and Equipment (Tables) | 9 Months Ended |
Apr. 01, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, plant and equipment are summarized below: April 1, July 3, (In millions) Land $ 45 $ 45 Software capitalized for internal use 138 155 Buildings 608 587 Machinery and equipment 1,336 1,526 2,127 2,313 Less accumulated depreciation and amortization (1,120 ) (1,148 ) $ 1,007 $ 1,165 |
Goodwill (Tables)
Goodwill (Tables) | 9 Months Ended |
Apr. 01, 2016 | |
Goodwill [Abstract] | |
Changes in carrying amount of Goodwill | The assignment of goodwill by business segment, and changes in the carrying amount of goodwill for the three quarters ended April 1, 2016 by business segment, were as follows: Communication Systems Space and Intelligence Systems Electronic Systems Critical Networks Total (In millions) Balance at July 3, 2015 $ 760 $ 1,446 $ 1,718 $ 2,424 $ 6,348 Impairment of goodwill — — — (290 ) (290 ) Decrease from reclassification to held for sale asset (1) — — (61 ) — (61 ) Currency translation adjustments — (7 ) (2 ) (39 ) (48 ) Other (including true-ups of previously estimated purchase price allocations) (2) 17 (12 ) 26 (40 ) (9 ) Balance at April 1, 2016 $ 777 $ 1,427 $ 1,681 $ 2,055 $ 5,940 (1) During the third quarter of fiscal 2016, we determined Aerostructures met the held for sale criteria and reclassified Aerostructures' assets to current assets in accordance with GAAP. We included Aerostructures' assets in the "Assets of disposal group held for sale" line item in the accompanying Condensed Consolidated Balance Sheet (Unaudited) as of April 1, 2016. See Note B — Discontinued Operations and Divestitures and Note T — Subsequent Events in these Notes for additional information. (2) Our accounting for the Exelis acquisition is still preliminary. The fair value estimates for the assets acquired and liabilities assumed were based on preliminary calculations, and our estimates and assumptions are subject to change as we obtain additional information for our estimates during the measurement period (up to one year from the acquisition date). The primary areas of these preliminary estimates that are not yet finalized relate to certain tangible assets, liabilities acquired (including environmental reserves), and tax-related items. During the three quarters ended April 1, 2016 , we recorded several purchase price adjustments which impacted goodwill, the largest of which reduced current liabilities by $82 million related to previously unrecognized tax benefits and to deferred revenue based on the fair value of a customer contract. |
Accrued Warranties (Tables)
Accrued Warranties (Tables) | 9 Months Ended |
Apr. 01, 2016 | |
Product Warranties Disclosures [Abstract] | |
Changes in warranty liability | Changes in our liability for standard product warranties, which is included as a component of the “Other accrued items” and “Other long-term liabilities” line items in the accompanying Condensed Consolidated Balance Sheet (Unaudited), during the three quarters ended April 1, 2016 were as follows: (In millions) Balance at July 3, 2015 $ 36 Warranty provision for sales 15 Settlements (14 ) Other adjustments to warranty liability, including those for foreign currency translation (2 ) Balance at April 1, 2016 $ 35 |
Postretirement Benefit Plans (T
Postretirement Benefit Plans (Tables) | 9 Months Ended |
Apr. 01, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Components of Net Periodic Benefit Cost | The following table provides the components of our net periodic benefit cost (income) for our defined benefit plans, including defined benefit pension plans and other postretirement defined benefit plans: Quarter Ended April 1, 2016 Three Quarters Ended April 1, 2016 Pension Other Benefits Total Pension Other Benefits Total (In millions) Net periodic benefit cost (income) Service cost $ 18 $ 1 $ 19 $ 56 $ 4 $ 60 Interest cost 63 3 66 186 10 196 Expected return on plan assets (87 ) (4 ) (91 ) (258 ) (13 ) (271 ) Amortization of net actuarial loss — — — — 2 2 Amortization of prior service cost — — — — (7 ) (7 ) Net periodic benefit income $ (6 ) $ — $ (6 ) $ (16 ) $ (4 ) $ (20 ) Effect of curtailments or settlements (1) — — — — (121 ) (121 ) Total net periodic benefit income $ (6 ) $ — $ (6 ) $ (16 ) $ (125 ) $ (141 ) (1) We discontinued certain significantly underfunded post-employment benefit plans effective December 31, 2015. Under GAAP, this resulted in a negative plan amendment and curtailment during the quarter ended January 1, 2016, a settlement as of December 31, 2015, and a net liability reduction of $101 million . |
Income From Continuing Operat36
Income From Continuing Operations Per Common Share (Tables) | 9 Months Ended |
Apr. 01, 2016 | |
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent [Abstract] | |
Net income per common share | The computations of income from continuing operations per common share are as follows: Quarter Ended Three Quarters Ended April 1, April 3, April 1, April 3, (In millions, except per share amounts) Income from continuing operations $ 170 $ 126 $ 183 $ 390 Adjustments for participating securities outstanding — (1 ) (1 ) (2 ) Income from continuing operations used in per basic and diluted common share calculations (A) $ 170 $ 125 $ 182 $ 388 Basic weighted average common shares outstanding (B) 124.0 103.7 123.7 104.1 Impact of dilutive share-based awards 1.1 1.1 1.1 1.1 Diluted weighted average common shares outstanding (C) 125.1 104.8 124.8 105.2 Income from continuing operations per basic common share (A)/(B) $ 1.37 $ 1.21 $ 1.47 $ 3.73 Income from continuing operations per diluted common share (A)/(C) $ 1.36 $ 1.20 $ 1.46 $ 3.69 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Apr. 01, 2016 | |
Fair Value Disclosures [Abstract] | |
Assets and liabilities measured at fair value on a recurring basis | The following table presents the fair value hierarchy of our assets and liabilities measured at fair value on a recurring basis (at least annually) as of April 1, 2016 : Level 1 Level 2 Level 3 Total (In millions) Assets Deferred compensation plan investments: (1) Corporate-owned life insurance $ — $ 17 $ — $ 17 Stock fund 56 — — 56 Equity security 36 — — 36 Fixed income securities (2) 19 — — 19 Liabilities Deferred compensation plans (3) 42 71 — 113 (1) Represents investments held in a “Rabbi Trust” associated with our non-qualified deferred compensation plans, which we include in the “Deferred compensation plan investments” and “Other non-current assets” line items in the accompanying Condensed Consolidated Balance Sheet (Unaudited). (2) Represents an investment in sovereign bonds, which we include in the "Other current assets" line item in the accompanying Condensed Consolidated Balance Sheet (Unaudited). (3) Primarily represents obligations to pay benefits under certain non-qualified deferred compensation plans, which we include in the “Deferred compensation plan liabilities” and “Other long-term liabilities” line items in the accompanying Condensed Consolidated Balance Sheet (Unaudited). Under these plans, participants designate investment options (including money market, stock and fixed-income funds), which serve as the basis for measurement of the notional value of their accounts. |
Carrying amounts and estimated fair values of financial instruments not measured at fair value | The following table presents the carrying amounts and estimated fair values of our significant financial instruments that were not measured at fair value (carrying amounts of other financial instruments not listed in the table below approximate fair value due to the short-term nature of those items): April 1, 2016 July 3, 2015 Carrying Amount Fair Value Carrying Amount Fair Value (In millions) Financial Liabilities Long-term debt (including current portion) (1) $ 4,702 $ 4,940 $ 5,183 $ 5,230 (1) The fair value was estimated using a market approach based on quoted market prices for our debt traded in the secondary market. If our long-term debt in our balance sheet were measured at fair value, it would be categorized in Level 2 of the fair value hierarchy. |
Business Segments (Tables)
Business Segments (Tables) | 9 Months Ended |
Apr. 01, 2016 | |
Segment Reporting [Abstract] | |
Summary of total assets by business segment | Total assets by business segment are summarized below: April 1, July 3, (In millions) Total Assets Communication Systems $ 1,757 $ 1,906 Space and Intelligence Systems 2,114 2,096 Electronic Systems 2,549 2,513 Critical Networks 2,972 3,492 Corporate (1) 2,508 3,120 $ 11,900 $ 13,127 (1) Identifiable intangible assets acquired in connection with acquisition of Exelis in the fourth quarter of fiscal 2015 were recorded as Corporate assets because they benefit the entire Company as opposed to any individual segments. Exelis identifiable intangible asset balances recorded as Corporate assets were $1.5 billion and $1.6 billion as of April 1, 2016 and July 3, 2015, respectively. |
Revenue and income from continuing operations before income taxes by segment | Segment revenue, segment operating income and a reconciliation of segment operating income to total income from continuing operations before income taxes follow: Quarter Ended Three Quarters Ended April 1, April 3, April 1, April 3, (In millions) Revenue Communication Systems $ 485 $ 458 $ 1,428 $ 1,282 Space and Intelligence Systems 489 228 1,370 702 Electronic Systems 393 126 1,149 363 Critical Networks 551 379 1,658 1,209 Corporate eliminations (9 ) (4 ) (42 ) (8 ) $ 1,909 $ 1,187 $ 5,563 $ 3,548 Income From Continuing Operations Before Income Taxes Segment Operating Income (Loss): Communication Systems (1) $ 154 $ 153 $ 413 $ 395 Space and Intelligence Systems 76 36 211 107 Electronic Systems 75 26 207 72 Critical Networks (2) 59 29 (186 ) 121 Unallocated corporate expense (3) (75 ) (29 ) (136 ) (67 ) Corporate eliminations (1 ) (2 ) (3 ) (7 ) Non-operating loss (1 ) — — — Net interest expense (46 ) (34 ) (138 ) (77 ) $ 241 $ 179 $ 368 $ 544 (1) Communication Systems operating income in the three quarters ended April 1, 2016 included $17 million of charges recorded in the quarter ended January 1, 2016, primarily related to workforce reductions, facility consolidation and other items. We recorded $14 million of these charges in the “Cost of product sales and services” line item and the remaining $3 million of these charges in the “Engineering, selling and administrative expenses” line item in the accompanying Condensed Consolidated Statement of Income (Unaudited). (2) Critical Networks operating loss in the three quarters ended April 1, 2016 was primarily due to a $367 million non-cash impairment charge recorded in the quarter ended January 1, 2016 to write down goodwill and other assets related to Harris CapRock Communications. We recorded this charge in the “Impairment of goodwill and other assets” line item in the accompanying Condensed Consolidated Statement of Income (Unaudited). Additionally, operating loss in the three quarters ended April 1, 2016 included $12 million of charges in the quarter ended January 1, 2016, primarily related to workforce reductions and facility consolidation. We recorded these charges in the “Engineering, selling and administrative expenses” line item in the accompanying Condensed Consolidated Statement of Income (Unaudited). (3) Unallocated corporate expense included: (i) the impact of a net liability reduction of $101 million in the three quarters ended April 1, 2016 for certain post-employment benefit plans, (ii) charges of $23 million and $92 million in the quarter and three quarters ended April 1, 2016 , respectively, for integration and other costs associated with our acquisition of Exelis in the fourth quarter of fiscal 2015 (which included charges of $3 million and $8 million in the quarter and three quarters ended April 1, 2016, respectively, for amortization of a step up in inventory), and (iii) $33 million and $99 million of expense in the quarter and three quarters ended April 1, 2016 , respectively, for amortization of intangible assets acquired as a result of our acquisition of Exelis. Because the acquisition of Exelis benefited the entire Company as opposed to any individual segments, the amortization of identifiable intangible assets acquired in the Exelis acquisition was recorded as unallocated corporate expense. |
Significant Accounting Polici39
Significant Accounting Policies and Recent Accounting Standards (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Jan. 01, 2016 | Apr. 01, 2016 | Jul. 03, 2015 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Non-current deferred income taxes, assets | $ 362 | $ 502 | |
Non-current deferred income taxes, liabilities | $ 8 | $ 12 | |
Tax reclassifications related to adoption of accounting standard | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Current deferred income taxes, assets | $ 341 | ||
Current deferred income taxes, liabilities | 7 | ||
Non-current deferred income taxes, assets | 339 | ||
Non-current deferred income taxes, liabilities | 5 | ||
Non-current deferred income taxes | $ 20 |
Discontinued Operations and D40
Discontinued Operations and Divestitures - Aerostructures (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Apr. 01, 2016 | Apr. 03, 2015 | Apr. 01, 2016 | Apr. 03, 2015 | Jul. 03, 2015 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Income from continuing operations before income taxes | $ 241 | $ 179 | $ 368 | $ 544 | |
Assets [Abstract] | |||||
Total current assets | 221 | 221 | $ 0 | ||
Liabilities [Abstract] | |||||
Liabilities of disposal group held for sale | 30 | 30 | $ 28 | ||
Electronic Systems | Disposal Group, Held-for-sale, Not Discontinued Operations | Aerostructures | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Asset sale agreement, cash | 187 | ||||
Asset sale agreement, capital leases | 23 | 23 | |||
Income from continuing operations before income taxes | 3 | 4 | |||
Assets [Abstract] | |||||
Receivables | 12 | 12 | |||
Inventories | 35 | 35 | |||
Other current assets | 1 | 1 | |||
Total current assets | 48 | 48 | |||
Property, plant and equipment | 84 | 84 | |||
Goodwill | 61 | 61 | |||
Other intangible assets | 24 | 24 | |||
Other non-current assets | 4 | 4 | |||
Total non-current assets | 173 | 173 | |||
Assets of disposal group held for sale | 221 | 221 | |||
Liabilities [Abstract] | |||||
Liabilities of disposal group held for sale | 12 | 12 | |||
Non-current liabilities | 44 | 44 | |||
Liabilities of disposal group held for sale | $ 56 | $ 56 |
Discontinued Operations and D41
Discontinued Operations and Divestitures Discontinued Operations and Divestitures - Broadcast Communications (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |||||
Apr. 01, 2016 | Jan. 01, 2016 | Apr. 03, 2015 | Dec. 28, 2012 | Apr. 01, 2016 | Apr. 03, 2015 | Jul. 03, 2015 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Loss on sale of discontinued operations | $ (20) | $ 0 | |||||
Discontinued operations, net of income taxes | $ (2) | $ 0 | $ (19) | $ 0 | |||
Loss on discontinued operations, per diluted share (in usd per share) | $ 1.34 | $ 1.20 | $ 1.31 | $ 3.69 | |||
Discontinued Operations, Liabilities | $ 30 | $ 30 | $ 28 | ||||
Broadcast Communications | Discontinued Operations | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Asset sale agreement | $ 225 | ||||||
Asset sale agreement, cash | 160 | ||||||
Asset sale agreement, promissory note | 15 | ||||||
Asset sale agreement, earnout | $ 50 | ||||||
Loss on sale of discontinued operations | 2 | $ (21) | |||||
Discontinued operations, net of income taxes | $ 2 | $ (17) | |||||
Loss on discontinued operations, per diluted share (in usd per share) | $ (0.14) | ||||||
Discontinued Operations, Liabilities | $ 43 |
Stock Options and Other Share42
Stock Options and Other Share-Based Compensation (Details) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 01, 2016USD ($)planshares | Apr. 03, 2015USD ($) | Apr. 01, 2016USD ($)planshares | Apr. 03, 2015USD ($) | |
Stock Options and Other Share Based Compensation (Textuals) | ||||
Number of shareholder approved employee stock incentive plans | plan | 2 | 2 | ||
Compensation cost for share-based awards | $ | $ 10 | $ 9 | $ 29 | $ 26 |
Stock options granted, shares | 1,658,000 | |||
Expected dividend yield | 2.50% | |||
Expected volatility | 23.01% | |||
Risk free interest rates | 1.52% | |||
Expected term (years) | 5 years 18 days | |||
Restricted Stock Awards | ||||
Share-based awards | ||||
Share-based awards | 14,000 | 114,270 | ||
Performance Share And Performance Share Unit | ||||
Share-based awards | ||||
Share-based awards | 292,665 |
Accumulated Other Comprehensi43
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Apr. 01, 2016 | Jul. 03, 2015 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Foreign currency translation, net of income taxes of $29 million and $15 million at April 1, 2016 and July 3, 2015, respectively | $ (114) | $ (62) |
Net unrealized loss on hedging derivatives, net of income taxes of $11 million and $12 million at April 1, 2016 and July 3, 2015, respectively | (18) | (19) |
Unrecognized postretirement obligations, net of income taxes of $41 million and $42 million at April 1, 2016 and July 3, 2015, respectively | 62 | 65 |
Accumulated other comprehensive loss | (70) | (16) |
Tax effect on foreign currency translation | 29 | 15 |
Tax effect on unrealized loss on hedging derivatives | 11 | 12 |
Tax effect on unrecognized post-retirement obligations | $ 41 | $ 42 |
Receivables (Details)
Receivables (Details) - USD ($) $ in Millions | Apr. 01, 2016 | Jul. 03, 2015 |
Receivables | ||
Accounts receivable | $ 732 | $ 837 |
Unbilled costs and accrued earnings on cost-plus contracts | 331 | 343 |
Receivables, gross | 1,063 | 1,180 |
Less allowances for collection losses | (9) | (12) |
Receivables, net | $ 1,054 | $ 1,168 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Apr. 01, 2016 | Jul. 03, 2015 |
Inventories | ||
Unbilled costs and accrued earnings on fixed-price contracts | $ 524 | $ 463 |
Finished products | 119 | 100 |
Work in process | 154 | 256 |
Raw materials and supplies | 195 | 196 |
Inventories | 992 | 1,015 |
Inventories (Textuals) | ||
Progress payments | $ 65 | $ 85 |
Property, Plant and Equipment (
Property, Plant and Equipment (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Apr. 01, 2016 | Apr. 03, 2015 | Apr. 01, 2016 | Apr. 03, 2015 | Jul. 03, 2015 | |
Property, Plant and Equipment | |||||
Land | $ 45 | $ 45 | $ 45 | ||
Software capitalized for internal use | 138 | 138 | 155 | ||
Buildings | 608 | 608 | 587 | ||
Machinery and equipment | 1,336 | 1,336 | 1,526 | ||
Property, plant and equipment, gross | 2,127 | 2,127 | 2,313 | ||
Less accumulated depreciation and amortization | (1,120) | (1,120) | (1,148) | ||
Property, plant and equipment | 1,007 | 1,007 | $ 1,165 | ||
Property Plant and Equipment (Textuals) | |||||
Depreciation and amortization expense related to property, plant and equipment | $ 42 | $ 36 | $ 141 | $ 109 |
Goodwill (Details)
Goodwill (Details) $ in Millions | 9 Months Ended |
Apr. 01, 2016USD ($) | |
Changes in the carrying amount of goodwill | |
Balance at July 3, 2015 | $ 6,348 |
Impairment of goodwill | (290) |
Decrease from reclassification to held for sale asset | (61) |
Currency translation adjustments | (48) |
Other (including true-ups of previously estimated purchase price allocations) | (9) |
Balance at April 1, 2016 | 5,940 |
Communication Systems | |
Changes in the carrying amount of goodwill | |
Balance at July 3, 2015 | 760 |
Impairment of goodwill | 0 |
Decrease from reclassification to held for sale asset | 0 |
Currency translation adjustments | 0 |
Other (including true-ups of previously estimated purchase price allocations) | 17 |
Balance at April 1, 2016 | 777 |
Space and Intelligence Systems | |
Changes in the carrying amount of goodwill | |
Balance at July 3, 2015 | 1,446 |
Impairment of goodwill | 0 |
Decrease from reclassification to held for sale asset | 0 |
Currency translation adjustments | (7) |
Other (including true-ups of previously estimated purchase price allocations) | (12) |
Balance at April 1, 2016 | 1,427 |
Electronic Systems | |
Changes in the carrying amount of goodwill | |
Balance at July 3, 2015 | 1,718 |
Impairment of goodwill | 0 |
Decrease from reclassification to held for sale asset | (61) |
Currency translation adjustments | (2) |
Other (including true-ups of previously estimated purchase price allocations) | 26 |
Balance at April 1, 2016 | 1,681 |
Critical Networks | |
Changes in the carrying amount of goodwill | |
Balance at July 3, 2015 | 2,424 |
Impairment of goodwill | (290) |
Decrease from reclassification to held for sale asset | 0 |
Currency translation adjustments | (39) |
Other (including true-ups of previously estimated purchase price allocations) | (40) |
Balance at April 1, 2016 | 2,055 |
Current Liabilities | Exelis | |
Goodwill Details (Textuals) [Abstract] | |
Total current liabilities | $ 82 |
Accrued Warranties (Details)
Accrued Warranties (Details) - USD ($) $ in Millions | 9 Months Ended | |
Apr. 01, 2016 | Jul. 03, 2015 | |
Changes in warranty liability | ||
Balance at July 3, 2015 | $ 36 | |
Warranty provision for sales | 15 | |
Settlements | (14) | |
Other adjustments to warranty liability, including those for foreign currency translation | (2) | |
Balance at April 1, 2016 | 35 | |
Extended Product Warranty Disclosure [Abstract] | ||
Extended Product Warranty Accrual | $ 28 | $ 36 |
Long-Term Debt (Details)
Long-Term Debt (Details) | Apr. 01, 2016USD ($) |
4.25% notes, due October 1, 2016 (Exelis) | Financial guarantee by Harris Corporation (terminated on Dec 31, 2015) | |
Guarantor Obligations [Line Items] | |
Notes Payable | $ 250,000,000 |
Interest rate on fixed rate debt | 4.25% |
5.55% notes, due October 1, 2021 (Exelis) | Financial guarantee by Harris Corporation (terminated on Dec 31, 2015) | |
Guarantor Obligations [Line Items] | |
Notes Payable | $ 400,000,000 |
Interest rate on fixed rate debt | 5.55% |
Fixed rate debt securities | Financial guarantee by Exelis Inc. (terminated on Dec 31, 2015) | |
Guarantor Obligations [Line Items] | |
Notes Payable | $ 3,226,000,000 |
Postretirement Benefit Plans -
Postretirement Benefit Plans - Components of Periodic Benefit Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Apr. 01, 2016 | Apr. 01, 2016 | Apr. 03, 2015 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Service cost | $ 19 | $ 60 | |
Interest cost | 66 | 196 | |
Expected return on plan assets | (91) | (271) | |
Amortization of net actuarial loss | 0 | 2 | |
Amortization of prior service cost | 0 | (7) | |
Net periodic benefit income | (6) | (20) | |
Effect of curtailments or settlements | 0 | (121) | |
Total net periodic benefit income | (6) | (141) | |
Net liability reduction for certain post-employment benefit plans | (101) | $ 0 | |
Pension | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Service cost | 18 | 56 | |
Interest cost | 63 | 186 | |
Expected return on plan assets | (87) | (258) | |
Amortization of net actuarial loss | 0 | 0 | |
Amortization of prior service cost | 0 | 0 | |
Net periodic benefit income | (6) | (16) | |
Effect of curtailments or settlements | 0 | 0 | |
Total net periodic benefit income | (6) | (16) | |
Other Benefits | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Service cost | 1 | 4 | |
Interest cost | 3 | 10 | |
Expected return on plan assets | (4) | (13) | |
Amortization of net actuarial loss | 0 | 2 | |
Amortization of prior service cost | 0 | (7) | |
Net periodic benefit income | 0 | (4) | |
Effect of curtailments or settlements | 0 | (121) | |
Total net periodic benefit income | $ 0 | (125) | |
Net liability reduction for certain post-employment benefit plans | $ (101) |
Postretirement Benefit Plans (D
Postretirement Benefit Plans (Details) $ in Millions | 9 Months Ended |
Apr. 01, 2016USD ($) | |
Compensation and Retirement Disclosure [Abstract] | |
Defined benefit plan, contributions by employer during period | $ 134 |
Defined benefit plan, estimated future employer contributions in remaining fiscal year | $ 40 |
Income From Continuing Operat52
Income From Continuing Operations Per Common Share (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 01, 2016 | Apr. 03, 2015 | Apr. 01, 2016 | Apr. 03, 2015 | |
Earnings Per Share [Abstract] | ||||
Income (loss) from continuing operations | $ 170 | $ 126 | $ 183 | $ 390 |
Adjustments for participating securities outstanding | 0 | (1) | (1) | (2) |
Income (loss) from continuing operations used in per basic and diluted common share calculations (A) | $ 170 | $ 125 | $ 182 | $ 388 |
Basic weighted average common shares outstanding (B) | 124,000,000 | 103,700,000 | 123,700,000 | 104,100,000 |
Impact of dilutive share-based awards (in usd per share) | 1,100,000 | 1,100,000 | 1,100,000 | 1,100,000 |
Diluted weighted average common shares outstanding (C) | 125,100,000 | 104,800,000 | 124,800,000 | 105,200,000 |
Income (loss) from continuing operations per basic common share (A)/(B) (in usd per share) | $ 1.37 | $ 1.21 | $ 1.47 | $ 3.73 |
Income (loss) from continuing operations per diluted common share (A)/(C) (in usd per share) | $ 1.36 | $ 1.20 | $ 1.46 | $ 3.69 |
Net Income Per Common Share (Textuals) [Abstract] | ||||
Outstanding antidilutive employee stock options | 1,618,558 | 765,438 |
Income Taxes (Details)
Income Taxes (Details) | 3 Months Ended | 9 Months Ended | ||
Apr. 01, 2016 | Apr. 03, 2015 | Apr. 01, 2016 | Apr. 03, 2015 | |
Income Taxes (Textuals) [Abstract] | ||||
Effective tax rate | 29.50% | 29.60% | 50.30% | 28.30% |
Impairment of Goodwill and Ot54
Impairment of Goodwill and Other Assets (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Apr. 01, 2016 | Jan. 01, 2016 | Apr. 03, 2015 | Apr. 01, 2016 | Apr. 03, 2015 | |
Impairment of goodwill and other assets | $ 0 | $ 367 | $ 0 | $ 367 | $ 0 |
Impairment of goodwill | $ 290 | ||||
Harris CapRock Communications | |||||
Impairment of goodwill and other assets | 367 | ||||
Impairment of goodwill | $ 290 |
Fair Value Measurements - Asset
Fair Value Measurements - Assets and Liabilities Measured on Recurring and Nonrecurring Basis (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Apr. 01, 2016 | Jan. 01, 2016 | Apr. 03, 2015 | Apr. 01, 2016 | Apr. 03, 2015 | Jul. 03, 2015 | |
Liabilities | ||||||
Goodwill | $ 5,940 | $ 5,940 | $ 6,348 | |||
Impairment of goodwill and other assets | 0 | $ 367 | $ 0 | 367 | $ 0 | |
Harris CapRock Communications | ||||||
Liabilities | ||||||
Impairment of goodwill and other assets | $ 367 | |||||
Recurring | Deferred Compensation Plan Corporate Owned Life Insurance | ||||||
Assets | ||||||
Corporate-owned life insurance | 17 | 17 | ||||
Recurring | Deferred Compensation Plan Corporate Owned Life Insurance | Level 1 | ||||||
Assets | ||||||
Corporate-owned life insurance | 0 | 0 | ||||
Recurring | Deferred Compensation Plan Corporate Owned Life Insurance | Level 2 | ||||||
Assets | ||||||
Corporate-owned life insurance | 17 | 17 | ||||
Recurring | Deferred Compensation Plan Corporate Owned Life Insurance | Level 3 | ||||||
Assets | ||||||
Corporate-owned life insurance | 0 | 0 | ||||
Recurring | Deferred Compensation Plan Stock Fund | ||||||
Assets | ||||||
Stuck fund and equity security | 56 | 56 | ||||
Recurring | Deferred Compensation Plan Stock Fund | Level 1 | ||||||
Assets | ||||||
Stuck fund and equity security | 56 | 56 | ||||
Recurring | Deferred Compensation Plan Stock Fund | Level 2 | ||||||
Assets | ||||||
Stuck fund and equity security | 0 | 0 | ||||
Recurring | Deferred Compensation Plan Stock Fund | Level 3 | ||||||
Assets | ||||||
Stuck fund and equity security | 0 | 0 | ||||
Recurring | Equity Securities | ||||||
Assets | ||||||
Stuck fund and equity security | 36 | 36 | ||||
Recurring | Equity Securities | Level 1 | ||||||
Assets | ||||||
Stuck fund and equity security | 36 | 36 | ||||
Recurring | Equity Securities | Level 2 | ||||||
Assets | ||||||
Stuck fund and equity security | 0 | 0 | ||||
Recurring | Equity Securities | Level 3 | ||||||
Assets | ||||||
Stuck fund and equity security | 0 | 0 | ||||
Recurring | Fixed income securities | ||||||
Assets | ||||||
Fixed income securities | 19 | 19 | ||||
Recurring | Fixed income securities | Level 1 | ||||||
Assets | ||||||
Fixed income securities | 19 | 19 | ||||
Recurring | Fixed income securities | Level 2 | ||||||
Assets | ||||||
Fixed income securities | 0 | 0 | ||||
Recurring | Fixed income securities | Level 3 | ||||||
Assets | ||||||
Fixed income securities | 0 | 0 | ||||
Recurring | Deferred Compensation Plan | ||||||
Liabilities | ||||||
Deferred compensation plans | 113 | 113 | ||||
Recurring | Deferred Compensation Plan | Level 1 | ||||||
Liabilities | ||||||
Deferred compensation plans | 42 | 42 | ||||
Recurring | Deferred Compensation Plan | Level 2 | ||||||
Liabilities | ||||||
Deferred compensation plans | 71 | 71 | ||||
Recurring | Deferred Compensation Plan | Level 3 | ||||||
Liabilities | ||||||
Deferred compensation plans | 0 | 0 | ||||
Critical Networks | ||||||
Liabilities | ||||||
Goodwill | 2,055 | 2,055 | $ 2,424 | |||
Critical Networks | Harris CapRock Communications | ||||||
Liabilities | ||||||
Impairment of goodwill and other assets | 367 | |||||
Critical Networks | Nonrecurring | Harris CapRock Communications | ||||||
Liabilities | ||||||
Goodwill, gross | 714 | 714 | ||||
Goodwill | $ 347 | 347 | ||||
Impairment of goodwill and other assets | $ 367 |
Fair Value Measurements - Ass56
Fair Value Measurements - Assets and Liabilities Not Measured at Fair Value (Details) - USD ($) $ in Millions | Apr. 01, 2016 | Jul. 03, 2015 |
Fair Value Disclosures [Abstract] | ||
Long-term debt (including current portion), carrying amount | $ 4,702 | $ 5,183 |
Long-term debt (including current portion), fair value | $ 4,940 | $ 5,230 |
Derivative Instruments and He57
Derivative Instruments and Hedging Activities (Details) - USD ($) $ in Millions | 9 Months Ended | |
Apr. 01, 2016 | Jul. 03, 2015 | |
Derivative Instruments and Hedging Activities (Textuals) | ||
Weighted average contract life | 1 month | |
Minimum | ||
Derivative Instruments and Hedging Activities (Textuals) | ||
Contract expiration dates lower range | 1 month | |
Maximum | ||
Derivative Instruments and Hedging Activities (Textuals) | ||
Contract expiration dates lower range | 23 months | |
Foreign Exchange Forward | ||
Derivative Instruments and Hedging Activities (Textuals) | ||
Derivative, Notional Amount | $ 72 | $ 74 |
Foreign Exchange Forward | Fair Value Hedging | ||
Derivative Instruments and Hedging Activities (Textuals) | ||
Derivative, Notional Amount | 68 | 73 |
Foreign Exchange Forward | Cash Flow Hedging | ||
Derivative Instruments and Hedging Activities (Textuals) | ||
Derivative, Notional Amount | $ 4 | $ 1 |
Changes in Estimate (Details)
Changes in Estimate (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 01, 2016 | Apr. 03, 2015 | Apr. 01, 2016 | Apr. 03, 2015 | |
Change in Accounting Estimate [Line Items] | ||||
Earnings per diluted share (in usd per share) | $ 1.34 | $ 1.20 | $ 1.31 | $ 3.69 |
Contracts Accounted for under Percentage of Completion | ||||
Change in Accounting Estimate [Line Items] | ||||
Operating Income (Loss) | $ 11 | $ 11 | $ 52 | $ 49 |
Earnings per diluted share (in usd per share) | $ 0.05 | $ 0.07 | $ 0.25 | $ 0.33 |
Business Segments (Details)
Business Segments (Details) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Apr. 01, 2016USD ($) | Jan. 01, 2016USD ($) | Apr. 03, 2015USD ($) | Apr. 01, 2016USD ($)segment | Apr. 03, 2015USD ($) | Jul. 03, 2015USD ($) | |
Segment Reporting Information [Line Items] | ||||||
Number of operating segments | segment | 4 | |||||
Number of reportable segments | segment | 4 | |||||
Total assets | $ 11,900 | $ 11,900 | $ 13,127 | |||
Identifiable intangible assets | 1,576 | 1,576 | 1,775 | |||
Revenue and income from continuing operations before income taxes by segment | ||||||
Revenue from product sales and services | (1,909) | $ (1,187) | (5,563) | $ (3,548) | ||
Non-operating loss | (1) | 0 | 0 | 0 | ||
Net interest expense | (46) | (34) | (138) | (77) | ||
Income from continuing operations before income taxes | 241 | 179 | 368 | 544 | ||
Business Segments (Textuals) | ||||||
Cost of product sales and services | 1,312 | 754 | 3,813 | 2,324 | ||
Engineering, selling and administrative expenses | 309 | 220 | 877 | 603 | ||
Impairment of goodwill and other assets | 0 | $ 367 | 0 | 367 | 0 | |
Net liability reduction for certain post-employment benefit plans | (101) | 0 | ||||
Amortization of intangible assets from Exelis Inc. acquisition | 99 | 0 | ||||
Communication Systems | ||||||
Segment Reporting Information [Line Items] | ||||||
Total assets | 1,757 | 1,757 | 1,906 | |||
Space and Intelligence Systems | ||||||
Segment Reporting Information [Line Items] | ||||||
Total assets | 2,114 | 2,114 | 2,096 | |||
Electronic Systems | ||||||
Segment Reporting Information [Line Items] | ||||||
Total assets | 2,549 | 2,549 | 2,513 | |||
Critical Networks | ||||||
Segment Reporting Information [Line Items] | ||||||
Total assets | 2,972 | 2,972 | 3,492 | |||
Corporate Segment | ||||||
Segment Reporting Information [Line Items] | ||||||
Total assets | 2,508 | 2,508 | 3,120 | |||
Business Segments (Textuals) | ||||||
Net liability reduction for certain post-employment benefit plans | 101 | |||||
Corporate Segment | Exelis | ||||||
Segment Reporting Information [Line Items] | ||||||
Identifiable intangible assets | 1,500 | 1,500 | $ 1,600 | |||
Business Segments (Textuals) | ||||||
Business Combination, Integration Related Costs | 23 | 92 | ||||
Amortization of intangible assets from Exelis Inc. acquisition | 33 | 99 | ||||
Operating Segments | Communication Systems | ||||||
Revenue and income from continuing operations before income taxes by segment | ||||||
Revenue from product sales and services | (485) | (458) | (1,428) | (1,282) | ||
Segment operating income | 154 | 153 | 413 | 395 | ||
Operating Segments | Space and Intelligence Systems | ||||||
Revenue and income from continuing operations before income taxes by segment | ||||||
Revenue from product sales and services | (489) | (228) | (1,370) | (702) | ||
Segment operating income | 76 | 36 | 211 | 107 | ||
Operating Segments | Electronic Systems | ||||||
Revenue and income from continuing operations before income taxes by segment | ||||||
Revenue from product sales and services | (393) | (126) | (1,149) | (363) | ||
Segment operating income | 75 | 26 | 207 | 72 | ||
Operating Segments | Critical Networks | ||||||
Revenue and income from continuing operations before income taxes by segment | ||||||
Revenue from product sales and services | (551) | (379) | (1,658) | (1,209) | ||
Segment operating income | 59 | 29 | (186) | 121 | ||
Corporate, Non-Segment | ||||||
Revenue and income from continuing operations before income taxes by segment | ||||||
Unallocated corporate income (expense) | (75) | (29) | (136) | (67) | ||
Eliminations | Corporate Segment | ||||||
Revenue and income from continuing operations before income taxes by segment | ||||||
Revenue from product sales and services | 9 | 4 | 42 | 8 | ||
Corporate eliminations | (1) | $ (2) | (3) | $ (7) | ||
Harris CapRock Communications | ||||||
Business Segments (Textuals) | ||||||
Impairment of goodwill and other assets | $ 367 | |||||
Harris CapRock Communications | Critical Networks | ||||||
Business Segments (Textuals) | ||||||
Impairment of goodwill and other assets | 367 | |||||
Workforce reductions, facility consolidation and other items [Member] | Communication Systems | ||||||
Revenue and income from continuing operations before income taxes by segment | ||||||
Segment operating income | 17 | |||||
Business Segments (Textuals) | ||||||
Cost of product sales and services | 14 | |||||
Engineering, selling and administrative expenses | 3 | |||||
Workforce reductions, facility consolidation and other items [Member] | Harris CapRock Communications | Critical Networks | ||||||
Business Segments (Textuals) | ||||||
Engineering, selling and administrative expenses | 12 | |||||
Integration and other costs associated with our acquisition of Exelis | Corporate Segment | Exelis | ||||||
Business Segments (Textuals) | ||||||
Charges for Amortization of Inventory Step-up | $ 3 | $ 8 |
Legal proceedings and conting60
Legal proceedings and contingencies (Details) $ in Millions | Mar. 31, 2016party | Apr. 01, 2016USD ($) | Jan. 01, 2016USD ($) | Apr. 03, 2015USD ($) | Dec. 28, 2012USD ($) | Apr. 01, 2016USD ($) | Apr. 03, 2015USD ($) |
Loss Contingencies [Line Items] | |||||||
Adjustment to loss on sales of businesses, net | $ 20 | $ 0 | |||||
Gain on sale of discontinued operations after-tax | $ (2) | $ 0 | (19) | $ 0 | |||
Broadcast Communications | |||||||
Loss Contingencies [Line Items] | |||||||
Asset sale agreement | $ 225 | ||||||
Asset sale agreement, cash | 160 | ||||||
Asset sale agreement, promissory note | 15 | ||||||
Asset sale agreement, earnout | $ 50 | ||||||
Adjustment to loss on sales of businesses, net | $ 21 | ||||||
Gain on sale of discontinued operations after-tax | $ (17) | ||||||
Exelis | Passaic River Alaska | |||||||
Loss Contingencies [Line Items] | |||||||
Estimated cost for all participating parties of EPA's preferred alternative | $ 1,380 | ||||||
Number of Responsible Parties Notified | party | 100 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event - Aerostructures $ in Millions | Apr. 08, 2016USD ($) |
Subsequent Event [Line Items] | |
Gain on sale of discontinued operations, after-tax | $ 187 |
Disposal Group, Not Discontinued Operations [Member] | |
Subsequent Event [Line Items] | |
Capital lease liability assumed on sale of discontinued operations | $ 23 |