Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Dec. 28, 2018 | Jan. 25, 2019 | |
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 | Dec. 28, 2018 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --06-28 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 117,829,781 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||||
Dec. 28, 2018 | Sep. 28, 2018 | Dec. 29, 2017 | Sep. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | |
Income Statement [Abstract] | ||||||
Revenue from product sales and services | $ 1,666 | $ 1,535 | $ 3,208 | $ 2,945 | ||
Cost of product sales and services | (1,095) | (1,022) | (2,105) | (1,941) | ||
Engineering, selling and administrative expenses | (304) | (291) | (583) | (559) | ||
Non-operating income | 47 | 44 | 94 | 90 | ||
Interest income | 0 | 1 | 1 | 1 | ||
Interest expense | (43) | (42) | (87) | (83) | ||
Income from continuing operations before income taxes | 271 | 225 | 528 | 453 | ||
Income taxes | (46) | (94) | (87) | (157) | ||
Income from continuing operations | 225 | 131 | 441 | 296 | ||
Discontinued operations, net of income taxes | 0 | 0 | (3) | (6) | ||
Net income | $ 225 | $ 213 | $ 131 | $ 159 | $ 438 | $ 290 |
Basic | ||||||
Continuing operations (in dollars per share) | $ 1.91 | $ 1.10 | $ 3.74 | $ 2.49 | ||
Discontinued operations (in dollars per share) | 0 | 0 | (0.03) | (0.06) | ||
Basic (in dollars per share) | 1.91 | 1.10 | 3.71 | 2.43 | ||
Diluted | ||||||
Continuing operations (in dollars per share) | 1.88 | 1.08 | 3.66 | 2.44 | ||
Discontinued operations (in dollars per share) | (0.01) | 0 | (0.02) | (0.05) | ||
Diluted (in dollars per share) | 1.87 | 1.08 | 3.64 | 2.39 | ||
Cash dividends paid per common share (in dollars per share) | $ 0.685 | $ 0.57 | $ 1.37 | $ 1.14 | ||
Basic weighted average common shares outstanding (in shares) | 117.7 | 118.5 | 117.8 | 118.8 | ||
Diluted weighted average common shares outstanding (in shares) | 120 | 120.9 | 120.3 | 121.1 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 28, 2018 | Dec. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 225 | $ 131 | $ 438 | $ 290 |
Other comprehensive income (loss): | ||||
Foreign currency translation gain (loss), net of income taxes | (8) | (4) | (8) | 21 |
Net unrealized gain on hedging derivatives, net of income taxes | 0 | 0 | 1 | 1 |
Net unrecognized loss on postretirement obligations, net of income taxes | (1) | 0 | (2) | 0 |
Other comprehensive income (loss), net of income taxes | (9) | (4) | (9) | 22 |
Total comprehensive income | $ 216 | $ 127 | $ 429 | $ 312 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions | Dec. 28, 2018 | Jun. 29, 2018 |
Current Assets | ||
Cash and cash equivalents | $ 343 | $ 288 |
Receivables | 494 | 466 |
Contract assets | 829 | 782 |
Inventories | 425 | 411 |
Income taxes receivable | 102 | 174 |
Other current assets | 118 | 103 |
Total current assets | 2,311 | 2,224 |
Non-current Assets | ||
Property, plant and equipment | 901 | 900 |
Goodwill | 5,370 | 5,372 |
Other intangible assets | 930 | 989 |
Non-current deferred income taxes | 99 | 119 |
Other non-current assets | 241 | 247 |
Total non-current assets | 7,541 | 7,627 |
Total assets | 9,852 | 9,851 |
Current Liabilities | ||
Short-term debt | 103 | 78 |
Accounts payable | 521 | 622 |
Contract liabilities | 479 | 372 |
Compensation and benefits | 128 | 142 |
Other accrued items | 275 | 317 |
Income taxes payable | 11 | 15 |
Current portion of long-term debt, net | 305 | 304 |
Total current liabilities | 1,822 | 1,850 |
Non-current Liabilities | ||
Defined benefit plans | 635 | 714 |
Long-term debt, net | 3,411 | 3,408 |
Non-current deferred income taxes | 60 | 79 |
Other long-term liabilities | 512 | 522 |
Total non-current liabilities | 4,618 | 4,723 |
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 117,774,474 shares at December 28, 2018 and 118,280,120 shares at June 29, 2018 | 118 | 118 |
Other capital | 1,681 | 1,714 |
Retained earnings | 1,824 | 1,648 |
Accumulated other comprehensive loss | (211) | (202) |
Total shareholders’ equity | 3,412 | 3,278 |
Total liabilities and equity | $ 9,852 | $ 9,851 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares | Dec. 28, 2018 | Jun. 29, 2018 |
Shareholders’ Equity: | ||
Preferred shares, without par value (in dollars per share) | ||
Preferred shares, authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred shares, issued (in shares) | 0 | 0 |
Common shares, par value (in dollars per share) | $ 1 | $ 1 |
Common shares, authorized (in shares) | 500,000,000 | 500,000,000 |
Common shares, issued (in shares) | 117,774,474 | 118,280,120 |
Common shares, outstanding (in shares) | 117,774,474 | 118,280,120 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions | 6 Months Ended | |
Dec. 28, 2018 | Dec. 29, 2017 | |
Operating Activities | ||
Net income | $ 438 | $ 290 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization of acquisition-related intangibles | 58 | 58 |
Depreciation and other amortization | 71 | 72 |
Share-based compensation | 70 | 24 |
Pension income | (68) | (68) |
(Increase) decrease in: | ||
Accounts receivable | (28) | (14) |
Contract assets | (47) | (84) |
Inventories | (14) | (23) |
Increase (decrease) in: | ||
Accounts payable | (101) | (78) |
Contract liabilities | 107 | 47 |
Income taxes | 76 | 216 |
Other | (93) | (67) |
Net cash provided by operating activities | 469 | 373 |
Investing Activities | ||
Additions of property, plant and equipment | (67) | (43) |
Adjustment to proceeds from sales of businesses, net | 0 | (2) |
Net cash used in investing activities | (67) | (45) |
Financing Activities | ||
Proceeds from borrowings | 26 | 248 |
Repayments of borrowings | (3) | (363) |
Proceeds from exercises of employee stock options | 18 | 18 |
Repurchases of common stock | (200) | (150) |
Cash dividends | (163) | (137) |
Other financing activities | (20) | (10) |
Net cash used in financing activities | (342) | (394) |
Effect of exchange rate changes on cash and cash equivalents | (5) | 4 |
Net increase (decrease) in cash and cash equivalents | 55 | (62) |
Cash and cash equivalents, beginning of year | 288 | 484 |
Cash and cash equivalents, end of quarter | $ 343 | $ 422 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Millions | Total | Common Stock | Other Capital | Retained Earnings | Accumulated Other Comprehensive Loss |
Beginning Balance at Jun. 30, 2017 | $ 2,903 | $ 120 | $ 1,741 | $ 1,318 | $ (276) |
Net income | 159 | 0 | 0 | 159 | 0 |
Other comprehensive income | 26 | 0 | 0 | 0 | 26 |
Shares issued under stock incentive plans | 14 | 0 | 14 | 0 | 0 |
Share-based compensation expense | 11 | 0 | 11 | 0 | 0 |
Repurchases and retirement of common stock | (122) | (1) | (73) | (48) | 0 |
Forward contract component of accelerated share repurchase | 38 | 0 | 38 | 0 | 0 |
Cash dividends ($.685 and $.570 per share) | (69) | 0 | 0 | (69) | 0 |
Ending Balance at Sep. 29, 2017 | 2,960 | 119 | 1,731 | 1,360 | (250) |
Beginning Balance at Jun. 30, 2017 | 2,903 | 120 | 1,741 | 1,318 | (276) |
Net income | 290 | ||||
Ending Balance at Dec. 29, 2017 | 2,959 | 119 | 1,705 | 1,389 | (254) |
Beginning Balance at Sep. 29, 2017 | 2,960 | 119 | 1,731 | 1,360 | (250) |
Net income | 131 | 0 | 0 | 131 | 0 |
Other comprehensive income | (4) | 0 | 0 | 0 | (4) |
Shares issued under stock incentive plans | 4 | 0 | 4 | 0 | 0 |
Share-based compensation expense | 12 | 0 | 12 | 0 | 0 |
Repurchases and retirement of common stock | (76) | 0 | (42) | (34) | 0 |
Cash dividends ($.685 and $.570 per share) | (68) | 0 | 0 | (68) | 0 |
Ending Balance at Dec. 29, 2017 | 2,959 | 119 | 1,705 | 1,389 | (254) |
Beginning Balance at Jun. 29, 2018 | 3,278 | 118 | 1,714 | 1,648 | (202) |
Net income | 213 | 0 | 0 | 213 | 0 |
Shares issued under stock incentive plans | 16 | 1 | 15 | 0 | 0 |
Shares issued under defined contribution plans | 23 | 0 | 23 | 0 | 0 |
Share-based compensation expense | 14 | 0 | 14 | 0 | 0 |
Repurchases and retirement of common stock | (218) | (1) | (118) | (99) | 0 |
Cash dividends ($.685 and $.570 per share) | (82) | 0 | 0 | (82) | 0 |
Ending Balance at Sep. 28, 2018 | 3,244 | 118 | 1,648 | 1,680 | (202) |
Beginning Balance at Jun. 29, 2018 | 3,278 | 118 | 1,714 | 1,648 | (202) |
Net income | 438 | ||||
Ending Balance at Dec. 28, 2018 | 3,412 | 118 | 1,681 | 1,824 | (211) |
Beginning Balance at Sep. 28, 2018 | 3,244 | 118 | 1,648 | 1,680 | (202) |
Net income | 225 | 0 | 0 | 225 | 0 |
Other comprehensive income | (9) | 0 | 0 | 0 | (9) |
Shares issued under stock incentive plans | 2 | 0 | 2 | 0 | 0 |
Shares issued under defined contribution plans | 17 | 0 | 17 | 0 | 0 |
Share-based compensation expense | 15 | 0 | 15 | 0 | 0 |
Repurchases and retirement of common stock | (1) | 0 | (1) | 0 | 0 |
Cash dividends ($.685 and $.570 per share) | (81) | 0 | 0 | (81) | 0 |
Ending Balance at Dec. 28, 2018 | $ 3,412 | $ 118 | $ 1,681 | $ 1,824 | $ (211) |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |||
Dec. 28, 2018 | Sep. 28, 2018 | Dec. 29, 2017 | Sep. 29, 2017 | |
Cash dividends (in dollars per share) | $ 0.685 | $ 0.57 | ||
Retained Earnings | ||||
Cash dividends (in dollars per share) | $ 0.685 | $ 0.685 | $ 0.570 | $ 0.570 |
Significant Accounting Policies
Significant Accounting Policies and Recent Accounting Standards | 6 Months Ended |
Dec. 28, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies and Recent Accounting Standards | Note A — Significant Accounting Policies and Recent Accounting Standards Basis of Presentation The accompanying Condensed Consolidated Financial Statements (Unaudited) 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 (Unaudited) 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 condition, results of operations, cash flows and equity in conformity with GAAP for annual financial statements. In the opinion of management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of our financial condition, results of operations and cash flows for the periods presented therein. The results for the quarter and two quarters ended December 28, 2018 are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period. The balance sheet at June 29, 2018 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 June 29, 2018 (our “Fiscal 2018 Form 10-K”) and in our Current Report on Form 8-K filed with the SEC on December 13, 2018 (our “ Fiscal 2017-2018 Update 8-K ”), which updated and superseded historical fiscal 2018 and fiscal 2017 financial information contained in Item 7, Item 8 and certain other Items in our Fiscal 2018 Form 10-K to reflect the impact for those two fiscal years of retrospective application of Accounting Standards Update (“ASU”) 2014-09, Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606) , as amended (“ASC 606”), and ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”), each of which we adopted effective June 30, 2018. See “Adoption of New Accounting Standards” below in this Note A for additional information. Amounts contained in this Report may not always add to totals due to rounding. Reclassifications The classification of certain prior-period amounts has been adjusted in our Condensed Consolidated Financial Statements (Unaudited) to conform with current-period classifications. Reclassifications include certain direct selling and bid and proposal costs from the “Cost of product sales and services” line item to the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited) and in these Notes. Use of Estimates The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes and related disclosures. These estimates and assumptions are based on experience and other information available prior to issuance of the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes. Materially different results can occur as circumstances change and additional information becomes known. Adoption of New Accounting Standards As discussed above, we adopted ASC 606 effective June 30, 2018. This standard 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 are 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 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 and cash flows, this standard requires significantly more interim and annual disclosures. We adopted the requirements of the new standard using the full retrospective transition method. We opted for this transition method because we believe it provides enhanced comparability and transparency across periods. We elected to apply the practical expedient related to backlog disclosures for prior reporting periods and the practical expedient related to evaluating the effects of contract modifications that occurred prior to the earliest period presented. No other transition practical expedients were applied. Retrospective application of this standard resulted in the recognition of a cumulative-effect adjustment of $15 million to reduce the opening balance of retained earnings at July 2, 2016. This standard also resulted in the establishment of “Contract assets” and “Contract liabilities” line items and the reclassification to these line items of amounts previously presented in the “Receivables,” “Inventories” and “Advance payments and unearned income” line items in our Condensed Consolidated Balance Sheet. See Note 2: “Accounting Changes or Recent Accounting Pronouncements” in our Notes to Consolidated Financial Statements in our Fiscal 2017-2018 Update 8-K for a table summarizing the effect of adopting ASC 606 on our previously reported Consolidated Balance Sheet as of June 29, 2018. Total net cash provided by operating activities and total net cash provided by or used in investing activities and financing activities in our previously reported Condensed Consolidated Statements of Cash Flows (Unaudited) were not impacted by our adoption of ASC 606. We also adopted ASU 2017-07 effective June 30, 2018, as discussed above. This update requires that entities present components of net periodic pension and postretirement benefit costs other than the service cost component (“non-service cost amounts”) separately from the service cost component. We adopted this update retrospectively by recasting each prior period presented, using as our estimation basis for recasting prior periods the amounts disclosed in Note 13: “Pension and Other Postretirement Benefits” in our Notes to Consolidated Financial Statements in our Fiscal 2018 Form 10-K. Retrospective application of this update resulted in reclassification to the “Non-operating income” line item of non-service cost amounts that were included in the “Cost of product sales and services” and “Engineering, selling and administrative expenses” line items in our Condensed Consolidated Statement of Income (Unaudited) prior to adopting ASU 2017-07. The following table summarizes the effect of adopting ASC 606 and ASU 2017-07 on our previously reported Condensed Consolidated Statement of Income (Unaudited) for the quarter and two quarters ended December 29, 2017 : Quarter Ended December 29, 2017 Previously Reported Effect of Adopting ASC 606 Effect of Adopting ASU 2017-07 Currently Reported (In millions, except per share amounts) Revenue from product sales and services $ 1,535 $ — $ — $ 1,535 Cost of product sales and services (987 ) 1 (36 ) (1,022 ) Engineering, selling and administrative expenses (276 ) (5 ) (10 ) (291 ) Non-operating income (loss) (2 ) — 46 44 Interest income 1 — — 1 Interest expense (42 ) — — (42 ) Income from continuing operations before income taxes 229 (4 ) — 225 Income taxes (90 ) (4 ) — (94 ) Income from continuing operations 139 (8 ) — 131 Discontinued operations, net of income taxes — — — — Net income $ 139 $ (8 ) $ — $ 131 Net income per common share Basic Continuing operations $ 1.17 $ (0.07 ) $ — $ 1.10 Discontinued operations — — — — $ 1.17 $ (0.07 ) $ — $ 1.10 Diluted Continuing operations $ 1.15 $ (0.07 ) $ — $ 1.08 Discontinued operations — — — — $ 1.15 $ (0.07 ) $ — $ 1.08 Two Quarters Ended December 29, 2017 Previously Reported Effect of Adopting ASC 606 Effect of Adopting ASU 2017-07 Currently Reported (In millions, except per share amounts) Revenue from product sales and services $ 2,948 $ (3 ) $ — $ 2,945 Cost of product sales and services (1,872 ) 4 (73 ) (1,941 ) Engineering, selling and administrative expenses (532 ) (8 ) (19 ) (559 ) Non-operating income (loss) (2 ) — 92 90 Interest income 1 — — 1 Interest expense (83 ) — — (83 ) Income from continuing operations before income taxes 460 (7 ) — 453 Income taxes (154 ) (3 ) — (157 ) Income from continuing operations 306 (10 ) — 296 Discontinued operations, net of income taxes (6 ) — — (6 ) Net income $ 300 $ (10 ) $ — $ 290 Net income per common share Basic Continuing operations $ 2.57 $ (0.08 ) $ — $ 2.49 Discontinued operations (0.05 ) (0.01 ) — (0.06 ) $ 2.52 $ (0.09 ) $ — $ 2.43 Diluted Continuing operations $ 2.52 $ (0.08 ) $ — $ 2.44 Discontinued operations (0.05 ) — — (0.05 ) $ 2.47 $ (0.08 ) $ — $ 2.39 The following table presents the effect of adopting ASC 606 on our previously reported Condensed Consolidated Statement of Cash Flows (Unaudited) for the two quarters ended December 29, 2017 : Two Quarters Ended December 29, 2017 Previously Reported Effect of Adopting ASC 606 Currently Reported (In millions, except shares) Net income $ 300 $ (10 ) $ 290 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of acquisition-related intangibles (1) 58 — 58 Depreciation and other amortization (1) 72 — 72 Share-based compensation 24 — 24 Pension income (68 ) — (68 ) (Increase) decrease in: Accounts receivable (19 ) 5 (14 ) Contract assets — (84 ) (84 ) Inventories (102 ) 79 (23 ) Increase (decrease) in: Accounts payable (78 ) — (78 ) Advance payments and unearned income 38 (38 ) — Contract liabilities — 47 47 Income taxes 213 3 216 Other (65 ) (2 ) (67 ) Net cash provided by operating activities $ 373 $ — $ 373 _______________ (1) “Amortization of acquisition-related intangibles” includes amortization of non-Exelis Inc. acquisition-related intangibles, which was previously included in the “Depreciation and amortization” line item in our Condensed Consolidated Statement of Cash Flows (Unaudited) in our Form 10-Q for the quarter ended December 29, 2017 . Accounting Standards Issued But Not Yet Effective In February 2016, the Financial Accounting Standards Board issued a new lease standard that supersedes existing lease guidance under GAAP. This standard requires, among other things, the recognition of right-of-use assets and liabilities on the balance sheet for most lease arrangements and disclosure of certain information about leasing arrangements. This standard currently allows two transition methods with certain practical expedients available. Companies may elect to use the modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements or to initially apply this standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. 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 have developed a project plan to evaluate the impact of this standard and design and implement future processes, tools and controls. The majority of our current lease arrangements are classified as operating leases under existing GAAP lease guidance, and we expect they will continue to be classified as operating leases under the new standard. Although we are continuing to evaluate the impact to our consolidated balance sheet of recognizing right-of-use assets and lease liabilities for the majority of our current lease obligations, which could be material, we do not expect this standard to have a material impact on our results of operations or cash flows. We have not yet made a decision on the transition method, as this determination is primarily dependent on the completion of our evaluation. |
Stock Options and Other Share-B
Stock Options and Other Share-Based Compensation | 6 Months Ended |
Dec. 28, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options and Other Share-Based Compensation | Note B — Stock Options and Other Share-Based Compensation During the two quarters ended December 28, 2018 , we had options or other share-based compensation outstanding under two shareholder-approved employee stock incentive plans (“SIPs”), the Harris Corporation 2005 Equity Incentive Plan (As Amended and Restated Effective August 27, 2010) and the Harris Corporation 2015 Equity Incentive Plan (the “2015 EIP”). Grants of share-based awards after October 23, 2015 were made under our 2015 EIP. We believe that share-based 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 $15 million and $29 million for the quarter and two quarters ended December 28, 2018 , respectively, and $13 million and $24 million for the quarter and two quarters ended December 29, 2017 , respectively. The aggregate number of shares of our common stock that we issued under the terms of our SIPs, net of shares withheld for tax purposes and inclusive of both continuing and discontinued operations, was 45,739 and 449,692 for the quarter and two quarters ended December 28, 2018 , respectively, and 67,717 and 398,932 for the quarter and two quarters ended December 29, 2017 , respectively. Awards granted to participants under our 2015 EIP during the quarter ended December 28, 2018 consisted of 3,538 restricted shares and restricted units. There were no stock options or performance units granted during the quarter ended December 28, 2018 . Awards granted to participants under our 2015 EIP during the two quarters ended December 28, 2018 consisted of 270,963 stock options, 92,758 restricted shares and restricted units and 135,629 performance units. The fair value as of the grant date of each stock option award was determined using the Black-Scholes-Merton option-pricing model and the following assumptions: expected dividend yield of 1.61 percent ; expected volatility of 19.87 percent ; risk-free interest rates averaging 2.72 percent ; and expected term of 5.03 years. The fair value as of the grant date of each restricted share award and restricted unit 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 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 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. |
Restructuring and Other Exit Co
Restructuring and Other Exit Costs | 6 Months Ended |
Dec. 28, 2018 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and Other Exit Costs | Note C — Restructuring and Other Exit Costs We record charges for restructuring and other exit activities related to sales or terminations of product lines, closures or relocations of business activities, changes in management structure and fundamental reorganizations that affect the nature and focus of operations. Such charges include termination benefits, contract termination costs and costs to consolidate facilities or relocate employees. We record these charges at their fair value when incurred. In cases where employees are required to render service until they are terminated in order to receive the termination benefits and will be retained beyond the minimum retention period, we record the expense ratably over the future service period. These charges are included as a component of the “Cost of product sales and services” and “Engineering, selling and administrative expenses” line items in our Condensed Consolidated Statement of Income (Unaudited). In the fourth quarter of fiscal 2018 , we recorded a $5 million charge for consolidation of certain Exelis Inc. (collectively with its subsidiaries, “Exelis”) facilities initiated in fiscal 2017. This charge is included as a component of the “Engineering, selling and administrative expenses” line item in our Consolidated Statement of Income in our Fiscal 2017-2018 Update 8-K . We had liabilities of $18 million and $27 million at December 28, 2018 and June 29, 2018 , respectively, associated with this integration activity and with previous restructuring actions. The majority of the remaining liabilities at December 28, 2018 represent lease obligations associated with exited facilities with remaining terms of five years or less. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 6 Months Ended |
Dec. 28, 2018 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Loss | Note D — Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss are summarized below: December 28, 2018 June 29, 2018 (In millions) Foreign currency translation, net of income taxes of $2 million at December 28, 2018 and June 29, 2018 $ (107 ) $ (99 ) Net unrealized loss on hedging derivatives, net of income taxes of $6 million and $7 million at December 28, 2018 and June 29, 2018, respectively (19 ) (20 ) Unrecognized postretirement obligations, net of income taxes of $30 million at December 28, 2018 and June 29, 2018 (85 ) (83 ) $ (211 ) $ (202 ) Accumulated other comprehensive loss at June 29, 2018 reflects a reclassification to retained earnings of $35 million in stranded tax effects as a result of our adoption of an accounting standards update, including $30 million from “Unrecognized postretirement obligations, net of income taxes,” $4 million from “Net unrealized loss on hedging derivatives, net of income taxes” and $1 million from “Foreign currency translation, net of income taxes.” See Note 2: “Accounting Changes or Recent Accounting Pronouncements” in our Fiscal 2017-2018 Update 8-K for additional information regarding this accounting standards update. |
Receivables
Receivables | 6 Months Ended |
Dec. 28, 2018 | |
Receivables [Abstract] | |
Receivables | Note E — Receivables Receivables are summarized below: December 28, 2018 June 29, 2018 (In millions) Accounts receivable $ 497 $ 468 Less allowances for collection losses (3 ) (2 ) $ 494 $ 466 We have a receivables sale agreement (“RSA”) with a third-party financial institution that permits us to sell, on a non-recourse basis, up to $50 million of outstanding receivables at any given time. From time to time, we have sold certain customer receivables under the RSA, which we continue to service and collect on behalf of the third-party financial institution. Receivables sold pursuant to the RSA meet the requirements for sales accounting under ASC 860, Transfers and Servicing , and, accordingly, are derecognized from our Condensed Consolidated Balance Sheet (Unaudited) at the time of sale. Outstanding accounts receivable sold pursuant to the RSA were not material at December 28, 2018 and June 29, 2018 . Impairment losses related to receivables from contracts with customers were not material during the quarter or two quarters ended December 28, 2018 or the quarter or two quarters ended December 29, 2017 . |
Contract Assets and Contract Li
Contract Assets and Contract Liabilities | 6 Months Ended |
Dec. 28, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Contract Assets and Contract Liabilities | Note F — Contract Assets and Contract Liabilities Contract assets include unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers for contracts utilizing the percentage of completion (“POC”) cost-to-cost revenue recognition method. We bill customers as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, upon achievement of contractual milestones or upon deliveries and, in certain arrangements, the customer may withhold payment of a small portion of the contract price until contract completion. Contract liabilities include advance payments and billings in excess of revenue recognized, including deferred revenue associated with extended product warranties. Contract assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period. The increase in contract liabilities in the two quarters ended December 28, 2018 was primarily due to an increase in the receipt of advance payments and the timing of contractual billing milestones. Changes in contract assets and contract liabilities balances during the quarter and two quarters ended December 28, 2018 were not materially impacted by any factors other than those described above. Contract assets and contract liabilities are summarized below: December 28, 2018 June 29, 2018 (In millions) Contract assets $ 829 $ 782 Contract liabilities, current (479 ) (372 ) Contract liabilities, non-current (1) (7 ) (7 ) Net contract assets $ 343 $ 403 _______________ (1) Represents the non-current portion of deferred revenue associated with extended product warranties, which is included as a component of the “Other long-term liabilities” line item in our Condensed Consolidated Balance Sheet (Unaudited). The components of contract assets are summarized below: December 28, 2018 June 29, 2018 (In millions) Unbilled contract receivables, gross $ 946 $ 881 Progress payments (117 ) (99 ) $ 829 $ 782 Impairment losses related to our contract assets were not material during the two quarters ended December 28, 2018 and December 29, 2017 . For the quarter and two quarters ended December 28, 2018 , we recognized revenue of $49 million and $207 million , respectively, related to contract liabilities that were outstanding at June 29, 2018 . For the quarter and two quarters ended December 29, 2017 , we recognized revenue of $53 million and $163 million , respectively, related to contract liabilities that were outstanding at June 30, 2017 . Note P — Backlog Backlog, which is the equivalent of our remaining performance obligations, represents the future revenue we expect to recognize as we perform on our current contracts. Backlog comprises both funded backlog (i.e., firm orders for which funding is authorized and appropriated) and unfunded backlog. Backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as indefinite delivery, indefinite quantity contracts. At December 28, 2018 , our ending backlog was $8.0 billion . We expect to recognize approximately half of the revenue associated with this backlog within the next twelve months and the substantial majority of the revenue associated with this backlog within the next 3 years. |
Inventories
Inventories | 6 Months Ended |
Dec. 28, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | Note G — Inventories Inventories are summarized below: December 28, 2018 June 29, 2018 (In millions) Finished products $ 69 $ 91 Work in process 128 121 Raw materials and supplies 228 199 $ 425 $ 411 |
Property, Plant and Equipment
Property, Plant and Equipment | 6 Months Ended |
Dec. 28, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Note H — Property, Plant and Equipment Property, plant and equipment are summarized below: December 28, 2018 June 29, 2018 (In millions) Land $ 43 $ 43 Software capitalized for internal use 171 171 Buildings 625 620 Machinery and equipment 1,394 1,349 2,233 2,183 Less accumulated depreciation and amortization (1,332 ) (1,283 ) $ 901 $ 900 Depreciation and amortization expense related to property, plant and equipment was $33 million and $68 million for the quarter and two quarters ended December 28, 2018 , respectively, and $36 million and $73 million for the quarter and two quarters ended December 29, 2017 , respectively. |
Accrued Warranties
Accrued Warranties | 6 Months Ended |
Dec. 28, 2018 | |
Product Warranties Disclosures [Abstract] | |
Accrued Warranties | Note I — 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 our Condensed Consolidated Balance Sheet (Unaudited), during the two quarters ended December 28, 2018 were as follows: (In millions) Balance at June 29, 2018 $ 24 Warranty provision for sales 9 Settlements (6 ) Balance at December 28, 2018 $ 27 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 and are included as a component of the “Contract liabilities” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited). Deferred revenue associated with extended product warranties was $16 million at December 28, 2018 and June 29, 2018 |
Postretirement Benefit Plans
Postretirement Benefit Plans | 6 Months Ended |
Dec. 28, 2018 | |
Retirement Benefits [Abstract] | |
Postretirement Benefit Plans | Note J — Postretirement Benefit Plans The following tables provide the components of our net periodic benefit income for our defined benefit plans, including defined benefit pension plans and other postretirement defined benefit plans: Quarter Ended December 28, 2018 Two Quarters Ended December 28, 2018 Pension Other Benefits Pension Other Benefits (In millions) Net periodic benefit income Service cost $ 9 $ — $ 18 $ — Interest cost 53 2 105 4 Expected return on plan assets (96 ) (4 ) (191 ) (8 ) Amortization of net actuarial gain — (1 ) — (3 ) Total net periodic benefit income $ (34 ) $ (3 ) $ (68 ) $ (7 ) Quarter Ended December 29, 2017 Two Quarters Ended December 29, 2017 Pension Other Benefits Pension Other Benefits (In millions) Net periodic benefit income Service cost $ 9 $ 1 $ 19 $ 1 Interest cost 49 2 97 4 Expected return on plan assets (92 ) (4 ) (184 ) (8 ) Amortization of net actuarial gain — (1 ) — (1 ) Total net periodic benefit income $ (34 ) $ (2 ) $ (68 ) $ (4 ) The service cost component of net periodic benefit income is included in the “Cost of product sales and services” and “Engineering, selling and administrative expenses” line items in our Condensed Consolidated Statement of Income (Unaudited). The non-service cost components of net periodic pension income are included in the “Non-operating income” line item in our Condensed Consolidated Statement of Income (Unaudited). We made a $300 million voluntary contribution to our U.S. qualified pension plans in the third quarter of fiscal 2018. As a result of this voluntary contribution as well as a $400 million voluntary contribution made during fiscal 2017, we made no contributions to our U.S. qualified defined benefit pension plans during the quarter and two quarters ended December 28, 2018 , and we currently anticipate making no contributions to our U.S. qualified defined benefit pension plans and minor contributions to a non-U.S. pension plan during the remainder of fiscal 2019. We made no contributions to our U.S. qualified defined benefit pension plans during the quarter and two quarters ended December 29, 2017 . The U.S. Salaried Retirement Plan (“U.S. SRP”), a U.S. qualified pension plan, is our largest defined benefit pension plan, with assets valued at $4.6 billion and a projected benefit obligation of $5.2 billion as of June 29, 2018 . Effective December 31, 2016, accruals under the U.S. SRP benefit formula were frozen for all employees and replaced with a 1% cash balance benefit formula for certain employees who were not highly compensated on December 31, 2016. |
Income From Continuing Operatio
Income From Continuing Operations Per Share | 6 Months Ended |
Dec. 28, 2018 | |
Earnings Per Share [Abstract] | |
Income From Continuing Operations Per Share | Note K — Income From Continuing Operations Per Share The computations of income from continuing operations per common share are as follows: Quarter Ended Two Quarters Ended December 28, 2018 December 29, 2017 December 28, 2018 December 29, 2017 (In millions, except per share amounts) Income from continuing operations $ 225 $ 131 $ 441 $ 296 Adjustments for participating securities outstanding — (1 ) (1 ) (1 ) Income from continuing operations used in per basic and diluted common share calculations (A) $ 225 $ 130 $ 440 $ 295 Basic weighted average common shares outstanding (B) 117.7 118.5 117.8 118.8 Impact of dilutive share-based awards 2.3 2.4 2.5 2.3 Diluted weighted average common shares outstanding (C) 120.0 120.9 120.3 121.1 Income from continuing operations per basic common share (A)/(B) $ 1.91 $ 1.10 $ 3.74 $ 2.49 Income from continuing operations per diluted common share (A)/(C) $ 1.88 $ 1.08 $ 3.66 $ 2.44 Potential dilutive common shares primarily consist of employee stock options and restricted and performance unit awards. Income from continuing operations per diluted common share excludes the antidilutive impact of 399,243 and 279,705 weighted average share-based awards outstanding for the quarter and two quarters ended December 28, 2018 , respectively, and 222 and 81,496 weighted average share-based awards outstanding for the quarter and two quarters ended December 29, 2017 , respectively. |
Income Taxes
Income Taxes | 6 Months Ended |
Dec. 28, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note L — Income Taxes On December 22, 2017, H.R.1, also known as the “Tax Cuts and Jobs Act,” was signed into U.S. law (“Tax Act”). Among other provisions, the Tax Act reduced the U.S. statutory corporate income tax rate from a maximum 35 percent to a flat 21 percent , effective January 1, 2018. Effective Tax Rate Our effective tax rate (income taxes as a percentage of income from continuing operations before income taxes) was 17.0 percent in the quarter ended December 28, 2018 compared with 41.8 percent in the quarter ended December 29, 2017 . In the quarter ended December 28, 2018 , our effective tax rate benefited from a reduction in the deferred tax liability maintained on the basis differences related to the unremitted foreign earnings and an increase in the research and development (“R&D”) credit, partially offset by an unfavorable impact of the differences in GAAP and tax accounting related to investments. In the quarter ended December 29, 2017 , our effective tax rate was impacted by a $58 million ( $.48 per diluted share) write-down of existing net deferred tax asset balances based on the lower tax rate and other tax law changes from the Tax Act, a $26 million ( $.21 per diluted share) benefit from the impact of our lower fiscal 2018 tax rate, a $22 million ( $.18 per diluted share) favorable impact of releasing provisions for uncertain tax positions and the favorable impact of differences in GAAP and tax accounting related to investments. Our effective tax rate was 16.5 percent in the two quarters ended December 28, 2018 compared with 34.7 percent in the two quarters ended December 29, 2017 . In addition to the items noted above for the quarters ended December 28, 2018 and December 29, 2017 , our effective tax rate for the two quarters ended December 28, 2018 and December 29, 2017 benefited from the favorable impact of excess tax benefits related to equity-based compensation. Tax Law Changes During the quarter ended December 28, 2018 , we completed our accounting for the income tax impact of enactment of the Tax Act and there were no material changes from the estimates reported in our Fiscal 2017-2018 Update 8-K . The Tax Act provides for a one-time transition tax on our post-1986 earnings and profits of foreign subsidiaries (“foreign E&P”) that was previously deferred from U.S. income tax expense. We have determined that we do not owe any one-time transition tax. We have also completed our evaluation of the U.S. federal corporate income tax impacts of the Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income provisions of the Tax Act, and our tax expense includes the impact of these provisions as a period cost in our effective tax rate. Because of the potential impact of deficit allocations on the tax basis for netted foreign E&P, we are maintaining a deferred tax liability of approximately $19 million in respect of potential cumulative tax basis differences of $88 million . Other than this deferred tax liability, we have not provided for additional income taxes on any remaining undistributed foreign E&P not subject to the transition tax, or any outside tax basis differences inherent in our foreign subsidiaries, because all other amounts continue to be reinvested indefinitely. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Dec. 28, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note M — 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. In certain instances, fair value is estimated using quoted market prices obtained from external pricing services. In obtaining such data from the external pricing services, we have evaluated the methodologies used to develop the estimate of fair value in order to assess whether such valuations are representative of fair value, including net asset value (“NAV”). Additionally, in certain circumstances, the NAV reported by an asset manager may be adjusted when sufficient evidence indicates NAV is not representative of fair value. The following table presents assets and liabilities measured at fair value on a recurring basis (at least annually) at December 28, 2018 and June 29, 2018 : December 28, 2018 June 29, 2018 Total Level 1 Total Level 1 (In millions) Assets Deferred compensation plan assets: (1) Equity and fixed income securities $ 46 $ 46 $ 46 $ 46 Investments measured at NAV: Equity and fixed income funds 56 63 Corporate-owned life insurance 27 27 Total investments measured at NAV 83 90 Total fair value of deferred compensation plan assets $ 129 $ 136 Liabilities Deferred compensation plan liabilities: (2) Equity securities and mutual funds $ 20 $ 20 $ 38 $ 38 Investments measured at NAV: Common/collective trusts and guaranteed investment contracts 132 111 Total fair value of deferred compensation plan liabilities $ 152 $ 149 _______________ (1) Represents diversified assets held in a “rabbi trust” associated with our non-qualified deferred compensation plans, which we include in the “Other current assets” and “Other non-current assets” line items in our Condensed Consolidated Balance Sheet (Unaudited) and which are measured at fair value. (2) Primarily represents obligations to pay benefits under certain non-qualified deferred compensation plans, which we include in the “Compensation and benefits” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited). Under these plans, participants designate investment options (including stock and fixed-income funds), which serve as the basis for measurement of the notional value of their accounts. 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): December 28, 2018 June 29, 2018 Carrying Amount Fair Value Carrying Amount Fair Value (In millions) Long-term debt (including current portion) (1) $ 3,716 $ 3,800 $ 3,712 $ 3,848 _______________ (1) 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 | 6 Months Ended |
Dec. 28, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments and Hedging Activities | Note N — Derivative Instruments and Hedging Activities In the normal course of 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 also may enter into derivative instruments that are not designated as hedges and do not qualify for hedge accounting. We recognize all derivatives in our Condensed Consolidated Balance Sheet (Unaudited) at fair value. We do not hold or issue derivatives for speculative trading purposes. At December 28, 2018 , we had two open foreign currency forward contracts with an aggregate notional amount of $5 million , one of which had a notional amount of $4 million and was classified as a fair value hedge, and the other had a notional amount of $1 million and was classified as a cash flow hedge. This compares with open foreign currency forward contracts with an aggregate notional amount of $39 million at June 29, 2018 , of which $4 million were classified as fair value hedges and $35 million were classified as cash flow hedges. At December 28, 2018 , contract expiration dates ranged from 3 days to approximately 3 months with a weighted average contract life of 2 months . Fair Value Hedges 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 our Condensed Consolidated Statement of Income (Unaudited). At December 28, 2018 , we had an outstanding foreign currency forward contract denominated in the Canadian Dollar to hedge a certain balance sheet item. The net gains or losses on foreign currency forward contracts designated as fair value hedges were not material in the quarter or two quarters ended December 28, 2018 or in the quarter or two quarters ended December 29, 2017 . In addition, no amounts were recognized in earnings in the quarter or two quarters ended December 28, 2018 or in the quarter or two quarters ended December 29, 2017 related to hedged firm commitments that no longer qualify as fair value hedges. Cash Flow Hedges We use foreign currency forward contracts and options to hedge off-balance sheet future foreign currency commitments and also have hedged U.S. Dollar payments to suppliers to maintain our anticipated profit margins in our international operations. At December 28, 2018 , we had an outstanding foreign currency forward contract denominated in the Euro to hedge a certain forecasted transaction. The net gains or losses from cash flow hedges recognized in earnings or recorded in other comprehensive income, including gains or losses related to hedge ineffectiveness, were not material in the quarter or two quarters ended December 28, 2018 or in the quarter or two quarters ended December 29, 2017 . |
Changes in Estimates
Changes in Estimates | 6 Months Ended |
Dec. 28, 2018 | |
Change in Accounting Estimate [Abstract] | |
Changes in Estimates | Note O — Changes in Estimates Contract Estimates Under the POC cost-to-cost method of revenue recognition, a single estimated profit margin is used to recognize profit for each performance obligation over its period of performance. Recognition of profit on a contract requires estimates of the total cost at completion and transaction price and the measurement of progress towards completion. Due to the long-term nature of many of our contracts, developing the estimated total cost at completion and total transaction price often requires judgment. Factors that must be considered in estimating the cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance. Factors that must be considered in estimating the total transaction price include contractual cost or performance incentives (such as incentive fees, award fees and penalties) and other forms of variable consideration as well as our historical experience and expectation for performance on the contract. 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 we review the progress and performance on our ongoing 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, as the contract progresses, our estimates of total transaction price may increase or decrease if, for example, we receive award fees that are higher or lower than expected. When adjustments in estimated total costs at completion or in estimated total transaction price are determined, the related impact on 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. Any anticipated losses on these contracts are fully recognized in the period in which the losses become evident. Net EAC adjustments resulting from changes in estimates impacted our operating income favorably by $2 million ( $.02 per diluted share) and unfavorably by $1 million for the quarter and two quarters ended December 28, 2018 , respectively, and unfavorably by $16 million ( $11 million after-tax or $.09 per diluted share) and $11 million ( $8 million after-tax or $.06 per diluted share) for the quarter and two quarters ended December 29, 2017 , respectively. Revenue recognized from performance obligations satisfied in prior periods was $9 million and $16 million for the quarter and two quarters ended December 28, 2018 , respectively, and $16 million and $30 million for the quarter and two quarters ended December 29, 2017 , respectively. Income Taxes See Note L — Income Taxes in these Notes for changes in estimates disclosures associated with our accounting for income taxes. |
Backlog
Backlog | 6 Months Ended |
Dec. 28, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Backlog | Note F — Contract Assets and Contract Liabilities Contract assets include unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers for contracts utilizing the percentage of completion (“POC”) cost-to-cost revenue recognition method. We bill customers as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, upon achievement of contractual milestones or upon deliveries and, in certain arrangements, the customer may withhold payment of a small portion of the contract price until contract completion. Contract liabilities include advance payments and billings in excess of revenue recognized, including deferred revenue associated with extended product warranties. Contract assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period. The increase in contract liabilities in the two quarters ended December 28, 2018 was primarily due to an increase in the receipt of advance payments and the timing of contractual billing milestones. Changes in contract assets and contract liabilities balances during the quarter and two quarters ended December 28, 2018 were not materially impacted by any factors other than those described above. Contract assets and contract liabilities are summarized below: December 28, 2018 June 29, 2018 (In millions) Contract assets $ 829 $ 782 Contract liabilities, current (479 ) (372 ) Contract liabilities, non-current (1) (7 ) (7 ) Net contract assets $ 343 $ 403 _______________ (1) Represents the non-current portion of deferred revenue associated with extended product warranties, which is included as a component of the “Other long-term liabilities” line item in our Condensed Consolidated Balance Sheet (Unaudited). The components of contract assets are summarized below: December 28, 2018 June 29, 2018 (In millions) Unbilled contract receivables, gross $ 946 $ 881 Progress payments (117 ) (99 ) $ 829 $ 782 Impairment losses related to our contract assets were not material during the two quarters ended December 28, 2018 and December 29, 2017 . For the quarter and two quarters ended December 28, 2018 , we recognized revenue of $49 million and $207 million , respectively, related to contract liabilities that were outstanding at June 29, 2018 . For the quarter and two quarters ended December 29, 2017 , we recognized revenue of $53 million and $163 million , respectively, related to contract liabilities that were outstanding at June 30, 2017 . Note P — Backlog Backlog, which is the equivalent of our remaining performance obligations, represents the future revenue we expect to recognize as we perform on our current contracts. Backlog comprises both funded backlog (i.e., firm orders for which funding is authorized and appropriated) and unfunded backlog. Backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as indefinite delivery, indefinite quantity contracts. At December 28, 2018 , our ending backlog was $8.0 billion . We expect to recognize approximately half of the revenue associated with this backlog within the next twelve months and the substantial majority of the revenue associated with this backlog within the next 3 years. |
Business Segment Information
Business Segment Information | 6 Months Ended |
Dec. 28, 2018 | |
Segment Reporting [Abstract] | |
Business Segment Information | Note Q — Business Segment Information We structure our operations primarily around the products, systems and services we sell and the markets we serve, and we report the financial results of our continuing operations in the following three reportable segments, which are also referred to as our business segments: • Communication Systems, serving markets in tactical communications and defense products, including tactical ground and airborne radio communications solutions and night vision technology, and in public safety networks; • Electronic Systems, providing electronic warfare, avionics, and command, control, communications, computers, intelligence, surveillance and reconnaissance (“C4ISR”) solutions for defense and classified customers and mission-critical communication systems for civil and military aviation and other customers; and • Space and Intelligence Systems, providing intelligence, space protection, geospatial, complete Earth observation, universe exploration, positioning, navigation and timing (“PNT”), and environmental solutions for national security, defense, civil and commercial customers, using advanced sensors, antennas and payloads, as well as ground processing and information analytics. As discussed in more detail in Note A — Significant Accounting Policies and Recent Accounting Standards in these Notes and in Note 1: “Significant Accounting Policies” and Note 2: “Accounting Changes or Recent Accounting Pronouncements” in our Notes to Consolidated Financial Statements in our Fiscal 2017-2018 Update 8-K , effective June 30, 2018, we adopted ASC 606 and ASU 2017-07 using the full retrospective method. The historical results, discussion and presentation of our business segments as set forth in our Condensed Consolidated Financial Statements (Unaudited) and these Notes reflect the impact of our adoption of ASC 606 and ASU 2017-07 for all periods presented in order to present all segment information on a comparable basis. 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 2017-2018 Update 8-K . We evaluate each segment’s performance based on segment operating income or loss, which we define as profit or loss from operations before income taxes, including pension income and 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 item in the table below represents the elimination of intersegment sales. The “Unallocated corporate expense and corporate eliminations” line item in the table below represents the portion of corporate expenses not allocated to our business segments and the elimination of intersegment profits. The “Pension adjustment” line item in the table below represents the reconciliation of the non-service components of net periodic pension and postretirement benefit costs, which are a component of segment operating income but are included in the “Non-operating income” line item in our Condensed Consolidated Statement of Income (Unaudited) as a result of our adoption of ASU 2017-07 as discussed in Note A — Significant Accounting Policies and Recent Accounting Standards in these Notes. The non-service components of net periodic pension and postretirement benefit costs include interest cost, expected return on plan assets and amortization of net actuarial gain. Segment revenue, segment operating income and a reconciliation of segment operating income to total income from continuing operations before income taxes are as follows: Quarter Ended Two Quarters Ended December 28, 2018 December 29, 2017 December 28, 2018 December 29, 2017 (In millions) Revenue Communication Systems $ 540 $ 492 $ 1,009 $ 898 Electronic Systems 617 582 1,206 1,123 Space and Intelligence Systems 513 462 1,001 928 Corporate eliminations (4 ) (1 ) (8 ) (4 ) $ 1,666 $ 1,535 $ 3,208 $ 2,945 Income From Continuing Operations Before Income Taxes Segment Operating Income: Communication Systems $ 162 $ 145 $ 302 $ 260 Electronic Systems 117 97 232 206 Space and Intelligence Systems 92 80 178 167 Unallocated corporate expense and corporate eliminations (1) (58 ) (54 ) (99 ) (96 ) Pension adjustment (46 ) (46 ) (93 ) (92 ) Non-operating income 47 44 94 90 Net interest expense (43 ) (41 ) (86 ) (82 ) $ 271 $ 225 $ 528 $ 453 _______________ (1) Unallocated corporate expense and corporate eliminations included: (i) $13 million of L3 Technologies, Inc. (“L3”) merger-related transaction and integration costs for the quarter and two quarters ended December 28, 2018; (ii) a $12 million adjustment for deferred compensation in the quarter and two quarters ended December 29, 2017 and (iii) $26 million and $51 million of expense in the quarter and two quarters ended December 28, 2018 , respectively, compared with $25 million and $50 million of expense in the quarter and two quarters ended December 29, 2017 , respectively, for amortization of identifiable 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 segment, the amortization of identifiable intangible assets acquired in the Exelis acquisition was recorded as unallocated corporate expense. Corporate eliminations of intersegment profits were not material in the quarter or two quarters ended December 28, 2018 or the quarter or two quarters ended December 29, 2017 . Disaggregation of Revenue Communication Systems: Communication Systems operates principally on a “commercial” market-driven business model through which the business segment provides ready-to-ship commercial off-the-shelf products to customers in the U.S. and internationally. Communication Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when the product is received and accepted by the customer. We disaggregate Communication Systems revenue by geographical region, as we believe this category best depicts how the nature, amount, timing and uncertainty of Communication Systems revenue and cash flows are affected by economic factors: Quarter Ended Two Quarters Ended December 28, 2018 December 29, 2017 December 28, 2018 December 29, 2017 (In millions) Revenue By Geographical Region United States $ 299 $ 276 $ 558 $ 484 International 241 216 451 414 $ 540 $ 492 $ 1,009 $ 898 Electronic Systems: Electronic Systems revenue is primarily derived from U.S. Government development and production contracts and is generally recognized over time using the POC cost-to-cost method. We disaggregate Electronic Systems revenue by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of Electronic Systems revenue and cash flows are affected by economic factors: Quarter Ended Two Quarters Ended December 28, 2018 December 29, 2017 December 28, 2018 December 29, 2017 (In millions) Revenue By Customer Relationship Prime contractor $ 399 $ 410 $ 793 $ 808 Subcontractor 218 172 413 315 $ 617 $ 582 $ 1,206 $ 1,123 Revenue By Contract Type Fixed-price (1) $ 508 $ 463 $ 986 $ 885 Cost-reimbursable 109 119 220 238 $ 617 $ 582 $ 1,206 $ 1,123 Revenue By Geographical Region United States $ 486 $ 464 $ 964 $ 890 International 131 118 242 233 $ 617 $ 582 $ 1,206 $ 1,123 _______________ (1) Includes revenue derived from time-and-materials contracts. Space and Intelligence Systems: Space and Intelligence Systems revenue is primarily derived from U.S. Government development and production contracts and is generally recognized over time using the POC cost-to-cost method. We disaggregate Space and Intelligence Systems revenue by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of Space and Intelligence Systems revenue and cash flows are affected by economic factors: Quarter Ended Two Quarters Ended December 28, 2018 December 29, 2017 December 28, 2018 December 29, 2017 (In millions) Revenue By Customer Relationship Prime contractor $ 362 $ 329 $ 714 $ 663 Subcontractor 151 133 287 265 $ 513 $ 462 $ 1,001 $ 928 Revenue By Contract Type Fixed-price (1) $ 188 $ 120 $ 360 $ 243 Cost-reimbursable 325 342 641 685 $ 513 $ 462 $ 1,001 $ 928 Revenue By Geographical Region United States $ 500 $ 446 $ 976 $ 898 International 13 16 25 30 $ 513 $ 462 $ 1,001 $ 928 _______________ (1) Includes revenue derived from time-and-materials contracts. Total assets by business segment are summarized below: December 28, 2018 June 29, 2018 (In millions) Total Assets Communication Systems $ 1,578 $ 1,567 Electronic Systems 4,196 4,174 Space and Intelligence Systems 2,242 2,193 Corporate (1) 1,836 1,917 $ 9,852 $ 9,851 _______________ (1) Identifiable intangible assets acquired in connection with our acquisition of Exelis in the fourth quarter of fiscal 2015 were recorded as Corporate assets because they benefited the entire Company as opposed to any individual segment. Exelis identifiable intangible asset balances recorded as Corporate assets were $923 million and $974 million at December 28, 2018 and June 29, 2018 , respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred compensation plan assets and buildings and equipment. |
Legal Proceedings and Contingen
Legal Proceedings and Contingencies | 6 Months Ended |
Dec. 28, 2018 | |
Legal Proceedings And Contingencies [Abstract] | |
Legal Proceedings and Contingencies | Note R — Legal Proceedings and Contingencies From time to time, as a normal incident of the nature and kind of businesses in which we are or 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 December 28, 2018 , our accrual for the potential resolution of lawsuits, claims or proceedings that we consider probable of being decided unfavorably to us was 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 December 28, 2018 are reserved against or would not have a material adverse effect on our financial condition, results of operations or cash flows. Merger Litigation In connection with our pending merger with L3 (see Note S — Pending Merger in these Notes for additional information), two putative class action lawsuits and one individual lawsuit were filed against L3 and its directors (together, the “L3 Parties”) in the U.S. District Court for the Southern District of New York between December 19, 2018 and January 15, 2019, and a third putative class action lawsuit, Kent v. L3 Technologies, Inc., et al ., was filed against the L3 Parties and Harris Corporation and its wholly owned subsidiary, Leopard Merger Sub Inc. (Harris Corporation and Leopard Merger Sub Inc., the “Harris Parties”), in the U.S. District Court for the District of Delaware on January 4, 2019. The complaints in the lawsuits contain substantially similar allegations contending, among other things, that the registration statement on Form S-4 in support of the pending merger misstates or fails to disclose certain allegedly material information in violation of federal securities laws. The complaint in the Kent lawsuit further alleges that the Harris Parties are liable for these violations as “controlling persons” of L3 within the meaning of federal securities laws. The complaints in all four lawsuits generally seek injunctive relief enjoining the merger, damages and costs, among other remedies. Additional lawsuits in connection with the merger may be filed in the future. Although the ultimate resolution of these lawsuits cannot be predicted with certainty, and an adverse ruling in any such lawsuit may cause the merger to be delayed or not to be completed, which could cause us not to realize some or all of the anticipated benefits of the merger, we believe that these lawsuits are without merit and intend to defend vigorously against them and any other lawsuits challenging the pending merger. Therefore, at this time, we do not believe the ultimate resolution of these lawsuits will have a material adverse effect on us or the merger. 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 or companies we have acquired are responsible, or alleged to be responsible, for environmental investigation and/or remediation of multiple sites. These sites are in various stages of investigation and/or remediation and in some cases our liability is considered de minimis. Notices from the U.S. Environmental Protection Agency (“EPA”) or equivalent state or international environmental agencies allege 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 of being 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, in June 2014, the U.S. Department of Justice (the “DOJ”), Environment and Natural Resources Division, notified several potentially responsible parties, including Exelis, of potential responsibility for contribution to the environmental investigation and remediation of multiple locations in Alaska. In addition, in March 2016, the EPA notified over 100 potentially responsible parties, including Exelis, of potential liability for the cost of remediation for the 8.3 -mile stretch of the Lower Passaic River, estimated by the EPA to be $1.38 billion , but the parties’ respective allocations have not been determined. Although it is not feasible to predict the outcome of these environmental claims made against us, based on available information, in the opinion of our management, any payments we may be required to make as a result of environmental claims made against us in existence at December 28, 2018 are reserved against, covered by insurance or would not have a material adverse effect on our financial condition, results of operations or cash flows. |
Pending Merger
Pending Merger | 6 Months Ended |
Dec. 28, 2018 | |
Business Combinations [Abstract] | |
Pending Merger | Note S — Pending Merger On October 14, 2018, we announced that on October 12, 2018, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), with L3 and Leopard Merger Sub Inc., our wholly owned subsidiary (“Merger Sub”), pursuant to which we and L3 have agreed to combine in an all-stock merger of equals. Under the terms and subject to the conditions set forth in the Merger Agreement, L3 shareholders will receive a fixed exchange ratio of 1.30 shares of Harris common stock for each share of L3 common stock. Upon closing of the transactions contemplated by the Merger Agreement, Harris Corporation will be re-named “L3 Harris Technologies, Inc.” and Merger Sub will merge with and into L3, with L3 being the surviving corporation and becoming a wholly-owned subsidiary of L3 Harris Technologies, Inc., which will be owned on a fully diluted basis approximately 54 percent by Harris shareholders and 46 percent by L3 shareholders. Upon closing, the merger will be accounted for using the acquisition method of accounting, and Harris will be treated as the accounting acquirer. The Merger Agreement has been unanimously approved by the Board of Directors of each company. The consummation of the merger is subject to the satisfaction or waiver of certain conditions, including, among others, approval by the shareholders of each company and the expiration or earlier termination of any applicable waiting period, and the receipt of approvals under domestic and certain foreign antitrust and competition laws, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). In connection with the proposed merger, we and L3 each filed a Notification and Report Form under the HSR Act (an “HSR Notification”) with the U.S. Federal Trade Commission and the DOJ on November 9, 2018. We voluntarily withdrew our HSR Notification effective as of December 10, 2018 and re-filed our HSR Notification on December 11, 2018. As part of the DOJ’s review of the merger, we and L3 each received on January 10, 2019 a request for additional information and documentary materials (the “Second Request”) from the DOJ, which extends the waiting period under the HSR Act until 30 days after both we and L3 have complied with the Second Request or such later time as the parties may agree with the DOJ, unless the waiting period is terminated earlier. We and L3 continue to work cooperatively with the DOJ on its review of the merger. As part of the regulatory process, we are moving proactively to explore the possible sale of our Night Vision business within our Communication Systems segment. The assets and liabilities of our Night Vision business were classified as held for use in our Condensed Consolidated Balance Sheet (Unaudited) at December 28, 2018 and will continue to be so classified unless the held for sale criteria are met, which has not occurred as of the date of this Report, because our Board of Directors has not approved commitment to any plan of sale. We and L3 continue to expect the merger to close in the previously announced time frame of mid-calendar year 2019, although we can give no assurances regarding the timing or occurrence of closing. L3 is a prime contractor in intelligence, surveillance and reconnaissance (“ISR”) systems, aircraft sustainment (including modifications and fleet management of special mission aircraft), simulation and training, night vision and image intensification equipment and security and detection systems headquartered in New York, New York. L3 is also a provider of a broad range of communication, electronic and sensor systems used on military, homeland security and commercial platforms. L3 employs approximately 31,000 employees and its customers include the U.S. Department of Defense and its prime contractors, U.S. government intelligence agencies, the U.S. Department of Homeland Security, foreign governments and domestic and commercial customers. L3 generated calendar 2018 revenue of approximately $10 billion . The foregoing description of the Merger Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the Agreement and Plan of Merger, dated as of October 12, 2018, by and among L3, us, and Merger Sub, a copy of which was filed as an exhibit to our Current Report on Form 8-K filed with the SEC on October 16, 2018. |
Significant Accounting Polici_2
Significant Accounting Policies and Recent Accounting Standards (Policies) | 6 Months Ended |
Dec. 28, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying Condensed Consolidated Financial Statements (Unaudited) 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 (Unaudited) 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 condition, results of operations, cash flows and equity in conformity with GAAP for annual financial statements. In the opinion of management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of our financial condition, results of operations and cash flows for the periods presented therein. The results for the quarter and two quarters ended December 28, 2018 are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period. The balance sheet at June 29, 2018 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 June 29, 2018 (our “Fiscal 2018 Form 10-K”) and in our Current Report on Form 8-K filed with the SEC on December 13, 2018 (our “ Fiscal 2017-2018 Update 8-K ”), which updated and superseded historical fiscal 2018 and fiscal 2017 financial information contained in Item 7, Item 8 and certain other Items in our Fiscal 2018 Form 10-K to reflect the impact for those two fiscal years of retrospective application of Accounting Standards Update (“ASU”) 2014-09, Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606) , as amended (“ASC 606”), and ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”), each of which we adopted effective June 30, 2018. See “Adoption of New Accounting Standards” below in this Note A for additional information. Amounts contained in this Report may not always add to totals due to rounding. |
Reclassifications | Reclassifications The classification of certain prior-period amounts has been adjusted in our Condensed Consolidated Financial Statements (Unaudited) to conform with current-period classifications. Reclassifications include certain direct selling and bid and proposal costs from the “Cost of product sales and services” line item to the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited) and in these Notes. |
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 (Unaudited) and these Notes and related disclosures. These estimates and assumptions are based on experience and other information available prior to issuance of the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes. Materially different results can occur as circumstances change and additional information becomes known. |
Adoption of New Accounting Standards and Accounting Standards Issued But Not Yet Effective | Adoption of New Accounting Standards As discussed above, we adopted ASC 606 effective June 30, 2018. This standard 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 are 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 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 and cash flows, this standard requires significantly more interim and annual disclosures. We adopted the requirements of the new standard using the full retrospective transition method. We opted for this transition method because we believe it provides enhanced comparability and transparency across periods. We elected to apply the practical expedient related to backlog disclosures for prior reporting periods and the practical expedient related to evaluating the effects of contract modifications that occurred prior to the earliest period presented. No other transition practical expedients were applied. Retrospective application of this standard resulted in the recognition of a cumulative-effect adjustment of $15 million to reduce the opening balance of retained earnings at July 2, 2016. This standard also resulted in the establishment of “Contract assets” and “Contract liabilities” line items and the reclassification to these line items of amounts previously presented in the “Receivables,” “Inventories” and “Advance payments and unearned income” line items in our Condensed Consolidated Balance Sheet. See Note 2: “Accounting Changes or Recent Accounting Pronouncements” in our Notes to Consolidated Financial Statements in our Fiscal 2017-2018 Update 8-K for a table summarizing the effect of adopting ASC 606 on our previously reported Consolidated Balance Sheet as of June 29, 2018. Total net cash provided by operating activities and total net cash provided by or used in investing activities and financing activities in our previously reported Condensed Consolidated Statements of Cash Flows (Unaudited) were not impacted by our adoption of ASC 606. We also adopted ASU 2017-07 effective June 30, 2018, as discussed above. This update requires that entities present components of net periodic pension and postretirement benefit costs other than the service cost component (“non-service cost amounts”) separately from the service cost component. We adopted this update retrospectively by recasting each prior period presented, using as our estimation basis for recasting prior periods the amounts disclosed in Note 13: “Pension and Other Postretirement Benefits” in our Notes to Consolidated Financial Statements in our Fiscal 2018 Form 10-K. Retrospective application of this update resulted in reclassification to the “Non-operating income” line item of non-service cost amounts that were included in the “Cost of product sales and services” and “Engineering, selling and administrative expenses” line items in our Condensed Consolidated Statement of Income (Unaudited) prior to adopting ASU 2017-07. Accounting Standards Issued But Not Yet Effective In February 2016, the Financial Accounting Standards Board issued a new lease standard that supersedes existing lease guidance under GAAP. This standard requires, among other things, the recognition of right-of-use assets and liabilities on the balance sheet for most lease arrangements and disclosure of certain information about leasing arrangements. This standard currently allows two transition methods with certain practical expedients available. Companies may elect to use the modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements or to initially apply this standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. 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 have developed a project plan to evaluate the impact of this standard and design and implement future processes, tools and controls. The majority of our current lease arrangements are classified as operating leases under existing GAAP lease guidance, and we expect they will continue to be classified as operating leases under the new standard. Although we are continuing to evaluate the impact to our consolidated balance sheet of recognizing right-of-use assets and lease liabilities for the majority of our current lease obligations, which could be material, we do not expect this standard to have a material impact on our results of operations or cash flows. We have not yet made a decision on the transition method, as this determination is primarily dependent on the completion of our evaluation. |
Stock Options and Other Share-Based Compensation | The fair value as of the grant date of each performance 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 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. |
Restructuring and Other Exit Costs | We record charges for restructuring and other exit activities related to sales or terminations of product lines, closures or relocations of business activities, changes in management structure and fundamental reorganizations that affect the nature and focus of operations. Such charges include termination benefits, contract termination costs and costs to consolidate facilities or relocate employees. We record these charges at their fair value when incurred. In cases where employees are required to render service until they are terminated in order to receive the termination benefits and will be retained beyond the minimum retention period, we record the expense ratably over the future service period. These charges are included as a component of the “Cost of product sales and services” and “Engineering, selling and administrative expenses” line items in our Condensed Consolidated Statement of Income (Unaudited). |
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. In certain instances, fair value is estimated using quoted market prices obtained from external pricing services. In obtaining such data from the external pricing services, we have evaluated the methodologies used to develop the estimate of fair value in order to assess whether such valuations are representative of fair value, including net asset value (“NAV”). Additionally, in certain circumstances, the NAV reported by an asset manager may be adjusted when sufficient evidence indicates NAV is not representative of fair value. |
Business Segment Information | We structure our operations primarily around the products, systems and services we sell and the markets we serve, and we report the financial results of our continuing operations in the following three reportable segments, which are also referred to as our business segments: • Communication Systems, serving markets in tactical communications and defense products, including tactical ground and airborne radio communications solutions and night vision technology, and in public safety networks; • Electronic Systems, providing electronic warfare, avionics, and command, control, communications, computers, intelligence, surveillance and reconnaissance (“C4ISR”) solutions for defense and classified customers and mission-critical communication systems for civil and military aviation and other customers; and • Space and Intelligence Systems, providing intelligence, space protection, geospatial, complete Earth observation, universe exploration, positioning, navigation and timing (“PNT”), and environmental solutions for national security, defense, civil and commercial customers, using advanced sensors, antennas and payloads, as well as ground processing and information analytics. We evaluate each segment’s performance based on segment operating income or loss, which we define as profit or loss from operations before income taxes, including pension income and 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 item in the table below represents the elimination of intersegment sales. |
Significant Accounting Polici_3
Significant Accounting Policies and Recent Accounting Standards (Tables) | 6 Months Ended |
Dec. 28, 2018 | |
Accounting Policies [Abstract] | |
Schedule of Effect of Adopting ASC 606 and ASU 2017-07 on Condensed Consolidated Financial Statements (Unaudited) | The following table summarizes the effect of adopting ASC 606 and ASU 2017-07 on our previously reported Condensed Consolidated Statement of Income (Unaudited) for the quarter and two quarters ended December 29, 2017 : Quarter Ended December 29, 2017 Previously Reported Effect of Adopting ASC 606 Effect of Adopting ASU 2017-07 Currently Reported (In millions, except per share amounts) Revenue from product sales and services $ 1,535 $ — $ — $ 1,535 Cost of product sales and services (987 ) 1 (36 ) (1,022 ) Engineering, selling and administrative expenses (276 ) (5 ) (10 ) (291 ) Non-operating income (loss) (2 ) — 46 44 Interest income 1 — — 1 Interest expense (42 ) — — (42 ) Income from continuing operations before income taxes 229 (4 ) — 225 Income taxes (90 ) (4 ) — (94 ) Income from continuing operations 139 (8 ) — 131 Discontinued operations, net of income taxes — — — — Net income $ 139 $ (8 ) $ — $ 131 Net income per common share Basic Continuing operations $ 1.17 $ (0.07 ) $ — $ 1.10 Discontinued operations — — — — $ 1.17 $ (0.07 ) $ — $ 1.10 Diluted Continuing operations $ 1.15 $ (0.07 ) $ — $ 1.08 Discontinued operations — — — — $ 1.15 $ (0.07 ) $ — $ 1.08 Two Quarters Ended December 29, 2017 Previously Reported Effect of Adopting ASC 606 Effect of Adopting ASU 2017-07 Currently Reported (In millions, except per share amounts) Revenue from product sales and services $ 2,948 $ (3 ) $ — $ 2,945 Cost of product sales and services (1,872 ) 4 (73 ) (1,941 ) Engineering, selling and administrative expenses (532 ) (8 ) (19 ) (559 ) Non-operating income (loss) (2 ) — 92 90 Interest income 1 — — 1 Interest expense (83 ) — — (83 ) Income from continuing operations before income taxes 460 (7 ) — 453 Income taxes (154 ) (3 ) — (157 ) Income from continuing operations 306 (10 ) — 296 Discontinued operations, net of income taxes (6 ) — — (6 ) Net income $ 300 $ (10 ) $ — $ 290 Net income per common share Basic Continuing operations $ 2.57 $ (0.08 ) $ — $ 2.49 Discontinued operations (0.05 ) (0.01 ) — (0.06 ) $ 2.52 $ (0.09 ) $ — $ 2.43 Diluted Continuing operations $ 2.52 $ (0.08 ) $ — $ 2.44 Discontinued operations (0.05 ) — — (0.05 ) $ 2.47 $ (0.08 ) $ — $ 2.39 The following table presents the effect of adopting ASC 606 on our previously reported Condensed Consolidated Statement of Cash Flows (Unaudited) for the two quarters ended December 29, 2017 : Two Quarters Ended December 29, 2017 Previously Reported Effect of Adopting ASC 606 Currently Reported (In millions, except shares) Net income $ 300 $ (10 ) $ 290 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of acquisition-related intangibles (1) 58 — 58 Depreciation and other amortization (1) 72 — 72 Share-based compensation 24 — 24 Pension income (68 ) — (68 ) (Increase) decrease in: Accounts receivable (19 ) 5 (14 ) Contract assets — (84 ) (84 ) Inventories (102 ) 79 (23 ) Increase (decrease) in: Accounts payable (78 ) — (78 ) Advance payments and unearned income 38 (38 ) — Contract liabilities — 47 47 Income taxes 213 3 216 Other (65 ) (2 ) (67 ) Net cash provided by operating activities $ 373 $ — $ 373 _______________ (1) “Amortization of acquisition-related intangibles” includes amortization of non-Exelis Inc. acquisition-related intangibles, which was previously included in the “Depreciation and amortization” line item in our Condensed Consolidated Statement of Cash Flows (Unaudited) in our Form 10-Q for the quarter ended December 29, 2017 . |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Dec. 28, 2018 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of Components of Accumulated Other Comprehensive Loss | The components of accumulated other comprehensive loss are summarized below: December 28, 2018 June 29, 2018 (In millions) Foreign currency translation, net of income taxes of $2 million at December 28, 2018 and June 29, 2018 $ (107 ) $ (99 ) Net unrealized loss on hedging derivatives, net of income taxes of $6 million and $7 million at December 28, 2018 and June 29, 2018, respectively (19 ) (20 ) Unrecognized postretirement obligations, net of income taxes of $30 million at December 28, 2018 and June 29, 2018 (85 ) (83 ) $ (211 ) $ (202 ) |
Receivables (Tables)
Receivables (Tables) | 6 Months Ended |
Dec. 28, 2018 | |
Receivables [Abstract] | |
Schedule of Receivables | Receivables are summarized below: December 28, 2018 June 29, 2018 (In millions) Accounts receivable $ 497 $ 468 Less allowances for collection losses (3 ) (2 ) $ 494 $ 466 |
Contract Assets and Contract _2
Contract Assets and Contract Liabilities (Tables) | 6 Months Ended |
Dec. 28, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Contract Assets and Contract Liabilities | Contract assets and contract liabilities are summarized below: December 28, 2018 June 29, 2018 (In millions) Contract assets $ 829 $ 782 Contract liabilities, current (479 ) (372 ) Contract liabilities, non-current (1) (7 ) (7 ) Net contract assets $ 343 $ 403 _______________ (1) Represents the non-current portion of deferred revenue associated with extended product warranties, which is included as a component of the “Other long-term liabilities” line item in our Condensed Consolidated Balance Sheet (Unaudited). The components of contract assets are summarized below: December 28, 2018 June 29, 2018 (In millions) Unbilled contract receivables, gross $ 946 $ 881 Progress payments (117 ) (99 ) $ 829 $ 782 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Dec. 28, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories are summarized below: December 28, 2018 June 29, 2018 (In millions) Finished products $ 69 $ 91 Work in process 128 121 Raw materials and supplies 228 199 $ 425 $ 411 |
Property Plant and Equipment (T
Property Plant and Equipment (Tables) | 6 Months Ended |
Dec. 28, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | Property, plant and equipment are summarized below: December 28, 2018 June 29, 2018 (In millions) Land $ 43 $ 43 Software capitalized for internal use 171 171 Buildings 625 620 Machinery and equipment 1,394 1,349 2,233 2,183 Less accumulated depreciation and amortization (1,332 ) (1,283 ) $ 901 $ 900 |
Accrued Warranties (Tables)
Accrued Warranties (Tables) | 6 Months Ended |
Dec. 28, 2018 | |
Product Warranties Disclosures [Abstract] | |
Schedule of 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 our Condensed Consolidated Balance Sheet (Unaudited), during the two quarters ended December 28, 2018 were as follows: (In millions) Balance at June 29, 2018 $ 24 Warranty provision for sales 9 Settlements (6 ) Balance at December 28, 2018 $ 27 |
Postretirement Benefit Plans (T
Postretirement Benefit Plans (Tables) | 6 Months Ended |
Dec. 28, 2018 | |
Retirement Benefits [Abstract] | |
Schedule of Components of Net Periodic Benefit Cost | The following tables provide the components of our net periodic benefit income for our defined benefit plans, including defined benefit pension plans and other postretirement defined benefit plans: Quarter Ended December 28, 2018 Two Quarters Ended December 28, 2018 Pension Other Benefits Pension Other Benefits (In millions) Net periodic benefit income Service cost $ 9 $ — $ 18 $ — Interest cost 53 2 105 4 Expected return on plan assets (96 ) (4 ) (191 ) (8 ) Amortization of net actuarial gain — (1 ) — (3 ) Total net periodic benefit income $ (34 ) $ (3 ) $ (68 ) $ (7 ) Quarter Ended December 29, 2017 Two Quarters Ended December 29, 2017 Pension Other Benefits Pension Other Benefits (In millions) Net periodic benefit income Service cost $ 9 $ 1 $ 19 $ 1 Interest cost 49 2 97 4 Expected return on plan assets (92 ) (4 ) (184 ) (8 ) Amortization of net actuarial gain — (1 ) — (1 ) Total net periodic benefit income $ (34 ) $ (2 ) $ (68 ) $ (4 ) |
Income From Continuing Operat_2
Income From Continuing Operations Per Share (Tables) | 6 Months Ended |
Dec. 28, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Computation of Net Income Per Common Share | The computations of income from continuing operations per common share are as follows: Quarter Ended Two Quarters Ended December 28, 2018 December 29, 2017 December 28, 2018 December 29, 2017 (In millions, except per share amounts) Income from continuing operations $ 225 $ 131 $ 441 $ 296 Adjustments for participating securities outstanding — (1 ) (1 ) (1 ) Income from continuing operations used in per basic and diluted common share calculations (A) $ 225 $ 130 $ 440 $ 295 Basic weighted average common shares outstanding (B) 117.7 118.5 117.8 118.8 Impact of dilutive share-based awards 2.3 2.4 2.5 2.3 Diluted weighted average common shares outstanding (C) 120.0 120.9 120.3 121.1 Income from continuing operations per basic common share (A)/(B) $ 1.91 $ 1.10 $ 3.74 $ 2.49 Income from continuing operations per diluted common share (A)/(C) $ 1.88 $ 1.08 $ 3.66 $ 2.44 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Dec. 28, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following table presents assets and liabilities measured at fair value on a recurring basis (at least annually) at December 28, 2018 and June 29, 2018 : December 28, 2018 June 29, 2018 Total Level 1 Total Level 1 (In millions) Assets Deferred compensation plan assets: (1) Equity and fixed income securities $ 46 $ 46 $ 46 $ 46 Investments measured at NAV: Equity and fixed income funds 56 63 Corporate-owned life insurance 27 27 Total investments measured at NAV 83 90 Total fair value of deferred compensation plan assets $ 129 $ 136 Liabilities Deferred compensation plan liabilities: (2) Equity securities and mutual funds $ 20 $ 20 $ 38 $ 38 Investments measured at NAV: Common/collective trusts and guaranteed investment contracts 132 111 Total fair value of deferred compensation plan liabilities $ 152 $ 149 _______________ (1) Represents diversified assets held in a “rabbi trust” associated with our non-qualified deferred compensation plans, which we include in the “Other current assets” and “Other non-current assets” line items in our Condensed Consolidated Balance Sheet (Unaudited) and which are measured at fair value. (2) Primarily represents obligations to pay benefits under certain non-qualified deferred compensation plans, which we include in the “Compensation and benefits” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited). Under these plans, participants designate investment options (including stock and fixed-income funds), which serve as the basis for measurement of the notional value of their accounts. |
Schedule of 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): December 28, 2018 June 29, 2018 Carrying Amount Fair Value Carrying Amount Fair Value (In millions) Long-term debt (including current portion) (1) $ 3,716 $ 3,800 $ 3,712 $ 3,848 _______________ (1) 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 Segment Information (T
Business Segment Information (Tables) | 6 Months Ended |
Dec. 28, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Segment Revenue and Reconciliation of Segment Income to Total Income From Continuing Operations Before Taxes | Segment revenue, segment operating income and a reconciliation of segment operating income to total income from continuing operations before income taxes are as follows: Quarter Ended Two Quarters Ended December 28, 2018 December 29, 2017 December 28, 2018 December 29, 2017 (In millions) Revenue Communication Systems $ 540 $ 492 $ 1,009 $ 898 Electronic Systems 617 582 1,206 1,123 Space and Intelligence Systems 513 462 1,001 928 Corporate eliminations (4 ) (1 ) (8 ) (4 ) $ 1,666 $ 1,535 $ 3,208 $ 2,945 Income From Continuing Operations Before Income Taxes Segment Operating Income: Communication Systems $ 162 $ 145 $ 302 $ 260 Electronic Systems 117 97 232 206 Space and Intelligence Systems 92 80 178 167 Unallocated corporate expense and corporate eliminations (1) (58 ) (54 ) (99 ) (96 ) Pension adjustment (46 ) (46 ) (93 ) (92 ) Non-operating income 47 44 94 90 Net interest expense (43 ) (41 ) (86 ) (82 ) $ 271 $ 225 $ 528 $ 453 _______________ (1) Unallocated corporate expense and corporate eliminations included: (i) $13 million of L3 Technologies, Inc. (“L3”) merger-related transaction and integration costs for the quarter and two quarters ended December 28, 2018; (ii) a $12 million adjustment for deferred compensation in the quarter and two quarters ended December 29, 2017 and (iii) $26 million and $51 million of expense in the quarter and two quarters ended December 28, 2018 , respectively, compared with $25 million and $50 million of expense in the quarter and two quarters ended December 29, 2017 , respectively, for amortization of identifiable 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 segment, the amortization of identifiable intangible assets acquired in the Exelis acquisition was recorded as unallocated corporate expense. Corporate eliminations of intersegment profits were not material in the quarter or two quarters ended December 28, 2018 or the quarter or two quarters ended December 29, 2017 . |
Schedule of Disaggregation of Revenue by Segment | Disaggregation of Revenue Communication Systems: Communication Systems operates principally on a “commercial” market-driven business model through which the business segment provides ready-to-ship commercial off-the-shelf products to customers in the U.S. and internationally. Communication Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when the product is received and accepted by the customer. We disaggregate Communication Systems revenue by geographical region, as we believe this category best depicts how the nature, amount, timing and uncertainty of Communication Systems revenue and cash flows are affected by economic factors: Quarter Ended Two Quarters Ended December 28, 2018 December 29, 2017 December 28, 2018 December 29, 2017 (In millions) Revenue By Geographical Region United States $ 299 $ 276 $ 558 $ 484 International 241 216 451 414 $ 540 $ 492 $ 1,009 $ 898 Electronic Systems: Electronic Systems revenue is primarily derived from U.S. Government development and production contracts and is generally recognized over time using the POC cost-to-cost method. We disaggregate Electronic Systems revenue by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of Electronic Systems revenue and cash flows are affected by economic factors: Quarter Ended Two Quarters Ended December 28, 2018 December 29, 2017 December 28, 2018 December 29, 2017 (In millions) Revenue By Customer Relationship Prime contractor $ 399 $ 410 $ 793 $ 808 Subcontractor 218 172 413 315 $ 617 $ 582 $ 1,206 $ 1,123 Revenue By Contract Type Fixed-price (1) $ 508 $ 463 $ 986 $ 885 Cost-reimbursable 109 119 220 238 $ 617 $ 582 $ 1,206 $ 1,123 Revenue By Geographical Region United States $ 486 $ 464 $ 964 $ 890 International 131 118 242 233 $ 617 $ 582 $ 1,206 $ 1,123 _______________ (1) Includes revenue derived from time-and-materials contracts. Space and Intelligence Systems: Space and Intelligence Systems revenue is primarily derived from U.S. Government development and production contracts and is generally recognized over time using the POC cost-to-cost method. We disaggregate Space and Intelligence Systems revenue by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of Space and Intelligence Systems revenue and cash flows are affected by economic factors: Quarter Ended Two Quarters Ended December 28, 2018 December 29, 2017 December 28, 2018 December 29, 2017 (In millions) Revenue By Customer Relationship Prime contractor $ 362 $ 329 $ 714 $ 663 Subcontractor 151 133 287 265 $ 513 $ 462 $ 1,001 $ 928 Revenue By Contract Type Fixed-price (1) $ 188 $ 120 $ 360 $ 243 Cost-reimbursable 325 342 641 685 $ 513 $ 462 $ 1,001 $ 928 Revenue By Geographical Region United States $ 500 $ 446 $ 976 $ 898 International 13 16 25 30 $ 513 $ 462 $ 1,001 $ 928 _______________ (1) Includes revenue derived from time-and-materials contracts. |
Schedule of Total Segment Assets Reconciliation | Total assets by business segment are summarized below: December 28, 2018 June 29, 2018 (In millions) Total Assets Communication Systems $ 1,578 $ 1,567 Electronic Systems 4,196 4,174 Space and Intelligence Systems 2,242 2,193 Corporate (1) 1,836 1,917 $ 9,852 $ 9,851 _______________ (1) Identifiable intangible assets acquired in connection with our acquisition of Exelis in the fourth quarter of fiscal 2015 were recorded as Corporate assets because they benefited the entire Company as opposed to any individual segment. Exelis identifiable intangible asset balances recorded as Corporate assets were $923 million and $974 million at December 28, 2018 and June 29, 2018 , respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred compensation plan assets and buildings and equipment. |
Significant Accounting Polici_4
Significant Accounting Policies and Recent Accounting Standards (Details) $ in Millions | Jul. 02, 2016USD ($) |
Retained Earnings | Effect of Adopting ASU 2014-09 | |
Business Combination, Separately Recognized Transactions [Line Items] | |
Cumulative effect adjustment as reduction of opening balance of retained earnings | $ 15 |
Significant Accounting Polici_5
Significant Accounting Policies and Recent Accounting Standards - Effect of ASC 606 and ASU 2017-07 on Condensed Consolidated Statement of Income (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||||
Dec. 28, 2018 | Sep. 28, 2018 | Dec. 29, 2017 | Sep. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Revenue from product sales and services | $ 1,666 | $ 1,535 | $ 3,208 | $ 2,945 | ||
Cost of product sales and services | (1,095) | (1,022) | (2,105) | (1,941) | ||
Engineering, selling and administrative expenses | (304) | (291) | (583) | (559) | ||
Non-operating income | 47 | 44 | 94 | 90 | ||
Interest income | 0 | 1 | 1 | 1 | ||
Interest expense | (43) | (42) | (87) | (83) | ||
Income from continuing operations before income taxes | 271 | 225 | 528 | 453 | ||
Income taxes | (46) | (94) | (87) | (157) | ||
Income from continuing operations | 225 | 131 | 441 | 296 | ||
Discontinued operations, net of income taxes | 0 | 0 | (3) | (6) | ||
Net income | $ 225 | $ 213 | $ 131 | $ 159 | $ 438 | $ 290 |
Basic | ||||||
Continuing operations (in dollars per share) | $ 1.91 | $ 1.10 | $ 3.74 | $ 2.49 | ||
Discontinued operations (in dollars per share) | 0 | 0 | (0.03) | (0.06) | ||
Basic (in dollars per share) | 1.91 | 1.10 | 3.71 | 2.43 | ||
Diluted | ||||||
Continuing operations (in dollars per share) | 1.88 | 1.08 | 3.66 | 2.44 | ||
Discontinued operations (in dollars per share) | (0.01) | 0 | (0.02) | (0.05) | ||
Diluted (in dollars per share) | $ 1.87 | $ 1.08 | $ 3.64 | $ 2.39 | ||
Previously Reported | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Revenue from product sales and services | $ 1,535 | $ 2,948 | ||||
Cost of product sales and services | (987) | (1,872) | ||||
Engineering, selling and administrative expenses | (276) | (532) | ||||
Non-operating income | (2) | (2) | ||||
Interest income | 1 | 1 | ||||
Interest expense | (42) | (83) | ||||
Income from continuing operations before income taxes | 229 | 460 | ||||
Income taxes | (90) | (154) | ||||
Income from continuing operations | 139 | 306 | ||||
Discontinued operations, net of income taxes | 0 | (6) | ||||
Net income | $ 139 | $ 300 | ||||
Basic | ||||||
Continuing operations (in dollars per share) | $ 1.17 | $ 2.57 | ||||
Discontinued operations (in dollars per share) | 0 | (0.05) | ||||
Basic (in dollars per share) | 1.17 | 2.52 | ||||
Diluted | ||||||
Continuing operations (in dollars per share) | 1.15 | 2.52 | ||||
Discontinued operations (in dollars per share) | 0 | (0.05) | ||||
Diluted (in dollars per share) | $ 1.15 | $ 2.47 | ||||
Restatement Adjustment | Effect of Adopting ASC 606 | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Revenue from product sales and services | $ 0 | $ (3) | ||||
Cost of product sales and services | 1 | 4 | ||||
Engineering, selling and administrative expenses | (5) | (8) | ||||
Non-operating income | 0 | 0 | ||||
Interest income | 0 | 0 | ||||
Interest expense | 0 | 0 | ||||
Income from continuing operations before income taxes | (4) | (7) | ||||
Income taxes | (4) | (3) | ||||
Income from continuing operations | (8) | (10) | ||||
Discontinued operations, net of income taxes | 0 | 0 | ||||
Net income | $ (8) | $ (10) | ||||
Basic | ||||||
Continuing operations (in dollars per share) | $ (0.07) | $ (0.08) | ||||
Discontinued operations (in dollars per share) | 0 | (0.01) | ||||
Basic (in dollars per share) | (0.07) | (0.09) | ||||
Diluted | ||||||
Continuing operations (in dollars per share) | (0.07) | (0.08) | ||||
Discontinued operations (in dollars per share) | 0 | 0 | ||||
Diluted (in dollars per share) | $ (0.07) | $ (0.08) | ||||
Restatement Adjustment | Effect of Adopting ASU 2017-07 | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Revenue from product sales and services | $ 0 | $ 0 | ||||
Cost of product sales and services | (36) | (73) | ||||
Engineering, selling and administrative expenses | (10) | (19) | ||||
Non-operating income | 46 | 92 | ||||
Interest income | 0 | 0 | ||||
Interest expense | 0 | 0 | ||||
Income from continuing operations before income taxes | 0 | 0 | ||||
Income taxes | 0 | 0 | ||||
Income from continuing operations | 0 | 0 | ||||
Discontinued operations, net of income taxes | 0 | 0 | ||||
Net income | $ 0 | $ 0 | ||||
Basic | ||||||
Continuing operations (in dollars per share) | $ 0 | $ 0 | ||||
Discontinued operations (in dollars per share) | 0 | 0 | ||||
Basic (in dollars per share) | 0 | 0 | ||||
Diluted | ||||||
Continuing operations (in dollars per share) | 0 | 0 | ||||
Discontinued operations (in dollars per share) | 0 | 0 | ||||
Diluted (in dollars per share) | $ 0 | $ 0 |
Significant Accounting Polici_6
Significant Accounting Policies and Recent Accounting Standards - Effect of ASC 606 on Condensed Consolidated Statement of Cash Flows (Unaudited) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||||
Dec. 28, 2018 | Sep. 28, 2018 | Dec. 29, 2017 | Sep. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Net income | $ 225 | $ 213 | $ 131 | $ 159 | $ 438 | $ 290 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Amortization of acquisition-related intangibles | 58 | 58 | ||||
Depreciation and other amortization | 71 | 72 | ||||
Share-based compensation | 70 | 24 | ||||
Pension income | (68) | (68) | ||||
(Increase) decrease in: | ||||||
Accounts receivable | (28) | (14) | ||||
Contract assets | (47) | (84) | ||||
Inventories | (14) | (23) | ||||
Increase (decrease) in: | ||||||
Accounts payable | (101) | (78) | ||||
Advance payments and unearned income | 0 | |||||
Contract liabilities | 107 | 47 | ||||
Income taxes | 76 | 216 | ||||
Other | (93) | (67) | ||||
Net cash provided by operating activities | $ 469 | 373 | ||||
Previously Reported | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Net income | 139 | 300 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Amortization of acquisition-related intangibles | 58 | |||||
Depreciation and other amortization | 72 | |||||
Share-based compensation | 24 | |||||
Pension income | (68) | |||||
(Increase) decrease in: | ||||||
Accounts receivable | (19) | |||||
Contract assets | 0 | |||||
Inventories | (102) | |||||
Increase (decrease) in: | ||||||
Accounts payable | (78) | |||||
Advance payments and unearned income | 38 | |||||
Contract liabilities | 0 | |||||
Income taxes | 213 | |||||
Other | (65) | |||||
Net cash provided by operating activities | 373 | |||||
Restatement Adjustment | Effect of Adopting ASC 606 | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Net income | $ (8) | (10) | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Amortization of acquisition-related intangibles | 0 | |||||
Depreciation and other amortization | 0 | |||||
Share-based compensation | 0 | |||||
Pension income | 0 | |||||
(Increase) decrease in: | ||||||
Accounts receivable | 5 | |||||
Contract assets | (84) | |||||
Inventories | 79 | |||||
Increase (decrease) in: | ||||||
Accounts payable | 0 | |||||
Advance payments and unearned income | (38) | |||||
Contract liabilities | 47 | |||||
Income taxes | 3 | |||||
Other | (2) | |||||
Net cash provided by operating activities | $ 0 |
Stock Options and Other Share_2
Stock Options and Other Share-Based Compensation (Details) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 28, 2018USD ($)planshares | Dec. 29, 2017USD ($)shares | Dec. 28, 2018USD ($)planshares | Dec. 29, 2017USD ($)shares | |
Continuing Operations | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Compensation costs related to share-based awards | $ | $ 15 | $ 13 | $ 29 | $ 24 |
SIPs | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of shareholder approved employee stock incentive plans | plan | 2 | 2 | ||
SIPs | Continuing and Discontinued Operations | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Common stock issued, net of shares withheld for tax purposes (in shares) | 45,739 | 67,717 | 449,692 | 398,932 |
2015 EIP | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expected dividend yield | 1.61% | |||
Expected volatility | 19.87% | |||
Risk free interest rates | 2.72% | |||
Expected term (years) | 5 years 11 days | |||
2015 EIP | Restricted Shares Units Awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Restricted shares and units granted (in shares) | 3,538 | 92,758 | ||
2015 EIP | Stock Options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock options granted (in shares) | 0 | 270,963 | ||
2015 EIP | Performance Units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Restricted shares and units granted (in shares) | 0 | 135,629 |
Restructuring and Other Exit _2
Restructuring and Other Exit Costs (Details) - USD ($) $ in Millions | 3 Months Ended | |
Jun. 29, 2018 | Dec. 28, 2018 | |
Discontinued Operations, Disposed of by Means Other than Sale | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring reserve | $ 27 | $ 18 |
Exelis | Engineering, selling and administrative expenses | ||
Restructuring Cost and Reserve [Line Items] | ||
Charges for integration and other costs | $ 5 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Dec. 28, 2018 | Jun. 29, 2018 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Foreign currency translation, net of income taxes of $2 million at December 28, 2018 and June 29, 2018 | $ (107) | $ (99) |
Net unrealized loss on hedging derivatives, net of income taxes of $6 million and $7 million at December 28, 2018 and June 29, 2018, respectively | (19) | (20) |
Unrecognized postretirement obligations, net of income taxes of $30 million at December 28, 2018 and June 29, 2018 | (85) | (83) |
Accumulated other comprehensive loss | (211) | (202) |
Tax effect on foreign currency translation | 2 | 2 |
Tax effect on unrealized loss on hedging derivatives | 6 | 7 |
Tax effect on unrecognized post-retirement obligations | $ 30 | $ 30 |
Accumulated Other Comprehensi_4
Accumulated Other Comprehensive Loss - Additional Information (Details) $ in Millions | Jul. 01, 2017USD ($) |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |
Reclassifications of stranded tax effects of Tax and Jobs Act of 2017, from accumulated other comprehensive loss to retained earnings | $ 35 |
Accumulated Defined Benefit Plans Adjustment Attributable to Parent | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |
Reclassifications of stranded tax effects of Tax and Jobs Act of 2017, from accumulated other comprehensive loss to retained earnings | 30 |
Accumulated Net Investment Gain (Loss) Attributable to Parent | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |
Reclassifications of stranded tax effects of Tax and Jobs Act of 2017, from accumulated other comprehensive loss to retained earnings | 4 |
Accumulated Foreign Currency Adjustment Attributable to Parent | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |
Reclassifications of stranded tax effects of Tax and Jobs Act of 2017, from accumulated other comprehensive loss to retained earnings | $ 1 |
Receivables (Details)
Receivables (Details) - USD ($) | Dec. 28, 2018 | Jun. 29, 2018 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | $ 497,000,000 | $ 468,000,000 |
Less allowances for collection losses | (3,000,000) | (2,000,000) |
Receivables | 494,000,000 | $ 466,000,000 |
RSA | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Authorized amount of accounts receivables outstanding under agreement | $ 50,000,000 |
Contract Assets and Contract _3
Contract Assets and Contract Liabilities (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Dec. 28, 2018 | Dec. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | Jun. 29, 2018 | |
Revenue from Contract with Customer [Abstract] | |||||
Contract assets | $ 829 | $ 829 | $ 782 | ||
Contract liabilities, current | (479) | (479) | (372) | ||
Contract liabilities, non-current | (7) | (7) | (7) | ||
Net contract assets | 343 | 343 | 403 | ||
Components of Contract Assets: | |||||
Unbilled contract receivables, gross | 946 | 946 | 881 | ||
Progress payments | (117) | (117) | (99) | ||
Contract assets | 829 | 829 | $ 782 | ||
Recognized sales on contract liabilities | $ 49 | $ 53 | $ 207 | $ 163 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Dec. 28, 2018 | Jun. 29, 2018 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 69 | $ 91 |
Work in process | 128 | 121 |
Raw materials and supplies | 228 | 199 |
Inventories | $ 425 | $ 411 |
Property, Plant and Equipment (
Property, Plant and Equipment (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Dec. 28, 2018 | Dec. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | Jun. 29, 2018 | |
Property, Plant and Equipment | |||||
Land | $ 43 | $ 43 | $ 43 | ||
Software capitalized for internal use | 171 | 171 | 171 | ||
Buildings | 625 | 625 | 620 | ||
Machinery and equipment | 1,394 | 1,394 | 1,349 | ||
Property, plant and equipment, gross | 2,233 | 2,233 | 2,183 | ||
Less accumulated depreciation and amortization | (1,332) | (1,332) | (1,283) | ||
Property, plant and equipment | 901 | 901 | $ 900 | ||
Depreciation and amortization expense related to property, plant and equipment | $ 33 | $ 36 | $ 68 | $ 73 |
Accrued Warranties - Changes in
Accrued Warranties - Changes in Liabilities for Standard Warranties (Details) $ in Millions | 6 Months Ended |
Dec. 28, 2018USD ($) | |
Changes in warranty liability | |
Balance at June 29, 2018 | $ 24 |
Warranty provision for sales | 9 |
Settlements | (6) |
Balance at December 28, 2018 | $ 27 |
Accrued Warranties - Additional
Accrued Warranties - Additional Information (Details) - USD ($) $ in Millions | Dec. 28, 2018 | Jun. 29, 2018 |
Contract Liabilities and Other Long-term Liabilities | ||
Product Warranty Liability [Line Items] | ||
Extended product warranty accrual | $ 16 | $ 16 |
Postretirement Benefit Plans -
Postretirement Benefit Plans - Components of Net Periodic Benefit Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 28, 2018 | Dec. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | |
Pension | ||||
Net periodic benefit income | ||||
Service cost | $ 9 | $ 9 | $ 18 | $ 19 |
Interest cost | 53 | 49 | 105 | 97 |
Expected return on plan assets | (96) | (92) | (191) | (184) |
Amortization of net actuarial gain | 0 | 0 | 0 | 0 |
Total net periodic benefit income | (34) | (34) | (68) | (68) |
Other Benefits | ||||
Net periodic benefit income | ||||
Service cost | 0 | 1 | 0 | 1 |
Interest cost | 2 | 2 | 4 | 4 |
Expected return on plan assets | (4) | (4) | (8) | (8) |
Amortization of net actuarial gain | (1) | (1) | (3) | (1) |
Total net periodic benefit income | $ (3) | $ (2) | $ (7) | $ (4) |
Postretirement Benefit Plans _2
Postretirement Benefit Plans - Additional Information (Details) - United States - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Dec. 28, 2018 | Mar. 30, 2018 | Dec. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | Jun. 30, 2017 | Jun. 29, 2018 | Dec. 31, 2016 | |
Pension | ||||||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||||||
Defined benefit plan, voluntary contributions by employer during period | $ 0 | $ 300,000,000 | $ 0 | $ 0 | $ 0 | $ 400,000,000 | ||
Defined benefit plans, estimated future employer contributions in current fiscal year | $ 0 | $ 0 | ||||||
U.S. SRP | ||||||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||||||
Value of defined benefit pension plan assets | $ 4,600,000,000 | |||||||
Projected benefit obligation of defined pension plan | $ 5,200,000,000 | |||||||
Cash balance percentage to replace frozen benefits under defined pension plan | 1.00% |
Income From Continuing Operat_3
Income From Continuing Operations Per Share (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 28, 2018 | Dec. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | |
Earnings Per Share [Abstract] | ||||
Income from continuing operations | $ 225 | $ 131 | $ 441 | $ 296 |
Adjustments for participating securities outstanding | 0 | (1) | (1) | (1) |
Income from continuing operations used in per basic and diluted common share calculations (A) | $ 225 | $ 130 | $ 440 | $ 295 |
Basic weighted average common shares outstanding (B) (in shares) | 117,700,000 | 118,500,000 | 117,800,000 | 118,800,000 |
Impact of dilutive share-based awards (in shares) | 2,300,000 | 2,400,000 | 2,500,000 | 2,300,000 |
Diluted weighted average common shares outstanding (C) (in shares) | 120,000,000 | 120,900,000 | 120,300,000 | 121,100,000 |
Income from continuing operations per basic common share (A)/(B) (in dollars per share) | $ 1.91 | $ 1.10 | $ 3.74 | $ 2.49 |
Income from continuing operations per diluted common share (A)/(C) (in dollars per share) | $ 1.88 | $ 1.08 | $ 3.66 | $ 2.44 |
Outstanding antidilutive employee stock options (in shares) | 399,243 | 222 | 279,705 | 81,496 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 28, 2018 | Dec. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | |
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | 17.00% | 41.80% | 16.50% | 34.70% |
Write-down of deferred tax assets balances due to changes in enacted tax rate | $ 58 | |||
Write-down of deferred tax assets balances due to changes in enacted tax rate, per diluted share (in dollars per share) | $ 0.48 | |||
Benefit from impact of lower tax rate | $ 26 | |||
Benefit from impact of lower tax rate, per diluted share (in dollars per share) | $ 0.21 | |||
Impact of releasing uncertain tax provisions and differences in tax accounting related to investments | $ 22 | |||
Impact of releasing uncertain tax provisions and differences in tax accounting related to investments per diluted share (in dollar per share) | $ 0.18 | |||
Deferred tax liability for netted foreign E&P | $ 19 | $ 19 | ||
Increase in deferred tax liability due to potential cumulative basis differences in netted foreign E&P | $ 88 | $ 88 |
Fair Value Measurements - Asset
Fair Value Measurements - Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($) $ in Millions | Dec. 28, 2018 | Jun. 29, 2018 |
Level 1 | Equity securities and mutual funds | ||
Liabilities | ||
Deferred compensation plan liabilities | $ 20 | $ 38 |
Level 1 | Equity and fixed income securities | ||
Assets | ||
Deferred compensation plan assets | 46 | 46 |
Fair Value | ||
Assets | ||
Deferred compensation plan assets | 129 | 136 |
Investments measured at NAV assets | 83 | 90 |
Liabilities | ||
Deferred compensation plan liabilities | 152 | 149 |
Fair Value | Equity securities and mutual funds | ||
Liabilities | ||
Deferred compensation plan liabilities | 20 | 38 |
Fair Value | Common/collective trusts and guaranteed investment contracts | ||
Liabilities | ||
Investments measured at NAV liabilities | 132 | 111 |
Fair Value | Equity and fixed income securities | ||
Assets | ||
Deferred compensation plan assets | 46 | 46 |
Fair Value | Equity and fixed income funds | ||
Assets | ||
Investments measured at NAV assets | 56 | 63 |
Fair Value | Corporate-owned life insurance | ||
Assets | ||
Investments measured at NAV assets | $ 27 | $ 27 |
Fair Value Measurements - Signi
Fair Value Measurements - Significant Financial Instruments Not Measured at Fair Value (Details) - USD ($) $ in Millions | Dec. 28, 2018 | Jun. 29, 2018 |
Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt (including current portion) | $ 3,716 | $ 3,712 |
Fair Value | Level 2 | Market Approach | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt (including current portion) | $ 3,800 | $ 3,848 |
Derivative Instruments and He_2
Derivative Instruments and Hedging Activities (Details) | 3 Months Ended | 6 Months Ended | |||
Dec. 28, 2018USD ($)contract | Dec. 29, 2017USD ($) | Dec. 28, 2018USD ($)contract | Dec. 29, 2017USD ($) | Jun. 29, 2018USD ($) | |
Derivative [Line Items] | |||||
Amount recognized in earnings from hedged related to commitment not qualifying as foreign currency fair value hedge | $ 0 | $ 0 | $ 0 | $ 0 | |
Foreign Currency Forward | |||||
Derivative [Line Items] | |||||
Derivative, number of contracts | contract | 2 | 2 | |||
Derivative, notional amount | $ 5,000,000 | $ 5,000,000 | $ 39,000,000 | ||
Weighted average contract life | 2 months | ||||
Foreign Currency Forward | Minimum | |||||
Derivative [Line Items] | |||||
Contract expiration date | 3 days | ||||
Foreign Currency Forward | Maximum | |||||
Derivative [Line Items] | |||||
Contract expiration date | 3 months | ||||
Foreign Currency Forward | Fair Value Hedge | |||||
Derivative [Line Items] | |||||
Derivative, number of contracts | contract | 1 | 1 | |||
Derivative, notional amount | $ 4,000,000 | $ 4,000,000 | 4,000,000 | ||
Foreign Currency Forward | Cash Flow Hedge | |||||
Derivative [Line Items] | |||||
Derivative, number of contracts | contract | 1 | 1 | |||
Derivative, notional amount | $ 1,000,000 | $ 1,000,000 | $ 35,000,000 |
Changes in Estimates (Details)
Changes in Estimates (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 28, 2018 | Dec. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | |
Change in Accounting Estimate [Line Items] | ||||
Revenue recognized from performance obligations satisfied in prior periods | $ 9 | $ 16 | $ 16 | $ 30 |
Contracts Accounted for under Percentage of Completion | ||||
Change in Accounting Estimate [Line Items] | ||||
Operating income (loss) | $ 2 | $ (16) | $ (1) | $ (11) |
Operating income (loss), per diluted share (in dollars per share) | $ 0.02 | $ (0.09) | $ (0.06) | |
Operating income (loss), net of tax | $ (11) | $ (8) |
Backlog (Details)
Backlog (Details) $ in Billions | Dec. 28, 2018USD ($) |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-12-29 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Ending backlog | $ 8 |
Remaining performance obligation percentage | 50.00% |
Expected timing of satisfaction period | 12 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-12-29 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation percentage | 50.00% |
Expected timing of satisfaction period | 3 years |
Business Segment Information -
Business Segment Information - Additional Information (Details) | 6 Months Ended |
Dec. 28, 2018segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 3 |
Number of business segments | 3 |
Business Segment Information _2
Business Segment Information - Revenues and Income From Continuing Operations by Segment (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 28, 2018 | Dec. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | |
Segment Reporting Information [Line Items] | ||||
Revenue | $ 1,666 | $ 1,535 | $ 3,208 | $ 2,945 |
Income From Continuing Operations Before Income Taxes | ||||
Non-operating income | 47 | 44 | 94 | 90 |
Net interest expense | (43) | (41) | (86) | (82) |
Income from continuing operations before income taxes | 271 | 225 | 528 | 453 |
Communication Systems | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 540 | 492 | 1,009 | 898 |
Electronic Systems | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 617 | 582 | 1,206 | 1,123 |
Space and Intelligence Systems | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 513 | 462 | 1,001 | 928 |
Operating Segments | Communication Systems | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 540 | 492 | 1,009 | 898 |
Income From Continuing Operations Before Income Taxes | ||||
Segment operating income | 162 | 145 | 302 | 260 |
Operating Segments | Electronic Systems | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 617 | 582 | 1,206 | 1,123 |
Income From Continuing Operations Before Income Taxes | ||||
Segment operating income | 117 | 97 | 232 | 206 |
Operating Segments | Space and Intelligence Systems | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 513 | 462 | 1,001 | 928 |
Income From Continuing Operations Before Income Taxes | ||||
Segment operating income | 92 | 80 | 178 | 167 |
Corporate eliminations | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | (4) | (1) | (8) | (4) |
Unallocated corporate expense and corporate eliminations | ||||
Income From Continuing Operations Before Income Taxes | ||||
Segment operating income | (58) | (54) | (99) | (96) |
Pension adjustment | (46) | (46) | (93) | (92) |
Adjustment for deferred compensation | 12 | 12 | ||
Unallocated corporate expense and corporate eliminations | Exelis | ||||
Income From Continuing Operations Before Income Taxes | ||||
Amortization of intangible assets | 26 | $ 25 | 51 | $ 50 |
Unallocated corporate expense and corporate eliminations | L3 Technologies, Inc. | ||||
Income From Continuing Operations Before Income Taxes | ||||
Merger-related transaction and integration costs | $ 13 | $ 13 |
Business Segment Information _3
Business Segment Information - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 28, 2018 | Dec. 29, 2017 | Dec. 28, 2018 | Dec. 29, 2017 | |
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 1,666 | $ 1,535 | $ 3,208 | $ 2,945 |
Communication Systems | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 540 | 492 | 1,009 | 898 |
Communication Systems | United States | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 299 | 276 | 558 | 484 |
Communication Systems | International | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 241 | 216 | 451 | 414 |
Electronic Systems | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 617 | 582 | 1,206 | 1,123 |
Electronic Systems | Fixed-price | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 508 | 463 | 986 | 885 |
Electronic Systems | Cost-reimbursable | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 109 | 119 | 220 | 238 |
Electronic Systems | Prime contractor | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 399 | 410 | 793 | 808 |
Electronic Systems | Subcontractor | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 218 | 172 | 413 | 315 |
Electronic Systems | United States | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 486 | 464 | 964 | 890 |
Electronic Systems | International | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 131 | 118 | 242 | 233 |
Space and Intelligence Systems | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 513 | 462 | 1,001 | 928 |
Space and Intelligence Systems | Fixed-price | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 188 | 120 | 360 | 243 |
Space and Intelligence Systems | Cost-reimbursable | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 325 | 342 | 641 | 685 |
Space and Intelligence Systems | Prime contractor | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 362 | 329 | 714 | 663 |
Space and Intelligence Systems | Subcontractor | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 151 | 133 | 287 | 265 |
Space and Intelligence Systems | United States | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 500 | 446 | 976 | 898 |
Space and Intelligence Systems | International | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 13 | $ 16 | $ 25 | $ 30 |
Business Segment Information _4
Business Segment Information - Assets by Segment (Details) - USD ($) $ in Millions | Dec. 28, 2018 | Jun. 29, 2018 |
Segment Reporting Information [Line Items] | ||
Assets | $ 9,852 | $ 9,851 |
Identifiable intangible assets | 930 | 989 |
Operating Segments | Communication Systems | ||
Segment Reporting Information [Line Items] | ||
Assets | 1,578 | 1,567 |
Operating Segments | Electronic Systems | ||
Segment Reporting Information [Line Items] | ||
Assets | 4,196 | 4,174 |
Operating Segments | Space and Intelligence Systems | ||
Segment Reporting Information [Line Items] | ||
Assets | 2,242 | 2,193 |
Corporate | ||
Segment Reporting Information [Line Items] | ||
Assets | 1,836 | 1,917 |
Corporate | Exelis | ||
Segment Reporting Information [Line Items] | ||
Identifiable intangible assets | $ 923 | $ 974 |
Legal Proceedings and Conting_2
Legal Proceedings and Contingencies (Details) $ in Millions | Jan. 04, 2019claim | Mar. 31, 2016party | Jan. 15, 2019claim | Dec. 28, 2018USD ($) |
Exelis | Passaic River Alaska | ||||
Loss Contingencies [Line Items] | ||||
Number of potentially responsible parties notified (over 100) | party | 100 | |||
Estimated cost for all participating parties of EPA's preferred alternative | $ | $ 1,380 | |||
L3 Harris Technologies, Inc. | Subsequent Event | Pending Litigation | ||||
Loss Contingencies [Line Items] | ||||
Number of lawsuits filed | 4 | |||
L3 Harris Technologies, Inc. | Subsequent Event | Pending Litigation | Putative Class Action Lawsuit | L3 Parties | ||||
Loss Contingencies [Line Items] | ||||
Number of lawsuits filed | 2 | |||
L3 Harris Technologies, Inc. | Subsequent Event | Pending Litigation | Putative Class Action Lawsuit | Kent v. L3 Technologies, Inc. | ||||
Loss Contingencies [Line Items] | ||||
Number of lawsuits filed | 1 | |||
L3 Harris Technologies, Inc. | Subsequent Event | Pending Litigation | Individual Lawsuit | L3 Parties | ||||
Loss Contingencies [Line Items] | ||||
Number of lawsuits filed | 1 |
Pending Merger (Details)
Pending Merger (Details) employee in Thousands, $ in Billions | Jun. 30, 2019 | Dec. 31, 2018USD ($) | Oct. 12, 2018employee |
L3 Technologies, Inc. | |||
Business Acquisition [Line Items] | |||
Entity number of employees | employee | 31 | ||
Subsequent Event | L3 Technologies, Inc. | |||
Business Acquisition [Line Items] | |||
Revenue | $ | $ 10 | ||
Subsequent Event | Scenario, Forecast | L3 Harris Technologies, Inc. | |||
Business Acquisition [Line Items] | |||
Fixed exchange conversion ratio per share | 1.30 | ||
Subsequent Event | Scenario, Forecast | L3 Harris Technologies, Inc. | Former Harris Shareholders | |||
Business Acquisition [Line Items] | |||
Percentage of voting interests acquired | 54.00% | ||
Subsequent Event | Scenario, Forecast | L3 Harris Technologies, Inc. | Former L3 Shareholders | |||
Business Acquisition [Line Items] | |||
Percentage of voting interests acquired | 46.00% |