Cover
Cover - shares | 3 Months Ended | |
Apr. 02, 2021 | Apr. 30, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Apr. 2, 2021 | |
Document Transition Report | false | |
Entity File Number | 1-3863 | |
Entity Registrant Name | L3HARRIS TECHNOLOGIES, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 34-0276860 | |
Entity Address, Address Line One | 1025 West NASA Boulevard | |
Entity Address, City or Town | Melbourne, | |
Entity Address, State or Province | FL | |
Entity Address, Postal Zip Code | 32919 | |
City Area Code | 321 | |
Local Phone Number | 727-9100 | |
Title of 12(b) Security | Common Stock, par value $1.00 per share | |
Trading Symbol | LHX | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 204,983,822 | |
Entity Central Index Key | 0000202058 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Income Statement [Abstract] | ||
Revenue from product sales and services | $ 4,567 | $ 4,626 |
Cost of product sales and services | (3,213) | (3,298) |
Engineering, selling and administrative expenses | (801) | (812) |
Business divestiture-related losses | (15) | (3) |
Impairment of goodwill and other assets | (62) | (324) |
Non-operating income | 117 | 95 |
Interest income | 3 | 5 |
Interest expense | (69) | (68) |
Income from continuing operations before income taxes | 527 | 221 |
Income taxes | (60) | (26) |
Income from continuing operations | 467 | 195 |
Discontinued operations, net of income taxes | (1) | (1) |
Net income | 466 | 194 |
Noncontrolling interests, net of income taxes | 2 | 23 |
Net income attributable to L3Harris Technologies, Inc. | 468 | 217 |
Amounts attributable to L3Harris Technologies, Inc. common shareholders | ||
Income from continuing operations | 469 | 218 |
Discontinued operations, net of income taxes | $ (1) | $ (1) |
Basic | ||
Continuing operations (in dollars per share) | $ 2.27 | $ 1 |
Discontinued operations (in dollars per share) | (0.01) | 0 |
Basic (in dollars per share) | 2.26 | 1 |
Diluted | ||
Continuing operations (in dollars per share) | 2.25 | 0.99 |
Discontinued operations (in dollars per share) | 0 | 0 |
Diluted (in dollars per share) | $ 2.25 | $ 0.99 |
Basic weighted average common shares outstanding (in shares) | 206.7 | 217.3 |
Diluted weighted average common shares outstanding (in shares) | 208.5 | 219.3 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 466 | $ 194 |
Other comprehensive loss: | ||
Foreign currency translation loss, net of income taxes | (18) | (67) |
Net unrealized gain (loss) on hedging derivatives, net of income taxes | 5 | (73) |
Net unrecognized loss on postretirement obligations, net of income taxes | 0 | (1) |
Other comprehensive loss recognized during the period | (13) | (141) |
Less: reclassification adjustments for gains included in net income | (2) | (2) |
Other comprehensive loss, net of income taxes | (15) | (143) |
Total comprehensive income | 451 | 51 |
Comprehensive loss attributable to noncontrolling interests | 2 | 23 |
Total comprehensive income attributable to L3Harris Technologies, Inc. | $ 453 | $ 74 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions | Apr. 02, 2021 | Jan. 01, 2021 |
Current Assets | ||
Cash and cash equivalents | $ 976 | $ 1,276 |
Receivables | 1,096 | 1,344 |
Contract assets | 2,577 | 2,437 |
Inventories | 904 | 973 |
Income taxes receivable | 199 | 295 |
Prepaid expenses and other current assets | 372 | 307 |
Assets of disposal groups held for sale | 1,414 | 35 |
Total current assets | 7,538 | 6,667 |
Non-current Assets | ||
Property, plant and equipment | 2,136 | 2,102 |
Operating lease right-of-use assets | 782 | 766 |
Goodwill | 18,252 | 18,876 |
Other intangible assets | 7,265 | 7,908 |
Deferred income taxes | 118 | 119 |
Other non-current assets | 499 | 522 |
Total non-current assets | 29,052 | 30,293 |
Total assets | 36,590 | 36,960 |
Current Liabilities | ||
Short-term debt | 2 | 2 |
Accounts payable | 1,373 | 1,406 |
Contract liabilities | 1,189 | 1,198 |
Compensation and benefits | 328 | 496 |
Other accrued items | 1,103 | 1,066 |
Income taxes payable | 51 | 49 |
Current portion of long-term debt, net | 12 | 10 |
Liabilities of disposal groups held for sale | 173 | 13 |
Total current liabilities | 4,231 | 4,240 |
Non-current Liabilities | ||
Defined benefit plans | 1,811 | 1,906 |
Operating lease liabilities | 737 | 734 |
Long-term debt, net | 7,066 | 6,943 |
Deferred income taxes | 1,218 | 1,237 |
Other long-term liabilities | 1,045 | 1,059 |
Total non-current liabilities | 11,877 | 11,879 |
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 204,864,804 and 208,230,353 shares at April 2, 2021 and January 1, 2021, respectively | 205 | 208 |
Other capital | 18,487 | 19,008 |
Retained earnings | 2,529 | 2,347 |
Accumulated other comprehensive loss | (854) | (839) |
Total shareholders’ equity | 20,367 | 20,724 |
Noncontrolling interests | 115 | 117 |
Total equity | 20,482 | 20,841 |
Total liabilities and equity | $ 36,590 | $ 36,960 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares | Apr. 02, 2021 | Jan. 01, 2021 |
Shareholders’ Equity: | ||
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) | 204,864,804 | 208,230,353 |
Common shares, outstanding (in shares) | 204,864,804 | 208,230,353 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Operating Activities | ||
Net income | $ 466 | $ 194 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization of acquisition-related intangibles | 164 | 145 |
Depreciation and other amortization | 87 | 85 |
Share-based compensation | 33 | 16 |
Share-based matching contributions under defined contribution plans | 57 | 71 |
Qualified pension plan contributions | (2) | (2) |
Pension and other postretirement benefit plan income | (92) | (80) |
Impairment of goodwill and other assets | 62 | 324 |
Business divestiture-related losses | 15 | 3 |
Deferred income taxes | (22) | (35) |
(Increase) decrease in: | ||
Accounts receivable | 213 | (164) |
Contract assets | (272) | (110) |
Inventories | 61 | 40 |
Prepaid expenses and other current assets | (85) | (29) |
Increase (decrease) in: | ||
Accounts payable | 15 | 253 |
Contract liabilities | 9 | (47) |
Compensation and benefits | (161) | (126) |
Income taxes | 72 | 20 |
Other accrued items | 71 | 51 |
Other | (30) | (76) |
Net cash provided by operating activities | 661 | 533 |
Investing Activities | ||
Net additions of property, plant and equipment | (64) | (48) |
Other investing activities | 3 | (10) |
Net cash used in investing activities | (61) | (58) |
Financing Activities | ||
Net proceeds from borrowings | 1 | 245 |
Repayments of borrowings | (1) | (1) |
Proceeds from exercises of employee stock options | 10 | 33 |
Repurchases of common stock | (700) | (700) |
Cash dividends | (209) | (183) |
Other financing activities | (1) | (6) |
Net cash used in financing activities | (900) | (612) |
Effect of exchange rate changes on cash and cash equivalents | 0 | (24) |
Net decrease in cash and cash equivalents | (300) | (161) |
Cash and cash equivalents, beginning of year | 1,276 | 824 |
Cash and cash equivalents, end of quarter | $ 976 | $ 663 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Millions | Total | Common Stock | Other Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Non-controlling Interests |
Beginning balance at Jan. 03, 2020 | $ 22,744 | $ 218 | $ 20,694 | $ 2,183 | $ (508) | $ 157 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 194 | 217 | (23) | |||
Other comprehensive loss | (143) | (143) | ||||
Shares issued under stock incentive plans | 33 | 1 | 32 | |||
Shares issued under defined contribution plans | 71 | 71 | ||||
Share-based compensation expense | 16 | 16 | ||||
Repurchases and retirement of common stock | (700) | (3) | (631) | (66) | ||
Cash dividends | (183) | (183) | ||||
Other, including distributions to noncontrolling interests | (5) | (5) | ||||
Ending balance at Apr. 03, 2020 | 22,027 | 216 | 20,182 | 2,151 | (651) | 129 |
Beginning balance at Jan. 01, 2021 | 20,841 | 208 | 19,008 | 2,347 | (839) | 117 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 466 | 468 | (2) | |||
Other comprehensive loss | (15) | (15) | ||||
Shares issued under stock incentive plans | 10 | 10 | ||||
Shares issued under defined contribution plans | 57 | 57 | ||||
Share-based compensation expense | 33 | 33 | ||||
Repurchases and retirement of common stock | (700) | (3) | (620) | (77) | ||
Cash dividends | (209) | (209) | ||||
Other, including distributions to noncontrolling interests | (1) | (1) | ||||
Ending balance at Apr. 02, 2021 | $ 20,482 | $ 205 | $ 18,487 | $ 2,529 | $ (854) | $ 115 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Retained Earnings | ||
Cash dividends (in dollars per share) | $ 1.02 | $ 0.85 |
Significant Accounting Policies
Significant Accounting Policies and Recent Accounting Standards | 3 Months Ended |
Apr. 02, 2021 | |
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 L3Harris Technologies, Inc. and its consolidated subsidiaries. As used in these Notes to Condensed Consolidated Financial Statements (Unaudited) (these “Notes”), the terms “L3Harris,” “Company,” “we,” “our” and “us” refer to L3Harris Technologies, Inc. and its consolidated subsidiaries. Intracompany transactions and accounts have been eliminated in consolidation. The accompanying Condensed Consolidated Financial Statements (Unaudited) have been prepared by L3Harris, 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, cash flows and equity for the periods presented therein. The results for the quarter ended April 2, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period. The balance sheet at January 1, 2021 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 January 1, 2021 (our “Fiscal 2020 Form 10-K”). Amounts contained in this Report may not always add to totals due to rounding. L3Harris Merger As discussed in more detail in our Fiscal 2020 Form 10-K, Harris Corporation (“Harris”) and L3 Technologies, Inc. (“L3”) combined their respective businesses on June 29, 2019, in an all-stock merger ("L3Harris Merger") that resulted in our combined Company, L3Harris Technologies, Inc. L3Harris Merger-related expenses for the quarters ended April 2, 2021 and April 3, 2020 were as follows: Quarter Ended (In millions) April 2, 2021 April 3, 2020 Additional cost of sales related to the fair value step-up in inventory sold $ — $ 15 Integration costs, recognized as incurred 21 31 Total L3Harris Merger-related expenses $ 21 $ 46 Because the L3Harris Merger benefited the entire Company as opposed to any individual business segment, the above costs were not allocated to any business segment. All of the above costs were recorded in the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited), except for the additional cost of sales related to the fair value step-up in inventory sold, which is included in the “Cost of product sales and services” line item in our Condensed Consolidated Statement of Income (Unaudited). For additional information, see Note 5: “Business Combination” in the Notes to Consolidated Financial Statements in our Fiscal 2020 Form 10-K. Divestitures See Note B — Business Divestitures in these Notes for information regarding the divestitures of the following businesses announced by us in fiscal 2020 and 2021: • Airport security and automation business, completed on May 4, 2020; • Applied Kilovolts and Analytical Instrumentation business, completed on May 15, 2020; • EOTech business, completed on July 31, 2020; • VSE disposal group (as defined in Note B — Business Divestitures in these Notes), definitive agreement entered into on February 23, 2021; • Military training business, definitive agreement entered into on February 27, 2021; and • CPS business (as defined in Note B — Business Divestitures in these Notes), definitive agreement entered into on March 1, 2021. Supplemental Cash Flow Information Non-cash investing and financing activities during the quarter ended April 2, 2021 included a $120 million right-of-use asset we obtained in exchange for a corresponding finance lease liability. These non-cash investing and financing activities are excluded from the “Net additions of property, plant and equipment” and “Net proceeds from borrowings” line items in our Condensed Consolidated Statement of Cash Flows (Unaudited). There were no material non-cash investing or financing activities during the quarter ended April 3, 2020. Finance lease liabilities are included in the “Current portion of long-term debt, net” and “Long-term debt, net” line items in our Condensed Consolidated Balance Sheet (Unaudited). Reclassifications The classification of certain prior-year amounts have been adjusted in our Condensed Consolidated Financial Statements (Unaudited) to conform to current-year classifications. Reclassifications include finance lease liabilities that were previously included in the “Other accrued items” and “Other long-term liabilities” line items and are now reflected in the “Current portion of long-term debt, net” and “Long-term debt, net” line items in our Condensed Consolidated Balance Sheet (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. Significant Accounting Policies Update |
Business Divestitures
Business Divestitures | 3 Months Ended |
Apr. 02, 2021 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Business Divestitures | Note B — Business Divestitures CPS business. On March 1, 2021, we entered into a definitive agreement to sell our Combat Propulsion Systems and related businesses (“CPS business”) to RENK AG for $398 million, subject to customary purchase price adjustments and closing conditions as set forth in the definitive agreement. The CPS business, which is reported as part of our Aviation Systems segment, engineers, designs and manufactures engines, transmissions, suspensions and turret drive systems for tracked and wheeled combat vehicle systems. Income before income taxes of our CPS business was $26 million and $16 million for the quarters ended April 2, 2021 and April 3, 2020, respectively. We expect to complete the sale of the CPS business in the second half of fiscal 2021. Because the pending divestiture of the CPS business would represent the disposal of a portion of a reporting unit within our Aviation Systems segment, we assigned $174 million of goodwill to the CPS business on a relative fair value basis during the quarter ended April 2, 2021 when the held for sale criteria were met. In connection with the preparation of our financial statements for the quarter ended April 2, 2021, we recognized a $69 million pre-tax loss to reduce the net assets of the CPS business disposal group to fair value, which included a non-cash goodwill impairment charge of $62 million (based on the excess of the carrying value of the business over estimated net cash proceeds, after estimated purchase price adjustments) and a $7 million non-cash remeasurement loss. These charges are included in the “Impairment of goodwill and other assets” and “Business divestiture-related losses” line items in our Condensed Consolidated Statement of Income (Unaudited) for the quarter ended April 2, 2021. The carrying amounts of the major classes of assets and liabilities of the CPS business classified as held for sale at April 2, 2021 were as follows: (In millions) April 2, 2021 Receivables $ 12 Contract assets 49 Inventories 4 Other current assets 1 Property, plant and equipment 16 Goodwill 112 Other intangible assets 189 Other non-current assets 3 Assets of disposal group held for sale $ 386 Accounts payable $ 19 Contract liabilities 5 Other accrued items 3 Other non-current liabilities 3 Deferred taxes 5 Liabilities of disposal group held for sale $ 35 Military training business. On February 27, 2021, we entered into a definitive agreement to sell our military training business to CAE USA Inc., a subsidiary of CAE Inc., for $1,050 million, subject to customary purchase price adjustments and closing conditions as set forth in the definitive agreement. The military training business, which is reported as part of our Aviation Systems segment, provides flight simulation solutions and training services to the U.S. Department of Defense (“DoD”) and foreign military agencies. Income before income taxes of our military training business was $16 million and $24 million for the quarters ended April 2, 2021 and April 3, 2020, respectively. We expect to complete the sale of the military training business in the second half of fiscal 2021. In connection with the preparation of our financial statements for the quarter ended April 2, 2021, we tested goodwill assigned to the military training business disposal group for impairment and concluded that no goodwill impairment existed at the time the held for sale criteria were met. The carrying amounts of the major classes of assets and liabilities of the military training business classified as held for sale at April 2, 2021 were as follows: (In millions) April 2, 2021 Receivables $ 21 Contract assets 80 Inventories 4 Other current assets 29 Property, plant and equipment 73 Goodwill 426 Other intangible assets 297 Deferred income taxes 9 Other non-current assets 59 Assets of disposal group held for sale $ 998 Accounts payable $ 29 Contract liabilities 13 Other accrued items 38 Other non-current liabilities 47 Liabilities of disposal group held for sale $ 127 VSE disposal group. On February 23, 2021, we entered into a definitive agreement to sell certain portions of our Voice Switch Enterprise business (“VSE disposal group”) for $20 million, subject to customary purchase price adjustments and closing conditions as set forth in the definitive agreement. The VSE disposal group, which is reported as part of our Aviation Systems segment, provides voice over internet protocol systems for air traffic management communications. Income before income taxes of the VSE disposal group was not material for the quarters ended April 2, 2021 or April 3, 2020. We expect to complete the sale of the VSE disposal group in the second half of fiscal 2021. Because the potential divestiture of the VSE disposal group would represent the disposal of a portion of a reporting unit within our Aviation Systems segment, we assigned $14 million of goodwill to the VSE disposal group on a relative fair value basis during the quarter ended July 3, 2020 when the held for sale criteria were met. In connection with the preparation of our financial statements for fiscal 2020, we recognized a $32 million pre-tax loss to reduce the net assets of the VSE disposal group to fair value, which included a non-cash goodwill impairment charge of $14 million (based on the excess of the carrying value of the business over estimated net cash proceeds, after estimated purchase price adjustments) and an $18 million non-cash remeasurement loss. During the quarter ended April 2, 2021, we recognized an additional $8 million loss to reduce the net assets of the VSE disposal group to fair value, which is included in the “Business divestiture-related losses” line items in our Condensed Consolidated Statement of Income (Unaudited) for the quarter ended April 2, 2021. The carrying amounts of assets and liabilities of the VSE disposal group classified as held for sale in our Condensed Consolidated Balance Sheet (Unaudited) were $30 million and $11 million, respectively, at April 2, 2021 and $35 million and $13 million, respectively, at January 1, 2021. EOTech business. On July 31, 2020, we completed the divestiture of our EOTech business for $42 million (net cash proceeds of $40 million after selling costs and estimated purchase price adjustments), subject to final customary purchase price adjustments as set forth in the definitive sale agreement. The EOTech business manufactures holographic sighting systems, magnified field optics and accessories for military, law enforcement and commercial markets around the world. The operating results of the EOTech business during the quarter ended April 3, 2020 were reported as part of our Communication Systems segment. Income before income taxes of the EOTech business was not material for the quarter ended April 3, 2020. Applied Kilovolts and Analytical Instrumentation business. On May 15, 2020, we completed the divestiture of our Applied Kilovolts and Analytical Instrumentation business for net cash proceeds of $12 million, after selling costs and purchase price adjustments as set forth in the definitive sale agreement. The operating results of the Applied Kilovolts and Analytical Instrumentation business during the quarter ended April 3, 2020 were reported as part of our Space and Airborne Systems segment. Income before income taxes of the Applied Kilovolts and Analytical Instrumentation business was not material for the quarter ended April 3, 2020. In connection with the preparation of our financial statements for the quarter ended April 3, 2020, we tested goodwill assigned to the Applied Kilovolts and Analytical Instrumentation business disposal group and goodwill assigned to the retained businesses of the reporting unit for impairment and concluded that goodwill related to the disposal group was impaired. As a result, we recorded a non-cash impairment charge of $5 million, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the quarter ended April 3, 2020. Airport security and automation business. On May 4, 2020, we completed the divestiture of the airport security and automation business to Leidos, Inc. for $1 billion (net cash proceeds of $987 million after selling costs and purchase price adjustments as set forth in the definitive sale agreement). The airport security and automation business provides solutions used by the aviation and transportation industries, regulatory and customs authorities, government and law enforcement agencies and commercial and other high-security facilities. The operating results of the airport security and automation business during the quarter ended April 3, 2020 were reported as part of our Aviation Systems segment. Income before income taxes of the airport security and automation business was $12 million for the quarter ended April 3, 2020. For purposes of allocating goodwill to the disposal groups above, we determined the fair value of each disposal group based on the respective negotiated selling price (or estimated net cash proceeds, in the case of no negotiated selling price), and the fair value of the retained businesses of the respective reporting unit based on a combination of market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions, and projected discounted cash flows. These fair value determinations are categorized as Level 3 in the fair value hierarchy due to their use of internal projections and unobservable measurement inputs. See Note 1: “Significant Accounting Policies” |
Stock Options and Other Share-B
Stock Options and Other Share-Based Compensation | 3 Months Ended |
Apr. 02, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Stock Options and Other Share-Based Compensation | Note C — Stock Options and Other Share-Based Compensation As of April 2, 2021, we had options or other share-based compensation outstanding under two Harris shareholder-approved stock incentive plans (“SIPs”), the Harris Corporation 2005 Equity Incentive Plan (As Amended and Restated Effective August 27, 2010) and the L3Harris Technologies, Inc. 2015 Equity Incentive Plan (As Amended and Restated Effective as of August 28, 2020) (the “2015 EIP”), as well as under employee stock incentive plans of L3 assumed by L3Harris (collectively, “L3Harris SIPs”). We believe that share-based awards more closely align the interests of participants with those of shareholders. The compensation cost related to our share-based awards that was charged against income was $33 million and $17 million for the quarters ended April 2, 2021 and April 3, 2020, respectively. The aggregate number of shares of our common stock that we issued under the terms of L3Harris SIPs, net of shares withheld for tax purposes, was 0.1 million and 0.5 million for the quarters ended April 2, 2021 and April 3, 2020, respectively. Awards granted to participants under L3Harris SIPs during the quarter ended April 2, 2021 consisted of 0.5 million stock options, 0.2 million performance stock units and 0.1 million restricted stock units. The fair value as of the grant date of each stock option award was determined using the Black-Scholes-Merton option-pricing model and the following assumptions: expected dividend yield of 1.99 percent; expected volatility of 31.71 percent; risk-free interest rates averaging 0.75 percent; and expected term of 5.05 years. The fair value as of the grant date of each restricted stock 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 stock 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. |
Restructuring and Other Exit Co
Restructuring and Other Exit Costs | 3 Months Ended |
Apr. 02, 2021 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and Other Exit Costs | Note D — Restructuring and Other Exit Costs We record charges for restructuring and other exit activities related to sales or terminations of product lines, closures or relocations of business activities, changes in management structure and fundamental reorganizations that affect the nature and focus of operations. Such charges include termination benefits, contract termination costs and costs to consolidate facilities or relocate employees. We record these charges at their fair value when incurred. In cases where employees are required to render service until they are terminated in order to receive the termination benefits and will be retained beyond the minimum retention period, we record the expense ratably over the future service period. These charges are included as a component of the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited). L3Harris Merger-Related Restructuring Costs. We recorded restructuring charges in connection with the L3Harris Merger of $10 million during fiscal 2020 and $117 million during the two quarters ended January 3, 2020. At April 2, 2021, we had liabilities of $17 million associated with these restructuring actions. We expect that the majority of the remaining liabilities as of April 2, 2021 will be paid in the next twelve months. COVID-Related Restructuring Costs. During fiscal 2020, we recorded $15 million of restructuring charges for workforce reductions, including severance and other employee-related exit costs, within our Aviation Systems segment associated with the COVID-related downturn in our Commercial Aviation Solutions sector and its impact on global air traffic and customer operations, including $3 million recorded in the quarter ended April 3, 2020. At April 2, 2021, we had liabilities of $7 million associated with these restructuring actions. We expect that the majority of the remaining liabilities as of April 2, 2021 will be paid in the next twelve months. Our liabilities for restructuring and other exit costs are included in the “Compensation and benefits,” “Other accrued items” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited). Changes to our liabilities for restructuring and other exit costs during the quarter ended April 2, 2021 were as follows: (In millions) Balance at January 1, 2021 $ 34 Payments (10) Balance at April 2, 2021 $ 24 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) ("AOCI") | 3 Months Ended |
Apr. 02, 2021 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income (Loss) ("AOCI") | Note E — Accumulated Other Comprehensive Income (Loss) ("AOCI") The components of AOCI are summarized below: (In millions) Foreign currency translation Net unrealized losses on hedging derivatives Unrecognized postretirement obligations Total AOCI Balance at January 1, 2021 $ (58) $ (80) $ (701) $ (839) Other comprehensive (loss) income, before income taxes (18) 6 — (12) Income taxes — (1) — (1) Other comprehensive (loss) income before reclassifications to earnings, net of income taxes (18) 5 — (13) Losses (gains) reclassified to earnings (1) — (4) 2 (2) Income taxes — 1 (1) — Losses (gains) reclassified to earnings, net of income taxes — (3) 1 (2) Other comprehensive (loss) income, net of income taxes (18) 2 1 (15) Balance at April 2, 2021 $ (76) $ (78) $ (700) $ (854) Balance at January 3, 2020 $ (81) $ (55) $ (372) $ (508) Other comprehensive loss, before income taxes (67) (98) (1) (166) Income taxes — 25 — 25 Other comprehensive loss before reclassifications to earnings, net of income taxes (67) (73) (1) (141) Losses (gains) reclassified to earnings (1) — 3 (5) (2) Income taxes — (1) 1 — Losses (gains) reclassified to earnings, net of income taxes — 2 (4) (2) Other comprehensive loss, net of income taxes (67) (71) (5) (143) Balance at April 3, 2020 $ (148) $ (126) $ (377) $ (651) _______________ (1) Losses (gains) reclassified to earnings are included in the “Revenue from product sales and services,” “Business divestiture-related losses,” “Interest expense” and “Non-operating income” line items in our Condensed Consolidated Statement of Income (Unaudited). |
Receivables
Receivables | 3 Months Ended |
Apr. 02, 2021 | |
Receivables [Abstract] | |
Receivables | Note F — Receivables Receivables are summarized below: (In millions) April 2, 2021 January 1, 2021 Accounts receivable $ 1,125 $ 1,369 Less allowance for credit losses (29) (25) Receivables, net $ 1,096 $ 1,344 We have two receivables sale agreements (“RSAs”) with third-party financial institutions that permit us to sell, on a non-recourse basis, up to $100 million each of outstanding receivables at any given time. From time to time, we have sold certain |
Contract Assets and Contract Li
Contract Assets and Contract Liabilities | 3 Months Ended |
Apr. 02, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Contract Assets and Contract Liabilities | Note G — 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. Contract assets and liabilities in the quarter ended April 2, 2021 were impacted primarily by reclassifications to assets and liabilities of disposal groups held for sale, accelerated progress payments due to the U.S. Government's increase in the progress payment rate from 80 percent to 90 percent and the timing of contractual billing milestones. See Note B — Business Divestitures in these Notes for additional information regarding assets and liabilities held for sale. Contract assets and contract liabilities are summarized below: (In millions) April 2, 2021 January 1, 2021 Contract assets $ 2,577 $ 2,437 Contract liabilities, current (1,189) (1,198) Contract liabilities, non-current (1) (84) (73) Net contract assets $ 1,304 $ 1,166 _______________ (1) The non-current portion of contract liabilities 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: (In millions) April 2, 2021 January 1, 2021 Unbilled contract receivables, gross $ 4,441 $ 4,268 Progress payments and advances (1,864) (1,831) Contract assets $ 2,577 $ 2,437 Impairment losses related to our contract assets were not material for the quarters ended April 2, 2021 or April 3, 2020. Contract liabilities recognized as revenue that were outstanding at the end of the prior fiscal year were $508 million and $484 million for the quarters ended April 2, 2021 and April 3, 2020, respectively. Note S — 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 April 2, 2021, our ending backlog was $21.4 billion. We expect to recognize approximately 75 percent of the revenue associated with this backlog by the end of 2022 and approximately 85 percent by the end of 2023, with the remainder to be recognized thereafter. At January 1, 2021, our ending backlog was $21.7 billion. |
Inventories
Inventories | 3 Months Ended |
Apr. 02, 2021 | |
Inventory Disclosure [Abstract] | |
Inventories | Note H — Inventories Inventories are summarized below: (In millions) April 2, 2021 January 1, 2021 Finished products $ 139 $ 136 Work in process 311 367 Raw materials and supplies 454 470 Total inventories $ 904 $ 973 |
Property, Plant and Equipment
Property, Plant and Equipment | 3 Months Ended |
Apr. 02, 2021 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Note I — Property, Plant and Equipment Property, plant and equipment are summarized below: (In millions) April 2, 2021 January 1, 2021 Land $ 82 $ 90 Software capitalized for internal use 462 417 Buildings 1,202 1,097 Machinery and equipment 2,221 2,265 3,967 3,869 Less accumulated depreciation and amortization (1,831) (1,767) Total property, plant and equipment $ 2,136 $ 2,102 Depreciation and amortization expense related to property, plant and equipment was $84 million and $76 million for the quarters ended April 2, 2021 and April 3, 2020, respectively. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 3 Months Ended |
Apr. 02, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets | Note J — Goodwill and Other Intangible Assets Goodwill The assignment of goodwill by business segment, and changes in the carrying amount of goodwill by business segment, were as follows: (In millions) Integrated Mission Systems Space and Airborne Systems Communication Systems Aviation Systems Total Balance at January 1, 2021 $ 6,499 $ 5,232 $ 4,153 $ 2,992 $ 18,876 Goodwill decrease from divestitures (1) — — — (538) (538) Impairment of goodwill — — — (62) (62) Currency translation adjustments (5) (14) — (5) (24) Balance at April 2, 2021 $ 6,494 $ 5,218 $ 4,153 $ 2,387 $ 18,252 Balance at January 3, 2020 $ 5,768 $ 5,131 $ 4,243 $ 4,859 $ 20,001 Goodwill decrease from divestitures (1) — (2) (9) (588) (599) Impairment of goodwill — (5) — (296) (301) Currency translation adjustments (2) (9) (3) (10) (24) Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed) 22 55 38 73 188 Balance at April 3, 2020 $ 5,788 $ 5,170 $ 4,269 $ 4,038 $ 19,265 _______________ (1) During the quarters ended April 2, 2021 and April 3, 2020, we assigned $538 million and $599 million, respectively, of goodwill associated with pending divestitures to “Assets of disposal groups held for sale” in our Condensed Consolidated Balance Sheet (Unaudited). See Note B — Business Divestitures in these Notes for additional information. CPS Business Impairment. During the quarter ended April 2, 2021, we determined the criteria to be classified as held for sale were met with respect to the CPS business within our Aviation Systems segment and assigned $174 million of goodwill to the disposal group on a relative fair value basis. In connection with the preparation of our financial statements for the quarter ended April 2, 2021, we concluded that goodwill related to the CPS business was impaired and we recorded a non-cash impairment charge of $62 million, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited). See Note B — Business Divestitures in these Notes for additional information. Commercial Aviation Solutions Impairment. Indications of potential impairment of goodwill related to our Commercial Aviation Solutions reporting unit (which is part of our Aviation Systems segment) were present at April 3, 2020 due to the COVID pandemic and its impact on global air traffic and customer operations, which resulted in a decrease in the fiscal 2020 outlook for the reporting unit, which we considered to be a triggering event requiring an interim impairment test. Consequently, in connection with the preparation of our financial statements for the quarter ended April 3, 2020, we performed a quantitative impairment test. To test for potential impairment of goodwill related to our Commercial Aviation Solutions reporting unit, we prepared an estimate of the fair value of the reporting unit based on a combination of market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions, and projected discounted cash flows. As a result of this impairment test, we concluded that goodwill related to our Commercial Aviation Solutions reporting unit was impaired as of April 3, 2020 and recorded a non-cash impairment charge of $296 million (including $28 million attributable to noncontrolling interests) in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the quarter ended April 3, 2020. The goodwill impairment charge was primarily not deductible for tax purposes. Identifiable Intangible Assets The most significant identifiable intangible asset that is separately recognized for our business combinations is customer relationships. Our customer relationships are established through written customer contracts (revenue arrangements). The fair value for customer relationships is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows arising from the follow-on sales expected from the customer relationships over the estimated lives, including the probability of expected future contract renewals and sales, less a contributory asset charge, all of which is discounted to present value. We assess the recoverability of the carrying value of our finite-lived identifiable intangible assets whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. We assess the recoverability of the carrying value of indefinite-lived identifiable intangible assets annually, or under certain circumstances more frequently, such as when events and circumstances indicate there may be an impairment. Identifiable intangible assets are summarized below: April 2, 2021 January 1, 2021 (In millions) Gross Accumulated Amortization Net Carrying Amount (1) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 6,320 $ 1,323 $ 4,997 $ 6,863 $ 1,257 $ 5,606 Developed technologies 634 273 361 653 261 392 Contract backlog 16 14 2 19 17 2 Trade names — divisions 130 49 81 129 45 84 Other 3 3 — 3 3 — Total identifiable intangible assets subject to amortization 7,103 1,662 5,441 7,667 1,583 6,084 In-process research and development 21 — 21 21 — 21 Trade names — corporate 1,803 — 1,803 1,803 — 1,803 Total identifiable intangible assets $ 8,927 $ 1,662 $ 7,265 $ 9,491 $ 1,583 $ 7,908 _______________ (1) During the quarter ended April 2, 2021, we reclassified $486 million of intangible assets associated with pending divestitures to “Assets of disposal groups held for sale” in our Consolidated Condensed Balance Sheet (Unaudited). See Note B — Business Divestitures in these Notes for additional information regarding divestitures. Amortization expense related to identifiable intangible assets, which primarily relates to the L3Harris Merger, was $164 million and $158 million for the quarters ended April 2, 2021 and April 3, 2020, respectively. Future estimated amortization expense for identifiable intangible assets subject to amortization is as follows: (In millions) Year 1 $ 628 Year 2 625 Year 3 612 Year 4 570 Year 5 521 Thereafter 2,485 Total $ 5,441 |
Accrued Warranties
Accrued Warranties | 3 Months Ended |
Apr. 02, 2021 | |
Product Warranties Disclosures [Abstract] | |
Accrued Warranties | Note K — Accrued Warranties Our liability for standard product warranties is included as a component of the “Other accrued items” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited). Changes in our liability for standard product warranties during the quarter ended April 2, 2021 were as follows: (In millions) Balance at January 1, 2021 $ 133 Accruals for product warranties issued during the period 9 Settlements made during the period (12) Other, including foreign currency translation adjustments (3) Balance at April 2, 2021 $ 127 |
Postretirement Benefit Plans
Postretirement Benefit Plans | 3 Months Ended |
Apr. 02, 2021 | |
Retirement Benefits [Abstract] | |
Postretirement Benefit Plans | Note L — 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 April 2, 2021 Quarter Ended April 3, 2020 (In millions) Pension Other Benefits Pension Other Benefits Net periodic benefit income Service cost $ 18 $ 1 $ 16 $ — Interest cost 46 1 69 2 Expected return on plan assets (155) (5) (158) (5) Amortization of net actuarial loss 9 — 2 — Amortization of prior service credit (7) — (7) — Contractual termination benefits (1) — — 1 — Total net periodic benefit income $ (89) $ (3) $ (77) $ (3) _______________ (1) Contractual termination benefits related to facility rationalization as part of restructuring activities in connection with the L3Harris Merger integration. See Note D — Restructuring and Other Exit Costs in these Notes for additional information regarding restructuring activities. 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 benefit income are included in the “Non-operating income” line item in our Condensed Consolidated Statement of Income (Unaudited), except for contractual termination benefits which are included in restructuring in the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited). |
Income From Continuing Operatio
Income From Continuing Operations Per Share | 3 Months Ended |
Apr. 02, 2021 | |
Earnings Per Share [Abstract] | |
Income From Continuing Operations Per Share | Note M — Income From Continuing Operations Per Share The computations of income from continuing operations per common share attributable to L3Harris common shareholders are as follows: Quarter Ended (In millions, except per share amounts) April 2, 2021 April 3, 2020 Income from continuing operations (A) $ 469 $ 218 Basic weighted average common shares outstanding (B) 206.7 217.3 Impact of dilutive share-based awards 1.8 2.0 Diluted weighted average common shares outstanding (C) 208.5 219.3 Income from continuing operations per basic common share (A)/(B) $ 2.27 $ 1.00 Income from continuing operations per diluted common share (A)/(C) $ 2.25 $ 0.99 Potential dilutive common shares primarily consist of employee stock options, restricted stock units and performance stock units. Income from continuing operations per diluted common share excludes the anti-dilutive impact of 1.6 million and 1.0 million weighted average share-based awards outstanding for the quarters ended April 2, 2021 and April 3, 2020, respectively. |
Non-Operating Income
Non-Operating Income | 3 Months Ended |
Apr. 02, 2021 | |
Nonoperating Income (Expense) [Abstract] | |
Non-Operating Income | Note N — Non-Operating Income The components of non-operating income were as follows: Quarter Ended (In millions) April 2, 2021 April 3, 2020 Pension adjustment (1) $ 111 $ 97 Other 6 (2) Total non-operating income $ 117 $ 95 _______________ |
Income Taxes
Income Taxes | 3 Months Ended |
Apr. 02, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note O — Income TaxesOur effective tax rate (income taxes as a percentage of income from continuing operations before income taxes) was 11.4 percent for the quarter ended April 2, 2021 compared with 11.8 percent for the quarter ended April 3, 2020. For the quarter ended April 2, 2021, our effective tax rate benefited from the favorable impact of research and development (“R&D”) credits, the resolution of specific audit uncertainties and the recognition of deferred tax assets on the outside basis of entities held-for-sale. For the quarter ended April 3, 2020, our effective tax rate benefited from the favorable impact of excess tax benefits related to equity-based compensation, R&D credits and the favorable impact of audit settlements, partially offset by a valuation allowance increase on international credits and the unfavorable impact of non-deductible goodwill impairment charges. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Apr. 02, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note P — Fair Value Measurements Fair value is defined as the price that would be received for an asset or the price that would be paid to transfer a liability in the principal market or most advantageous market 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 April 2, 2021 and January 1, 2021: April 2, 2021 January 1, 2021 (In millions) Total Level 1 Level 2 Total Level 1 Level 2 Assets Deferred compensation plan assets: (1) Equity and fixed-income securities $ 69 $ 69 $ — $ 67 $ 67 $ — Investments measured at NAV: Corporate-owned life insurance 32 31 Total fair value of deferred compensation plan assets $ 101 $ 69 $ — $ 98 $ 67 $ — Derivatives (foreign currency forward contracts) $ 21 $ — $ 21 $ 24 $ — $ 24 Liabilities Deferred compensation plan liabilities: (2) Equity securities and mutual funds $ 4 $ 4 $ — $ 4 $ 4 $ — Investments measured at NAV: Common/collective trusts and guaranteed investment contracts 124 116 Total fair value of deferred compensation plan liabilities $ 128 $ 4 $ — $ 120 $ 4 $ — Derivatives (foreign currency forward contracts) $ 2 $ — $ 2 $ 4 $ — $ 4 _______________ (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): April 2, 2021 January 1, 2021 (In millions) Carrying Fair Carrying Fair Long-term debt (including current portion) (1) $ 7,078 $ 7,736 $ 6,953 $ 7,986 _______________ (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. See Note B — Business Divestitures and Note J — Goodwill and Other Intangible Assets |
Derivative Instruments and Hedg
Derivative Instruments and Hedging Activities | 3 Months Ended |
Apr. 02, 2021 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments and Hedging Activities | Note Q — 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. Exchange-Rate Risk — Cash Flow Hedges. To manage our exposure to currency risk and market fluctuation risk associated with anticipated cash flows that are probable of occurring in the future, we implement cash flow hedges. More specifically, we use foreign currency forward contracts and options to hedge off-balance sheet future foreign currency commitments, including purchase commitments to suppliers, future committed sales to customers and inter-segment transactions. These derivatives are used to hedge currency exposures from cash flows anticipated across our business segments. We also hedge U.S. Dollar payments to suppliers to maintain our anticipated profit margins in our international operations. These derivatives have only nominal intrinsic value at the time of purchase and have a high degree of correlation to the anticipated cash flows they are designated to hedge. Hedge effectiveness is determined by the correlation of the anticipated cash flows from the hedging instruments and the anticipated cash flows from the future foreign currency commitments through the maturity dates of the derivatives used to hedge these cash flows. These financial instruments are marked-to-market using forward prices and fair value quotes with the offset to other comprehensive income (loss). Gains and losses in AOCI are reclassified to earnings when the related hedged item is recognized in earnings. The cash flow impact of our derivatives is included in the same category in our Condensed Consolidated Statement of Cash Flows (Unaudited) as the cash flows of the related hedged items. Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent exposure to foreign currency losses. At April 2, 2021, we had open foreign currency forward contracts with an aggregate notional amount of $406 million, hedging certain forecasted transactions denominated in U.S. Dollars, Canadian Dollars, British Pounds, Euros, New Zealand Dollars and Australian Dollars. At January 1, 2021, we had open foreign currency forward contracts with an aggregate notional amount of $488 million, hedging certain forecasted transactions denominated in U.S. Dollars, Canadian Dollars, British Pounds, Euros, Australian Dollars and New Zealand Dollars. At April 2, 2021, our foreign currency forward contracts had maturities through 2025. The table below presents the fair values of our derivatives designated as foreign currency hedging instruments in our Condensed Consolidated Balance Sheet (Unaudited) at April 2, 2021 and January 1, 2021. (In millions) April 2, 2021 January 1, 2021 Derivatives designated as hedging instruments: Foreign currency forward contracts (1) Other current assets $ 18 $ 21 Other non-current assets 3 3 Other accrued items 2 4 _______________ (1) See Note P — Fair Value Measurements in these Notes for a description of the fair value hierarchy related to our foreign currency forward contracts. Net unrealized gains or losses recognized in other comprehensive loss were not material for the quarter ended April 2, 2021. During the quarter ended April 3, 2020, we recognized a net unrealized loss of $16 million before income taxes in other comprehensive loss from foreign currency derivatives designated as cash flow hedges. During the quarters ended April 2, 2021 and April 3, 2020, the net gain or loss reclassified from AOCI into earnings from foreign currency derivatives designated as cash flow hedges was not material. At April 2, 2021, the estimated amount of existing net gains to be reclassified into earnings within the next twelve months was $18 million. Gains and losses from foreign currency derivatives designated as cash flow hedges are included in the line item in our Condensed Consolidated Statement of Income (Unaudited) associated with the hedged transaction, with the exception of any losses resulting from discontinued cash flow hedges, which are included in the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited). |
Changes in Estimates
Changes in Estimates | 3 Months Ended |
Apr. 02, 2021 | |
Change in Accounting Estimate [Abstract] | |
Changes in Estimates | Note R — 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 our expectation for performance on the contract. These variable amounts generally are awarded upon achievement of certain negotiated performance metrics, program milestones or cost targets and can be based upon customer discretion. We include such estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. 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 had the following impact to earnings for the periods presented: Quarter Ended (In millions, except per share amounts) April 2, 2021 April 3, 2020 Net EAC adjustments, before income taxes $ 82 $ 103 Net EAC adjustments, net of income taxes $ 62 $ 78 Net EAC adjustments, net of income taxes, per diluted common share $ 0.30 $ 0.35 Revenue recognized from performance obligations satisfied in prior periods was $108 million and $136 million for the quarters ended April 2, 2021 and April 3, 2020, respectively. |
Backlog
Backlog | 3 Months Ended |
Apr. 02, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Backlog | Note G — 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. Contract assets and liabilities in the quarter ended April 2, 2021 were impacted primarily by reclassifications to assets and liabilities of disposal groups held for sale, accelerated progress payments due to the U.S. Government's increase in the progress payment rate from 80 percent to 90 percent and the timing of contractual billing milestones. See Note B — Business Divestitures in these Notes for additional information regarding assets and liabilities held for sale. Contract assets and contract liabilities are summarized below: (In millions) April 2, 2021 January 1, 2021 Contract assets $ 2,577 $ 2,437 Contract liabilities, current (1,189) (1,198) Contract liabilities, non-current (1) (84) (73) Net contract assets $ 1,304 $ 1,166 _______________ (1) The non-current portion of contract liabilities 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: (In millions) April 2, 2021 January 1, 2021 Unbilled contract receivables, gross $ 4,441 $ 4,268 Progress payments and advances (1,864) (1,831) Contract assets $ 2,577 $ 2,437 Impairment losses related to our contract assets were not material for the quarters ended April 2, 2021 or April 3, 2020. Contract liabilities recognized as revenue that were outstanding at the end of the prior fiscal year were $508 million and $484 million for the quarters ended April 2, 2021 and April 3, 2020, respectively. Note S — 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 April 2, 2021, our ending backlog was $21.4 billion. We expect to recognize approximately 75 percent of the revenue associated with this backlog by the end of 2022 and approximately 85 percent by the end of 2023, with the remainder to be recognized thereafter. At January 1, 2021, our ending backlog was $21.7 billion. |
Business Segment Information
Business Segment Information | 3 Months Ended |
Apr. 02, 2021 | |
Segment Reporting [Abstract] | |
Business Segment Information | Note T — 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 four operating segments, which are also our reportable segments and are referred to as our business segments: • Integrated Mission Systems, including multi-mission intelligence, surveillance and reconnaissance (“ISR”) and communication systems; integrated electrical and electronic systems for maritime platforms; and advanced electro-optical and infrared solutions; • Space and Airborne Systems, including space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; avionics; and electronic warfare; • Communication Systems, including tactical communications; broadband communications; integrated vision solutions; public safety and global communications solutions; and • Aviation Systems, including defense aviation; commercial aviation products; commercial and military pilot training; and mission networks for air traffic management. As described in more detail in Note B — Business Divestitures and elsewhere in these Notes, during fiscal 2020 and 2021, we announced the divestitures of the following businesses: • Airport security and automation business, completed on May 4, 2020, the results of which were reported as part of our Aviation Systems segment through the date of divestiture; • Applied Kilovolts and Analytical Instrumentation business, completed on May 15, 2020, the results of which were reported as part of our Space and Airborne Systems segment through the date of divestiture; • EOTech business, completed on July 31, 2020, the results of which were reported as part of our Communication Systems segment through the date of divestiture; • VSE disposal group, definitive agreement entered into on February 23, 2021, expected to be completed in the second half of fiscal 2021, the results of which are reported as part of our Aviation Systems segment; • Military training business, definitive agreement entered into on February 27, 2021, expected to be completed in the second half of 2021, the results of which are reported as part of our Aviation Systems segment; and • CPS business, definitive agreement entered into on March 1, 2021, expected to be completed in the second half of 2021, the results of which are reported as part of our Aviation Systems segment. The accounting policies of our business segments are the same as those described in Note 1: “Significant Accounting Policies” in the Notes to Consolidated Financial Statements in our Fiscal 2020 Form 10-K. We evaluate each business segment’s performance based on its 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. Corporate expenses are primarily allocated to our business segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. The “Unallocated corporate expenses” line item in the table below represents the portion of corporate expenses not allocated to our business segments and 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). The non-service components of net periodic pension and postretirement benefit costs include interest cost, expected return on plan assets, amortization of net actuarial gain or loss, and effect of curtailments or settlements. Segment revenue, segment operating income (loss) and a reconciliation of segment operating income to total income from continuing operations before income taxes are as follows: Quarter Ended (In millions) April 2, 2021 April 3, 2020 Revenue Integrated Mission Systems $ 1,451 $ 1,370 Space and Airborne Systems 1,236 1,192 Communication Systems 1,112 1,094 Aviation Systems 814 1,011 Corporate eliminations (46) (41) Total revenue $ 4,567 $ 4,626 Income From Continuing Operations Before Income Taxes Segment Operating Income (Loss): Integrated Mission Systems $ 240 $ 201 Space and Airborne Systems 240 221 Communication Systems 281 250 Aviation Systems 128 (177) Unallocated corporate expenses (1) (40) (25) L3Harris Merger-related integration and restructuring expenses (21) (31) Amortization of acquisition-related intangibles (2) (164) (145) Business divestiture-related losses (15) (3) Impairment of goodwill and other assets (62) (5) Pension adjustment (111) (97) Non-operating income 117 95 Net interest expense (66) (63) Total income from continuing operations before income taxes $ 527 $ 221 _______________ (1) For the quarter ended April 2, 2021, includes $7 million of divestiture-related expenses and a $15 million accrual for a value added tax obligation. For the quarter ended April 3, 2020, includes $15 million of additional cost of sales related to the fair value step-up in inventory sold. (2) For the quarters ended April 2, 2021 and April 3, 2020, respectively, includes $140 million and $120 million of amortization of identifiable intangible assets acquired as a result of the L3Harris Merger and $24 million and $25 million of amortization of identifiable intangible assets acquired as a result of our acquisition of Exelis Inc. Because the L3Harris Merger and the acquisition of Exelis Inc. benefited the entire Company as opposed to any individual segment, the amortization of identifiable intangible assets acquired was not allocated to any segment. Disaggregation of Revenue We disaggregate revenue for all four business segments by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Integrated Mission Systems: Integrated Mission 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 revenue recognition method. Quarter Ended (In millions) April 2, 2021 April 3, 2020 Revenue By Customer Relationship Prime contractor $ 1,006 $ 949 Subcontractor 445 421 $ 1,451 $ 1,370 Revenue By Contract Type Fixed-price (1) $ 1,093 $ 1,025 Cost-reimbursable 358 345 $ 1,451 $ 1,370 Revenue By Geographical Region United States $ 1,033 $ 1,105 International 418 265 $ 1,451 $ 1,370 _______________ (1) Includes revenue derived from time-and-materials contracts. Space and Airborne Systems: Space and Airborne 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 revenue recognition method. Quarter Ended (In millions) April 2, 2021 April 3, 2020 Revenue By Customer Relationship Prime contractor $ 683 $ 658 Subcontractor 553 534 $ 1,236 $ 1,192 Revenue By Contract Type Fixed-price (1) $ 716 $ 670 Cost-reimbursable 520 522 $ 1,236 $ 1,192 Revenue By Geographical Region United States $ 1,062 $ 1,003 International 174 189 $ 1,236 $ 1,192 _______________ (1) Includes revenue derived from time-and-materials contracts. Communication Systems: Communication Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems and services. Quarter Ended (In millions) April 2, 2021 April 3, 2020 Revenue By Customer Relationship Prime contractor $ 729 $ 740 Subcontractor 383 354 $ 1,112 $ 1,094 Revenue By Contract Type Fixed-price (1) $ 946 $ 918 Cost-reimbursable 166 176 $ 1,112 $ 1,094 Revenue by Geographical Region United States $ 841 $ 834 International 271 260 $ 1,112 $ 1,094 _______________ (1) Includes revenue derived from time-and-materials contracts. Aviation Systems: Aviation Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems and services. Quarter Ended (In millions) April 2, 2021 April 3, 2020 Revenue By Customer Relationship Prime contractor $ 536 $ 664 Subcontractor 278 347 $ 814 $ 1,011 Revenue By Contract Type Fixed-price (1) $ 652 $ 841 Cost-reimbursable 162 170 $ 814 $ 1,011 Revenue By Geographical Region United States $ 699 $ 749 International 115 262 $ 814 $ 1,011 _______________ (1) Includes revenue derived from time-and-materials contracts. Total assets by business segment are summarized below: (In millions) April 2, 2021 January 1, 2021 Total Assets Integrated Mission Systems $ 9,080 $ 8,906 Space and Airborne Systems 6,996 6,943 Communication Systems 5,720 5,746 Aviation Systems 5,436 5,026 Corporate (1) 9,358 10,339 Total Assets $ 36,590 $ 36,960 _______________ (1) Identifiable intangible assets acquired in connection with the L3Harris Merger on June 29, 2019 and our acquisition of Exelis Inc. in fiscal 2015 were recorded as Corporate assets because they benefited the entire Company as opposed to any individual segment. Identifiable intangible asset balances recorded as Corporate assets were approximately $7.3 billion and $7.9 billion at April 2, 2021 and January 1, 2021, respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred compensation plan investments, buildings and equipment, as well as any assets and liabilities from discontinued operations and divestitures. See Note B — Business Divestitures in these Notes for additional information. |
Legal Proceedings and Contingen
Legal Proceedings and Contingencies | 3 Months Ended |
Apr. 02, 2021 | |
Legal Proceedings And Contingencies [Abstract] | |
Legal Proceedings and Contingencies | Note U — 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 April 2, 2021, 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, that are considered probable of being rendered against us in litigation or arbitration in existence at April 2, 2021 are reserved against or would not have a material adverse effect on our financial condition, results of operations, cash flows or equity. Environmental Matters |
Significant Accounting Polici_2
Significant Accounting Policies and Recent Accounting Standards (Policies) | 3 Months Ended |
Apr. 02, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying Condensed Consolidated Financial Statements (Unaudited) include the accounts of L3Harris Technologies, Inc. and its consolidated subsidiaries. As used in these Notes to Condensed Consolidated Financial Statements (Unaudited) (these “Notes”), the terms “L3Harris,” “Company,” “we,” “our” and “us” refer to L3Harris Technologies, Inc. and its consolidated subsidiaries. Intracompany transactions and accounts have been eliminated in consolidation. The accompanying Condensed Consolidated Financial Statements (Unaudited) have been prepared by L3Harris, 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, cash flows and equity for the periods presented therein. The results for the quarter ended April 2, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period. The balance sheet at January 1, 2021 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 January 1, 2021 (our “Fiscal 2020 Form 10-K”). Amounts contained in this Report may not always add to totals due to rounding. |
Reclassifications | Reclassifications The classification of certain prior-year amounts have been adjusted in our Condensed Consolidated Financial Statements (Unaudited) to conform to current-year classifications. Reclassifications include finance lease liabilities that were previously included in the “Other accrued items” and “Other long-term liabilities” line items and are now reflected in the “Current portion of long-term debt, net” and “Long-term debt, net” line items in our Condensed Consolidated Balance Sheet (Unaudited) and in these Notes. |
Use of Estimates | Use of EstimatesThe preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes and related disclosures. These estimates and assumptions are based on experience and other information available prior to issuance of the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes. Materially different results can occur as circumstances change and additional information becomes known. |
Significant Accounting Policies Update | Significant Accounting Policies UpdateThere have been no material changes to our significant accounting policies described in our Fiscal 2020 Form 10-K. |
Restructuring and Other Exit Costs | We record charges for restructuring and other exit activities related to sales or terminations of product lines, closures or relocations of business activities, changes in management structure and fundamental reorganizations that affect the nature and focus of operations. Such charges include termination benefits, contract termination costs and costs to consolidate facilities or relocate employees. We record these charges at their fair value when incurred. In cases where employees are required to render service until they are terminated in order to receive the termination benefits and will be retained beyond the minimum retention period, we record the expense ratably over the future service period. These charges are included as a component of the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited). |
Fair Value Measurements | Fair value is defined as the price that would be received for an asset or the price that would be paid to transfer a liability in the principal market or most advantageous market 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. |
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.Exchange-Rate Risk — Cash Flow Hedges. To manage our exposure to currency risk and market fluctuation risk associated with anticipated cash flows that are probable of occurring in the future, we implement cash flow hedges. More specifically, we use foreign currency forward contracts and options to hedge off-balance sheet future foreign currency commitments, including purchase commitments to suppliers, future committed sales to customers and inter-segment transactions. These derivatives are used to hedge currency exposures from cash flows anticipated across our business segments. We also hedge U.S. Dollar payments to suppliers to maintain our anticipated profit margins in our international operations. These derivatives have only nominal intrinsic value at the time of purchase and have a high degree of correlation to the anticipated cash flows they are designated to hedge. Hedge effectiveness is determined by the correlation of the anticipated cash flows from the hedging instruments and the anticipated cash flows from the future foreign currency commitments through the maturity dates of the derivatives used to hedge these cash flows. These financial instruments are marked-to-market using forward prices and fair value quotes with the offset to other comprehensive income (loss). Gains and losses in AOCI are reclassified to earnings when the related hedged item is recognized in earnings. The cash flow impact of our derivatives is included in the same category in our Condensed Consolidated Statement of Cash Flows (Unaudited) as the cash flows of the related hedged items. Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent exposure to foreign currency losses.Gains and losses from foreign currency derivatives designated as cash flow hedges are included in the line item in our Condensed Consolidated Statement of Income (Unaudited) associated with the hedged transaction, with the exception of any losses resulting from discontinued cash flow hedges, which are included in the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited). |
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 four operating segments, which are also our reportable segments and are referred to as our business segments: • Integrated Mission Systems, including multi-mission intelligence, surveillance and reconnaissance (“ISR”) and communication systems; integrated electrical and electronic systems for maritime platforms; and advanced electro-optical and infrared solutions; • Space and Airborne Systems, including space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; avionics; and electronic warfare; • Communication Systems, including tactical communications; broadband communications; integrated vision solutions; public safety and global communications solutions; and • Aviation Systems, including defense aviation; commercial aviation products; commercial and military pilot training; and mission networks for air traffic management. As described in more detail in Note B — Business Divestitures and elsewhere in these Notes, during fiscal 2020 and 2021, we announced the divestitures of the following businesses: • Airport security and automation business, completed on May 4, 2020, the results of which were reported as part of our Aviation Systems segment through the date of divestiture; • Applied Kilovolts and Analytical Instrumentation business, completed on May 15, 2020, the results of which were reported as part of our Space and Airborne Systems segment through the date of divestiture; • EOTech business, completed on July 31, 2020, the results of which were reported as part of our Communication Systems segment through the date of divestiture; • VSE disposal group, definitive agreement entered into on February 23, 2021, expected to be completed in the second half of fiscal 2021, the results of which are reported as part of our Aviation Systems segment; • Military training business, definitive agreement entered into on February 27, 2021, expected to be completed in the second half of 2021, the results of which are reported as part of our Aviation Systems segment; and • CPS business, definitive agreement entered into on March 1, 2021, expected to be completed in the second half of 2021, the results of which are reported as part of our Aviation Systems segment. The accounting policies of our business segments are the same as those described in Note 1: “Significant Accounting Policies” in the Notes to Consolidated Financial Statements in our Fiscal 2020 Form 10-K. We evaluate each business segment’s performance based on its 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. Corporate expenses are primarily allocated to our business segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. The “Unallocated corporate expenses” line item in the table below represents the portion of corporate expenses not allocated to our business segments and 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). The non-service components of net periodic pension and postretirement benefit costs include interest cost, expected return on plan assets, amortization of net actuarial gain or loss, and effect of curtailments or settlements. |
Contract Estimates, Backlog and Disaggregation of Revenue | 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 our expectation for performance on the contract. These variable amounts generally are awarded upon achievement of certain negotiated performance metrics, program milestones or cost targets and can be based upon customer discretion. We include such estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. 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. Disaggregation of Revenue We disaggregate revenue for all four business segments by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Integrated Mission Systems: Integrated Mission 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 revenue recognition method. Space and Airborne Systems: Space and Airborne 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 revenue recognition method. Communication Systems: Communication Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems and services. Aviation Systems: Aviation Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems and services. |
Significant Accounting Polici_3
Significant Accounting Policies and Recent Accounting Standards (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Accounting Policies [Abstract] | |
Schedule of L3Harris Merger-related Expenses | L3Harris Merger-related expenses for the quarters ended April 2, 2021 and April 3, 2020 were as follows: Quarter Ended (In millions) April 2, 2021 April 3, 2020 Additional cost of sales related to the fair value step-up in inventory sold $ — $ 15 Integration costs, recognized as incurred 21 31 Total L3Harris Merger-related expenses $ 21 $ 46 |
Business Divestitures (Tables)
Business Divestitures (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Assets and Liabilities Classified as Held for Sale | The carrying amounts of the major classes of assets and liabilities of the CPS business classified as held for sale at April 2, 2021 were as follows: (In millions) April 2, 2021 Receivables $ 12 Contract assets 49 Inventories 4 Other current assets 1 Property, plant and equipment 16 Goodwill 112 Other intangible assets 189 Other non-current assets 3 Assets of disposal group held for sale $ 386 Accounts payable $ 19 Contract liabilities 5 Other accrued items 3 Other non-current liabilities 3 Deferred taxes 5 Liabilities of disposal group held for sale $ 35 The carrying amounts of the major classes of assets and liabilities of the military training business classified as held for sale at April 2, 2021 were as follows: (In millions) April 2, 2021 Receivables $ 21 Contract assets 80 Inventories 4 Other current assets 29 Property, plant and equipment 73 Goodwill 426 Other intangible assets 297 Deferred income taxes 9 Other non-current assets 59 Assets of disposal group held for sale $ 998 Accounts payable $ 29 Contract liabilities 13 Other accrued items 38 Other non-current liabilities 47 Liabilities of disposal group held for sale $ 127 |
Restructuring and Other Exit _2
Restructuring and Other Exit Costs (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Restructuring and Related Activities [Abstract] | |
Schedule of Changes in Liabilities for Restructuring and Other Exit Costs | Changes to our liabilities for restructuring and other exit costs during the quarter ended April 2, 2021 were as follows: (In millions) Balance at January 1, 2021 $ 34 Payments (10) Balance at April 2, 2021 $ 24 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) ("AOCI") (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Equity [Abstract] | |
Schedule of Components of AOCI | The components of AOCI are summarized below: (In millions) Foreign currency translation Net unrealized losses on hedging derivatives Unrecognized postretirement obligations Total AOCI Balance at January 1, 2021 $ (58) $ (80) $ (701) $ (839) Other comprehensive (loss) income, before income taxes (18) 6 — (12) Income taxes — (1) — (1) Other comprehensive (loss) income before reclassifications to earnings, net of income taxes (18) 5 — (13) Losses (gains) reclassified to earnings (1) — (4) 2 (2) Income taxes — 1 (1) — Losses (gains) reclassified to earnings, net of income taxes — (3) 1 (2) Other comprehensive (loss) income, net of income taxes (18) 2 1 (15) Balance at April 2, 2021 $ (76) $ (78) $ (700) $ (854) Balance at January 3, 2020 $ (81) $ (55) $ (372) $ (508) Other comprehensive loss, before income taxes (67) (98) (1) (166) Income taxes — 25 — 25 Other comprehensive loss before reclassifications to earnings, net of income taxes (67) (73) (1) (141) Losses (gains) reclassified to earnings (1) — 3 (5) (2) Income taxes — (1) 1 — Losses (gains) reclassified to earnings, net of income taxes — 2 (4) (2) Other comprehensive loss, net of income taxes (67) (71) (5) (143) Balance at April 3, 2020 $ (148) $ (126) $ (377) $ (651) _______________ (1) Losses (gains) reclassified to earnings are included in the “Revenue from product sales and services,” “Business divestiture-related losses,” “Interest expense” and “Non-operating income” line items in our Condensed Consolidated Statement of Income (Unaudited). |
Receivables (Tables)
Receivables (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Receivables [Abstract] | |
Schedule of Receivables | Receivables are summarized below: (In millions) April 2, 2021 January 1, 2021 Accounts receivable $ 1,125 $ 1,369 Less allowance for credit losses (29) (25) Receivables, net $ 1,096 $ 1,344 |
Contract Assets and Contract _2
Contract Assets and Contract Liabilities (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Contract Assets and Contract Liabilities | Contract assets and contract liabilities are summarized below: (In millions) April 2, 2021 January 1, 2021 Contract assets $ 2,577 $ 2,437 Contract liabilities, current (1,189) (1,198) Contract liabilities, non-current (1) (84) (73) Net contract assets $ 1,304 $ 1,166 _______________ (1) The non-current portion of contract liabilities 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: (In millions) April 2, 2021 January 1, 2021 Unbilled contract receivables, gross $ 4,441 $ 4,268 Progress payments and advances (1,864) (1,831) Contract assets $ 2,577 $ 2,437 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories are summarized below: (In millions) April 2, 2021 January 1, 2021 Finished products $ 139 $ 136 Work in process 311 367 Raw materials and supplies 454 470 Total inventories $ 904 $ 973 |
Property, Plant, and Equipment
Property, Plant, and Equipment (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | Property, plant and equipment are summarized below: (In millions) April 2, 2021 January 1, 2021 Land $ 82 $ 90 Software capitalized for internal use 462 417 Buildings 1,202 1,097 Machinery and equipment 2,221 2,265 3,967 3,869 Less accumulated depreciation and amortization (1,831) (1,767) Total property, plant and equipment $ 2,136 $ 2,102 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill by Business Segments | The assignment of goodwill by business segment, and changes in the carrying amount of goodwill by business segment, were as follows: (In millions) Integrated Mission Systems Space and Airborne Systems Communication Systems Aviation Systems Total Balance at January 1, 2021 $ 6,499 $ 5,232 $ 4,153 $ 2,992 $ 18,876 Goodwill decrease from divestitures (1) — — — (538) (538) Impairment of goodwill — — — (62) (62) Currency translation adjustments (5) (14) — (5) (24) Balance at April 2, 2021 $ 6,494 $ 5,218 $ 4,153 $ 2,387 $ 18,252 Balance at January 3, 2020 $ 5,768 $ 5,131 $ 4,243 $ 4,859 $ 20,001 Goodwill decrease from divestitures (1) — (2) (9) (588) (599) Impairment of goodwill — (5) — (296) (301) Currency translation adjustments (2) (9) (3) (10) (24) Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed) 22 55 38 73 188 Balance at April 3, 2020 $ 5,788 $ 5,170 $ 4,269 $ 4,038 $ 19,265 _______________ (1) During the quarters ended April 2, 2021 and April 3, 2020, we assigned $538 million and $599 million, respectively, of goodwill associated with pending divestitures to “Assets of disposal groups held for sale” in our Condensed Consolidated Balance Sheet (Unaudited). See Note B — Business Divestitures in these Notes for additional information. |
Schedule of Identifiable Intangible Assets Subject to Amortization | Identifiable intangible assets are summarized below: April 2, 2021 January 1, 2021 (In millions) Gross Accumulated Amortization Net Carrying Amount (1) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 6,320 $ 1,323 $ 4,997 $ 6,863 $ 1,257 $ 5,606 Developed technologies 634 273 361 653 261 392 Contract backlog 16 14 2 19 17 2 Trade names — divisions 130 49 81 129 45 84 Other 3 3 — 3 3 — Total identifiable intangible assets subject to amortization 7,103 1,662 5,441 7,667 1,583 6,084 In-process research and development 21 — 21 21 — 21 Trade names — corporate 1,803 — 1,803 1,803 — 1,803 Total identifiable intangible assets $ 8,927 $ 1,662 $ 7,265 $ 9,491 $ 1,583 $ 7,908 _______________ (1) During the quarter ended April 2, 2021, we reclassified $486 million of intangible assets associated with pending divestitures to “Assets of disposal groups held for sale” in our Consolidated Condensed Balance Sheet (Unaudited). See Note B — Business Divestitures in these Notes for additional information regarding divestitures. |
Schedule of Identifiable Intangible Assets Not Subject to Amortization | Identifiable intangible assets are summarized below: April 2, 2021 January 1, 2021 (In millions) Gross Accumulated Amortization Net Carrying Amount (1) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 6,320 $ 1,323 $ 4,997 $ 6,863 $ 1,257 $ 5,606 Developed technologies 634 273 361 653 261 392 Contract backlog 16 14 2 19 17 2 Trade names — divisions 130 49 81 129 45 84 Other 3 3 — 3 3 — Total identifiable intangible assets subject to amortization 7,103 1,662 5,441 7,667 1,583 6,084 In-process research and development 21 — 21 21 — 21 Trade names — corporate 1,803 — 1,803 1,803 — 1,803 Total identifiable intangible assets $ 8,927 $ 1,662 $ 7,265 $ 9,491 $ 1,583 $ 7,908 _______________ (1) During the quarter ended April 2, 2021, we reclassified $486 million of intangible assets associated with pending divestitures to “Assets of disposal groups held for sale” in our Consolidated Condensed Balance Sheet (Unaudited). See Note B — Business Divestitures in these Notes for additional information regarding divestitures. |
Schedule of Future Estimated Amortization Expense For Identifiable Intangible Assets | Future estimated amortization expense for identifiable intangible assets subject to amortization is as follows: (In millions) Year 1 $ 628 Year 2 625 Year 3 612 Year 4 570 Year 5 521 Thereafter 2,485 Total $ 5,441 |
Accrued Warranties (Tables)
Accrued Warranties (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Product Warranties Disclosures [Abstract] | |
Schedule of Accrued Warranties | Changes in our liability for standard product warranties during the quarter ended April 2, 2021 were as follows: (In millions) Balance at January 1, 2021 $ 133 Accruals for product warranties issued during the period 9 Settlements made during the period (12) Other, including foreign currency translation adjustments (3) Balance at April 2, 2021 $ 127 |
Postretirement Benefit Plans (T
Postretirement Benefit Plans (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
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 April 2, 2021 Quarter Ended April 3, 2020 (In millions) Pension Other Benefits Pension Other Benefits Net periodic benefit income Service cost $ 18 $ 1 $ 16 $ — Interest cost 46 1 69 2 Expected return on plan assets (155) (5) (158) (5) Amortization of net actuarial loss 9 — 2 — Amortization of prior service credit (7) — (7) — Contractual termination benefits (1) — — 1 — Total net periodic benefit income $ (89) $ (3) $ (77) $ (3) _______________ (1) Contractual termination benefits related to facility rationalization as part of restructuring activities in connection with the L3Harris Merger integration. See Note D — Restructuring and Other Exit Costs in these Notes for additional information regarding restructuring activities. |
Income From Continuing Operat_2
Income From Continuing Operations Per Share (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of Computation Income From Continuing Operations Per Common Share | The computations of income from continuing operations per common share attributable to L3Harris common shareholders are as follows: Quarter Ended (In millions, except per share amounts) April 2, 2021 April 3, 2020 Income from continuing operations (A) $ 469 $ 218 Basic weighted average common shares outstanding (B) 206.7 217.3 Impact of dilutive share-based awards 1.8 2.0 Diluted weighted average common shares outstanding (C) 208.5 219.3 Income from continuing operations per basic common share (A)/(B) $ 2.27 $ 1.00 Income from continuing operations per diluted common share (A)/(C) $ 2.25 $ 0.99 |
Non-Operating Income (Tables)
Non-Operating Income (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Nonoperating Income (Expense) [Abstract] | |
Schedule of Components of Non-Operating Income | The components of non-operating income were as follows: Quarter Ended (In millions) April 2, 2021 April 3, 2020 Pension adjustment (1) $ 111 $ 97 Other 6 (2) Total non-operating income $ 117 $ 95 _______________ |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
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 April 2, 2021 and January 1, 2021: April 2, 2021 January 1, 2021 (In millions) Total Level 1 Level 2 Total Level 1 Level 2 Assets Deferred compensation plan assets: (1) Equity and fixed-income securities $ 69 $ 69 $ — $ 67 $ 67 $ — Investments measured at NAV: Corporate-owned life insurance 32 31 Total fair value of deferred compensation plan assets $ 101 $ 69 $ — $ 98 $ 67 $ — Derivatives (foreign currency forward contracts) $ 21 $ — $ 21 $ 24 $ — $ 24 Liabilities Deferred compensation plan liabilities: (2) Equity securities and mutual funds $ 4 $ 4 $ — $ 4 $ 4 $ — Investments measured at NAV: Common/collective trusts and guaranteed investment contracts 124 116 Total fair value of deferred compensation plan liabilities $ 128 $ 4 $ — $ 120 $ 4 $ — Derivatives (foreign currency forward contracts) $ 2 $ — $ 2 $ 4 $ — $ 4 _______________ (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): April 2, 2021 January 1, 2021 (In millions) Carrying Fair Carrying Fair Long-term debt (including current portion) (1) $ 7,078 $ 7,736 $ 6,953 $ 7,986 _______________ (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 He_2
Derivative Instruments and Hedging Activities (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Fair Values of Derivative Instruments in Condensed Consolidated Balance Sheets | The table below presents the fair values of our derivatives designated as foreign currency hedging instruments in our Condensed Consolidated Balance Sheet (Unaudited) at April 2, 2021 and January 1, 2021. (In millions) April 2, 2021 January 1, 2021 Derivatives designated as hedging instruments: Foreign currency forward contracts (1) Other current assets $ 18 $ 21 Other non-current assets 3 3 Other accrued items 2 4 _______________ (1) See Note P — Fair Value Measurements in these Notes for a description of the fair value hierarchy related to our foreign currency forward contracts. |
Changes in Estimates (Tables)
Changes in Estimates (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Change in Accounting Estimate [Abstract] | |
Schedule of Effect of Net Estimate at Completion Adjustment ("EAC") on Consolidated Statement of Income | Net EAC adjustments had the following impact to earnings for the periods presented: Quarter Ended (In millions, except per share amounts) April 2, 2021 April 3, 2020 Net EAC adjustments, before income taxes $ 82 $ 103 Net EAC adjustments, net of income taxes $ 62 $ 78 Net EAC adjustments, net of income taxes, per diluted common share $ 0.30 $ 0.35 |
Business Segment Information (T
Business Segment Information (Tables) | 3 Months Ended |
Apr. 02, 2021 | |
Segment Reporting [Abstract] | |
Schedule of Revenue and Reconciliation of Income From Continuing Operations Before Taxes by Segment | Segment revenue, segment operating income (loss) and a reconciliation of segment operating income to total income from continuing operations before income taxes are as follows: Quarter Ended (In millions) April 2, 2021 April 3, 2020 Revenue Integrated Mission Systems $ 1,451 $ 1,370 Space and Airborne Systems 1,236 1,192 Communication Systems 1,112 1,094 Aviation Systems 814 1,011 Corporate eliminations (46) (41) Total revenue $ 4,567 $ 4,626 Income From Continuing Operations Before Income Taxes Segment Operating Income (Loss): Integrated Mission Systems $ 240 $ 201 Space and Airborne Systems 240 221 Communication Systems 281 250 Aviation Systems 128 (177) Unallocated corporate expenses (1) (40) (25) L3Harris Merger-related integration and restructuring expenses (21) (31) Amortization of acquisition-related intangibles (2) (164) (145) Business divestiture-related losses (15) (3) Impairment of goodwill and other assets (62) (5) Pension adjustment (111) (97) Non-operating income 117 95 Net interest expense (66) (63) Total income from continuing operations before income taxes $ 527 $ 221 _______________ (1) For the quarter ended April 2, 2021, includes $7 million of divestiture-related expenses and a $15 million accrual for a value added tax obligation. For the quarter ended April 3, 2020, includes $15 million of additional cost of sales related to the fair value step-up in inventory sold. (2) For the quarters ended April 2, 2021 and April 3, 2020, respectively, includes $140 million and $120 million of amortization of identifiable intangible assets acquired as a result of the L3Harris Merger and $24 million and $25 million of amortization of identifiable intangible assets acquired as a result of |
Schedule of Disaggregation of Revenue by Segment | Disaggregation of Revenue We disaggregate revenue for all four business segments by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Integrated Mission Systems: Integrated Mission 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 revenue recognition method. Quarter Ended (In millions) April 2, 2021 April 3, 2020 Revenue By Customer Relationship Prime contractor $ 1,006 $ 949 Subcontractor 445 421 $ 1,451 $ 1,370 Revenue By Contract Type Fixed-price (1) $ 1,093 $ 1,025 Cost-reimbursable 358 345 $ 1,451 $ 1,370 Revenue By Geographical Region United States $ 1,033 $ 1,105 International 418 265 $ 1,451 $ 1,370 _______________ (1) Includes revenue derived from time-and-materials contracts. Space and Airborne Systems: Space and Airborne 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 revenue recognition method. Quarter Ended (In millions) April 2, 2021 April 3, 2020 Revenue By Customer Relationship Prime contractor $ 683 $ 658 Subcontractor 553 534 $ 1,236 $ 1,192 Revenue By Contract Type Fixed-price (1) $ 716 $ 670 Cost-reimbursable 520 522 $ 1,236 $ 1,192 Revenue By Geographical Region United States $ 1,062 $ 1,003 International 174 189 $ 1,236 $ 1,192 _______________ (1) Includes revenue derived from time-and-materials contracts. Communication Systems: Communication Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems and services. Quarter Ended (In millions) April 2, 2021 April 3, 2020 Revenue By Customer Relationship Prime contractor $ 729 $ 740 Subcontractor 383 354 $ 1,112 $ 1,094 Revenue By Contract Type Fixed-price (1) $ 946 $ 918 Cost-reimbursable 166 176 $ 1,112 $ 1,094 Revenue by Geographical Region United States $ 841 $ 834 International 271 260 $ 1,112 $ 1,094 _______________ (1) Includes revenue derived from time-and-materials contracts. Aviation Systems: Aviation Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems and services. Quarter Ended (In millions) April 2, 2021 April 3, 2020 Revenue By Customer Relationship Prime contractor $ 536 $ 664 Subcontractor 278 347 $ 814 $ 1,011 Revenue By Contract Type Fixed-price (1) $ 652 $ 841 Cost-reimbursable 162 170 $ 814 $ 1,011 Revenue By Geographical Region United States $ 699 $ 749 International 115 262 $ 814 $ 1,011 _______________ (1) Includes revenue derived from time-and-materials contracts. |
Schedule of Total Assets by Business Segment | Total assets by business segment are summarized below: (In millions) April 2, 2021 January 1, 2021 Total Assets Integrated Mission Systems $ 9,080 $ 8,906 Space and Airborne Systems 6,996 6,943 Communication Systems 5,720 5,746 Aviation Systems 5,436 5,026 Corporate (1) 9,358 10,339 Total Assets $ 36,590 $ 36,960 _______________ (1) Identifiable intangible assets acquired in connection with the L3Harris Merger on June 29, 2019 and our acquisition of Exelis Inc. in fiscal 2015 were recorded as Corporate assets because they benefited the entire Company as opposed to any individual segment. Identifiable intangible asset balances recorded as Corporate assets were approximately $7.3 billion and $7.9 billion at April 2, 2021 and January 1, 2021, respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred compensation plan investments, buildings and equipment, as well as any assets and liabilities from discontinued operations and divestitures. See Note B — Business Divestitures in these Notes for additional information. |
Significant Accounting Polici_4
Significant Accounting Policies and Recent Accounting Standards - L3Harris Merger-related Expenses (Details) - L3Harris - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Business Acquisition [Line Items] | ||
Additional cost of sales related to the fair value step-up in inventory sold | $ 0 | $ 15 |
Integration costs, recognized as incurred | 21 | 31 |
Total L3Harris Merger-related expenses | $ 21 | $ 46 |
Significant Accounting Polici_5
Significant Accounting Policies and Recent Accounting Standards - Narrative (Details) $ in Millions | 3 Months Ended |
Apr. 02, 2021USD ($) | |
Accounting Policies [Abstract] | |
Right-of-use assets obtained in exchange for finance lease liabilities | $ 120 |
Business Divestitures - Narrati
Business Divestitures - Narrative (Details) - USD ($) | Jul. 31, 2020 | May 15, 2020 | May 04, 2020 | Apr. 02, 2021 | Apr. 03, 2020 | Jan. 01, 2021 | Mar. 01, 2021 | Feb. 27, 2021 | Feb. 23, 2021 | Jul. 03, 2020 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Pre-tax loss recognized to reduce fair value of assets of disposal group | $ 62,000,000 | $ 5,000,000 | ||||||||
Non-cash goodwill impairment charge | 62,000,000 | 301,000,000 | ||||||||
Aviation Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Non-cash goodwill impairment charge | 62,000,000 | 296,000,000 | ||||||||
Communication Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Non-cash goodwill impairment charge | 0 | 0 | ||||||||
Space and Airborne Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Non-cash goodwill impairment charge | 0 | 5,000,000 | ||||||||
Disposal Group, Held-for-sale, Not Discontinued Operations | CPS Business | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Goodwill assigned to disposal group | 112,000,000 | |||||||||
Assets of disposal group held for sale | 386,000,000 | |||||||||
Liabilities of disposal group held for sale | 35,000,000 | |||||||||
Disposal Group, Held-for-sale, Not Discontinued Operations | CPS Business | Aviation Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Goodwill assigned to disposal group | 174,000,000 | |||||||||
Pre-tax loss recognized to reduce fair value of assets of disposal group | 69,000,000 | |||||||||
Non-cash goodwill impairment charge | 62,000,000 | |||||||||
Non-cash remeasurement loss recognized on remaining assets of disposal group | 7,000,000 | |||||||||
Disposal Group, Held-for-sale, Not Discontinued Operations | CPS Business | Aviation Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Net cash proceeds from sale of business | $ 398,000,000 | |||||||||
Income before taxes of disposal group | 26,000,000 | 16,000,000 | ||||||||
Disposal Group, Held-for-sale, Not Discontinued Operations | Military Training Business | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Goodwill assigned to disposal group | 426,000,000 | |||||||||
Assets of disposal group held for sale | 998,000,000 | |||||||||
Liabilities of disposal group held for sale | 127,000,000 | |||||||||
Disposal Group, Held-for-sale, Not Discontinued Operations | Military Training Business | Aviation Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Non-cash goodwill impairment charge | 0 | |||||||||
Disposal Group, Held-for-sale, Not Discontinued Operations | Military Training Business | Aviation Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Net cash proceeds from sale of business | $ 1,050,000,000 | |||||||||
Income before taxes of disposal group | 16,000,000 | 24,000,000 | ||||||||
Disposal Group, Held-for-sale, Not Discontinued Operations | VSE Disposal Group | Aviation Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Goodwill assigned to disposal group | $ 14,000,000 | |||||||||
Pre-tax loss recognized to reduce fair value of assets of disposal group | 8,000,000 | $ 32,000,000 | ||||||||
Non-cash goodwill impairment charge | 14,000,000 | |||||||||
Non-cash remeasurement loss recognized on remaining assets of disposal group | 18,000,000 | |||||||||
Disposal Group, Held-for-sale, Not Discontinued Operations | VSE Disposal Group | Aviation Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Net cash proceeds from sale of business | $ 20,000,000 | |||||||||
Assets of disposal group held for sale | 30,000,000 | 35,000,000 | ||||||||
Liabilities of disposal group held for sale | $ 11,000,000 | $ 13,000,000 | ||||||||
Disposal Group, Disposed of by Sale, Not Discontinued Operations | EOTech Business | Communication Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Net cash proceeds from sale of business | $ 42,000,000 | |||||||||
Net cash proceeds from sale of business, after selling costs and estimated price adjustments | $ 40,000,000 | |||||||||
Disposal Group, Disposed of by Sale, Not Discontinued Operations | Applied Kilovolts and Analytical Instrumentation Business | Space and Airborne Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Non-cash goodwill impairment charge | 5,000,000 | |||||||||
Disposal Group, Disposed of by Sale, Not Discontinued Operations | Applied Kilovolts and Analytical Instrumentation Business | Space and Airborne Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Net cash proceeds from sale of business, after selling costs and estimated price adjustments | $ 12,000,000 | |||||||||
Disposal Group, Disposed of by Sale, Not Discontinued Operations | Airport Security and Automation Business | Aviation Systems | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Net cash proceeds from sale of business | $ 1,000,000,000 | |||||||||
Income before taxes of disposal group | $ 12,000,000 | |||||||||
Net cash proceeds from sale of business, after selling costs and estimated price adjustments | $ 987,000,000 |
Business Divestitures - Assets
Business Divestitures - Assets and Liabilities Classified as Held For Sale (Details) - Disposal Group, Held-for-sale, Not Discontinued Operations $ in Millions | Apr. 02, 2021USD ($) |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Other intangible assets | $ 486 |
CPS Business | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Receivables | 12 |
Contract assets | 49 |
Inventories | 4 |
Other current assets | 1 |
Property, plant and equipment | 16 |
Goodwill | 112 |
Other intangible assets | 189 |
Other non-current assets | 3 |
Assets of disposal group held for sale | 386 |
Accounts payable | 19 |
Contract liabilities | 5 |
Other accrued items | 3 |
Other non-current liabilities | 3 |
Deferred taxes | 5 |
Liabilities of disposal group held for sale | 35 |
Military Training Business | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Receivables | 21 |
Contract assets | 80 |
Inventories | 4 |
Other current assets | 29 |
Property, plant and equipment | 73 |
Goodwill | 426 |
Other intangible assets | 297 |
Deferred income taxes | 9 |
Other non-current assets | 59 |
Assets of disposal group held for sale | 998 |
Accounts payable | 29 |
Contract liabilities | 13 |
Other accrued items | 38 |
Other non-current liabilities | 47 |
Liabilities of disposal group held for sale | $ 127 |
Stock Options and Other Share_2
Stock Options and Other Share-Based Compensation (Details) shares in Millions, $ in Millions | 3 Months Ended | |
Apr. 02, 2021USD ($)planshares | Apr. 03, 2020USD ($)shares | |
SIPs | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shareholder approved employee stock incentive plans | plan | 2 | |
L3Harris SIPs | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation costs related to share-based awards | $ | $ 33 | $ 17 |
Common stock issued, net of shares withheld for tax purposes (in shares) | 0.1 | 0.5 |
Stock options granted (in shares) | 0.5 | |
L3Harris SIPs | Restricted Sock Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Awards granted (in shares) | 0.1 | |
L3Harris SIPs | Performance Stock Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Awards granted (in shares) | 0.2 | |
L3Harris SIPs | Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected dividend yield | 1.99% | |
Expected volatility | 31.71% | |
Risk free interest rates | 0.75% | |
Expected term | 5 years 18 days |
Restructuring and Other Exit _3
Restructuring and Other Exit Costs - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Apr. 03, 2020 | Jan. 03, 2020 | Jan. 01, 2021 | Apr. 02, 2021 | |
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring liabilities | $ 34 | $ 24 | ||
Workforce Reduction | COVID-19 | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring liabilities | 7 | |||
Workforce Reduction | COVID-19 | Aviation Systems | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | $ 3 | 15 | ||
Workforce Reduction | L3Harris | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | $ 117 | $ 10 | ||
Restructuring liabilities | $ 17 |
Restructuring and Other Exit _4
Restructuring and Other Exit Costs - Changes in Liabilities for Restructuring and Other Exit Costs (Details) $ in Millions | 3 Months Ended |
Apr. 02, 2021USD ($) | |
Restructuring Reserve [Roll Forward] | |
Balance at January 1, 2021 | $ 34 |
Payments | (10) |
Balance at April 2, 2021 | $ 24 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) ("AOCI") (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Beginning balance | $ 20,841 | $ 22,744 |
Other comprehensive (loss) income, before income taxes | (12) | (166) |
Income taxes | (1) | 25 |
Other comprehensive loss recognized during the period | (13) | (141) |
Losses (gains) reclassified to earnings | (2) | (2) |
Income taxes | 0 | 0 |
Losses (gains) reclassified to earnings, net of income taxes | (2) | (2) |
Other comprehensive loss, net of income taxes | (15) | (143) |
Ending balance | 20,482 | 22,027 |
Foreign currency translation | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Beginning balance | (58) | (81) |
Other comprehensive (loss) income, before income taxes | (18) | (67) |
Income taxes | 0 | 0 |
Other comprehensive loss recognized during the period | (18) | (67) |
Losses (gains) reclassified to earnings | 0 | 0 |
Income taxes | 0 | 0 |
Losses (gains) reclassified to earnings, net of income taxes | 0 | 0 |
Other comprehensive loss, net of income taxes | (18) | (67) |
Ending balance | (76) | (148) |
Net unrealized losses on hedging derivatives | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Beginning balance | (80) | (55) |
Other comprehensive (loss) income, before income taxes | 6 | (98) |
Income taxes | (1) | 25 |
Other comprehensive loss recognized during the period | 5 | (73) |
Losses (gains) reclassified to earnings | (4) | 3 |
Income taxes | 1 | (1) |
Losses (gains) reclassified to earnings, net of income taxes | (3) | 2 |
Other comprehensive loss, net of income taxes | 2 | (71) |
Ending balance | (78) | (126) |
Unrecognized postretirement obligations | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Beginning balance | (701) | (372) |
Other comprehensive (loss) income, before income taxes | 0 | (1) |
Income taxes | 0 | 0 |
Other comprehensive loss recognized during the period | 0 | (1) |
Losses (gains) reclassified to earnings | 2 | (5) |
Income taxes | (1) | 1 |
Losses (gains) reclassified to earnings, net of income taxes | 1 | (4) |
Other comprehensive loss, net of income taxes | 1 | (5) |
Ending balance | (700) | (377) |
Total AOCI | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Beginning balance | (839) | (508) |
Other comprehensive loss, net of income taxes | (15) | (143) |
Ending balance | $ (854) | $ (651) |
Receivables (Details)
Receivables (Details) - USD ($) $ in Millions | Apr. 02, 2021 | Jan. 01, 2021 |
Receivables [Abstract] | ||
Accounts receivable | $ 1,125 | $ 1,369 |
Less allowance for credit losses | (29) | (25) |
Receivables, net | $ 1,096 | $ 1,344 |
Receivables - Narrative (Detail
Receivables - Narrative (Details) | Apr. 02, 2021USD ($)receivableSaleAgreement |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Number of receivables sales agreements | receivableSaleAgreement | 2 |
RSA One | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Authorized amount of accounts receivables outstanding under agreement | $ 100,000,000 |
RSA Two | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Authorized amount of accounts receivables outstanding under agreement | $ 100,000,000 |
Contract Assets and Contract _3
Contract Assets and Contract Liabilities (Details) - USD ($) $ in Millions | Apr. 02, 2021 | Jan. 01, 2021 |
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 2,577 | $ 2,437 |
Contract liabilities, current | (1,189) | (1,198) |
Contract liabilities, non-current | (84) | (73) |
Net contract assets | 1,304 | 1,166 |
Components of Contract Assets: | ||
Unbilled contract receivables, gross | 4,441 | 4,268 |
Progress payments and advances | (1,864) | (1,831) |
Contract assets | $ 2,577 | $ 2,437 |
Contract Assets and Contract _4
Contract Assets and Contract Liabilities - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Apr. 02, 2021 | Apr. 03, 2020 | Jan. 01, 2021 | |
Revenue from Contract with Customer [Abstract] | |||
U.S. Government's progress payment rate | 90.00% | 80.00% | |
Recognized sales on contract liabilities | $ 508 | $ 484 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Apr. 02, 2021 | Jan. 01, 2021 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 139 | $ 136 |
Work in process | 311 | 367 |
Raw materials and supplies | 454 | 470 |
Inventories | $ 904 | $ 973 |
Property, Plant, and Equipmen_2
Property, Plant, and Equipment (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Apr. 02, 2021 | Apr. 03, 2020 | Jan. 01, 2021 | |
Property, Plant and Equipment | |||
Land | $ 82 | $ 90 | |
Software capitalized for internal use | 462 | 417 | |
Buildings | 1,202 | 1,097 | |
Machinery and equipment | 2,221 | 2,265 | |
Property, plant and equipment, gross | 3,967 | 3,869 | |
Less accumulated depreciation and amortization | (1,831) | (1,767) | |
Total property, plant and equipment | 2,136 | $ 2,102 | |
Depreciation and amortization expense related to property, plant and equipment | $ 84 | $ 76 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Goodwill by Business Segment (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | Jan. 01, 2021 | |
Changes in the carrying amount of goodwill | |||
Beginning Balance | $ 18,876 | $ 20,001 | $ 20,001 |
Goodwill decrease from divestitures | (538) | (599) | |
Impairment of goodwill | (62) | (301) | |
Currency translation adjustments | (24) | (24) | |
Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed) | 188 | ||
Ending Balance | 18,252 | 19,265 | 18,876 |
Disposal Group, Held-for-sale, Not Discontinued Operations | |||
Changes in the carrying amount of goodwill | |||
Goodwill decrease from divestitures | (538) | (599) | |
Integrated Mission Systems | |||
Changes in the carrying amount of goodwill | |||
Beginning Balance | 6,499 | 5,768 | 5,768 |
Goodwill decrease from divestitures | 0 | 0 | |
Impairment of goodwill | 0 | 0 | |
Currency translation adjustments | (5) | (2) | |
Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed) | 22 | ||
Ending Balance | 6,494 | 5,788 | 6,499 |
Space and Airborne Systems | |||
Changes in the carrying amount of goodwill | |||
Beginning Balance | 5,232 | 5,131 | 5,131 |
Goodwill decrease from divestitures | 0 | (2) | |
Impairment of goodwill | 0 | (5) | |
Currency translation adjustments | (14) | (9) | |
Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed) | 55 | ||
Ending Balance | 5,218 | 5,170 | 5,232 |
Communication Systems | |||
Changes in the carrying amount of goodwill | |||
Beginning Balance | 4,153 | 4,243 | 4,243 |
Goodwill decrease from divestitures | 0 | (9) | |
Impairment of goodwill | 0 | 0 | |
Currency translation adjustments | 0 | (3) | |
Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed) | 38 | ||
Ending Balance | 4,153 | 4,269 | 4,153 |
Aviation Systems | |||
Changes in the carrying amount of goodwill | |||
Beginning Balance | 2,992 | 4,859 | 4,859 |
Goodwill decrease from divestitures | (538) | (588) | |
Impairment of goodwill | (62) | (296) | |
Currency translation adjustments | (5) | (10) | |
Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed) | 73 | ||
Ending Balance | $ 2,387 | $ 4,038 | $ 2,992 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Finite-Lived Intangible Assets [Line Items] | ||
Non-cash goodwill impairment charge | $ 62 | $ 301 |
Amortization expense for intangible assets | 164 | 158 |
CPS Business | Disposal Group, Held-for-sale, Not Discontinued Operations | ||
Finite-Lived Intangible Assets [Line Items] | ||
Goodwill assigned to disposal group | 112 | |
Aviation Systems | CPS Business | Disposal Group, Held-for-sale, Not Discontinued Operations | ||
Finite-Lived Intangible Assets [Line Items] | ||
Goodwill assigned to disposal group | 174 | |
Non-cash goodwill impairment charge | $ 62 | |
Commercial Aviation Solutions | COVID-19 | ||
Finite-Lived Intangible Assets [Line Items] | ||
Non-cash goodwill impairment charge | 296 | |
Non-cash goodwill impairment charge attributable to noncontrolling interests | $ 28 |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets - Intangibles Assets (Details) - USD ($) $ in Millions | Apr. 02, 2021 | Jan. 01, 2021 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 7,103 | $ 7,667 |
Accumulated Amortization | 1,662 | 1,583 |
Net Carrying Amount | 5,441 | 6,084 |
Total intangibles assets, Gross Carrying Amount | 8,927 | 9,491 |
Total identifiable intangible assets | 7,265 | 7,908 |
Disposal Group, Held-for-sale, Not Discontinued Operations | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangibles reclassified as assets of disposal group held for sale | 486 | |
In-process research and development | ||
Finite-Lived Intangible Assets [Line Items] | ||
Indefinite-lived Intangibles | 21 | 21 |
Trade names — corporate | ||
Finite-Lived Intangible Assets [Line Items] | ||
Indefinite-lived Intangibles | 1,803 | 1,803 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 6,320 | 6,863 |
Accumulated Amortization | 1,323 | 1,257 |
Net Carrying Amount | 4,997 | 5,606 |
Developed technologies | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 634 | 653 |
Accumulated Amortization | 273 | 261 |
Net Carrying Amount | 361 | 392 |
Contract backlog | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 16 | 19 |
Accumulated Amortization | 14 | 17 |
Net Carrying Amount | 2 | 2 |
Trade names — corporate | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 130 | 129 |
Accumulated Amortization | 49 | 45 |
Net Carrying Amount | 81 | 84 |
Other | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 3 | 3 |
Accumulated Amortization | 3 | 3 |
Net Carrying Amount | $ 0 | $ 0 |
Goodwill and Other Intangible_6
Goodwill and Other Intangible Assets - Future Estimated Amortization Expense of Identifiable Intangible Assets (Details) - USD ($) $ in Millions | Apr. 02, 2021 | Jan. 01, 2021 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Year 1 | $ 628 | |
Year 2 | 625 | |
Year 3 | 612 | |
Year 4 | 570 | |
Year 5 | 521 | |
Thereafter | 2,485 | |
Net Carrying Amount | $ 5,441 | $ 6,084 |
Accrued Warranties (Details)
Accrued Warranties (Details) $ in Millions | 3 Months Ended |
Apr. 02, 2021USD ($) | |
Changes in product warranty liability | |
Balance at January 1, 2021 | $ 133 |
Accruals for product warranties issued during the period | 9 |
Settlements made during the period | (12) |
Other, including foreign currency translation adjustments | (3) |
Balance at April 2, 2021 | $ 127 |
Postretirement Benefit Plans -
Postretirement Benefit Plans - Components of Net Periodic Benefit Costs (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Pension | ||
Net periodic benefit income | ||
Service cost | $ 18 | $ 16 |
Interest cost | 46 | 69 |
Expected return on plan assets | (155) | (158) |
Amortization of net actuarial loss | 9 | 2 |
Amortization of prior service credit | (7) | (7) |
Contractual termination benefits | 0 | 1 |
Total net periodic benefit income | (89) | (77) |
Other Benefits | ||
Net periodic benefit income | ||
Service cost | 1 | 0 |
Interest cost | 1 | 2 |
Expected return on plan assets | (5) | (5) |
Amortization of net actuarial loss | 0 | 0 |
Amortization of prior service credit | 0 | 0 |
Contractual termination benefits | 0 | 0 |
Total net periodic benefit income | $ (3) | $ (3) |
Postretirement Benefit Plans _2
Postretirement Benefit Plans - Narrative (Details) - Pension - U.S. - USD ($) | 3 Months Ended | 6 Months Ended | ||
Sep. 27, 2019 | Dec. 28, 2018 | Dec. 29, 2017 | Apr. 02, 2021 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Voluntary employer contributions | $ 302,000,000 | $ 700,000,000 | $ 700,000,000 | |
Required employer contributions during the remainder of fiscal 2021 | $ 0 |
Income From Continuing Operat_3
Income From Continuing Operations Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Earnings Per Share [Abstract] | ||
Income from continuing operations (A) | $ 469 | $ 218 |
Basic weighted average common shares outstanding (in shares) (B) | 206.7 | 217.3 |
Impact of dilutive share-based awards (in shares) | 1.8 | 2 |
Diluted weighted average common shares outstanding (in shares) (C) | 208.5 | 219.3 |
Income from continuing operations per basic common share (in dollars per share) (A)/(B) | $ 2.27 | $ 1 |
Income from continuing operations per diluted common share (in dollars per share) (A)/(C) | $ 2.25 | $ 0.99 |
Weighted average anti-dilutive share-based awards outstanding (in shares) | 1.6 | 1 |
Non-Operating Income (Details)
Non-Operating Income (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Nonoperating Income (Expense) [Abstract] | ||
Pension adjustment | $ 111 | $ 97 |
Other | 6 | (2) |
Non-operating income | $ 117 | $ 95 |
Income Taxes (Details)
Income Taxes (Details) | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 11.40% | 11.80% |
Fair Value Measurements - Asset
Fair Value Measurements - Assets and Liabilities Measured on a Recurring Basis (Details) - Fair value - USD ($) $ in Millions | Apr. 02, 2021 | Jan. 01, 2021 |
Assets | ||
Deferred compensation plan assets | $ 101 | $ 98 |
Derivatives (foreign currency forward contracts) | 21 | 24 |
Liabilities | ||
Deferred compensation plan liabilities | 128 | 120 |
Derivatives (foreign currency forward contracts) | 2 | 4 |
Equity securities and mutual funds | ||
Liabilities | ||
Deferred compensation plan liabilities | 4 | 4 |
Equity and fixed-income securities | ||
Assets | ||
Deferred compensation plan assets | 69 | 67 |
Level 1 | ||
Assets | ||
Deferred compensation plan assets | 69 | 67 |
Derivatives (foreign currency forward contracts) | 0 | 0 |
Liabilities | ||
Deferred compensation plan liabilities | 4 | 4 |
Derivatives (foreign currency forward contracts) | 0 | 0 |
Level 1 | Equity securities and mutual funds | ||
Liabilities | ||
Deferred compensation plan liabilities | 4 | 4 |
Level 1 | Equity and fixed-income securities | ||
Assets | ||
Deferred compensation plan assets | 69 | 67 |
Level 2 | ||
Assets | ||
Deferred compensation plan assets | 0 | 0 |
Derivatives (foreign currency forward contracts) | 21 | 24 |
Liabilities | ||
Deferred compensation plan liabilities | 0 | 0 |
Derivatives (foreign currency forward contracts) | 2 | 4 |
Level 2 | Equity securities and mutual funds | ||
Liabilities | ||
Deferred compensation plan liabilities | 0 | 0 |
Level 2 | Equity and fixed-income securities | ||
Assets | ||
Deferred compensation plan assets | 0 | 0 |
Investments measured at NAV | Common/collective trusts and guaranteed investment contracts | ||
Liabilities | ||
Deferred compensation plan liabilities | 124 | 116 |
Investments measured at NAV | Corporate Owned Life Insurance [Member] | ||
Assets | ||
Deferred compensation plan assets | $ 32 | $ 31 |
Fair Value Measurements - Signi
Fair Value Measurements - Significant Financial Instruments Not Measured at Fair Value (Details) - USD ($) $ in Millions | Apr. 02, 2021 | Jan. 01, 2021 |
Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt (including current portion) | $ 7,078 | $ 6,953 |
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) | $ 7,736 | $ 7,986 |
Derivative Instruments and He_3
Derivative Instruments and Hedging Activities - Narrative (Details) - Cash flow hedges - Foreign currency forward contracts - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Jan. 01, 2021 | |
Derivative [Line Items] | ||
Derivative outstanding | $ 406 | $ 488 |
Net unrealized losses recognized in other comprehensive loss from cash flow hedges | 16 | |
Estimated amount of existing gains to be reclassified into earnings within the next twelve months | $ 18 |
Derivative Instruments and He_4
Derivative Instruments and Hedging Activities - Fair Value of Derivative Instruments in Condensed Consolidated Balance Sheet (Details) - Derivatives designated as hedging instruments - Foreign currency forward contracts - Cash flow hedges - USD ($) $ in Millions | Apr. 02, 2021 | Jan. 01, 2021 |
Other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset | $ 18 | $ 21 |
Other non-current assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset | 3 | 3 |
Other accrued items | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability | $ 2 | $ 4 |
Changes in Estimates (Details)
Changes in Estimates (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Change in Accounting Estimate [Line Items] | ||
Revenue recognized from performance obligations satisfied in prior periods | $ 108 | $ 136 |
Contracts Accounted for under Percentage of Completion | ||
Change in Accounting Estimate [Line Items] | ||
Net EAC adjustments, before income taxes | 82 | 103 |
Net EAC adjustments, net of income taxes | $ 62 | $ 78 |
Net EAC adjustments, net of income taxes, per diluted common share (in dollars per share) | $ 0.30 | $ 0.35 |
Backlog (Details)
Backlog (Details) - USD ($) $ in Billions | Apr. 02, 2021 | Jan. 01, 2021 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Backlog | $ 21.7 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-03 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Backlog | $ 21.4 | |
Revenue performance obligation percentage | 75.00% | |
Revenue performance obligation expected timing of satisfaction period | 1 year 9 months | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue performance obligation percentage | 10.00% | |
Revenue performance obligation expected timing of satisfaction period | 1 year |
Business Segment Information -
Business Segment Information - Narrative (Details) | 3 Months Ended |
Apr. 02, 2021segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 4 |
Number of reportable segments | 4 |
Business Segment Information _2
Business Segment Information - Revenues and Income From Continuing Operations by Segment (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Segment Reporting Information [Line Items] | ||
Revenue | $ 4,567 | $ 4,626 |
Income From Continuing Operations Before Income Taxes | ||
L3Harris Merger-related integration expenses | (21) | (31) |
Amortization of acquisition-related intangibles | (164) | (145) |
Business divestiture-related losses | (15) | (3) |
Impairment of goodwill and other assets | (62) | (5) |
Pension adjustment | (111) | (97) |
Non-operating income | 117 | 95 |
Net interest expense | (66) | (63) |
Income from continuing operations before income taxes | 527 | 221 |
L3Harris | ||
Income From Continuing Operations Before Income Taxes | ||
Amortization of acquisition-related intangibles | (140) | (120) |
Additional cost of sales related to the fair value step-up in inventory sold | 0 | 15 |
Exelis | ||
Income From Continuing Operations Before Income Taxes | ||
Amortization of acquisition-related intangibles | (24) | (25) |
Operating segments | Integrated Mission Systems | ||
Segment Reporting Information [Line Items] | ||
Revenue | 1,451 | 1,370 |
Income From Continuing Operations Before Income Taxes | ||
Segment operating income | 240 | 201 |
Operating segments | Space and Airborne Systems | ||
Segment Reporting Information [Line Items] | ||
Revenue | 1,236 | 1,192 |
Income From Continuing Operations Before Income Taxes | ||
Segment operating income | 240 | 221 |
Operating segments | Communication Systems | ||
Segment Reporting Information [Line Items] | ||
Revenue | 1,112 | 1,094 |
Income From Continuing Operations Before Income Taxes | ||
Segment operating income | 281 | 250 |
Operating segments | Aviation Systems | ||
Segment Reporting Information [Line Items] | ||
Revenue | 814 | 1,011 |
Income From Continuing Operations Before Income Taxes | ||
Segment operating income | 128 | (177) |
Corporate eliminations | ||
Segment Reporting Information [Line Items] | ||
Revenue | (46) | (41) |
Unallocated corporate expenses | ||
Income From Continuing Operations Before Income Taxes | ||
Segment operating income | (40) | (25) |
Divestiture-related expenses | (7) | |
Accrual for value added tax obligation | $ 15 | |
Additional cost of sales related to the fair value step-up in inventory sold | $ 15 |
Business Segment Information _3
Business Segment Information - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2021 | Apr. 03, 2020 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 4,567 | $ 4,626 |
Integrated Mission Systems | Transferred over time | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,451 | 1,370 |
Integrated Mission Systems | Transferred over time | United States | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,033 | 1,105 |
Integrated Mission Systems | Transferred over time | International | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 418 | 265 |
Integrated Mission Systems | Transferred over time | Fixed-price | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,093 | 1,025 |
Integrated Mission Systems | Transferred over time | Cost-reimbursable | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 358 | 345 |
Integrated Mission Systems | Transferred over time | Prime contractor | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,006 | 949 |
Integrated Mission Systems | Transferred over time | Subcontractor | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 445 | 421 |
Space and Airborne Systems | Transferred over time | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,236 | 1,192 |
Space and Airborne Systems | Transferred over time | United States | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,062 | 1,003 |
Space and Airborne Systems | Transferred over time | International | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 174 | 189 |
Space and Airborne Systems | Transferred over time | Fixed-price | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 716 | 670 |
Space and Airborne Systems | Transferred over time | Cost-reimbursable | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 520 | 522 |
Space and Airborne Systems | Transferred over time | Prime contractor | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 683 | 658 |
Space and Airborne Systems | Transferred over time | Subcontractor | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 553 | 534 |
Communication Systems | Transferred at point in time and over time | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,112 | 1,094 |
Communication Systems | Transferred at point in time and over time | United States | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 841 | 834 |
Communication Systems | Transferred at point in time and over time | International | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 271 | 260 |
Communication Systems | Transferred at point in time and over time | Fixed-price | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 946 | 918 |
Communication Systems | Transferred at point in time and over time | Cost-reimbursable | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 166 | 176 |
Communication Systems | Transferred at point in time and over time | Prime contractor | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 729 | 740 |
Communication Systems | Transferred at point in time and over time | Subcontractor | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 383 | 354 |
Aviation Systems | Transferred at point in time and over time | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 814 | 1,011 |
Aviation Systems | Transferred at point in time and over time | United States | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 699 | 749 |
Aviation Systems | Transferred at point in time and over time | International | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 115 | 262 |
Aviation Systems | Transferred at point in time and over time | Fixed-price | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 652 | 841 |
Aviation Systems | Transferred at point in time and over time | Cost-reimbursable | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 162 | 170 |
Aviation Systems | Transferred at point in time and over time | Prime contractor | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 536 | 664 |
Aviation Systems | Transferred at point in time and over time | Subcontractor | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 278 | $ 347 |
Business Segment Information _4
Business Segment Information - Total Assets by Segment (Details) - USD ($) $ in Millions | Apr. 02, 2021 | Jan. 01, 2021 |
Segment Reporting Information [Line Items] | ||
Assets | $ 36,590 | $ 36,960 |
Identifiable intangibles assets acquired | 7,265 | 7,908 |
Operating segments | Integrated Mission Systems | ||
Segment Reporting Information [Line Items] | ||
Assets | 9,080 | 8,906 |
Operating segments | Space and Airborne Systems | ||
Segment Reporting Information [Line Items] | ||
Assets | 6,996 | 6,943 |
Operating segments | Communication Systems | ||
Segment Reporting Information [Line Items] | ||
Assets | 5,720 | 5,746 |
Operating segments | Aviation Systems | ||
Segment Reporting Information [Line Items] | ||
Assets | 5,436 | 5,026 |
Corporate | ||
Segment Reporting Information [Line Items] | ||
Assets | 9,358 | 10,339 |
Corporate | Exelis | ||
Segment Reporting Information [Line Items] | ||
Identifiable intangibles assets acquired | $ 7,300 | $ 7,900 |
Legal Proceedings and Conting_2
Legal Proceedings and Contingencies (Details) - Exelis - Passaic River Alaska $ in Millions | 1 Months Ended | 3 Months Ended |
Mar. 31, 2016responsible_party | Apr. 02, 2021USD ($) | |
Loss Contingencies [Line Items] | ||
Number of potentially responsible parties notified (over 100) | responsible_party | 100 | |
Estimated cost for all participating parties of EPA's preferred alternative | $ | $ 1,380 |