þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended April 1, 2016
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
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Delaware
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34-0276860
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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||
1025 West NASA Boulevard
Melbourne, Florida
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329l9
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(Address of principal executive offices)
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(Zip Code)
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(321) 727-9l00
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(Registrant’s telephone number, including area code)
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No changes
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||
(Former name, former address and former fiscal year, if changed since last report)
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Large accelerated filer
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þ
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Page
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Part I. Financial Information:
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|
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Item 1. Financial Statements (Unaudited):
|
|
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Condensed Consolidated Statement of Income for the Quarter and Three Quarters ended April 1, 2016 and April 3, 2015
|
|
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Condensed Consolidated Statement of Comprehensive Income for the Quarter and Three Quarters ended April 1, 2016 and April 3, 2015
|
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Condensed Consolidated Balance Sheet at April 1, 2016 and July 3, 2015
|
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Condensed Consolidated Statement of Cash Flows for the Three Quarters ended April 1, 2016 and April 3, 2015
|
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Notes to Condensed Consolidated Financial Statements
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Review Report of Independent Registered Certified Public Accounting Firm
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21
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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22
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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37
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Item 4. Controls and Procedures
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38
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Part II. Other Information:
|
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Item 1. Legal Proceedings
|
39
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Item 1A. Risk Factors
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39
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
39
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Item 3. Defaults Upon Senior Securities
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40
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Item 4. Mine Safety Disclosures
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Item 5. Other Information
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Item 6. Exhibits
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41
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Signature
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42
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Exhibit Index
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Quarter Ended
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Three Quarters Ended
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||||||||||||
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April 1, 2016
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April 3, 2015
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|
April 1, 2016
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|
April 3, 2015
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||||||||
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(In millions, except per share amounts)
|
||||||||||||||
Revenue from product sales and services
|
$
|
1,909
|
|
|
$
|
1,187
|
|
|
$
|
5,563
|
|
|
$
|
3,548
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of product sales and services
|
(1,312
|
)
|
|
(754
|
)
|
|
(3,813
|
)
|
|
(2,324
|
)
|
||||
Engineering, selling and administrative expenses
|
(309
|
)
|
|
(220
|
)
|
|
(877
|
)
|
|
(603
|
)
|
||||
Impairment of goodwill and other assets
|
—
|
|
|
—
|
|
|
(367
|
)
|
|
—
|
|
||||
Non-operating loss
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Interest income
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
||||
Interest expense
|
(46
|
)
|
|
(34
|
)
|
|
(139
|
)
|
|
(79
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations before income taxes
|
241
|
|
|
179
|
|
|
368
|
|
|
544
|
|
||||
Income taxes
|
(71
|
)
|
|
(53
|
)
|
|
(185
|
)
|
|
(154
|
)
|
||||
Income from continuing operations
|
170
|
|
|
126
|
|
|
183
|
|
|
390
|
|
||||
Discontinued operations, net of income taxes
|
(2
|
)
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
||||
Net income
|
$
|
168
|
|
|
$
|
126
|
|
|
$
|
164
|
|
|
$
|
390
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per common share
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.37
|
|
|
$
|
1.21
|
|
|
$
|
1.47
|
|
|
$
|
3.73
|
|
Discontinued operations
|
(0.02
|
)
|
|
—
|
|
|
(0.15
|
)
|
|
—
|
|
||||
|
$
|
1.35
|
|
|
$
|
1.21
|
|
|
$
|
1.32
|
|
|
$
|
3.73
|
|
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.36
|
|
|
$
|
1.20
|
|
|
$
|
1.46
|
|
|
$
|
3.69
|
|
Discontinued operations
|
(0.02
|
)
|
|
—
|
|
|
(0.15
|
)
|
|
—
|
|
||||
|
$
|
1.34
|
|
|
$
|
1.20
|
|
|
$
|
1.31
|
|
|
$
|
3.69
|
|
|
|
|
|
|
|
|
|
||||||||
Cash dividends paid per common share
|
$
|
0.50
|
|
|
$
|
0.47
|
|
|
$
|
1.50
|
|
|
$
|
1.41
|
|
|
|
|
|
|
|
|
|
||||||||
Basic weighted average common shares outstanding
|
124.0
|
|
|
103.7
|
|
|
123.7
|
|
|
104.1
|
|
||||
Diluted weighted average common shares outstanding
|
125.1
|
|
|
104.8
|
|
|
124.8
|
|
|
105.2
|
|
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Quarter Ended
|
|
Three Quarters Ended
|
||||||||||||
|
April 1, 2016
|
|
April 3, 2015
|
|
April 1, 2016
|
|
April 3, 2015
|
||||||||
|
(In millions)
|
||||||||||||||
Net income
|
$
|
168
|
|
|
$
|
126
|
|
|
$
|
164
|
|
|
$
|
390
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation loss, net of income taxes
|
(5
|
)
|
|
(37
|
)
|
|
(52
|
)
|
|
(111
|
)
|
||||
Net unrealized gain (loss) on hedging derivatives, net of income taxes
|
—
|
|
|
(24
|
)
|
|
1
|
|
|
(25
|
)
|
||||
Net unrecognized gain (loss) on postretirement obligations, net of income taxes
|
1
|
|
|
—
|
|
|
(3
|
)
|
|
12
|
|
||||
Other comprehensive loss, net of income taxes
|
(4
|
)
|
|
(61
|
)
|
|
(54
|
)
|
|
(124
|
)
|
||||
Total comprehensive income
|
$
|
164
|
|
|
$
|
65
|
|
|
$
|
110
|
|
|
$
|
266
|
|
|
April 1, 2016
|
|
July 3, 2015
|
||||
|
(In millions, except shares)
|
||||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
302
|
|
|
$
|
481
|
|
Receivables
|
1,054
|
|
|
1,168
|
|
||
Inventories
|
992
|
|
|
1,015
|
|
||
Income taxes receivable
|
144
|
|
|
87
|
|
||
Deferred compensation plan investments
|
14
|
|
|
267
|
|
||
Other current assets
|
139
|
|
|
165
|
|
||
Assets of disposal group held for sale
|
221
|
|
|
—
|
|
||
Total current assets
|
2,866
|
|
|
3,183
|
|
||
Non-current Assets
|
|
|
|
||||
Property, plant and equipment
|
1,007
|
|
|
1,165
|
|
||
Goodwill
|
5,940
|
|
|
6,348
|
|
||
Other intangible assets
|
1,576
|
|
|
1,775
|
|
||
Non-current deferred income taxes
|
362
|
|
|
502
|
|
||
Other non-current assets
|
149
|
|
|
154
|
|
||
Total non-current assets
|
9,034
|
|
|
9,944
|
|
||
|
$
|
11,900
|
|
|
$
|
13,127
|
|
|
|
|
|
||||
Liabilities and Equity
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Short-term debt
|
$
|
91
|
|
|
$
|
33
|
|
Accounts payable
|
529
|
|
|
581
|
|
||
Compensation and benefits
|
187
|
|
|
255
|
|
||
Other accrued items
|
387
|
|
|
490
|
|
||
Advance payments and unearned income
|
328
|
|
|
433
|
|
||
Income taxes payable
|
14
|
|
|
57
|
|
||
Deferred compensation plan liabilities
|
7
|
|
|
267
|
|
||
Current portion of long-term debt
|
383
|
|
|
130
|
|
||
Liabilities of discontinued operations
|
30
|
|
|
28
|
|
||
Liabilities of disposal group held for sale
|
56
|
|
|
—
|
|
||
Total current liabilities
|
2,012
|
|
|
2,274
|
|
||
Non-current Liabilities
|
|
|
|
||||
Defined benefit plans
|
1,716
|
|
|
1,943
|
|
||
Long-term debt
|
4,319
|
|
|
5,053
|
|
||
Non-current deferred income taxes
|
8
|
|
|
12
|
|
||
Other long-term liabilities
|
478
|
|
|
443
|
|
||
Total non-current liabilities
|
6,521
|
|
|
7,451
|
|
||
Equity
|
|
|
|
||||
Shareholders’ Equity:
|
|
|
|
||||
Preferred stock, without par value; 1,000,000 shares authorized; none issued
|
—
|
|
|
—
|
|
||
Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 124,481,216 shares at April 1, 2016 and 123,675,756 shares at July 3, 2015
|
124
|
|
|
124
|
|
||
Other capital
|
2,080
|
|
|
2,031
|
|
||
Retained earnings
|
1,232
|
|
|
1,258
|
|
||
Accumulated other comprehensive loss
|
(70
|
)
|
|
(16
|
)
|
||
Total shareholders’ equity
|
3,366
|
|
|
3,397
|
|
||
Noncontrolling interests
|
1
|
|
|
5
|
|
||
Total equity
|
3,367
|
|
|
3,402
|
|
||
|
$
|
11,900
|
|
|
$
|
13,127
|
|
|
Three Quarters Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
|
(In millions)
|
||||||
Operating Activities
|
|
|
|
||||
Net income
|
$
|
164
|
|
|
$
|
390
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
163
|
|
|
164
|
|
||
Amortization of intangible assets from Exelis Inc. acquisition
|
99
|
|
|
—
|
|
||
Share-based compensation
|
29
|
|
|
26
|
|
||
Pension contributions
|
(134
|
)
|
|
—
|
|
||
Pension income
|
(17
|
)
|
|
—
|
|
||
Net liability reduction for certain post-employment benefit plans
|
(101
|
)
|
|
—
|
|
||
Impairment of goodwill and other assets
|
367
|
|
|
—
|
|
||
Adjustment to loss on sales of businesses, net
|
20
|
|
|
—
|
|
||
(Increase) decrease in:
|
|
|
|
||||
Accounts receivable
|
102
|
|
|
(87
|
)
|
||
Inventories
|
(22
|
)
|
|
(17
|
)
|
||
Increase (decrease) in:
|
|
|
|
||||
Accounts payable and accrued expenses
|
(175
|
)
|
|
(111
|
)
|
||
Advance payments and unearned income
|
(87
|
)
|
|
(25
|
)
|
||
Income taxes
|
70
|
|
|
46
|
|
||
Other
|
29
|
|
|
9
|
|
||
Net cash provided by operating activities
|
507
|
|
|
395
|
|
||
|
|
|
|
||||
Investing Activities
|
|
|
|
||||
Cash paid for fixed income securities
|
(19
|
)
|
|
—
|
|
||
Additions of property, plant and equipment
|
(84
|
)
|
|
(102
|
)
|
||
Proceeds from sale of property, plant and equipment
|
2
|
|
|
—
|
|
||
Proceeds from sale of Cyber Integration Center
|
—
|
|
|
7
|
|
||
Adjustment to proceeds from sales of businesses, net
|
(11
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(112
|
)
|
|
(95
|
)
|
||
Financing Activities
|
|
|
|
||||
Proceeds from borrowings
|
118
|
|
|
14
|
|
||
Repayments of borrowings
|
(510
|
)
|
|
(46
|
)
|
||
Proceeds from exercises of employee stock options
|
36
|
|
|
34
|
|
||
Repurchases of common stock
|
—
|
|
|
(150
|
)
|
||
Cash dividends
|
(189
|
)
|
|
(149
|
)
|
||
Other financing activities
|
(15
|
)
|
|
(39
|
)
|
||
Net cash used in financing activities
|
(560
|
)
|
|
(336
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(14
|
)
|
|
(37
|
)
|
||
|
|
|
|
||||
Net decrease in cash and cash equivalents
|
(179
|
)
|
|
(73
|
)
|
||
Cash and cash equivalents, beginning of year
|
481
|
|
|
561
|
|
||
Cash and cash equivalents, end of quarter
|
$
|
302
|
|
|
$
|
488
|
|
•
|
In the accompanying Condensed Consolidated Balance Sheet (Unaudited), we reclassified
$341 million
of current deferred income tax assets from the “Current deferred income taxes” line item in the assets section and
$7 million
of current deferred income tax liabilities from the "Current deferred income taxes" line item in the liabilities and equity section, which resulted in an increase of
$339 million
to the “Non-current deferred income taxes” line item in the assets section and a net increase of
$5 million
to the "Non-current deferred income taxes" line item in the liabilities and equity section.
|
•
|
In the accompanying Condensed Consolidated Statement of Cash Flows (Unaudited), we reclassified
$20 million
from the “Non-current deferred income taxes” line item to the “Income taxes” line item in the operating activities section.
|
|
April 1, 2016
|
|||
|
(In millions)
|
|||
Receivables
|
$
|
12
|
|
|
Inventories
|
35
|
|
||
Other current assets
|
1
|
|
||
Total current assets
|
48
|
|
||
Property, plant and equipment
|
84
|
|
||
Goodwill
|
61
|
|
||
Other intangible assets
|
24
|
|
||
Other non-current assets
|
4
|
|
||
Total non-current assets
|
173
|
|
||
Assets of disposal group held for sale
|
$
|
221
|
|
|
|
|
|||
Current liabilities
|
$
|
12
|
|
|
Non-current liabilities
|
44
|
|
||
Liabilities of disposal group held for sale
|
$
|
56
|
|
|
|
|
|
April 1,
2016 (1) |
|
July 3,
2015 (1) |
|||||
|
(In millions)
|
|||||||
Foreign currency translation, net of income taxes of $29 million and $15 million at April 1, 2016 and July 3, 2015, respectively
|
$
|
(114
|
)
|
|
$
|
(62
|
)
|
|
Net unrealized loss on hedging derivatives, net of income taxes of $11 million and $12 million at April 1, 2016 and July 3, 2015, respectively
|
(18
|
)
|
|
(19
|
)
|
|||
Unrecognized postretirement obligations, net of income taxes of $41 million and $42 million at April 1, 2016 and July 3, 2015, respectively
|
62
|
|
|
65
|
|
|||
|
$
|
(70
|
)
|
|
$
|
(16
|
)
|
|
|
|
|
|
|
(1)
|
Reclassifications out of accumulated other comprehensive loss to earnings were not material for the
three quarters ended April 1, 2016
or
April 3, 2015
.
|
|
April 1,
2016 |
|
July 3,
2015 |
||||
|
(In millions)
|
||||||
Accounts receivable
|
$
|
732
|
|
|
$
|
837
|
|
Unbilled costs and accrued earnings on cost-plus contracts
|
331
|
|
|
343
|
|
||
|
1,063
|
|
|
1,180
|
|
||
Less allowances for collection losses
|
(9
|
)
|
|
(12
|
)
|
||
|
$
|
1,054
|
|
|
$
|
1,168
|
|
|
April 1,
2016 |
|
July 3,
2015 |
||||
|
(In millions)
|
||||||
Unbilled costs and accrued earnings on fixed-price contracts
|
$
|
524
|
|
|
$
|
463
|
|
Finished products
|
119
|
|
|
100
|
|
||
Work in process
|
154
|
|
|
256
|
|
||
Raw materials and supplies
|
195
|
|
|
196
|
|
||
|
$
|
992
|
|
|
$
|
1,015
|
|
|
April 1,
2016 |
|
July 3,
2015 |
||||
|
(In millions)
|
||||||
Land
|
$
|
45
|
|
|
$
|
45
|
|
Software capitalized for internal use
|
138
|
|
|
155
|
|
||
Buildings
|
608
|
|
|
587
|
|
||
Machinery and equipment
|
1,336
|
|
|
1,526
|
|
||
|
2,127
|
|
|
2,313
|
|
||
Less accumulated depreciation and amortization
|
(1,120
|
)
|
|
(1,148
|
)
|
||
|
$
|
1,007
|
|
|
$
|
1,165
|
|
|
Communication
Systems
|
|
Space and
Intelligence
Systems
|
|
Electronic
Systems
|
|
Critical
Networks
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Balance at July 3, 2015
|
$
|
760
|
|
|
$
|
1,446
|
|
|
$
|
1,718
|
|
|
$
|
2,424
|
|
|
$
|
6,348
|
|
Impairment of goodwill
|
—
|
|
|
—
|
|
|
—
|
|
|
(290
|
)
|
|
(290
|
)
|
|||||
Decrease from reclassification to held for sale asset (1)
|
—
|
|
|
—
|
|
|
(61
|
)
|
|
—
|
|
|
(61
|
)
|
|||||
Currency translation adjustments
|
—
|
|
|
(7
|
)
|
|
(2
|
)
|
|
(39
|
)
|
|
(48
|
)
|
|||||
Other (including true-ups of previously estimated purchase price allocations) (2)
|
17
|
|
|
(12
|
)
|
|
26
|
|
|
(40
|
)
|
|
(9
|
)
|
|||||
Balance at April 1, 2016
|
$
|
777
|
|
|
$
|
1,427
|
|
|
$
|
1,681
|
|
|
$
|
2,055
|
|
|
$
|
5,940
|
|
|
(1)
|
During the third quarter of fiscal 2016, we determined Aerostructures met the held for sale criteria and reclassified Aerostructures' assets to current assets in accordance with GAAP. We included Aerostructures' assets in the "Assets of disposal group held for sale" line item in the accompanying Condensed Consolidated Balance Sheet (Unaudited) as of April 1, 2016. See
Note B — Discontinued Operations and Divestitures
and
Note T — Subsequent Events
in these Notes for additional information.
|
(2)
|
Our accounting for the Exelis acquisition is still preliminary. The fair value estimates for the assets acquired and liabilities assumed were based on preliminary calculations, and our estimates and assumptions are subject to change as we obtain additional information for our estimates during the measurement period (up to one year from the acquisition date). The primary areas of these preliminary estimates that are not yet finalized relate to certain tangible assets, liabilities acquired (including environmental reserves), and tax-related items. During the
three quarters ended April 1, 2016
, we recorded several purchase price adjustments which impacted goodwill, the largest of which reduced current liabilities by
$82 million
related to previously unrecognized tax benefits and to deferred revenue based on the fair value of a customer contract.
|
|
(In millions)
|
||
Balance at July 3, 2015
|
$
|
36
|
|
Warranty provision for sales
|
15
|
|
|
Settlements
|
(14
|
)
|
|
Other adjustments to warranty liability, including those for foreign currency translation
|
(2
|
)
|
|
Balance at April 1, 2016
|
$
|
35
|
|
|
|
Quarter Ended April 1, 2016
|
|
Three Quarters Ended April 1, 2016
|
||||||||||||||||||||
|
|
Pension
|
|
Other
Benefits
|
|
Total
|
|
Pension
|
|
Other
Benefits
|
|
Total
|
||||||||||||
|
|
(In millions)
|
||||||||||||||||||||||
Net periodic benefit cost (income)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Service cost
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
19
|
|
|
$
|
56
|
|
|
$
|
4
|
|
|
$
|
60
|
|
|
Interest cost
|
63
|
|
|
3
|
|
|
66
|
|
|
186
|
|
|
10
|
|
|
196
|
|
|||||||
Expected return on plan assets
|
(87
|
)
|
|
(4
|
)
|
|
(91
|
)
|
|
(258
|
)
|
|
(13
|
)
|
|
(271
|
)
|
|||||||
Amortization of net actuarial loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|||||||
Amortization of prior service cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
(7
|
)
|
|||||||
Net periodic benefit income
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
(6
|
)
|
|
$
|
(16
|
)
|
|
$
|
(4
|
)
|
|
$
|
(20
|
)
|
|
Effect of curtailments or settlements (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(121
|
)
|
|
(121
|
)
|
|||||||
Total net periodic benefit income
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
(6
|
)
|
|
$
|
(16
|
)
|
|
$
|
(125
|
)
|
|
$
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
We discontinued certain significantly underfunded post-employment benefit plans effective December 31, 2015. Under GAAP, this resulted in a negative plan amendment and curtailment during the quarter ended January 1, 2016, a settlement as of December 31, 2015, and a net liability reduction of
$101 million
.
|
|
Quarter Ended
|
|
Three Quarters Ended
|
||||||||||||
|
April 1,
2016 |
|
April 3,
2015 |
|
April 1,
2016 |
|
April 3,
2015 |
||||||||
|
(In millions, except per share amounts)
|
||||||||||||||
Income from continuing operations
|
$
|
170
|
|
|
$
|
126
|
|
|
$
|
183
|
|
|
$
|
390
|
|
Adjustments for participating securities outstanding
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
||||
Income from continuing operations used in per basic and diluted common share calculations (A)
|
$
|
170
|
|
|
$
|
125
|
|
|
$
|
182
|
|
|
$
|
388
|
|
|
|
|
|
|
|
|
|
||||||||
Basic weighted average common shares outstanding (B)
|
124.0
|
|
|
103.7
|
|
|
123.7
|
|
|
104.1
|
|
||||
Impact of dilutive share-based awards
|
1.1
|
|
|
1.1
|
|
|
1.1
|
|
|
1.1
|
|
||||
Diluted weighted average common shares outstanding (C)
|
125.1
|
|
|
104.8
|
|
|
124.8
|
|
|
105.2
|
|
||||
Income from continuing operations per basic common share (A)/(B)
|
$
|
1.37
|
|
|
$
|
1.21
|
|
|
$
|
1.47
|
|
|
$
|
3.73
|
|
Income from continuing operations per diluted common share (A)/(C)
|
$
|
1.36
|
|
|
$
|
1.20
|
|
|
$
|
1.46
|
|
|
$
|
3.69
|
|
•
|
Amounts recorded in respect of our expected near-term recognition of a tax loss for the divestiture of Aerostructures, net of valuation allowance, following our classification of Aerostructures as held for sale as of the end of the third quarter of fiscal 2016;
|
•
|
Additional deductions and additional research credits claimed on our fiscal 2015 tax return compared with our recorded estimates at the end of fiscal 2015; and
|
•
|
State tax reductions resulting from our integration of Exelis operations.
|
•
|
The discrete items noted above favorably impacting the third quarter of fiscal 2016;
|
•
|
The effect of legislation enacted in the second quarter of fiscal
2016
that restored the U.S. Federal income tax credit for qualifying research and development (“R&D”) expenses for calendar year
2015
and made the credit permanent for the periods following December 31, 2015;
|
•
|
The settlement of a state tax issue for an amount lower than the previously recorded estimate; and
|
•
|
Several differences between GAAP and tax accounting for investments.
|
•
|
The discrete items noted above favorably impacting the third quarter of fiscal 2015;
|
•
|
The effect of legislation enacted in the second quarter of fiscal 2015 that restored the U.S. Federal income tax credit for qualifying R&D expenses for calendar year
2014
;
|
•
|
Finalizing issues with Canadian and U.S. tax authorities for amounts lower than previously recorded estimates; and
|
•
|
The recognition of foreign tax credits resulting from a dividend paid by a foreign subsidiary during fiscal 2013 that exceeded the U.S. tax liability in respect of the dividend.
|
•
|
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.
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
(In millions)
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|||||||||
Deferred compensation plan investments: (1)
|
|
|
|
|
|
|
|
|||||||||
Corporate-owned life insurance
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
Stock fund
|
56
|
|
|
—
|
|
|
—
|
|
|
56
|
|
|||||
Equity security
|
36
|
|
|
—
|
|
|
—
|
|
|
36
|
|
|||||
Fixed income securities (2)
|
19
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|||||
Liabilities
|
|
|
|
|
|
|
|
|||||||||
Deferred compensation plans (3)
|
42
|
|
|
71
|
|
|
—
|
|
|
113
|
|
|||||
|
|
|
|
|
|
|
|
|
(1)
|
Represents investments held in a “Rabbi Trust” associated with our non-qualified deferred compensation plans, which we include in the “Deferred compensation plan investments” and “Other non-current assets” line items in the accompanying Condensed Consolidated Balance Sheet (Unaudited).
|
(2)
|
Represents an investment in sovereign bonds, which we include in the "Other current assets" line item in the accompanying Condensed Consolidated Balance Sheet (Unaudited).
|
(3)
|
Primarily represents obligations to pay benefits under certain non-qualified deferred compensation plans, which we include in the “Deferred compensation plan liabilities” and “Other long-term liabilities” line items in the accompanying Condensed Consolidated Balance Sheet (Unaudited). Under these plans, participants designate investment options (including money market, stock and fixed-income funds), which serve as the basis for measurement of the notional value of their accounts.
|
|
|
April 1, 2016
|
|
July 3, 2015
|
||||||||||||
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
|
|
(In millions)
|
||||||||||||||
Financial Liabilities
|
|
|
|
|
|
|
|
|||||||||
Long-term debt (including current portion) (1)
|
$
|
4,702
|
|
|
$
|
4,940
|
|
|
$
|
5,183
|
|
|
$
|
5,230
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The fair value was estimated using a market approach based on quoted market prices for our debt traded in the secondary market. If our long-term debt in our balance sheet were measured at fair value, it would be categorized in Level 2 of the fair value hierarchy.
|
•
|
Communication Systems, serving markets in tactical and airborne radios, night vision technology, and defense and public safety networks;
|
•
|
Space and Intelligence Systems, providing complete earth observation, environmental, geospatial, space protection, and intelligence solutions from advanced sensors and payloads, as well as ground processing and information analytics;
|
•
|
Electronic Systems, offering an extensive portfolio of solutions in electronic warfare, avionics, wireless technology, command, control, communications, computers and intelligence (“C4I”), undersea systems and aerostructures (this business was classified as held for sale as of the end of the third quarter of fiscal 2016); and
|
•
|
Critical Networks, providing managed services supporting air traffic management, energy and maritime communications, and ground network operation and sustainment, as well as high-value information technology (“IT”) and engineering services.
|
|
|
April 1,
2016 |
|
July 3,
2015 |
||||
|
|
(In millions)
|
||||||
Total Assets
|
|
|
|
|||||
Communication Systems
|
$
|
1,757
|
|
|
$
|
1,906
|
|
|
Space and Intelligence Systems
|
2,114
|
|
|
2,096
|
|
|||
Electronic Systems
|
2,549
|
|
|
2,513
|
|
|||
Critical Networks
|
2,972
|
|
|
3,492
|
|
|||
Corporate (1)
|
2,508
|
|
|
3,120
|
|
|||
|
$
|
11,900
|
|
|
$
|
13,127
|
|
|
|
|
|
|
|
(1)
|
Identifiable intangible assets acquired in connection with acquisition of Exelis in the fourth quarter of fiscal
2015
were recorded as Corporate assets because they benefit the entire Company as opposed to any individual segments. Exelis identifiable intangible asset balances recorded as Corporate assets were
$1.5 billion
and
$1.6 billion
as of April 1, 2016 and July 3, 2015, respectively.
|
|
|
Quarter Ended
|
|
Three Quarters Ended
|
||||||||||||
|
|
April 1,
2016 |
|
April 3,
2015 |
|
April 1,
2016 |
|
April 3,
2015 |
||||||||
|
|
(In millions)
|
||||||||||||||
Revenue
|
|
|
|
|
|
|
|
|||||||||
Communication Systems
|
$
|
485
|
|
|
$
|
458
|
|
|
$
|
1,428
|
|
|
$
|
1,282
|
|
|
Space and Intelligence Systems
|
489
|
|
|
228
|
|
|
1,370
|
|
|
702
|
|
|||||
Electronic Systems
|
393
|
|
|
126
|
|
|
1,149
|
|
|
363
|
|
|||||
Critical Networks
|
551
|
|
|
379
|
|
|
1,658
|
|
|
1,209
|
|
|||||
Corporate eliminations
|
(9
|
)
|
|
(4
|
)
|
|
(42
|
)
|
|
(8
|
)
|
|||||
|
$
|
1,909
|
|
|
$
|
1,187
|
|
|
$
|
5,563
|
|
|
$
|
3,548
|
|
|
Income From Continuing Operations Before Income Taxes
|
|
|
|
|
|
|
|
|||||||||
Segment Operating Income (Loss):
|
|
|
|
|
|
|
|
|||||||||
Communication Systems (1)
|
$
|
154
|
|
|
$
|
153
|
|
|
$
|
413
|
|
|
$
|
395
|
|
|
Space and Intelligence Systems
|
76
|
|
|
36
|
|
|
211
|
|
|
107
|
|
|||||
Electronic Systems
|
75
|
|
|
26
|
|
|
207
|
|
|
72
|
|
|||||
Critical Networks (2)
|
59
|
|
|
29
|
|
|
(186
|
)
|
|
121
|
|
|||||
Unallocated corporate expense (3)
|
(75
|
)
|
|
(29
|
)
|
|
(136
|
)
|
|
(67
|
)
|
|||||
Corporate eliminations
|
(1
|
)
|
|
(2
|
)
|
|
(3
|
)
|
|
(7
|
)
|
|||||
Non-operating loss
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net interest expense
|
(46
|
)
|
|
(34
|
)
|
|
(138
|
)
|
|
(77
|
)
|
|||||
|
$
|
241
|
|
|
$
|
179
|
|
|
$
|
368
|
|
|
$
|
544
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Communication Systems operating income in the three quarters ended April 1, 2016 included
$17 million
of charges recorded in the quarter ended January 1, 2016, primarily related to workforce reductions, facility consolidation and other items. We recorded
$14 million
of these charges in the “Cost of product sales and services” line item and the remaining
$3 million
of these charges in the “Engineering, selling and administrative expenses” line item in the accompanying Condensed Consolidated Statement of Income (Unaudited).
|
(2)
|
Critical Networks operating loss in the
three quarters ended April 1, 2016
was primarily due to a
$367 million
non-cash impairment charge recorded in the quarter ended January 1, 2016 to write down goodwill and other assets related to Harris CapRock Communications. We recorded this charge in the “Impairment of goodwill and other assets” line item in the accompanying Condensed Consolidated Statement of Income (Unaudited). Additionally, operating loss in the
three quarters ended April 1, 2016
included
$12 million
of charges in the quarter ended January 1, 2016, primarily related to workforce reductions and facility consolidation. We recorded these charges in the “Engineering, selling and administrative expenses” line item in the accompanying Condensed Consolidated Statement of Income (Unaudited).
|
(3)
|
Unallocated corporate expense included: (i) the impact of a net liability reduction of
$101 million
in the
three quarters ended April 1, 2016
for certain post-employment benefit plans, (ii) charges of
$23 million
and
$92 million
in the quarter and
three quarters ended April 1, 2016
, respectively, for integration and other costs associated with our acquisition of Exelis in the fourth quarter of fiscal
2015
(which included charges of
$3 million
and
$8 million
in the quarter and three quarters ended April 1, 2016, respectively, for amortization of a step up in inventory), and (iii)
$33 million
and
$99 million
of expense in the quarter and
three quarters ended April 1, 2016
, respectively, for amortization of intangible assets acquired as a result of our acquisition of Exelis. Because the acquisition of Exelis benefited the entire Company as opposed to any individual segments, the amortization of identifiable intangible assets acquired in the Exelis acquisition was recorded as unallocated corporate expense.
|
•
|
Results of Operations
— an analysis of our consolidated results of operations and of the results in each of our four business segments, to the extent the segment operating results are helpful to an understanding of our business as a whole, for the periods presented in our Condensed Consolidated Financial Statements (Unaudited).
|
•
|
Liquidity and Capital Resources
— an analysis of cash flows, funding of pension plans, common stock repurchases, dividends, capital structure and resources, off-balance sheet arrangements and commercial commitments and contractual obligations.
|
•
|
Critical Accounting Policies and Estimates
— information about accounting policies that require critical judgments and estimates and about accounting standards that have been issued, but are not yet effective for us, and their potential impact on our financial position, results of operations and cash flows.
|
•
|
Forward-Looking Statements and Factors that May Affect Future Results
— cautionary information about forward-looking statements and a description of certain risks and uncertainties that could cause our actual results to differ materially from our historical results or our current expectations or projections.
|
•
|
Communication Systems, serving markets in tactical and airborne radios, night vision technology, and defense and public safety networks;
|
•
|
Space and Intelligence Systems, providing complete earth observation, environmental, geospatial, space protection, and intelligence solutions from advanced sensors and payloads, as well as ground processing and information analytics;
|
•
|
Electronic Systems, offering an extensive portfolio of solutions in electronic warfare, avionics, wireless technology, C4I, undersea systems and aerostructures (this business was classified as held for sale as of the end of the third quarter of fiscal 2016); and
|
•
|
Critical Networks, providing managed services supporting air traffic management, energy and maritime communications, and ground network operation and sustainment, as well as high-value IT and engineering services.
|
•
|
Revenue increased
60.8 percent
to
$1.909 billion
in the
third
quarter of fiscal
2016
from
$1.187 billion
in the
third
quarter of fiscal
2015
;
|
•
|
Income from continuing operations increased
34.9 percent
to
$170 million
in the
third
quarter of fiscal
2016
from
$126 million
in the
third
quarter of fiscal
2015
;
|
•
|
Income from continuing operations per diluted share increased
13.3 percent
to
$1.36
in the
third
quarter of fiscal
2016
from
$1.20
in the
third
quarter of fiscal
2015
;
|
•
|
Communication Systems revenue increased 5.9 percent to $485 million and operating income increased 0.7 percent to $154 million in the
third
quarter of fiscal
2016
compared with the
third
quarter of fiscal
2015
;
|
•
|
Space and Intelligence Systems revenue increased
114.5 percent
to
$489 million
and operating income increased
111.1 percent
to
$76 million
in the
third
quarter of fiscal
2016
compared with the
third
quarter of fiscal
2015
;
|
•
|
Electronic Systems revenue increased
211.9 percent
to
$393 million
and operating income increased
188.5 percent
to
$75 million
in the
third
quarter of fiscal
2016
compared with the
third
quarter of fiscal
2015
;
|
•
|
Critical Networks revenue increased
45.4 percent
to
$551 million
and operating income increased
103.4 percent
to
$59 million
in the
third
quarter of fiscal
2016
compared with the
third
quarter of fiscal
2015
; and
|
•
|
Net cash provided by operating activities increased
28.4 percent
to
$507 million
in the first
three
quarters of fiscal
2016
from
$395 million
in the first
three
quarters of fiscal
2015
.
|
|
|
Quarter Ended
|
|
Three Quarters Ended
|
||||||||||||||||||
|
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
||||||||||
|
|
(Dollars in millions, except per share amounts)
|
||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Communication Systems
|
$
|
485
|
|
|
$
|
458
|
|
|
5.9
|
%
|
|
$
|
1,428
|
|
|
$
|
1,282
|
|
|
11.4
|
%
|
|
Space and Intelligence Systems
|
489
|
|
|
228
|
|
|
114.5
|
%
|
|
1,370
|
|
|
702
|
|
|
95.2
|
%
|
|||||
Electronic Systems
|
393
|
|
|
126
|
|
|
211.9
|
%
|
|
1,149
|
|
|
363
|
|
|
216.5
|
%
|
|||||
Critical Networks
|
551
|
|
|
379
|
|
|
45.4
|
%
|
|
1,658
|
|
|
1,209
|
|
|
37.1
|
%
|
|||||
Corporate eliminations
|
(9
|
)
|
|
(4
|
)
|
|
125.0
|
%
|
|
(42
|
)
|
|
(8
|
)
|
|
425.0
|
%
|
|||||
Total revenue
|
1,909
|
|
|
1,187
|
|
|
60.8
|
%
|
|
5,563
|
|
|
3,548
|
|
|
56.8
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cost of product sales and services
|
(1,312
|
)
|
|
(754
|
)
|
|
74.0
|
%
|
|
(3,813
|
)
|
|
(2,324
|
)
|
|
64.1
|
%
|
|||||
Gross margin
|
597
|
|
|
433
|
|
|
37.9
|
%
|
|
1,750
|
|
|
1,224
|
|
|
43.0
|
%
|
|||||
% of total revenue
|
31.3
|
%
|
|
36.5
|
%
|
|
|
|
31.5
|
%
|
|
34.5
|
%
|
|
|
|||||||
Engineering, selling and administrative expenses
|
(309
|
)
|
|
(220
|
)
|
|
40.5
|
%
|
|
(877
|
)
|
|
(603
|
)
|
|
45.4
|
%
|
|||||
% of total revenue
|
16.2
|
%
|
|
18.5
|
%
|
|
|
|
15.8
|
%
|
|
17.0
|
%
|
|
|
|||||||
Impairment of goodwill and other assets
|
—
|
|
|
—
|
|
|
*
|
|
|
(367
|
)
|
|
—
|
|
|
*
|
|
|||||
Non-operating loss
|
(1
|
)
|
|
—
|
|
|
*
|
|
|
—
|
|
|
—
|
|
|
*
|
|
|||||
Net interest expense
|
(46
|
)
|
|
(34
|
)
|
|
35.3
|
%
|
|
(138
|
)
|
|
(77
|
)
|
|
79.2
|
%
|
|||||
Income from continuing operations before income taxes
|
241
|
|
|
179
|
|
|
34.6
|
%
|
|
368
|
|
|
544
|
|
|
(32.4
|
)%
|
|||||
Income taxes
|
(71
|
)
|
|
(53
|
)
|
|
34.0
|
%
|
|
(185
|
)
|
|
(154
|
)
|
|
20.1
|
%
|
|||||
Effective tax rate
|
29.5
|
%
|
|
29.6
|
%
|
|
|
|
50.3
|
%
|
|
28.3
|
%
|
|
|
|||||||
Income from continuing operations
|
$
|
170
|
|
|
$
|
126
|
|
|
34.9
|
%
|
|
$
|
183
|
|
|
$
|
390
|
|
|
(53.1
|
)%
|
|
% of total revenue
|
8.9
|
%
|
|
10.6
|
%
|
|
|
|
3.3
|
%
|
|
11.0
|
%
|
|
|
|||||||
Income from continuing operations per diluted common share
|
$
|
1.36
|
|
|
$
|
1.20
|
|
|
13.3
|
%
|
|
$
|
1.46
|
|
|
$
|
3.69
|
|
|
(60.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
Amounts recorded in respect of our expected near-term recognition of a tax loss for the divestiture of Aerostructures, net of valuation allowance, following our classification of Aerostructures as held for sale as of the end of the third quarter of fiscal 2016;
|
•
|
Additional deductions and additional research credits claimed on our fiscal 2015 tax return compared with our recorded estimates at the end of fiscal 2015; and
|
•
|
State tax reductions resulting from our integration of Exelis operations.
|
•
|
The discrete items noted above favorably impacting the third quarter of fiscal 2016;
|
•
|
The effect of legislation enacted in the second quarter of fiscal
2016
that restored the U.S. Federal income tax credit for qualifying research and development (“R&D”) expenses for calendar year
2015
and made the credit permanent for the periods following December 31, 2015;
|
•
|
The settlement of a state tax issue for an amount lower than the previously recorded estimate; and
|
•
|
Several differences between GAAP and tax accounting for investments.
|
•
|
The discrete items noted above favorably impacitng the third quarter of fiscal 2015;
|
•
|
The effect of legislation enacted in the second quarter of fiscal 2015 that restored the U.S. Federal income tax credit for qualifying R&D expenses for calendar year
2014
;
|
•
|
Finalizing issues with Canadian and U.S. tax authorities for amounts lower than previously recorded estimates; and
|
•
|
The recognition of foreign tax credits resulting from a dividend paid by a foreign subsidiary during fiscal 2013 that exceeded the U.S. tax liability in respect of the dividend.
|
|
Quarter Ended
|
|
Three Quarters Ended
|
||||||||||||||||||
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
||||||||||
|
(Dollars in millions)
|
||||||||||||||||||||
Revenue
|
$
|
485
|
|
|
$
|
458
|
|
|
5.9
|
%
|
|
$
|
1,428
|
|
|
$
|
1,282
|
|
|
11.4
|
%
|
Cost of product sales and services
|
(233
|
)
|
|
(207
|
)
|
|
12.6
|
%
|
|
(713
|
)
|
|
(612
|
)
|
|
16.5
|
%
|
||||
Gross margin
|
252
|
|
|
251
|
|
|
0.4
|
%
|
|
715
|
|
|
670
|
|
|
6.7
|
%
|
||||
% of revenue
|
52.0
|
%
|
|
54.8
|
%
|
|
|
|
50.1
|
%
|
|
52.3
|
%
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
ESA expenses
|
(98
|
)
|
|
(98
|
)
|
|
—
|
%
|
|
(302
|
)
|
|
(275
|
)
|
|
9.8
|
%
|
||||
% of revenue
|
20.2
|
%
|
|
21.4
|
%
|
|
|
|
21.1
|
%
|
|
21.5
|
%
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Segment operating income
|
$
|
154
|
|
|
$
|
153
|
|
|
0.7
|
%
|
|
$
|
413
|
|
|
$
|
395
|
|
|
4.6
|
%
|
% of revenue
|
31.8
|
%
|
|
33.4
|
%
|
|
|
|
28.9
|
%
|
|
30.8
|
%
|
|
|
|
Quarter Ended
|
|
Three Quarters Ended
|
||||||||||||||||||
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
||||||||||
|
(Dollars in millions)
|
||||||||||||||||||||
Revenue
|
$
|
489
|
|
|
$
|
228
|
|
|
114.5
|
%
|
|
$
|
1,370
|
|
|
$
|
702
|
|
|
95.2
|
%
|
Cost of product sales and services
|
(362
|
)
|
|
(157
|
)
|
|
130.6
|
%
|
|
(1,006
|
)
|
|
(496
|
)
|
|
102.8
|
%
|
||||
Gross margin
|
127
|
|
|
71
|
|
|
78.9
|
%
|
|
364
|
|
|
206
|
|
|
76.7
|
%
|
||||
% of revenue
|
26.0
|
%
|
|
31.1
|
%
|
|
|
|
26.6
|
%
|
|
29.3
|
%
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
ESA expenses
|
(51
|
)
|
|
(35
|
)
|
|
45.7
|
%
|
|
(153
|
)
|
|
(99
|
)
|
|
54.5
|
%
|
||||
% of revenue
|
10.4
|
%
|
|
15.4
|
%
|
|
|
|
11.2
|
%
|
|
14.1
|
%
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Segment operating income
|
$
|
76
|
|
|
$
|
36
|
|
|
111.1
|
%
|
|
$
|
211
|
|
|
$
|
107
|
|
|
97.2
|
%
|
% of revenue
|
15.5
|
%
|
|
15.8
|
%
|
|
|
|
15.4
|
%
|
|
15.2
|
%
|
|
|
|
Quarter Ended
|
|
Three Quarters Ended
|
||||||||||||||||||
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
||||||||||
|
(Dollars in millions)
|
||||||||||||||||||||
Revenue
|
$
|
393
|
|
|
$
|
126
|
|
|
211.9
|
%
|
|
$
|
1,149
|
|
|
$
|
363
|
|
|
216.5
|
%
|
Cost of product sales and services
|
(283
|
)
|
|
(88
|
)
|
|
221.6
|
%
|
|
(826
|
)
|
|
(258
|
)
|
|
220.2
|
%
|
||||
Gross margin
|
110
|
|
|
38
|
|
|
189.5
|
%
|
|
323
|
|
|
105
|
|
|
207.6
|
%
|
||||
% of revenue
|
28.0
|
%
|
|
30.2
|
%
|
|
|
|
28.1
|
%
|
|
28.9
|
%
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
ESA expenses
|
(35
|
)
|
|
(12
|
)
|
|
191.7
|
%
|
|
(116
|
)
|
|
(33
|
)
|
|
251.5
|
%
|
||||
% of revenue
|
8.9
|
%
|
|
9.5
|
%
|
|
|
|
10.1
|
%
|
|
9.1
|
%
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Segment operating income
|
$
|
75
|
|
|
$
|
26
|
|
|
188.5
|
%
|
|
$
|
207
|
|
|
$
|
72
|
|
|
187.5
|
%
|
% of revenue
|
19.1
|
%
|
|
20.6
|
%
|
|
|
|
18.0
|
%
|
|
19.8
|
%
|
|
|
|
|
Quarter Ended
|
|
Three Quarters Ended
|
||||||||||||||||||
|
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
||||||||||
|
|
(Dollars in millions)
|
||||||||||||||||||||
Revenue
|
$
|
551
|
|
|
$
|
379
|
|
|
45.4
|
%
|
|
$
|
1,658
|
|
|
$
|
1,209
|
|
|
37.1
|
%
|
|
Cost of product sales and services
|
(444
|
)
|
|
(306
|
)
|
|
45.1
|
%
|
|
(1,310
|
)
|
|
(968
|
)
|
|
35.3
|
%
|
|||||
Gross margin
|
107
|
|
|
73
|
|
|
46.6
|
%
|
|
348
|
|
|
241
|
|
|
44.4
|
%
|
|||||
% of revenue
|
19.4
|
%
|
|
19.3
|
%
|
|
|
|
21.0
|
%
|
|
19.9
|
%
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
ESA expenses
|
(48
|
)
|
|
(44
|
)
|
|
9.1
|
%
|
|
(167
|
)
|
|
(120
|
)
|
|
39.2
|
%
|
|||||
% of revenue
|
8.7
|
%
|
|
11.6
|
%
|
|
|
|
10.1
|
%
|
|
9.9
|
%
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Impairment of goodwill and other assets
|
—
|
|
|
—
|
|
|
*
|
|
|
(367
|
)
|
|
—
|
|
|
*
|
|
|||||
Segment operating income (loss)
|
$
|
59
|
|
|
$
|
29
|
|
|
103.4
|
%
|
|
$
|
(186
|
)
|
|
$
|
121
|
|
|
*
|
|
|
% of revenue
|
10.7
|
%
|
|
7.7
|
%
|
|
|
|
(11.2
|
)%
|
|
10.0
|
%
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Three Quarters Ended
|
||||||||||||||||||
|
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
|
April 1, 2016
|
|
April 3, 2015
|
|
%
Inc/
(Dec)
|
||||||||||
|
|
(Dollars in millions)
|
||||||||||||||||||||
Unallocated corporate expense
|
$
|
42
|
|
|
$
|
29
|
|
|
44.8
|
%
|
|
$
|
37
|
|
|
$
|
67
|
|
|
(44.8
|
)%
|
|
Amortization of intangible assets from Exelis Inc. acquisition
|
33
|
|
|
—
|
|
|
*
|
|
|
99
|
|
|
—
|
|
|
*
|
|
|||||
Total unallocated corporate expense
|
$
|
75
|
|
|
$
|
29
|
|
|
158.6
|
%
|
|
$
|
136
|
|
|
$
|
67
|
|
|
103.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Quarters Ended
|
||||||
|
April 1,
2016 |
|
April 3,
2015 |
||||
|
(In millions)
|
||||||
Net cash provided by operating activities
|
$
|
507
|
|
|
$
|
395
|
|
Net cash used in investing activities
|
(112
|
)
|
|
(95
|
)
|
||
Net cash used in financing activities
|
(560
|
)
|
|
(336
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(14
|
)
|
|
(37
|
)
|
||
Net decrease in cash and cash equivalents
|
(179
|
)
|
|
(73
|
)
|
||
Cash and cash equivalents, beginning of year
|
481
|
|
|
561
|
|
||
Cash and cash equivalents, end of quarter
|
$
|
302
|
|
|
$
|
488
|
|
•
|
Any obligation under certain guarantee contracts;
|
•
|
A retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;
|
•
|
Any obligation, including a contingent obligation, under certain derivative instruments; and
|
•
|
Any obligation, including a contingent obligation, under a material variable interest held by the registrant in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the registrant, or engages in leasing, hedging or research and development services with the registrant.
|
|
Quarter Ended
|
|
Three Quarters Ended
|
||||||||||||
|
April 1,
2016 |
|
April 3,
2015 |
|
April 1,
2016 |
|
April 3,
2015 |
||||||||
|
(In millions)
|
||||||||||||||
Favorable adjustments
|
$
|
52
|
|
|
$
|
30
|
|
|
$
|
148
|
|
|
$
|
94
|
|
Unfavorable adjustments
|
(41
|
)
|
|
(19
|
)
|
|
(96
|
)
|
|
(45
|
)
|
||||
Net operating income adjustments
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
52
|
|
|
$
|
49
|
|
•
|
We depend on U.S. Government customers for a significant portion of our revenue, and the loss of these relationships, a reduction in U.S. Government funding or a change in U.S. Government spending priorities could have an adverse impact on our business, financial condition, results of operations and cash flows.
|
•
|
We depend significantly on U.S. Government contracts, which often are only partially funded, subject to immediate termination, and heavily regulated and audited. The termination or failure to fund, or negative audit findings for, one or more of these contracts could have an adverse impact on our business, financial condition, results of operations and cash flows.
|
•
|
We could be negatively impacted by a security breach, through cyber attack, cyber intrusion or otherwise, or other significant disruption of our IT networks and related systems or of those we operate for certain of our customers.
|
•
|
The level of returns on defined benefit plan assets, changes in interest rates and other factors could affect our earnings and cash flows in future periods.
|
•
|
We enter into fixed-price contracts that could subject us to losses in the event of cost overruns or a significant increase in inflation.
|
•
|
We use estimates in accounting for many of our programs and changes in our estimates could adversely affect our future financial results.
|
•
|
We derive a significant portion of our revenue from international operations and are subject to the risks of doing business internationally, including fluctuations in currency exchange rates.
|
•
|
Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents or business partners.
|
•
|
We may not be successful in obtaining the necessary export licenses to conduct certain operations abroad, and Congress may prevent proposed sales to certain foreign governments.
|
•
|
The continued effects of the general weakness in the global economy and the U.S. Government’s budget deficits and national debt and sequestration could have an adverse impact on our business, financial condition, results of operations and cash flows.
|
•
|
Our future success will depend on our ability to develop new products, systems, services and technologies that achieve market acceptance in our current and future markets.
|
•
|
We participate in markets that are often subject to uncertain economic conditions, which makes it difficult to estimate growth in our markets and, as a result, future income and expenditures.
|
•
|
We cannot predict the consequences of future geo-political events, but they may adversely affect the markets in which we operate, our ability to insure against risks, our operations or our profitability.
|
•
|
We have made, and may continue to make, strategic acquisitions and divestitures that involve significant risks and uncertainties.
|
•
|
Disputes with our subcontractors and the inability of our subcontractors to perform, or our key suppliers to timely deliver our components, parts or services, could cause our products or services to be produced or delivered in an untimely or unsatisfactory manner.
|
•
|
Third parties have claimed in the past and may claim in the future that we are infringing directly or indirectly upon their intellectual property rights, and third parties may infringe upon our intellectual property rights.
|
•
|
The outcome of litigation or arbitration in which we are involved is unpredictable and an adverse decision in any such matter could have a material adverse effect on our financial condition, results of operations and cash flows.
|
•
|
We face certain significant risk exposures and potential liabilities that may not be covered adequately by insurance or indemnity.
|
•
|
Changes in our effective tax rate may have an adverse effect on our results of operations.
|
•
|
Our level of indebtedness and our ability to make payments on or service our indebtedness and our unfunded pension liability may adversely affect our financial and operating activities or our ability to incur additional debt.
|
•
|
A downgrade in our credit ratings could materially adversely affect our business.
|
•
|
Unforeseen environmental issues could have a material adverse effect on our business, financial condition, results of operations and cash flows.
|
•
|
We have significant operations in locations that could be materially and adversely impacted in the event of a natural disaster or other significant disruption.
|
•
|
Sustained weakness or volatility in oil or natural gas prices, or negative expectations about future prices or volatility, could adversely affect demand for our managed satellite and terrestrial communications solutions or other products, which could adversely affect our business, financial condition, results of operations and cash flows.
|
•
|
Changes in the regulatory framework under which our managed satellite and terrestrial communications solutions operations are operated could adversely affect our business, financial condition, results of operations and cash flows.
|
•
|
We rely on third parties to provide satellite bandwidth for our managed satellite and terrestrial communications solutions, and any bandwidth constraints could harm our business, financial condition, results of operations and cash flows.
|
•
|
Changes in future business or other market conditions could cause business investments and/or recorded goodwill or other long-term assets to become impaired, resulting in substantial losses and write-downs that would adversely affect our results of operations.
|
•
|
Some of our workforce is represented by labor unions, so our business could be harmed in the event of a prolonged work stoppage.
|
•
|
We must attract and retain key employees, and failure to do so could seriously harm us.
|
•
|
We may be responsible for U.S. Federal income tax liabilities that relate to the spin-off of Vectrus, Inc. (“Vectrus”) completed by Exelis.
|
•
|
In connection with the Vectrus spin-off, Vectrus indemnified Exelis for certain liabilities and Exelis indemnified Vectrus for certain liabilities. This indemnity may not be sufficient to insure us against the full amount of the liabilities assumed by Vectrus and Vectrus may be unable to satisfy its indemnification obligations to us in the future.
|
•
|
The Vectrus spin-off may expose us to potential liabilities arising out of state and Federal fraudulent conveyance laws and legal distribution requirements.
|
•
|
The ITT Corporation (“ITT”) spin-off of Exelis may expose us to potential liabilities arising out of state and Federal fraudulent conveyance laws and legal distribution requirements.
|
•
|
If we are required to indemnify ITT or Xylem, Inc. (“Xylem”) in connection with the ITT spin-off of Exelis, we may need to divert cash to meet those obligations and our financial results could be negatively impacted.
|
Period*
|
Total number of
shares purchased
|
|
Average price
paid per share
|
|
Total number of
shares purchased
as part of publicly
announced plans
or programs (1)
|
|
Maximum approximate
dollar value of shares
that may yet be
purchased under the
plans or programs (1)
|
|||||||
Month No. 1
|
|
|
|
|
|
|
|
|||||||
(January 2, 2016-January 29, 2016)
|
|
|
|
|
|
|
|
|||||||
Repurchase Programs (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
683,544,295
|
|
||
Employee Transactions (2)
|
1,720
|
|
|
$
|
86.78
|
|
|
—
|
|
|
—
|
|
||
Month No. 2
|
|
|
|
|
|
|
|
|||||||
(January 30, 2016-February 26, 2016)
|
|
|
|
|
|
|
|
|||||||
Repurchase Programs (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
683,544,295
|
|
||
Employee Transactions (2)
|
26,142
|
|
|
$
|
72.62
|
|
|
—
|
|
|
—
|
|
||
Month No. 3
|
|
|
|
|
|
|
|
|||||||
(February 27, 2016-April 1, 2016)
|
|
|
|
|
|
|
|
|||||||
Repurchase Programs (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
683,544,295
|
|
||
Employee Transactions (2)
|
3,308
|
|
|
$
|
79.02
|
|
|
—
|
|
|
—
|
|
||
Total
|
31,170
|
|
|
$
|
74.08
|
|
|
—
|
|
|
$
|
683,544,295
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Periods represent our fiscal months.
|
(1)
|
On August 26, 2013, we announced that on August 23, 2013, our Board of Directors approved a new share repurchase program (our “2013 Repurchase Program”) authorizing us to repurchase up to $1 billion in shares of our common stock through open-market transactions, private transactions, transactions structured through investment banking institutions or any combination thereof. As of
April 1, 2016
, $683,544,295 (as reflected in the table above) was the approximate dollar amount of our common stock that may yet be purchased under our 2013 Repurchase Program, which does not have a stated expiration date. The level of our repurchases depends on a number of factors, including our financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors our Board of Directors may deem relevant. The timing, volume and nature of repurchases are subject to market conditions, applicable securities laws and other factors and are at our discretion and may be suspended or discontinued at any time.
|
(2)
|
Represents a combination of (a) shares of our common stock delivered to us in satisfaction of the tax withholding obligation of holders of performance share units, restricted stock units or restricted shares that vested during the quarter or (b) performance share units, restricted stock units or restricted shares returned to us upon retirement or employment termination of employees. Our equity incentive plans provide that the value of shares delivered to us to pay the exercise price of options or to cover tax withholding obligations shall be the closing price of our common stock on the date the relevant transaction occurs.
|
(3
|
)
|
|
(a) Restated Certificate of Incorporation of Harris Corporation (1995), as amended, incorporated herein by reference to Exhibit 3(a) to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2012. (Commission File Number 1-3863)
|
|
|
(b) By-Laws of Harris Corporation, as amended and restated effective December 5, 2014, incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 8, 2014. (Commission File Number 1-3863)
|
|
(10
|
)
|
|
*(a) Offer Letter Agreement, dated December 17, 2014, between Harris Corporation and Rahul Ghai.
|
|
|
*(b) Amendment to Offer Letter Agreement, dated January 29, 2016, between Harris Corporation and Rahul Ghai.
|
|
|
|
*(c) Separation Agreement and Release of All Claims, dated January 29, 2016, between Harris Corporation and Miguel A. Lopez.
|
|
(12
|
)
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
(15
|
)
|
|
Letter Regarding Unaudited Interim Financial Information.
|
(31.1
|
)
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
|
(31.2
|
)
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
|
(32.1
|
)
|
|
Section 1350 Certification of Chief Executive Officer.
|
(32.2
|
)
|
|
Section 1350 Certification of Chief Financial Officer.
|
(101.INS)
|
|
|
XBRL Instance Document.
|
(101.SCH)
|
|
|
XBRL Taxonomy Extension Schema Document.
|
(101.CAL)
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
(101.LAB)
|
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
(101.PRE)
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
(101.DEF)
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
*
|
Management contract or compensatory plan or arrangement
|
|
|
|
|
|
|
|
|
|
|
|
HARRIS CORPORATION
|
||
|
|
|
|
(Registrant)
|
||
|
|
|
|
|||
Date: May 4, 2016
|
|
|
|
By:
|
|
/s/ Rahul Ghai
|
|
|
|
|
|
|
Rahul Ghai
|
|
|
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
|
|
|
(principal financial officer and duly authorized officer)
|
Exhibit No.
Under Reg. S-K,
Item 601
|
|
Description
|
(3)
|
|
(a) Restated Certificate of Incorporation of Harris Corporation (1995), as amended, incorporated herein by reference to Exhibit 3(a) to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2012. (Commission File Number 1-3863)
(b) By-Laws of Harris Corporation, as amended and restated effective December 5, 2014, incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 8, 2014. (Commission File Number 1-3863)
|
(10)
|
|
*(a) Offer Letter Agreement, dated December 17, 2014, between Harris Corporation and Rahul Ghai.
*(b) Amendment to Offer Letter Agreement, dated January 29, 2016, between Harris Corporation and Rahul Ghai.
*(c) Separation Agreement and Release of All Claims, dated January 29, 2016, between Harris Corporation and Miguel A. Lopez.
|
(12)
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
(15)
|
|
Letter Regarding Unaudited Interim Financial Information.
|
(31.1)
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
|
(31.2)
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
|
(32.1)
|
|
Section 1350 Certification of Chief Executive Officer.
|
(32.2)
|
|
Section 1350 Certification of Chief Financial Officer.
|
(101.INS)
|
|
XBRL Instance Document.
|
(101.SCH)
|
|
XBRL Taxonomy Extension Schema Document.
|
(101.CAL)
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
(101.LAB)
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
(101.PRE)
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
(101.DEF)
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
*
|
Management contract or compensatory plan or arrangement
|
|
HARRIS CORPORATION
|
|
1025 West NASA Boulevard
|
|
Melbourne, FL USA 32919
|
|
phone 1-321-727-9100
|
|
www.harris.com
|
1)
|
An annual base salary of $325,000 payable bi-weekly. Base salaries are reviewed annually, with adjustments made (generally effective in September) subject to both business and personal performance.
|
2)
|
A one-time Restricted Stock Award (RSA) of 14,600 RSA’s with an approximate grant value of $1,000,000 to offset foregone equity from your current employer and as an incentive to join Harris. This award will be granted on the first New York Stock Exchange trading day during the month following your start date (if that trading day occurs within a Quiet Period as defined by Harris’ equity grant policy, the grant date will be the first trading day following the end of the Quiet Period). Assuming continued employment with the company, this award will vest ratably over three years, in equal amounts on the grant date anniversary.
|
3)
|
A one-time sign-on bonus of $150,000 less applicable taxes and other withholdings, payable within forty-five (45) days of hire to offset your current employer’s forgone annual incentive and as an incentive to join Harris. Should you voluntarily terminate your employment with Harris within twenty-four (24) months of hire, you will be required to repay this bonus.
|
4)
|
As a Harris executive, you will participate in the Harris Annual Incentive Plan (“AIP”). Your FY15 target opportunity will be 60% of base salary. Incentive awards are paid based on the achievement of pre-established, annual business operating metrics and the successful completion of personal performance objectives set during the annual performance management cycle. Incentive awards may range from 0% to 200% of target based on business and personal performance. Your participation in AIP will begin on your start date and be pro-rated for the year.
To the extent earned, payouts are made in September following the fiscal year end, net of applicable withholdings and deductions.
|
5)
|
Eligibility to accept annual equity awards granted by Harris Corporation under the
Harris Corporation 2005 Equity Incentive Plan
(the “Plan”), with a target value of $300,000. These awards are typically delivered in the form of stock options and performance share units and are granted in late August following the Board of Directors approval of annual equity awards to other Harris executives. Once approved, the awards are subject to the applicable terms and conditions in effect at the time of the grant. Annual equity grants are performance based and the amount awarded may vary. Your FY16 grant, scheduled to be granted in August 2015, will not be prorated in any way, as related to your mid-fiscal year hire date.
|
6)
|
Eligibility to participate in the Harris Corporation Retirement Plan 401(k) with a company match equivalent to 100% of the first 6% of employee contributions. While you will be immediately eligible to participate in the plan up to individual plan contribution limits, company match contributions will only be made after one year of service.
|
7)
|
Eligibility to participate in the Harris Corporation Supplemental Executive Retirement Plan (“SERP”) during the next annual open enrollment period. This IRS non-qualified retirement plan preserves your ability to make pre-tax contributions, and receive employer match contributions (after one year of service) above the qualified IRS limits and in accordance with the plan terms.
|
8)
|
Eligibility to participate in the Harris Performance Reward Plan (“PRP”) with a target of 2% of total cash compensation after one year of service. PRP awards are paid based on the achievement of pre-established, annual business operating metrics, and may range from 0% to 200% of target.
|
9)
|
Participation in Harris health and welfare benefit plans, including qualified dependents as applicable. These plans include medical, prescription, dental, vision, life and short and long-term disability benefits. Coverage under these programs is effective, should you choose to participate, as soon as day one of employment with Harris Corporation.
|
10)
|
One hundred twenty (120) hours of vacation annually under the Harris Paid Time Off Program. The use of additional personal time is at the discretion of your supervisor.
|
11)
|
Relocation benefits to assist with your move from Fairfield, CT to the Herndon, VA area. Benefits will include, but not be limited to the Harris Home Buyout Option; loss on home sale assistance not to exceed $100,000; home purchase assistance; ninety (90) days of temporary living accommodations; the packing and shipment of household goods; and a disruption bonus equivalent to one month of base salary less applicable taxes and other withholdings. Additional details regarding your relocation benefits will be provided under separate cover.
|
12)
|
In the event that your employment is involuntarily terminated within twenty-four (24) months following your date of hire and the termination is a Qualifying Termination, the company will provide you with a cash severance amount equal to your then current base salary. Payment of this severance is conditioned on you executing a release of all claims against Harris and its affiliates in a form satisfactory to Harris within 45 days following your separation and not revoking such release. This severance amount will be subject to appropriate withholdings and deductions. This severance amount will be paid to you in a lump sum within sixty (60) days following your separation from service;
provided, however
, that if such sixty (60) day payment period begins in one calendar year and ends in a second calendar year, then payment shall occur in the second calendar year. After the expiration of twenty-four (24) months following your date of hire, your separation/severance pay eligibility will be solely pursuant to Harris’ Severance Pay Plan.
|
i.
|
a material diminution of your employment duties (a change in your title shall not, itself, constitute a diminution of duties);
|
ii.
|
a material reduction in your base salary;
|
iii.
|
a material reduction in the target value of your annual cash incentive; or
|
iv.
|
a requirement that your place of employment be more than fifty (50) miles from Herndon, VA.
|
i.
|
a willful breach or failure to satisfy any material provision or condition of this offer letter, including without limitation, those set forth under “Conditional Offer” below;
|
ii.
|
your substantial and continuing failure or refusal to perform your material duties as Vice President, Finance or to perform specific directives of the Board or of the officer to whom you report that are consistent with your position;
|
iii.
|
any failure by you to devote your full working time to the Company or any unexcused, repeated or prolonged absence from work by you (other than as a result of, or in connection with, sickness, injury or disability) during a period of ninety (90) consecutive days;
|
iv.
|
any reckless or willful misconduct (including action or failures to act) by you that causes material harm to the business or reputation of the Company or its subsidiaries;
|
v.
|
any willful or reckless breach of a statutory or common law duty of loyalty to the Company or its subsidiaries;
|
vi.
|
any act of fraud, dishonesty, embezzlement, theft or unethical business conduct by you in connection with your duties or in the course of your employment, or your admission or conviction of a felony or of any crime involving moral turpitude, fraud, dishonesty, embezzlement, theft, or misrepresentation;
|
vii.
|
your willful violation of a material Company policy that is generally applicable to all employees of the Company (including the Company’s Standards of Business Conduct); or
|
viii.
|
a failure by you to cooperate in an internal Company investigation after being instructed by the Board or the officer to whom you report to cooperate.
|
13)
|
Conditional Offer. You understand and agree that this employment offer is conditional and expressly subject to your complying with the following pre-conditions of employment:
|
a.
|
You complete your relocation to the Herndon, VA area within twenty-four (24) months of your start date.
|
b.
|
You accurately completed Harris’ Disclosure of Potential Employment Conflicts form and fully disclosed, and provided copies where applicable, of any written or other agreements or understandings to which you are a party that relate to the protection of confidential, trade secret or proprietary information; non-competition restrictions; non-solicitation or no-hire prohibitions (employees or customers); and/or ownership of invention provisions. You affirm that your employment with Harris will not violate any such agreements or understandings.
|
c.
|
You pass a drug test prior to commencing employment. A failed drug test will cause you to be ineligible for hire by Harris for at least twelve months.
|
d.
|
You undergo background and reference checks with results that are satisfactory to Harris.
|
e.
|
You execute Harris’ standard Employee Agreement (copy enclosed) at orientation.
|
f.
|
You execute and timely return all forms and other documents required for Harris to complete the employment process.
|
/s/ Rahul Ghai
|
|
Date:
|
1/15/2015
|
|
Signature: Rahul Ghai
|
|
|
|
|
|
HARRIS CORPORATION
|
|
1025 West NASA Boulevard
|
|
Melbourne, FL USA 32919
|
|
phone 1-321-727-9100
|
|
www.harris.com
|
1)
|
An annual base salary of $450,000 payable bi-weekly.
|
2)
|
Participation in the Harris Annual Incentive Plan (“AIP”) with a target value of 75% of base salary. Incentive awards are paid based on the achievement of pre-established annual business operating metrics and the successful completion of personal performance objectives set during the annual performance management cycle. Incentive awards may range from 0% to 200% of target based on business and personal performance. Your participation in the FY16 AIP will be pro-rated, with respect to your current target, based on the effective date of your promotion. To the extent earned, payouts are made in September following the fiscal year end, net of applicable withholdings and deductions.
|
3)
|
Eligibility to receive annual equity awards granted by Harris Corporation under its 2015 Equity Incentive Plan (the “Plan”), with a target value of $1,000,000. The awards are typically delivered in the form of stock options (“Options”) and performance share units (“PSUs”) and are granted in late August following the Board of Directors approval of annual equity awards to Harris executives. Once approved and accepted by you, the awards are subject to the applicable terms and conditions in effect at the time of the grant. Annual equity grants are performance-based and the award amount may vary from year-to-year. Your new target value will be effective during the next award planning cycle.
|
4)
|
Severance, relocation and other benefits will continue per the terms and conditions of your original offer letter, dated December 27, 2014. However, rather than a relocation to the Washington, DC area, you must relocate to the Melbourne, FL area.
|
/s/ Robert L. Duffy
|
|
/s/ Rahul Ghai
|
|
Date:
|
2/1/2016
|
|
Signature: Rahul Ghai
|
|
|
|
|
1.
|
Separation Date
.
Your employment with Harris will end at close of business on February 11, 2016 (your “
Separation Date
”).
|
2.
|
Separation Pay
.
As a result of your separation from Harris, you will receive a lump sum amount equal to your current annual base salary of $540,800 (the “
Separation Pay
”). As set forth in Section 7, you will also be entitled to a Fiscal Year 2016 Annual Incentive Plan (“
AIP
”) payment at target pro-rated for the portion of Fiscal 2016 prior to your Separation Date (rather than subject to Harris’ financial results and your individual performance goals against established goals). But for the application of the six-month delay under Section 409A of the Internal Revenue Code (“
Section 409A
”) due to your status as a Specified Employee (the “
Specified Employee Requirement
”), your Separation Pay would have been paid to you within sixty (60) days following your separation from service. Due to the Specified Employee Requirement, no separation pay may be paid to you during the period beginning on the date of your separation from service and ending on the date that is six months following the date of your separation from service (or if earlier, on the date of your death). Accordingly, your Separation Pay will be paid to you in a lump sum on August 12, 2016 (or if earlier, within ninety (90) days following your death) and will be subject to withholdings and deductions. You acknowledge and agree that the payment described in this Section 2 is conditional on your timely executing and delivering this Agreement to Harris and not revoking the Release of All Claims set forth herein.
|
3.
|
Benefits Coverage; Relocation Reimbursement
.
(a) Effective as of the close of business on the Separation Date, you will cease to be eligible for the employee benefit plans, programs and arrangements maintained by Harris in accordance with the applicable terms thereof. If you participate in the Medical, Dental, or Vision Care Plans or the Health Care Spending Accounts, you will be offered the opportunity to elect continued coverage for yourself and your qualifying dependents in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (“
COBRA
”). Harris will pay all premiums otherwise due under the Medical, Dental or Vision Care Plans (but not Health Care Spending Accounts) for a period of up to the shorter of (A) twelve (12) months following your Separation Date or (B) the time when you are eligible for group medical plans maintained by another employer. Following such twelve (12) month period, you may continue coverage for the remainder of the COBRA period at the full monthly cost plus a 2% administrative fee. If you do not elect COBRA within thirty (30) days of the receipt of applicable enrollment documents, your healthcare benefits and Health Care Spending Account participation will end on your Separation Date. (b) You will be reimbursed in the amount of $50,000 in respect of a partial offset of your relocation expenses.
|
4.
|
Vacation Pay Deferred Payment
.
You will be paid $31,760, which is the value of your deferred compensation account attributable to certain vacation and/or paid time off that was converted into non-qualified deferred compensation. But for the application of the Specified Employee Requirement, your account would have been paid to you within thirty (30) days following your Separation Date. Due to the Specified Employee Requirement, your account may not be paid to you during the period beginning on your Separation Date and ending on the date that six (6) months following your Separation Date (or if earlier, on the date of your death). Accordingly, your account will be paid to you in a lump sum on August 12, 2016 (or if earlier, within ninety (90) days following your death). The payment will be subject to applicable taxes and withholdings (FICA deductions have already been taken from this amount).
|
5.
|
Retirement Plan Participation
.
Benefit accruals and contributions under the Retirement Plan and Supplemental Executive Retirement Plan, including matching contributions, will end as of your Separation Date; provided however, that your deferral elections, if any, with respect to any compensation payable to you pursuant to the Fiscal Year 2016 AIP shall remain in full force and effect.
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6.
|
Performance Reward Plan (PRP)
.
Under the terms of the PRP, you will not be eligible for any PRP payment in respect of Fiscal Year 2016.
|
7.
|
Annual Incentive Plan
.
In lieu of a pro-rated Fiscal Year 2016 AIP payout subject to Harris’ financial results and your individual performance against established goals, you will receive a Fiscal Year 2016 AIP payment of $253,800, which is equal to your pro-rated Fiscal Year 2016 AIP at target. The timing of such payment will be governed by the terms and conditions of the AIP. You acknowledge and agree that the payment described in this Section 7 is conditional on your timely executing and delivering this Agreement to Harris and not revoking the Release of All Claims set forth herein.
|
8.
|
Stock Options
.
The stock options you hold as of the Separation Date will be governed by the terms of the applicable Harris Equity Incentive Plan(s) and terms and conditions thereunder in effect at the time of the grant. You will have ninety (90) days from the Separation Date to exercise vested options. Options not vested as of the Separation Date will be immediately cancelled and forfeited.
|
9.
|
Performance Unit Awards
.
Your outstanding performance unit awards which you hold as of the Separation Date will be governed by the terms of the applicable Harris Equity Incentive Plan(s) and terms and conditions thereunder in effect at the time of grant. The performance unit awards for the Fiscal 2015-2017 and Fiscal 2016-2018 cycles granted to you will be immediately cancelled and forfeited on the Separation Date.
|
10.
|
Restricted Unit and Stock Awards
.
Your outstanding restricted unit award which you hold as of the Separation Date will be governed by the terms of the applicable Harris Equity Incentive Plan(s) and terms and conditions thereunder in effect at the time of the grant, it being agreed that your separation shall be treated as an involuntary separation for purposes of the restricted unit award of 12,500 units granted to you on March 3, 2014, with such award being pro-rated through your Separation Date and paid in shares as soon as administratively practicable following the Separation Date or if applicable, following the applicable six-month delay under Section 409A. The restricted stock award granted to you on June 1, 2015, will not satisfy the minimum one year vesting period and will be immediately cancelled and forfeited on the Separation Date.
|
11.
|
Outplacement Assistance
.
You will be eligible for a six (6) month executive outplacement program (the “
Program
”) administered by Right Management Associates. Participation in the Program is voluntary, but must be elected by March 11, 2016. If you do not elect to participate in the Program, you will not receive cash in lieu thereof.
|
12.
|
No Further Benefits
.
Unless otherwise expressly provided herein or pursuant to applicable employee compensation or benefit arrangements, you will not be entitled to any pay, compensation, severance, insurance, or employment benefits from Harris after your Separation Date. You acknowledge and agree that the payments and benefits specified under this Agreement satisfy in their entirety any and all obligations of Harris to you under your Offer Letter dated February 4, 2014, the Harris Corporation Severance Pay Plan, or any other severance program, policy or arrangement maintained by Harris or otherwise.
|
13.
|
Executive Change in Control Severance and Indemnification Agreements; Resignation from Office
.
You acknowledge that effective as of the Separation Date, based on this Agreement and the consideration you receive pursuant hereto, and notwithstanding any provision therein to the contrary, the Executive Change in Control Severance Agreement between you and Harris dated February 28, 2014 (the “
Change in Control Severance Agreement
”) and the Indemnification Agreement between you and Harris dated February 28, 2014 (the “
Indemnification Agreement
”) are terminated in their entirety by mutual agreement and no longer have any force or effect. Notwithstanding the foregoing, obligations of Harris under the Indemnification Agreement with respect to your activity prior to the Separation Date shall continue in accordance with Section 26 of the Indemnification Agreement. You agree that no later than the Separation Date you will resign from any offices, directorships, trusteeships, committee memberships or other positions you hold with Harris or any of its affiliates. You agree to execute any documents provided by Harris to effectuate your resignation from such offices, directorships, trusteeships, committee memberships or other positions.
|
14.
|
Releasees
.
For purposes of this Agreement, “Releasees” include Harris and its subsidiaries and affiliated companies and their officers, directors, shareholders, employees, agents, representatives, plans, trusts, administrators, fiduciaries, insurance companies, successors, and assigns.
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15.
|
Release of All Claims
.
You, on behalf of yourself and your personal and legal representatives, heirs, executors, successors and assigns, hereby acknowledge full and complete satisfaction of, and fully and forever waive, release, and discharge Releasees from, any and all claims, causes of action, demands, liabilities, damages, obligations, and debts (collectively referenced as “
Claims
”), of every kind and nature, whether known or unknown, suspected or unsuspected, that you hold as of the date you sign this Agreement, or at any time previously held, against any Releasee, arising out of any matter whatsoever (except for breach of this Agreement). This release specifically includes, but is not limited to, any and all Claims:
|
a.
|
Arising out of or in any way related to your employment with or separation from Harris, or any contract or agreement between you and Harris;
|
b.
|
Arising under or based on the Equal Pay Act of 1963 (EPA); Title VII of the Civil Rights Act of 1964 (Title VII); Section 1981 of the Civil Rights Act of 1866 (42 U.S.C. §1981); the Civil Rights Act of 1991 (42 U.S.C. §1981a); the Americans with Disabilities Act of 1990 (ADA); the Family and Medical Leave Act of 1993 (FMLA); the Genetic Information Nondiscrimination Act of 2008 (GINA); the National Labor Relations Act (NLRA); the Worker Adjustment and Retraining Notification Act of 1988 (WARN); the Uniform Services Employment and Reemployment Rights Act (USERRA); the Rehabilitation Act of 1973; the Occupational Safety and Health Act (OSHA); the Employee Retirement Income Security Act of 1974 (ERISA) (except claims for vested benefits, if any, to which you are legally entitled); the False Claims Act; Title VIII of the Corporate and Criminal Fraud and Accountability Act (18 U.S.C. §1514A) (Sarbanes-Oxley Act); the federal Whistleblower Protection Act and any state whistleblower protection statute(s); the Florida Civil Rights Act or any other fair employment practice statute(s) of any state, in each case as amended from time to time;
|
c.
|
Arising under or based on any other federal, state, county or local law, statute, ordinance, decision, order, policy or regulation prohibiting employment discrimination; providing for the payment of wages or benefits (including overtime and workers’ compensation); or otherwise creating rights or claims for employees, including, but not limited to, any and all claims alleging breach of public policy; the implied obligation of good faith and fair dealing; or any express, implied, oral or written contract, handbook, manual, policy statement or employment practice; or alleging misrepresentation; defamation; libel; slander; interference with contractual relations; intentional or negligent infliction of emotional distress; invasion of privacy; assault; battery; fraud; negligence; harassment; retaliation; or wrongful discharge; and
|
d.
|
Arising under or based on the Age Discrimination in Employment Act of 1967 (“
ADEA
”), as amended by the Older Workers Benefit Protection Act (“
OWBPA
”), and alleging a violation thereof by any Releasee, at any time on or prior to the date this Agreement is executed.
|
16.
|
Filing an Action Despite Release
.
You agree that you will not file a civil action, lawsuit or administrative proceeding against any Releasee with respect to any of the Claims released herein (this does not include claims which, by law, cannot be waived).
This provision prohibits you from recovering monetary or other relief in any legal proceeding brought by you or on your behalf, but does not apply to or limit your right to initiate or participate in an EEOC or other administrative proceeding in which you do not seek personal relief. This provision also does not preclude you from bringing suit to challenge the validity or enforceability of this Agreement under the ADEA, as amended by the OWBPA.
|
17.
|
Return of Property
.
You agree that, no later than your Separation Date, you will return to Harris all company information and property, in whatever form, including but not limited to laptop, phone, tablets, documents, records, reports, notebooks, drawings, photographs, technical data, credit cards, keys, equipment, computer software, supplies, or other information or property containing confidential or proprietary information of Harris or its subsidiaries and affiliates, and you agree that you will not retain copies of same. You further certify that, no later than your Separation Date, you will permanently delete from your personal computers, tablets or storage devices any and all confidential or proprietary documents and/or information relating to Harris and its subsidiaries and affiliates.
|
18.
|
Confidentiality
.
In addition to your agreement to return company information and property to Harris, you acknowledge that, while employed by Harris, you had access to, acquired and/or assisted in the development of confidential or proprietary information, inventions, and trade secrets relating to the present and anticipated business and operations of Harris or its subsidiaries and affiliates, including without limitation: research projects; manufacturing processes; sales and marketing
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19.
|
Standards of Business Conduct
.
You acknowledge that you have read and understand Harris’ Code of Conduct and that you do not have any information or knowledge as to non‑compliance with, or violation of, the policies and standards set forth therein.
|
20.
|
Non-Solicitation
. In consideration of the benefits and payments to be made to you under this Agreement and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, commencing on the date hereof and continuing through February 11, 2017, you agree that you will not, directly or indirectly, individually or on behalf of any other employer or any other business, person or entity: (i) recruit, induce, solicit or attempt to recruit, induce or solicit any individual employed by Harris or any of its subsidiaries to terminate, abandon or otherwise leave or discontinue employment with Harris or any of its subsidiaries; or (ii) hire or cause or assist any individual employed by Harris or any of its subsidiaries to become employed by or provide services to any other business, person or entity whether as an employee, consultant, contactor or otherwise. You also agree that this restriction is reasonable and necessary for the protection of Harris’ legitimate business interests and that a violation of this restriction will cause irreparable harm to Harris. The provisions of this Section 20 are separate from and in addition to any other non-solicit agreement between you and Harris or its subsidiaries or affiliates, including but not limited to: (i) your Employee Agreement, which you signed on February 4, 2014, and (ii) the terms and conditions of equity awards granted to you. Any breach of the above-described additional non-solicitation provisions will constitute a violation and breach of this Agreement.
|
21.
|
Non-Disparagement
.
In consideration of the benefits and payments to be made to you under this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which you hereby acknowledge, you agree that you will not criticize, disparage, defame, or otherwise attempt to impugn the character, integrity or reputation of Releasees or the products or services of Harris and its subsidiaries or affiliates (verbally, in writing or otherwise), nor will you unlawfully interfere with any of the business relationships of Harris and its subsidiaries or affiliates. The provisions of this Section 21 are separate from and in addition to any other non-disparagement agreement between you and Harris or its subsidiaries or affiliates, including but not limited to, the non-disparagement restrictions contained in the equity awards granted to you by Harris. Any breach of the above-described additional non-disparagement provisions will also constitute a violation and breach of this Agreement.
|
22.
|
Non-Competition
.
In consideration of the benefits and payments to be made to you under this Agreement and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, you agree that from your Separation Date through February 11, 2017, you shall not, directly or indirectly, as an employee, independent contractor, consultant, officer, director, principal, lender or investor engage or otherwise participate in any activities with, or provide services to, a Competitive Business, without the prior written consent of the Senior Vice President, Human Resources or other designated executive officer of Harris (which consent shall be at such officer’s discretion to give or withhold). Nothing in this section shall preclude you from owning up to 1% of the equity in any publicly traded company. For purposes of this Agreement, “
Competitive Business
” means any business, person or entity that is engaged, or planning or contemplating to engage within a period of twelve (12) months, in any business activity that is competitive with the business and business activities engaged in by a business unit of Harris at the Separation Date. The provisions of this Section 22 are separate from and in addition to any other non-competition agreement between you and Harris or its subsidiaries or affiliates, including but not limited to the non-competition restrictions contained in the equity awards granted to you by Harris. Any breach of the above-described additional non-competition provisions will constitute a violation and breach of this Agreement.
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23.
|
Customer and Potential Customer Non-Interference
.
In consideration of the benefits and payments to be made to you under this Agreement and for other good and valuable consideration, the receipt and sufficiency of which you hereby acknowledge, you agree that from your Separation Date through February 11, 2017, you shall not, directly or indirectly, individually or: (i) on behalf of any other employer or any other business, person or entity, entice, induce, solicit or attempt or participate in enticing, inducing or soliciting, any Customer or Potential Customer of Harris or its subsidiaries to cease or reduce or refrain from doing business with Harris or its subsidiaries; or (ii) on behalf of any Competitive Business, entice, induce, solicit, or attempt or participate in enticing, inducing or soliciting or accept or attempt or participate in accepting, business from any Customer or Potential Customer of Harris or its subsidiaries. For purposes of this Agreement: (a) “
Customer
” means any business, person or entity who purchased any products, goods, systems or services from Harris or its subsidiaries at any time during the preceding twenty-four months; and (b) “
Potential Customer
” means any business, person or entity targeted during the preceding twelve (12) months as a customer to purchase any products, goods, systems or services from Harris or its subsidiaries. The provisions of this Section 23 are separate from and in addition to any other customer non-solicit agreement between you and Harris or its subsidiaries or affiliates, including but not limited to, the customer non-solicit restrictions contained in the equity awards granted to you by Harris. Any breach of the above-described additional customer non-solicit provisions will constitute a violation and breach of this Agreement.
|
24.
|
Breach of Agreement
.
If you file or permit to be filed any civil action, lawsuit, or administrative proceeding against any Releasee seeking personal legal or equitable relief in connection with any matter relating to your employment with or separation from Harris, breach the restrictive covenants applicable to you under this Agreement or otherwise breach a provision of this Agreement, in addition to any other rights, remedies, or defenses Harris or the other Releasees may have, Harris may: (1) immediately terminate this Agreement, if still in effect, without further obligation or liability to you of any kind; (2) recover from you the aggregate dollar value of all pay, insurance, and other benefits provided to you following the Separation Date; and (3) recover from you all damages, costs and expenses, including reasonable attorneys’ fees and costs, incurred by Harris or the other Releasee(s) in defending such civil action, lawsuit or administrative proceeding or in connection with such breach. You further agree that any breach or threatened breach by you, intentional or otherwise, of the non-solicitation, non-competition or other provisions of this Agreement, including Sections 20, 21, 22 and 23, will entitle Harris, in addition to other available remedies, to a temporary or permanent injunction or any other appropriate degree of specific performance (without bond or security being required) in order to enjoin such breach or threatened breach.
|
25.
|
No Admission of Liability
.
By entering into this Agreement, Harris does not admit to, and expressly denies, any liability or wrongdoing. In addition, you acknowledge and agree that this Agreement may not be used as evidence to claim or prove any alleged wrongdoing by Harris, other than failure to comply with the terms of this Agreement.
|
26.
|
Acknowledgement of ADEA Rights
.
You acknowledge as follows:
|
a.
|
You are advised to consult with an attorney or other representative of your choice prior to signing this Agreement;
|
b.
|
By executing this Agreement, you waive all rights or claims, if any, that you have or may have against any Releasee under the ADEA, as amended by the OWBPA, and under any state or local laws prohibiting age discrimination;
|
c.
|
You are waiving rights and claims that you may have under the ADEA in exchange for consideration that is additional to anything of value to which you are already entitled;
|
d.
|
You are not waiving rights and claims that you may have under the ADEA that may arise after the date this Agreement is signed;
|
e.
|
You fully understand this Agreement and are signing it voluntarily and of your own free will;
|
f.
|
You received this Agreement on or prior to your Separation Date, and you have up to
45
calendar days from that date to consider whether to sign it;
|
g.
|
If you wish to sign this Agreement prior to the expiration of the 45-day period explained above, you may do so;
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h.
|
You have
7
calendar days following the date you sign this Agreement to revoke your release of claims under the ADEA, and your release of such claims will not become effective until the revocation period has expired without your revoking it (at which time it will become fully enforceable and irrevocable); and
|
i.
|
To revoke your release of claims under the ADEA, you must deliver to Harris (via
both
U.S. mail and facsimile), within the 7-day revocation period, a signed written statement that you revoke your release of claims under the ADEA. The revocation must be postmarked within the period stated above and addressed to:
|
27.
|
Section 409A
.
This Agreement will be interpreted and construed in a manner that avoids the imposition of taxes and other penalties under Section 409A (“
409A Penalties
”). In the event that the terms of this Agreement provide deferred compensation within the meaning of Section 409A and do not comply with such section and regulations promulgated thereunder, the parties will cooperate diligently to amend the terms of this Agreement to avoid 409A Penalties, to the extent possible. In addition, in the event that the terms of this Agreement provide deferred compensation within the meaning of Section 409A, each payment of separation pay or other amount, or provision of benefits, pursuant to this Agreement will constitute a “separately identified” amount within the meaning of Treasury Reg. §1.409A-2(b)(2). Notwithstanding the foregoing, no particular tax result with respect to any income recognized in connection with this Agreement is guaranteed, and under no circumstances will Harris be responsible for any taxes, penalties, interest or other losses or expenses incurred by you due to any failure to comply with Section 409A.
|
28.
|
Entire Understanding
.
This Agreement constitutes the entire agreement between you and Harris with respect to the subjects addressed herein. However, this Agreement is not intended to supersede the provisions of your Harris Employee Agreement dated February 4, 2014, a copy of which has been provided to you, or any other obligations you may have regarding confidentiality, non-disclosure, intellectual property, ownership of inventions, non-competition and/or non-solicitation pursuant to any agreement with Harris or its subsidiaries or affiliates. You acknowledge and agree that the terms of your Offer Letter dated February 4, 2014 providing for severance in the event of your termination of employment under certain circumstances is no longer in force or effect and that you have no rights to any payment of severance or any other amounts pursuant to such Offer Letter.
|
29.
|
Withholding
.
Notwithstanding any other provision of this Agreement, Harris may withhold from amounts payable under this Agreement all amounts that are required or authorized to be withheld, including, but not limited to, federal, state, local and foreign taxes to be withheld by applicable laws or regulations.
|
30.
|
Successors and Assigns
.
This Agreement will be binding in all respects upon, and will inure to the benefit of, the parties’ representatives, heirs, executors, successors, and assigns.
|
31.
|
Governing Law
.
The validity and interpretation of this Agreement will be governed by Florida law without giving effect to principles of conflicts of law. The parties stipulate that jurisdiction and venue will lie exclusively in Brevard County, Florida or the United States District Court for the Middle District of Florida for any action involving the validity, interpretation and enforcement of this Agreement, for any claim for breach of this Agreement, and for damages or any other relief sought under this Agreement.
|
32.
|
Severability
.
In the event that any provision of this Agreement is found to be partially or wholly invalid, illegal or unenforceable, the parties agree that such provision shall be modified or restricted as necessary to render it valid, legal and enforceable. It is expressly understood and agreed that such modification or restriction may be accomplished by mutual
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33.
|
Preparation of Agreement
.
This Agreement will be interpreted in accordance with the plain meaning of its terms and not strictly for or against any of the parties hereto. Regardless of which party initially drafted this Agreement, it will not be construed against any one party, and will be construed and enforced as a mutually-prepared document.
|
34.
|
Burden of Proof
.
Any party contesting the validity or enforceability of any term of this Agreement will be required to prove by clear and convincing evidence fraud, concealment, failure to disclose material information, unconscionability, misrepresentation, or mistake of fact or law.
|
35.
|
Counterparts
.
This Agreement may be executed in counterparts or by copies transmitted electronically, all of which have the same force and effect as the original.
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Employee:
|
|
Harris Corporation
|
||||
/s/ Miguel Lopez
|
|
By:
|
/s/ Robert L. Duffy
|
|||
Signature
|
|
Name:
|
Robert L. Duffy
|
|||
|
|
|
|
Title:
|
Senior Vice President
|
|
|
|
|
|
|
|
Human Resources and Administration
|
Miguel Lopez
|
|
|
|
|
||
Print Name
|
|
Date:
|
1/29/2016
|
|||
|
|
|
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|
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Date:
|
1/29/2016
|
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Three Quarters Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
|
(In millions, except ratios)
|
||||||
Earnings:
|
|
|
|
||||
Income from continuing operations
|
$
|
183
|
|
|
$
|
390
|
|
Plus: Income taxes
|
185
|
|
|
154
|
|
||
Fixed charges
|
142
|
|
|
86
|
|
||
Amortization of capitalized interest
|
—
|
|
|
—
|
|
||
Less: Interest capitalized during the period
|
—
|
|
|
(3
|
)
|
||
Undistributed earnings in equity investments
|
—
|
|
|
—
|
|
||
|
$
|
510
|
|
|
$
|
627
|
|
Fixed Charges:
|
|
|
|
||||
Interest expense
|
$
|
139
|
|
|
$
|
79
|
|
Plus: Interest capitalized during the period
|
—
|
|
|
3
|
|
||
Interest portion of rental expense
|
3
|
|
|
4
|
|
||
|
$
|
142
|
|
|
$
|
86
|
|
Ratio of Earnings to Fixed Charges
|
3.59
|
|
|
7.29
|
|
Form S-4
|
|
No. 333-202539
|
|
Harris Corporation Shares of Common Stock
|
Form S-8
|
|
No. 333-192735
|
|
Harris Corporation Retirement Plan
|
Form S-8
|
|
No. 333-130124
|
|
Harris Corporation 2005 Equity Incentive Plan
|
Form S-8
|
|
No. 333-207774
|
|
Harris Corporation 2015 Equity Incentive Plan
|
|
|
/s/ Ernst & Young LLP
|
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q for the
quarter ended April 1, 2016
of Harris Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 4, 2016
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/s/ William M. Brown
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||
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Name:
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William M. Brown
|
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Title:
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Chairman, President and Chief Executive Officer
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1.
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I have reviewed this Quarterly Report on Form 10-Q for the
quarter ended April 1, 2016
of Harris Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: May 4, 2016
|
|
|
|
/s/ Rahul Ghai
|
||
|
|
|
|
Name:
|
|
Rahul Ghai
|
|
|
|
|
Title:
|
|
Senior Vice President and Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Harris as of the dates and for the periods expressed in the Report.
|
Date: May 4, 2016
|
|
|
|
/s/ William M. Brown
|
||
|
|
|
|
Name:
|
|
William M. Brown
|
|
|
|
|
Title:
|
|
Chairman, President and Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Harris as of the dates and for the periods expressed in the Report.
|
Date: May 4, 2016
|
|
|
|
/s/ Rahul Ghai
|
||
|
|
|
|
Name:
|
|
Rahul Ghai
|
|
|
|
|
Title:
|
|
Senior Vice President and Chief Financial Officer
|