|
|
|
|
|
|
|
|
|
Delaware
|
|
1-3863
|
|
34-0276860
|
|
|
|
|
|
(State or other jurisdiction
of incorporation)
|
|
(Commission
File Number)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
1025 West NASA Blvd., Melbourne, Florida
|
|
32919
|
|
|
|
(Address of principal executive offices)
|
|
(Zip Code)
|
No change
|
|
(Former name or former address, if changed since last report)
|
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|
|
o
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
|
|
o
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
|
|
o
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
|
|
o
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Securities registered pursuant to Section 12(b) of the Act:
|
||||
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
Common Stock, par value $1.00 per share
|
|
HRS
|
|
New York Stock Exchange
|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
|
|
|
|
Emerging growth company
o
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
|
|
|
|
|
|
|
HARRIS CORPORATION
|
|
||
|
By:
|
/s/ Rahul Ghai
|
|
|
|
|
Name:
|
Rahul Ghai
|
|
|
|
Title:
|
Senior Vice President and Chief Financial Officer
|
|
|
•
|
the unaudited pro forma condensed combined balance sheet as of March 29, 2019 combines Harris’ historical unaudited condensed consolidated balance sheet as of March 29, 2019, which was the end of Harris’ third quarter of fiscal 2019, and L3’s historical unaudited condensed consolidated balance sheet as of March 29, 2019, which was the end of L3’s first quarter of 2019;
|
•
|
the unaudited pro forma condensed combined statement of income for the three quarters ended March 29, 2019 combines Harris’ historical unaudited results of operations for the three quarters ended March 29, 2019, which were Harris’ first three quarters of fiscal 2019, and L3’s historical unaudited results of operations for the three quarters ended March 29, 2019, which were L3’s third and fourth quarters of 2018 and first quarter of 2019; and
|
•
|
the unaudited pro forma condensed combined statement of income for the fiscal year ended June 29, 2018 combines Harris’ historical audited results of operations for the fiscal year ended June 29, 2018, which was the end of Harris’ fiscal 2018, and L3’s historical unaudited results of operations for the four quarters ended June 29, 2018.
|
•
|
the accompanying notes to the unaudited pro forma condensed combined financial statements;
|
•
|
Harris’ audited consolidated financial statements and related notes thereto contained in its Current Report on Form 8-K filed with the SEC on December 13, 2018 and Harris’ Quarterly Report on Form 10-Q for the quarter ended March 29, 2019; and
|
•
|
L3’s audited consolidated financial statements and related notes thereto contained in its Annual Report on Form 10-K filed with the SEC on February 21, 2019 and L3’s Quarterly Reports on Form 10-Q for the quarters ended June 29, 2018 and March 29, 2019.
|
|
|
Historical
Harris |
|
Historical
L3 |
|
Pro Forma
Adjustments |
|
Note
References |
|
Pro Forma
Combined |
||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||
Current Assets
|
|
|
|
|
|
|
|
|
|
|||||||||
Cash and cash equivalents
|
$
|
334
|
|
|
$
|
1,108
|
|
|
$
|
(295
|
)
|
|
3a
|
|
$
|
1,422
|
|
|
|
|
|
|
|
(70
|
)
|
|
3b
|
|
|
||||||||
|
|
|
|
|
345
|
|
|
3c
|
|
|
||||||||
Receivables
|
453
|
|
|
804
|
|
|
(13
|
)
|
|
3c
|
|
1,244
|
|
|||||
Contract assets
|
881
|
|
|
1,735
|
|
|
—
|
|
|
|
|
2,616
|
|
|||||
Inventories
|
433
|
|
|
896
|
|
|
157
|
|
|
2g
|
|
1,432
|
|
|||||
|
|
|
|
|
(54
|
)
|
|
3c
|
|
|
||||||||
Income taxes receivable
|
77
|
|
|
—
|
|
|
61
|
|
|
3f
|
|
138
|
|
|||||
Other current assets
|
107
|
|
|
362
|
|
|
|
|
|
|
|
469
|
|
|||||
Total current assets
|
2,285
|
|
|
4,905
|
|
|
131
|
|
|
|
|
7,321
|
|
|||||
Non-current Assets
|
|
|
|
|
|
|
|
|
|
|||||||||
Property, plant and equipment
|
904
|
|
|
1,178
|
|
|
(27
|
)
|
|
3c
|
|
2,055
|
|
|||||
Operating lease right-of-use assets
|
—
|
|
|
618
|
|
|
(618
|
)
|
|
2f
|
|
—
|
|
|||||
Goodwill
|
5,371
|
|
|
6,826
|
|
|
(6,826
|
)
|
|
2f
|
|
21,416
|
|
|||||
|
|
|
|
|
16,077
|
|
|
2o
|
|
|
||||||||
|
|
|
|
|
(32
|
)
|
|
3c
|
|
|
||||||||
Other intangible assets
|
902
|
|
|
378
|
|
|
(378
|
)
|
|
2f
|
|
6,363
|
|
|||||
|
|
|
|
|
5,465
|
|
|
2h
|
|
|
||||||||
|
|
|
|
|
(4
|
)
|
|
3c
|
|
|
||||||||
Non-current deferred income taxes
|
91
|
|
|
—
|
|
|
—
|
|
|
|
|
91
|
|
|||||
Other non-current assets
|
239
|
|
|
358
|
|
|
(3
|
)
|
|
2f
|
|
686
|
|
|||||
|
|
|
|
|
60
|
|
|
2i
|
|
|
||||||||
|
|
|
|
|
32
|
|
|
3a
|
|
|
||||||||
Total non-current assets
|
7,507
|
|
|
9,358
|
|
|
13,746
|
|
|
|
|
30,611
|
|
|||||
|
$
|
9,792
|
|
|
$
|
14,263
|
|
|
$
|
13,877
|
|
|
|
|
$
|
37,932
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|||||||||
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||
Short-term debt
|
$
|
103
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
103
|
|
|
Accounts payable
|
523
|
|
|
672
|
|
|
(14
|
)
|
|
3c
|
|
1,181
|
|
|||||
Contract liabilities
|
466
|
|
|
711
|
|
|
(23
|
)
|
|
2j
|
|
1,153
|
|
|||||
|
|
|
|
|
(1
|
)
|
|
3c
|
|
|
||||||||
Compensation and benefits
|
176
|
|
|
411
|
|
|
(3
|
)
|
|
3c
|
|
584
|
|
|||||
Other accrued items
|
316
|
|
|
219
|
|
|
364
|
|
|
3e
|
|
823
|
|
|||||
|
|
|
|
|
(74
|
)
|
|
2f
|
|
|
||||||||
|
|
|
|
|
(2
|
)
|
|
3c
|
|
|
||||||||
Income taxes payable
|
16
|
|
|
55
|
|
|
(117
|
)
|
|
3a
|
|
16
|
|
|||||
|
|
|
|
|
(13
|
)
|
|
3b
|
|
|
||||||||
|
|
|
|
|
14
|
|
|
3c
|
|
|
||||||||
|
|
|
|
|
61
|
|
|
3f
|
|
|
||||||||
Other current liabilities
|
—
|
|
|
364
|
|
|
(364
|
)
|
|
3e
|
|
—
|
|
|||||
Current portion of long-term debt, net
|
6
|
|
|
—
|
|
|
—
|
|
|
|
|
6
|
|
|||||
Total current liabilities
|
1,606
|
|
|
2,432
|
|
|
(172
|
)
|
|
|
|
3,866
|
|
|||||
Non-current Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||
Defined benefit plans
|
601
|
|
|
1,202
|
|
|
61
|
|
|
2l
|
|
1,788
|
|
|||||
|
|
|
|
|
(76
|
)
|
|
3a
|
|
|
||||||||
Long term debt, net
|
3,412
|
|
|
3,322
|
|
|
129
|
|
|
2k
|
|
6,863
|
|
|||||
Non-current deferred income taxes
|
59
|
|
|
205
|
|
|
(547
|
)
|
|
2f
|
|
1,057
|
|
|||||
|
|
|
|
|
1,260
|
|
|
2n
|
|
|
Unaudited Pro Forma Condensed Combined Balance Sheet (Continued)
As of March 29, 2019 (In millions)
|
|||||||||||||||||||
|
|
|
|
|
80
|
|
|
3a
|
|
|
|||||||||
Other long-term liabilities
|
507
|
|
|
415
|
|
|
15
|
|
|
2i
|
|
772
|
|
||||||
|
|
|
|
|
(163
|
)
|
|
3a
|
|
|
|||||||||
|
|
|
|
|
(2
|
)
|
|
3c
|
|
|
|||||||||
Operating lease liabilities
|
—
|
|
|
569
|
|
|
(569
|
)
|
|
2f
|
|
—
|
|
||||||
Total non-current liabilities
|
4,579
|
|
|
5,713
|
|
|
188
|
|
|
|
|
10,480
|
|
||||||
Equity
|
|
|
|
|
|
|
|
|
|
||||||||||
Preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
||||||
Common stock
|
118
|
|
|
6,904
|
|
|
(6,904
|
)
|
|
2e
|
|
223
|
|
||||||
|
|
|
|
|
1
|
|
|
3a
|
|
|
|||||||||
|
|
|
|
|
104
|
|
|
2c
|
|
|
|||||||||
Treasury stock
|
—
|
|
|
(7,726
|
)
|
|
7,726
|
|
|
2e
|
|
—
|
|
||||||
Other capital
|
1,720
|
|
|
—
|
|
|
77
|
|
|
3a
|
|
21,247
|
|
||||||
|
|
|
|
|
19,450
|
|
|
2p
|
|
|
|||||||||
Retained earnings
|
1,986
|
|
|
7,574
|
|
|
(7,574
|
)
|
|
2e
|
|
2,087
|
|
||||||
|
|
|
|
|
(57
|
)
|
|
3b
|
|
|
|||||||||
|
|
|
|
|
(65
|
)
|
|
3a
|
|
|
|||||||||
|
|
|
|
|
223
|
|
|
3c
|
|
|
|||||||||
Accumulated other comprehensive loss
|
(217
|
)
|
|
(701
|
)
|
|
701
|
|
|
2e
|
|
(217
|
)
|
||||||
Total stockholders’ equity
|
3,607
|
|
|
6,051
|
|
|
13,682
|
|
|
|
|
23,340
|
|
||||||
Noncontrolling interest
|
—
|
|
|
67
|
|
|
(67
|
)
|
|
2e
|
|
246
|
|
||||||
|
|
|
|
|
246
|
|
|
2m
|
|
|
|||||||||
Total Equity
|
3,607
|
|
|
6,118
|
|
|
13,861
|
|
|
|
|
23,586
|
|
||||||
|
$
|
9,792
|
|
|
$
|
14,263
|
|
|
$
|
13,877
|
|
|
|
|
$
|
37,932
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Harris |
|
Historical
L3 |
|
Pro Forma
Adjustments |
|
Note
References |
|
Pro Forma
Combined |
||||||||
Revenue from product sales and services
|
$
|
4,936
|
|
|
$
|
7,990
|
|
|
$
|
(13
|
)
|
|
3d
|
|
$
|
12,791
|
|
|
|
|
|
|
(122
|
)
|
|
3c
|
|
|
|||||||
Cost of product sales and services
|
(3,244
|
)
|
|
(5,894
|
)
|
|
13
|
|
|
3d
|
|
(9,067
|
)
|
||||
|
|
|
|
|
83
|
|
|
3c
|
|
|
|||||||
|
|
|
|
|
(25
|
)
|
|
3i
|
|
|
|||||||
Engineering, selling and administrative expenses
|
(893
|
)
|
|
(1,203
|
)
|
|
27
|
|
|
3b
|
|
(2,460
|
)
|
||||
|
|
|
|
|
6
|
|
|
3a
|
|
|
|||||||
|
|
|
|
|
20
|
|
|
3c
|
|
|
|||||||
|
|
|
|
|
(356
|
)
|
|
3i
|
|
|
|||||||
|
|
|
|
|
(6
|
)
|
|
3n
|
|
|
|||||||
|
|
|
|
|
(52
|
)
|
|
3g
|
|
|
|||||||
|
|
|
|
|
(3
|
)
|
|
3o
|
|
|
|||||||
Loss on sale of Crestview Aerospace and TCS Business
|
—
|
|
|
(6
|
)
|
|
6
|
|
|
3g
|
|
—
|
|
||||
Merger, acquisition and divestiture related expenses
|
—
|
|
|
(46
|
)
|
|
46
|
|
|
3g
|
|
—
|
|
||||
Non-operating income
|
140
|
|
|
—
|
|
|
(7
|
)
|
|
3g
|
|
174
|
|
||||
|
|
|
|
|
41
|
|
|
3k
|
|
|
|||||||
Interest and other income, net
|
—
|
|
|
27
|
|
|
(27
|
)
|
|
3g
|
|
—
|
|
||||
Debt retirement charge
|
—
|
|
|
(21
|
)
|
|
21
|
|
|
3g
|
|
—
|
|
||||
Interest income
|
2
|
|
|
—
|
|
|
13
|
|
|
3g
|
|
15
|
|
||||
Interest expense
|
(130
|
)
|
|
(116
|
)
|
|
(15
|
)
|
|
3j
|
|
(258
|
)
|
||||
|
|
|
|
|
3
|
|
|
3l
|
|
|
|||||||
Income from continuing operations before income taxes
|
811
|
|
|
731
|
|
|
(347
|
)
|
|
|
|
1,195
|
|
||||
Income taxes
|
(127
|
)
|
|
(68
|
)
|
|
83
|
|
|
3m
|
|
(112
|
)
|
||||
Income from continuing operations
|
684
|
|
|
663
|
|
|
(264
|
)
|
|
|
|
1,083
|
|
||||
Income from continuing operations attributable to non-controlling interests
|
—
|
|
|
(18
|
)
|
|
—
|
|
|
|
|
(18
|
)
|
||||
Income from continuing operations attributable to common stockholders
|
$
|
684
|
|
|
$
|
645
|
|
|
$
|
(264
|
)
|
|
|
|
$
|
1,065
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations per basic common share attributable to common stockholders
|
$
|
5.79
|
|
|
|
|
|
|
|
|
$
|
4.79
|
|
||||
Income from continuing operations per diluted common share attributable to common stockholders
|
$
|
5.67
|
|
|
|
|
|
|
|
|
$
|
4.73
|
|
||||
Basic weighted average common shares outstanding
|
117.9
|
|
|
|
|
103.9
|
|
|
2c
|
|
221.8
|
|
|||||
Diluted weighted average common shares outstanding
|
120.3
|
|
|
|
|
104.5
|
|
|
2c
|
|
224.8
|
|
|
Historical
Harris |
|
Historical
L3 |
|
Pro Forma
Adjustments |
|
Note
References |
|
Pro
Forma Combined |
||||||||
Revenue from product sales and services
|
$
|
6,168
|
|
|
$
|
9,821
|
|
|
$
|
(165
|
)
|
|
3h
|
|
$
|
15,653
|
|
|
|
|
|
|
(148
|
)
|
|
3c
|
|
|
|||||||
|
|
|
|
|
(23
|
)
|
|
3d
|
|
|
|||||||
Cost of product sales and services
|
(4,066
|
)
|
|
(7,214
|
)
|
|
125
|
|
|
3h
|
|
(11,067
|
)
|
||||
|
|
|
|
|
106
|
|
|
3c
|
|
|
|||||||
|
|
|
|
|
23
|
|
|
3d
|
|
|
|||||||
|
|
|
|
|
(41
|
)
|
|
3i
|
|
|
|||||||
Engineering, selling and administrative expenses
|
(1,182
|
)
|
|
(1,583
|
)
|
|
6
|
|
|
3a
|
|
(3,163
|
)
|
||||
|
|
|
|
|
21
|
|
|
3c
|
|
|
|||||||
|
|
|
|
|
(456
|
)
|
|
3i
|
|
|
|||||||
|
|
|
|
|
(12
|
)
|
|
3n
|
|
|
|||||||
|
|
|
|
|
(5
|
)
|
|
3o
|
|
|
|||||||
|
|
|
|
|
48
|
|
|
3g
|
|
|
|||||||
Gain on sale of Crestview Aerospace and TCS businesses
|
—
|
|
|
48
|
|
|
(48
|
)
|
|
3g
|
|
—
|
|
||||
Non-operating income
|
156
|
|
|
—
|
|
|
(47
|
)
|
|
3g
|
|
173
|
|
||||
|
|
|
|
|
64
|
|
|
3k
|
|
|
|||||||
Interest and other income, net
|
—
|
|
|
17
|
|
|
(17
|
)
|
|
3g
|
|
—
|
|
||||
Debt retirement charge
|
—
|
|
|
(48
|
)
|
|
48
|
|
|
3g
|
|
—
|
|
||||
Interest income
|
2
|
|
|
—
|
|
|
16
|
|
|
3g
|
|
18
|
|
||||
Interest expense
|
(170
|
)
|
|
(170
|
)
|
|
(20
|
)
|
|
3j
|
|
(354
|
)
|
||||
|
|
|
|
|
6
|
|
|
3l
|
|
|
|||||||
Income from continuing operations before income taxes
|
908
|
|
|
871
|
|
|
(519
|
)
|
|
|
|
1,260
|
|
||||
Income taxes
|
(206
|
)
|
|
(73
|
)
|
|
155
|
|
|
3m
|
|
(124
|
)
|
||||
Income from continuing operations
|
702
|
|
|
798
|
|
|
(364
|
)
|
|
|
|
1,136
|
|
||||
Income from continuing operations attributable to non-controlling interests
|
—
|
|
|
(16
|
)
|
|
—
|
|
|
|
|
(16
|
)
|
||||
Income from continuing operations attributable to common stockholders
|
$
|
702
|
|
|
$
|
782
|
|
|
$
|
(364
|
)
|
|
|
|
$
|
1,120
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations per basic common share attributable to common stockholders
|
$
|
5.90
|
|
|
|
|
|
|
|
|
$
|
5.02
|
|
||||
Income from continuing operations per diluted common share attributable to common stockholders
|
$
|
5.78
|
|
|
|
|
|
|
|
|
$
|
4.95
|
|
||||
Basic weighted average common shares outstanding
|
118.6
|
|
|
|
|
103.9
|
|
|
2c
|
|
222.5
|
|
|||||
Diluted weighted average common shares outstanding
|
121.1
|
|
|
|
|
104.5
|
|
|
2c
|
|
225.6
|
|
(In millions, except per share amounts)
|
Note
|
|
Amount
|
||
Calculation of estimated consideration to be transferred:
|
|||||
Outstanding shares of L3 common stock as of March 29, 2019
|
|
|
79.40
|
|
|
L3 restricted stock unit awards expected to be converted into shares of Harris common stock
|
a
|
|
0.51
|
|
|
L3 performance unit awards expected to be converted into shares of Harris common stock
|
b
|
|
0.03
|
|
|
|
|
|
79.94
|
|
|
Exchange ratio
|
|
|
x
|
1.30
|
|
Shares of Harris common stock to be issued for L3 outstanding common stock
|
c
|
|
103.92
|
|
|
Price per share of Harris common stock as of as of May 24, 2019
|
|
|
$
|
187.08
|
|
Fair value of Harris common stock to be issued for L3 outstanding common stock
|
|
|
$
|
19,442
|
|
Fair value of Harris stock options to be issued for L3 outstanding stock options
|
d
|
|
112
|
|
|
Less estimated cash to be acquired
|
|
|
(1,108
|
)
|
|
Total estimated consideration transferred
|
|
|
$
|
18,446
|
|
(In millions)
|
Note
|
|
Amount
|
||
Recognized amounts of identifiable assets acquired and liabilities assumed:
|
|
|
|
||
Net book value of assets, excluding cash, acquired as of March 29, 2019
|
e
|
|
$
|
5,010
|
|
Less elimination of pre-existing L3 goodwill, intangible assets, operating right-of-use assets and operating lease liabilities and certain other non-current assets, non-current deferred income taxes and other accrued items
|
f
|
|
(6,635
|
)
|
|
Adjusted net book value of assets acquired
|
|
|
(1,625
|
)
|
|
Increase in inventory to fair value
|
g
|
|
157
|
|
|
Identifiable intangible assets at fair value
|
h
|
|
5,465
|
|
|
Increase in other non-current assets for favorable leases
|
i
|
|
60
|
|
|
Decrease in deferred revenue liabilities
|
j
|
|
23
|
|
|
Increase in long-term debt assumed to fair value
|
k
|
|
(129
|
)
|
|
Increase in long-term liabilities for unfavorable leases
|
i
|
|
(15
|
)
|
|
Increase in defined benefit plans liabilities
|
l
|
|
(61
|
)
|
|
Non-controlling interest at fair value
|
m
|
|
(246
|
)
|
|
Deferred tax impact of fair value adjustments
|
n
|
|
(1,260
|
)
|
|
Goodwill
|
o
|
|
16,077
|
|
|
Net assets acquired at fair value
|
|
|
$
|
18,446
|
|
|
Total Estimated Consideration Transferred
|
|
Estimated Goodwill
|
||||
|
(In millions)
|
||||||
As presented in pro forma combined results
|
$
|
18,446
|
|
|
$
|
16,077
|
|
20% increase in Harris common stock price
|
$
|
22,381
|
|
|
$
|
20,012
|
|
20% decrease in Harris common stock price
|
$
|
14,515
|
|
|
$
|
12,146
|
|
a
.
|
Any L3 restricted stock unit award (“RSU”) granted prior to October 12, 2018 that is outstanding at the effective time will be deemed accelerated in full and each L3 RSU will, automatically and without any action on the part of the holder thereof, be cancelled and the holder will be entitled to receive a number of shares of Harris common stock equal to the product (rounded to the nearest whole number) of the number of shares of L3 common stock subject to such L3 RSU immediately prior to the effective time multiplied by the exchange ratio. The amount shown represents the estimated number of L3 RSUs expected to be converted into shares of Harris common stock, without reduction for withholding taxes, based on approximately
0.51 million
L3 RSUs outstanding as of March 29, 2019.
|
b
.
|
Each L3 performance unit award (“PSU”) granted prior to October 12, 2018 that is outstanding at the effective time may entitle the holder to receive a number of shares of Harris common stock for an L3 PSU deemed settled and may entitle the holder to receive a converted L3 PSU for an L3 PSU that is not deemed settled, in each case, with respect to a number of shares of L3 common stock based on the greater of the target and actual level of performance through the effective time. L3 PSUs deemed settled will be deemed satisfied and accelerated in full and each settled L3 PSU will, automatically and without action on the part of the holder thereof, be cancelled and the holder will be entitled to receive a number of shares of Harris common stock equal to the product of (a) the number of shares of L3 common stock subject to such L3 PSU immediately prior to the effective time multiplied by (b) the exchange ratio. Each earned L3 PSU that is not deemed settled will, automatically and without any action on the part of the holder thereof, be cancelled and converted into a time-vested restricted stock unit denominated in shares of Harris common stock. The number of shares of Harris common stock subject to each converted L3 PSU will equal the product of (a) the number of shares of L3 common stock subject to such converted L3 PSU immediately prior to the effective time and (b) the exchange ratio. The amount shown represents the estimated number of L3 PSUs expected to be converted into shares of Harris common stock, without reduction for withholding taxes, based on approximately
0.03 million
L3 PSUs outstanding as of March 29, 2019 expected to be deemed settled.
|
c
.
|
Increase in common stock due to shares of Harris common stock to be issued for L3 common stock, L3 RSUs and L3 PSUs. Diluted shares also include the dilutive impact of Harris stock options to be issued for L3 stock options calculated using the treasury stock method.
|
d
.
|
At the effective time, any service-based or performance-based vesting conditions applicable to each outstanding L3 stock option granted prior to October 12, 2018 will be deemed satisfied and accelerated in full and will be converted into an option to purchase a number of shares of Harris common stock equal to the product of (a) the number of shares of L3 common stock subject to such L3 stock option immediately prior to the effective time and (b) the exchange ratio, at an exercise price per share equal to (i) the exercise price per share of L3 common stock of such option immediately prior to the effective time divided by (ii) the exchange ratio. The amount shown represents the estimated fair value of Harris stock options to be issued based on approximately 1.1 million L3 stock options outstanding as of March 29, 2019.
|
e
.
|
Reflects the historical net book value of assets, excluding cash, acquired from L3. The unaudited pro forma condensed combined balance sheet reflects the elimination of L3’s historical common stock, treasury stock, retained earnings, accumulated other comprehensive loss and non-controlling interest as part of purchase accounting.
|
f
.
|
Reflects the elimination of certain previously recorded assets and liabilities by L3 as part of purchase accounting. The historical book value of these assets and liabilities was as follows:
|
g
.
|
Reflects the increase of L3’s inventory to fair value based on preliminary valuation.
|
h
.
|
Identifiable intangible assets expected to be acquired consist of the following:
|
(In millions)
|
Amount
|
||
Acquired customer relationships
|
$
|
4,000
|
|
Acquired trade names
|
800
|
|
|
Acquired technology
|
600
|
|
|
Acquired in-process research and development
|
65
|
|
|
Estimated fair value of identifiable intangible assets
|
$
|
5,465
|
|
i
.
|
$60 million
increase in other non-current assets reflects assets recorded as part of purchase accounting for lease contracts with terms that are more favorable than are available in the current market.
$15 million
increase in other long-term liabilities reflects liability recorded as part of purchase accounting for lease contracts with terms that are less favorable than are available in the current market.
|
j
.
|
Reflects the estimated fair value adjustment to L3’s deferred revenue balances as part of purchase accounting. The balance of deferred revenue reflects legal performance obligations assumed by Harris.
|
k
.
|
Reflects the estimated fair value adjustments to L3’s long-term debt determined using prices in secondary markets for identical and similar securities obtained from external pricing sources.
|
l
.
|
Increase in defined benefit plans to reflect preliminary actuarial valuation of plan liabilities and the fair value of plan assets.
|
m
.
|
Reflects the fair value of L3’s non-controlling interest.
|
n
.
|
Represents estimated deferred tax liabilities, at an estimated statutory tax rate of
24%
, associated with identifiable intangible assets expected to be acquired and fair value adjustments for inventory, deferred revenue, favorable/unfavorable lease contracts, long-term debt and defined benefit plan liabilities.
|
o
.
|
Goodwill is calculated as the difference between the fair value of the consideration transferred and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed.
|
p
.
|
Represents the impact of the fair value of consideration to other capital as part of purchase accounting, calculated as follows:
|
(In millions)
|
Amount
|
||
Total estimated consideration transferred
|
$
|
18,446
|
|
Add estimated cash to be acquired
|
1,108
|
|
|
Fair value of equity consideration
|
19,554
|
|
|
Less increase in common stock
|
(104
|
)
|
|
Increase in other capital
|
$
|
19,450
|
|
a
.
|
Reflects the impact of expected change-in-control payments under certain post-retirement and share-based and deferred compensation arrangements.
|
b
.
|
Represents remaining estimated transaction costs for Harris and L3 of
$33 million
(
$27 million
after taxes) and
$37 million
(
$30 million
after taxes), respectively. As of March 29, 2019, Harris has recognized
$12 million
of transaction costs, which were included in engineering, selling and administrative expenses in Harris’ historical statement of income for the three quarters ended March 29, 2019. As of March 29, 2019, L3 incurred
$15 million
of transaction costs, which were included in merger, acquisition and divestiture related expenses in L3’s historical statement of operations for the quarter ended March 29, 2019 and in merger and acquisition related expenses in L3’s historical statement of operations for the year ended December 31, 2018.
|
c
.
|
Reflects the impact of the expected sale of Harris’ Night Vision business.
|
d
.
|
Reflects the elimination of intercompany balances and transactions between L3 and Harris.
|
e
.
|
Reflects other current liabilities of
$364 million
from L3’s historical balance sheet, which were reclassified to other accrued items to conform their presentation to that of Harris in the unaudited pro forma condensed consolidated balance sheet at March 29, 2019.
|
f
.
|
Reflects income taxes payable of
$61 million
that were reclassified to income taxes receivable as a result of pro forma adjustments.
|
g
.
|
Certain amounts from L3’s historical statement of operations data were reclassified to conform their presentation to that of
|
1.
|
Loss on sale of the Crestview Aerospace and TCS businesses of
$6 million
for the three quarters ended March 29, 2019 and gain on sale of the Crestview Aerospace and TCS businesses of
$48 million
for the fiscal year ended June 29, 2018 were reclassified to engineering, selling and administrative expenses.
|
2.
|
Merger, acquisition and divestiture related expenses of
$46 million
were reclassified to engineering, selling and administrative expenses for the three quarters ended March 29, 2019.
|
3.
|
Interest and other income, net of
$27 million
and
$17 million
, of which
$13 million
and
$16 million
were reclassified to interest income and $14 million and $1 million were reclassified to non-operating income for the three quarters ended March 29, 2019 and fiscal year ended June 29, 2018, respectively.
|
4.
|
Debt retirement charges of
$21 million
and
$48 million
were reclassified to non-operating income for the three quarters ended March 29, 2019 and fiscal year ended June 29, 2018, respectively.
|
h
.
|
In its adoption of ASC 606, L3 elected the modified-retrospective transition method and, accordingly, did not apply ASC 606 to reporting periods beginning prior to January 1, 2018. Harris elected the full retrospective transition method in its adoption of ASC 606 and retrospectively applied ASC 606 to all periods presented. Amounts reflect the estimated impact of the retrospective application of ASC 606 to L3’s historical statement of operations data for the six months ended December 31, 2017.
|
i
.
|
Reflects the net increase in amortization expense related to the estimated fair value of acquired finite-lived identifiable intangible assets and the elimination of historical amortization expense recognized by L3 for the three quarters ended March 29, 2019 and the fiscal year ended June 29, 2018. Assumptions and details are as follows:
|
(In millions)
|
|
Weighted
Average Useful Lives (Years) |
|
Fair
Value |
|
Three Quarters Ended
March 29, 2019 |
|
Fiscal Year Ended
June 29, 2018 |
||||||
Acquired customer relationships
|
|
16
|
|
$
|
4,000
|
|
|
$
|
296
|
|
|
$
|
376
|
|
Acquired trade names
|
|
10
|
|
800
|
|
|
60
|
|
|
80
|
|
|||
Adjustment to engineering, selling and administrative expenses
|
|
|
|
|
|
356
|
|
|
456
|
|
||||
Acquired developed technology
|
|
7
|
|
600
|
|
|
65
|
|
|
86
|
|
|||
Less historical L3 amortization
|
|
|
|
|
|
(40
|
)
|
|
(45
|
)
|
||||
Adjustment to cost of product sales and services
|
|
|
|
|
|
25
|
|
|
41
|
|
||||
Total net adjustment to amortization expense
|
|
|
|
|
|
$
|
381
|
|
|
$
|
497
|
|
j
.
|
Reflects amortization of the increase to L3’s long-term debt based on a preliminary
$129 million
fair value adjustment (see also Note
2k
).
|
k
.
|
Reflects the elimination of amortization of net actuarial losses from accumulated comprehensive loss related to L3’s post-retirement benefit plans as part of purchase accounting.
|
l
.
|
Reflects the elimination of amortization of deferred debt issuance costs as part of purchase accounting.
|
m
.
|
Represents the income tax impact of the pro forma adjustments, using the blended worldwide tax rates for L3, in the case of pro forma adjustments to L3’s historical results, and the federal and state statutory tax rates for Harris, in the case of pro forma adjustments to Harris’ historical results. As a result, the combined statutory tax rate used to tax effect the pro forma adjustments was approximately
24%
and
30%
for the three quarters ended March 29, 2019 and the fiscal year ended June 29, 2018, respectively. These tax rates do not represent the combined company’s effective tax rate, which will include other tax charges and benefits, and does not take into account any historical or possible future tax events that may impact the combined company following the consummation of the merger.
|
n
.
|
In connection with the merger, on October 12, 2018, each company entered into a letter agreement with its chief executive officer, to outline the terms of each such person’s role and compensation arrangements following the merger. Amounts shown reflect the expected increase in compensation expense as a result of these modified arrangements.
|
o
.
|
Reflects the net statement of income impact of adjustments for favorable and unfavorable leases as part of purchase accounting (see also Note
2i
).
|