☑
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended April 3, 2020
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from to _
|
Delaware
|
|
34-0276860
|
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
1025 West NASA Boulevard
|
|
|
||
Melbourne,
|
Florida
|
|
|
32919
|
(Address of principal executive offices)
|
|
(Zip Code)
|
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
|
|
LHX
|
|
New York Stock Exchange
|
Large accelerated filer
|
|
þ
|
|
|
Accelerated filer
|
o
|
Non-accelerated filer
|
|
o
|
|
|
Smaller reporting company
|
☐
|
Emerging growth company
|
|
☐
|
|
|
|
|
|
Page
No.
|
Part I. Financial Information:
|
|
Item 1. Financial Statements (Unaudited):
|
|
Condensed Consolidated Statement of Income for the Quarter Ended April 3, 2020 and March 29, 2019
|
|
Condensed Consolidated Statement of Comprehensive Income for the Quarter Ended April 3, 2020 and March 29, 2019
|
|
Condensed Consolidated Balance Sheet at April 3, 2020 and January 3, 2020
|
|
Condensed Consolidated Statement of Cash Flows for the Quarter Ended April 3, 2020 and March 29, 2019
|
|
Condensed Consolidated Statement of Equity for the Quarter Ended April 3, 2020 and March 29, 2019
|
|
Notes to Condensed Consolidated Financial Statements
|
|
Report of Independent Registered Public Accounting Firm
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
|
|
Item 4. Controls and Procedures
|
|
|
|
Part II. Other Information:
|
|
Item 1. Legal Proceedings
|
|
Item 1A. Risk Factors
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
|
Item 3. Defaults Upon Senior Securities
|
|
Item 4. Mine Safety Disclosures
|
|
Item 5. Other Information
|
|
Item 6. Exhibits
|
|
|
|
Signature
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
|
|
|
||||
|
(In millions, except per share amounts)
|
||||||
Revenue from product sales and services
|
$
|
4,626
|
|
|
$
|
1,728
|
|
Cost of product sales and services
|
(3,298
|
)
|
|
(1,139
|
)
|
||
Engineering, selling and administrative expenses
|
(815
|
)
|
|
(310
|
)
|
||
Impairment of goodwill and other assets
|
(324
|
)
|
|
—
|
|
||
Non-operating income
|
95
|
|
|
46
|
|
||
Interest income
|
5
|
|
|
1
|
|
||
Interest expense
|
(68
|
)
|
|
(43
|
)
|
||
Income from continuing operations before income taxes
|
221
|
|
|
283
|
|
||
Income taxes
|
(26
|
)
|
|
(40
|
)
|
||
Income from continuing operations
|
195
|
|
|
243
|
|
||
Discontinued operations, net of income taxes
|
(1
|
)
|
|
—
|
|
||
Net income
|
194
|
|
|
243
|
|
||
Noncontrolling interests, net of income taxes
|
23
|
|
|
—
|
|
||
Net income attributable to L3Harris Technologies, Inc.
|
$
|
217
|
|
|
$
|
243
|
|
Amounts attributable to L3Harris Technologies, Inc. common shareholders
|
|
|
|
||||
Income from continuing operations
|
$
|
218
|
|
|
$
|
243
|
|
Discontinued operations, net of income taxes
|
(1
|
)
|
|
—
|
|
||
Net income
|
$
|
217
|
|
|
$
|
243
|
|
|
|
|
|
||||
Net income per common share attributable to L3Harris Technologies, Inc. common shareholders
|
|
|
|
||||
Basic
|
|
|
|
||||
Continuing operations
|
$
|
1.00
|
|
|
$
|
2.06
|
|
Discontinued operations
|
—
|
|
|
—
|
|
||
|
$
|
1.00
|
|
|
$
|
2.06
|
|
Diluted
|
|
|
|
||||
Continuing operations
|
$
|
0.99
|
|
|
$
|
2.02
|
|
Discontinued operations
|
—
|
|
|
—
|
|
||
|
$
|
0.99
|
|
|
$
|
2.02
|
|
|
|
|
|
||||
Basic weighted average common shares outstanding
|
217.3
|
|
|
117.9
|
|
||
Diluted weighted average common shares outstanding
|
219.3
|
|
|
120.3
|
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Net income
|
$
|
194
|
|
|
$
|
243
|
|
Other comprehensive loss:
|
|
|
|
||||
Foreign currency translation gain (loss), net of income taxes
|
(67
|
)
|
|
3
|
|
||
Net unrealized loss on hedging derivatives, net of income taxes
|
(73
|
)
|
|
(8
|
)
|
||
Net unrecognized loss on postretirement obligations, net of income taxes
|
(1
|
)
|
|
(1
|
)
|
||
Other comprehensive loss, net of income taxes
|
(141
|
)
|
|
(6
|
)
|
||
Total comprehensive income
|
53
|
|
|
237
|
|
||
Comprehensive loss attributable to noncontrolling interests
|
23
|
|
|
—
|
|
||
Total comprehensive income attributable to L3Harris Technologies, Inc.
|
$
|
76
|
|
|
$
|
237
|
|
|
April 3,
2020 |
|
January 3,
2020 |
||||
|
|
|
|
||||
|
(In millions, except shares)
|
||||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
663
|
|
|
$
|
824
|
|
Receivables
|
1,278
|
|
|
1,216
|
|
||
Contract assets
|
2,467
|
|
|
2,459
|
|
||
Inventories
|
990
|
|
|
1,219
|
|
||
Income taxes receivable
|
205
|
|
|
202
|
|
||
Other current assets
|
400
|
|
|
392
|
|
||
Assets of disposal group held for sale
|
1,208
|
|
|
—
|
|
||
Total current assets
|
7,211
|
|
|
6,312
|
|
||
Non-current Assets
|
|
|
|
||||
Property, plant and equipment
|
2,032
|
|
|
2,117
|
|
||
Operating lease right-of-use assets
|
784
|
|
|
837
|
|
||
Goodwill
|
19,265
|
|
|
20,001
|
|
||
Other intangible assets
|
8,171
|
|
|
8,458
|
|
||
Deferred income taxes
|
112
|
|
|
102
|
|
||
Other non-current assets
|
530
|
|
|
509
|
|
||
Total non-current assets
|
30,894
|
|
|
32,024
|
|
||
|
$
|
38,105
|
|
|
$
|
38,336
|
|
Liabilities and Equity
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Short-term debt
|
$
|
2
|
|
|
$
|
3
|
|
Accounts payable
|
1,422
|
|
|
1,261
|
|
||
Contract liabilities
|
1,138
|
|
|
1,214
|
|
||
Compensation and benefits
|
329
|
|
|
460
|
|
||
Other accrued items
|
1,095
|
|
|
790
|
|
||
Income taxes payable
|
37
|
|
|
24
|
|
||
Current portion of long-term debt, net
|
896
|
|
|
257
|
|
||
Liabilities of disposal group held for sale
|
204
|
|
|
—
|
|
||
Total current liabilities
|
5,123
|
|
|
4,009
|
|
||
Non-current Liabilities
|
|
|
|
||||
Defined benefit plans
|
1,744
|
|
|
1,819
|
|
||
Operating lease liabilities
|
729
|
|
|
781
|
|
||
Long-term debt, net
|
6,294
|
|
|
6,694
|
|
||
Deferred income taxes
|
1,402
|
|
|
1,481
|
|
||
Other long-term liabilities
|
786
|
|
|
808
|
|
||
Total non-current liabilities
|
10,955
|
|
|
11,583
|
|
||
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 215,759,497 shares at April 3, 2020 and 218,226,614 shares at January 3, 2020
|
216
|
|
|
218
|
|
||
Other capital
|
20,182
|
|
|
20,694
|
|
||
Retained earnings
|
2,151
|
|
|
2,183
|
|
||
Accumulated other comprehensive loss
|
(651
|
)
|
|
(508
|
)
|
||
Total shareholders’ equity
|
21,898
|
|
|
22,587
|
|
||
Noncontrolling interests
|
129
|
|
|
157
|
|
||
Total equity
|
22,027
|
|
|
22,744
|
|
||
|
$
|
38,105
|
|
|
$
|
38,336
|
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Operating Activities
|
|
|
|
||||
Net income
|
$
|
194
|
|
|
$
|
243
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
230
|
|
|
64
|
|
||
Share-based compensation
|
87
|
|
|
37
|
|
||
Qualified pension plan contributions
|
(2
|
)
|
|
—
|
|
||
Pension and other postretirement benefit plan income
|
(80
|
)
|
|
(37
|
)
|
||
Impairment of goodwill and other assets
|
324
|
|
|
—
|
|
||
Deferred income taxes
|
(35
|
)
|
|
5
|
|
||
(Increase) decrease in:
|
|
|
|
||||
Accounts receivable
|
(164
|
)
|
|
41
|
|
||
Contract assets
|
(110
|
)
|
|
(52
|
)
|
||
Inventories
|
40
|
|
|
(8
|
)
|
||
Increase (decrease) in:
|
|
|
|
||||
Accounts payable
|
253
|
|
|
2
|
|
||
Contract liabilities
|
(47
|
)
|
|
(13
|
)
|
||
Compensation and benefits
|
(126
|
)
|
|
48
|
|
||
Income taxes
|
20
|
|
|
35
|
|
||
Other accrued items
|
(69
|
)
|
|
26
|
|
||
Other
|
18
|
|
|
14
|
|
||
Net cash provided by operating activities
|
533
|
|
|
405
|
|
||
Investing Activities
|
|
|
|
||||
Net additions of property, plant and equipment
|
(48
|
)
|
|
(37
|
)
|
||
Other investing activities
|
(10
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(58
|
)
|
|
(37
|
)
|
||
Financing Activities
|
|
|
|
||||
Net proceeds from borrowings
|
245
|
|
|
—
|
|
||
Repayments of borrowings
|
(1
|
)
|
|
(301
|
)
|
||
Proceeds from exercises of employee stock options
|
33
|
|
|
6
|
|
||
Repurchases of common stock
|
(700
|
)
|
|
—
|
|
||
Cash dividends
|
(183
|
)
|
|
(81
|
)
|
||
Distributions to noncontrolling interests
|
(5
|
)
|
|
—
|
|
||
Tax withholding payments associated with vested share-based awards
|
(1
|
)
|
|
(4
|
)
|
||
Net cash used in financing activities
|
(612
|
)
|
|
(380
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(24
|
)
|
|
3
|
|
||
Net decrease in cash and cash equivalents
|
(161
|
)
|
|
(9
|
)
|
||
Cash and cash equivalents, beginning of year
|
824
|
|
|
343
|
|
||
Cash and cash equivalents, end of quarter
|
$
|
663
|
|
|
$
|
334
|
|
|
Common
Stock
|
|
Other
Capital
|
|
Retained
Earnings
|
|
Accumulated Other
Comprehensive Loss
|
|
Non-controlling
Interests
|
|
Total
Equity
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(In millions, except per share amounts)
|
||||||||||||||||||||||
Balance at January 3, 2020
|
$
|
218
|
|
|
$
|
20,694
|
|
|
$
|
2,183
|
|
|
$
|
(508
|
)
|
|
$
|
157
|
|
|
$
|
22,744
|
|
Net income
|
—
|
|
|
—
|
|
|
217
|
|
|
—
|
|
|
(23
|
)
|
|
194
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(141
|
)
|
|
—
|
|
|
(141
|
)
|
||||||
Net gain from postretirement obligations and hedging derivatives reclassified to earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
||||||
Shares issued under stock incentive plans
|
1
|
|
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
||||||
Shares issued under defined contribution plans
|
—
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
71
|
|
||||||
Share-based compensation expense
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||
Repurchases and retirement of common stock
|
(3
|
)
|
|
(631
|
)
|
|
(66
|
)
|
|
—
|
|
|
—
|
|
|
(700
|
)
|
||||||
Cash dividends ($.85 per share)
|
—
|
|
|
—
|
|
|
(183
|
)
|
|
—
|
|
|
—
|
|
|
(183
|
)
|
||||||
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(5
|
)
|
||||||
Balance at April 3, 2020
|
$
|
216
|
|
|
$
|
20,182
|
|
|
$
|
2,151
|
|
|
$
|
(651
|
)
|
|
$
|
129
|
|
|
$
|
22,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balance at December 28, 2018
|
$
|
118
|
|
|
$
|
1,681
|
|
|
$
|
1,824
|
|
|
$
|
(211
|
)
|
|
$
|
—
|
|
|
$
|
3,412
|
|
Net income
|
—
|
|
|
—
|
|
|
243
|
|
|
—
|
|
|
—
|
|
|
243
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
||||||
Shares issued under stock incentive plans
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||||
Shares issued under defined contribution plans
|
—
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
||||||
Share-based compensation expense
|
—
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
||||||
Repurchases and retirement of common stock
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
||||||
Cash dividends ($.685 per share)
|
—
|
|
|
—
|
|
|
(81
|
)
|
|
—
|
|
|
—
|
|
|
(81
|
)
|
||||||
Balance at March 29, 2019
|
$
|
118
|
|
|
$
|
1,720
|
|
|
$
|
1,986
|
|
|
$
|
(217
|
)
|
|
$
|
—
|
|
|
$
|
3,607
|
|
(In millions, except exchange ratio and per share amounts)
|
June 29, 2019
|
||
Outstanding shares of L3 common stock as of June 28, 2019
|
79.63
|
|
|
L3 restricted stock unit awards settled in shares of L3Harris common stock
|
0.41
|
|
|
L3 performance unit awards settled in shares of L3Harris common stock
|
0.04
|
|
|
|
80.08
|
|
|
Exchange Ratio
|
1.30
|
|
|
Shares of L3Harris common stock issued for L3 outstanding common stock
|
104.10
|
|
|
Price per share of L3Harris common stock as of June 28, 2019
|
$
|
189.13
|
|
Fair value of L3Harris common stock issued for L3 outstanding common stock
|
$
|
19,689
|
|
Fair value of replacement RSUs attributable to merger consideration
|
10
|
|
|
Fair value of L3Harris stock options issued for L3 outstanding stock options
|
101
|
|
|
Withholding tax liability incurred for converted L3 share-based awards
|
45
|
|
|
Fair value of replacement award consideration
|
156
|
|
|
Fair value of total consideration
|
19,845
|
|
|
Less cash acquired
|
(1,195
|
)
|
|
Total net consideration transferred
|
$
|
18,650
|
|
|
Preliminary Fair Value
|
|
Measurement Period Adjustments
|
|
Adjusted Fair Value
|
||||||
|
(In millions)
|
||||||||||
Receivables
|
$
|
849
|
|
|
$
|
(20
|
)
|
|
$
|
829
|
|
Contract assets
|
1,708
|
|
|
(56
|
)
|
|
1,652
|
|
|||
Inventories
|
1,056
|
|
|
(74
|
)
|
|
982
|
|
|||
Other current assets
|
517
|
|
|
(26
|
)
|
|
491
|
|
|||
Property, plant and equipment
|
1,176
|
|
|
42
|
|
|
1,218
|
|
|||
Operating lease right-of-use assets
|
704
|
|
|
—
|
|
|
704
|
|
|||
Goodwill
|
15,423
|
|
|
(585
|
)
|
|
14,838
|
|
|||
Other intangible assets
|
6,768
|
|
|
1,206
|
|
|
7,974
|
|
|||
Other non-current assets
|
327
|
|
|
(9
|
)
|
|
318
|
|
|||
Total assets acquired
|
$
|
28,528
|
|
|
$
|
478
|
|
|
$
|
29,006
|
|
|
|
|
|
|
|
||||||
Accounts payable
|
$
|
898
|
|
|
$
|
(17
|
)
|
|
$
|
881
|
|
Contract liabilities
|
722
|
|
|
2
|
|
|
724
|
|
|||
Other current liabilities
|
772
|
|
|
199
|
|
|
971
|
|
|||
Operating lease liabilities
|
715
|
|
|
—
|
|
|
715
|
|
|||
Defined benefit plans
|
1,411
|
|
|
—
|
|
|
1,411
|
|
|||
Long-term debt, net
|
3,548
|
|
|
—
|
|
|
3,548
|
|
|||
Other long-term liabilities
|
1,661
|
|
|
290
|
|
|
1,951
|
|
|||
Total liabilities assumed
|
9,727
|
|
|
474
|
|
|
10,201
|
|
|||
Net assets acquired
|
18,801
|
|
|
4
|
|
|
18,805
|
|
|||
Noncontrolling interests
|
(151
|
)
|
|
(4
|
)
|
|
(155
|
)
|
|||
Total net consideration transferred
|
$
|
18,650
|
|
|
$
|
—
|
|
|
$
|
18,650
|
|
|
Weighted Average Amortization Period
|
|
Total
|
||
|
|
|
|
||
|
(In years)
|
|
(In millions)
|
||
Identifiable intangible assets acquired:
|
|
|
|
||
Customer relationships (Government)
|
15
|
|
$
|
4,769
|
|
Customer relationships (Commercial)
|
15
|
|
648
|
|
|
Trade names — Divisions
|
9
|
|
123
|
|
|
Developed technology
|
7
|
|
562
|
|
|
Total identifiable intangible assets subject to amortization
|
14
|
|
6,102
|
|
|
Trade names — Corporate
|
indefinite
|
|
1,803
|
|
|
In-process research and development
|
n/a
|
|
69
|
|
|
Total identifiable intangible assets
|
|
|
$
|
7,974
|
|
•
|
$15 million of additional cost of sales related to the fair value step-up in inventory sold; and
|
•
|
$31 million of integration costs, recognized as incurred.
|
|
March 29, 2019
|
||
|
|
||
|
(In millions)
|
||
Revenue from product sales and services — as reported
|
$
|
1,728
|
|
Revenue from product sales and services — pro forma
|
$
|
4,386
|
|
Income from continuing operations — as reported
|
$
|
243
|
|
Income from continuing operations — pro forma
|
$
|
400
|
|
|
April 3, 2020
|
||
|
|
||
|
(In millions)
|
||
Receivables
|
$
|
75
|
|
Contract assets
|
75
|
|
|
Inventories
|
136
|
|
|
Other current assets
|
11
|
|
|
Property, plant and equipment
|
39
|
|
|
Goodwill
|
588
|
|
|
Other intangible assets
|
203
|
|
|
Other assets
|
19
|
|
|
Assets of disposal group held for sale
|
$
|
1,146
|
|
|
|
||
Accounts payable
|
$
|
82
|
|
Contract liabilities
|
34
|
|
|
Other accrued items
|
24
|
|
|
Other non-current liabilities
|
33
|
|
|
Deferred taxes
|
22
|
|
|
Liabilities of disposal group held for sale
|
$
|
195
|
|
|
April 3, 2020
|
||
|
|
||
|
(In millions)
|
||
Receivables
|
$
|
10
|
|
Inventories
|
12
|
|
|
Property, plant and equipment
|
3
|
|
|
Goodwill
|
9
|
|
|
Other intangible assets
|
12
|
|
|
Other assets
|
2
|
|
|
Assets of disposal group held for sale
|
$
|
48
|
|
|
|
||
Accounts payable
|
$
|
4
|
|
Contract liabilities
|
1
|
|
|
Other accrued items
|
3
|
|
|
Liabilities of disposal group held for sale
|
$
|
8
|
|
|
Employee severance-related costs
|
|
Facilities consolidation and other exit costs
|
|
Total
|
||||||
|
|
|
|
|
|
||||||
|
(In millions)
|
||||||||||
Balance at January 3, 2020
|
$
|
58
|
|
|
$
|
7
|
|
|
$
|
65
|
|
Additional provisions
|
3
|
|
|
—
|
|
|
3
|
|
|||
Payments
|
(20
|
)
|
|
—
|
|
|
(20
|
)
|
|||
Balance at April 3, 2020
|
$
|
41
|
|
|
$
|
7
|
|
|
$
|
48
|
|
|
Foreign currency translation
|
|
Net unrealized (losses) gains on hedging derivatives
|
|
Unrecognized postretirement obligations
|
|
Total AOCI
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In millions)
|
||||||||||||||
Balance at January 3, 2020
|
$
|
(81
|
)
|
|
$
|
(55
|
)
|
|
$
|
(372
|
)
|
|
$
|
(508
|
)
|
Other comprehensive loss, before income taxes
|
(67
|
)
|
|
(98
|
)
|
|
(1
|
)
|
|
(166
|
)
|
||||
Income taxes
|
—
|
|
|
25
|
|
|
—
|
|
|
25
|
|
||||
Other comprehensive loss
|
(67
|
)
|
|
(73
|
)
|
|
(1
|
)
|
|
(141
|
)
|
||||
Amounts reclassified to earnings from AOCI, before income taxes
|
—
|
|
|
3
|
|
|
(5
|
)
|
|
(2
|
)
|
||||
Income taxes
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
||||
Amounts reclassified to earnings from AOCI
|
—
|
|
|
2
|
|
|
(4
|
)
|
|
(2
|
)
|
||||
Balance at April 3, 2020
|
$
|
(148
|
)
|
|
$
|
(126
|
)
|
|
$
|
(377
|
)
|
|
$
|
(651
|
)
|
|
|
|
|
|
|
|
|
||||||||
Balance at December 28, 2018
|
$
|
(107
|
)
|
|
$
|
(19
|
)
|
|
$
|
(85
|
)
|
|
$
|
(211
|
)
|
Other comprehensive income (loss), before income taxes
|
3
|
|
|
(11
|
)
|
|
(2
|
)
|
|
(10
|
)
|
||||
Income taxes
|
—
|
|
|
3
|
|
|
1
|
|
|
4
|
|
||||
Other comprehensive income (loss)
|
3
|
|
|
(8
|
)
|
|
(1
|
)
|
|
(6
|
)
|
||||
Balance at March 29, 2019
|
$
|
(104
|
)
|
|
$
|
(27
|
)
|
|
$
|
(86
|
)
|
|
$
|
(217
|
)
|
|
April 3, 2020
|
|
January 3, 2020
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Accounts receivable
|
$
|
1,312
|
|
|
$
|
1,228
|
|
Less allowance for credit losses
|
(34
|
)
|
|
(12
|
)
|
||
|
$
|
1,278
|
|
|
$
|
1,216
|
|
|
April 3, 2020
|
|
January 3, 2020
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Contract assets
|
$
|
2,467
|
|
|
$
|
2,459
|
|
Contract liabilities, current
|
(1,138
|
)
|
|
(1,214
|
)
|
||
Contract liabilities, non-current(1)
|
(74
|
)
|
|
(87
|
)
|
||
Net contract assets
|
$
|
1,255
|
|
|
$
|
1,158
|
|
(1)
|
The non-current portion of contract liabilities is included as a component of the “Other long-term liabilities” line item in our Condensed Consolidated Balance Sheet (Unaudited).
|
|
April 3, 2020
|
|
January 3, 2020
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Unbilled contract receivables, gross
|
$
|
3,781
|
|
|
$
|
3,690
|
|
Progress payments and advances
|
(1,314
|
)
|
|
(1,231
|
)
|
||
|
$
|
2,467
|
|
|
$
|
2,459
|
|
|
April 3, 2020
|
|
January 3, 2020
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Finished products
|
$
|
197
|
|
|
$
|
216
|
|
Work in process
|
307
|
|
|
386
|
|
||
Raw materials and supplies
|
486
|
|
|
617
|
|
||
|
$
|
990
|
|
|
$
|
1,219
|
|
|
April 3, 2020
|
|
January 3, 2020
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Land
|
$
|
90
|
|
|
$
|
90
|
|
Software capitalized for internal use
|
333
|
|
|
287
|
|
||
Buildings
|
1,044
|
|
|
1,073
|
|
||
Machinery and equipment
|
2,120
|
|
|
2,194
|
|
||
|
3,587
|
|
|
3,644
|
|
||
Less accumulated depreciation and amortization
|
(1,555
|
)
|
|
(1,527
|
)
|
||
|
$
|
2,032
|
|
|
$
|
2,117
|
|
|
Integrated Mission Systems
|
|
Space and Airborne Systems
|
|
Communication Systems
|
|
Aviation Systems
|
|
Total
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Balance at January 3, 2020
|
$
|
5,768
|
|
|
$
|
5,131
|
|
|
$
|
4,243
|
|
|
$
|
4,859
|
|
|
$
|
20,001
|
|
Decrease from reclassification to assets of disposal group held for sale(1)
|
—
|
|
|
(2
|
)
|
|
(9
|
)
|
|
(588
|
)
|
|
(599
|
)
|
|||||
Impairment of goodwill
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(296
|
)
|
|
(301
|
)
|
|||||
Currency translation adjustments
|
(2
|
)
|
|
(9
|
)
|
|
(3
|
)
|
|
(10
|
)
|
|
(24
|
)
|
|||||
Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed)
|
22
|
|
|
55
|
|
|
38
|
|
|
73
|
|
|
188
|
|
|||||
Balance at April 3, 2020
|
$
|
5,788
|
|
|
$
|
5,170
|
|
|
$
|
4,269
|
|
|
$
|
4,038
|
|
|
$
|
19,265
|
|
(1)
|
During the quarter ended April 3, 2020, we assigned $599 million of goodwill to “Assets of disposal groups held for sale” in our Condensed Consolidated Balance Sheet (Unaudited) associated with three pending divestitures. See Note C — Business Divestitures and Assets Sales in these Notes for additional information.
|
|
April 3, 2020
|
|
January 3, 2020
|
||||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Customer relationships
|
$
|
6,454
|
|
|
$
|
769
|
|
|
$
|
5,685
|
|
|
$
|
6,518
|
|
|
$
|
653
|
|
|
$
|
5,865
|
|
Developed technologies
|
689
|
|
|
194
|
|
|
495
|
|
|
768
|
|
|
183
|
|
|
585
|
|
||||||
Trade names
|
139
|
|
|
36
|
|
|
103
|
|
|
165
|
|
|
35
|
|
|
130
|
|
||||||
Other
|
32
|
|
|
16
|
|
|
16
|
|
|
10
|
|
|
4
|
|
|
6
|
|
||||||
Total intangible assets subject to amortization
|
7,314
|
|
|
1,015
|
|
|
6,299
|
|
|
7,461
|
|
|
875
|
|
|
6,586
|
|
||||||
In process research and development
|
69
|
|
|
—
|
|
|
69
|
|
|
69
|
|
|
—
|
|
|
69
|
|
||||||
L3 trade name
|
1,803
|
|
|
—
|
|
|
1,803
|
|
|
1,803
|
|
|
—
|
|
|
1,803
|
|
||||||
Total intangibles assets
|
$
|
9,186
|
|
|
$
|
1,015
|
|
|
$
|
8,171
|
|
|
$
|
9,333
|
|
|
$
|
875
|
|
|
$
|
8,458
|
|
|
(In millions)
|
||
Year 1
|
$
|
554
|
|
Year 2
|
622
|
|
|
Year 3
|
604
|
|
|
Year 4
|
580
|
|
|
Year 5
|
551
|
|
|
Thereafter
|
3,388
|
|
|
Total
|
$
|
6,299
|
|
|
(In millions)
|
||
Balance at January 3, 2020
|
$
|
112
|
|
Adjustments to previously estimated fair value of warranty liabilities assumed
|
19
|
|
|
Decrease from reclassification to liabilities of disposal group held for sale
|
(8
|
)
|
|
Accruals for product warranties issued during the period
|
17
|
|
|
Settlements made during the period
|
(21
|
)
|
|
Other, including foreign currency translation adjustments
|
(2
|
)
|
|
Balance at April 3, 2020
|
$
|
117
|
|
|
|
April 3, 2020
|
|
January 3, 2020
|
||||
|
|
|
|
|
||||
|
|
(In millions)
|
||||||
Variable-rate debt:
|
|
|
|
|||||
Floating rate notes, due April 30, 2020
|
$
|
250
|
|
|
$
|
250
|
|
|
Floating rate notes, due March 10, 2023
|
250
|
|
|
—
|
|
|||
Total variable-rate debt
|
500
|
|
|
250
|
|
|||
Fixed-rate debt:
|
|
|
|
|||||
4.95% notes, due February 15, 2021
|
650
|
|
|
650
|
|
|||
3.85% notes, due June 15, 2023
|
800
|
|
|
800
|
|
|||
3.95% notes, due May 28, 2024
|
350
|
|
|
350
|
|
|||
3.832% notes, due April 27, 2025
|
600
|
|
|
600
|
|
|||
7.0% debentures, due January 15, 2026
|
100
|
|
|
100
|
|
|||
3.85% notes, due December 15, 2026
|
550
|
|
|
550
|
|
|||
6.35% debentures, due February 1, 2028
|
26
|
|
|
26
|
|
|||
4.40% notes, due June 15, 2028
|
1,850
|
|
|
1,850
|
|
|||
2.900% notes, due December 15, 2029
|
400
|
|
|
400
|
|
|||
4.854% notes, due April 27, 2035
|
400
|
|
|
400
|
|
|||
6.15% notes, due December 15, 2040
|
300
|
|
|
300
|
|
|||
5.054% notes, due April 27, 2045
|
500
|
|
|
500
|
|
|||
Other
|
48
|
|
|
49
|
|
|||
Total fixed-rate debt
|
6,574
|
|
|
6,575
|
|
|||
Total debt
|
7,074
|
|
|
6,825
|
|
|||
Plus: unamortized bond premium
|
145
|
|
|
154
|
|
|||
Less: unamortized discounts and issuance costs
|
(29
|
)
|
|
(28
|
)
|
|||
Total debt, net
|
7,190
|
|
|
6,951
|
|
|||
Less: current portion of long-term debt, net
|
(896
|
)
|
|
(257
|
)
|
|||
Total long-term debt, net
|
$
|
6,294
|
|
|
$
|
6,694
|
|
|
Aggregate Principal Amount of L3 Notes (prior to debt exchange)
|
|
Aggregate Principal Amount of New L3Harris Notes Issued
|
|
Aggregate Principal Amount of Remaining L3 Notes
|
||||||
|
|
|
|
|
|
||||||
|
(In millions)
|
||||||||||
4.95% notes due February 15, 2021 (“4.95% 2021 Notes”)
|
$
|
650
|
|
|
$
|
501
|
|
|
$
|
149
|
|
3.85% notes due June 15, 2023 (“3.85% 2023 Notes”)
|
800
|
|
|
741
|
|
|
59
|
|
|||
3.95% notes due May 28, 2024 (“3.95% 2024 Notes”)
|
350
|
|
|
326
|
|
|
24
|
|
|||
3.85% notes due December 15, 2026 (“3.85% 2026 Notes”)
|
550
|
|
|
535
|
|
|
15
|
|
|||
4.40% notes due June 15, 2028 (“4.40% 2028 Notes”)
|
1,000
|
|
|
918
|
|
|
82
|
|
|||
Total
|
$
|
3,350
|
|
|
$
|
3,021
|
|
|
$
|
329
|
|
|
Quarter Ended April 3, 2020
|
||||||
|
Pension
|
|
Other Benefits
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Net periodic benefit income
|
|
|
|
||||
Service cost
|
$
|
16
|
|
|
$
|
—
|
|
Interest cost
|
69
|
|
|
2
|
|
||
Expected return on plan assets
|
(158
|
)
|
|
(5
|
)
|
||
Amortization of net actuarial loss
|
2
|
|
|
—
|
|
||
Amortization of prior service credit
|
(7
|
)
|
|
—
|
|
||
Contractual termination benefits(1)
|
1
|
|
|
—
|
|
||
Net periodic benefit income
|
$
|
(77
|
)
|
|
$
|
(3
|
)
|
(1)
|
Contractual termination benefits related to facility rationalization as part of restructuring activities in connection with the L3Harris Merger integration. See Note E — Restructuring and Other Exit Costs in these Notes for additional information regarding restructuring activities.
|
|
Quarter Ended March 29, 2019
|
||||||
|
Pension
|
|
Other Benefits
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Net periodic benefit income
|
|
|
|
||||
Service cost
|
$
|
9
|
|
|
$
|
1
|
|
Interest cost
|
52
|
|
|
2
|
|
||
Expected return on plan assets
|
(95
|
)
|
|
(4
|
)
|
||
Amortization of net actuarial gain
|
—
|
|
|
(2
|
)
|
||
Net periodic benefit income
|
$
|
(34
|
)
|
|
$
|
(3
|
)
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
|
|
|
||||
|
(In millions, except per share amounts)
|
||||||
Income from continuing operations
|
$
|
218
|
|
|
$
|
243
|
|
Adjustments for participating securities outstanding
|
—
|
|
|
(1
|
)
|
||
Income from continuing operations used in per basic and diluted common share calculations (A)
|
$
|
218
|
|
|
$
|
242
|
|
|
|
|
|
||||
Basic weighted average common shares outstanding (B)
|
217.3
|
|
|
117.9
|
|
||
Impact of dilutive share-based awards
|
2.0
|
|
|
2.4
|
|
||
Diluted weighted average common shares outstanding (C)
|
219.3
|
|
|
120.3
|
|
||
Income from continuing operations per basic common share (A)/(B)
|
$
|
1.00
|
|
|
$
|
2.06
|
|
Income from continuing operations per diluted common share (A)/(C)
|
$
|
0.99
|
|
|
$
|
2.02
|
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
(In millions)
|
||||||
Pension adjustment(1)
|
$
|
97
|
|
|
$
|
47
|
|
Other
|
(2
|
)
|
|
(1
|
)
|
||
|
$
|
95
|
|
|
$
|
46
|
|
(1)
|
Pension adjustment recorded as “Non-operating income” in our Condensed Consolidated Statement of Income (Unaudited) represents the non-service component of net periodic pension and postretirement benefit costs, which includes interest cost, expected return on plan assets, amortization of net actuarial gain and effect of curtailments or settlements.
|
•
|
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.
|
|
April 3, 2020
|
|
January 3, 2020
|
||||||||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Deferred compensation plan assets:(1)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity and fixed income securities
|
$
|
49
|
|
|
$
|
49
|
|
|
$
|
—
|
|
|
$
|
58
|
|
|
$
|
58
|
|
|
$
|
—
|
|
Investments measured at NAV:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate-owned life insurance
|
27
|
|
|
|
|
|
|
29
|
|
|
|
|
|
||||||||||
Total fair value of deferred compensation plan assets
|
$
|
76
|
|
|
$
|
49
|
|
|
$
|
—
|
|
|
$
|
87
|
|
|
$
|
58
|
|
|
$
|
—
|
|
Derivatives (foreign currency forward contracts)
|
11
|
|
|
—
|
|
|
11
|
|
|
10
|
|
|
—
|
|
|
10
|
|
||||||
Total assets measured at fair value
|
$
|
87
|
|
|
$
|
49
|
|
|
$
|
11
|
|
|
$
|
97
|
|
|
$
|
58
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Deferred compensation plan liabilities:(2)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity securities and mutual funds
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
—
|
|
Investments measured at NAV:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Common/collective trusts and guaranteed investment contracts
|
61
|
|
|
|
|
|
|
69
|
|
|
|
|
|
||||||||||
Total fair value of deferred compensation plan liabilities
|
$
|
63
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
71
|
|
|
$
|
2
|
|
|
$
|
—
|
|
Derivatives (foreign currency forward contracts)
|
27
|
|
|
—
|
|
|
27
|
|
|
8
|
|
|
—
|
|
|
8
|
|
||||||
Derivatives (treasury lock contracts)
|
135
|
|
|
—
|
|
|
135
|
|
|
56
|
|
|
—
|
|
|
56
|
|
||||||
Total liabilities measured at fair value
|
$
|
225
|
|
|
$
|
2
|
|
|
$
|
162
|
|
|
$
|
135
|
|
|
$
|
2
|
|
|
$
|
64
|
|
(1)
|
Represents diversified assets held in a “rabbi trust” associated with our non-qualified deferred compensation plans, which we include in the “Other current assets” and “Other non-current assets” line items in our Condensed Consolidated Balance Sheet (Unaudited) and which are measured at fair value.
|
(2)
|
Primarily represents obligations to pay benefits under certain non-qualified deferred compensation plans, which we include in the “Compensation and benefits” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited). Under these plans, participants designate investment options (including stock and fixed-income funds), which serve as the basis for measurement of the notional value of their accounts.
|
|
April 3, 2020
|
|
January 3, 2020
|
||||||||||||
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In millions)
|
||||||||||||||
Long-term debt (including current portion)(1)
|
$
|
7,190
|
|
|
$
|
7,485
|
|
|
$
|
6,951
|
|
|
$
|
7,536
|
|
(1)
|
Fair value was estimated using a market approach based on quoted market prices for our debt traded in the secondary market. If our long-term debt in our balance sheet were measured at fair value, it would be categorized in Level 2 of the fair value hierarchy.
|
|
April 3, 2020
|
|
January 3, 2020
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Derivatives designated as hedging instruments:
|
|
|
|
||||
Foreign currency forward contracts(1)
|
|
|
|
||||
Other current assets
|
$
|
8
|
|
|
$
|
8
|
|
Other non-current assets
|
3
|
|
|
2
|
|
||
Other accrued items
|
21
|
|
|
6
|
|
||
Other long-term liabilities
|
6
|
|
|
2
|
|
(1)
|
See Note R — Fair Value Measurements in these Notes for a description of the fair value hierarchy related to our foreign currency forward contracts.
|
•
|
Integrated Mission Systems, including multi-mission ISR and communication systems; integrated electrical and electronic systems for maritime platforms; and advanced electro-optical and infrared solutions;
|
•
|
Space and Airborne Systems, including space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; avionics; and electronic warfare;
|
•
|
Communication Systems, including tactical communications; broadband communications; integrated vision solutions; and public safety; and
|
•
|
Aviation Systems, including defense aviation products; security, detection and other commercial aviation products; commercial and military pilot training; and mission networks for air traffic management.
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Revenue
|
|
|
|
||||
Integrated Mission Systems
|
$
|
1,370
|
|
|
$
|
14
|
|
Space and Airborne Systems
|
1,192
|
|
|
956
|
|
||
Communication Systems
|
1,094
|
|
|
580
|
|
||
Aviation Systems
|
1,011
|
|
|
144
|
|
||
Other non-reportable business segments(1)
|
—
|
|
|
35
|
|
||
Corporate eliminations
|
(41
|
)
|
|
(1
|
)
|
||
|
$
|
4,626
|
|
|
$
|
1,728
|
|
Income From Continuing Operations Before Income Taxes
|
|
|
|
||||
Segment Operating Income (Loss):
|
|
|
|
||||
Integrated Mission Systems
|
$
|
201
|
|
|
$
|
3
|
|
Space and Airborne Systems
|
221
|
|
|
174
|
|
||
Communication Systems
|
250
|
|
|
167
|
|
||
Aviation Systems
|
(177
|
)
|
|
17
|
|
||
Other non-reportable business segments(1)
|
—
|
|
|
6
|
|
||
Unallocated corporate expenses(2)
|
(33
|
)
|
|
—
|
|
||
L3Harris Merger-related transaction and integration expenses
|
(31
|
)
|
|
(16
|
)
|
||
Amortization of acquisition-related intangibles(3)
|
(145
|
)
|
|
(25
|
)
|
||
Pension adjustment
|
(97
|
)
|
|
(47
|
)
|
||
Non-operating income
|
95
|
|
|
46
|
|
||
Net interest expense
|
(63
|
)
|
|
(42
|
)
|
||
Total
|
$
|
221
|
|
|
$
|
283
|
|
(1)
|
Includes the operating results of the Harris Night Vision business prior to the date of divestiture on September 13, 2019. See Note C — Business Divestitures and Assets Sales in these Notes for more information.
|
(2)
|
Includes: (i) $15 million of additional cost of sales related to the fair value step-up in inventory sold (see Note B — Business Combination in these Notes for more information); (ii) a $5 million non-cash goodwill impairment charge related to the pending divestiture of our Applied Kilovolts and Analytical Instrumentation business; and (iii) $3 million of divestiture expenses for the quarter ended April 3, 2020.
|
(3)
|
Includes $120 million of amortization of identifiable intangible assets acquired as a result of the L3Harris Merger for the quarter ended April 3, 2020 and $25 million of amortization of identifiable intangible assets acquired as a result of our acquisition of Exelis Inc. for each of the quarters ended April 3, 2020 and March 29, 2019. Because the L3Harris Merger and the acquisition of Exelis Inc. benefited the entire Company as opposed to any individual segment, the amortization of identifiable intangible assets acquired was not allocated to any segment.
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Revenue By Customer Relationship
|
|
|
|
||||
Prime contractor
|
$
|
949
|
|
|
$
|
8
|
|
Subcontractor
|
421
|
|
|
6
|
|
||
|
$
|
1,370
|
|
|
$
|
14
|
|
Revenue By Contract Type
|
|
|
|
||||
Fixed-price(1)
|
$
|
1,025
|
|
|
$
|
14
|
|
Cost-reimbursable
|
345
|
|
|
—
|
|
||
|
$
|
1,370
|
|
|
$
|
14
|
|
Revenue By Geographical Region
|
|
|
|
||||
United States
|
$
|
1,105
|
|
|
$
|
9
|
|
International
|
265
|
|
|
5
|
|
||
|
$
|
1,370
|
|
|
$
|
14
|
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Revenue By Customer Relationship
|
|
|
|
||||
Prime contractor
|
$
|
658
|
|
|
$
|
572
|
|
Subcontractor
|
534
|
|
|
384
|
|
||
|
$
|
1,192
|
|
|
$
|
956
|
|
Revenue By Contract Type
|
|
|
|
||||
Fixed-price(1)
|
$
|
670
|
|
|
$
|
531
|
|
Cost-reimbursable
|
522
|
|
|
425
|
|
||
|
$
|
1,192
|
|
|
$
|
956
|
|
Revenue By Geographical Region
|
|
|
|
||||
United States
|
$
|
1,003
|
|
|
$
|
846
|
|
International
|
189
|
|
|
110
|
|
||
|
$
|
1,192
|
|
|
$
|
956
|
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Revenue By Customer Relationship(1)
|
|
|
|
||||
Prime contractor
|
$
|
740
|
|
|
|
||
Subcontractor
|
354
|
|
|
|
|||
|
$
|
1,094
|
|
|
|
||
Revenue By Contract Type(1)
|
|
|
|
||||
Fixed-price(2)
|
$
|
918
|
|
|
|
||
Cost-reimbursable
|
176
|
|
|
|
|||
|
$
|
1,094
|
|
|
|
||
Revenue by Geographical Region
|
|
|
|
||||
United States
|
$
|
834
|
|
|
$
|
347
|
|
International
|
260
|
|
|
233
|
|
||
|
$
|
1,094
|
|
|
$
|
580
|
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Revenue By Customer Relationship
|
|
|
|
||||
Prime contractor
|
$
|
664
|
|
|
$
|
140
|
|
Subcontractor
|
347
|
|
|
4
|
|
||
|
$
|
1,011
|
|
|
$
|
144
|
|
Revenue By Contract Type
|
|
|
|
||||
Fixed-price(1)
|
$
|
841
|
|
|
$
|
122
|
|
Cost-reimbursable
|
170
|
|
|
22
|
|
||
|
$
|
1,011
|
|
|
$
|
144
|
|
Revenue By Geographical Region
|
|
|
|
||||
United States
|
$
|
749
|
|
|
$
|
143
|
|
International
|
262
|
|
|
1
|
|
||
|
$
|
1,011
|
|
|
$
|
144
|
|
|
April 3, 2020
|
|
January 3, 2020
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Total Assets
|
|
|
|
||||
Integrated Mission Systems
|
$
|
7,999
|
|
|
$
|
7,896
|
|
Space and Airborne Systems
|
6,948
|
|
|
6,829
|
|
||
Communication Systems
|
5,928
|
|
|
5,930
|
|
||
Aviation Systems
|
7,423
|
|
|
7,569
|
|
||
Corporate(1)
|
9,807
|
|
|
10,112
|
|
||
|
$
|
38,105
|
|
|
$
|
38,336
|
|
(1)
|
Identifiable intangible assets acquired in connection with the L3Harris Merger in the quarter ended September 27, 2019 and our acquisition of Exelis Inc. in fiscal 2015 were recorded as Corporate assets because they benefited the entire Company as opposed to any individual segment. Identifiable intangible asset balances recorded as Corporate assets were approximately $8.2 billion and $8.5 billion at April 3, 2020 and January 3, 2020, respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred compensation plan investments, buildings and equipment, as well as any assets and liabilities from discontinued operations and divestitures. See Note C — Business Divestitures and Assets Sales in these Notes for additional information.
|
•
|
Results of Operations — an analysis of our consolidated results of operations and the results in each of our business segments, to the extent the segment results are helpful to an understanding of our business as a whole, for the periods presented in our Condensed Consolidated Financial Statements (Unaudited).
|
•
|
Liquidity, Capital Resources and Financial Strategies — 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 condition, 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.
|
•
|
Integrated Mission Systems, including multi-mission intelligence, surveillance and reconnaissance and communication systems; integrated electrical and electronic systems for maritime platforms; and advanced electro-optical and infrared solutions;
|
•
|
Space and Airborne Systems, including space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; avionics; and electronic warfare;
|
•
|
Communication Systems, including tactical communications; broadband communications; integrated vision solutions; and public safety; and
|
•
|
Aviation Systems, including defense aviation products; security, detection and other commercial aviation products; commercial and military pilot training; and mission networks for air traffic management.
|
•
|
Revenue increased 168 percent to $4.6 billion from $1.7 billion;
|
•
|
Gross margin increased 125 percent to $1,328 million from $589 million;
|
•
|
Income from continuing operations decreased 20 percent to $195 million from $243 million; and
|
•
|
Income from continuing operations per diluted common share attributable to L3Harris Technologies, Inc. common shareholders decreased 51 percent to $0.99 from $2.02.
|
•
|
Revenue increased 5 percent to $4.6 billion from $4.4 billion;
|
•
|
Gross margin increased 5 percent to $1,328 million from $1,267 million;
|
•
|
Income from continuing operations decreased 51 percent to $195 million from $400 million; and
|
•
|
Income from continuing operations per diluted common share attributable to L3Harris Technologies, Inc. common shareholders decreased 43 percent to $0.99 from $1.75.
|
|
Quarter Ended
|
||||||||||||||||
|
April 3,
2020 |
|
March 29,
2019 |
|
% Inc/(Dec)
|
|
March 29,
2019 |
|
% Inc/(Dec)
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
As Reported
|
|
Pro Forma
|
||||||||||||||
|
(Dollars in millions, except per share amounts)
|
||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||||
Integrated Mission Systems
|
$
|
1,370
|
|
|
$
|
14
|
|
|
*
|
|
|
$
|
1,362
|
|
|
1
|
%
|
Space and Airborne Systems
|
1,192
|
|
|
956
|
|
|
25
|
%
|
|
1,112
|
|
|
7
|
%
|
|||
Communication Systems
|
1,094
|
|
|
580
|
|
|
89
|
%
|
|
1,041
|
|
|
5
|
%
|
|||
Aviation Systems
|
1,011
|
|
|
144
|
|
|
*
|
|
|
914
|
|
|
11
|
%
|
|||
Other non-reportable business segments
|
—
|
|
|
35
|
|
|
(100
|
)%
|
|
—
|
|
|
*
|
|
|||
Corporate eliminations
|
(41
|
)
|
|
(1
|
)
|
|
*
|
|
|
(43
|
)
|
|
(5
|
)%
|
|||
Total revenue
|
4,626
|
|
|
1,728
|
|
|
168
|
%
|
|
4,386
|
|
|
5
|
%
|
|||
Cost of product sales and services
|
(3,298
|
)
|
|
(1,139
|
)
|
|
190
|
%
|
|
(3,119
|
)
|
|
6
|
%
|
|||
Gross margin
|
1,328
|
|
|
589
|
|
|
125
|
%
|
|
1,267
|
|
|
5
|
%
|
|||
% of total revenue
|
29
|
%
|
|
34
|
%
|
|
|
|
29
|
%
|
|
|
|||||
Engineering, selling and administrative expenses
|
(815
|
)
|
|
(310
|
)
|
|
163
|
%
|
|
(799
|
)
|
|
2
|
%
|
|||
% of total revenue
|
18
|
%
|
|
18
|
%
|
|
|
|
18
|
%
|
|
|
|||||
Impairment of goodwill and other assets
|
(324
|
)
|
|
—
|
|
|
*
|
|
|
—
|
|
|
*
|
|
|||
Non-operating income
|
95
|
|
|
46
|
|
|
107
|
%
|
|
55
|
|
|
73
|
%
|
|||
Net interest expense
|
(63
|
)
|
|
(42
|
)
|
|
50
|
%
|
|
(67
|
)
|
|
(6
|
)%
|
|||
Income from continuing operations before income taxes
|
221
|
|
|
283
|
|
|
(22
|
)%
|
|
456
|
|
|
(52
|
)%
|
|||
Income taxes
|
(26
|
)
|
|
(40
|
)
|
|
(35
|
)%
|
|
(56
|
)
|
|
(54
|
)%
|
|||
Effective tax rate
|
12
|
%
|
|
14
|
%
|
|
|
|
12
|
%
|
|
|
|||||
Income from continuing operations
|
195
|
|
|
243
|
|
|
(20
|
)%
|
|
400
|
|
|
(51
|
)%
|
|||
Noncontrolling interests, net of income taxes
|
23
|
|
|
—
|
|
|
*
|
|
|
(6
|
)
|
|
(483
|
)%
|
|||
Income from continuing operations attributable to L3Harris Technologies, Inc. common shareholders
|
$
|
218
|
|
|
$
|
243
|
|
|
(10
|
)%
|
|
$
|
394
|
|
|
(45
|
)%
|
% of total revenue
|
5
|
%
|
|
14
|
%
|
|
|
|
9
|
%
|
|
|
|||||
Income from continuing operations per diluted common share attributable to L3Harris Technologies, Inc. common shareholders
|
$
|
0.99
|
|
|
$
|
2.02
|
|
|
(51
|
)%
|
|
$
|
1.75
|
|
|
(43
|
)%
|
Unaudited Pro Forma Condensed Combined Statement of Income
|
|||||||||||||||||
For the quarter ended March 29, 2019
|
|||||||||||||||||
|
Historical
Harris |
|
Historical
L3 |
|
Pro Forma
Adjustments |
|
Note
References |
|
Pro Forma
Combined |
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
(In millions, except per share amounts)
|
||||||||||||||||
Revenue from product sales and services
|
$
|
1,728
|
|
|
$
|
2,700
|
|
|
$
|
(7
|
)
|
|
a
|
|
$
|
4,386
|
|
|
|
|
|
|
(35
|
)
|
|
b
|
|
|
|||||||
Cost of product sales and services
|
(1,139
|
)
|
|
(2,007
|
)
|
|
7
|
|
|
a
|
|
(3,119
|
)
|
||||
|
|
|
|
|
24
|
|
|
b
|
|
|
|||||||
|
|
|
|
|
(4
|
)
|
|
c
|
|
|
|||||||
Engineering, selling and administrative expenses
|
(310
|
)
|
|
(382
|
)
|
|
5
|
|
|
b
|
|
(799
|
)
|
||||
|
|
|
|
|
(103
|
)
|
|
c
|
|
|
|||||||
|
|
|
|
|
9
|
|
|
d
|
|
|
|||||||
|
|
|
|
|
(2
|
)
|
|
e
|
|
|
|||||||
|
|
|
|
|
2
|
|
|
f
|
|
|
|||||||
|
|
|
|
|
(18
|
)
|
|
j
|
|
|
|||||||
Merger, acquisition and divestiture related expenses
|
—
|
|
|
(18
|
)
|
|
18
|
|
|
j
|
|
—
|
|
||||
Non-operating income
|
46
|
|
|
—
|
|
|
9
|
|
|
j
|
|
55
|
|
||||
Interest and other income, net
|
—
|
|
|
4
|
|
|
9
|
|
|
g
|
|
—
|
|
||||
|
|
|
|
|
(13
|
)
|
|
j
|
|
|
|||||||
Interest income
|
1
|
|
|
—
|
|
|
4
|
|
|
j
|
|
5
|
|
||||
Interest expense
|
(43
|
)
|
|
(37
|
)
|
|
1
|
|
|
h
|
|
(72
|
)
|
||||
|
|
|
|
|
7
|
|
|
i
|
|
|
|||||||
Income from continuing operations before income taxes
|
283
|
|
|
260
|
|
|
(87
|
)
|
|
|
|
456
|
|
||||
Income taxes
|
(40
|
)
|
|
(37
|
)
|
|
21
|
|
|
k
|
|
(56
|
)
|
||||
Income from continuing operations
|
243
|
|
|
223
|
|
|
(66
|
)
|
|
|
|
400
|
|
||||
Noncontrolling interest, net of income taxes
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
|
|
(6
|
)
|
||||
Income from continuing operations attributable to common shareholders
|
$
|
243
|
|
|
$
|
217
|
|
|
$
|
(66
|
)
|
|
|
|
$
|
394
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations per basic common share attributable to common shareholders
|
$
|
2.06
|
|
|
|
|
|
|
|
|
$
|
1.77
|
|
||||
Income from continuing operations per diluted common share attributable to common shareholders
|
$
|
2.02
|
|
|
|
|
|
|
|
|
$
|
1.75
|
|
||||
Basic weighted average common shares outstanding
|
117.9
|
|
|
|
|
104.1
|
|
|
l
|
|
222.0
|
|
|||||
Diluted weighted average common shares outstanding
|
120.3
|
|
|
|
|
104.6
|
|
|
l
|
|
224.9
|
|
a.
|
Reflects the elimination of intercompany balances and transactions between L3 and Harris.
|
b.
|
Reflects the sale of the Harris Night Vision business.
|
c.
|
Reflects the net increase in amortization expense related to the fair value of acquired finite-lived identifiable intangible assets and the elimination of historical amortization expense recognized by L3 for the quarter ended March 29, 2019. Assumptions and details are as follows:
|
|
Weighted Average Amortization Period
|
|
Fair Value
|
|
Quarter ended March 29, 2019
|
||||
|
|
|
|
|
|
||||
|
(In years)
|
|
(In millions)
|
||||||
Identifiable Intangible Assets Acquired:
|
|
|
|
|
|
||||
Customer relationships
|
15
|
|
$
|
5,417
|
|
|
$
|
100
|
|
Trade names — Divisions
|
9
|
|
123
|
|
|
3
|
|
||
Adjustment to engineering, selling and administrative expenses
|
|
|
|
|
103
|
|
|||
Developed technology
|
7
|
|
562
|
|
|
16
|
|
||
Less: L3 historical amortization
|
|
|
|
|
(12
|
)
|
|||
Adjustment to cost of product sales and services
|
|
|
|
|
4
|
|
|||
Total net adjustment to amortization expense
|
|
|
|
|
$
|
107
|
|
d.
|
Represents the elimination of transaction costs, which were included in merger, acquisition and divestiture related expenses in L3’s historical statement of operations and in engineering, selling and administrative expenses in Harris’ historical statement of income.
|
e.
|
In connection with the L3Harris Merger, on October 12, 2018, each company entered into a letter of 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 increase in compensation expense as a result of these modified arrangements.
|
f.
|
Reflects the impact of change-in-control payments under certain post-retirement and share-based and deferred compensation arrangements.
|
g.
|
Reflects the elimination of amortization of net actuarial losses from accumulated comprehensive loss related to L3’s postretirement benefit plans as part of purchase accounting.
|
h.
|
Reflects the elimination of amortization of deferred debt issuance costs as part of purchase accounting.
|
i.
|
Reflects amortization of the increase to L3’s long-term debt based on a $172 million fair value adjustment.
|
j.
|
Certain amounts from L3’s historical statement of operations data were reclassified to conform their presentation to that of Harris. These reclassifications include:
|
1.
|
Merger, acquisition and divestiture related expenses, which were reclassified to engineering, selling and administrative expenses; and
|
2.
|
Interest and other income, net, which was reclassified to interest income.
|
k.
|
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 percent for the quarter ended March 29, 2019. This tax rate does 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 L3Harris Merger.
|
l.
|
Increase in common stock due to shares of L3Harris common stock issued for L3 common stock, L3 restricted stock units and L3 performance stock units. Diluted shares also include the dilutive impact of L3Harris stock options issued for L3 stock options calculated using the treasury stock method.
|
|
Quarter Ended
|
|||||||||||||||
|
April 3,
2020 |
|
March 29,
2019 |
|
% Inc/(Dec)
|
|
March 29,
2019 |
|
% Inc/(Dec)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||
|
As Reported
|
|
Pro Forma
|
|||||||||||||
|
(Dollars in millions)
|
|||||||||||||||
Revenue
|
$
|
1,370
|
|
|
$
|
14
|
|
|
*
|
|
$
|
1,362
|
|
|
1
|
%
|
Segment operating income
|
$
|
201
|
|
|
$
|
3
|
|
|
*
|
|
$
|
165
|
|
|
22
|
%
|
% of revenue
|
15
|
%
|
|
21
|
%
|
|
|
|
12
|
%
|
|
|
|
Quarter Ended
|
||||||||||||||||
|
April 3,
2020 |
|
March 29,
2019 |
|
% Inc/(Dec)
|
|
March 29,
2019 |
|
% Inc/(Dec)
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
As Reported
|
|
Pro Forma
|
||||||||||||||
|
(Dollars in millions)
|
||||||||||||||||
Revenue
|
$
|
1,192
|
|
|
$
|
956
|
|
|
25
|
%
|
|
$
|
1,112
|
|
|
7
|
%
|
Segment operating income
|
$
|
221
|
|
|
$
|
174
|
|
|
27
|
%
|
|
$
|
198
|
|
|
12
|
%
|
% of revenue
|
19
|
%
|
|
18
|
%
|
|
|
|
18
|
%
|
|
|
|
Quarter Ended
|
||||||||||||||||
|
April 3,
2020 |
|
March 29,
2019 |
|
% Inc/(Dec)
|
|
March 29,
2019 |
|
% Inc/(Dec)
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
As Reported
|
|
Pro Forma
|
||||||||||||||
|
(Dollars in millions)
|
||||||||||||||||
Revenue
|
$
|
1,094
|
|
|
$
|
580
|
|
|
89
|
%
|
|
$
|
1,041
|
|
|
5
|
%
|
Segment operating income
|
$
|
250
|
|
|
$
|
167
|
|
|
50
|
%
|
|
$
|
226
|
|
|
11
|
%
|
% of revenue
|
23
|
%
|
|
29
|
%
|
|
|
|
22
|
%
|
|
|
|
Quarter Ended
|
||||||||||||||||
|
April 3,
2020 |
|
March 29, 2019
|
|
% Inc/(Dec)
|
|
March 29, 2019
|
|
% Inc/(Dec)
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
As Reported
|
|
Pro Forma
|
||||||||||||||
|
(Dollars in millions)
|
||||||||||||||||
Unallocated corporate expenses
|
$
|
(33
|
)
|
|
$
|
—
|
|
|
*
|
|
|
$
|
—
|
|
|
*
|
|
L3Harris Merger-related transaction and integration expenses
|
(31
|
)
|
|
(16
|
)
|
|
94
|
%
|
|
(25
|
)
|
|
24
|
%
|
|||
Amortization of acquisition-related intangibles
|
(145
|
)
|
|
(25
|
)
|
|
480
|
%
|
|
(145
|
)
|
|
—
|
%
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Net cash provided by operating activities
|
$
|
533
|
|
|
$
|
405
|
|
Net cash used in investing activities
|
(58
|
)
|
|
(37
|
)
|
||
Net cash used in financing activities
|
(612
|
)
|
|
(380
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(24
|
)
|
|
3
|
|
||
Net decrease in cash and cash equivalents
|
(161
|
)
|
|
(9
|
)
|
||
Cash and cash equivalents, beginning of year
|
824
|
|
|
343
|
|
||
Cash and cash equivalents, end of period
|
$
|
663
|
|
|
$
|
334
|
|
•
|
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 in an unconsolidated entity that is held by, and material to, the registrant, where such entity provides financing, liquidity, market risk or credit risk support to the registrant, or engages in leasing, hedging or R&D services with the registrant.
|
|
Quarter Ended
|
||||||
|
April 3, 2020
|
|
March 29, 2019
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Favorable adjustments
|
$
|
182
|
|
|
$
|
32
|
|
Unfavorable adjustments
|
(79
|
)
|
|
(26
|
)
|
||
Net operating income adjustments
|
$
|
103
|
|
|
$
|
6
|
|
•
|
The COVID-19 pandemic could have a material adverse effect on our business operations, financial condition, results of operations and cash flows.
|
•
|
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.
|
•
|
The U.S. Government’s budget deficit and the national debt, as well as any inability of the U.S. Government to complete its budget process for any government fiscal year and consequently having to shut down or operate on funding levels equivalent to its prior fiscal year pursuant to a “continuing resolution,” 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, insider threats or otherwise, or other significant disruption of our IT networks and related systems or of those we operate for certain of our customers.
|
•
|
Our ability to successfully manage ongoing business and organizational changes could impact our business results.
|
•
|
Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts. In particular, our fixed-price contracts 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.
|
•
|
The level of returns on defined benefit plan assets, changes in interest rates and other factors could affect our financial condition, results of operations and cash flows in future periods.
|
•
|
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.
|
•
|
Disputes with our subcontractors or the inability of our subcontractors to perform, or our key suppliers to timely deliver our components, parts or services, could cause our products, systems or services to be produced or delivered in an untimely or unsatisfactory manner.
|
•
|
Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents or business partners.
|
•
|
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.
|
•
|
Strategic transactions, including mergers, acquisitions and divestitures, involve significant risks and uncertainties that could adversely affect our business, financial condition, results of operations and cash flows.
|
•
|
The outcome of litigation or arbitration in which we are involved from time to time 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 are subject to government investigations, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects.
|
•
|
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.
|
•
|
Our commercial aviation products, systems and services business is affected by global demand and economic factors that could negatively impact our financial results.
|
•
|
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 defined benefit plans 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.
|
•
|
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.
|
•
|
We must attract and retain key employees, and any failure to do so could seriously harm us.
|
•
|
Some of our workforce is represented by labor unions, so our business could be harmed in the event of a prolonged work stoppage.
|
•
|
We may fail to realize all of the anticipated benefits of the L3Harris Merger or those benefits may take longer to realize than expected. We may also encounter significant difficulties in integrating the businesses.
|
•
|
Certain business uncertainties arising from the L3Harris Merger could adversely affect our businesses and operations.
|
•
|
We have incurred and will incur direct and indirect costs as a result of the L3Harris Merger.
|
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 4, 2020 - January 31, 2020)
|
|
|
|
|
|
|
|
|||||||
Repurchase program(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
2,500,113,105
|
|
||
Employee transactions(2)
|
4,337
|
|
|
$
|
220.13
|
|
|
—
|
|
|
—
|
|
||
Month No. 2
|
|
|
|
|
|
|
|
|||||||
(February 1, 2020 - February 28, 2020)
|
|
|
|
|
|
|
|
|||||||
Repurchase program(1)
|
1,927,359
|
|
|
$
|
223.92
|
|
|
1,927,359
|
|
|
$
|
2,068,540,227
|
|
|
Employee transactions(2)
|
5,379
|
|
|
$
|
225.58
|
|
|
—
|
|
|
—
|
|
||
Month No. 3
|
|
|
|
|
|
|
|
|||||||
(February 29, 2020 - April 3, 2020)
|
|
|
|
|
|
|
|
|||||||
Repurchase program(1)
|
1,350,200
|
|
|
$
|
198.74
|
|
|
1,350,200
|
|
|
$
|
1,800,204,462
|
|
|
Employee transactions(2)
|
2,292
|
|
|
$
|
182.40
|
|
|
—
|
|
|
—
|
|
||
Total
|
3,289,567
|
|
|
|
|
3,277,559
|
|
|
$
|
1,800,204,462
|
|
*
|
Periods represent our fiscal months.
|
(1)
|
On July 1, 2019, we announced that our Board of Directors approved a $4 billion share repurchase program (our “2019 Repurchase Program”) replacing our prior share repurchase program and authorizing us to repurchase up to $4 billion in shares of our common stock through open-market purchases, private transactions, transactions structured through investment banking institutions or any combination thereof. As of April 3, 2020, $1,800,204,462 (as reflected in the table above) was the approximate dollar amount of our common stock that could still be purchased under our 2019 Repurchase Program, which does not have a stated expiration date.
|
(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 units, restricted units or restricted shares that vested during the quarter and (b) performance units, restricted 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
|
)
|
|
|
|
|
|
|
(10.1
|
)
|
|
|
(10.2
|
)
|
|
|
(10.3
|
)
|
|
|
(10.4
|
)
|
|
|
(10.5
|
)
|
|
|
(10.6
|
)
|
|
|
(10.7
|
)
|
|
|
(15
|
)
|
|
|
(21
|
)
|
|
|
(31.1
|
)
|
|
|
(31.2
|
)
|
|
|
(32.1
|
)
|
|
|
(32.2
|
)
|
|
|
(101)
|
|
|
The financial information from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2020 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Statement of Income, (ii) the Condensed Consolidated Statement of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheet, (iv) the Condensed Consolidated Statement of Cash Flows, (v) the Condensed Consolidated Statement of Equity, and (vi) the Notes to the Condensed Consolidated Financial Statements.
|
(104)
|
|
|
Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101.
|
*
|
Management contract or compensatory plan or arrangement.
|
|
|
|
|
|
|
|
|
|
|
|
L3HARRIS TECHNOLOGIES, INC.
|
||
|
|
|
|
(Registrant)
|
||
|
|
|
|
|||
Date: May 7, 2020
|
|
|
|
By:
|
|
/s/ Jesus Malave Jr.
|
|
|
|
|
|
|
Jesus Malave Jr.
|
|
|
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
|
|
|
(principal financial officer and duly authorized officer)
|
1.
|
Article 8 hereby is amended to add the following new Section 8.8 thereto:
|
Form S-4
|
|
No. 333-236885
|
|
L3Harris Technologies, Inc. Offer to Exchange
|
Form S-3
|
|
No. 333-233827
|
|
L3Harris Technologies, Inc. Debt and Equity Securities
|
Form S-4/A
|
|
No. 333-228829
|
|
Harris Corporation Shares of Common Stock
|
Form S-8
|
|
No. 333-232482
|
|
L3 Technologies, Inc. Amended and Restated 2008 Long Term Performance Plan; L3 Technologies, Inc. Master Savings Plan; and Aviations Communications & Surveillance Systems 401(k) Plan
|
Form S-8
|
|
No. 333-222821
|
|
Harris Corporation Retirement Plan
|
Form S-8
|
|
No. 333-192735
|
|
Harris Corporation Retirement Plan
|
Form S-8
|
|
No. 333-163647
|
|
Harris Corporation Retirement Plan
|
Form S-8
|
|
No. 333-75114
|
|
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
|
|
|
|
Name of Subsidiary
|
|
State or Other
Jurisdiction of Incorporation
|
AeroElite Limited
|
|
United Kingdom
|
Aerosim Academy, Inc.
|
|
Florida
|
Aerosim Bangkok Company Limited
|
|
Thailand
|
Aerosim Technologies, Inc.
|
|
Minnesota
|
Aerosim Thai Company Limited
|
|
Thailand
|
Airline Placement Limited
|
|
United Kingdom
|
Airline Recruitment Limited
|
|
United Kingdom
|
Applied Defense Solutions, Inc.
|
|
Delaware
|
Applied Kilovolts Limited
|
|
United Kingdom
|
Asian Aviation Training Centre Ltd.
|
|
Thailand
|
ASV Global, L.L.C.
|
|
Louisiana
|
Autonomous Surface Vehicles Limited
|
|
United Kingdom
|
Autonomous Surface Vehicles, LLC
|
|
Louisiana
|
Aviation Communication & Surveillance Systems, LLC
|
|
Delaware
|
Aydin Yazilim ve Elektronik Sanayi A.S.*
|
|
Turkey
|
Azimuth Security Pty Ltd
|
|
Australia
|
Azimuth Security Trust
|
|
Australia
|
Azimuth Security, LLC
|
|
Florida
|
Beijing MAPPS-SERI Technology Company Ltd.*
|
|
China
|
Calzoni S.r.l.
|
|
Italy
|
Combat Advanced Propulsion, LLC*
|
|
Delaware
|
CR MSA LLC
|
|
Delaware
|
CTC Aviation Group Limited
|
|
United Kingdom
|
CTC Aviation Holdings Limited
|
|
United Kingdom
|
CTC Aviation International Limited
|
|
United Kingdom
|
CTC Aviation Services Limited
|
|
United Kingdom
|
CTC Aviation Training (UK) Limited.
|
|
United Kingdom
|
Defence Investments Limited
|
|
United Kingdom
|
DMRAC-Aviation Corporation - SGPS, Unipessoal LDA
|
|
Portugal
|
EAA – Escola de Aviação Aerocondor, S.A.
|
|
Portugal
|
Eagle Technology, LLC
|
|
Delaware
|
EDO (UK) Ltd.
|
|
United Kingdom
|
EDO MBM Technology Ltd.
|
|
United Kingdom
|
EDO Western Corporation
|
|
Utah
|
Electrodynamics, Inc.
|
|
Arizona
|
ESSCO Collins Limited
|
|
Ireland
|
Exelis Arctic Services
|
|
Delaware
|
Exelis Australia Holdings Pty Ltd
|
|
Australia
|
Exelis Australia Pty Ltd
|
|
Australia
|
Exelis Holdings, Inc.
|
|
Delaware
|
FAST Holdings Limited*
|
|
United Kingdom
|
|
|
|
|
|
|
|
|
|
Name of Subsidiary
|
|
State or Other
Jurisdiction of Incorporation
|
FAST Training Services Limited*
|
|
United Kingdom
|
Felec Services, Inc.
|
|
Delaware
|
Flight Data Services Limited
|
|
United Kingdom
|
Flight Training Acquisitions LLC
|
|
Delaware
|
ForceX, Inc
|
|
Tennessee
|
G Air Advanced Training, Lda
|
|
Portugal
|
G Air II Maintenance, Lda
|
|
Portugal
|
G4U – Gestão de Activos Aeronáuticos, Sociedade, Lda
|
|
Portugal
|
Harris Asia Pacific Sdn. Bhd.
|
|
Malaysia
|
Harris Atlas Systems LLC*
|
|
UAE
|
Harris C4i Pty Ltd
|
|
Australia
|
Harris Canada Systems, Inc.
|
|
Canada
|
Harris Cayman Ltd.
|
|
Cayman Islands
|
Harris Communications (Australia) Pty. Ltd.
|
|
Australia
|
Harris Communications (Spain), S. L.
|
|
Spain
|
Harris Communications FZCO
|
|
UAE
|
Harris Communications GmbH
|
|
Germany
|
Harris Communications Limited
|
|
Hong Kong
|
Harris Communications Malaysia Sdn. Bhd.
|
|
Malaysia
|
Harris Communications MH Spain, S. L.
|
|
Spain
|
Harris Communications Pakistan (Private) Limited
|
|
Pakistan
|
Harris Communications Systems India Private Limited
|
|
India
|
Harris Comunicações e Participações do Brasil Ltda.
|
|
Brazil
|
Harris Defence Ltd.
|
|
United Kingdom
|
Harris Denmark ApS
|
|
Denmark
|
Harris Denmark Holding ApS
|
|
Denmark
|
Harris Geospatial Solutions B.V.
|
|
Netherlands
|
Harris Geospatial Solutions France SARL
|
|
France
|
Harris Geospatial Solutions GmbH
|
|
Germany
|
Harris Geospatial Solutions Italia SRL
|
|
Italy
|
Harris Geospatial Solutions KK
|
|
Japan
|
Harris Geospatial Solutions UK Limited
|
|
United Kingdom
|
Harris Geospatial Solutions, Inc.
|
|
Colorado
|
Harris Global Communications, Inc.
|
|
New York
|
Harris Holdco LLC
|
|
Delaware
|
Harris International Chile Limitada
|
|
Chile
|
Harris International Holdings, LLC
|
|
Delaware
|
Harris International Saudi Communications
|
|
Saudi Arabia
|
Harris International Venezuela, C.A.
|
|
Venezuela
|
Harris International, Inc.
|
|
Delaware
|
Harris Luxembourg Sarl
|
|
Luxembourg
|
Harris NV
|
|
Belgium
|
Harris Orthogon GmbH
|
|
Germany
|
Harris Pension Management Limited
|
|
United Kingdom
|
Harris Solid-State (Malaysia) Sdn. Bhd.
|
|
Malaysia
|
Harris Systems Limited
|
|
United Kingdom
|
Honeywell TCAS Inc.
|
|
Delaware
|
Interstate Electronics Corporation
|
|
California
|
L-3 Afghanistan, LLC
|
|
Delaware
|
|
|
|
|
|
|
Name of Subsidiary
|
|
State or Other
Jurisdiction of Incorporation
|
L3 Applied Technologies, Inc.
|
|
Delaware
|
L3 Australia Group Pty Ltd
|
|
Australia
|
L3 Aviation Products, Inc.
|
|
Delaware
|
L-3 Brasil Importação, Exportação e Comércio Ltda.
|
|
Brazil
|
L-3 Centaur, LLC
|
|
Delaware
|
L3 Cincinnati Electronics Corporation
|
|
Ohio
|
L3 Commercial Training Solutions Limited
|
|
United Kingdom
|
L-3 Communications AIS GP Corporation
|
|
Delaware
|
L-3 Communications ASA Limited
|
|
United Kingdom
|
L-3 Communications Australia Pty Ltd
|
|
Australia
|
L-3 Communications Flight Capital LLC
|
|
Delaware
|
L-3 Communications Holding GmbH
|
|
Germany
|
L-3 Communications India Private Limited
|
|
India
|
L-3 Communications Integrated Systems L.P.
|
|
Delaware
|
L-3 Communications Investments Inc.
|
|
Delaware
|
L-3 Communications Limited
|
|
United Kingdom
|
L-3 Communications Link Simulation and Training UK (Overseas) Limited
|
|
United Kingdom
|
L-3 Communications Singapore Pte. Ltd.
|
|
Singapore
|
L3 CTS Airline Academy (NZ) Limited
|
|
New Zealand
|
L3 CTS Airline and Academy Training Limited
|
|
United Kingdom
|
L-3 Domestic Holdings, Inc.
|
|
Delaware
|
L3 Doss Aviation, Inc.
|
|
Texas
|
L3 Electron Devices, Inc.
|
|
Delaware
|
L3 ESSCO, Inc.
|
|
Delaware
|
L3 Foreign Holdings, Inc.
|
|
Delaware
|
L3 Fuzing and Ordnance Systems, Inc.
|
|
Delaware
|
L-3 Global Holding UK Ltd.
|
|
United Kingdom
|
L3 International Australia Pty Ltd
|
|
Australia
|
L-3 International UK Ltd
|
|
United Kingdom
|
L3 Investments UK Holdings Ltd
|
|
United Kingdom
|
L3 Investments, LLC
|
|
Delaware
|
L3 Kenya LTD
|
|
Kenya
|
L3 Kigre, Inc.
|
|
Ohio
|
L3 Latitude, LLC
|
|
Arizona
|
L3 Magnet-Motor GmbH
|
|
Germany
|
L3 MAPPS INC.
|
|
Canada
|
L3 MAPPS Limited
|
|
United Kingdom
|
L3 MAPPS Sdn. Bhd.
|
|
Malaysia
|
L3 Micreo Pty Limited
|
|
Australia
|
L3 Oceania Pty Limited
|
|
Australia
|
L3 Open Water Power, Inc.
|
|
Delaware
|
L-3 Saudi Arabia LLC
|
|
Saudi Arabia
|
L-3 Security Equipment Trading (Beijing) Co., Ltd.*
|
|
China
|
L-3 Societá Srl.
|
|
Italy
|
L3 Technologies Australia Group Pty Ltd
|
|
Australia
|
L3 Technologies Canada Group Inc.
|
|
Canada
|
L3 Technologies Canada Inc.
|
|
Canada
|
L3 Technologies Investments Limited
|
|
Cyprus
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Subsidiary
|
|
State or Other
Jurisdiction of Incorporation
|
L3 Technologies MAS Inc.
|
|
Canada
|
L3 Technologies UK Group Ltd
|
|
United Kingdom
|
L3 Technologies, Inc.
|
|
Delaware
|
L-3 Technology & Services UK Ltd
|
|
United Kingdom
|
L3 Unidyne, Inc.
|
|
Delaware
|
L3 Unmanned Systems, Inc.
|
|
Texas
|
L3 Westwood Corporation
|
|
Nevada
|
L3Harris Technologies Australia Group Pty. Ltd.
|
|
Australia
|
L3Harris Technologies Holding, LLC
|
|
Delaware
|
L3Harris Technologies UK Holding Ltd.
|
|
United Kingdom
|
Linchpin Labs Inc.
|
|
Canada
|
Linchpin Labs Inc.
|
|
Delaware
|
Linchpin Labs Limited
|
|
United Kingdom
|
Linchpin Labs Limited
|
|
New Zealand
|
Linchpin Labs Pty Limited
|
|
Australia
|
L-Tres Comunicaciones Costa Rica, S.A.
|
|
Costa Rica
|
Manatee Investment, LLC
|
|
Delaware
|
Manu Kai, LLC*
|
|
Hawaii
|
Melbourne Leasing, LLC
|
|
Florida
|
Mustang Technology Group, L.P.
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Texas
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Narda Safety Test Solutions GmbH
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Germany
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Narda Safety Test Solutions S.r.l.
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Italy
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NexGen Communications, LLC
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Virginia
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Power Paragon, Inc.
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Delaware
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S.C. Harris Assured Communications SRL
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Romania
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SARL Assured Communications
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Algeria
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SPD Electrical Systems, Inc.
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Delaware
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Sunshine General Services, LLC
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Iraq
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TRL Electronics Limited
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United Kingdom
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TRL Technology Limited
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United Kingdom
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Wescam Inc.
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Canada
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Wescam USA, Inc.
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Florida
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1.
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I have reviewed this Quarterly Report on Form 10-Q for the quarter ended April 3, 2020 of L3Harris Technologies, Inc.;
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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.
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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:
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(a)
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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;
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(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;
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(c)
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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
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(d)
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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.
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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):
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(a)
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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
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(b)
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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 7, 2020
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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 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 3, 2020 of L3Harris Technologies, Inc.;
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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.
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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;
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(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;
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(c)
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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
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(d)
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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.
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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):
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(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
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(b)
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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 7, 2020
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/s/ Jesus Malave Jr.
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Name:
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Jesus Malave Jr.
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Title:
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Senior Vice President and Chief Financial Officer
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(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
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of L3Harris as of the dates and for the periods expressed in the Report.
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Date: May 7, 2020
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/s/ William M. Brown
|
||
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Name:
|
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William M. Brown
|
|
|
|
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Title:
|
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Chairman 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
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(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of L3Harris as of the dates and for the periods expressed in the Report.
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Date: May 7, 2020
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/s/ Jesus Malave Jr.
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||
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Name:
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Jesus Malave Jr.
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Title:
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Senior Vice President and Chief Financial Officer
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