XML 20 R10.htm IDEA: XBRL DOCUMENT
v3.10.0.1

ACCOUNTING CHANGES OR RECENT ACCOUNTING PRONOUNCEMENTS | 12 Months Ended
--- | ---
Jun. 29, 2018
Accounting Changes and Error Corrections [Abstract] |
ACCOUNTING CHANGES OR RECENT ACCOUNTING PRONOUNCEMENTS | NOTE 2: ACCOUNTING CHANGES OR RECENT ACCOUNTING PRONOUNCEMENTS Adoption of New Accounting Standards In the first quarter of fiscal 2018, we adopted an accounting standards update issued by the Financial Accounting Standards Board (“FASB”) that requires recognition of the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs. Consequently, this update eliminates the exception to the recognition of current and deferred income taxes for intra-entity transfers of assets other than for inventory until the assets have been sold to an outside party. This update requires entities to apply a modified retrospective approach with a cumulative catch-up adjustment to beginning retained earnings in the period of adoption. In addition, entities are required to record deferred tax balances with an offset to retained earnings for unrecognized amounts that will be recognized under this update. We applied all changes required by this update using the modified retrospective approach from the beginning of fiscal 2018. Adopting this update resulted in a $27 million reduction of prepaid income tax assets from the “Other current assets” and “Other non-current assets” line items and a $27 million increase in the “Non-current deferred income taxes” line item in our Condensed Consolidated Balance Sheet (Unaudited) as of September 29, 2017. In the fourth quarter of fiscal 2018, we adopted an accounting standards update issued by the FASB that allows companies to reclassify the stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), from accumulated other comprehensive loss to retained earnings. Stranded tax effects are the deferred tax amounts recorded through other comprehensive income, using a 35% statutory rate, that remained after we remeasured our net deferred tax assets and liabilities to reflect the lower enacted corporate tax rates. We elected to early adopt this accounting standards update and elected to reclassify, in the period of enactment, stranded tax effects totaling $35 million from the “Accumulated other comprehensive loss” line item to the “Retained earnings” line item in our Consolidated Balance Sheet. The reclassification amount primarily included income tax effects related to our pension and postretirement benefit plans. Income tax effects remaining in accumulated other comprehensive income will be released into earnings as the related pretax amounts are reclassified to earnings. Effective June 30, 2018 we adopted ASC 606. This standard supersedes nearly all revenue recognition guidance under GAAP and International Financial Reporting Standards and supersedes some cost guidance for construction-type and production-type contracts. The guidance in this standard is principles-based, and, consequently, entities are required to use more judgment and make more estimates than under prior guidance, including identifying contract performance obligations, estimating variable consideration to include in the contract price and allocating the transaction price to separate performance obligations. The core principle of this standard is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. To help financial statement users better understand the nature, amount, timing and potential uncertainty of the revenue and cash flows, this standard requires significantly more interim and annual disclosures. We have adopted the requirements of the new standard using the full retrospective method, which means that we have restated each prior reporting period presented and recognized the cumulative effect of applying the standard at the earliest period presented. We opted for this adoption method because we believe it provides enhanced comparability and transparency across periods. We elected to apply the practical expedient related to backlog disclosures for prior reporting periods. We also elected to apply the practical expedient related to evaluating the effects of contract modifications that occurred prior to the earliest period presented. No other transition practical expedients were applied. Adopting this standard resulted in the recognition of a cumulative-effect adjustment of $15 million to reduce the opening balance of retained earnings at July 2, 2016. Our fiscal 2017 revenue from product sales and services decreased by $3 million and our income from continuing operations decreased by $10 million ($.08 per share). Our fiscal 2018 revenue from product sales and services decreased by $14 million and our income from continuing operations decreased by $19 million ($.15 per share). This standard also resulted in the establishment of “Contract assets” and “Contract liabilities” line items and the reclassification to these line items of amounts previously presented in the “Receivables,” “Inventories” and “Advanced payments and unearned income” line items in our Consolidated Balance Sheet. Total net cash provided by operating activities and total net cash provided by or used in investing activities and financing activities in our Consolidated Statements of Cash Flows were not impacted by the adoption of ASC 606. These amounts are reflected in the tables below and are updated from the preliminary assessment of the impacts of adopting ASC 606 included in our Fiscal 2018 Annual Report on Form 10-K. We also adopted ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, effective June 30, 2018. This standard requires that entities present components of net periodic pension and postretirement benefit costs other than the service cost component (“other components of net benefit cost”) separately from the service cost component. The other components of net benefit cost may be presented as a separate line item or items, or if a separate line item is not used, the line item used to present the other components of net benefit cost must be disclosed. Previously, we included each component of net benefit cost within the “Cost of product sales and services” and “Engineering, selling and administrative expenses” line items in our Consolidated Statement of Income. In accordance with this update, we will present the other components of net benefit cost as part of the “Non-operating income” line item in our Consolidated Statement of Income. We adopted this update retrospectively by recasting each prior period presented, using as our estimation basis for recasting prior periods the amounts disclosed in the Postretirement benefit plan footnote to our previously issued financial statements. Adopting this update resulted in a $147 million increase in cost of sales and services, a $37 million increase in engineering, selling and administrative expenses and a corresponding $184 million increase in non-operating income for fiscal 2018, with no impact to net income and a $132 million increase in cost of sales and services, a $32 million increase in engineering, selling and administrative expenses and a corresponding $164 million increase in non-operating income for fiscal 2017, with no impact to net income. The following tables summarize the effect of adopting ASC 606 and ASU 2017-07 on our Consolidated Statement of Income for fiscal 2018 and 2017:
| Fiscal Year Ended June 29, 2018
| As Previously Reported |  | Effect of Adopting ASC 606 |  | Effect of Adopting ASU 2017-07 |  | As Recast
| (In millions, except per share amounts)
Revenue from product sales and services |  |  |  |  |  |  |
Revenue from product sales | $ | 5,062 |  |  | $ | (24 | ) |  | $ | — |  |  | $ | 5,038 |
Revenue from services | 1,120 |  |  | 10 |  |  | — |  |  | 1,130 |
| 6,182 |  |  | (14 | ) |  | — |  |  | 6,168 |
Cost of product sales and services |  |  |  |  |  |  |
Cost of product sales | (3,106 | ) |  | 14 |  |  | (147 | ) |  | (3,239 | )
Cost of services | (825 | ) |  | (2 | ) |  | — |  |  | (827 | )
| (3,931 | ) |  | 12 |  |  | (147 | ) |  | (4,066 | )
Engineering, selling and administrative expenses | (1,129 | ) |  | (16 | ) |  | (37 | ) |  | (1,182 | )
Non-operating income (loss) | (28 | ) |  | — |  |  | 184 |  |  | 156 |
Interest income | 2 |  |  | — |  |  | — |  |  | 2 |
Interest expense | (170 | ) |  | — |  |  | — |  |  | (170 | )
Income from continuing operations before income taxes | 926 |  |  | (18 | ) |  | — |  |  | 908 |
Income taxes | (205 | ) |  | (1 | ) |  | — |  |  | (206 | )
Income from continuing operations | 721 |  |  | (19 | ) |  | — |  |  | 702 |
Discontinued operations, net of income taxes | (3 | ) |  | — |  |  | — |  |  | (3 | )
Net income | $ | 718 |  |  | $ | (19 | ) |  | $ | — |  |  | $ | 699 |
Net income per common share |  |  |  |  |  |  |
Basic |  |  |  |  |  |  |
Continuing operations | $ | 6.06 |  |  | $ | (0.16 | ) |  | $ | — |  |  | $ | 5.90 |
Discontinued operations | (0.02 | ) |  | — |  |  | — |  |  | (0.02 | )
| $ | 6.04 |  |  | $ | (0.16 | ) |  | $ | — |  |  | $ | 5.88 |
Diluted |  |  |  |  |  |  |
Continuing operations | $ | 5.94 |  |  | $ | (0.16 | ) |  | $ | — |  |  | $ | 5.78 |
Discontinued operations | (0.02 | ) |  | — |  |  | — |  |  | (0.02 | )
| $ | 5.92 |  |  | $ | (0.16 | ) |  | $ | — |  |  | $ | 5.76 |
| Fiscal Year Ended June 29, 2017
| As Previously Reported |  | Effect of Adopting ASC 606 |  | Effect of Adopting ASU 2017-07 |  | As Recast
| (In millions, except per share amounts)
Revenue from product sales and services |  |  |  |  |  |  |
Revenue from product sales | $ | 4,667 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,667 |
Revenue from services | 1,233 |  |  | (3 | ) |  | — |  |  | 1,230 |
| 5,900 |  |  | (3 | ) |  | — |  |  | 5,897 |
Cost of product sales and services |  |  |  |  |  |  |
Cost of product sales | (2,964 | ) |  | 10 |  |  | (104 | ) |  | (3,058 | )
Cost of services | (770 | ) |  | 2 |  |  | (28 | ) |  | (796 | )
| (3,734 | ) |  | 12 |  |  | (132 | ) |  | (3,854 | )
Engineering, selling and administrative expenses | (1,093 | ) |  | (25 | ) |  | (32 | ) |  | (1,150 | )
Non-operating income | 2 |  |  | — |  |  | 164 |  |  | 166 |
Interest income | 2 |  |  | — |  |  | — |  |  | 2 |
Interest expense | (172 | ) |  | — |  |  | — |  |  | (172 | )
Income from continuing operations before income taxes | 905 |  |  | (16 | ) |  | — |  |  | 889 |
Income taxes | (267 | ) |  | 6 |  |  | — |  |  | (261 | )
Income from continuing operations | 638 |  |  | (10 | ) |  | — |  |  | 628 |
Discontinued operations, net of income taxes | (85 | ) |  | — |  |  | — |  |  | (85 | )
Net income | $ | 553 |  |  | $ | (10 | ) |  | $ | — |  |  | $ | 543 |
Net income per common share |  |  |  |  |  |  |
Basic |  |  |  |  |  |  |
Continuing operations | $ | 5.19 |  |  | $ | (0.08 | ) |  | $ | — |  |  | $ | 5.11 |
Discontinued operations | (0.69 | ) |  | — |  |  | — |  |  | (0.69 | )
| $ | 4.50 |  |  | $ | (0.08 | ) |  | $ | — |  |  | $ | 4.42 |
Diluted |  |  |  |  |  |  |
Continuing operations | $ | 5.12 |  |  | $ | (0.08 | ) |  | $ | — |  |  | $ | 5.04 |
Discontinued operations | (0.68 | ) |  | — |  |  | — |  |  | (0.68 | )
| $ | 4.44 |  |  | $ | (0.08 | ) |  | $ | — |  |  | $ | 4.36 |
The following table summarizes the effect of the adoption of ASC 606 on our Consolidated Balance Sheet at June 29, 2018 and June 30, 2017:
| June 29, 2018 |  | June 30, 2017
| As Previously Reported |  | Effect of Adopting ASC 606 |  | As Recast |  | As Reported |  | Effect of adopting ASC 606 |  | As Recast
| (In millions)
Assets |  |  |  |  |  |  |  |  |  |  |
Current Assets |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 288 |  |  | $ | — |  |  | $ | 288 |  |  | $ | 484 |  |  | $ | — |  |  | $ | 484 |
Receivables | 735 |  |  | (269 | ) |  | 466 |  |  | 623 |  |  | (258 | ) |  | 365 |
Contract assets | — |  |  | 782 |  |  | 782 |  |  | — |  |  | 706 |  |  | 706 |
Inventories | 925 |  |  | (514 | ) |  | 411 |  |  | 841 |  |  | (449 | ) |  | 392 |
Income taxes receivable | 174 |  |  | — |  |  | 174 |  |  | 24 |  |  | — |  |  | 24 |
Other current assets | 101 |  |  | 2 |  |  | 103 |  |  | 101 |  |  | — |  |  | 101 |
Total current assets | 2,223 |  |  | 1 |  |  | 2,224 |  |  | 2,073 |  |  | (1 | ) |  | 2,072 |
Non-current Assets |  |  |  |  |  |  |  |  |  |  |
Property, plant and equipment | 900 |  |  | — |  |  | 900 |  |  | 904 |  |  | — |  |  | 904 |
Goodwill | 5,372 |  |  | — |  |  | 5,372 |  |  | 5,366 |  |  | — |  |  | 5,366 |
Other intangible assets | 989 |  |  | — |  |  | 989 |  |  | 1,104 |  |  | — |  |  | 1,104 |
Non-current deferred income taxes | 116 |  |  | 3 |  |  | 119 |  |  | 409 |  |  | 15 |  |  | 424 |
Other non-current assets | 239 |  |  | 8 |  |  | 247 |  |  | 234 |  |  | 8 |  |  | 242 |
Total non-current assets | 7,616 |  |  | 11 |  |  | 7,627 |  |  | 8,017 |  |  | 23 |  |  | 8,040 |
| $ | 9,839 |  |  | $ | 12 |  |  | $ | 9,851 |  |  | $ | 10,090 |  |  | $ | 22 |  |  | $ | 10,112 |
Liabilities and Equity |  |  |  |  |  |  |  |  |  |  |
Current Liabilities |  |  |  |  |  |  |  |  |  |  |
Short-term debt | $ | 78 |  |  | $ | — |  |  | $ | 78 |  |  | $ | 80 |  |  | $ | — |  |  | $ | 80 |
Accounts payable | 622 |  |  | — |  |  | 622 |  |  | 540 |  |  | — |  |  | 540 |
Advanced payments and unearned income | 314 |  |  | (314 | ) |  | — |  |  | 252 |  |  | (252 | ) |  | — |
Contract liabilities | — |  |  | 372 |  |  | 372 |  |  | — |  |  | 291 |  |  | 291 |
Compensation and benefits | 142 |  |  | — |  |  | 142 |  |  | 140 |  |  | — |  |  | 140 |
Other accrued items | 313 |  |  | 4 |  |  | 317 |  |  | 329 |  |  | 3 |  |  | 332 |
Income taxes payable | 15 |  |  | — |  |  | 15 |  |  | 31 |  |  | (1 | ) |  | 30 |
Current portion of long-term debt, net | 304 |  |  | — |  |  | 304 |  |  | 554 |  |  | — |  |  | 554 |
Total current liabilities | 1,788 |  |  | 62 |  |  | 1,850 |  |  | 1,926 |  |  | 41 |  |  | 1,967 |
Non-current Liabilities |  |  |  |  |  |  |  |  |  |  |
Defined benefit plans | 714 |  |  | — |  |  | 714 |  |  | 1,278 |  |  | — |  |  | 1,278 |
Long-term debt, net | 3,408 |  |  | — |  |  | 3,408 |  |  | 3,396 |  |  | — |  |  | 3,396 |
Non-current deferred income taxes | 90 |  |  | (11 | ) |  | 79 |  |  | 34 |  |  | — |  |  | 34 |
Other long-term liabilities | 517 |  |  | 5 |  |  | 522 |  |  | 528 |  |  | 6 |  |  | 534 |
Total non-current liabilities | 4,729 |  |  | (6 | ) |  | 4,723 |  |  | 5,236 |  |  | 6 |  |  | 5,242 |
Equity |  |  |  |  |  |  |  |  |  |  |
Shareholders’ Equity: |  |  |  |  |  |  |  |  |  |  |
Common stock | 118 |  |  | — |  |  | 118 |  |  | 120 |  |  | — |  |  | 120 |
Other capital | 1,714 |  |  | — |  |  | 1,714 |  |  | 1,741 |  |  | — |  |  | 1,741 |
Retained earnings | 1,692 |  |  | (44 | ) |  | 1,648 |  |  | 1,343 |  |  | (25 | ) |  | 1,318 |
Accumulated other comprehensive loss | (202 | ) |  | — |  |  | (202 | ) |  | (276 | ) |  | — |  |  | (276 | )
Total equity | 3,322 |  |  | (44 | ) |  | 3,278 |  |  | 2,928 |  |  | (25 | ) |  | 2,903 |
| $ | 9,839 |  |  | $ | 12 |  |  | $ | 9,851 |  |  | $ | 10,090 |  |  | $ | 22 |  |  | $ | 10,112 |
The following table presents the effect of the adoption of ASC 606 on our Consolidated Statement of Cash Flows for fiscal 2018 and 2017:
| Fiscal Year Ended
| June 29, 2018 |  | June 30, 2017
| As Previously Reported |  | Effect of Adopting ASC 606 |  | As Recast |  | As Reported |  | Effect of Adopting ASC 606 |  | As Recast
| (In millions)
Net income | $ | 718 |  |  | (19 | ) |  | $ | 699 |  |  | $ | 553 |  |  | $ | (10 | ) |  | $ | 543 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |
Amortization of acquisition-related intangibles(1) | 117 |  |  | — |  |  | 117 |  |  | 151 |  |  | — |  |  | 151 |
Depreciation and other amortization(1) | 142 |  |  | — |  |  | 142 |  |  | 160 |  |  | — |  |  | 160 |
Share-based compensation | 82 |  |  | — |  |  | 82 |  |  | 42 |  |  | — |  |  | 42 |
Qualified pension plan contributions | (301 | ) |  | — |  |  | (301 | ) |  | (589 | ) |  | — |  |  | (589 | )
Pension income | (135 | ) |  | — |  |  | (135 | ) |  | (97 | ) |  | — |  |  | (97 | )
Impairment of goodwill and other assets | — |  |  | — |  |  | — |  |  | 240 |  |  | — |  |  | 240 |
Loss on sales of businesses, net | — |  |  | — |  |  | — |  |  | 14 |  |  | — |  |  | 14 |
Loss on extinguishment of debt | 24 |  |  | — |  |  | 24 |  |  | — |  |  | — |  |  | — |
(Increase) decrease in: |  |  |  |  |  |  |  |  |  |  |
Accounts receivable | (112 | ) |  | 11 |  |  | (101 | ) |  | 111 |  |  | (87 | ) |  | 24 |
Contract assets | — |  |  | (76 | ) |  | (76 | ) |  | — |  |  | 156 |  |  | 156 |
Inventories | (84 | ) |  | 65 |  |  | (19 | ) |  | 28 |  |  | (60 | ) |  | (32 | )
Increase (decrease) in: |  |  |  |  |  |  |  |  |  |  |
Accounts payable | 82 |  |  | — |  |  | 82 |  |  | 18 |  |  | — |  |  | 18 |
Advanced payments and unearned income | 63 |  |  | (63 | ) |  | — |  |  | (42 | ) |  | 42 |  |  | — |
Contract liabilities | — |  |  | 81 |  |  | 81 |  |  | — |  |  | (31 | ) |  | (31 | )
Income taxes | 202 |  |  | — |  |  | 202 |  |  | 131 |  |  | (20 | ) |  | 111 |
Other | (47 | ) |  | 1 |  |  | (46 | ) |  | (151 | ) |  | 10 |  |  | (141 | )
Net cash provided by operating activities | $ | 751 |  |  | $ | — |  |  | $ | 751 |  |  | $ | 569 |  |  | $ | — |  |  | $ | 569 |
_______________
(1) | “Amortization of acquisition-related intangibles” includes amortization of non-Exelis Inc. acquisition-related intangibles, which was previously included in the “Depreciation and amortization” line item in our Consolidated Statement of Cash Flows in our fiscal Fiscal 2018 Annual Report on Form 10-K.
Accounting Standards Issued But Not Yet Effective In February 2016, the FASB issued a new lease standard that supersedes existing lease guidance under GAAP. This standard requires, among other things, the recognition of right-of-use assets and liabilities on the balance sheet for all leases longer than 12 months and disclosure of certain information about leasing arrangements. The standard currently allows two transition methods whereby companies may elect to use the modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with certain practical expedients available, or to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This standard is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2018, which for us is our fiscal 2020. We continue to evaluate the impact this standard will have on our financial condition, results of operations and cash flows, which could be material, and we have not yet made a decision on the adoption method, as this determination is primarily dependent on the completion of our analysis.

X
- References No definition available. + Details
Name: | us-gaap_AccountingChangesAndErrorCorrectionsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
Name: | us-gaap_NewAccountingPronouncementsAndChangesInAccountingPrinciplesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration