XML 35 R11.htm IDEA: XBRL DOCUMENT
v3.19.2

DISCONTINUED OPERATIONS AND DIVESTITURES | 12 Months Ended
--- | ---
Jun. 28, 2019
Discontinued Operations and Disposal Groups [Abstract] |
DISCONTINUED OPERATIONS AND DIVESTITURES | NOTE 3: DISCONTINUED OPERATIONS AND DIVESTITURES Discontinued Operations We completed two significant divestitures during fiscal 2017, the divestiture of our government information technology (“IT”) services business (“IT Services”) and the divestiture of our Harris CapRock Communications commercial business (“CapRock”), which are described in more detail below. These divestitures individually and collectively represented a strategic shift away from non-core markets (for example, energy, maritime and government IT services). The decision to divest these businesses was part of our strategy to simplify our operating model to focus on technology-differentiated, high-margin businesses, and had a major effect on our operations and financial results. As a result, IT Services and CapRock are reported as discontinued operations in the accompanying Consolidated Financial Statements and these Notes. Except for disclosures related to our cash flows, or unless otherwise specified, disclosures in the accompanying Consolidated Financial Statements and these Notes relate solely to our continuing operations. The major components of discontinued operations in our Consolidated Statement of Income included the following:
| 2019 |  | 2018 |  | 2017
| (In millions)
Revenue from product sales and services | $ | — |  |  | $ | — |  |  | $ | 1,039 |
Cost of product sales and services | — |  |  | — |  |  | (885 | )
Engineering, selling and administrative expenses | — |  |  | — |  |  | (91 | )
Impairment of goodwill and other assets | — |  |  | — |  |  | (240 | )
Non-operating loss, net(1) | (5 | ) |  | (8 | ) |  | (7 | )
Loss before income taxes | (5 | ) |  | (8 | ) |  | (184 | )
Loss on sale of discontinued operations, net(2) | — |  |  | — |  |  | (11 | )
Income tax benefit | 1 |  |  | 5 |  |  | 110 |
Discontinued operations, net of income taxes | $ | (4 | ) |  | $ | (3 | ) |  | $ | (85 | )
_______________
(1) | “Non-operating loss, net” included a loss of $2 million in fiscal 2017 related to our former broadcast communications business (“Broadcast Communications”), which was divested in fiscal 2013.
(2) | “Loss on sale of discontinued operations, net” in fiscal 2017 included a $3 million decrease to the loss on the sale of Broadcast Communications.
Depreciation and amortization, capital expenditures and significant non-cash items of discontinued operations included the following:
| 2017
| (In millions)
Depreciation and amortization | $ | 39 |
Capital expenditures | 4 |
Significant non-cash items: |
Impairment of goodwill and other assets | (240 | )
Loss on sale of discontinued operations, net | (11 | )
IT Services On April 28, 2017, we completed the divestiture to an affiliate of Veritas Capital Fund Management, L.L.C. (“Veritas”) of IT Services, which primarily provided IT and engineering managed services to U.S. Government customers, for net cash proceeds of $646 million, and recognized a pre-tax loss of $28 million (an after-tax gain of $55 million after certain tax benefits related to the transaction or $.44 per diluted share) on the sale after transaction expenses. The decision to divest IT Services was part of our strategy to simplify our operating model to focus on technology-differentiated, high-margin businesses. IT Services was part of our former Critical Networks segment and in connection with the definitive agreement to sell IT Services, as described above, the other remaining operations that had been a part of the Critical Networks segment, including our air traffic management business, primarily serving the Federal Aviation Administration (“FAA”), were integrated with our Electronic Systems segment effective for the third quarter of fiscal 2017, and our Critical Networks segment was eliminated. We agreed to provide various transition services to Veritas for a period of up to 18 months following the closing of the transaction pursuant to a separate agreement. Because the then-pending divestiture of IT Services represented the disposal of a portion of a reporting unit within our former Critical Networks segment, we assigned $487 million of goodwill to the IT Services disposal group on a relative fair value basis during the third quarter of fiscal 2017, when the held for sale criteria were met. The fair value of the IT Services disposal group was determined based on the negotiated selling price, and the fair value of the retained businesses (which comprised the remaining portion of the reporting unit) was determined based on a combination of market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions, and projected discounted cash flows. These fair value determinations are categorized as Level 3 in the fair value hierarchy due to their use of internal projections and unobservable measurement inputs. See Note 1: Significant Accounting Policies for additional information regarding the fair value hierarchy. In conjunction with the allocation, we tested goodwill assigned to the disposal group and goodwill allocated to the retained businesses for impairment. As a result, we concluded that goodwill and other assets related to IT Services were impaired as of March 31, 2017, and we recorded a non-cash impairment charge of $240 million in discontinued operations, $228 million of which related to goodwill. The goodwill impairment charge was non-deductible for tax purposes. The following table presents the key financial results of IT Services included in “Discontinued operations, net of income taxes” in our Consolidated Statement of Income:
| 2019 |  | 2018 |  | 2017
| (In millions)
Revenue from product sales and services | $ | — |  |  | $ | — |  |  | $ | 895 |
Cost of product sales and services | — |  |  | — |  |  | (777 | )
Engineering, selling and administrative expenses | — |  |  | — |  |  | (68 | )
Impairment of goodwill and other assets | — |  |  | — |  |  | (240 | )
Non-operating loss | (1 | ) |  | (4 | ) |  | (9 | )
Loss before income taxes | (1 | ) |  | (4 | ) |  | (199 | )
Loss on sale of discontinued operations, net | — |  |  | — |  |  | (28 | )
Income tax benefit | — |  |  | 5 |  |  | 69 |
Discontinued operations, net of income taxes | $ | (1 | ) |  | $ | 1 |  |  | $ | (158 | )
CapRock On January 1, 2017, we completed the divestiture to SpeedCast International Ltd. of CapRock, which provided wireless, terrestrial and satellite communications services to energy and maritime customers, for net cash proceeds of $368 million, and recognized a pre-tax gain of $14 million ($61 million after certain tax benefits related to the transaction, including reversal of valuation allowances on capital losses and net operating losses, or $.49 per diluted share) on the sale after transaction expenses and purchase adjustments in respect of net cash and net working capital as set forth in the definitive sales agreement entered into November 1, 2016. The following table presents the key financial results of CapRock included in “Discontinued operations, net of income taxes” included in our Consolidated Statement of Income:
| 2019 |  | 2018 |  | 2017
| (In millions)
Revenue from product sales and services | $ | — |  |  | $ | — |  |  | $ | 144 |
Cost of product sales and services | — |  |  | — |  |  | (108 | )
Engineering, selling and administrative expenses | — |  |  | — |  |  | (23 | )
Non-operating income (loss) | (3 | ) |  | (4 | ) |  | 4 |
Income (loss) before income taxes | (3 | ) |  | (4 | ) |  | 17 |
Gain on sale of discontinued operations | — |  |  | — |  |  | 14 |
Income tax benefit | 1 |  |  | — |  |  | 41 |
Discontinued operations, net of income taxes | $ | (2 | ) |  | $ | (4 | ) |  | $ | 72 |
Divestitures As part of the regulatory process in connection with the L3Harris Merger, we entered into a definitive agreement on April 4, 2019 to sell Harris Night Vision business to Elbit Systems of America, LLC, a subsidiary of Elbit Systems Ltd., for $350 million in cash, subject to customary purchase price adjustments as set forth in the definitive agreement. The sale transaction was conditioned on completion of the L3Harris Merger, as well as customary closing conditions, including receipt of regulatory approvals. The Harris Night Vision business, which is reported as part of our Communication Systems Segment in this Report, is a global supplier of high-performance, vision-enhancing products for U.S. and allied military and security forces and commercial customers. During the fourth quarter of fiscal 2019, we received all necessary regulatory approvals for the L3Harris Merger and the assets and liabilities of the Harris Night Vision business were classified as held for sale in our Consolidated Balance Sheet at June 28, 2019. We expect to close the sale of the Harris Night Vision business during the third quarter of calendar year 2019 and use the proceeds from the sale to pre-fund L3Harris pension plans and return cash to shareholders. Summarized financial information for the Harris Night Vision business is as follows:
| 2019 |  | 2018 |  | 2017
| (In millions)
Revenue from product sales and services | $ | 166 |  |  | $ | 148 |  |  | $ | 121 |
Income before income taxes | 27 |  |  | 23 |  |  | 11 |
Receivables | $ | 18 |  |  |  |  |
Inventories | 52 |  |  |  |  |
Property, plant and equipment | 29 |  |  |  |  |
Goodwill | 30 |  |  |  |  |
Other intangible assets | 4 |  |  |  |  |
Assets of disposal group held for sale | $ | 133 |  |  |  |  |
Accounts payable | $ | 13 |  |  |  |  |
Contract liabilities | 1 |  |  |  |  |
Compensation and benefits | 3 |  |  |  |  |
Other accrued items | 3 |  |  |  |  |
Defined benefit plans | 16 |  |  |  |  |
Liabilities of disposal group held for sale | $ | 36 |  |  |  |  |

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

X
- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
Name: | us-gaap_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration