On October 12, 2018, Harris Corporation, a Delaware corporation, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with L3 Technologies, Inc., a Delaware corporation, and Leopard Merger Sub Inc., a Delaware corporation and a newly formed, direct wholly-owned subsidiary of Harris (“Merger Sub”), pursuant to which Harris and L3 agreed to combine their respective businesses in an all-stock merger, at the closing of which Merger Sub would merge with and into L3, with L3 continuing as the surviving corporation and a direct wholly-owned subsidiary of Harris (the “L3Harris Merger”).

The closing of the L3Harris Merger occurred on June 29, 2019 (“Closing Date”), the first day of our Fiscal Transition Period. Upon completion of the L3Harris Merger, Harris was renamed “L3Harris Technologies, Inc.” and each share of L3 common stock converted into the right to receive 1.30 shares (“Exchange Ratio”) of L3Harris common stock. Shares of L3Harris common stock, which previously traded under ticker symbol “HRS” on the New York Stock Exchange prior to completion of the L3Harris Merger, are traded under ticker symbol “LHX” following completion of the L3Harris Merger. L3Harris was owned on a fully diluted basis 54 percent by Harris shareholders and 46 percent by L3 shareholders immediately following the completion of the L3Harris Merger.

L3 was a prime contractor in intelligence, surveillance and reconnaissance (“ISR”) systems, aircraft sustainment (including modifications and fleet management of special mission aircraft), simulation and training, night vision and image intensification equipment and security and detection systems. L3 also was a leading provider of a broad range of communication, electronic and sensor systems used on military, homeland security and commercial platforms. L3 employed approximately 31,000 employees and its customers included the U.S. Department of Defense and its prime contractors, the U.S. Intelligence Community, the U.S. Department of Homeland Security, foreign governments and domestic and foreign commercial customers. L3 generated calendar 2018 revenue of approximately $10 billion.

In connection with completion of the L3Harris Merger, we issued to L3 shareholders 104 million shares of L3Harris common stock, the trading price of which was $189.13 per share as of the Closing Date. In addition, we issued L3Harris share-based awards in replacement of certain outstanding L3 share-based awards held by employees.

We accounted for the L3Harris Merger under the acquisition method of accounting, which required us to measure identifiable assets acquired, liabilities assumed and any noncontrolling interests in the acquiree at their fair values as of the Closing Date, with the excess of the consideration transferred over those fair values recorded as goodwill.


(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 restricted stock units attributable to merger consideration	10
Fair value of L3Harris stock options issued to replace 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

Our preliminary fair value estimates and assumptions to measure the assets acquired, liabilities assumed and noncontrolling interests in L3 were subject to change as we obtained additional information during the measurement period. We completed our accounting for the L3Harris Merger during the quarter ended July 3, 2020. The following table summarizes the initial fair value amounts recognized during the quarter ended September 27, 2019 for each major class of assets acquired or liabilities assumed and noncontrolling interests, as well as adjustments during the measurement period:


(In millions)	Preliminary Fair Value as of September 27, 2019		Measurement Period Adjustments		Adjusted Fair Value as of July 3, 2020

Receivables	$	849	$	(20)	$	829
Contract assets	1,708		(57)		1,651
Inventories	1,056		(73)		983
Other current assets	517		(16)		501
Property, plant and equipment	1,176		43		1,219
Operating lease right-of-use assets	704		108		812
Goodwill	15,423		(841)		14,582
Other intangible assets	6,768		1,690		8,458
Other non-current assets	327		(13)		314
Total assets acquired	$	28,528	$	821	$	29,349

Accounts payable	$	898	$	(13)	$	885
Contract liabilities	722		4		726
Other current liabilities	772		301		1,073
Operating lease liabilities	715		45		760
Defined benefit plans	1,411		—		1,411
Long-term debt, net	3,548		—		3,548
Other long-term liabilities	1,661		480		2,141
Total liabilities assumed	9,727		817		10,544
Net assets acquired	18,801		4		18,805
Noncontrolling interests	(151)		(4)		(155)
Total net consideration transferred	$	18,650	$	—	$	18,650

Additionally, we acquired certain off-market customer contracts in connection with the L3Harris Merger, and we have recorded liabilities as well as separate identifiable intangible assets for the acquisition-date fair value of the off-market

components of these customer contracts. In aggregate, the acquisition-date fair value of the off-market components was a net liability of $139 million. We measured the fair value of these components as the present value of the amount by which the terms of the contract with the customer deviated from the terms that a market participant could have achieved at the Closing Date. The off-market components of these contracts will be recognized as an increase to, or reduction of, revenue as we incur costs to satisfy the associated performance obligations. We recognized $20 million, $58 million and $13 million of revenue in fiscal 2021, fiscal 2020 and the Fiscal Transition Period, respectively, for amortization of net off-market contract liabilities. Fiscal 2020 also included the cumulative effect of amortization that would have been recognized in the Fiscal Transition Period. Future estimated revenue from the amortization of net off-market contract liabilities (based on the estimated pattern of cash flows to be incurred to satisfy associated performance obligations) is as follows: $15 million in 2022, $10 million in 2023 and $23 million in 2024.

The goodwill resulting from the L3Harris Merger was primarily associated with L3’s market presence and leading positions, growth opportunities in the markets in which L3 businesses operate, experienced work force and established operating infrastructures. Most of the goodwill related to the L3Harris Merger is nondeductible for tax purposes.


	Weighted Average Amortization Period	Total

	(In years)	(In millions)
Identifiable intangible assets acquired:
Customer relationships — government	14	$	5,082
Customer relationships — commercial	15	860
Contract backlog	3	19
Trade names — divisions	9	123
Developed technologies	7	550
Total identifiable intangible assets subject to amortization	13	6,634
Trade names — corporate	indefinite	1,803
In-process research and development	N/A	21
Total identifiable intangible assets		$	8,458


	Fiscal Years Ended				Two Quarters Ended		Fiscal Year Ended
(In millions)	December 31, 2021		January 1, 2021		January 3, 2020		June 28, 2019

Equity award acceleration charges, recognized upon change in control	$	—	$	—	$	70	$	—
Transaction costs, recognized as incurred	—		—		83		31
Additional cost of sales related to the fair value step-up in inventory sold	—		31		142		—
Restructuring charges, recognized as incurred	—		10		117		—
Facility consolidation costs	—		—		48		—
Integration costs, recognized as incurred	128		130		72		34
Total L3Harris Merger-related charges	$	128	$	171	$	532	$	65

Because the L3Harris Merger benefited the entire Company as opposed to any individual business segment, the above costs were not allocated to any business segment. Most of the costs above were recorded in the “Engineering, selling and administrative expenses” line item in our Consolidated Statement of Income, except for additional cost of sales related to the fair value step-up in inventory sold, which is included in the “Cost of product sales and services” line item in our Consolidated Statement of Income and facility consolidation costs, the majority of which is included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Income.

The following unaudited consolidated pro forma results of operations for the four quarters ended January 3, 2020 combines reported results for the two quarters ended January 3, 2020 with the pro forma results for the two quarters ended June 28, 2019. The pro forma results for the two quarters ended June 28, 2019 were prepared on a pro forma basis, as if the L3Harris Merger had been completed on June 30, 2018, the first day of Harris’ fiscal 2019, after including any post-merger adjustments directly attributable to the L3Harris Merger, such as the sale of the Harris Night Vision business, and after including the impact of adjustments such as amortization of identifiable intangible assets, as well as the related income tax effects. This pro forma presentation does not include any impact of transaction synergies. The pro forma results are not necessarily indicative of our results of operations that actually would have been obtained had the L3Harris Merger been completed on the assumed date or for the period presented, or which may be realized in the future.


	Four Quarters Ended		Two Quarters Ended
(In millions)	January 3, 2020		December 28, 2018

Revenue from product sales and services — as reported	$	12,856	$	3,208
Revenue from product sales and services — pro forma	18,097		8,404
Income from continuing operations — as reported	1,347		441
Income from continuing operations — pro forma	1,652		760