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Condensed Consolidating Financial Statements
 3 Months Ended 12 Months Ended
Oct. 02, 2015
Sep. 26, 2014
Jul. 03, 2015
Guarantees [Abstract]      
Condensed Consolidating Financial Statements

Note Q – Condensed Consolidating Financial Statements

 

On May 29, 2015, we acquired Exelis Inc. and its subsidiaries, and Exelis Inc. became a 100 percent directly owned subsidiary of Harris Corporation. In connection with the acquisition, Harris Corporation fully and unconditionally guaranteed all of the long-term fixed-rate debt securities issued by Exelis Inc. outstanding at the time of the acquisition, which consisted of $250 million in aggregate principal amount of 4.25% senior notes due October 1, 2016 and $400 million in aggregate principal amount of 5.55% senior notes due October 1, 2021 (the “Exelis Notes”). The Exelis Notes are included in our long-term fixed-rate debt in the accompanying Condensed Consolidated Balance Sheet (Unaudited). In addition, Exelis Inc. fully and unconditionally guaranteed all of the long-term fixed-rate debt securities issued by Harris Corporation outstanding at the time of the acquisition, which consisted of nine series of fixed-rate debt securities in an aggregate principal amount of $3.226 billion. The Exelis Notes are guaranteed only by Harris Corporation, and the nine series of long-term fixed-rate debt securities issued by Harris Corporation are guaranteed only by Exelis Inc. None of our other subsidiaries (including the subsidiaries of Exelis Inc.) is a guarantor of the Exelis Notes or any of the nine series of fixed-rate debt securities issued by Harris Corporation.

 

The following condensed consolidating financial statements, consisting of condensed consolidating statements of comprehensive income, balance sheets and statements of cash flows, are provided so that separate condensed consolidated financial statements of Harris Corporation and Exelis Inc., the issuers and guarantors as described above, are not required to be filed with the Securities and Exchange Commission. The condensed consolidating financial statements provide information for Harris Corporation, Exelis Inc. and our non-guarantor subsidiaries (including the subsidiaries of Exelis Inc.) for all periods presented to reflect the cross guarantees of our outstanding long-term fixed-rate debt securities as described above. The condensed consolidating financial statements reflect investments in subsidiaries using the equity method of accounting. The consolidating adjustments primarily relate to eliminations of investments in subsidiaries and intercompany transactions and balances. The issuers and guarantors as described above and the non-guarantor subsidiaries are not consistent with our reporting segments; and consequently, this basis of presentation is not included to present our financial condition, results of operations or cash flows for any purpose other than to comply with the specific requirements for guarantor reporting.

 

The cross guarantees of our outstanding long-term fixed-rate debt securities as described above are subject to being released under customary circumstances, as reflected in the supplemental indentures providing for the cross guarantees filed with the Securities and Exchange Commission as exhibits to our Current Report on Form 8-K filed on June 2, 2015. Moreover, we currently expect that in the second quarter of fiscal 2016, Exelis Inc. will merge with and into Harris Corporation, with Harris Corporation being the surviving entity, and the cross guarantees of our outstanding long-term fixed-rate debt securities as described above will terminate.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
                  
    Quarter Ended October 2, 2015
                
    Harris Exelis Non-Guarantor Consolidating Consolidated
    Parent Co. Parent Co. Subsidiaries Adjustments Total
             
    (In millions)
Revenue from product sales and services$ 790 $ 584 $ 437 $ ― $ 1,811
Cost of product sales and services  (491)   (422)   (307)   ―   (1,220)
Engineering, selling and administrative expenses  (156)   (86)   (87)   ―   (329)
Intercompany income (expense), net  (12)   2   10   ―   ―
Non-operating income  1   ―   ―   ―   1
Interest income  ―   ―   1   ―   1
Interest expense  (41)   (5)   (2)   ―   (48)
Income before income taxes 91  73  52   ―  216
Income taxes (26)  (26)  (16)   ―  (68)
Equity in earnings of subsidiaries, net of income taxes  83   9   ―   (92)   ―
Net income 148  56  36  (92)  148
Other comprehensive loss, net of income taxes (84)  (15)  (25)  92  (32)
Total comprehensive income$64 $41 $11 $ ― $116

CONDENSED CONSOLIDATING BALANCE SHEET
(Unaudited)
                  
    Quarter Ended October 2, 2015
             
    Harris Exelis Non-Guarantor Consolidating Consolidated
    Parent Co. Parent Co. Subsidiaries Adjustments Total
    (In millions)
Assets              
Current Assets              
 Cash and cash equivalents$ 64 $ 49 $ 207 $ ― $ 320
 Receivables  503   498   2,359   (2,282)   1,078
 Inventories  530   285   292   ―   1,107
 Income taxes receivable  16   6   8   ―   30
 Current deferred income taxes  103   212   31   ―   346
 Deferred compensation plan investments  12   28   ―   ―   40
 Other current assets  34   42   56   ―   132
  Total current assets  1,262   1,120   2,953   (2,282)   3,053
Non-current Assets              
 Property, plant and equipment  534   383   233   ―   1,150
 Goodwill  465   4,683   1,173   ―   6,321
 Other intangible assets  29   1,255   445   ―   1,729
 Non-current deferred income taxes  97   179   ―   (111)   165
 Investment in subsidiaries  8,518   11   ―   (8,529)   ―
 Other non-current assets  103   ―   96   (53)   146
  Total non-current assets  9,746   6,511   1,947   (8,693)   9,511
    $ 11,008 $ 7,631 $ 4,900 $ (10,975) $ 12,564
Liabilities and Equity              
Current Liabilities              
 Short-term debt$ 25 $ ― $ 25 $ ― $ 50
 Accounts payable  2,355   161   221   (2,282)   455
 Compensation and benefits  134   79   45   ―   258
 Other accrued items  241   161   72   ―   474
 Advance payments and unearned income  149   177   95   ―   421
 Income taxes payable  43   8   19   ―   70
 Current deferred income taxes  ―   ―   1   ―   1
 Deferred compensation plan liabilities  12   ―   ―   ―   12
 Current portion of long-term debt  130   ―   ―   ―   130
  Total current liabilities  3,089   586   478   (2,282)   1,871
Non-current Liabilities              
 Defined benefit plans  ―   1,841   35   ―   1,876
 Long-term debt  4,179   698   24   ―   4,901
 Long-term contract liability  67   ―   ―   ―   67
 Non-current deferred income taxes  ―   ―   125   (111)   14
 Other long-term liabilities  210   124   91   (53)   372
  Total non-current liabilities  4,456   2,663   275   (164)   7,230
Equity              
Shareholders’ Equity:              
 Common stock  124   ―   ―   ―   124
 Other capital  3,796   4,283   2,307   (8,342)   2,044
 Retained earnings  (117)   36   1,934   (511)   1,342
 Accumulated other comprehensive loss  (340)   63   (95)   324   (48)
  Total shareholders’ equity  3,463   4,382   4,146   (8,529)   3,462
Noncontrolling interests  ―   ―   1   ―   1
  Total equity  3,463   4,382   4,147   (8,529)   3,463
 $ 11,008 $ 7,631 $ 4,900 $ (10,975) $ 12,564

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(Unaudited)
                  
    Quarter Ended October 2, 2015
             
    Harris Exelis Non-Guarantor Consolidating Consolidated
    Parent Co. Parent Co. Subsidiaries Adjustments Total
             
    (In millions)
Net cash provided by (used in) operating activities$ 177 $ 1 $ (114) $ ― $ 64
Investing Activities              
 Intercompany loans  (61)   ―   5   56   ―
 Additions of property, plant and equipment  (15)   (6)   (5)   ―   (26)
 Proceeds from sale of property, plant and equipment  2   ―   ―   ―   2
Net cash provided by (used in) investing activities  (74)   (6)   ―   56   (24)
Financing Activities              
 Intercompany loans  (5)   ―   61   (56)   ―
 Proceeds from borrowings  25   ―   16   ―   41
 Repayments of borrowings  (150)   ―   (23)   ―   (173)
 Proceeds from exercises of employee stock options  19   ―   ―   ―   19
 Cash dividends  (64)   ―   ―   ―   (64)
 Other financing activities  (15)   ―   ―   ―   (15)
Net cash provided by (used in) financing activities  (190)   ―   54   (56)   (192)
Effect of exchange rate changes on cash and               
cash equivalents  ―   ―   (9)   ―   (9)
Net decrease in cash and cash equivalents  (87)   (5)   (69)   ―   (161)
Cash and cash equivalents, beginning of year  151   54   276   ―   481
Cash and cash equivalents, end of quarter$ 64 $ 49 $ 207 $ ― $ 320
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
               
    Quarter Ended September 26, 2014
              
    Harris Non-Guarantor Consolidating Consolidated
    Parent Co. Subsidiaries Adjustments Total
           
    (In millions)
Revenue from product sales and services$ 827 $ 328 $ ― $ 1,155
Cost of product sales and services  (524)   (238)   ―   (762)
Engineering, selling and administrative expenses  (157)   (38)   ―   (195)
Intercompany income (expense), net  (8)   8   ―   ―
Non-operating income (loss)  13   (13)   ―   ―
Interest income  ―   1   ―   1
Interest expense  (23)   ―   ―   (23)
Income before income taxes 128  48   ―  176
Income taxes (36)  (15)   ―  (51)
Equity in earnings of subsidiaries, net of income taxes  33   ―   (33)   ―
Net income  125   33   (33)   125
Other comprehensive loss, net of income taxes  (37)   (17)   33   (21)
Total comprehensive income$88 $16 $ ― $104

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(Unaudited)
               
    Quarter Ended September 26, 2014
           
    Harris Non-Guarantor Consolidating Consolidated
    Parent Co. Subsidiaries Adjustments Total
    (In millions)
Net cash provided by (used in) operating activities$ 212 $ (132) $ ― $ 80
Investing Activities           
 Intercompany loans  (35)   93   (58)   ―
 Additions of property, plant and equipment  (31)   (10)   ―   (41)
 Proceeds from sale of Cyber Integration Center  7   ―   ―   7
Net cash provided by (used in) investing activities  (59)   83   (58)   (34)
Financing Activities           
 Intercompany loans  (93)   35   58   ―
 Proceeds from borrowings  ―   3   ―   3
 Repayments of borrowings  ―   (9)   ―   (9)
 Proceeds from exercises of employee stock options  18   ―   ―   18
 Repurchases of common stock  (100)   ―   ―   (100)
 Cash dividends  (50)   ―   ―   (50)
 Other financing activities  (12)   ―   ―   (12)
Net cash provided by (used in) financing activities  (237)   29   58   (150)
Effect of exchange rate changes on cash and            
cash equivalents  ―   (8)   ―   (8)
Net decrease in cash and cash equivalents  (84)   (28)   ―   (112)
Cash and cash equivalents, beginning of year  252   309   ―   561
Cash and cash equivalents, end of quarter$ 168 $ 281 $ ― $ 449
CONDENSED CONSOLIDATING BALANCE SHEET
                  
    Fiscal Year Ended July 3, 2015
             
    Harris Exelis Non-Guarantor Consolidating Consolidated
    Parent Co. Parent Co. Subsidiaries Adjustments Total
    (In millions)
Assets              
Current Assets              
 Cash and cash equivalents$ 151 $ 54 $ 276 $ ― $ 481
 Receivables  623   333   2,430   (2,218)   1,168
 Inventories  478   272   265   ―   1,015
 Income taxes receivable  17   65   5   ―   87
 Current deferred income taxes  108   202   31   ―   341
 Deferred compensation plan investments  12   255   ―   ―   267
 Other current assets  39   68   58   ―   165
  Total current assets  1,428   1,249   3,065   (2,218)   3,524
Non-current Assets              
 Property, plant and equipment  549   375   241   ―   1,165
 Goodwill  462   4,693   1,193   ―   6,348
 Other intangible assets  31   1,282   462   ―   1,775
 Non-current deferred income taxes  95   179   ―   (111)   163
 Investment in subsidiaries  8,249   2   ―   (8,251)   ―
 Other non-current assets  110   10   34   ―   154
  Total non-current assets  9,496   6,541   1,930   (8,362)   9,605
    $ 10,924 $ 7,790 $ 4,995 $ (10,580) $ 13,129
Liabilities and Equity              
Current Liabilities              
 Short-term debt$ ― $ ― $ 33 $ ― $ 33
 Accounts payable  2,201   290   308   (2,218)   581
 Compensation and benefits  128   70   57   ―   255
 Other accrued items  246   226   46   ―   518
 Advance payments and unearned income  149   187   97   ―   433
 Income taxes payable  27   19   11   ―   57
 Current deferred income taxes  ―   ―   7   ―   7
 Deferred compensation plan liabilities  12   255   ―   ―   267
 Current portion of long-term debt  130   ―   ―   ―   130
  Total current liabilities  2,893   1,047   559   (2,218)   2,281
Non-current Liabilities              
 Defined benefit plans  ―   1,923   20   ―   1,943
 Long-term debt  4,328   701   24   ―   5,053
 Long-term contract liability  71   ―   ―   ―   71
 Non-current deferred income taxes  ―   ―   118   (111)   7
 Other long-term liabilities  235   38   99   ―   372
  Total non-current liabilities  4,634   2,662   261   (111)   7,446
Equity              
Shareholders’ Equity:              
 Common stock  124   ―   ―   ―   124
 Other capital  3,731   4,023   2,342   (8,065)   2,031
 Retained earnings  (202)   (20)   1,898   (418)   1,258
 Accumulated other comprehensive loss  (256)   78   (70)   232   (16)
  Total shareholders’ equity  3,397   4,081   4,170   (8,251)   3,397
Noncontrolling interests  ―   ―   5   ―   5
  Total equity  3,397   4,081   4,175   (8,251)   3,402
 $ 10,924 $ 7,790 $ 4,995 $ (10,580) $ 13,129

Note: The above table reflects the correction of classification errors of $194 million in goodwill between Harris Parent Co. and Non-Guarantor Subsidiaries, $126 million in accounts payable between Exelis Parent Co. and Non-Guarantor Subsidiaries and $25 million in income taxes payable between Harris Parent Co. and Exelis Parent Co., in each case in the Consolidated Balance Sheet for the fiscal year ended July 3, 2015 in Note 26: “Condensed Consolidating Financial Statements” in our Notes to Consolidated Financial Statements in our Fiscal 2015 Form 10-K. The errors impacted the “Goodwill,” “Accounts payable,” “Income taxes payable,” “Investment in subsidiaries” and “Other capital” line items. The errors and corrections did not impact amounts in the Consolidated Total column for any line items or the Company's consolidated financial results.