RESTRUCTURING AND OTHER EXIT COSTS

6 Months Ended

Jan. 03, 2020

Restructuring and Related Activities [Abstract]

RESTRUCTURING AND OTHER EXIT COSTS

NOTE 4: RESTRUCTURING AND OTHER EXIT COSTS

We record charges for restructuring and other exit activities related to sales or terminations of product lines, closures or relocations of business activities, changes in management structure, and fundamental reorganizations that affect the nature and focus of operations. Such charges include termination benefits, contract termination costs and costs to consolidate facilities or relocate employees. We record termination benefits and contract termination costs at their fair value when incurred. In cases where employees are required to render service until they are terminated in order to receive the termination benefits and will be retained beyond the minimum retention period, we record the expense ratably over the future service period. These charges are included as a component of the “Engineering, selling and administrative expenses” line item in our Consolidated Statement of Income.

L3Harris Merger-Related Restructuring Costs

During the two quarters ended January 3, 2020, we recorded $117 million of restructuring costs for workforce reductions (including severance and other employee-related exit costs) in connection with the L3Harris Merger. At January 3, 2020, we had

liabilities of $58 million associated with these restructuring activities, of which we expect substantially all will be paid in the next twelve months.

During the quarter ended January 3, 2020, we finalized our plan to close L3’s former headquarters offices located at 600 Third Avenue in New York City. On December 3, 2019, we entered into an amended lease agreement with the landlord, which reduced the number of leased floors from six to five effective October 1, 2020 through the expiration of the lease on October 31, 2031. We plan to fully exit the remaining floors during 2020 and sublease the space over the remaining lease term. During the quarter ended January 3, 2020, we recorded a $2 million lease modification and a $46 million impairment charge for ROU and other assets in connection with the termination of the lease.

Previous Restructuring and other Exit Costs

In fiscal 2018 and 2017, we recorded $5 million and $58 million, respectively, for integration and other costs in connection with our acquisition of Exelis Inc., which we acquired in fiscal 2015 (“Exelis”). We had liabilities of $16 million and $27 million as of the end of fiscal 2019 and 2018, respectively, associated with these integration activities and previous restructuring actions. The majority of the remaining liabilities as of January 3, 2020 represent lease obligations associated with exited facilities with remaining terms of four years or less.

In fiscal 2018, we also recorded $45 million of charges in connection with our decision to transition and exit a commercial line of business that had been developing an air-to-ground radio access network for the business aviation market based on the Long Term Evolution (“LTE”) standard operating in the unlicensed spectrum. We had a liability of $18 million at June 29, 2018 associated with this exit activity, which was paid on July 2, 2018.

Our liabilities for restructuring and other exit costs are included in the “Other accrued items” and “Other long-term liabilities” line items in our Consolidated Balance Sheet. Changes to our restructuring and other exit costs liabilities during the two quarters ended January 3, 2020 and fiscal 2019 and 2018 were as follows:

	Employee severance-related costs			Facilities consolidation and other exit costs(1)			Total
	(In millions)
Balance at June 30, 2017	$	12		$	31		$	43
Additional provisions	1			50			51
Payments	(9		)	(38		)	(47		)
Other	(2		)	—			(2		)
Balance at June 29, 2018	2			43			45
Payments	(2		)	(27		)	(29		)
Balance at June 28, 2019	—			16			16
Additional provisions	117			—			117
Payments	(62		)	(1		)	(63		)
Other	3			(8		)	(5		)
Balance at January 3, 2020	$	58		$	7		$	65

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(1)

Excludes our operating lease liability related to L3’s former headquarter offices.