Restructuring and Other Exit Costs

9 Months Ended

Oct. 02, 2020

Restructuring and Related Activities [Abstract]

Note E — 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 these charges 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 Condensed Consolidated Statement of Income (Unaudited).

L3Harris Merger-Related Restructuring Costs. We recorded restructuring charges of $7 million during the quarter ended July 3, 2020 and $111 million during the quarter ended September 27, 2019 in connection with the L3Harris Merger. At October 2, 2020, we had liabilities of $24 million associated with these L3Harris Merger-related restructuring actions, of which substantially all will be paid in the next twelve months.

COVID-19-Related Restructuring Costs. During the quarter and three quarters ended October 2, 2020, we recorded $2 million and $16 million, respectively, of restructuring charges, including workforce reductions and other exit costs within our Aviation Systems segment associated with the COVID-19-related downturn in our Commercial Aviation Solutions sector and its impact on global air traffic and customer operations. In addition, during the quarter ended July 3, 2020, we recorded $1 million of restructuring charges for workforce reductions in our Communication Systems segment associated with the COVID-19 impact to local and state government customers of our Public Safety sector. At October 2, 2020, we had liabilities of $10 million associated with COVID-19-related restructuring actions, of which substantially all will be paid in the next twelve months.

Other Restructuring and Exit Costs. Prior to the L3Harris Merger, we had liabilities for lease obligations associated with exited facilities with remaining terms of three years or less, of which $6 million remained outstanding at October 2, 2020.

Our liabilities for restructuring and other exit costs are included in the “Other accrued items” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited). Changes to our liabilities for restructuring and other exit costs during the three quarters ended October 2, 2020 were as follows:



(In millions)	Employee severance-related costs		Facilities consolidation and other exit costs		Total

Balance at January 3, 2020	$	58	$	7	$	65
Additional provisions	24		—		24
Payments	(49)		(1)		(50)
Other, including foreign currency translation adjustments	1		—		1
Total changes	(24)		(1)		(25)
Balance at October 2, 2020	$	34	$	6	$	40