2023 Annual Report
ABOUT L3HARRIS
TECHNOLOGIES
L3Harris Technologies is the Trusted Disruptor in the
defense industry. With customers’ mission-critical
needs always in mind, our dedicated employees
deliver end-to-end technology solutions connecting
the space, air, land, sea and cyber domains in the
interest of national security.
FAST FACTS
50K
EMPLOYEES
$19.4B
ANNUAL REVENUE
>$2B
IN INNOVATION
INVESTMENTS
25K+
CLEARED
PERSONNEL
$12.36
NON-GAAP
EPS
>$1B
RETURNED TO
SHAREHOLDERS
OUR VALUES
INTEGRITY
> Accountable
> Ethical
> Honest
EXCELLENCE
> Flawless Execution
> Customer-Focused
> Innovative
RESPECT
> Safe and Sustainable
> Community-Minded
> Inclusive
BUSINESS SEGMENTS
SPACE AND AIRBORNE SYSTEMS
INTEGRATED MISSION SYSTEMS
$6.9B
$6.6B
Edward Zoiss, President
Jon Rambeau, President
SAS is a leading provider of full mission solutions
as a prime and subsystem integrator in the space,
airborne and cyber domains. We provide top-tier
capabilities in the design, development, integration,
production and sustainment of major weapons
systems for defense primes and national security,
civil government and international customers.
IMS is a leading provider of differentiated mission
capabilities and prime-systems integration for the air,
land and sea domains. We deliver top-tier capabilities
in the design, development, integration, production,
modernization and sustainment of intelligence,
surveillance, and reconnaissance (ISR), passive sensing
and targeting, electronic attack, autonomy, power and
communications, networks and sensors for national
security and international customers.
COMMUNICATION SYSTEMS
AEROJET ROCKETDYNE
$5.1B
Samir Mehta, President
$1.1B*
Ross Niebergall, President
CS enables warfighters across all domains with
solutions critical to mission success even in the most
contested environments. We are a leading provider
of resilient communications solutions for U.S.
Department of Defense (DoD), international,
federal and state agency customers.
AR is a leading provider of propulsion, power
and armament products and systems to the
U.S. government, including the DoD, National
Aeronautics and Space Administration (NASA)
and major aerospace and defense prime contractors.
*Aerojet Rocketdyne results reflect the 5-month post-acquisition period
PAGE 1 | L3HARRIS TECHNOLOGIES 2023 ANNUAL REPORT
ANNUAL LETTER TO
SHAREHOLDERS
2023 marked the fourth anniversary of L3Harris and a return to growth after a
few years of macroeconomic disruptions. Through the execution of our strategy,
we are improving operational performance and delivering on our commitments
to shareholders and customers while strengthening our position as the industry’s
Trusted Disruptor.
With an increasingly complex geopolitical environment, the need for differentiated
capabilities and innovative solutions is more important than ever. As we continue
to leverage our national security-focused portfolio, L3Harris is uniquely positioned
to meet our customers’ evolving needs and deliver advanced capabilities with the
agility required to support the U.S. and its allies.
Customer demand for L3Harris solutions remains robust, and in 2023 we were
awarded orders of $23 billion. These awards contributed to a record backlog
of $33 billion, more than double our backlog at the time of the merger, providing further visibility and
demonstrating that our strategy is working.
To further align with national defense priorities and broaden our capabilities in high-growth markets, we
expanded our portfolio with the acquisitions of Tactical Data Links (TDL) and Aerojet Rocketdyne (AR). Under
a rigorous regulatory environment, we were successful in closing these acquisitions, each enabling long-term
shareholder value.
Operationally, we experienced improving trends in supply chain and employee attrition, helping to drive
growth and execution in the business, resulting in better financial predictability. Additionally, we embarked
on the next phase of the L3Harris journey, known as LHX NeXt, a targeted three year program designed to
enhance organizational agility and performance by leveraging our scale and relationships across segments
to drive operational efficiency and competitiveness for the enterprise. With this program, we are investing
in enterprise tools and optimized, revamped processes with the objective of at least $1 billion in gross cost
savings. This is expected to unlock opportunity for margin expansion and create additional shareholder value.
Delivering for our customers and shareholders remains at the core of what we do, and I’m proud of the
many milestones we achieved throughout the year.
IN SPACE AND AIRBORNE SYSTEMS,
we continue to grow our positions in satellite systems and space superiority
and ended the year with a record 58 satellites in backlog, including addressing
a growing market for the Space Development Agency (SDA) Tracking Layer
satellites, the first of which will be launched in 2024. These satellites will
leverage L3Harris’ responsive space capabilities to address and deter near-peer
threats.
IN INTEGRATED MISSION SYSTEMS,
we delivered the first of 10 EC-37B Compass Call aircraft to the U.S. Air Force,
providing critical electromagnetic warfare capabilities in support of the air,
surface and special operations forces of the U.S. and its allies. Continuing our
role as the platform integration prime, we were awarded $550 million to begin
integration on four additional Compass Call aircraft.
L3HARRIS TECHNOLOGIES 2023 ANNUAL REPORT | PAGE 2
IN COMMUNICATION SYSTEMS,
we continue to fulfill urgent needs of Ukraine and, to date, have delivered
~25,000 tactical radios, including ~10,000 in 2023, doubling Ukraine’s inventory
and furthering our position as the global leader in resilient communications for
domestic and international customers.
IN AEROJET ROCKETDYNE,
we opened a modernized facility to support the hardware fabrication for
a next-generation missile program. The facility complements other recent
new or modernized facilities including the Engineering, Manufacturing and
Development facility to support large solid rocket motor production and the
Advanced Manufacturing Facility specializing in inert component production
for solid rocket motor cases.
Throughout 2023, I highlighted our emphasis on Performance First. As a core pillar of the L3Harris strategy,
operational performance is a primary driver of our return to growth. Coupled with strong customer demand
and the acquisitions of TDL and AR, we met our financial commitments and delivered a positive total
shareholder return (TSR) for the year.
We expect this positive momentum to continue into 2024, driving organic revenue growth, expanding
margins, EPS and free cash flow. We will continue to deliver on the objectives we shared at our recent
Investor Day, including our 2024–2026 capital deployment priorities of paying down debt to achieve a
leverage ratio below 3.0x and returning excess cash to shareholders. We are committed to meeting our
financial framework of $23 billion in revenue, 16% segment operating margins and $2.8 billion of free cash
flow by 2026.
Turning to governance, we added three new members to the Board of Directors in 2023, following the
retirements of Thomas A. Corcoran, Lewis Kramer and Lloyd W. Newton. I’d like to thank them for their
contributions and leadership. We remain focused on continuous improvement across various Environmental,
Social and Governance (ESG) areas and rank among the top of global aerospace and defense companies for
our sustainability performance.
I’m proud of the progress we made in 2023 to perform, grow and innovate and look forward to building
on that momentum to continue delivering value for our shareholders and customers. The collective efforts
of our dedicated employees are truly helping to shape the future of national security.
Christopher E. Kubasik
Chair and Chief Executive Officer
PAGE 3 | L3HARRIS TECHNOLOGIES 2023 ANNUAL REPORT
L3HARRIS
LEADERSHIP
BOARD OF DIRECTORS
> Christopher E. Kubasik
> Kirk S. Hachigian
Chair and CEO
> Sallie B. Bailey
Former EVP and CFO,
Louisiana-Pacific
> Peter W. Chiarelli
General, U.S. Army
(Retired)
> Thomas A. Dattilo
Former Chair,
President and CEO,
Cooper Tire & Rubber
> Roger B. Fradin
Former Vice Chair,
Honeywell
> Joanna L. Geraghty
CEO, JetBlue Airways
EXECUTIVE TEAM
> Christopher E. Kubasik
Chair and CEO
> Samir B. Mehta
President,
Communication Systems
> Ross S. Niebergall
President,
Aerojet Rocketdyne
> Jonathan P. Rambeau
President,
Integrated Mission
Systems
> Edward J. Zoiss
President,
Space and
Airborne Systems
Former Chair and CEO,
JELD-WEN
> Robert B. Millard
Chair Emeritus,
MIT Corporation
> Harry B. Harris, Jr.
> Edward A. Rice, Jr.
Former U.S. Ambassador
and Admiral, U.S. Navy
(Retired)
> Lewis Hay III
Operating Advisor,
Clayton, Dubilier & Rice;
former Chair and CEO,
NextEra Energy
> Rita S. Lane
Former Vice President,
Operations, Apple
General, U.S. Air Force
(Retired)
> William H. Swanson
Former Chair and CEO,
Raytheon Company
> Christina L. Zamarro
EVP and CFO,
The Goodyear Tire
& Rubber Company
> Kenneth L. Bedingfield
Senior Vice President
and CFO
> Scott T. Mikuen
Senior Vice President,
General Counsel
and Secretary
> Sean J. Stackley
Senior Vice President,
Strategy, Growth
& Technology
> Tania W. Hanna
Vice President,
Government Relations
& Communications
> Kimberly A. Mackenroth
Vice President
and CIO
> Corliss J. Montesi
Vice President
and Principal Accounting
Officer
> Byron M. Green
Vice President,
Global Operations
> Melanie Rakita
Vice President
and CHRO
L3HARRIS TECHNOLOGIES 2023 ANNUAL REPORT | PAGE 4
NON-GAAP FINANCIAL MEASURES
To supplement results presented in accordance with U.S. generally accepted accounting principles (GAAP),
results in this Annual Report include non-GAAP financial measures (NGFM) within the meaning of Regulation G
promulgated by the Securities and Exchange Commission (SEC), including non-GAAP income from continuing
operations per diluted common share (EPS), adjusted for certain costs, charges, expenses, losses or other
amounts as set forth in the reconciliation of NGFMs included below. A NGFM is generally defined as a numerical
measure of a company’s historical or future performance that excludes or includes amounts, or is subject
to adjustments, so as to be different from the most directly comparable measure calculated and presented
in accordance with GAAP. L3Harris management believes excluding the adjustments outlined below for the
purposes of calculating certain NGFMs is useful to investors because these costs do not reflect our ongoing
operating performance. These adjustments, when considered together with the unadjusted GAAP financial
measures, provide information that is useful to investors in understanding period-over-period operating results
separate and apart from items that may, or could, have a disproportionately positive or negative impact on
results in any particular period. L3Harris management also believes that these adjustments to our NGFMs
enhance the ability of investors to analyze L3Harris business trends and to understand L3Harris performance.
L3Harris may utilize NGFMs as guides in forecasting, budgeting and long-term planning processes and to
measure operating performance for some management compensation purposes. NGFMs should be considered
in addition to, and not as a substitute for, or superior to, financial measures presented in accordance with GAAP.
NON-GAAP EPS
AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS
Diluted weighted average common shares outstanding
EPS
Significant and/or non-recurring items included in EPS above
Amortization of acquisition-related intangibles
Additional cost of sales related to the fair value step-up in inventory sold
Merger, acquisition, and divestiture-related expenses
Business divestiture-related losses, net
Impairment of goodwill and other assets
LHX NeXt implementation costs
Gain on sale of property, plant and equipment
Total pre-tax significant and/or non-recurring items included in EPS above per share
Noncontrolling interests portion of adjustments per share
Income taxes on above adjustments per share
Total adjustments after-tax
Non-GAAP EPS
2023
190.6
6.44
$
4.09
0.16
0.91
0.27
1.96
0.60
(0.14)
7.85
(0.19)
(1.74)
5.92
12.36
$
PAGE 5 | L3HARRIS TECHNOLOGIES 2023 ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☑
OR
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File Number 1-3863
L3HARRIS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
34-0276860
(I.R.S. Employer Identification No.)
1025 West NASA Boulevard
Melbourne, Florida
(Address of principal executive offices)
32919
(Zip Code)
Registrant’s telephone number, including area code: (321) 727-9100
Title of each class
Common Stock, par value $1.00 per share
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
LHX
Name of each exchange on which registered
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☑
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting common equity held by non-affiliates of the registrant at June 30, 2023 was $37,362,290,944
(based on the quoted closing sale price per share of the stock on the New York Stock Exchange). For purposes of this calculation, the registrant
has assumed that its directors and executive officers as of June 30, 2023 are affiliates.
The number of shares outstanding of the registrant’s common stock as of February 9, 2024 was 190,107,856.
Documents Incorporated by Reference:
Portions of the registrant’s definitive Proxy Statement for the 2024 Annual Meeting of Shareholders scheduled to be held on April 19,
2024, which will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended
December 29, 2023, are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent described therein.
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 29, 2023
L3HARRIS TECHNOLOGIES, INC.
TABLE OF CONTENTS
Page No.
ITEM 1. Business .................................................................................................................................
ITEM 1A. Risk Factors ............................................................................................................................
ITEM 1B. Unresolved Staff Comments ...............................................................................................
ITEM 1C. Cybersecurity .........................................................................................................................
ITEM 2. Properties ...............................................................................................................................
ITEM 3. Legal Proceedings .................................................................................................................
ITEM 4. Mine Safety Disclosures .......................................................................................................
Information about our Executive Officers ..............................................................................................
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities ...........................................................................................
ITEM 6. [Reserved] ..............................................................................................................................
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations .............................................................................................................................
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk ........................................
ITEM 8. Financial Statements and Supplementary Data ..............................................................
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure ..............................................................................................................................
ITEM 9A. Controls and Procedures .....................................................................................................
ITEM 9B. Other Information .................................................................................................................
ITEM 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections .......................
ITEM 10. Directors, Executive Officers and Corporate Governance .............................................
ITEM 11. Executive Compensation .....................................................................................................
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters .............................................................................................................
ITEM 13. Certain Relationships and Related Transactions, and Director Independence .........
ITEM 14. Principal Accounting Fees and Services ...........................................................................
Part I:
Part II:
Part III
:
Part IV:
ITEM 15. Exhibits, Financial Statement Schedules .........................................................................
ITEM 16. Form 10-K Summary ...........................................................................................................
Signatures .....................................................................................................................................................................
Exhibits
This Annual Report on Form 10-K contains trademarks, service marks and registered marks of L3Harris
Technologies, Inc. and its subsidiaries. All other trademarks are the property of their respective owners.
1
7
19
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Cautionary Statement Regarding Forward-Looking Statements
This Annual Report on Form 10-K (this “Report”), including “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” contains forward-looking statements that involve risks and
uncertainties, as well as assumptions that may not materialize or prove correct, which could cause our results to
differ materially from those expressed in or implied by such forward-looking statements. All statements other than
statements of historical fact are statements that could be deemed forward-looking statements, including, but not
limited to, statements concerning: our plans, strategies and objectives for future operations; new products, systems,
technologies, services or developments; future economic conditions, performance or outlook; future political
conditions; the outcome of contingencies or litigation; environmental remediation cost estimates; the potential level
of share repurchases, dividends or pension contributions; potential acquisitions or divestitures; the integration of
our acquisitions; the value of contract awards and programs; expected revenue; expected cash flows or capital
expenditures; our beliefs or expectations; activities, events or developments that we intend, expect, project, believe
or anticipate will or may occur in the future; and assumptions underlying any of the foregoing. Forward-looking
statements may be identified by their use of forward-looking terminology, such as “believes,” “expects,” “may,”
“could,” “should,” “would,” “will,” “intends,” “plans,” “estimates,” “anticipates,” “projects” and similar words or
expressions. You should not place undue reliance on these forward-looking statements, which reflect our
management’s opinions only as of the date of filing of this Report and are not guarantees of future performance or
actual results. Factors that might cause our results to differ materially from those expressed in or implied by these
forward-looking statements, from our current expectations or projections or from our historical results include, but
are not limited to, those discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Item 1A. Risk Factors” of this Report. All forward-looking statements are qualified by,
and should be read in conjunction with, those risk factors. Forward-looking statements are made in reliance on the
safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are made as of the date
of filing of this Report, and we disclaim any intention or obligation, other than imposed by law, to update or revise
any forward-looking statements, whether as a result of new information, future events or developments or
otherwise, after the date of filing of this Report or, in the case of any document incorporated by reference, the date
of that document.
Amounts contained in this Report may not always add to totals due to rounding.
PART I
ITEM 1.
BUSINESS.
General
L3Harris Technologies, Inc. is the Trusted Disruptor for the defense industry. With customers’ mission-critical
needs in mind, we deliver end-to-end technology solutions connecting the space, air, land, sea and cyber domains.
We support government customers in more than 100 countries, with our largest customers being various
departments and agencies of the U.S. Government and their prime contractors. Our products and services have
defense and civil government applications, as well as commercial applications.
Our fiscal year ends on the Friday nearest December 31. Each of our fiscal years ended December 29, 2023
(“fiscal 2023”), December 30, 2022 (“fiscal 2022”) and December 31, 2021 (“fiscal 2021”) included 52 weeks.
Unless the context otherwise requires, the terms “we,” “our,” “us,” “Company” and “L3Harris” as used in this
Report mean L3Harris Technologies, Inc. and its subsidiaries.
We structure our operations primarily around the products, systems and services we sell and the markets we
serve, and we report the financial results of our continuing operations in four operating segments, which are also our
reportable segments: Space & Airborne Systems (“SAS”); Integrated Mission Systems (“IMS”); Communication
Systems (“CS”); and Aerojet Rocketdyne (“AR”), established in connection with the fiscal 2023 acquisition of Aerojet
Rocketdyne Holdings, Inc. (“AJRD”), discussed further below. Throughout this form 10-K, we also refer to our
operating segments as our business segments. See Note 14: Business Segments in the Notes to Consolidated
Financial Statements in this Report (the “Notes”) for further information regarding our business segments, including
how we define segment operating income or loss.
Business Realignment. Effective for fiscal 2023, we adjusted our reporting to better align our businesses and
transferred our Agile Development Group (“ADG”) business from our IMS segment to our SAS segment. On October
1, 2023, we combined our Electronic Warfare sector and the majority of the ADG sector within our SAS segment to
_____________________________________________________________________
1
create a new sector, Advanced Combat Systems (“ACS”). The remaining portion of the ADG sector was combined
with our Space Systems sector within our SAS segment.
The historical results, discussion and presentation of our business segments as set forth in the accompanying
Consolidated Financial Statements and the Notes reflect the impact of these changes for all periods presented in
order to present segment information on a comparable basis. There is no impact on our previously reported
consolidated statements of operations, balance sheets, statements of cash flows or statements of equity resulting
from these changes. See Note 6: Goodwill and Intangible Assets and Note 14: Business Segments in the Notes for
further information.
Description of Business Segments
Our business segments provide a wide-range of products, systems and services to various customers and are
described below. For financial information with respect to our business segments, including revenue, operating
income and total assets, and with respect to our operations outside the United States, see Note 14: Business
Segments in the Notes, and for additional information with respect to our business segments, see “Discussion of
Business Segment Results of Operations” in “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations” of this Report. For a discussion of certain risks affecting our business segments,
including risks relating to our U.S. Government contracts and subcontracts, see “Item 1. Business - Government
Contracts,” “Item 1A. Risk Factors” and “Item 3. Legal Proceedings” of this Report.
SAS
SAS is a leading provider of full mission solutions as a prime and subsystem integrator in the space, airborne and
cyber domains. We provide top-tier capabilities in the design, development, integration, production and sustainment
of major weapons systems for defense primes and national security, civil government, and international customers
in the following business sectors:
Space Systems: End-to-end mission solutions in support of intelligence, surveillance and reconnaissance
(“ISR”); position, navigation and timing; weather and climate monitoring; missile defense and ground-based space
surveillance networks.
Intel & Cyber: Situational awareness, intelligence systems and advanced wireless solutions for classified
intelligence and defense customers.
Mission Avionics: Sensors, processors, hardened electronics, release systems and antennas for aircraft
platforms.
Mission Networks: Communications and networking solutions for air traffic management.
ACS: Threat warning and countermeasures for airborne, ground and maritime platforms. Also includes ADG, an
innovation accelerator and collaboration initiative established to rapidly address near-peer, national security
threats.
IMS
IMS is a leading provider of differentiated mission capabilities and prime systems integration for the air, land
and sea domains. We deliver top-tier capabilities in the design, development, integration, production, modernization
and sustainment of ISR, passive sensing and targeting, electronic attack, autonomy, power and communications,
networks and sensors for national security and international customers in the following business sectors:
ISR: Airborne passive sensing and targeting, mission systems development, integration and life-cycle
management for strategic reconnaissance, national command and control, tactical surveillance, electronic attack,
agile strike, mobility, and classified platforms.
Maritime: Passive sensing and targeting, autonomy and manned and unmanned teaming, power and
communications, undersea sensors and networks and classified capabilities for manned platforms and unmanned
surface and undersea vessels.
Electro Optical: Passive sensing and targeting; laser imaging and sensor systems; space communications and
avionics; and fuzing, navigation and range-testing solutions on platforms spanning all domains.
Commercial Aviation Solutions: Integrated aircraft avionics, pilot training and data analytics services for the
commercial aviation industry. On November 27, 2023, we announced that we entered into a definitive agreement to
sell Commercial Aviation Solutions (“CAS disposal group”). See Note 13: Acquisitions, Divestitures and Asset Sales in
the Notes for further information.
_____________________________________________________________________
2
CS
CS enables warfighters across all domains with solutions critical to mission success even in the most contested
environments. We are a leading provider of resilient communication solutions for the U.S. Department of Defense
(“DoD”), international, federal and state agency customers in the following business sectors:
Tactical Communications: Design, manufacture and sustainment of resilient and secure communication
solutions that include tactical radios, software, satellite terminals and end-to-end battlefield systems.
Broadband Communications: Design, manufacture and sustainment of resilient and secure communication
solutions that include ISR and tactical data links, software and integrated broadband networks. Includes the
operations of Tactical Data Links product line (“TDL”), acquired from Viasat, Inc. (“Viasat”) on January 3, 2023. See
Note 13: Acquisitions, Divestitures and Asset Sales in the Notes for further information.
Integrated Vision Solutions (“IVS”): Design, manufacture and sustainment of a full suite of helmet-mounted
integrated night vision goggles with leading-edge image intensifier tubes and weapon-mounted sights, aiming
lasers, and range finders.
Public Safety: State-of-art communication equipment, systems and applications for federal agencies, state and
local government first responders, utilities and transit agencies.
AR
On July 28, 2023, we acquired AJRD, a technology-based engineering and manufacturing company. AR is a
leading provider of propulsion, power and armament products and systems to U.S. government, including the DoD,
National Aeronautics and Space Administration (“NASA”) and major aerospace and defense prime contractors in the
following business sectors:
Missile Solutions: Propulsion technologies and armament systems for strategic defense, missile defense,
hypersonic and tactical systems.
Space Propulsion and Power Systems: Premier propulsion and power systems for national security, space and
exploration missions.
International Business
In fiscal 2023, revenue from products and services where the end consumer is located outside the U.S.,
including foreign military sales funded through the U.S. Government, whether directly or through prime contractors,
was $4.2 billion (21% of our revenue) and came from a large number of countries with no single foreign country
accounting for more than 5% of our total revenue. For financial information regarding our domestic and international
operations, including long-lived assets, see Note 14: Business Segments in the Notes.
The majority of our international marketing activities are conducted through subsidiaries that operate in the
Europe, Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”) regions and Canada. We also have established
international marketing organizations and several regional sales offices. For further information regarding our
international subsidiaries, see Exhibit 21 of this Report.
Competitive Conditions and Trends in Market Demand
We operate in highly-competitive markets that are sensitive to technological advances. Some of our competitors
in each of our markets are larger than we are and can maintain higher levels of expenditures for research and
development (“R&D”). We concentrate on the opportunities that we believe are compatible with our resources,
overall technological capabilities and objectives. Principal competitive factors are product and system quality and
reliability; technological capabilities; service; past performance; ability to develop and implement complex,
integrated solutions; ability to meet delivery schedules; and cost-effectiveness. We frequently “partner” or are
involved in subcontracting and teaming relationships with companies that are, from time to time, competitors on
other programs. We compete domestically and internationally against large defense companies; principally BAE
Systems, Boeing, General Dynamics, Lockheed Martin, Northrop Grumman, RTX; Thales; and non-traditional defense
contractors.
For further discussion of trends in market demand, see “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of this Report.
Backlog
Company-wide total backlog was $32.7 billion at December 29, 2023, inclusive of backlog from the acquisitions
of TDL and AJRD, compared with $22.3 billion at December 30, 2022. We expect to recognize approximately 40%
of the revenue associated with Company-wide total backlog by the end of 2024 and approximately 65% of the
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revenue associated with Company-wide total backlog by the end of 2025, with the remainder to be recognized
thereafter.
See Note 1: Significant Accounting Policies in the Notes for additional information regarding Company-wide total
backlog.
Research and Development
We conduct R&D activities using our own funds (company-funded R&D) and under contractual arrangements
(customer-funded R&D), such as designs. See Note 1: Significant Accounting Policies in the Notes for further
information on company-funded R&D.
Intellectual Property
We own a large portfolio of patents, trade secrets, know-how, confidential information, trademarks, copyrights
and other intellectual property and we routinely apply for new patents, trademarks and copyrights. We also license
intellectual property to and from third parties. For discussion of risks relating to intellectual property, see “Item 1A.
Risk Factors” of this Report. With regard to certain patents, the U.S. Government has an irrevocable, non-exclusive,
royalty-free license, pursuant to which the U.S. Government may use or authorize others to use the inventions
covered by such patents. Pursuant to similar arrangements, the U.S. Government may consent to our use of
inventions covered by patents owned by other persons. Numerous trademarks used on or in connection with our
products are also considered to be valuable assets.
Government Regulations
Our company is subject to various federal, state, local and international laws and regulations relating to the
development, manufacture, sale and distribution of our products and services, and it is our policy to comply with the
applicable laws in each jurisdiction in which we conduct business. Regulations include, but are not limited to, those
related to import and export controls, corruption, bribery, the protection of the environment, government
procurement, wireless communications, competition, product safety, workplace health and safety, employment,
labor and data privacy. The following describes significant regulations that may impact our businesses. For further
discussion of risks relating to government regulations, see “Item 1A. Risk Factors” of this Report.
Government Contracts. In fiscal 2023, the percentage of our revenue that was derived from sales to
U.S. Government customers, including foreign military sales funded through the U.S. Government, whether directly
or through prime contractors, was 76% and no other customer accounted for more than 5% of our revenue.
Additional information regarding customers for each of our segments is provided under “Item 1. Business —
Description of Business Segments” of this Report.
Cost-type contracts: Our U.S. Government cost-reimbursable contracts provide for the reimbursement of
allowable costs plus payment of a fee and fall into three basic types: (i) cost-plus fixed-fee contracts, which provide
for payment of a fixed fee irrespective of the final cost of performance; (ii) cost-plus incentive-fee contracts, which
provide for payment of a fee that may increase or decrease, within specified limits, based on actual results
compared with contractual targets relating to factors such as cost, performance and delivery schedule; and (iii) cost-
plus award-fee contracts, which provide for payment of an award fee determined at the customer’s discretion based
on our performance against pre-established performance criteria. Under our U.S. Government cost-reimbursable
contracts, we are reimbursed periodically for allowable costs and are paid a portion of the fee based on contract
progress. Some costs have been made partially or wholly unallowable for reimbursement by statute or regulation.
Examples include certain merger and acquisition costs, lobbying costs, charitable contributions, interest expense
and certain litigation defense costs.
Fixed-price contracts: Our U.S. Government fixed-price contracts are either firm fixed-price contracts or fixed-
price incentive contracts. Under our U.S. Government firm fixed-price contracts, we agree to perform a specific
scope of work or sell a specific product for a fixed price and, as a result, benefit from cost savings or carry the
burden of cost overruns. Under our U.S. Government fixed-price incentive contracts, we share with the
U.S. Government both savings accrued for performance at less than target cost as well as costs incurred in excess of
target cost up to a negotiated ceiling price, which is higher than the target cost, but carry the entire burden of costs
exceeding the negotiated ceiling price. Under such incentive contracts, profit may also be adjusted up or down
depending on whether specified performance objectives are met. Under our U.S. Government firm fixed-price and
fixed-price incentive contracts, we generally receive either milestone payments totaling 100% of the contract price
or monthly progress payments in amounts equaling 80% of costs incurred under the contract. The remaining
amounts, including profits or incentive fees, are billed upon delivery and final acceptance of end items and
deliverables under the contract.
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4
Our production contracts are mainly fixed-price contracts and development contracts are generally cost-
reimbursable contracts, although we have some fixed-price development contracts. Time-and-material contracts
are considered fixed-price contracts as they specify a fixed hourly rate for each labor hour charged.
For further discussion of risks relating to U.S. Government contracts, see “Item 1A. Risk Factors,” “Item 3.
Legal Proceedings” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” of this Report.
Environmental. Our operations are subject to and affected by U.S. federal, state, local and foreign laws and
regulations regarding discharge of materials into the environment or otherwise relating to the protection of the
environment. We have previously announced our environmental sustainability goals: to reduce greenhouse gas
(“GHG”) emissions by 30% and water usage by 20% from 2019 levels and achieve a 75% solid waste diversion rate
(away from landfills) by 2026. We invested in renewable energy and other solutions to achieve our GHG emission
reduction target and our other environmental sustainability goals. We took a step towards our goal by entering into a
virtual power purchase agreement, which has been operational since 2021. In 2023, we measured our performance
against these goals and exceeded our GHG emissions and water use reduction targets and are progressing towards
our solid waste diversion rate from landfill goal. Additional information is provided in our Sustainability Report,
which can be found on our Company website, and is not incorporated by reference into this Report.
We have incurred, and based on currently available information, we expect to continue to incur capital and
operating costs to comply with existing and pending environmental laws and regulations. See “Item 1A. Risk
Factors” and “Item 3. Legal Proceedings” of this Report and Note 1: Significant Accounting Policies and Note 15:
Legal Proceedings, Commitments and Contingencies in the Notes.
Materials, Suppliers and Seasonality
Because of the diversity of our products and services, as well as the wide geographic dispersion of our facilities,
we use numerous sources for the wide array of materials, such as electronic components, printed circuit boards,
metals and plastics needed for our operations and products. We depend on suppliers and subcontractors for a large
number of components and subsystems. For example, in our AR segment we are reliant on a limited number of
certified suppliers of cases and igniters, in part because of the extensive qualification and safety requirements on
explosive and missile-related components. We also rely on a limited number of certified microelectronics
component suppliers for our products. We have experienced component shortages from vendors as a result of
pandemics, natural disasters, or the shifting regulatory landscape. These events or regulations may cause a spike in
demand for certain electronic components, such as lead-free components, resulting in industry-wide supply chain
disruptions. For further discussion of risks relating to subcontractors and suppliers, see “Item 1A. Risk Factors” of
this Report.
We do not consider any material portion of our business to be seasonal. Various factors can affect the
distribution of our revenue between accounting periods, including the timing of contract awards and the timing and
availability of U.S. Government funding, as well as the timing of product deliveries and customer acceptance.
Human Capital
Our success depends on our highly-educated and skilled workforce. Attracting, developing, motivating and
retaining highly-skilled people, particularly those with technical, engineering and science backgrounds, is critical to
our ability to execute our strategic priorities. We use human capital measures to set goals and monitor performance
in several areas, including employee health and safety; talent acquisition, development and retention; and diversity,
equity and inclusion (“DE&I”).
Workforce Demographics. We had approximately 50,000 employees at December 29, 2023, including
approximately 20,000 engineers and scientists. Of our total employees, 89% are located in the U.S. and a significant
number of our employees possess a U.S. Government security clearance. As of December 29, 2023, approximately
2,800, or 6%, of our U.S. employees were covered by various collective bargaining agreements, which we expect will
be renegotiated as they expire, as we historically have done without significant disruption to operating activities.
Health and Safety. We prioritize the safety of our employees through maintaining a proactive safety culture and
implementing programs designed to eliminate workplace incidents, risks and hazards. Throughout the year, we
review and monitor our performance closely to reduce Occupational Safety and Health Administration reportable
incidents. With these efforts, in the last 3 years, we have reduced our total recordable injury rate (“TRIR”) and lost
day injury rate (“LDIR”) by 37% and 41%, respectively. For fiscal 2023, our TRIR declined by 24% and LDIR
declined by 29%, compared with the previous year, while numerous of our locations reached one year or more
without a recordable injury.
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Talent Acquisition, Development and Retention. Our talent strategy focuses on attracting new perspectives,
ideas and capabilities, recognizing and rewarding performance, and developing, engaging and retaining high-
performing employees. We strive to attract employees in all stages of their careers. In addition to hiring
approximately 6,400 new employees (excluding acquisition in fiscal 2023), we were recognized with more than 15
employer awards or recognitions from external organizations in fiscal 2023. Our development philosophy centers
around creating broad experiences, setting “SMART” (specific, measurable, achievable, realistic, and timely)
performance goals and offering continuous feedback and learning opportunities. We provide formal and informal
development aligned with individual learning styles including self-directed personal and professional development
through e-learning, books and videos; professional certification support; leadership development programs
developed in partnership with leading universities; rotational programs; and on-the-job learning. Annually and
quarterly, we assign learning content that supports our “e3” (excellence, everywhere, everyday) operating system,
Code of Conduct, ethical standards, compliance with laws applicable to our business and responsibility for safety
and environmental goals. We maintain a robust succession planning process whereby we regularly review our
internal talent pipeline and adjust individual development plans accordingly. We offer competitive salaries and
comprehensive benefit packages, including health care, retirement planning and employer retirement contributions,
educational assistance, child and elder back-up care, paid parental leave and a discretionary paid time off program.
In addition, we offer caregiver time-off and pre-retirement programs. Also, we have a robust and comprehensive
listening strategy centered around multiple employee surveys, enabling us to gain real-time insights into the
employee experience. By prioritizing engagement and utilizing the power of feedback, we continuously evolve our
workplace culture to ensure that individuals feel engaged, valued and inspired to perform at their best.
DE&I. Our success as the industry’s Trusted Disruptor depends on our ability to continue to innovate and
develop new solutions to solve our customers’ most critical challenges. We believe that having a strong, talented
workforce and culture with a diverse array of experiences, perspectives and backgrounds is essential to driving
innovation. We have established two clear long-term goals: half of our workforce will be female and at least one
third will be people of color. We progress toward these goals through growing diverse talent, enabling a culture of
inclusivity and equity, and ensuring we clearly communicate our DE&I efforts internally and externally. We support a
variety of science, technology, engineering and mathematics (“STEM”) initiatives to further develop our employees
and build talent pipelines within our communities. We also have an established diversity council, co-chaired by our
Chief Executive Officer (“CEO”) and comprised of employee resource group (“ERG”) leadership and executives from
across the Company, to evaluate and influence the strategies, policies and steps we take to advance DE&I. We now
offer eleven ERGs - adding two new groups this year - that bring together employees from all backgrounds to foster
professional development, community outreach and employee engagement opportunities. We also further develop
inclusive behaviors and culture through ongoing learning throughout the year, encouraging conversation and action
through initiatives like our annual “Day of Understanding” event, our “Six Signature Traits for Inclusive Leadership”
training and the launch of our new “DE&I Champions” program. Finally, we celebrate the unique voices of our
employees through our “I am L3Harris” and “Inclusive Leadership” internal communication series. We continue to
improve the diversity of our workforce and work toward our long-term goals.
The table below provides the makeup of our workforce at December 29, 2023:
Persons of color(1)
Female population(1)
Veterans(1)
Persons with disabilities(1)
Generational breakout(2):
Boomers (1945-1964)
Generation X (1965-1980)
Millennials (1981-1996)
Generation Z (after 1996)
Overall
29%
25%
16%
10%
21%
34%
36%
9%
Executive
18%
36%
15%
9%
20%
59%
21%
—%
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(1) Based on employee self-identification
(2) Age ranges align with Pew Research Center definitions.
Additional information regarding our human capital strategy is available in our DE&I Annual Report that can be
found on our company website. Information on our website, including our DE&I Annual Report, is not incorporated
by reference into this Report.
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Available Information
Our principal executive offices are located at 1025 West NASA Boulevard, Melbourne, Florida 32919. Our
website address is https://www.l3harris.com.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, current reports on Form 8-
K and amendments to such reports are available free of charge on our website https://www.l3harris.com/investors,
as soon as reasonably practicable after these reports are electronically filed with or furnished to the U.S. Securities
and Exchange Commission (“SEC”). We also will provide the reports in electronic or paper form, free of charge, upon
written request. Our website and the information posted thereon are not incorporated into this Report or any current
or other periodic report that we file with or furnish to the SEC.
ITEM 1A.
RISK FACTORS.
We have described many of the trends and other factors that we believe could impact our business and future
results in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this
Report. In addition, our business, financial condition, results of operations, cash flows and equity are subject to, and
could be materially adversely affected by, various risks and uncertainties, including, without limitation, those set
forth below, any one of which could cause our actual results to vary materially from recent results or our anticipated
future results.
Macroeconomic, Industry and Governmental Risks
We depend on winning business in competitive markets from U.S. Government customers for a significant
portion of our revenue. We are highly dependent on revenue from U.S. Government customers, primarily defense-
related programs with the DoD and a broad range of programs with the U.S. Intelligence Community and other
U.S. Government departments and agencies. The percentage of our revenue derived from sales to U.S. Government
customers, including foreign military sales funded through the U.S. Government, both directly and through prime
contractors, was 76% in fiscal 2023.
The market for sales to U.S. Government customers is highly competitive, and the U.S. Government often
chooses to use contractors other than us, for example, as part of competitive bidding processes (through which we
expect that a majority of the business we seek will be awarded), or otherwise due to our competitors’ ongoing
efforts to expand their business relationships with the U.S. Government. The U.S. Government has increasingly
relied on certain types of contracts that are subject to multiple competitive bidding processes, including multi-
vendor indefinite delivery, indefinite quantity (“IDIQ”), government-wide acquisition contracts (“GWACs”), General
Services Administration Schedules and other multi-award contracts, which has resulted in greater competition and
increased pricing pressure. Some of our competitors have greater financial resources than we do and may have
more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some
areas. We may not be able to continue to win competitively awarded contracts or to obtain task orders under multi-
award contracts. Further, competitive bidding processes involve significant cost and managerial time to prepare bids
and proposals for contracts that may not be awarded to us or may be split with competitors, and the risk that we
may fail to accurately estimate the resources and costs required to fulfill any contract awarded to us. For these
reasons and others, we may choose not to bid in certain competitive bidding processes, which would result in the
potential loss of opportunities. Additionally, bid protests from unsuccessful bidders can extend the time until work
on a contract can begin and may result in significant expense or delay, contract modification or contract rescission
as a result of our competitors protesting or challenging contracts awarded to us.
A reduction in U.S. Government funding or a change in U.S. Government spending priorities could have an
adverse impact on our business, financial condition, results of operations, cash flows and equity. Our U.S.
Government programs must compete with programs managed by other government contractors and with other
policy imperatives for consideration for limited resources and for uncertain levels of funding during the budget and
appropriations process. Although multi-year contracts may be authorized and appropriated in connection with major
procurements, Congress generally appropriates funds on a U.S. Government fiscal year (“GFY”) basis. Procurement
funds are typically made available for obligation over the course of one to three years. Consequently, programs often
initially receive only partial funding, and additional funds are obligated only as Congress authorizes further
appropriations.
We cannot predict the extent to which total funding and/or funding for individual programs will be included,
increased, or reduced as part of the annual appropriations process ultimately approved by Congress and the
President or in separate supplemental appropriations or continuing resolutions, as applicable. Budget and
appropriations decisions made by the U.S. Government are outside of our control and have long-term consequences
for our business. U.S. Government spending priorities and levels remain uncertain and difficult to predict and are
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affected by numerous factors, including the U.S. Government’s budget deficit and the national debt. A change in U.S.
Government spending priorities or an increase in non-procurement spending at the expense of our programs, or a
reduction in total U.S. Government spending on an absolute or inflation-adjusted basis, could have material adverse
consequences on our current or future business.
For GFY 2024, the federal government is currently being funded under a Continuing Resolution (“CR”). The CR
funds Agriculture, Energy-Water, Military-Construction-VA and Transportation-HUD through March 1, 2024 and the
other portions of the federal government, including the DoD, through March 8, 2024. This is the third CR in GFY2024.
Pursuant to the Fiscal Responsibility Act (P.L., 118-5), if a final GFY2024 appropriations bill is not enacted by April
30, 2024, then spending cuts would go into effect and discretionary spending limits would be revised to reflect GFY
2023 enacted levels for defense and nondefense categories and decrease by 1%. In addition, if Congress does not
enact a full-year GFY2024 appropriations bill, the U.S. Government may not be able to fulfill its funding obligations,
and there could be significant disruption to all discretionary programs and corresponding impacts on the entire
defense industry, which could adversely affect our business, results of operations, financial condition and cash flow.
Any inability of the U.S. Government to complete its budget process for any GFY and resulting operation on funding
levels equivalent to its prior fiscal year pursuant to a CR or shut down, also could have material adverse
consequences on our current or future business. For more information see “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations - U.S. and International Budget Environment” of this
Report.
Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and
time-and-material type contracts. Our fixed-price contracts, particularly those for development programs, could
subject us to losses in the event of cost overruns or a significant increase in or sustained period of increased
inflation. We generate revenue through various fixed-price, cost-plus and time-and-material contracts. For a general
description of our U.S. Government contracts and subcontracts, including a discussion of revenue generated
thereunder and of cost-reimbursable versus fixed-price contracts, see “Item 1. Business - Government Contracts”
of this Report. For a description of our revenue recognition policies, see “Item 7. Management’s Discussion and
Analysis of Financial Conditions and Results of Operations - Critical Accounting Estimates - Revenue Recognition” of
this Report.
In fiscal 2023, 73% of our revenue was derived from fixed-price contracts that allow us to benefit from cost
savings, but subject us to the risk of potential cost overruns, including due to greater than anticipated or a sustained
period of increased inflation or unexpected delays because we assume all of the cost burden. If our initial estimates
are incorrect, we can lose money (or make more or less money than estimated) on these contracts. Fixed-price
U.S. Government contracts can expose us to potentially large losses because the U.S. Government can hold us
responsible for completing a project or, in certain circumstances, paying the entire cost of its replacement by
another provider regardless of the size or foreseeability of any cost overruns that occur over the life of the contract.
In fiscal 2023, approximately 27% of our revenue was derived from cost-type contracts. Under cost-type
contracts, we agree to be reimbursed for allowable costs and paid a fee. When our costs are in excess of the final
target cost, fees and our margin may be adversely affected. If our costs exceed authorized contract funding or do not
qualify as allowable costs under applicable regulations, we will not be reimbursed for those costs. Cost overruns
may adversely affect our financial performance and our ability to win new contracts.
Contracts for development programs include complex design and technical requirements and are generally
contracted on a cost-reimbursable basis, however, some of our existing development programs are contracted on a
fixed-price basis or include cost-type contracting for the development phase with fixed-price production options.
Because many of these contracts involve new technologies and applications and can last for years, unforeseen
events, such as technological difficulties, fluctuations in the price of materials, a significant increase in or a
sustained period of increased inflation, problems with our suppliers, labor market conditions and cost overruns, can
result in the contractual price becoming less favorable or even unprofitable to us over-time (which, especially in the
case of sharp and significant sustained inflation, could happen quickly and have long lasting impacts), and increased
interest rates resulting from inflationary pressures can also impact the fair value of these contracts. Furthermore, if
we do not meet contract deadlines or specifications, we may need to renegotiate contracts on less favorable terms,
be forced to pay penalties or liquidated damages or suffer major losses if the customer exercises its right to
terminate. In addition, some of our contracts have provisions relating to cost controls and audit rights, and if we fail
to meet the terms specified in those contracts, we may not realize their full benefits. Cost overruns would adversely
impact our results of operations, which are dependent on our ability to maximize our earnings from our contracts,
and the potential risk would be greater if our contracts shifted toward a greater percentage of fixed-price contracts,
particularly firm fixed-price contracts, as opposed to cost-plus and time-and-material contracts.
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To the extent feasible, we have consistently followed the practice of contractually adjusting our prices to reflect
the impact of inflation on salaries and fringe benefits for employees and the cost of purchased materials and
services and in some cases seeking the inclusion of adjustment clauses to incorporate certain cost adjustments in
fixed-price contracts for unexpected inflation. However, our fixed-price contracts could subject us to losses in the
event of cost overruns or a significant increase in or a sustained period of increased inflation if these measures are
not effective.
Any or all of the foregoing could have a negative impact on our business, financial condition, results of
operations, cash flows and equity.
We depend significantly on U.S. Government contracts, which generally are subject to immediate termination
and heavily regulated and audited. The application or impact of regulations, unilateral government action,
termination or negative audit findings for one or more of these contracts could have an adverse impact on our
business, financial condition, results of operations, cash flows and equity. U.S. Government contracts also
generally are subject to U.S. Government oversight audits, which could result in adjustments to our contract costs.
Any costs found to be improperly allocated to a specific contract will not be reimbursed, and such costs already
reimbursed must be refunded. We have recorded contract revenue based on costs we expect to realize upon final
audit. However, we do not know the outcome of any future audits and adjustments, and we may be required to
materially reduce our revenue or profits upon completion and final negotiation of audits. Negative audit findings
could also result in termination of a contract, forfeiture of profits, suspension of payments, fines or suspension or
debarment from U.S. Government contracting or subcontracting for a period of time.
In addition, U.S. Government contracts generally contain provisions permitting termination, in whole or in part,
without prior notice at the U.S. Government’s convenience upon payment only for work done and commitments
made at the time of termination. For some contracts, we are a subcontractor and not the prime contractor, and in
those arrangements, the U.S. Government could terminate the prime contractor for convenience without regard for
our performance as a subcontractor. We may be unable to procure new contracts to offset revenue or backlog lost
as a result of any termination of our U.S. Government contracts. Because a significant portion of our revenue is
dependent on our performance and payment under our U.S. Government contracts, the loss of one or more large
contracts could have an adverse impact on our business, financial condition, results of operations, cash flows and
equity.
From time to time, we may begin performance of a U.S. Government contract under an undefinitized contract
action with a not-to-exceed price before the terms, specifications or price are finally agreed to between the parties.
In these arrangements, the U.S. Government has the ability to unilaterally definitize the contract if a mutual
agreement regarding terms, specifications and price cannot be reached. These uncertainties or loss of negotiating
leverage associated with long delays could have a material adverse impact on our business, financial condition,
results of operations, cash flows and equity.
Our U.S. Government business also is subject to specific procurement regulations and a variety of
socioeconomic and other requirements that, although customary in U.S. Government contracts, increase our
performance and compliance costs. These costs might increase in the future, thereby reducing our margins, which
could have an adverse effect on our business, financial condition, results of operations, cash flows and equity. In
addition, the U.S. Government has and may continue to implement initiatives focused on efficiencies, affordability
and cost growth and other changes to its procurement practices. These initiatives and changes to procurement
practices may change the way U.S. Government contracts are solicited, negotiated and managed, which may affect
whether and how we pursue opportunities to provide our products and services to the U.S. Government, including
the terms and conditions under which we do so, which may have an adverse impact on our business, financial
condition, results of operations, cash flows and equity. For example, contracts awarded under the DoD’s Other
Transaction Authority for research and prototypes generally require cost-sharing and may not follow, or may follow
only in part, standard U.S. Government contracting practices and terms, such as the Federal Acquisition Regulation
(“FAR”) and U.S. Government Cost Accounting Standards (“CAS”).
Failure to comply with applicable regulations and requirements could lead to fines, penalties, repayments or
compensatory or treble damages, or suspension or debarment from U.S. Government contracting or subcontracting
for a period of time. Among the causes for debarment are violations of various laws and regulations, including those
related to procurement integrity, export control (including International Traffic in Arms Regulations (“ITAR”)),
U.S. Government security, employment practices, protection of the environment, accuracy of records, proper
recording of costs and foreign corruption. The termination of a U.S. Government contract or relationship as a result
of any of these acts would have an adverse impact on our operations and could have an adverse effect on our
standing and eligibility for future U.S. Government contracts.
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We participate in markets that are often subject to uncertain economic conditions, which makes it difficult to
estimate growth in our markets and, as a result, future income and expenditures. We participate in U.S. and
international markets that are subject to uncertain economic conditions. In particular, U.S. federal, state and local
government spending priorities and levels remain uncertain and difficult to predict and are affected by numerous
factors. In addition, certain of our non-U.S. customers, including in the Middle East and other oil or natural gas-
producing countries, could be adversely affected by weakness or volatility in oil or natural gas prices, or negative
expectations about future prices or volatility or impacts of the war between Israel and Hamas, which could
adversely affect demand for our products, systems, services or technologies. As a result of that uncertainty, it is
difficult to develop accurate estimates of the level of growth in the markets we serve. Because those estimates
underpin all components of our budgeting and forecasting, our estimates or guidance for future revenue, income and
expenditures may be inaccurate, and we may make significant investments and expenditures but never realize the
anticipated benefits.
We cannot predict the consequences of future geo-political events, but they may adversely affect the markets in
which we operate, our ability to insure against risks, our operations or our profitability. Ongoing instability and
current conflicts in global markets, including in the Ukraine and Eastern Europe, Israel, the Gaza Strip and the
Middle East and Asia, and the potential for other conflicts and future terrorist activities and other recent geo-political
events throughout the world, including new or increased economic and trade sanctions, have created and may
continue to create economic and political uncertainties and impacts that could have a material adverse effect on our
business, operations and profitability. These types of matters cause uncertainty in financial and insurance markets
and may significantly increase the political, economic and social instability in the geographic areas in which we
operate.
Unfavorable credit conditions in financial markets outside of the U.S. could adversely affect the ability of our
international customers and suppliers to obtain financing and could result in a decrease in or cancellation of orders
for our products and services or impact the ability of our customers to make payments. These matters also may
cause us to experience increased costs, such as for insurance coverage and performance bonds (or for them to be
unavailable altogether), as well as difficulty with financing our operating, investing or financing (or refinancing)
activities.
We are subject to government investigations, which could have a material adverse effect on our business,
financial condition, results of operations, cash flows and equity. U.S. Government contractors are subject to
extensive legal and regulatory requirements, including ITAR and U.S. Foreign Corrupt Practices Act (“FCPA”), and
from time to time agencies of the U.S. Government investigate whether we have been and are operating in
accordance with these requirements. We may cooperate with the U.S. Government in those investigations. Under
U.S. Government regulations, an indictment of L3Harris by a federal grand jury, or an administrative finding against
us as to our present responsibility to be a U.S. Government contractor or subcontractor, could result in us being
suspended for a period of time from eligibility for awards of new government contracts or task orders or in a loss of
export privileges, which could have a material adverse effect on our business, financial condition, results of
operations, cash flows and equity. A conviction, or an administrative finding against us that satisfies the requisite
level of seriousness, could result in debarment from contracting with the U.S. Government for a specific term, which
could have a material adverse effect on our business, financial condition, results of operations, cash flows and
equity.
We derive a significant portion of our revenue from international operations and are subject to the risks of doing
business internationally. We are dependent on sales to customers outside the U.S. The percentage of our total
revenue represented by revenue from products and services where the end consumer is located outside the U.S.,
including foreign military sales funded through the U.S. Government, whether directly or through prime contractors,
was 21%, 23% and 22% in fiscal 2023, 2022 and 2021, respectively. In fiscal 2023, 45% of our international
business was transacted in local currency. We expect that international revenue will continue to account for a
significant portion of our total revenue. Also, a significant portion of our international revenue is from, and a
significant portion of our business activity is being conducted with or in, less-developed countries and sometimes
countries with unstable governments, or in areas of military conflict or at military installations. Other risks of doing
business internationally include:
•
•
•
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Laws, regulations and policies of foreign governments relating to investments and operations;
Unforeseen changes in export controls and other trade regulations;
Changes in regulatory requirements, including business or operating license requirements, currency
exchange controls or embargoes;
Uncertainties and restrictions concerning the availability of funding, credit or guarantees;
Risk of non-payment or delayed payment by non-U.S. customers;
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•
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Contractual obligations to non-U.S. customers that may include specific in-country purchases, investments,
manufacturing agreements or financial or other support obligations, known as offset obligations, that may
extend for years, require teaming with local companies and result in significant penalties if not satisfied;
Issues related to involving international dealers, distributors, sales representatives and consultants;
Difficulties of managing a geographically dispersed organization and culturally diverse workforces, including
compliance with local laws and practices;
Fluctuations of currency, currency revaluations, difficulties with repatriating cash generated or held abroad
in a tax-efficient manner and changes in tax laws;
Uncertainties as to local laws and enforcement of contract and intellectual property rights and occasional
requirements for onerous contract terms;
Changes in government, economic and political policies, political or civil unrest, acts of terrorism, threats of
international boycotts, U.S. anti-boycott legislation or sanctions against U.S. defense companies; and
Increased risk of an incident resulting in damage or destruction to our facilities or products or resulting in
injury or loss of life to our employees, subcontractors or other third parties.
Business and Operational Risks
We depend on our subcontractors and suppliers to provide materials, components, subsystems and services for
many of our products and services, and failures in or disruptions to our supply chain could cause our products and
or services to be produced or delivered in an untimely or unsatisfactory manner. Our ability to manufacture and
deliver products and services to our customers requires our U.S. and non-U.S. subcontractors and suppliers to
provide a variety of materials, components, subsystems and services. Some of our programs are very long duration
with complex re-qualification and we must ensure long term supply capacity of subcontractors and suppliers. In
some instances, we depend upon a single supplier for components, which adds risk because that supplier may at
times be unable to meet our needs and because we may have little negotiating leverage with sole-source suppliers.
Identifying and qualifying dual and second-source suppliers can be difficult, time consuming and may result in
increased costs. Any inability to timely develop cost-effective alternative sources of supply could materially impact
our ability to manufacture and deliver products and services to our customers.
In addition, we are required to procure certain materials and components, including certain microelectronic
components, from U.S. Government-approved supply sources. Certain heightened regulatory requirements that
may apply to these sources can further limit the subcontractors and suppliers we may utilize. Legislation, regulatory
changes or other governmental actions, including product certification or stewardship requirements, sourcing
restrictions, tariffs, embargos, product authenticity, cybersecurity regulation, and environmental standards (e.g.,
greenhouse gas emission limitations) may all impact our subcontractors and suppliers.
From time to time, as with any industry, our subcontractors and suppliers experience financial and operational
difficulties outside of our direct control, which may impact their ability to deliver the materials, components,
subsystems and services we need. The number of contracts where we act as a prime contractor (62% in 2023)
further increases our exposure to subcontractor and supplier failures and disruptions.
In recent years, global supply chains, including ours, have experienced significant disruption from material
availability and supplier performance, as well as extended lead times, pricing volatility, inflationary pressures and
labor issues. We and our subcontractors and suppliers have also experienced difficulties in the timely procurement
of necessary materials and components, including microelectronics. Current geopolitical conditions, including
sanctions and other trade restrictive activities and strained inter-country relations, have contributed to issues
procuring necessary materials and components. For example, some materials and components in our supply chain
have previously been sourced from areas now under sanctions or other trade restrictions, such as specialty metals
from Russia and certain equipment from China, or are currently sourced from areas which are at risk of sanctions or
other trade restrictive actions, not just by the United States but by other nations or groups, such as the European
Union.
All of these issues have led to significant supplier and subcontractor performance failures and delays, which
have negatively impacted our production flow, results of operations, financial condition and cash flows. For example,
in fiscal 2022 and to a lesser extent in fiscal 2023, revenue, operating income and orders in our CS segment were
adversely impacted by supply chain disruptions, although we implemented supply chain resiliency initiatives that
mitigated these disruptions during 2023. These efforts included leveraging our scale to better negotiate with our
suppliers, investing in tools and analytics to assess supplier risk, strengthening relationships with key suppliers and
entering into long-term strategic partnerships, seeking alternate supply sources and pursuing various cost
reductions. However, while we continuously work to implement supply chain resiliency initiatives such as these, we
cannot guarantee the success of any of these efforts. Material supply disruptions may still occur in the future,
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leading to untimely delivery or unsatisfactory quality of products and services, and potentially adversely affecting
our business, operational results, financial condition and cash flow.
We must attract and retain key employees, and any failure to do so could seriously harm us. Our future success
depends to a significant degree upon the continued contributions of our management and our ability to attract and
retain highly-qualified management and technical personnel, including engineers and employees who have U.S.
Government security clearances, particularly clearances of top secret and above. While we have robust processes in
place to ensure we have the right talent in place to meet our commitments, to the extent that the demand for
qualified personnel exceeds supply in certain areas, we could also experience higher labor, recruiting or training
costs in order to attract and retain such employees. Failure to attract and retain such personnel would damage our
future prospects and could adversely affect our ability to succeed in our human capital goals and priorities, as well
as negatively impact our business and operating results.
We could be negatively impacted by a security breach, through cyber-attack, cyber intrusion, insider threats or
otherwise, or other significant disruption of our Information Technology (“IT”) networks and related systems or of
those we operate for certain of our customers. We face the risk of a security breach, whether through cyber-attack,
cyber intrusion or insider threat via the Internet, malware, computer viruses, attachments to e-mails, persons inside
our organization or with access to systems inside our organization, subcontractors or suppliers, threats to the
physical security of our facilities and employees or other significant disruption of our IT networks and related
systems or those of our suppliers or subcontractors. We face an added risk of a security breach or other significant
disruption of the IT networks and related systems that we develop, install, operate and maintain on behalf of certain
customers, which may involve managing and protecting information relating to national security and other sensitive
government functions. The risk of a security breach or disruption, particularly through cyber-attack or cyber
intrusion, including by computer hackers, foreign governments and cyber terrorists, is persistent and substantial as
the volume, intensity and sophistication of attempted attacks, intrusions and threats from around the world remain
elevated and unlikely to diminish.
As an advanced technology-based solutions provider, and particularly as a government contractor with access to
national security or other sensitive government information, we face a heightened risk of a security breach or
disruption from threats to gain unauthorized access to our and our customers’ proprietary information on our IT
networks and related systems, our classified networks, and to the IT networks and related systems that we operate
and maintain for certain of our customers. These types of information and IT networks and related systems are
critical to the operation of our business and essential to our ability to perform day-to-day operations, and, in some
cases, are critical to the operations of certain of our customers. We make efforts to maintain the security and
integrity of these types of information and IT networks and related systems and have implemented various
measures to manage the risk of a security breach or disruption. See “Item 1C -Cybersecurity" in this Report for
further discussion of or risk management and strategy related to cybersecurity threats. Our efforts and measures
have not been entirely effective in the case of every cyber security incident, but no incident has had a material
negative impact on us to date. Even the most well-protected information, networks, systems and facilities remain
potentially vulnerable because attempted security breaches, particularly cyber-attacks and cyber intrusions, or
disruptions will occur in the future, and because the techniques used in such attempts are constantly evolving and
generally are not recognized until launched against a target, and in some cases are designed not to be detected and,
in fact, may not be detected. In some cases, the resources of foreign governments may be behind such attacks due
to the nature of our business and the industries in which we operate. Accordingly, we may be unable to anticipate
these techniques or to implement adequate security barriers or other preventative measures. Thus, it is impossible
for us to entirely mitigate this risk, and future cyber security incidents could have a material negative impact on us. A
security breach or other significant disruption involving these types of information and IT networks and related
systems could:
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Disrupt proper functioning of these networks and systems and, therefore, our operations and/or those of
certain of our customers;
Result in unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary,
confidential, sensitive or otherwise valuable information of ours, our customers or our employees, including
trade secrets, which could be used to compete against us or for disruptive, destructive or otherwise harmful
purposes and outcomes;
Compromise national security and other sensitive government functions;
Require significant management attention and resources to remedy damages that result;
Result in costs which exceed our insurance coverage and/or indemnification arrangements;
Subject us to claims for contract breach, damages, credits, penalties or termination; and
Damage our reputation with our customers and the general public.
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We must also rely on the safeguards put in place by customers, suppliers, vendors, subcontractors or other third
parties to minimize the impact of cyber threats, other security threats or business disruptions. These third parties
may have varying levels of cybersecurity expertise and safeguards, and their relationships with government
contractors, such as us, may increase their likelihood of being targeted by the same cyber threats we face. Our
commercial arrangements with these third parties include processes designed to require that the third parties and
their employees and agents agree to maintain certain standards for the storage, protection and transfer of
confidential, personal and proprietary information. However, we remain at risk of a data breach due to the
intentional or unintentional non-compliance by a third party’s employee or agent, the breakdown of a third party’s
data protection processes, which may not be as sophisticated as ours, or a cyber-attack on a third party’s
information network and systems.
Any or all of the foregoing could have a negative impact on our business, financial condition, results of
operations, cash flows and equity, reputation, ability to protect data, assets, and intellectual property, maintenance
of customer and vendor relationships, competitive posture, and could lead to litigation or regulatory investigations
or actions.
Our future success will depend on our ability to develop new products and services and technologies that
achieve market acceptance in our current and future markets. Our businesses are characterized by rapidly changing
technologies and evolving industry standards. To remain competitive, we need to continue to design, develop,
manufacture, assemble, test, market and support new products and services and technologies, which will require
the investment of significant financial resources. We have allocated substantial funds for such investments through
customer-funded and internal R&D, acquisitions or other teaming arrangements. This practice will continue to be
required, but we may not be able to successfully identify new opportunities and may not have the necessary
financial resources to develop new products and services and technologies in a timely or cost-effective manner.
Furthermore, the need to make these expenditures could divert our attention and resources from other projects, and
we cannot be sure that these expenditures ultimately will lead to the timely development of new products and
services or technologies. Due to the design complexity of some of our products and services and technologies, we
may experience delays in completing development and introducing new products and services or technologies in the
future. Any delays could result in increased costs of development or divert resources from other projects.
In addition, the markets for our products and services or technologies may not develop as we currently
anticipate, we may not be as successful in newly identified markets as we currently anticipate, and acquisitions,
joint ventures or other teaming arrangements we may enter into to pursue developing new products and services or
technologies may not be successful. Failure of our products and services or technologies to gain market acceptance
could significantly reduce our revenue and harm our business. Furthermore, competitors may develop competing
products and services or technologies that gain market acceptance in advance of our products and services or
technologies, or competitors may develop new products and services or technologies that cause our existing
products and services or technologies to become non-competitive or obsolete, which could adversely affect our
results of operations. The future direction of the domestic and global economies, including its impact on customer
demand, also will have a significant impact on our overall performance.
We have significant operations in locations that could be materially and adversely impacted in the event of a
natural disaster or other significant disruption. Our corporate headquarters and significant business operations are
located in Florida, which is subject to the risk of major hurricanes. Our worldwide operations and operations of our
suppliers and customers could be subject to natural disasters (including those as a result of climate change) or other
significant disruptions, including hurricanes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other
extreme weather conditions, epidemics, pandemics, acts of terrorism, power shortages and blackouts,
telecommunications failures and other natural and man-made disasters or disruptions. In the event of such a natural
disaster or other disruption, we could experience disruptions or interruptions to our operations or the operations of
our suppliers, subcontractors, distributors, resellers or customers, including inability of employees to work;
destruction of facilities; and/or loss of life, all of which could materially increase our costs and expenses, delay or
decrease orders and revenue from our customers and have a material adverse effect on the continuity of our
business and our business, financial condition, results of operations, cash flows and equity. Additionally, we could
incur significant costs to improve the climate-related resiliency of our infrastructure and supply chain and otherwise
prepare for, respond to and mitigate the effects of climate change.
With our acquisition of AJRD, there is risk of the release, unplanned ignition, explosion, or improper handling of
dangerous materials used in our business, which could disrupt our operations and adversely affect our financial
results. With our acquisition of AJRD, our business operations are subject to risk in connection with the handling,
production, and disposition of potentially explosive and ignitable energetic materials and other dangerous
chemicals, including motors and other materials used in rocket propulsion. The handling, production, transport, and
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disposition of hazardous materials could result in incidents that temporarily shut down or otherwise disrupt our
manufacturing operations and could cause production delays. A release of these chemicals or an unplanned ignition
or explosion could result in death or significant injuries to employees and others. Material property damage to us or
third parties could also occur.
The use of these products in applications by our customers could also result in liability if an explosion,
unplanned ignition or fire were to occur. Extensive regulations apply to the handling of explosive and energetic
materials, including but not limited to, regulations governing hazardous substances and hazardous waste. We
regularly review safety related to these products with our Board of Directors (“Board”). The failure to properly store
and ultimately dispose of such materials could create significant liability and/or result in regulatory sanctions. Any
release, unplanned ignition or explosion could expose us to adverse publicity or liability for damages or cause
production delays, any of which could have a material adverse effect on our business, financial condition, results of
operations, cash flows and equity.
Failure to achieve the expected results of LHX NeXt could adversely affect our future financial condition and
results of operations. In Fiscal 2023, we announced LHX NeXt, a targeted three-year program designed to enhance
organizational agility and performance by leveraging our scale and relationships across segments to drive
operational efficiency and competitiveness for the enterprise. There can be no assurances that the initiatives that
are part of LHX NeXt will achieve their desired results.
Financial Risks
Changes in estimates we use in accounting for many of our programs could adversely affect our future financial
condition and results of operations. Accounting for our contracts requires judgment relative to assessing risks,
including estimating contract revenue and costs and assumptions for schedule and technical issues. Due to the size
and nature of many of our contracts, the estimation of total revenue and cost at completion is complicated and
subject to many variables. For example, we must make assumptions regarding: (i) the nature and complexity of the
work to be performed; (ii) subcontractors’ and suppliers’ expected performance; (iii) availability and costs of labor,
materials, components subsystems and services (including expected increases in wages and prices); (iv) the length
of time to complete the contract; (v) the allocation of transaction price to one or more performance obligations
based on the products and services promised to the customer; (vi) incentives or penalties related to performance on
contracts in estimating revenue and profit rates, and recording them when there is sufficient information for us to
assess anticipated performance; and (vii) estimates of award fees in estimating revenue and profit rates based on
actual and anticipated awards.
Our gross margins and operating income can be adversely affected when estimated contract costs increase,
from our initial estimates (resulting in an Estimate At Completion (“EAC”) adjustment) especially without
comparable increases in revenue. There are many reasons estimated contract costs can increase, including: (i)
supply chain disruptions, inflation and labor issues; (ii) design or other development challenges; and (iii) program
execution challenges (including from technical or quality issues and other performance concerns). However,
because of the significance of the judgments and the difficulties inherent in estimating future costs, we cannot
guarantee that estimated revenues and contract costs will not change in the future. Any cost growth or changes in
estimated contract revenues and costs may adversely affect results of operations and financial condition. For
additional information regarding our critical accounting estimates applicable to our accounting for our contracts, see
“Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Critical
Accounting Estimates” of this Report.
Our level of indebtedness and our ability to make payments on or service our indebtedness and our unfunded
defined benefit plans liability may materially adversely affect our financial and operating activities or our ability to
incur additional debt. At December 29, 2023, we had $11.5 billion in aggregate principal amount of outstanding
debt and $227 million of unfunded defined benefit plan liabilities. Our ability to make payments on and to refinance
our current or future indebtedness, and our ability to make contributions to our unfunded defined benefit plans
liability, will depend on our ability to generate cash from operations, financings and investments, which may be
subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our
control.
If we are not able to repay or refinance our debt as it becomes due or make contributions to our unfunded
defined benefit plans liability, we may be forced to divest businesses, sell assets or take other disadvantageous
actions, including reducing financing for working capital, capital expenditures and general corporate purposes;
reducing our cash dividend rate and/or share repurchases; or dedicating an unsustainable level of our cash flow
from operations to the payment of principal and interest on our indebtedness. In addition, our ability to withstand
competitive pressures and to react to changes in the defense technology industry could be impaired. The lenders
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who hold such debt could also accelerate amounts due, which could potentially trigger a default or acceleration of
any of our other debt.
The level of returns on defined benefit plan assets, changes in interest rates and other factors could materially
adversely affect our financial condition, results of operations, cash flows and equity. A substantial portion of our
retired employee population and a portion of our current employee population are covered by defined benefit
pension and other postretirement defined benefit plans (collectively, “defined benefit plans”). We may experience
significant fluctuations in costs related to defined benefit plans as a result of macro-economic factors, such as
interest rates, that are beyond our control. The cost of our defined benefit plans is incurred over long periods of time
and involves various factors and uncertainties during those periods that can be volatile and unpredictable, including
the rates of return on defined benefit plan assets, discount rates used to calculate liabilities and expenses, mortality
of plan participants and trends for future medical costs. We develop our assumptions using relevant plan experience
and expectations in conjunction with market-related data. These assumptions and other actuarial assumptions may
change significantly due to changes in economic, legislative and/or demographic experience or circumstances.
Significant changes in key economic indicators, financial market volatility, future legislation and other governmental
regulatory actions could materially affect our financial condition, results of operations, cash flows and equity.
We will make contributions to fund our defined benefit plans when considered necessary or advantageous to do
so. The macro-economic factors discussed above, including the rates of return on defined benefit plan assets and
the minimum funding requirements established by government funding or taxing authorities, or established by other
agreement, may influence future funding requirements. A significant decline in the fair value of our plan assets, or
other adverse changes to our overall defined benefit plans, could require us to make significant funding
contributions and affect cash flows in future periods.
CAS governs the extent to which postretirement costs and plan contributions are allocable to and recoverable
under contracts with the U.S. Government. We expect to continue to seek reimbursement from the U.S. Government
for a portion of our postretirement costs and plan contributions; however, pension plan cost recoveries under our
U.S. Government contracts may occur in different periods from when those pension costs are recognized for
financial statement purposes or when pension funding is made. CAS rules have been revised to partially harmonize
the measurement and period of assignment of pension plan costs allocable to U.S. Government contracts and
minimum required contributions under the Employee Retirement Income Security Act of 1974, as amended,
(“ERISA”). However, there is still a lag between the time when we contribute cash to our plans under pension
funding rules and when we recover pension costs under CAS rules. These timing differences could have a material
adverse effect on our cash flows.
Legal, Tax and Regulatory Risks
Changes in our effective tax rate or additional tax exposures may have an adverse effect on our results of
operations and cash flows. We are subject to income taxes in the U.S. and numerous international jurisdictions.
There are transactions and calculations in the ordinary course of business where the application of tax law may be
uncertain, require significant judgment or be subject to differing interpretations.
Our worldwide income tax provision may be adversely affected by a number of factors, which include:
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Changes in domestic or international tax laws or the interpretation of such tax laws;
The jurisdictions in which profits are determined to be earned and taxed;
Adjustments to estimated taxes upon finalization of various tax returns;
Increases in expenses not fully deductible for tax purposes, including impairment of goodwill or other long-
term assets in connection with mergers or acquisitions;
Changes in available tax credits;
Changes in share-based compensation expense;
Changes in the valuation of our deferred tax assets and liabilities; and
The resolution of issues arising from tax audits with various tax authorities.
Any significant increase in our future effective tax rates could adversely impact our results of operations for
future periods.
We may not be successful in obtaining the necessary export licenses to conduct certain operations abroad, and
Congress may prevent proposed sales to certain foreign governments. We must first obtain export and other
licenses and authorizations from various U.S. Government agencies before we are permitted to sell certain products
and technologies outside of the U.S. For example, the U.S. Department of State must notify Congress at least 15 to
60 days, depending on the size and location of the proposed sale, prior to authorizing certain sales of defense
equipment and services to foreign governments. During that time, Congress may take action to block the proposed
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sale. We may be unsuccessful in obtaining necessary licenses or authorizations or Congress may prevent or delay
certain sales.
Our ability to obtain necessary licenses and authorizations timely or at all is subject to risks and uncertainties,
including changing U.S. Government policies or laws or delays in Congressional action due to geopolitical and other
factors. If we are not successful in obtaining or maintaining the necessary licenses or authorizations in a timely
manner, our sales relating to those approvals may be reversed, prevented or delayed, and any significant
impairment of our ability to sell products or technologies outside of the U.S. could negatively impact our business,
financial condition, results of operations, cash flows and equity.
Unforeseen environmental issues, including regulations related to GHG emissions or change in customer
sentiment related to environmental sustainability, could have a material adverse effect on our business, financial
condition, results of operations, cash flows and equity. Our operations are subject to various U.S. federal, state and
local, as well as certain foreign, environmental laws and regulations within the countries in which we operate
relating to the discharge, storage, treatment, handling, disposal and remediation of certain materials, substances
and wastes used in our operations. The real estate assets acquired as part of our acquisition of AJRD in particular
are subject to various risks, including that our reserves for estimated future environmental obligations may prove to
be insufficient, we may be unable to complete environmental remediation or, we may be unable to have state and
federal environmental restrictions on lifted. In addition, we could be affected by future environmental laws or
regulations, including, for example, new restrictions on materials used in our operations or claims asserted in
response to concerns over climate change, such as regulations related to GHG emissions, other aspects of the
environment or natural resources. Changes in government procurement laws that mandate or include climate
change considerations, such as the contractor’s GHG emissions, lower emission products or other climate risks, in
evaluating bids could result in costly changes to our operations or affect our competitiveness on future bids.
Compliance with current and future environmental laws and regulations may require significant operating and
capital costs. Environmental laws and regulations may institute substantial fines and criminal sanctions as well as
facility shutdowns to address violations and may require the installation of costly pollution control equipment or
operational changes to limit emissions or discharges. Our suppliers may face similar business interruptions and
incur additional costs that may increase the price of materials needed for manufacturing. We also incur, and expect
to continue to incur, costs to comply with current environmental laws and regulations related to remediation of
conditions in the environment. In addition, if violations of environmental laws result in us, or in one or more of our
operations, being identified as an excluded party in the U.S. Government’s System for Award Management, then we
or one or more of our operations would become ineligible to receive certain contracts, subcontracts and other
benefits from the federal government or to perform work under a government contract or subcontract. Generally,
such ineligibility would continue until the basis for the listing has been appropriately addressed. If our responses to
new or evolving legal and regulatory requirements or other sustainability concerns are unsuccessful or perceived as
inadequate for the U.S. or our international markets, we also may suffer damage to our reputation, which could
adversely affect our business. Developments such as the adoption of new environmental laws and regulations,
stricter enforcement of existing laws and regulations, violations by us of such laws and regulations, discovery of
previously unknown or more extensive contamination, litigation involving environmental impacts, our inability to
recover costs associated with any such developments under previously priced contracts or financial insolvency of
other responsible parties could have a material adverse effect on our business, financial condition, results of
operations, cash flows and equity.
Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents or
business partners. We have implemented compliance controls, training, policies and procedures designed to
prevent and detect reckless or criminal acts from being committed by our employees, agents or business partners
that would violate the laws of the jurisdictions in which we operate, including laws governing payments to
government officials, such as the FCPA, the protection of export-controlled or classified information, such as ITAR,
false claims, procurement integrity, cost accounting and billing, competition, information security and data privacy
and the terms of our contracts.
We cannot ensure, however, that our controls, training, policies and procedures will prevent or detect all such
reckless or criminal acts, and we have been adversely impacted by such acts in the past. If not prevented, such acts
could subject us to civil or criminal investigations, monetary and non-monetary penalties and suspension and
debarment by the U.S. Government and could have a material adverse effect on our business, results of operations
and reputation. In addition, misconduct involving data security lapses resulting in the compromise of personal
information or the improper use of our customers’ sensitive or classified information could result in remediation
costs, regulatory sanctions against us and serious harm to our reputation and could adversely impact our ability to
continue to contract with the U.S. Government.
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The outcome of litigation or arbitration in which we are involved from time to time is unpredictable, and an
adverse decision in any such matter could have a material adverse effect on our financial condition, results of
operations, cash flows and equity. The size, nature and complexity of our business make us susceptible to
investigations, claims, disputes, enforcement actions, litigation and other legal proceedings, particularly those
involving governments. From time to time, we are defendants in a number of litigation matters and are involved in a
number of arbitration matters. These actions may divert financial and management resources that would otherwise
be used to benefit our operations. The results of these or new matters may be unfavorable to us. Although we
maintain insurance policies, they may not be adequate to protect us from all material judgments and expenses
related to current or future claims and may not cover the conduct that is the subject of the litigation or arbitration.
Desired levels of insurance may not be available in the future at economical prices or at all. In addition, the results of
litigation or arbitration can be difficult to predict, including litigation involving jury trials. Accordingly, our current
judgment as to the likelihood of our loss (or our current estimate as to the potential range of loss, if applicable) with
respect to any particular litigation or arbitration matter may be wrong. A significant judgment or arbitration award
against us arising out of any of our current or future litigation or arbitration matters could have a material adverse
effect on our business, financial condition, results of operations, cash flows and equity.
Third parties have claimed in the past, and may claim in the future, that we are infringing directly or indirectly
upon their intellectual property rights, and third parties may infringe upon our intellectual property rights. Many of
the markets we serve are characterized by vigorous protection and pursuit of intellectual property rights, which
often has resulted in protracted and expensive litigation. Our efforts to gain awards of contracts and ensure a
competitive position in the market depends in part on our ability to ensure that our intellectual property is protected,
that our intellectual property rights are not diluted or subject to misuse, and that we are able to license certain third-
party intellectual property on reasonable terms. Third parties have claimed in the past, and may claim in the future,
that we are infringing directly or indirectly upon their intellectual property rights, and we may be found to be
infringing or to have infringed directly or indirectly upon those intellectual property rights. Claims of infringement
might also require us to enter into costly royalty or license agreements. Our patents and other intellectual property
may be challenged, invalidated, misappropriated or circumvented by third parties. Moreover, we may not be able to
obtain royalty or license agreements on terms acceptable to us, or at all.
We also may be subject to significant damages or injunctions against development and sale of certain of our
products, services and solutions. Our success depends in large part on our proprietary technology. We rely on a
combination of patents, copyrights, trademarks, trade secrets, know-how, confidentiality provisions and licensing
arrangements to establish and protect our intellectual property rights. In addition, the laws concerning intellectual
property vary among nations and the protection provided to our intellectual property by the laws and courts of
foreign nations may differ from those of the U.S. If we fail to successfully protect and enforce these rights, our
competitive position could suffer. Our pending patent and trademark registration applications may not be allowed,
or competitors may challenge the validity or scope of our patents or trademark registrations. In addition, our patents
may not provide us a significant competitive advantage. We may be required to spend significant resources to
monitor and enforce our intellectual property rights. Litigation to determine the scope of intellectual property rights,
even if ultimately successful, could be costly and could divert management’s attention away from other aspects of
our business. We may not be able to detect infringement, and our competitive position may be harmed before we do
so. In addition, competitors may design around our technology or develop competing technologies.
We face certain significant risk exposures and potential liabilities that may not be covered adequately by insurance
or indemnity. We are exposed to liabilities that are unique to the products and services we provide. A significant
portion of our business relates to designing, developing and manufacturing advanced defense, technology and
communications systems and products. New technologies associated with these systems and products may be
untested or unproven. Components of certain defense systems and products we develop are inherently dangerous.
Failures of satellites, missile systems, air traffic control systems, electronic warfare systems, space superiority
systems, command, control, computers, communications, cyber, ISR, homeland security applications and aircraft
have the potential to cause loss of life and extensive property damage. Other examples of unforeseen problems that
could result, either directly or indirectly, in the loss of life or property or otherwise negatively affect revenue and
profitability include loss on launch of spacecraft, premature failure of products that cannot be accessed for repair or
replacement, problems with quality and workmanship, country of origin, delivery of subcontractor components or
services and unplanned degradation of product performance. In addition, problems and delays in development or
delivery as a result of issues with respect to design, technology, licensing and patent rights, labor, learning curve
assumptions or materials and components could prevent us from achieving contractual requirements. In many
circumstances, we may receive indemnification from the U.S. Government. We generally do not receive
indemnification from foreign governments. Although we maintain insurance for certain risks, including certain
cybersecurity exposures, the amount of our insurance coverage may not be adequate to cover all claims or liabilities,
and we may be forced to bear substantial costs from an accident or incident. It also is not possible for us to obtain
_____________________________________________________________________
17
insurance to protect against all operational risks and liabilities. Substantial claims resulting from an incident in
excess of U.S. Government indemnity and our insurance coverage would harm our financial condition, results of
operations, cash flows and equity. Other factors that may affect revenue and profits include loss of follow-on work,
and, in the case of certain contracts, liquidated damages, penalties and repayment to the customer of contract cost
and fee payments we previously received. Moreover, any accident or incident for which we are liable, even if fully
insured, could negatively affect our standing with our customers and the public, thereby making it more difficult for
us to compete effectively, and could significantly impact the cost and availability of adequate insurance in the future.
Strategic Transactions and Investments Risks
Challenges arising from the expanded operations related to the acquisition of AJRD may affect our future
results. Our recent acquisitions have expanded the size and complexity of our business. Our future success
depends, in part, on the ability to integrate AJRD, and to anticipate and overcome challenges arising from the
expansion of our operations, including challenges related to expanded operations and new manufacturing processes
and products or services, and the associated costs and complexity. There can be no assurance that we will be able
to anticipate or overcome all of the challenges resulting from our expanding operations or that we will realize the
expected benefits of the acquisitions in the intended timeframe or at all, which may cause our future results to be
adversely affected.
Strategic transactions, including mergers, acquisitions and divestitures, involve significant risks and
uncertainties that could adversely affect our business, financial condition, results of operations, cash flows and
equity. Strategic mergers, acquisitions and divestitures we have made in the past and may make in the future
present significant risks and uncertainties that could adversely affect our business, financial condition, results of
operations, cash flows and equity, which include:
•
•
•
•
•
•
•
•
•
•
•
•
•
Difficulty in identifying and evaluating potential mergers and acquisitions, including the risk that our due
diligence does not identify or fully assess valuation issues, potential liabilities or other merger or acquisition
risks;
Difficulty, delays and expense in integrating newly merged or acquired businesses and operations, including
combining product and service offerings, and in entering into new markets in which we are not experienced,
in an efficient and cost-effective manner while maintaining adequate standards, controls and procedures,
and the risk that we encounter significant unanticipated costs or other problems associated with integration;
Differences in business backgrounds, corporate cultures and management philosophies that may delay
successful integration;
Difficulty, delays and expense in consolidating and rationalizing IT infrastructure, which may include
multiple legacy systems from various mergers and acquisitions and integrating software code;
Challenges in achieving strategic objectives, cost savings and other expected benefits;
Risk that our markets do not evolve as anticipated and that the strategic mergers, acquisitions and
divestitures do not prove to be those needed to be successful in those markets;
Risk that we assume or retain, or that companies we have merged with or acquired have assumed or
retained or otherwise become subject to, significant liabilities that exceed the limitations of any applicable
indemnification provisions or the financial resources of any indemnifying parties;
Risk that indemnification related to businesses divested or spun off that we may be required to provide or
otherwise bear may be significant and could negatively impact our business;
Risk that mergers, acquisitions, divestitures, spin offs and other strategic transactions fail to qualify for the
intended tax treatment for U.S. federal income tax purposes and the possibility that the full tax benefits
anticipated to result from such transactions may not be realized;
Risk that we are not able to complete strategic divestitures on satisfactory terms and conditions, including
non-competition arrangements applicable to certain of our business lines, or within expected timeframes;
Potential loss of key employees or customers of the businesses acquired or to be divested;
Risk of diverting the attention of senior management from our existing operations; and
Risk that we have a future impairment charge related to the acquired goodwill or other long-term assets.
Changes in future business or other market conditions could cause business investments and/or recorded
goodwill or other intangible assets to become impaired, resulting in substantial losses and write-downs that would
materially adversely affect our results of operations and financial condition. A significant portion of our assets
consist of goodwill and other intangible assets, primarily recorded as the result of acquisitions. Assumptions and
judgments in determining initial acquisition price may subsequently prove to have been inaccurate and unforeseen
issues could arise, which could adversely affect the anticipated returns or which are otherwise not recoverable as an
adjustment to the purchase price. We evaluate the recoverability of recorded goodwill annually, as well as when we
change reporting units (either as a result of a reorganization or as the result of divestiture activity) and when events
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18
or circumstances indicate there may be an impairment. If an impairment exists, we record the charge in the period
of determination. Because of the significance of our goodwill and other intangible assets, any future impairment of
these assets could have a material adverse effect on our results of operations and financial condition. For additional
information on our accounting policies related to impairment of goodwill, see our discussion under “Critical
Accounting Estimates” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” of this Report and Note 1: Significant Accounting Policies and Note 6: Goodwill and Intangible Assets in
the Notes.
ITEM 1B.
UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 1C.
CYBERSECURITY.
Risk Management and Strategy
We assess and identify material risks from cybersecurity threats primarily through the work of our Information
Security organization as part of our enterprise risk management (“ERM”) process. The ERM process, administered by
management with input from each business segment and function, continually monitors material risks facing
L3Harris, including cybersecurity threats. Our Chief Information Officer (“CIO”), has extensive experience leading
information technology for global organizations across aerospace, defense and industrials, works directly with our
CEO and other members of senior management to assess cybersecurity threats as part of the ERM process. The CIO
also oversees the internal cybersecurity organization of more than 100 full-time employees headed by our Chief
Information Security Officer (our “Cybersecurity Team”).
Risks related to cybersecurity threats are reflected in an enterprise risk “heat map,” along with other material
risks identified through the ERM process, and any mitigation plans developed to manage such risks are reported to
our Board. The “heat map” includes risks related to cybersecurity threats to L3Harris and our customers, suppliers,
vendors, subcontractors or other third parties, and the possibility of a data breach of our confidential, personal and
proprietary information through a cybersecurity incident impacting L3Harris or any third party. We could be
negatively impacted by a security breach, through cyber-attack, cyber intrusion, insider threats, supply chain
incidents, or otherwise, or other significant disruption of our IT networks and related systems or of those we operate
for certain of our customers. See “Item 1A - Risk Factors” in this Report for further discussion of specific risks
related to cybersecurity threats.
To actively manage cybersecurity risks identified as part of the ERM process or otherwise and to manage
emerging cybersecurity threats in real time, management has implemented an ISO 27001 certified Information
Security Management System. Our Cybersecurity Team operates a Security Operations Center that continuously
monitors activity, frequently scans applications and systems for vulnerabilities to risk from cybersecurity threats and
creates action plans to address and track identified cybersecurity threats until they have been remediated. Activities
and cybersecurity incidents are reported to our CIO, who briefs senior management, including our CEO, as well the
Innovation and Cyber Committee of our Board (the “Innovation and Cyber Committee”) and the Audit Committee of
our Board (the “Audit Committee”), as appropriate. Our Cybersecurity Team also routinely engages with third
parties, including government agencies focused on cyber resiliency, to manage risks from cybersecurity threats. For
example, we are members of the DoD Defense Industrial Base Collaborative Information Sharing Environment, the
National Defense Information Sharing and Analysis Center, and the National Security Agency Enduring Security
Framework. These organizations share real-time cybersecurity threat information and best practices in protecting,
detecting and recovering from cybersecurity threats.
We also have a counterintelligence and insider threat program to detect potential external and internal threats,
conducted by purposeful or unwitting actors. As a government contractor, we must comply with extensive
cybersecurity regulations, including the Defense Federal Acquisition Regulation Supplement (“DFARS”) related to
adequately safeguarding controlled unclassified information (“CUI”) and reporting cybersecurity incidents to the
DoD. The policies and implemented controls reflect our adherence to these requirements and have been assessed
by external organizations, including industry partners and the federal government.
To mitigate cybersecurity risk introduced from our supply chain, we have a dedicated Cybersecurity - Supply
Chain Risk Management team. This team assesses new suppliers against best cybersecurity practices, ensures
cybersecurity regulations are contractually obligated and coordinates mitigation actions across the company if a
supplier is impacted by a cybersecurity incident. They utilize industry monitoring services to identify potential supply
chain incidents and work closely with our Cybersecurity team to understand the latest threats affecting our industry.
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19
Additionally, as part of our processes to manage risks related to a breach in our information systems,
management requires employees to take annual cybersecurity training and shares regular awareness updates
regarding cybersecurity threats. Our Cybersecurity Team regularly tests employees throughout the year to assess
the effectiveness of the cybersecurity training. We also periodically conduct penetration testing of our network, hold
tabletop exercises of cyber incidents, and undertake cybersecurity assessments led by Internal Audit to improve our
risk mitigation and assist in the determination of a potential material impact caused by a cybersecurity incident.
Governance
The Audit Committee provides regular oversight and review of our ERM process and other guidelines and
policies governing the processes by which our CEO and senior management assess our exposure to risk, including
risk from cybersecurity threats. The Innovation and Cyber Committee receives regular briefings from our CIO, Chief
Information Security Officer and other members of senior management on cybersecurity threats and related matters
and assists the Audit Committee in its oversight and review of our ERM process.
The Innovation and Cyber Committee reviews our cybersecurity risk across the enterprise at least annually,
including IT, supply chain and products and our cybersecurity strategy framework and operational posture. The
Innovation and Cyber Committee also reviews our IT, data security and other systems, processes, policies,
procedures and controls at least annually to (a) identify, assess, monitor and mitigate cybersecurity risks; (b) identify
measures to protect and safeguard against cybersecurity threats and breaches of confidential information and data
and IT infrastructure and our other assets or assets of our customers or other third parties in our possession or
custody; (c) support the response and management of cybersecurity threats and data breach incidents; and (d) aid in
compliance with legal and regulatory requirements governing cybersecurity or data security reporting requirements.
The Innovation and Cyber Committee reports its activities to the full Board on a regular basis and makes such
recommendations to the Board and management with respect to risks from cybersecurity threats and other matters
as it deems necessary or appropriate.
ITEM 2.
PROPERTIES.
As of December 29, 2023, we operated approximately 300 locations in the U.S., Canada, EMEA, APAC and South
America, consisting of approximately 27 million square feet of manufacturing, administrative, R&D, warehousing,
engineering and office space, of which we owned approximately 12 million square feet and leased approximately 15
million square feet. As of December 29, 2023, we had major operations at the following locations:
SAS — Palm Bay, Melbourne and Malabar, Florida; Rochester and Amityville, New York; Clifton, New Jersey; Van
Nuys, San Diego, San Leandro and Menlo Park, California; Colorado Springs, Colorado; Herndon, Virginia; Fort
Wayne, Indiana; Wilmington, Massachusetts; and Alpharetta, Georgia.
IMS — Greenville, Waco, Rockwall and Plano, Texas; Mirabel and Waterdown, Canada; Camden, New Jersey;
Anaheim, California; Mason and Cincinnati, Ohio; Tulsa, Oklahoma; Salt Lake City, Utah; Philadelphia, Pennsylvania;
Crawley, United Kingdom; and Grand Rapids, Michigan.
CS — Salt Lake City, Utah; Rochester, New York; Londonderry, New Hampshire; Lynchburg, Virginia; Tempe,
Arizona; Carlsbad, California; Farnborough, United Kingdom; Brisbane, Australia; Sunrise, Florida; and Abu Dhabi,
United Arab Emirates.
AR — Camden, Arkansas; Chatsworth, California; Huntsville, Alabama; West Palm Beach, Florida; Orange,
Virginia; Redmond, Washington; Orlando, Florida; Hancock County, Mississippi; and Jonesborough, Tennessee.
Corporate — Melbourne, Florida; and Washington, D.C.
Our facilities are suitable and adequate for their intended purposes, are well-maintained, are generally in regular
use and have capacities adequate for current and projected needs. We will, from time to time, acquire additional
facilities, expand existing facilities and dispose of existing facilities or parts thereof, as management deems
necessary. See Note 5: Property, Plant and Equipment, Net and Note 11: Leases in the Notes for more information on
our owned properties and our lease obligations, respectively.
ITEM 3.
LEGAL PROCEEDINGS.
See Note 15: Legal Proceedings, Commitments and Contingencies included in our Notes for information relating
to our legal proceedings.
ITEM 4.
MINE SAFETY DISCLOSURES.
Not applicable.
_____________________________________________________________________
20
INFORMATION ABOUT OUR EXECUTIVE OFFICERS.
The name, age, position held with us and principal occupation and employment during at least the past
five years for each of our executive officers as of February 16, 2024 were as follows:
Name and Age
Position Currently Held and Past Business Experience
Kenneth L. Bedingfield, 51 Chief Financial Officer (“CFO”) since December 11, 2023. Before joining L3Harris, Mr.
Bedingfield worked at Epirus, Inc. (“Epirus”) as CEO from December 2022 to
December 2023, President and Chief Operating Officer from August 2022 to
December 2022, and as CFO from June 2020 to December 2022. Prior to Epirus, Mr.
Bedingfield worked at Northrop Grumman Corporation (“Northrop Grumman”) most
recently as CFO from 2015 to 2020, Aerospace Sector CFO from 2013 to 2015, and
Corporate Controller and Chief Accounting Officer from 2011 to 2013. Prior to
Northrop Grumman, Mr. Bedingfield spent 17 years at KPMG, serving as the Partner of
the Aerospace & Defense Audit Practice.
Samir B. Mehta, 51
Christopher E. Kubasik, 62 Chair and CEO since June 29, 2022. Vice Chair and CEO from June 29, 2021. Vice
Chair, President and Chief Operating Officer from June 29, 2019 to June 29, 2021.
Served with L3 Technologies, Inc. (“L3”), as Chairman, CEO and President from May
2018 to June 2019; as CEO and President from January 2018 to May 2018.
President, CS since January 2023. Before joining L3Harris, Mr. Mehta worked at
Collins Aerospace, a subsidiary of RTX, as President of Advanced Structures from
2018 to 2022 and President, Aftermarket from 2017 to 2018. Prior to RTX, Mr. Mehta
spent over 17 years with Sikorsky Aircraft, notably serving as President, Defense
Systems and Services.
Senior Vice President, General Counsel and Secretary since February 2013. General
Counsel since 2010 and Secretary since 2004. Mr. Mikuen joined L3Harris as finance
counsel in 1996.
Scott T. Mikuen, 62
Corliss J. Montesi, 59
Ross S. Niebergall, 60
Melanie Rakita, 46
Jonathan P. Rambeau, 51
Sean J. Stackley, 66
Edward J. Zoiss, 59
Vice President and Principal Accounting Officer since August 2021. Vice President,
Internal Audit from June 2020 to August 2021. Before joining L3Harris, Ms. Montesi
worked at Stanley Black and Decker as Vice President, Functional Transformation –
Shared Services from 2018 to 2019; and as Vice President, Corporate Controller from
2014 to 2018.
President, AR since July 2023. Vice President, AR Integration from March 2023 to
July 2023. Vice President and Chief Technology Officer from July 2017 to March
2023. Before joining L3Harris, Mr. Niebergall worked at RTX, for over 10 years,
notably serving as the Vice President and Deputy for Development Programs,
Engineering and Technology from 2016 to 2017 and CEO of Thales Raytheon Systems
from 2014 to 2016.
Vice President and Chief Human Resources Officer since April 2023. Vice President,
Human Resources for IMS from February 2023 to March 2023, for SAS from July
2019 to February 2023, and for Electronic Systems from February 2018 to June
2019. Vice President of Talent and Inclusion from February 2017 to February 2018.
Vice President, Critical Networks from November 2015 to February 2017. Before
joining L3Harris, Ms. Rakita worked for United Technologies Corporation from 2008 to
2015.
President, IMS since October 2022. Before joining L3Harris, Mr. Rambeau worked at
Lockheed Martin for 26 years, notably serving as Vice President and General Manager,
Integrated Warfare Systems and Sensors of the Rotary and Mission Systems business
from 2020 to 2022 and Vice President and General Manager, C6ISR, Rotary and
Mission Systems from 2016 to 2020.
Senior Vice President, Strategy & Growth since October 2022. President, IMS from
June 2019 to October 2022. Served with L3 as Senior Vice President and President of
Communications & Networked Systems Segment from September 2018 to June
2019; and as Corporate Vice President, Strategic Advance Programs and Technologies
from January 2018 to September 2018. Before joining L3 in January 2018, (Hon.) Mr.
Stackley spent four decades in public service, including a 27-year career with the U.S.
Navy, where he most recently was Acting Secretary of the Navy from January 2017 to
July 2017 and Secretary of the Navy for Research, Development and Acquisition from
2008 to 2017.
President, SAS since June 2019. President, Electronic Systems from July 2015 to
June 2019. Vice President and General Manager, Defense Programs, Government
Communications Systems from June 2013 to July 2015.
There is no family relationship between any of our executive officers or directors. All of our executive officers are
elected annually and serve at the pleasure of our Board.
_____________________________________________________________________
21
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock, par value $1.00 per share, is listed and traded on the New York Stock Exchange (“NYSE”),
under the ticker symbol “LHX.” According to the records of our transfer agent, as of February 9, 2024, there were
9,667 holders of record of our common stock.
Dividends
We paid per share cash dividends on our common stock of $1.14 each quarterly period of fiscal 2023, $1.12
each quarterly period of fiscal 2022 and $1.02 each quarterly period of fiscal 2021. Our annualized per share cash
dividend rate was $4.56 in fiscal 2023, $4.48 in fiscal 2022 and $4.08 in fiscal 2021. Quarterly cash dividends are
typically paid in March, June, September and December. We currently expect to continue paying cash dividends in
the near future, but we can give no assurances concerning payment of future dividends or future dividend increases.
The declaration of dividends by our Board and the amount thereof will depend on a number of factors, including our
financial condition, capital requirements, cash flows, results of operations, future business prospects and other
factors our Board may deem relevant.
L3Harris Stock Performance Graph
The following performance graph is not deemed to be filed with the SEC or subject to the liabilities of Section 18 of
the Exchange Act, and should not be deemed to be incorporated by reference into any other previous or future filings
by us under the Securities Act or the Exchange Act.
The performance graph and table below compare the fiscal year in the period ended June 28, 2019, the fiscal
transition period for the two quarters ended January 3, 2020, fiscal 2020, fiscal 2021, fiscal 2022 and fiscal 2023
cumulative total shareholder return (“TSR”) of our common stock (the common stock of Harris Corporation prior to
the L3Harris Merger on June 29, 2019, and the common stock of L3Harris Technologies, Inc. after the L3Harris
Merger) with the comparable cumulative total returns of the Standard & Poor’s 500 Composite Stock Index (“S&P
500”) and the Standard & Poor’s 500 Aerospace & Defense Index (“S&P 500 Aerospace & Defense”). The figures in
the performance graph below assume an initial investment of $100 at the close of business on June 29, 2018 in
L3Harris common stock, the S&P 500 and the S&P 500 Aerospace & Defense and the reinvestment of all dividends.
_____________________________________________________________________
22
COMPARISON OF THE FISCAL YEAR ENDED JUNE 28, 2019 (PRIOR TO THE L3HARRIS MERGER), THE
FISCAL TRANSITION PERIOD FOR THE TWO QUARTERS ENDED JANUARY 3, 2020, FISCAL 2020, FISCAL
2021, FISCAL 2022 AND FISCAL 2023 CUMULATIVE TOTAL RETURN AMONG L3HARRIS, S&P 500 AND S&P 500
AEROSPACE & DEFENSE
Recent Sales of Unregistered Securities
During fiscal 2023, we did not issue or sell any unregistered securities.
Issuer Purchases of Equity Securities
On January 28, 2021, we announced that our Board approved a $6.0 billion share repurchase authorization
under our repurchase program. On October 21, 2022, we announced that our Board approved an additional $3.0
billion share repurchase authorization that was in addition to the remaining unused authorization of 1.5 billion at
that time. Our repurchase program does not have an expiration date and authorizes us to repurchase shares of our
common stock through open market purchases, private transactions, transactions structured through investment
banking institutions or any combination thereof.
During fiscal 2023, we repurchased 2.5 million shares of our common stock under our share repurchase
program for $0.5 billion at an average share price of $204.38, excluding commissions of $0.02 per share. During
fiscal 2022, we repurchased 4.7 million shares of our common stock under our share repurchase program for $1.1
billion at an average share price of $231.44, excluding commissions of $0.02 per share. As of December 29, 2023,
the remaining unused authorization under our repurchase programs was $3.9 billion.
Employee transactions are represented by a combination of (a) shares of our common stock delivered to us in
satisfaction of the tax withholding obligation of holders of performance units, restricted units or restricted shares
that vested during the quarter and (b) performance units, restricted units or restricted shares returned to us upon
retirement or employment termination of employees. Our equity incentive plans provide that the value of shares
delivered to us to pay the exercise price of options or to cover tax withholding obligations shall be the closing price
of our common stock on the date the relevant transaction occurs.
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23
L3Harris S&P 500S&P 500 Aerospace & Defense June 29,2018June 28,2019January 3,2020January 1,2021December 31,2021December 30,2022December 29,2023$50$100$150$200$250 The following table sets forth information with respect to repurchases by us of our common stock during the
fiscal quarter ended December 29, 2023.
Period*
Month No. 1
(September 30, 2023 - October 27, 2023)
Repurchase program(1)
Employee transactions(2)
Month No. 2
(October 28, 2023 - November 24, 2023)
Repurchase program(1)
Employee transactions(2)
Month No. 3
(November 25, 2023 - December 29, 2023)
Repurchase program(1)
Employee transactions(2)
Total
Total number of
shares purchased
Average price
paid per share
Total number of
shares purchased
as part of publicly
announced plans
or programs(1)
Maximum
approximate
dollar value of shares
that may yet be
purchased under the
plans or programs(1)
($ in millions)
— $
20,761 $
—
171.09
— $
26,591 $
—
185.30
— $
9,314 $
56,666
—
200.54
—
—
—
—
—
—
—
$3,935
—
$3,935
—
$3,935
—
$3,935
_______________
*
(1) On October 21, 2022, we announced that our Board approved a $3 billion share repurchase authorization under our share repurchase
Periods represent our fiscal months.
program that was in addition to the remaining unused authorization of 1.5 billion at that time. Our repurchase program does not have an
expiration date and authorizes us to repurchase shares of our common stock through open market purchases, private transactions,
transactions structured through investment banking institutions or any combination thereof. As of December 29, 2023, the remaining
unused authorization under our repurchase programs was $3.9 billion (as reflected in the table above).
(2) Represents a combination of (a) shares of our common stock delivered to us in satisfaction of the tax withholding obligation of holders of
performance units or restricted units that vested during the quarter and (b) performance units or restricted units returned to us upon
retirement or employment termination of employees. Our equity incentive plans provide that the value of shares delivered to us to pay the
exercise price of options or to cover tax withholding obligations shall be the closing price of our common stock on the date the relevant
transaction occurs.
ITEM 6.
[RESERVED.]
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our
financial condition and results of operations for fiscal 2023 compared with fiscal 2022. A discussion of fiscal 2022
compared to fiscal 2021 can be found in Part II: Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended
December 30, 2022 (our “Fiscal 2022 Form 10-K”). This MD&A is provided as a supplement to, should be read in
conjunction with and is qualified in its entirety by reference to, our Consolidated Financial Statements and
accompanying Notes appearing elsewhere in this Report. Except for the historical information contained herein, the
discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results
could differ materially from those discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below in this MD&A under “Forward-Looking Statements and Factors
that May Affect Future Results.”
OVERVIEW
We are the Trusted Disruptor in the defense industry. With customers’ mission-critical needs in mind, we deliver
end-to-end technology solutions connecting the space, air, land, sea and cyber domains. We support government
customers in more than 100 countries, with our largest customers being various departments and agencies of the
U.S. Government and their prime contractors. Our products and services have defense and civil government
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24
applications, as well as commercial applications. As of December 29, 2023, we had approximately 50,000
employees, including approximately 20,000 engineers and scientists. We generally sell directly to our customers,
and we utilize agents and intermediaries to sell and market some products and services, especially in international
markets.
We structure our operations primarily around the products, systems and services we sell and the markets we
serve, and we report the financial results of our continuing operations in the four segments: SAS, IMS, CS and AR.
See Note 14: Business Segments in the Notes for further information regarding our business segments, including how
we define segment operating income or loss.
U.S. and International Budget Environment
Our largest customers are various departments and agencies of the U.S. Government — the percentage of our
revenue that was derived from sales to U.S. Government customers, including foreign military sales funded through
the U.S. Government, whether directly or through prime contractors, was 76%, 74% and 75%, in fiscal 2023, 2022
and 2021, respectively.
On December 29, 2022, the President signed the Consolidated Appropriations Act, 2023 (H.R. 2617 ) into law,
which provided $858 billion of national defense funding for the 2023 GFY, of which $816 billion was allotted to the
DoD. On March 13, 2023, the President’s Budget Request for GFY 2024 (“2024 PBR”) was released. The 2024 PBR
includes $842 billion for the DoD, a proposed increase of approximately 3% over the enacted GFY 2023 DoD budget.
Many of our offerings funded in the enacted GFY 2023 DoD budget are also supported by the 2024 PBR, including
responsive satellites, ISR aircraft, tactical communications and maritime solutions.
On June 3, 2023, the President signed into law the Fiscal Responsibility Act of 2023 (“FRA”), (P.L., 118-5) which
suspended the federal debt limit through January 1, 2025 and established new discretionary funding limits for
defense and non-defense accounts. The deal capped GFY 2024 national defense funding at $886 billion, including
$842 billion for the DoD specifically, and non-defense funding at $704 billion. The FRA includes a provision that
requires if a CR is in effect on January 1, 2024, for any discretionary account, the discretionary spending limits
would be revised to reflect GFY23 enacted levels for defense and nondefense, decreased by 1%. If a final GFY2024
appropriations bill is not enacted by April 30, the 1% spending cuts would go into effect.
On September 30, 2023, the President signed a short-term CR, funding the government for 48 days through
November 17, 2023. On November 17, 2023, the President signed a second CR into law. The second CR funded
some government agencies through January 19, 2024, and other agencies, including the DoD, through February 2,
2024. On January 19, 2024, the President signed a third CR into law extending government funding through March 1
and March 8, respectively. Congress must enact full-year GFY appropriations bills or another CR to fund the
government by those respective deadlines. While operating under a CR, government agencies are allocated a portion
of GFY 2023 enacted funds, and DoD is prohibited from starting new programs.
The overall defense spending environment, both in the U.S. and internationally, reflects the continued impacts of
the conflicts in Ukraine and geopolitical tensions across Asia and the Middle East, and changes to U.S. Government
or international spending priorities have and could in the future impact our business.
For a discussion of U.S. Government funding risks and international business risks see “Item 1. Business -
Government Contracts,” “Item 1. Business - International Business,” “Item 1A. Risk Factors” and “Item 3. Legal
Proceedings” of this Report.
Economic Environment
The macroeconomic environment continues to present challenges, which have impacted and may continue to
impact our future results. The ongoing uncertainty related to the impacts of inflation, as well as increased interest
rates, which raises the cost of borrowing for the federal government, could in the future impact U.S. Government
spending priorities and the demand for our products.
For a discussion of inflation-related risks, see “Item 1A. Risk Factors” of this Report.
Acquisitions and Pending Divestitures
TDL Product Line. On January 3, 2023, we completed the acquisition of TDL for a purchase price of $1,958
million. TDL is reported within our CS segment.
AJRD. On July 28, 2023, we completed the acquisition of AJRD for a total net purchase price of $4,715 million.
The operations of AJRD are reported in the newly established AR segment and in our corporate headquarters.
Pending Divestiture of CAS Disposal Group. On November 27, 2023, we announced that we entered into a
definitive agreement to sell our CAS disposal group, which is included in our IMS segment.
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25
See Note 13: Acquisitions, Divestitures and Asset Sales in the Notes for further information.
Operating Environment, Strategic Priorities and Key Performance Measures
The heightened geopolitical tensions worldwide emphasize the need for strengthened deterrence to support the
U.S. and its allies. With a national security, technology-focused portfolio, we are uniquely positioned to meet our
customers’ evolving needs across all domains and deliver advanced capabilities to support the U.S. and its allies.
Many of our offerings are supported in the 2024 GFY DoD budget, including responsive satellites, ISR aircraft,
tactical communications, networked maritime systems and classified cyber solutions. In fiscal 2023, we received
several key strategic contract awards across each of our domains, and we ended the year with backlog of $32.7
billion, a 47% increase over the prior year. Also in fiscal 2023, we invested $480 million (2% of total revenue) in
company-funded R&D focused on technologies that expand our capabilities across our domains.
As noted in the “Acquisitions and Pending Divestitures” section above, during fiscal 2023, we closed on two
acquisitions. The TDL acquisition provides us access to the Link 16 network and positions us to make the installed
base of terminals more resilient and relevant, consistent with joint all-domain command and control (“JADC2”)
modernization efforts. The AJRD acquisition provides access to new markets in missiles and missile defense as well
as space exploration.
This year, we embarked on the next phase of the L3Harris evolution, known as LHX NeXt, a targeted three-year
program designed to enhance organizational agility and performance by leveraging our scale and relationships
across segments, driving operational efficiency and competitiveness for the enterprise. With this program we are
investing in enterprise tools and optimized, revamped processes to unlock further opportunities for margin
expansion and create additional value for our shareholders.
Our strategic priorities continue to be performance, growth and innovation, with “Performance First” continuing
to be our primary focus. We plan to continue to invest, consistent with growth opportunities, and sustain our culture
of innovation, while delivering on our commitments to investors, our customers and on every contract we are
awarded. We intend to accomplish this by:
•
•
•
•
Relentlessly focusing on program execution and continuous improvement;
Strengthening the risk management culture that has developed over the highly volatile past three years;
Seamlessly integrating TDL and AJRD; and
Attracting, developing and retaining the skilled workforce key to our role as a Trusted Disruptor.
We use the following key financial performance measures to manage our business, which are discussed in detail
below in the “Operations Review” and “Liquidity and Capital Resources” sections of this MD&A:
Revenue;
•
• Operating income and margin; and
• Net cash provided by operating activities.
We also measure the success of our business using certain measures that are not defined by U.S. Generally
Accepted Accounting Principles (“GAAP”), such as adjusted segment operating income (defined as operating income
excluding certain corporate items and certain significant and/or nonrecurring items), earnings before interest and
taxes, non-GAAP earnings per share, free cash flow (defined as net cash provided by operating activities less
additions of property, plant and equipment net of proceeds from the sale of property, plant and equipment) and
return on invested capital (defined as after-tax operating income from continuing operations divided by the five-
point average of invested capital at the beginning and end of the period, where invested capital equals equity plus
debt, less cash and cash equivalents), which may be calculated differently by other companies. We use these
measures, along with our key financial performance measures above, to assess the success of our business and our
ability to create shareholder value. We believe these measures are balanced among long-term and short-term
performance, growth and innovation. We also use some of these and other performance metrics for executive
compensation purposes.
_____________________________________________________________________
26
OPERATIONS REVIEW
Consolidated Results of Operations
(Dollars in millions, except per share amounts)
Revenue
Cost of revenue
% of total revenue
Gross margin
% of total revenue
General and administrative expenses
% of total revenue
Asset group and business divestiture-related (losses) gains, net
Impairment of goodwill and other assets
Operating income
Non-service FAS pension income and other, net1
Interest expense, net
Income from continuing operations before income taxes
Income taxes
Effective tax rate
Net income
Noncontrolling interests, net of income taxes
Net income attributable to L3Harris Technologies, Inc.
% of total revenue
Net income from continuing operations per diluted common share attributable
to L3Harris Technologies, Inc common shareholders
$
$
_____
1“FAS” is defined as Financial Accounting Standards.
Revenue
Fiscal Year Ended
December 29, 2023 December 30, 2022
$
19,419
$
17,062
(14,306)
(12,135)
74 %
5,113
26 %
(3,262)
17 %
(51)
(374)
1,426
338
(543)
1,221
(23)
1.9 %
1,198
29
1,227
$
71 %
4,927
29 %
(3,006)
18 %
8
(802)
1,127
425
(279)
1,273
(212)
16.7 %
1,061
1
1,062
6 %
6 %
6.44
$
5.49
As described in more detail in Note 13: Acquisitions, Divestitures and Asset Sales and elsewhere in the Notes,
during fiscal 2023 and 2022, we completed certain asset group sales and business divestitures. There was no
significant revenue attributable to divested businesses.
Revenue for fiscal 2023 increased 14% compared with fiscal 2022 from the inclusion of $1,052 million of
revenue from the July 28, 2023 acquisition of AJRD, which is reported in our AR segment, and higher revenue in CS
of $853 million (including $365 million of revenue from the acquisition of TDL) and SAS of $472 million. See the
“Discussion of Business Segment Results of Operations” discussion below in this MD&A for further information.
Gross margin
Gross margin for fiscal 2023 increased compared to fiscal 2022, largely due to the increases in revenue noted
above, partially offset by an unfavorable net change in EAC adjustments which decreased gross margin by
$121 million and a higher mix of lower margin revenue, primarily in our CS segment. Gross margin as a percentage of
revenue decreased compared to fiscal 2022 from EAC adjustments and a higher mix of lower margin revenue,
primarily in our CS segment. For discussion of operating income by segment see the “Discussion of Business
Segment Results of Operations” below in this MD&A for further information.
_____________________________________________________________________
27
Segment Product and Service Analysis
The following tables present revenue and cost of revenue from products and services by segment.
(In millions)
Revenue
Products
Services
Intersegment
Total
Cost of revenue
Products
Services
Intersegment
Total
Revenue
Products
Services
Intersegment
Total
Cost of revenue
Products
Services
Intersegment
Total
_________________
SAS
IMS
CS
AR
Eliminations
Total
Fiscal Year Ended
December 29, 2023
$ 4,879 $ 4,006 $ 4,057 $
2,537
87
1,928
49
960
53
752 $
300
—
$ 6,856 $ 6,630 $ 5,070 $ 1,052 $
— $ 13,694
5,725
—
(189)
—
(189) $ 19,419
$ 3,777 $ 3,055 $ 2,319 $
1,944
87
1,554
49
845
53
$ 5,380 $ 5,086 $ 3,217 $
558 $
259
—
817 $
2
(7)
(189)
(194)
9,711
4,595
—
14,306
Fiscal Year Ended
December 30, 2022
SAS
IMS
CS
AR
Eliminations
Total
$ 4,574 $ 4,152 $ 3,370
802
45
2,403
71
1,761
49
$ 6,384 $ 6,626 $ 4,217 $
$ 3,397 $ 3,008 $ 1,953
600
45
1,814
71
1,364
49
** $
**
**
— $
— $ 12,097
4,965
—
—
(165)
(165) $ 17,062
** $
**
**
(3) $ 8,355
3,780
—
2
(165)
$ 4,810 $ 4,893 $ 2,598 $
—
$
(166) $ 12,135
** AR is a new reportable segment established in the quarter ended September 29, 2023 which consists of the operations assumed in the AJRD
acquisition. As such, there is no comparable prior year information.
Products revenue. Products revenue increased $1,598 million, from the inclusion of $752 million of products
revenue from AR, as well as increases of $687 million at CS, primarily from the inclusion of TDL, and of $305 million
at SAS, respectively. Such increases were partially offset by a decrease of $146 million at IMS.
Cost of product revenue. Cost of product revenue increased $1,356 million, primarily from the inclusion of $558
million of cost of product revenue from AR and an increase of $366 million at CS, in line with the increase in product
revenue and primarily from the inclusion of TDL. The increase was also attributable to an increase in cost of product
revenue of $380 million at SAS, primarily from an increase in products revenue in Space Systems and $47 million at
IMS.
Services revenue. Services revenue increased $759 million, from the inclusion of $300 million of services
revenue from AR, as well as increases of $167 million at SAS, $158 million at CS, primarily from the inclusion of TDL,
and $134 million at IMS.
Cost of services revenue. Cost of services revenue increased $815 million, primarily from the inclusion of $259
million of cost of services revenue from AR and an increase of $245 million, higher costs of services revenue at CS
primarily from the inclusion of TDL, and $190 million and $130 million higher costs of services revenue at SAS and
IMS respectively, primarily due to a larger volume of lower margin service sales.
_____________________________________________________________________
28
General and administrative expenses
Major components of General and administrative expenses (“G&A”) were as follows:
(In millions)
Amortization of acquisition-related intangibles
Company-funded R&D costs
Merger, acquisition, and divestiture related expenses
LHX NeXt(1)
Selling and marketing
Other G&A expenses(2)
Total G&A expenses
Fiscal Year Ended
December 29, 2023 December 30, 2022
$
$
(687) $
(480)
(174)
(115)
(450)
(1,356)
(3,262) $
(532)
(603)
(162)
—
(483)
(1,226)
(3,006)
______________
(1) Costs associated with transforming multiple functions, systems and processes to increase agility and competitiveness, including third-party
consulting, workforce optimization and incremental IT expenses for implementation of new systems.
(2) Other G&A expenses primarily includes unallocated corporate expenses and segment G&A expense.
In fiscal 2023, G&A expenses increased due to the inclusion of costs from our LHX NeXt initiative, as discussed
in more detail under the “Operating Environment, Strategic Priorities and Key Performance Measures” section above
in this MD&A, as well as increases in amortization of acquisition-related intangibles and an increase in Other G&A
expenses as described below. Such increases were partially offset by a decrease in R&D costs and decreases from
charges for severance and other termination costs and charges related to an additional pre-merger legal
contingency that occurred in fiscal 2022.
For fiscal 2023, the increase in other G&A expenses of $190 million is attributable to increases of $39 million at
our CS segment, partially from the inclusion of TDL and $16 million at our IMS segment, as well as the inclusion of
approximately $75 million of other G&A expenses in our new AR segment, partially offset by a decrease in other
G&A expenses in our SAS segment of $8 million. The remaining amount is attributable to an increase in corporate
other G&A expenses and eliminations.
Asset group and business divestiture-related (losses) gains, net
During fiscal 2023, pre-tax losses, net, consist of a $77 million loss associated with the pending divestiture of
the CAS disposal group within the IMS segment, partially offset by a $26 million pre-tax gain recognized on
divestiture of our Visual Information Solutions (“VIS”) business from our SAS segment.
During fiscal 2022, we completed one business divestiture and one asset sale from our IMS segment and
recognized a pre-tax gain of $8 million associated with the asset sale. See Note 13: Acquisitions, Divestitures and
Asset Sales in the Notes for further information.
Impairment of goodwill and other assets
Impairment of goodwill and other assets consisted of the following non-cash charges:
(In millions)
Goodwill:(1)
IMS
CS
SAS
Total impairment of goodwill
Other assets:
Impairment of customer contracts
Facility closure
In-process R&D impairment(1)
Total impairment of other assets
Total impairment of goodwill and other assets
Fiscal Year Ended
December 29, 2023 December 30, 2022
$
$
$
$
296 $
—
—
296 $
48
9
21
78 $
374 $
367
355
80
802
—
—
—
—
802
_____________________________________________________________________
29
______________
(1)
See Note 6: Goodwill and Intangible Assets in the Notes for further information.
Non-service FAS pension income and other, net
Included in this caption is non-service FAS pension income and other non-operating income and expenses.
Non-service FAS pension income of $310 million in fiscal 2023 decreased $131 million compared with fiscal 2022
primarily due to the $170 million increase in interest cost due to a higher discount rate in fiscal 2023, partially offset
by a $31 million increase in amortization of net actuarial gains. Other non-operating income, net of $28 million in
fiscal 2023 increased $44 million from non-operating expense, net of $16 million in fiscal 2022 primarily from
changes in the market value of our rabbi trust assets, gains and losses on our equity investments in nonconsolidated
affiliates and royalty income.
See Note 9: Retirement Benefits in the Notes for more information on the composition of non-service cost
components of FAS pension and other postretirement benefits (“OPEB”) income and expense.
Interest expense, net
Our net interest expense increased in fiscal 2023 compared with fiscal 2022 primarily due to interest expense of
$207 million on the $5.5 billion of long-term debt issued in fiscal 2023 and $69 million increase in interest expense
on outstanding notes under our commercial paper program (“CP Program”) during fiscal 2023, both of which were
primarily due to the acquisitions of TDL and AJRD. See Note 8: Debt and Credit Arrangements in the Notes for further
information.
Income taxes
Our effective tax rate (income taxes as a percentage of income from continuing operations before income taxes)
was 1.9% in fiscal 2023 compared with 16.7% in fiscal 2022. The decrease was primarily attributable to favorable
impacts of divestitures and internal restructuring and the reduction of unfavorable non-deductible goodwill
impairments experienced in fiscal 2022. See Note 7: Income Taxes in the Notes for further information.
Net income per common share attributable to L3Harris Technologies, Inc. common shareholders
The increase in income from continuing operations per diluted common share attributable to L3Harris common
shareholders in fiscal 2023 compared with fiscal 2022 was primarily due to higher net income and fewer diluted
weighted average common shares outstanding, primarily reflecting the repurchases of our common stock under our
share repurchase program during fiscal 2023. See the “Common Stock Repurchases” discussion below in this MD&A
for further information.
Discussion of Business Segment Results of Operations
Effective for fiscal 2023, we adjusted our reporting to better align our businesses and transferred our ADG
business from our IMS segment to our SAS segment. Additionally, upon completion of the AJRD acquisition on
July 28, 2023, we established a new reportable segment, AR.
The historical results, discussion and presentation of our business segments as set forth in this MD&A reflect the
impact of these changes for all periods presented in order to present segment information on a comparable basis.
There is no impact on our previously reported consolidated statements of operations, balance sheets, statements of
cash flows or statements of equity resulting from these changes.
SAS Segment
Our SAS segment includes space payloads, sensors and full-mission solutions; classified intelligence and cyber;
avionics; electronic warfare; and mission networks for air traffic management operations. See “Item 1: Business” of
this Report for a description of the sectors in SAS.
(Dollars in millions)
Revenue
Operating income
Operating margin
Fiscal Year Ended
December 29, 2023 December 30, 2022 % Inc/(Dec)
$
$
6,856
756
11.0 %
6,384
665
10.4 %
7%
14%
The increase in SAS revenue in fiscal 2023 compared with fiscal 2022 was primarily due to higher revenue of
$445 million from program growth in Space Systems, Mission Networks and Intel and Cyber.
_____________________________________________________________________
30
The increases in SAS operating income and operating margin in fiscal 2023 compared with fiscal 2022 were
primarily due to higher volume, $66 million of lower R&D expenses, $53 million of lower non-cash charges for
impairment of goodwill and other assets, lower overhead costs and favorable mix in Space Systems due to a non-
recurring license sale during fiscal 2023. Such increases were partially offset by $40 million change in EAC
adjustments from program execution during fiscal 2023.
IMS Segment
Our IMS segment includes ISR; passive sensing and targeting; electronic attack; autonomy; power and
communications; networks; sensors; aviation products; and pilot training operations. See “Item 1: Business” of this
Report for a description of the sectors in IMS.
(Dollars in millions)
Revenue
Operating income
Operating margin
Fiscal Year Ended
December 29, 2023
December 30, 2022 % Inc/(Dec)
$
$
6,630
459
6.9 %
6,626
494
7.5 %
—%
(7%)
The flat IMS revenue in fiscal 2023 compared with fiscal 2022 was primarily due to lower revenue of $179
million in ISR largely from lower aircraft missionization volume, offset by higher revenues of $69 million in Electro
Optical from higher volume in space and sensors, $63 million in Maritime largely from volume in classified programs,
power and energy solutions and international and $61 million in Commercial Aviation Solutions from volume.
The decrease in IMS operating income and operating margin in fiscal 2023 compared with fiscal 2022 were
primarily due to a net change in EAC adjustments of $103 million, principally in ISR and in Maritime from net
unfavorable EAC adjustments in fiscal 2023 due to program execution, and the sale of $33 million of end-of-life
inventory in Commercial Aviation Systems during fiscal 2022. Such decreases were partially offset by $64 million of
lower R&D expenses and $59 million of lower non-cash charges for impairment of goodwill and other assets in fiscal
2023.
CS Segment
Our CS segment includes tactical communications with global communications solutions; broadband
communications; integrated vision solutions; and public safety radios, system applications and equipment. See
“Item 1: Business” of this Report for a description of the sectors in CS.
(Dollars in millions)
Revenue
Operating income
Operating margin
Fiscal Year Ended
December 29, 2023 December 30, 2022 % Inc/(Dec)
$
$
5,070
1,229
24.2 %
4,217
667
15.8 %
20%
84%
The increase in CS revenue in fiscal 2023 compared with fiscal 2022 was primarily due to higher revenue of
$464 million in Broadband Communications, from the inclusion of $365 million of revenue from the acquisition of
TDL and higher volume on legacy Broadband Communications platforms and $318 million in Tactical
Communications and $83 million in Public Safety, both from increased demand and improved electronic component
availability.
The increases in CS operating income and operating margin in fiscal 2023 compared with fiscal 2022 were
primarily due to higher volume during fiscal 2023, including operating income of $131 million from the TDL
acquisition and absence of a $355 million non-cash charge for impairment of goodwill recorded in our Broadband
reporting unit in fiscal 2022. The increase in CS operating margin was partially offset by a higher mix of lower margin
revenue, principally in Public Safety and IVS.
AR Segment
Our AR segment includes missile solutions with propulsion technologies for strategic defense, missile defense,
and hypersonic and tactical systems; and space propulsion and power systems for national security space and
exploration missions. See “Item 1: Business” of this Report for a description of the sectors in AR. AR is a new
reportable segment established in the quarter ended September 29, 2023 and as such, there is no comparable prior
_____________________________________________________________________
31
year information.
(Dollars in millions)
Revenue
Operating income
Operating margin
Fiscal Year Ended
December 29, 2023
$
1,052
122
11.6 %
Fiscal 2023 results were driven by program performance across Missile Solutions and Space Propulsion and
Power Systems portfolios from the July 28, 2023 acquisition date through December 29, 2023. Operating income
was impacted by operational inefficiencies, partially offset by integration benefits recognized in fiscal 2023.
Unallocated Corporate Expenses
(Dollars in millions)
Total unallocated corporate expense
Fiscal Year Ended
December 29, 2023 December 30, 2022
$
(1,140) $
(699)
Total unallocated corporate expense includes the portion of corporate costs not included in management’s
evaluation of segment operating performance. Unallocated corporate expenses increased $441 million in fiscal
2023 compared with fiscal 2022, primarily from an increase of $174 million of amortization of acquisition-related
intangibles related to the inclusion of TDL and AJRD, the inclusion of $115 million of LHX NeXt related
implementation costs (see discussion under “LHX NeXt implementation costs” below), higher asset group and
business divestiture-related losses of $59 million and a $42 million expense during fiscal 2023 compared with
$29 million of income during fiscal 2022 related to our deferred compensation plans.
LHX NeXt implementation costs. LHX NeXt is our initiative to transform multiple functions, systems and
processes to increase agility and competitiveness. Costs related to the LHX NeXt effort are expected to continue
through 2025, and are expected to include workforce optimization costs, incremental IT expenses for
implementation of new systems, third-party consulting expenses and other related costs.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL STRATEGIES
We prioritize cash flow generation through our commitment to operational excellence, efficient balance sheet
management and continuous cost reduction efforts. We consistently assess various capital deployment options,
considering both our long-term outlook and the evolving market conditions, recognizing the importance of
adaptability as market dynamics change over time.
Our primary capital deployment priorities involve a focus on funding the business, debt repayment to be
achieved through the prioritization of capital allocation, potentially accelerated with proceeds from non-core asset
divestitures, and returning cash to our shareholders through dividends and share repurchases.
As of December 29, 2023, we had cash and cash equivalents of $560 million, of which $343 million was held by
our foreign subsidiaries, a significant portion of which we believe can be repatriated to the U.S. with minimal tax
cost. Additionally, we have two credit facilities and a commercial paper program. See the “Capital Structure and
Resources” discussion below in this MD&A for further information about our credit facilities and CP Program.
_____________________________________________________________________
32
Cash Flows
(In millions)
Cash and cash equivalents, beginning of period
Operating Activities:
Net income
Non-cash adjustments
Changes in working capital
Other, net
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents, end of period
Fiscal Year Ended
December 29, 2023 December 30, 2022
$
880 $
941
1,198
1,213
286
(601)
2,096 $
(7,021)
4,594
11
(320) $
560 $
1,061
1,066
(196)
227
2,158
(250)
(1,951)
(18)
(61)
880
$
$
$
Net cash provided by operating activities: The $62 million decrease in net cash provided by operating activities
in fiscal 2023 compared with fiscal 2022 was primarily due to increases in payments of income taxes of
$406 million and interest of $193 million on the $2.25 billion, three-year senior unsecured term loan facility (“Term
Loan 2025”), the $3.25 billion aggregate principal amount of new long-term fixed-rate debt consisting of the 5.4%
2027 Notes, the 5.4% 2033 Notes and the 5.6% 2053 Notes (collectively, the “AJRD Notes”) and our CP Program,
partially offset by less cash used to fund net working capital (i.e., receivables, contract assets, inventories, accounts
payable and contract liabilities).
Cash flow from operations was positive in all of our business segments in fiscal 2023.
Net cash used in investing activities: The $6.8 billion increase in net cash used in investing activities in fiscal
2023 compared with fiscal 2022 was primarily due to the $6.7 billion cash used for the acquisitions of TDL and
AJRD during the first quarter and third quarter of fiscal 2023, respectively.
Net cash provided by (used in) financing activities: The $6.5 billion increase in net cash provided by financing
activities in fiscal 2023 compared with fiscal 2022 was primarily due to the issuance and sale of $3.25 billion
aggregate principal amount of new AJRD Notes, $2.25 billion in proceeds from borrowings on Term Loan 2025, of
which $2.0 billion was utilized for the TDL acquisition, $1.6 billion in net proceeds from issuances of commercial
paper and the $565 million decrease in cash used to repurchase our common stock under our share repurchase
program. Such amounts were partially offset by an increase in repayments of borrowings, including the $800 million
aggregate principal amount of our 3.85% 2023 Notes and the $250 million aggregate principal amount of our
Floating Rate Notes due March 2023 (“Floating 2023 Notes”).
Capital Structure and Resources
Long-Term Debt, Net
We had $11.5 billion of long-term debt, net, including the current portion of long-term debt, net and financing
lease obligations, outstanding at December 29, 2023, the majority of which we incurred in connection with merger
and acquisition activity.
Long-Term Variable-Rate Debt. During fiscal 2023, we drew $2.25 billion in long-term debt on Term Loan 2025.
The proceeds were utilized to fund the cash consideration paid and a portion of the associated transaction and
integration costs related to the TDL acquisition and repay the entire outstanding $250 million aggregate principal
amount of our Floating 2023 Notes. See Note 8: Debt and Credit Arrangements in the Notes for further information on
our long-term fixed-rate debt.
Long-Term Fixed-Rate Debt. On June 15, 2023, we repaid the entire outstanding $800 million aggregate
principal amount of our 3.85% 2023 Notes through cash on hand and the issuance of commercial paper. The
commercial paper issued to fund repayment of the 3.85% 2023 Notes was repaid during fiscal 2023.
On July 31, 2023, we closed the issuance and sale of $3.25 billion aggregate principal amount of the AJRD
Notes. The AJRD Notes were used to fund a portion of the purchase price for the AJRD acquisition, which closed on
_____________________________________________________________________
33
July 28, 2023, and to pay related fees and expenses. See Note 8: Debt and Credit Arrangements in the Notes for
further information on our long-term variable-rate debt.
Short-Term Debt, Credit Arrangements and CP Program
We had $1.6 billion of short-term debt at December 29, 2023, consisting of outstanding notes under the CP
Program and local borrowing by international subsidiaries for working capital needs. See Note 8: Debt and Credit
Arrangements in the Notes for further information on Credit Arrangements and CP Program.
2023 Credit Agreement. On March 10, 2023, we established a $2.4 billion, 364-day senior unsecured revolving
credit facility (“2023 Credit Facility”) by entering into a 364-Day Credit Agreement (“2023 Credit Agreement”) with a
syndicate of lenders. Proceeds of the initial funding of loans under the 2023 Credit Agreement were required to be
used to finance a portion of the purchase price for the acquisition of AJRD and for the fees, taxes, costs and related
expenses related to it, and thereafter may be used for working capital purposes.
On July 28, 2023, we borrowed $2.1 billion under the 2023 Credit Agreement and used the proceeds together
with proceeds from the AJRD Notes to fund the acquisition of AJRD and to pay related fees and expenses. All
borrowings under the 2023 Credit Agreement were repaid with proceeds of commercial paper issued during fiscal
2023. At December 29, 2023, we had no outstanding borrowings under the 2023 Credit Agreement, had available
borrowing capacity of $800 million, net of outstanding CP Program borrowings, and were in compliance with all
covenants under the 2023 Credit Agreement.
On January 26, 2024, we replaced the 2023 Credit Agreement with a new $1.5 billion, 364-day senior
unsecured revolving credit facility maturing no later than January 24, 2025.
2022 Credit Agreement. We have a $2.0 billion, 5-year senior unsecured revolving credit facility (the “2022
Credit Facility”) under a Revolving Credit Agreement (the “2022 Credit Agreement”) entered into on July 29, 2022
with a syndicate of lenders, which the lenders may agree to increase by up to $1.0 billion upon our request.
At December 29, 2023, we had no outstanding borrowings and were in compliance with all covenants under the
2022 Credit Agreement.
Commercial Paper Programs. On March 14, 2023, we established the CP Program, which is supported by
amounts unused and available under the 2022 Credit Agreement and the 2023 Credit Agreement. From time to
time, we use borrowings under the CP Program for general corporate purposes, including the funding of acquisitions,
debt refinancing, dividend payments and repurchases of our common stock. We terminated our prior existing
$1.0 billion commercial paper program during fiscal 2023.
During fiscal 2023, we had a maximum outstanding balance of $3.0 billion under our CP Program, which we
primarily used to repay $2.1 billion outstanding under the 2023 Credit Agreement, a portion of which was repaid
with cash on hand during the second half of fiscal 2023.
Amounts outstanding under the CP Program at December 29, 2023 and the daily average balance and weighted
average yield during fiscal 2023 were as follows:
(In millions, except weighted-average interest rate)
CP Program
Weighted-average interest rate
December 29, 2023
Outstanding
Daily Average
$
1,599
$
1,300
5.95 %
5.45 %
We expect balances under the CP Program to remain elevated as compared to historical norms through fiscal
2025.
Liquidity Assessment
Given our current cash position, outlook for funds generated from operations, credit ratings, available credit
facilities, cash needs and debt structure, we have not experienced to date, and do not expect to experience, any
material issues with liquidity for the next 12 months and in the longer term, although we can give no assurances
concerning our future liquidity, particularly in light of our overall level of debt, U.S. Government budget uncertainties
and the state of global commerce and general political and global financial uncertainty.
Based on our current business plan and revenue prospects, we believe that our existing cash, funds generated
from operations, availability under our senior unsecured credit facilities and our CP Program and access to the public
and private debt and equity markets will be sufficient to provide for our anticipated working capital requirements,
capital expenditures, dividend payments, repurchases under our share repurchase program and repayments of our
debt securities at maturity for the next twelve months and the reasonably foreseeable future thereafter. Our total
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34
additions of property, plant and equipment net of proceeds from the sale of property, plant and equipment for fiscal
2024 are expected to be approximately 2% of revenue. Other than operating expenses, cash uses for fiscal 2024 are
expected to consist primarily of additions of property, plant and equipment, dividend payments, debt repayments,
costs associated with our LHX NeXt program and repurchases under our share repurchase program.
Purchase of Tax Credits under Inflation Reduction Act of 2022 (“IRA”)
The IRA includes a new transferability provision under Section 6418 of the Internal Revenue Code which
permits, in certain circumstances, the sale of federal income tax credits generated from renewable and alternative
energy sources. During the year ended December 29, 2023, we entered into a binding agreement to purchase tax
credits totaling $51 million for the 2023 tax year for a net purchase price of $0.95 per $1.00 of tax credits, allowing
us to reduce our 2023 federal income taxes payable by the amount of credits we expect to claim on our tax returns
as a result of our binding agreement. We have recorded a liability to the transferor for the amount owed in the “Other
accrued items” line of the Consolidated Balance Sheet. We have recorded an income tax benefit of $2 million for the
difference between the amount paid or to be paid to the transferor and the reduction to our taxes payable in the
“Income taxes” line of the Consolidated Statement of Operations.
Funding of Pension Plans
With respect to our U.S. qualified defined benefit pension plans, we intend to contribute annually no less than
the required minimum funding thresholds. As a result of prior voluntary contributions and plan performance, we
made no material contributions to our U.S. qualified defined benefit pension plans in fiscal 2023. We expect to make
approximately $35 million of contributions to these plans in fiscal 2024, and may consider voluntary contributions
thereafter.
Future required contributions primarily will depend on the actual annual return on assets and the discount rate
used to measure the benefit obligation at the end of each year. Depending on these factors, and the resulting funded
status of our pension plans, the level of future statutory required minimum contributions could be material. We had
net defined benefit plan assets of $66 million as of December 29, 2023 compared with net unfunded defined benefit
plan obligations of $69 million as of December 30, 2022. The improvement in the funded status as of December 29,
2023 is primarily due to more favorable than expected return on plan assets, partially offset by increased pension
obligations resulting from lower discount rates. See Note 9: Retirement Benefits in the Notes for further information
regarding our pension plans.
Common Stock Repurchases
During fiscal 2023 and 2022, $30 million and $45 million, respectively, in shares of our common stock were
delivered to us or withheld by us to satisfy withholding taxes on employee share-based awards. Shares repurchased
by us are cancelled and retired.
At December 29, 2023, we had a remaining unused authorization under our repurchase program of $3.9 billion.
Our repurchase program does not have a stated expiration date and authorizes us to repurchase shares of our
common stock through open market purchases, private transactions, transactions structured through investment
banking institutions or any combination thereof. We have announced that share repurchases will be moderated in
the near-term, but the level and timing of our repurchases depends on a number of factors, including our financial
condition, capital requirements, cash flows, results of operations, future business prospects and other factors our
Board and management may deem relevant. The timing, volume and nature of repurchases are also subject to
market conditions, applicable securities laws and other factors and are at our discretion and may be suspended or
discontinued at any time. Additional information regarding our repurchase program is set forth above under “Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of
this Report.
Dividends
Information concerning our dividends is set forth above under “Item 5. Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Report.
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35
Material Cash Requirements and Commercial Commitments
Current and long-term material cash requirements at December 29, 2023 are as follows:
(In millions)
Long-term debt(1)
Interest on long-term debt
Purchase obligations
Operating and finance lease commitments
Minimum pension contributions(2)
Total(3)
Total
Payment Due
Within 1 Year
$
$
11,275 $
3,800
5,975
1,306
35
22,391 $
355
547
4,444
182
35
5,563
_______________
(1) Does not include amounts for finance lease commitments.
(2) As a result of prior voluntary contributions and plan performance, we made no material contributions to our U.S. qualified defined benefit
pension plans in fiscal 2023. We expect to make approximately $35 million in contributions to these plans in fiscal 2024, and may consider
voluntary contributions thereafter. In addition, we made no material contributions to our non-U.S. pension plans in fiscal 2023 and do not
expect to make any material contributions to these plans in fiscal 2024.
(3) The above table does not include unrecognized tax benefits of $652 million.
Purchase obligations mainly consist of outstanding commitments on open purchase orders made to suppliers,
subcontractors and other outsourcing partners under U.S. government contracts. Our risk associated with these
purchase obligations is generally limited to the termination liability provisions within such contracts. As such, we do
not believe there to be a material liquidity risk associated with outstanding purchase obligations.
There can be no assurance that our business will continue to generate cash flows at current levels or that the
cost or availability of future borrowings, if any, under our CP Program, credit facilities, term loan or in the debt
markets will not be impacted by any potential future credit or capital markets disruptions. If we are unable to
maintain cash balances, generate cash flow from operations or borrow under our CP Program, our credit facility or
term loan sufficient to service our obligations, we may be required to reduce capital expenditures, reduce or
terminate our share repurchases, obtain additional financing or sell assets. Our ability to make principal payments or
pay interest on or refinance our indebtedness depends on our future performance and financial results, which, to a
certain extent, are subject to general conditions affecting the defense, government and other markets we serve and
to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.
Commercial Commitments
We have entered into commercial commitments in the normal course of business including surety bonds,
standby letter of credit agreements and other arrangements with financial institutions and customers primarily
relating to the guarantee of future performance on certain contracts to provide products and services to customers
or to obtain insurance policies with our insurance carriers. See Note 15: Legal Proceedings, Commitments and
Contingencies in the Notes for additional information.
Impact of Foreign Exchange
Our international business transacted in local currency environments was 45%, 43% and 40% in fiscal 2023,
fiscal 2022 and fiscal 2021, respectively. The impact of translating the assets and liabilities of these operations to
U.S. Dollars is included as a component of shareholders’ equity. The cumulative foreign currency translation
adjustment included in shareholders’ equity was a $201 million loss and a $237 million loss at December 29, 2023
and December 30, 2022, respectively. We utilize foreign currency hedging instruments to minimize the currency risk
of international transactions. Gains and losses resulting from currency rate fluctuations did not have a material
effect on our results in fiscal 2023, 2022 or 2021.
Financial Risk Management
In the normal course of business, we are exposed to risks associated with foreign currency exchange rates and
changes in interest rates. We employ established policies and procedures governing the use of financial instruments
to manage our exposure to such risks.
Foreign Exchange and Currency. Our U.S. and foreign businesses enter into contracts with customers,
subcontractors or vendors that are denominated in currencies other than the functional currencies of such
businesses. We use foreign currency forward contracts and options to hedge both balance sheet and off-balance
sheet future foreign currency commitments. Factors that could impact the effectiveness of our hedging programs for
foreign currency include accuracy of sales estimates, volatility of currency markets and the cost and availability of
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36
hedging instruments. A 10% change in currency exchange rates for our foreign currency derivatives held at
December 29, 2023 would not have had a material impact on the fair value of such instruments or our results of
operations or cash flows. This quantification of exposure to the market risk associated with foreign currency
financial instruments does not take into account the offsetting impact of changes in the fair value of our foreign
denominated assets, liabilities and firm commitments.
Interest Rates. As of December 29, 2023, we had long-term variable-rate and fixed-rate debt obligations. The
fair value of these obligations is impacted by changes in interest rates; however, a 10% change in interest rates for
our long-term variable-rate and fixed-rate debt obligations at December 29, 2023 would not have had a material
impact on the fair value of these obligations. There is no interest-rate risk associated with long-term fixed-rate debt
obligations on our results of operations and cash flows unless existing obligations are refinanced upon maturity at
then-current interest rates, because the interest rates are fixed until maturity, and because our long-term fixed-rate
debt is not puttable to us (i.e., not required to be redeemed by us prior to maturity). We can give no assurances,
however, that interest rates will not change significantly or have a material effect on the fair value of our long-term
variable-rate and fixed-rate debt obligations over the next twelve months. See Note 8: Debt and Credit Arrangements
in the Notes for information regarding the maturities of our long-term variable-rate and fixed-rate debt obligations.
At December 29, 2023, we had long-term variable-rate debt obligations of $2.25 billion under Term Loan 2025.
These debt obligations bear interest that is variable based on certain short-term indices, thus exposing us to
interest-rate risk; however, a 10% change in interest rates for these debt obligations at December 29, 2023 would
not have had a material impact on our results of operations or cash flows. See Note 8: Debt and Credit Arrangements
in the Notes for further information.
We have also used short-term variable-rate debt borrowings, primarily under our commercial paper program,
which are subject to interest rate risk. We utilize our commercial paper program to satisfy short-term cash
requirements, temporarily funding repurchases under our share repurchase programs and funding redemption of
long-term debt and acquisitions. These debt obligations bear interest that is variable based on certain short-term
indices, thus exposing us to interest-rate risk; however, a 10% change in interest rates for these debt obligations at
December 29, 2023 would not have had a material impact on our results of operations or cash flows.
CRITICAL ACCOUNTING ESTIMATES
Preparation of this Report in accordance with GAAP requires us to make estimates and assumptions that affect
the reported amount of assets, liabilities, revenue, expenses and backlog as well as disclosure of contingent assets
and liabilities. While the following is not intended to be a comprehensive list of our accounting estimates, we
consider the estimates discussed below as critical to an understanding of our financial statements because their
application places the most significant demands on our judgment, with financial reporting results dependent on
estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Specific
risks for these critical accounting estimates are described in the following paragraphs. The impact and any
associated risks described in the following paragraphs related to these estimates on our business operations are
discussed throughout this MD&A where such estimates affect our reported and expected financial results. Senior
management has discussed the development and selection of the critical accounting estimates and the related
disclosure included herein with the Audit Committee of our Board. Actual results may differ from those estimates.
Revenue Recognition
A significant portion of our business is derived from development and production contracts. Revenue and profit
related to development and production contracts are generally recognized over-time, typically using the percentage
of completion (“POC”) cost-to-cost method of revenue recognition, whereby we measure our progress towards
completion of the performance obligation based on the ratio of costs incurred to date to estimated costs at
completion under the contract. Because costs incurred represent work performed, we believe this method best
depicts the transfer of control of the asset to the customer. Under the POC cost-to-cost method of revenue
recognition, a single estimated profit margin is used to recognize profit for each performance obligation over its
period of performance.
Recognition of profit on a contract requires estimates of the total cost at completion and transaction price and
the measurement of progress towards completion. Due to the long-term nature of many of our contracts, developing
the estimated total cost at completion and total transaction price often requires judgment. Factors that must be
considered in estimating the cost of the work to be completed include: the nature and complexity of the work to be
performed, subcontractor performance, the cost and availability of purchased materials and services, labor cost and
availability and the risk and impact of delayed performance. Factors that must be considered in estimating the total
transaction price include contractual cost or performance incentives (such as incentive fees, award fees and
penalties) and other forms of variable consideration as well as our historical experience and our expectation for
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37
performance on the contract. These variable amounts generally are awarded upon achievement of certain
negotiated performance metrics, program milestones or cost targets and can be based upon customer discretion.
We include such estimated amounts in the transaction price to the extent it is probable that a significant reversal of
cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is
resolved.
At the outset of each contract, we gauge its complexity and perceived risks and establish an estimated total cost
at completion in line with these expectations. We follow a standard EAC process in which we review the progress
and performance on our ongoing contracts at least quarterly and, in many cases, more frequently. If we successfully
retire risks associated with the technical, schedule and cost aspects of a contract, we may lower our estimated total
cost at completion commensurate with the retirement of these risks. Conversely, if we are not successful in retiring
these risks, we may increase our estimated total cost at completion. Additionally, as the contract progresses, our
estimates of total transaction price may increase or decrease if, for example, we receive incentive or award fees that
are higher or lower than expected.
When changes in estimated total costs at completion or in estimated total transaction price are determined, the
related impact on operating income is recognized on a cumulative basis. Cumulative EAC adjustments represent the
cumulative effect of the changes on current and prior periods; revenue and operating margins in future periods are
recognized as if the revised estimates had been used since contract inception. Any anticipated losses on these
contracts are fully recognized in the period in which the losses become evident.
EAC adjustments had the following impacts to operating income for the periods presented:
(In millions)
Favorable adjustments
Unfavorable adjustments
Net operating income adjustments
Fiscal Year Ended
December 29, 2023 December 30, 2022
$
$
593 $
(678)
(85) $
454
(418)
36
There were no individual EAC adjustments that were material to our results of operations on a consolidated or
segment basis in fiscal 2023 or 2022.
We recognize revenue from numerous contracts with multiple performance obligations. For these contracts, we
allocate the transaction price to each performance obligation based on the relative standalone selling price of the
product or service underlying each performance obligation. The standalone selling price represents the amount for
which we would sell the product or service to a customer on a standalone basis (i.e., not sold as a bundled sale with
any other products or services). The allocation of transaction price among separate performance obligations may
impact the timing of revenue recognition but will not change the total revenue recognized on the contract.
A substantial majority of our revenue is derived from contracts with the U.S. Government, including foreign
military sales contracts. These contracts are subject to the FAR and the prices of our contract deliverables are
typically based on our estimated or actual costs plus a reasonable profit margin. As a result, the standalone selling
prices of the products and services in these contracts are typically equal to the selling prices stated in the contract,
thereby eliminating the need to allocate (or reallocate) the transaction price to the multiple performance obligations.
In our non-U.S. Government contracts, when standalone selling prices are not directly observable, we also generally
use the expected cost plus margin approach to determine standalone selling price. In determining the appropriate
margin under the cost plus margin approach, we consider historical margins on similar products sold to similar
customers or within similar geographies where objective evidence is available. We may also consider our cost
structure and profit objectives, the nature of the proposal, the effects of customization of pricing, our practices used
to establish pricing of bundled products, the expected technological life of the product, margins earned on similar
contracts with different customers and other factors to determine the appropriate margin.
Pension and Other Postretirement Benefit Plans
Certain of our current and former employees participate in defined benefit plans in the United States, Canada,
United Kingdom and Germany, which are sponsored by L3Harris. The determination of projected benefit obligations
(“PBO”) and the recognition of expenses related to defined benefit plans are dependent on various assumptions.
These major assumptions primarily relate to discount rates, long-term expected rates of return on plan assets, rate
of future compensation increases, mortality, termination and other factors (some of which are disclosed in Note 9:
Retirement Benefits in the Notes). Actual results that differ from our assumptions are accumulated and generally
amortized for each plan to the extent required over the estimated future life expectancy or, if applicable, the future
working lifetime of the plan’s active participants.
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38
Significant Assumptions. We develop assumptions using relevant experience, in conjunction with market-
related data for each plan. Assumptions are reviewed annually with third-party experts and adjusted as appropriate.
The table included below provides the weighted average assumptions used to estimate the PBOs and net periodic
benefit cost as they pertain to our defined benefit pension plans.
Obligation assumptions as of:
Discount rate
Rate of future compensation increase
Cash balance interest crediting rate
December 29, 2023 December 30, 2022
4.91%
3.01%
4.50%
5.18%
3.01%
4.00%
Cost assumptions for fiscal periods ended:
December 29, 2023 December 30, 2022
Discount rate to determine service cost
Discount rate to determine interest cost
Expected return on plan assets
Rate of future compensation increase
Cash balance interest crediting rate
5.18%
5.08%
7.46%
3.01%
4.00%
2.69%
2.27%
7.44%
3.01%
3.50%
Key assumptions for the Consolidated Pension Plan (our largest defined benefit plan), with 88% of the total PBO
as of December 29, 2023 included a discount rate for obligation assumptions of 4.92%, a cash balance interest
crediting rate of 4.50% and expected return on plan assets of 7.50% for fiscal 2023, which is being maintained at
7.50% for fiscal 2024. There is also a frozen pension equity benefit that assumes a 4.25% interest crediting rate.
Expected Return on Plan Assets. Substantially all of our plan assets are managed on a commingled basis in a
master investment trust. We determine our expected return on plan assets by evaluating both historical returns and
estimates of future returns. Specifically, we consider the plan’s actual historical annual return on assets over the
past 15, 20 and 25 years and historical broad market returns over long-term time frames based on our strategic
allocation, which is detailed in Note 9: Retirement Benefits in the Notes. Future returns are based on independent
estimates of long-term asset class returns. Based on this approach, the weighted average long-term annual rate of
return on assets was estimated to be 7.46% for both fiscal 2023 and 2024.
Discount Rate. The discount rate is used to calculate the present value of expected future benefit payments at
the measurement date. An increase in the discount rate decreases the present value of PBO and generally increases
pension expense. A decrease in the discount rate increases the present value of the PBO and generally decreases
pension expense. The discount rate assumption is based on current investment yields of high-quality fixed income
investments during the retirement benefits maturity period. The pension discount rate is determined by considering
an interest rate yield curve comprising AAA/AA bonds, with maturities between zero and thirty years, developed by
the plan’s actuaries. Annual benefit payments are then discounted to present value using this yield curve to develop
a single discount rate matching the plan’s characteristics.
Sensitivity Analysis
Pension Expense. A 25 basis point change in the long-term expected rate of return on plan assets and discount
rate would have the following effect on the combined U.S. defined benefit pension plans’ pension expense for the
next twelve months:
(In millions)
Increase/(Decrease)
in Pension Expense
25 Basis
Point Increase
25 Basis
Point Decrease
Long-term rate of return on assets used to determine net periodic benefit
cost
Discount rate used to determine net periodic benefit cost
$
$
(21) $
9 $
21
(9)
PBO. Funded status is derived by subtracting the respective year-end values of the PBO from the fair value of
plan assets. The sensitivity of the PBO to changes in the discount rate varies depending on the magnitude and
direction of the change in the discount rate. We estimate that a decrease of 25 basis points in the discount rate of
the combined U.S. defined benefit pension plans would increase the PBO by approximately $190 million and an
increase of 25 basis points would decrease the PBO by approximately $182 million.
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39
Fair Value of Plan Assets. The plan assets of our defined benefit plans comprise a broad range of investments,
including domestic and international equity securities, fixed income investments, interests in private equity and
hedge funds and cash and cash equivalents.
A portion of our defined benefit plans’ asset portfolio is comprised of investments in private equity and hedge
funds. The private equity and hedge fund investments are generally measured using the valuation of the underlying
investments or at net asset value (“NAV”). However, in certain instances, the values reported by the asset managers
were not current at the measurement date. Consequently, we have estimated adjustments to the last reported value
where necessary to measure the assets at fair value at the measurement date. These adjustments consider
information received from the asset managers, as well as general market information. Asset values for other
positions were generally measured using market observable prices. See Note 9: Retirement Benefits in the Notes for
further information.
Goodwill
We test our goodwill for impairment annually as of the first business day of our fourth fiscal quarter, which was
October 2, 2023 for fiscal 2023, or under certain circumstances more frequently, such as when events or
circumstances indicate there may be impairment or when we reorganize our reporting structure such that the
composition of one or more of our reporting units is affected. We test goodwill for impairment at a level within the
Company referred to as the reporting unit, which is our business segment level or one level below the business
segment. Some of our segments are comprised of several reporting units. Allocation of goodwill to several reporting
units could make it more likely that we will have an impairment charge in the future. An impairment charge to any
one of our reporting units could have a material impact on our financial condition and results of operations.
The process of evaluating the potential impairment of goodwill is highly subjective and requires significant
judgment. To test goodwill for impairment, we may perform both qualitative and quantitative assessments. If we
elect to perform a qualitative assessment for a certain reporting unit, we evaluate events and circumstances
impacting the reporting unit to determine the probability that goodwill is impaired. If we determine it is more-likely-
than-not that the fair value of the reporting unit is less than its carrying amount, we perform a quantitative
assessment.
Our qualitative assessment of the recoverability of goodwill, whether performed annually or based on specific
events or circumstances, considers various macroeconomic, industry-specific and company-specific factors. These
factors include: (i) deterioration in the general economy; (ii) deterioration in the environment in which the Company
operates; (iii) increase in materials, labor or other costs; (iv) negative or declining cash flows; (v) changes in
management, changes in strategy or significant litigation; (vi) changes in the composition or carrying amount of net
assets or an expectation of disposing all or a portion of the reporting unit; or (vii) a sustained decrease in share price.
If we perform a quantitative assessment for a certain reporting unit, we calculate the fair value of that reporting
unit and compare the fair value to the reporting unit’s net book value. We estimate fair values of our reporting units
based on projected cash flows. Values derived from projected cash flows are corroborated through review of
revenue and/or earnings multiples applied to the latest twelve months’ revenue and earnings of our reporting units.
Projected cash flows are based on our best estimate of future revenues, operating costs and balance sheet metrics
reflecting our view of the financial and market conditions of the underlying business; and the resulting cash flows are
discounted using an appropriate discount rate that reflects the risk in the forecasted cash flows. The revenues and
earnings multiples applied to the revenues and earnings of our reporting units are based on current multiples of
revenues and earnings for similar businesses, and based on revenues and earnings multiples paid for recent
acquisitions of similar businesses made in the marketplace. We then assess whether any implied control premium,
based on a comparison of fair value based purely on our stock price and outstanding shares with fair value
determined by using all of the above-described models, is reasonable. If the fair value of a reporting unit exceeds its
carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit
exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Fiscal 2023 Impairment Tests. We performed our annual impairment test of all of our reporting units’ goodwill
as of September 30, 2023 and concluded that for each of our reporting units no impairment existed.
Segment reorganization. Effective in fiscal 2023, we adjusted our reporting to better align our businesses and
transferred our ADG business (a reporting unit) from our IMS segment to our SAS segment (also a reporting unit). In
connection with the realignment, we reduced our reporting units from nine to eight as the ADG reporting unit and all
$327 million of associated goodwill was absorbed by our existing SAS reporting unit given the economic similarities
of the two reporting units. Immediately before the realignment, we performed a qualitative impairment assessment
over our SAS reporting unit and a quantitative impairment assessment over our ADG reporting unit. Immediately
after the realignment, we performed a quantitative impairment assessment over the SAS reporting unit. We
_____________________________________________________________________
40
prepared estimates of the fair value of our pre-realignment ADG reporting unit and post-realignment SAS reporting
unit based on a combination of market-based valuation techniques, utilizing quoted market prices, comparable
publicly reported transactions and an income-based valuation technique using projected discounted cash flows.
These assessments indicated no impairment existed either before or after the realignment.
CAS Disposal Group Pending Divestiture. As described in more detail in Note 13: Acquisitions, Divestitures and
Asset Sales, on November 27, 2023, we announced that we entered into a definitive agreement to sell our CAS
disposal group, which includes both the CTS and Commercial Aviation reporting units. As of November 27, 2023, the
fair value less costs to sell the CAS disposal group is $834 million, inclusive of considerations related to
noncontrolling interest and accumulated other comprehensive income.
The CAS disposal group includes both the Commercial Training Solutions (“CTS”) and Commercial Aviation
reporting units. In connection with the preparation of our financial statements for the fiscal year ended December
29, 2023, we evaluated the facts and circumstances which impacted the agreed upon selling price of the CAS
disposal group and identified interim indicators of impairment within both reporting units subsequent to our annual
impairment testing date of October 2, 2023. Specifically, supply chain-related operational challenges which
negatively impact cash flows over the short-term forecast period were assessed in combination with our long-term
portfolio shaping strategy to dispose of non-core businesses. As a result, we performed quantitative impairment
tests for both reporting units as of November 27, 2023, utilizing an income approach aligned to market prices for the
two reporting units, as specified in the definitive agreement. As a result of these tests, we determined that the fair
value of the CTS reporting unit was above carrying value, while the fair value of the Commercial Avionics reporting
unit was below its carrying value, and concluded goodwill related to the Commercial Aviation reporting unit was
impaired. Therefore we recorded a non-cash charge for impairment of $296 million associated with the Commercial
Aviation reporting unit in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of
Operations.
At-risk goodwill. Based on the annual impairment testing, our Broadband reporting unit had clearance of
approximately 20% and goodwill of $2,656 million and our ISR and Electro Optical reporting units had clearances of
approximately 6% and goodwill of $3,186 million and $2,193 million, respectively. An impairment of goodwill could
result from a number of circumstances, including different assumptions used in determining the fair value of the
reporting units; changes to U.S. Government spending priorities or ability to win competitively awarded contracts; an
inability to meet our forecast; the rescission of significant contract awards as a result of competitors protesting or
challenging contracts awarded to us; or an increase in interest rates without a corresponding increase in future
revenue.
Fiscal 2022 Impairment Tests. For information related to fiscal 2022 impairment tests and resulting
impairments see Note 6: Goodwill and Intangible Assets in the Notes.
Goodwill-Related Fair Value Estimates. Fair value determinations described above under the heading
“Goodwill” in this Critical Accounting Estimates section of this MD&A were determined based on a combination of
market-based valuation techniques, utilizing quoted market prices, comparable publicly reported transactions, and
projected discounted cash flows. The process of evaluating the potential impairment of goodwill is highly subjective
and requires significant judgment. Material changes in these estimates could occur and result in additional
impairments in future periods.
Business Combinations
We follow the acquisition method of accounting to record identifiable assets acquired and liabilities assumed
recognized in connection with acquired businesses at their estimated fair value as of the date of acquisition.
Identifiable intangible assets from business combinations are recognized at their estimated fair values as of the
date of acquisition and consist of customer relationships, developed technology and trade names. Determination of
the estimated fair value of identifiable intangible assets requires judgment. The fair value of intangible assets is
estimated using the relief from royalty method for the acquired developed technology and trade names and the
multi-period excess earnings method for the acquired customer relationships. Both of these fair value methods are
income-based valuation approaches, which require judgment to estimate appropriate discount rates, royalty rates
related to the developed technology and trade name intangible assets, revenue growth attributable to the intangible
assets and remaining useful lives. Finite-lived identifiable intangible assets are amortized to expense over their
useful lives, generally ranging from two to twenty seven years. The fair value of identifiable intangible assets
acquired in connection with the TDL and AJRD acquisitions was $755 million and $2,840 million, respectively. See
Note 13: Acquisitions, Divestitures and Asset Sales and Note 6: Goodwill and Intangible Assets in the Notes for
additional information.
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41
Income Taxes
We record deferred tax assets and liabilities for differences between the tax basis of assets and liabilities and
amounts reported in our Consolidated Balance Sheet, as well as operating loss and tax credit carryforwards. We
follow very specific and detailed guidelines in each tax jurisdiction regarding the recoverability of any tax assets
recorded on the balance sheet and provide necessary valuation allowances as required. Future realization of
deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character
(for example, ordinary income or capital gain) within the carryback or carryforward periods available under the tax
law. We regularly review our deferred tax assets for recoverability based on historical taxable income, projected
future taxable income, the expected timing of the reversals of existing temporary differences and tax planning
strategies. We have not made any material changes in the methodologies used to determine our tax valuation
allowances during fiscal 2023.
Our Consolidated Balance Sheet as of December 29, 2023 included deferred tax assets of $91 million and
deferred tax liabilities of $815 million. For all jurisdictions in which we have net deferred tax assets, we expect that
our existing levels of pre-tax earnings are sufficient to generate the amount of future taxable income needed to
realize these tax assets. Our valuation allowance related to deferred income taxes, which is reflected in our
Consolidated Balance Sheet, was $240 million as of December 29, 2023. Although we make reasonable efforts to
ensure the accuracy of our deferred tax assets, if we continue to operate at a loss in certain jurisdictions, or are
unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or
time period within which the underlying temporary differences become taxable or deductible, or if the potential
impact of tax planning strategies changes, we could be required to increase the valuation allowance against all or a
significant portion of our deferred tax assets resulting in a substantial increase in our effective tax rate and a
material adverse impact on our operating results.
The evaluation of tax positions taken in a filed tax return, or planned to be taken in a future tax return or claim,
involves inherent uncertainty and requires the use of judgment. We evaluate our income tax positions and record tax
benefits for all years subject to examination based on our assessment of the facts and circumstances as of the
reporting date. For tax positions where it is more likely than not that a tax benefit will be realized, we record the
largest amount of tax benefit with a greater than 50% probability of being realized upon ultimate settlement with the
applicable taxing authority, assuming the taxing authority has full knowledge of all relevant information. For income
tax positions where it is not more likely than not that a tax benefit will be realized, we do not recognize a tax benefit
in our Consolidated Financial Statements.
As of December 29, 2023, we had $652 million of unrecognized tax benefits, of which $509 million would
favorably impact our future tax rates in the event that the tax benefits are eventually recognized.
It is reasonably possible that there could be a significant change to our unrecognized tax benefits during the
course of the next twelve months as ongoing tax examinations continue, other tax examinations commence or
various statutes of limitations expire. However, an estimate of the range of possible changes is not practicable for
the remaining unrecognized tax benefits because of the significant number of jurisdictions in which we do business
and the number of open tax periods under various states of examination. See Note 7: Income Taxes in the Notes for
additional information.
Impact of Recently Issued Accounting Pronouncements
There have been no new accounting pronouncements which became effective during fiscal 2023 that have had a
material impact on our Consolidated Financial Statements.
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS
The following are some of the factors we believe could cause our actual results to differ materially from our
historical results or our current expectations or projections. Other factors besides those listed here also could
adversely affect us. See “Item 1A. Risk Factors” of this Report for more information regarding factors that might
cause our results to differ materially from those expressed in or implied by the forward-looking statements
contained in this Report.
• We depend on winning business in competitive markets from U.S. Government customers for a significant
•
portion of our revenue.
A reduction in U.S. Government funding or a change in U.S. Government spending priorities could have an
adverse impact on our business, financial condition, results of operations, cash flows and equity.
• Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and
time-and-material type contracts. Our fixed-price contracts, particularly those for development programs,
_____________________________________________________________________
42
could subject us to losses in the event of cost overruns or a significant increase in or sustained period of
increased inflation.
• We depend significantly on U.S. Government contracts, which generally are subject to immediate
termination and heavily regulated and audited. The application or impact of regulations, unilateral
government action, termination or negative audit findings for one or more of these contracts could have an
adverse impact on our business, financial condition, results of operations, cash flows and equity.
• We participate in markets that are often subject to uncertain economic conditions, which makes it difficult to
estimate growth in our markets and, as a result, future income and expenditures.
• We cannot predict the consequences of future geo-political events, but they may adversely affect the
markets in which we operate, our ability to insure against risks, our operations or our profitability.
• We are subject to government investigations, which could have a material adverse effect on our business,
financial condition, results of operations, cash flows and equity.
• We derive a significant portion of our revenue from international operations and are subject to the risks of
doing business internationally.
• We depend on our subcontractors and suppliers to provide materials, components, subsystems and services
for many of our products and services, and failures in or disruptions to our supply chain could cause our
products and or services to be produced or delivered in an untimely or unsatisfactory manner.
• We must attract and retain key employees, and any failure to do so could seriously harm us.
• We could be negatively impacted by a security breach, through cyber-attack, cyber intrusion, insider threats
or otherwise, or other significant disruption of our IT networks and related systems or of those we operate
for certain of our customers.
• Our future success will depend on our ability to develop new products and services and technologies that
achieve market acceptance in our current and future markets.
• We have significant operations in locations that could be materially and adversely impacted in the event of a
natural disaster or other significant disruption.
• With our acquisition of AJRD, there is increased risk of the release, unplanned ignition, explosion, or
improper handling of dangerous materials used in our business, which could disrupt our operations and
adversely affect our financial results.
Failure to achieve the expected results of LHX NeXt could adversely affect our future financial condition and
results of operations.
•
• Our level of indebtedness and our ability to make payments on or service our indebtedness and our
unfunded defined benefit plans liability may materially adversely affect our financial and operating activities
or our ability to incur additional debt.
The level of returns on defined benefit plan assets, changes in interest rates and other factors could
materially adversely affect our financial condition, results of operations, cash flows and equity.
Changes in our effective tax rate or additional tax exposures may have an adverse effect on our results of
operations and cash flows.
•
•
• We may not be successful in obtaining the necessary export licenses to conduct certain operations abroad,
•
and Congress may prevent proposed sales to certain foreign governments.
Unforeseen environmental issues, including regulations related to GHG emissions or change in customer
sentiment related to environmental sustainability, could have a material adverse effect on our business,
financial condition, results of operations, cash flows and equity.
• Our reputation and ability to do business may be impacted by the improper conduct of our employees,
•
•
agents or business partners.
The outcome of litigation or arbitration in which we are involved from time to time is unpredictable, and an
adverse decision in any such matter could have a material adverse effect on our financial condition, results
of operations, cash flows and equity.
Third parties have claimed in the past, and may claim in the future, that we are infringing directly or
indirectly upon their intellectual property rights, and third parties may infringe upon our intellectual property
rights.
• We face certain significant risk exposures and potential liabilities that may not be covered adequately by
•
•
insurance or indemnity.
Challenges arising from the expanded operations related to the acquisition of AJRD may affect our future
results.
Strategic transactions, including mergers, acquisitions and divestitures, involve significant risks and
uncertainties that could adversely affect our business, financial condition, results of operations, cash flows
and equity.
_____________________________________________________________________
43
•
Changes in future business or other market conditions could cause business investments and/or recorded
goodwill or other intangible assets to become impaired, resulting in substantial losses and write-downs that
would materially adversely affect our results of operations and financial condition.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In the normal course of business, we are exposed to the risks associated with foreign currency exchange rates
and changes in interest rates. We employ established policies and procedures governing the use of financial
instruments to manage our exposure to such risks. For a discussion of such policies and procedures and the related
risks, see “Financial Risk Management” in “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations” of this Report, which is incorporated by reference into this Item 7A.
In addition, we are exposed to market return fluctuations on our defined benefit plans. A material adverse
decline in the value of these assets and/or the discount rate for PBOs would result in a decrease in the funded status
of the defined benefit plans, an increase in net periodic benefit cost and an increase in required funding. To protect
against declines in the discount rate (i.e., interest rates), we will continue to monitor the performance of these
assets and market conditions as we evaluate the amount of future contributions. For further information, see Note 9:
Retirement Benefits in the Notes, which information is incorporated by reference into this Item 7A.
Page
45
46
50
52
53
54
55
56
57
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management’s Report on Internal Control Over Financial Reporting ..............................................................................
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) on the Consolidated Financial
Statements ...........................................................................................................................................................................
Report of Independent Registered Public Accounting Firm on the Effectiveness of Internal Control Over
Financial Reporting .............................................................................................................................................................
Consolidated Statement of Operations — Fiscal Year Ended December 29, 2023, December 30, 2022 and
December 31, 2021 ............................................................................................................................................................
Consolidated Statement of Comprehensive Income — Fiscal Year Ended December 29, 2023, December 30,
2022 and December 31, 2021 .........................................................................................................................................
Consolidated Balance Sheet — December 29, 2023 and December 30, 2022 .............................................................
Consolidated Statement of Cash Flows — Fiscal Year Ended December 29, 2023, December 30, 2022 and
December 31, 2021 ...........................................................................................................................................................
Consolidated Statement of Equity — Fiscal Year Ended December 29, 2023, December 30, 2022 and
December 31, 2021 ...........................................................................................................................................................
Notes to Consolidated Financial Statements .......................................................................................................................
_____________________________________________________________________
44
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of L3Harris Technologies, Inc. (the “Company”) is responsible for establishing and maintaining
adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to
provide reasonable assurance, based on an appropriate cost-benefit analysis, regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with U.S. generally
accepted accounting principles. The Company’s internal control over financial reporting includes those policies and
procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted
accounting principles, and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the
effectiveness of the Company’s internal control over financial reporting as of December 29, 2023. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on management’s
assessment and those criteria, management concluded that the Company maintained effective internal control over
financial reporting as of December 29, 2023.
Management excluded from its assessment of effectiveness of the Company’s internal control over financial
reporting the internal controls of Tactical Data Links product line (“TDL”) and Aerojet Rocketdyne Holdings, Inc.
(“AJRD”), which the Company acquired on January 3, 2023 and July 28, 2023, respectively. The financial
statements of TDL and AJRD represent 1% and 5%, respectively, of the Company’s total assets, excluding the
preliminary value of goodwill and other intangible assets, as of December 29, 2023, and 2% and 5%, respectively, of
the Company’s total revenue for the fiscal year then ended. Management will include the internal controls of TDL
and AJRD in its assessment of the effectiveness of the Company’s internal control over financial reporting as of the
end of fiscal 2024.
The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued a report on the
effectiveness of the Company’s internal control over financial reporting. This report appears on page 50 of this
Annual Report on Form 10-K.
_____________________________________________________________________
45
To the Shareholders and the Board of Directors of L3Harris Technologies, Inc.
Report of Independent Registered Public Accounting Firm
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of L3Harris Technologies, Inc. (the Company) as of
December 29, 2023 and December 30, 2022, the related consolidated statements of operations, comprehensive
income, cash flows and equity for each of the three years in the period ended December 29, 2023, and the related
notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 29, 2023 and
December 30, 2022, and the results of its operations and its cash flows for each of the three years in the period
ended December 29, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 29, 2023, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework), and our report dated February 16, 2024 expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.
_____________________________________________________________________
46
Cost estimation for revenue recognition on development and production contracts
Description of the Matter As described in the consolidated financial statements, the Company recognized revenue for
certain of its development and production contracts over time, typically using a percentage
of completion cost-to-cost method, which required estimates of costs at completion for
each contract. At the outset of each contract, the Company gauges its complexity and
perceived risks and establishes an estimated total cost at completion with these
expectations. After establishing the estimated total cost at completion, the Company
reviews the progress and performance on its ongoing contracts at least quarterly and
updates the estimated total cost at completion. Such estimates are subject to change
during the performance of the contract and significant changes in estimates could have a
material effect on the Company’s results of operations.
How We Addressed the
Matter in Our Audit
Auditing the cost estimation for revenue recognition on development and production
contracts where revenue is recognized over time using the POC cost-to-cost method
involved subjective auditor judgment because the Company’s development of the
estimated total cost at completion requires estimates of the cost of the work to be
completed based on the Company’s underlying assumptions around achieving the
technical, schedule and cost aspects of its contracts. In determining the estimates of the
cost of the work to be completed, the Company considered the nature and complexity of
the work to be performed, subcontractor performance and the risk and impact of delayed
performance. Estimates of total cost at completion are also affected by management’s
assessment of the current status of the contract and expectation for performance on the
contract, as well as historical experience.
We obtained an understanding, evaluated the design and tested the operating
effectiveness of certain internal controls over the Company’s accounting for cost
estimation for development and production contracts. For example, we tested certain
controls over management’s review of the estimate at completion analyses and the
significant assumptions underlying the estimated total costs at completion. We also tested
certain of management’s controls to validate that the data used in the estimate at
completion analyses was complete and accurate.
To test the cost estimation for development and production contracts, our audit
procedures included, among others, obtaining an understanding of the contract, meeting
with program management to confirm our understanding of the risks associated with the
arrangement and the current contract performance, review of customer correspondence
and contractual milestones and comparing cost estimates to historical cost experience
with similar contracts, when applicable. Additionally, we obtained an understanding of the
Company’s past performance of estimating total costs at completion by reviewing changes
in the cost estimates from previous periods and reviewing the overall accuracy of
management’s cost to completion estimations through lookback analyses.
_____________________________________________________________________
47
Description of the Matter At December 29, 2023, the Company’s goodwill was $20.0 billion. As more fully described
Valuation of Goodwill
How We Addressed the
Matter in Our Audit
in the consolidated financial statements, the Company tests goodwill for impairment
annually (or under certain circumstances, more frequently) at the reporting unit level using
either a qualitative or quantitative assessment. Under the quantitative assessment to test
for goodwill impairment, the Company compares the fair value of a reporting unit to its
carrying amount, including goodwill. The Company estimates the fair value of its reporting
units using a combination of a discounted cash flows analysis and market-based valuation
methodologies.
Auditing the Company’s quantitative goodwill impairment tests involved subjective auditor
judgment due to the significant estimation required in management’s determination of the
fair value of the reporting units. The significant estimation is primarily due to the sensitivity
of the respective fair values to underlying assumptions, particularly at the Electro Optical
and Intelligence, Surveillance, and Reconnaissance reporting units, including changes in
the weighted average cost of capital, projected revenue growth rates and projected EBITDA
margins. These assumptions relate to the expected future operating performance of the
Company’s reporting units, are forward-looking, and are sensitive to and affected by
economic, industry and company-specific qualitative factors.
We obtained an understanding, evaluated the design and tested the operating
effectiveness of relevant internal controls over the Company’s goodwill impairment review
process, including controls over management’s review of the significant assumptions used
in the valuation models. We also tested management’s controls to validate that the data
used in the valuation models was complete and accurate.
To test the estimated fair value of the Company’s reporting units, we performed audit
procedures that included, among others, assessing the valuation methodologies used by
the Company, involving our valuation specialists to assist in testing the significant
assumptions discussed above, and testing the completeness and accuracy of the
underlying data the Company used in its valuation analyses. For example, we compared the
significant assumptions used by management to current industry, market and economic
trends, the historical results of the reporting units and other relevant factors. We also
assessed the historical accuracy of management’s valuation estimates and performed
sensitivity analyses of significant assumptions used in the impairment tests to evaluate the
change in the fair value of the reporting unit resulting from changes in the significant
assumptions.
In addition, we reviewed the reconciliation of the fair value of the reporting units based on
the annual impairment test to the market capitalization of the Company.
_____________________________________________________________________
48
Description of the Matter As described in the consolidated financial statements, the Company completed its
Valuation of customer relationship intangible assets in the acquisition of Aerojet
Rocketdyne
How We Addressed the
Matter in Our Audit
acquisition of Aerojet Rocketdyne Holdings, Inc. on July 28, 2023. The acquisition was
accounted for using the acquisition method of accounting. The Company’s preliminary
accounting for the acquisition included determining the fair value of the customer
relationship intangible assets acquired of $2.8 billion. The acquired customer relationship
intangible asset is significant, and the valuation is sensitive based on current and projected
operating results.
Auditing the Company’s accounting for the acquired customer relationship intangible
assets involved subjective auditor judgment due to the significant assumptions required in
management’s analysis. The significant estimations are primarily due to the sensitivity of
the respective fair values to underlying assumptions including changes in the weighted
average cost of capital and the projected revenue and EBITDA margins. These assumptions
relate to the expected future operating performance of the Company’s reporting unit, are
forward-looking, and are sensitive to and affected by economic, industry and company-
specific qualitative factors.
We obtained an understanding of the process for evaluating the valuation of acquired
customer relationship intangible assets by performing a walkthrough of the fair value
analysis process, focusing on key controls identified by the company. This included
management’s review of the reasonableness of the assumptions used in the analysis.
We also tested management’s controls to validate that the data used in the valuation
models was complete and accurate.
We used an EY valuation specialist to assist with our auditing of the Company’s analysis. In
addition, we leveraged our audit team members with experience in complex areas to assist
in performing the work, which included engagement executives.
Our focus included evaluating the work of the management specialists used for the
valuation, reviewing key assumptions included in the valuation with a focus on comparing
these assumptions to current industry and economic trends, changes to the Company’s
business model, customer base or product mix and other relevant factors. We also
performed a sensitivity analysis of significant assumptions to evaluate the changes in the
fair value of the acquired intangible assets that would result from changes in the
assumptions.
We have served as the Company’s auditor since at least 1932, but we are unable to determine the specific year.
/s/ Ernst & Young LLP
Orlando, Florida
February 16, 2024
_____________________________________________________________________
49
To the Shareholders and the Board of Directors of L3Harris Technologies, Inc.
Report of Independent Registered Public Accounting Firm
Opinion on Internal Control Over Financial Reporting
We have audited L3Harris Technologies, Inc.’s internal control over financial reporting as of December 29, 2023,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, L3Harris
Technologies, Inc. (the Company) maintained, in all material respects, effective internal control over financial
reporting as of December 29, 2023, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not
include the internal controls of Tactical Data Links product line (“TDL”) and Aerojet Rocketdyne Holdings, Inc.
(“AJRD”), which are included in the 2023 consolidated financial statements of the Company as of December 29,
2023 and constituted 1% and 5%, respectively, of total assets, excluding the preliminary value of goodwill and other
intangible assets, as of December 29, 2023 and 2% and 5%, respectively, of total revenue for the year then ended.
Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal
control over financial reporting of TDL and AJRD.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 29, 2023 and December 30,
2022, the related consolidated statements of operations, comprehensive income, cash flows and equity for each of
the three years in the period ended December 29, 2023, and the related notes and our report dated February 16,
2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
_____________________________________________________________________
50
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Orlando, Florida
February 16, 2024
_____________________________________________________________________
51
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
December 29, 2023 December 30, 2022 December 31, 2021
Fiscal Year Ended
Revenue
Products
Services
Total revenue
Cost of revenue
Products
Services
Total cost of revenue
General and administrative expenses
Asset group and business divestiture-related (losses)
gains, net
Impairment of goodwill and other assets
Operating income
Non-service FAS pension income and other, net
Interest expense, net
Income from continuing operations before income taxes
Income taxes
Income from continuing operations
Discontinued operations, net of income taxes
Net income
$
13,694 $
5,725
19,419
12,097 $
4,965
17,062
(9,711)
(4,595)
(14,306)
(3,262)
(8,355)
(3,780)
(12,135)
(3,006)
(51)
(374)
1,426
338
(543)
1,221
(23)
1,198
—
1,198
29
1,227 $
1,227 $
—
1,227 $
8
(802)
1,127
425
(279)
1,273
(212)
1,061
—
1,061
1
1,062 $
1,062 $
—
1,062 $
13,156
4,658
17,814
(9,007)
(3,431)
(12,438)
(3,280)
220
(207)
2,109
439
(265)
2,283
(440)
1,843
(1)
1,842
4
1,846
1,847
(1)
1,846
9.17
9.09
Noncontrolling interests, net of income taxes
Net income attributable to L3Harris Technologies, Inc.
$
Amount attributable to L3Harris Technologies, Inc. common shareholders
Income from continuing operations
Discontinued operations, net of income taxes
$
Net income
$
Net income per common share attributable to L3Harris Technologies, Inc. common shareholders
5.54 $
5.49 $
6.47 $
6.44 $
Basic
Diluted
$
$
See accompanying Notes to Consolidated Financial Statements.
_____________________________________________________________________
52
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In millions)
Net income
Other comprehensive income (loss):
Foreign currency translation income (loss), net of income
taxes
Net unrealized income (loss) on hedging derivatives, net of
income taxes
Net unrecognized gains (losses) on postretirement
obligations, net of income taxes
Other comprehensive income (loss), recognized during the
period
Reclassification adjustments for (gains) losses included in
net income
Other comprehensive income (loss), net of income taxes
Total comprehensive income
Comprehensive loss attributable to noncontrolling interest
Total comprehensive income attributable to L3Harris
Technologies, Inc.
Fiscal Year Ended
December 29, 2023 December 30, 2022 December 31, 2021
$
1,198 $
1,061 $
1,842
36
10
71
117
(27)
90
1,288
29
(119)
(8)
(26)
(153)
11
(142)
919
1
(63)
(3)
758
692
1
693
2,535
4
$
1,317 $
920 $
2,539
See accompanying Notes to Consolidated Financial Statements.
_____________________________________________________________________
53
CONSOLIDATED BALANCE SHEET
(In millions, except shares)
Assets
Current assets
Cash and cash equivalents
Receivables, net of allowances for collection losses of $15 and $40,
December 29, 2023 December 30, 2022
$
560 $
880
respectively
Contract assets
Inventories
Other current assets
Assets of business held for sale
Total current assets
Non-current assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Deferred income taxes
Other non-current assets
Total assets
Liabilities and equity
Current liabilities
Short-term debt
Current portion of long-term debt, net
Accounts payable
Contract liabilities
Compensation and benefits
Other accrued items
Income taxes payable
Liabilities of business held for sale
Total current liabilities
Non-current liabilities
Long-term debt, net
Deferred income taxes
Other long-term liabilities
Total liabilities
Equity
Shareholders’ Equity:
Preferred stock, without par value; 1,000,000 shares authorized; none issued
Common stock, $1.00 par value; 500,000,000 shares authorized; issued and
outstanding 189,808,581 and 190,611,458 shares at December 29, 2023
and December 30, 2022, respectively
Paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
See accompanying Notes to Consolidated Financial Statements.
1,230
3,196
1,472
491
1,106
8,055
2,862
19,979
8,540
91
2,160
41,687 $
1,602 $
363
2,106
1,900
544
1,129
88
272
8,004
11,160
815
2,879
22,858
1,251
2,987
1,291
298
47
6,754
2,104
17,283
6,001
73
1,309
33,524
2
818
1,945
1,400
398
818
376
19
5,776
6,225
719
2,180
14,900
—
—
190
15,553
3,220
(198)
18,765
64
18,829
41,687 $
191
15,677
2,943
(288)
18,523
101
18,624
33,524
$
$
$
_____________________________________________________________________
54
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Operating Activities
Fiscal Year Ended
December 29, 2023 December 30, 2022 December 31, 2021
Net income
Adjustments to reconcile net income to net cash provided
$
by operating activities:
Amortization of acquisition-related intangibles
Depreciation and other amortization
Share-based compensation
Share-based matching contributions under defined
contribution plans
Pension and other postretirement benefit plan income
Impairment of goodwill and other assets
Asset group and business divestiture-related losses
(gains), net
Deferred income taxes
(Increase) decrease in:
Receivables, net
Contract assets
Inventories
Other current assets
Increase (decrease) in:
Accounts payable
Contract liabilities
Compensation and benefits
Other accrued items
Income taxes
Other operating activities
Net cash provided by operating activities
Investing Activities
Net cash paid for acquired businesses
Additions to property, plant and equipment
Proceeds from sale of property, plant and equipment, net
Proceeds from sales of asset groups and businesses, net
Other investing activities
Net cash (used in) provided by investing activities
Financing Activities
Proceeds from borrowings, net of issuance cost
Repayments of borrowings
Change in commercial paper, net(1)
Proceeds from exercises of employee stock options
Repurchases of common stock
Cash dividends
Other financing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
$
1,198 $
1,061 $
1,842
779
387
89
231
(275)
374
51
(423)
124
62
(182)
(55)
87
195
38
(88)
(333)
(163)
605
333
109
216
(395)
802
(8)
(596)
(210)
23
(310)
13
180
121
(45)
(181)
499
(59)
2,096
2,158
(6,688)
(449)
56
71
(11)
(7,021)
7,568
(3,170)
1,599
24
(518)
(868)
(41)
4,594
11
(320)
880
560 $
—
(252)
14
23
(35)
(250)
4
(14)
—
57
(1,083)
(864)
(51)
(1,951)
(18)
(61)
941
880 $
627
340
129
219
(375)
244
(220)
(114)
217
(820)
(68)
23
430
178
(44)
20
190
(131)
2,687
—
(342)
7
1,729
—
1,394
6
(13)
—
97
(3,675)
(817)
(11)
(4,413)
(3)
(335)
1,276
941
_______________
(1) See Note 8: Debt and Credit Arrangements in the Notes to the Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
_____________________________________________________________________
55
Common
Stock
Paid-in
capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Non-
controlling
Interests
Total
Equity
$ 208 $ 19,008 $ 2,347 $
CONSOLIDATED STATEMENT OF EQUITY
(In millions, except per share amounts)
Balance at January 1, 2021
Net income (loss)
Other comprehensive income, net of income
taxes
Shares issued under stock incentive plans
Shares issued under defined contribution plans
Share-based compensation expense
Tax withholding payments on share-based
awards
Repurchases and retirement of common stock
Cash dividends ($4.08 per share)
Other
Balance at December 31, 2021
Net income (loss)
Other comprehensive loss, net of income taxes
Shares issued under stock incentive plans
Shares issued under defined contribution plans
Share-based compensation expense
Tax withholding payments on share-based
awards
Repurchases and retirement of common stock
Cash dividends ($4.48 per share)
Other
Balance at December 30, 2022
Net income (loss)
Other comprehensive income, net of income
taxes
Shares issued under stock incentive plans
Shares issued under defined contribution plans
Share-based compensation expense
Tax withholding payments on share-based
awards
Repurchases and retirement of common stock
Cash dividends ($4.56 per share)
Other
Balance at December 29, 2023
—
—
1
1
—
—
1,846
—
96
218
129
—
—
—
—
(5)
(3,199)
—
(17)
—
1
194
—
—
1
1
—
—
1
16,248
—
—
56
215
109
—
(459)
(817)
—
2,917
1,062
—
—
—
—
—
(5)
—
—
191
—
(45)
(907)
—
1
15,677
—
—
(171)
(864)
(1)
2,943
1,227
—
1
1
—
—
(3)
—
—
—
23
230
89
—
—
—
—
(30)
(433)
—
(3)
—
(82)
(868)
—
(839) $
—
117 $ 20,841
1,842
(4)
693
—
—
—
—
—
—
—
(146)
—
(142)
—
—
—
—
—
—
—
(288)
—
90
—
—
—
106
—
—
—
—
693
97
219
129
—
—
—
(7)
(1)
—
—
—
—
—
—
—
(4)
(5)
(3,675)
(817)
(5)
19,319
1,061
(142)
57
216
109
(45)
(1,083)
(864)
(4)
18,624
1,198
—
—
—
—
90
24
231
89
101
(29)
—
—
—
—
(198) $
(30)
—
(518)
—
(868)
—
(11)
(8)
64 $ 18,829
$ 190 $ 15,553 $ 3,220 $
See accompanying Notes to Consolidated Financial Statements.
_____________________________________________________________________
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
Organization — L3Harris Technologies, Inc., together with its subsidiaries, is the Trusted Disruptor in the
defense industry. With customers’ mission-critical needs in mind, we deliver end-to-end technology solutions
connecting the space, air, land, sea and cyber domains. We support government customers in more than 100
countries, with our largest customers being various departments and agencies of the U.S. Government and their
prime contractors. Our products, systems and services have defense and civil government applications, as well as
commercial applications. As of December 29, 2023 we had approximately 50,000 employees.
Principles of Consolidation — Our Consolidated Financial Statements include the accounts of L3Harris
Technologies, Inc. and its consolidated subsidiaries. As used in these Notes to the Consolidated Financial
Statements, the terms “L3Harris,” “Company,” “we,” “our” and “us” refer to L3Harris Technologies, Inc. and its
consolidated subsidiaries. Intracompany transactions and accounts have been eliminated. Amounts contained in
this Report may not always add to totals due to rounding.
Fiscal Year — Our fiscal year ends on the Friday nearest December 31. Fiscal 2023, fiscal 2022 and fiscal 2021
each included 52 weeks.
Organizational Structure and Change in Accounting Policy — Effective for fiscal 2023, we adjusted our
reporting to better align our businesses and transferred our ADG business from our IMS segment to our SAS
segment. On October 1, 2023, we combined our Electronic Warfare sector and the majority of the ADG sector within
our SAS segment to create a new sector, Advanced Combat Systems (“ACS”). The remaining portion of the ADG
sector was combined with our Space Systems sector within our SAS segment.
The historical results, discussion and presentation of our business segments as set forth in the accompanying
Consolidated Financial Statements and these Notes reflect the impact of these changes for all periods presented in
order to present segment information on a comparable basis. There is no impact on our previously reported
consolidated statements of operations, balance sheets, statements of cash flows or statements of equity resulting
from these changes. See “Business Segments” section below in this Note and Note 14: Business Segments in these
Notes for information regarding our pension presentation and segment structure.
Divestitures — See Note 13: Acquisitions, Divestitures and Asset Sales in these Notes for information regarding
our business divestitures and asset sales in fiscal 2023, 2022 and 2021.
Use of Estimates — The preparation of financial statements in accordance with GAAP requires us to make
estimates and assumptions that affect the amounts reported in the accompanying Consolidated Financial
Statements and these Notes and related disclosures. These estimates and assumptions are based on experience
and other information available prior to issuance of the accompanying Consolidated Financial Statements and these
Notes. Materially different results can occur as circumstances change and additional information becomes known.
Reclassifications — The classification of certain prior year amounts have been adjusted in our Consolidated
Financial Statements and these Notes to conform to current year classifications.
Supplemental Cash Flow Information — Non-cash investing and financing activities during fiscal 2023, fiscal
2022 and fiscal 2021 included a $26 million, $20 million and $120 million, respectively, right-of-use (“ROU”) asset
we obtained in exchange for a corresponding finance lease liability. These non-cash investing and financing activities
are excluded from the “Additions to property, plant and equipment” and “Proceeds from borrowings, net of issuance
cost” line items in our Consolidated Statement of Cash Flows. Right-of-use assets for finance leases are included in
the “Property, plant and equipment, net” line item and the corresponding finance lease liabilities are included in the
“Current portion of long-term debt, net” and “Long-term debt, net” line items in our Consolidated Balance Sheet.
Cash and Cash Equivalents — Cash and cash equivalents include cash at banks and temporary cash
investments with a maturity of three or fewer months when purchased. These investments include accrued interest
and are carried at the lower of cost or market.
Fair Value of Financial Instruments — The carrying amounts reflected in our Consolidated Balance Sheet for
cash and cash equivalents, accounts receivable, non-current receivables, notes receivable, accounts payable, short-
term debt and long-term variable-rate debt approximate their fair values. Fair values for long-term fixed-rate debt
are primarily based on quoted market prices for those or similar instruments. See Note 8: Debt and Credit
Arrangements in these Notes for additional information regarding fair values for our long-term fixed-rate debt. A
discussion of fair values for our derivative financial instruments is included under the caption “Financial Instruments
and Risk Management” in this Note.
_____________________________________________________________________
57
Fair Value Measurements — Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in the principal market (or most advantageous market, in the absence of a principal market) for the
asset or liability in an orderly transaction between market participants at the measurement date. Entities are
required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair
value, and to utilize a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three
levels of inputs used to measure fair value are as follows:
•
•
•
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included within Level 1, including quoted prices for
similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in
markets that are not active; and inputs other than quoted prices that are observable or are derived
principally from, or corroborated by, observable market data by correlation or other means.
Level 3 — Unobservable inputs that are supported by little or no market activity, are significant to the fair
value of the assets or liabilities and reflect our own assumptions about the assumptions market participants
would use in pricing the asset or liability developed using the best information available in the
circumstances.
In certain instances, fair value is estimated using quoted market prices obtained from external pricing services.
In obtaining such data from the pricing service, we have evaluated the methodologies used to develop the estimate
of fair value in order to assess whether such valuations are representative of fair value, including NAV. Additionally,
in certain circumstances, the NAV reported by an asset manager may be adjusted when sufficient evidence indicates
NAV is not representative of fair value.
Accounts Receivable — We record receivables derived from contracts with customers at net realizable value
and they generally do not bear interest. This value includes an allowance for estimated uncollectible accounts to
reflect any losses anticipated on the accounts receivable balances which is charged to the provision for doubtful
accounts. We calculate this allowance at inception based on expected loss over the life of the receivable. We
consider historical write-offs by customer, level of past due accounts and economic status of the customers. A
receivable is considered delinquent if it is unpaid after the term of the related invoice has expired. Write-offs are
recorded at the time a customer receivable is deemed uncollectible.
Contract Assets and Liabilities — The timing of revenue recognition, customer billings and cash collections
results in accounts receivable, contract assets and contract liabilities at the end of each reporting period. Contract
assets include unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers
for contracts utilizing the POC cost-to-cost revenue recognition method. We bill customers as work progresses in
accordance with agreed-upon contractual terms, either at periodic intervals, upon achievement of contractual
milestones or upon deliveries and, in certain arrangements, the customer may withhold payment of a portion of the
contract price until contract completion. Contract liabilities include advance payments and billings in excess of
revenue recognized, including deferred revenue. Contract assets and liabilities are reported on a contract-by-
contract basis at the end of each reporting period. The non-current portion of contract liabilities is included within
the “Other long-term liabilities” line item in our Consolidated Balance Sheet.
Contract assets related to amounts withheld by customers until contract completion are not considered a
significant financing component of our contracts because the intent is to protect the customers from our failure to
satisfactorily complete our performance obligations. Payments received from customers in advance of revenue
recognition are not considered a significant financing component of our contracts because they are utilized to pay for
contract costs within a one-year period or are requested by us to ensure the customers meet their payment
obligations. See Note 3: Contract Assets and Contract Liabilities in these Notes for additional information.
Inventories — Inventories are valued at the lower of cost (determined by average and first-in, first-out methods)
or net realizable value. We regularly review inventory quantities on hand and record a provision for excess and
obsolete inventory primarily based on our estimated forecast of product demand, anticipated end of product life and
production requirements. See Note 4: Inventories in these Notes for additional information regarding inventories.
Property, Plant and Equipment — Property, plant and equipment are carried on the basis of cost and include
software capitalized for internal use. Depreciation of buildings, machinery and equipment is computed by the
straight-line and accelerated methods. The estimated useful lives of buildings, including leasehold improvements,
generally range between 2 and 45 years. The estimated useful lives of machinery and equipment generally range
between 2 and 10 years. Amortization of internal-use software begins when the software is put into service and is
based on the expected useful life of the software. The useful lives over which we amortize internal-use software
generally range between 2 and 10 years. See Note 5: Property, Plant and Equipment, Net in these Notes for
additional information regarding property, plant and equipment.
_____________________________________________________________________
58
Goodwill — We follow the acquisition method of accounting to record the assets and liabilities of acquired
businesses at their estimated fair value at the date of acquisition. We initially record goodwill for the amount the
consideration transferred exceeds the acquisition-date fair value of net identifiable assets acquired.
We test goodwill for impairment at a level within the Company referred to as the reporting unit, which is our
business segment level or one level below the business segment. Goodwill is tested for impairment annually as of
the first business day of our fourth fiscal quarter, or under certain circumstances more frequently, such as when
events or circumstances indicate there may be impairment. Such events or circumstances may include a significant
deterioration in overall economic conditions, changes in the business climate of our industry, a decline in our market
capitalization, operating performance indicators, competition, reorganizations of our business or the disposal of all
or a portion of a reporting unit.
To test goodwill for impairment, we may perform both qualitative and quantitative assessments. If we elect to
perform a qualitative assessment for a certain reporting unit, we evaluate events and circumstances impacting the
reporting unit to determine the probability that goodwill is impaired. If we perform a quantitative assessment for a
certain reporting unit, we calculate the fair value of that reporting unit and compare the fair value to the reporting
unit’s net book value. We estimate fair values of our reporting units based on projected cash flows. Values derived
from projected cash flows are corroborated through review of revenue and/or earnings multiples applied to the
latest twelve months’ revenue and earnings of our reporting units. Projected cash flows are based on our best
estimate of future revenues, operating costs and balance sheet metrics reflecting our view of the financial and
market conditions of the underlying business; and the resulting cash flows are discounted using an appropriate
discount rate that reflects the risk in the forecasted cash flows. Revenue and earnings multiples are based on
current multiples of revenues and earnings for similar businesses, and based on revenue and earnings multiples
paid for recent acquisitions of similar businesses made in the marketplace. We then assess whether any implied
control premium, based on a comparison of fair value based purely on our stock price and outstanding shares with
fair value determined by using all of the above-described models, is reasonable.
If we determine it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount,
we measure any impairment loss by comparing the fair value of each reporting unit to its carrying amount, including
goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired, and an
impairment loss is recognized in an amount equal to that excess. See Note 13: Acquisitions, Divestitures and Asset
Sales and Note 6: Goodwill and Intangible Assets in these Notes for additional information regarding goodwill.
Long-Lived Assets, Including Intangible Assets — Long-lived assets, including finite-lived intangible assets,
are amortized to expense over their useful lives either according to the underlying economic benefit as reflected by
future net cash inflows or on a straight-line basis depending on the nature of the asset.
We assess the recoverability of the carrying value of our long-lived assets, including finite-lived intangible
assets, whenever events or changes in circumstances indicate the carrying amount of the assets may not be
recoverable. We evaluate the recoverability of such assets based on the expectations of undiscounted cash flows
from such assets. If the sum of the expected future undiscounted cash flows are less than the carrying amount of
the asset, a loss is recognized for the difference between the fair value and the carrying amount. Indefinite-lived
intangible assets are not amortized, but are tested annually for impairment, or under certain circumstances more
frequently, such as when events and circumstances indicate there may be an impairment. This testing compares the
fair value of the asset to its carrying amount, and, when appropriate, the carrying amount of these assets is reduced
to its fair value. See Note 5: Property, Plant and Equipment, Net and Note 6: Goodwill and Intangible Assets in these
Notes for additional information regarding long-lived assets and intangible assets.
Leases — We recognize ROU assets and lease liabilities in our Consolidated Balance Sheet for operating and
finance leases under which we are the lessee. As a practical expedient, leases with a term of twelve months or less
(including reasonably certain extension periods) and leases with expected lease payments of less than $250
thousand are expensed as incurred.
Operating lease assets and finance lease assets are included in the “Other non-current assets” and “Property,
plant and equipment, net” line items, respectively, in our Consolidated Balance Sheet. Operating lease liabilities and
finance lease liabilities for obligations due within twelve months are included in the “Other accrued items” line item
in our Consolidated Balance Sheet. Operating lease liabilities and finance lease liabilities for obligations due longer
than twelve months are included in the “Other long-term liabilities” line item in our Consolidated Balance Sheet.
ROU assets and lease liabilities are recognized based on the present value of future lease payments, which are
primarily base rent. We have some lease payments that are based on an index and changes to the index are treated
as variable lease payments and recognized in the period in which the obligation for those payments is incurred. Our
_____________________________________________________________________
59
lease payments also include non-lease components such as real estate taxes and common-area maintenance costs.
As a practical expedient, we account for lease and non-lease components as a single component. For certain leases,
the non-lease components are variable and are therefore excluded from lease payments to determine the ROU
asset. The present value of future lease payments is determined using our incremental borrowing rate at lease
commencement over the expected lease term. We use our incremental borrowing rate because our leases do not
provide an implicit lease rate. The expected lease term represents the number of years we expect to lease the
property, including options to extend or terminate the lease when it is reasonably certain that we will exercise the
option.
Operating lease expense is recognized as an operating cost on a straight-line basis over the expected lease term
in the “Cost of revenue” and “General and administrative expenses” line items in our Consolidated Statement of
Operations. For finance leases, the asset is amortized on a straight-line basis over the lease term, and interest on
the lease liability is recognized in interest expense.
We are a lessor for certain flight simulators and aircraft which meet the criteria for operating lease classification.
Lease income associated with these leases was not material in fiscal 2023, 2022 or 2021.
See Note 11: Leases in these Notes for additional information regarding leases
Income Taxes — We follow the asset and liability method of accounting for income taxes. We record deferred
tax assets and liabilities for differences between the tax basis of assets and liabilities and amounts reported in our
Consolidated Balance Sheet, as well as operating loss and tax credit carryforwards. We follow very specific and
detailed guidelines in each tax jurisdiction regarding the recoverability of any tax assets recorded on the balance
sheet and provide necessary valuation allowances as required. We regularly review our deferred tax assets for
recoverability based on historical taxable income, projected future taxable income, the expected timing of the
reversals of existing temporary differences and tax planning strategies.
The implementation of a modified territorial tax system by the Tax Cuts and Jobs Act of 2017 (“TCJA”) subjects
us to tax on our Global Intangible Low-Taxed Income (“GILTI”) starting with fiscal 2019. The Financial Accounting
Standards Board has permitted companies to make an accounting policy decision to either (1) treat taxes due on
future GILTI inclusions in U.S. taxable income as a current-period expense when incurred (“period cost method”) or
(2) factor such amounts into the measurement of its deferred taxes (“deferred method”). We have elected to use the
period cost method.
See Note 7: Income Taxes in these Notes for additional information regarding income taxes.
Standard Warranties — We record estimated standard warranty costs in the period that control of the related
products transfers to the customer. Factors that affect the estimated cost for warranties include the terms of the
contract, the type and complexity of the delivered product, the number of installed units, historical experience and
management’s assumptions regarding anticipated rates of warranty claims and cost per claim. Our standard
warranties start from the shipment, delivery or customer acceptance date and continue as follows:
Segment
Average Warranty Period
SAS
IMS
CS
AR
One to three years
One to three years
One to five years
One year
Because our products are manufactured, in many cases, to customer specifications and their acceptance is
based on meeting those specifications, we historically have experienced minimal warranty costs. Factors that affect
our warranty liability include the number of installed units, historical experience, anticipated delays in delivery of
products to end customers, in-country support for international revenues and our assumptions regarding anticipated
rates of warranty claims and cost per claim. We assess the adequacy of our recorded warranty liabilities every
quarter and make adjustments to the liability as necessary.
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 close or 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.
_____________________________________________________________________
60
Foreign Currency Translation — The functional currency for most international subsidiaries is the local
currency. Assets and liabilities are translated at current rates of exchange and income and expense items are
translated at the weighted average exchange rate for the year. The resulting translation adjustments are recorded as
a separate component of shareholders’ equity.
Stock Options and Other Share-Based Compensation — We measure compensation cost for all share-based
payments (including employee stock options) at fair value and recognize cost over the vesting period, with
forfeitures recognized as they occur. It is our practice to issue shares when options are exercised. See Note 10:
Stock Options and Other Share-Based Compensation in these Notes for additional information regarding share-based
compensation.
Revenue Recognition — We account for a contract when it has approval and commitment from all parties, the
rights and payment terms of the parties can be identified, the contract has commercial substance and the
collectability of the consideration, or transaction price, is probable. Our contracts are often subsequently modified to
include changes in specifications, requirements or price that may create new or change existing enforceable rights
and obligations. We do not account for contract modifications (including unexercised options) or follow-on contracts
until they meet the requirements noted above to account for a contract.
We categorize revenue and costs for performance obligations to provide tangible goods as “product” and
revenue and costs for performance obligations to provide services for which the principal result is not to produce
anything tangible as “service.” In instances where a single performance obligation requires us to deliver products
and perform services, we derive the product and service categories presented in our financial statements based
upon the predominant nature of each performance. In these cases, we classify the revenue and costs from the entire
performance obligation based on the nature of the overall promise made to the customer.
At the inception of each contract, we evaluate the promised products and services to determine whether the
contract should be accounted for as having one or more performance obligations. A performance obligation is a
promise to transfer a distinct product or service to a customer and represents the unit of accounting for revenue
recognition. A substantial majority of our revenue is derived from long-term development and production contracts
involving the design, development, manufacture or modification of defense products and related services according
to the customers’ specifications. Due to the highly interdependent and interrelated nature of the underlying
products and services and the significant service of integration that we provide, which often result in the delivery of
multiple units, we account for these contracts as one performance obligation. For contracts that include both
development/production and follow-on support services (for example, operations and maintenance), we generally
consider the follow-on services distinct in the context of the contract and account for them as separate performance
obligations. Additionally, we also recognize revenue from contracts to provide multiple distinct products to a
customer where the products can readily be sold to other customers based on their commercial nature and,
accordingly, these products are accounted for as separate performance obligations.
Shipping and handling costs incurred after control of a product has transferred to the customer (for example, in
free on board shipping arrangements) are treated as fulfillment costs and, therefore, are not accounted for as
separate performance obligations. Also, we record taxes collected from customers and remitted to governmental
authorities on a net basis in that they are excluded from revenue.
As noted above, our contracts are often subsequently modified to include changes in specifications,
requirements or price. Depending on the nature of the modification, we consider whether to account for the
modification as an adjustment to the existing contract or as a separate contract. Often, the deliverables in our
contract modifications are not distinct from the existing contract due to the significant integration and interrelated
tasks provided in the context of the contract. Therefore, such modifications are accounted for as if they are part of
the existing contract, and we may be required to recognize a cumulative catch-up adjustment to revenue at the date
of the contract modification.
We determine the transaction price for each contract based on our best estimate of the consideration we expect
to receive, which includes assumptions regarding variable consideration, such as award and incentive fees. These
variable amounts are generally awarded upon achievement of certain negotiated performance metrics, program
milestones or cost targets and can be based upon customer discretion. We include such estimated amounts in the
transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not
occur when the uncertainty associated with the variable consideration is resolved. We estimate variable
consideration primarily using the most likely amount method.
For contracts with multiple performance obligations, we allocate the transaction price to each performance
obligation based on the relative standalone selling price of the product or service underlying each performance
_____________________________________________________________________
61
obligation. The standalone selling price represents the amount for which we would sell the product or service to a
customer on a standalone basis (i.e., not sold as a bundle with any other products or services). Our contracts with
the U.S. Government, including foreign military sales contracts, are subject to the FAR and the prices of our contract
deliverables are typically based on our estimated or actual costs plus a reasonable profit margin. As a result, the
standalone selling prices of the products and services in these contracts are typically equal to the selling prices
stated in the contract, thereby eliminating the need to allocate (or reallocate) the transaction price to the multiple
performance obligations. In our non-U.S. Government contracts, we also generally use the expected cost plus a
reasonable profit margin approach to determine standalone selling price. In addition, we determine standalone
selling price for certain contracts that are commercial in nature based on observable selling prices.
We recognize revenue for each performance obligation when (or as) the performance obligation is satisfied by
transferring control of the promised products or services underlying the performance obligation to the customer.
The transfer of control can occur over-time or at a point in time. A significant portion of our business is derived from
development and production contracts. Revenue and profit related to development and production contracts are
generally recognized over-time, typically using the POC cost-to-cost method of revenue recognition, whereby we
measure our progress towards completion of the performance obligation based on the ratio of costs incurred to date
to estimated costs at completion under the contract. Because costs incurred represent work performed, we believe
this method best depicts the transfer of control of the asset to the customer. Under the POC cost-to-cost method of
revenue recognition, a single estimated profit margin is used to recognize profit for each performance obligation
over its period of performance. To a lesser extent, we also recognize revenue from contracts to provide multiple
distinct products to a customer that are commercial in nature and can readily be sold to other customers. These
performance obligations do not meet any of the three criteria listed below to recognize revenue over-time; therefore,
we recognize revenue at a point in time, generally when the products are received and accepted by the customer.
Point-in-Time Revenue Recognition. Our performance obligations are satisfied at a point in time unless they
meet at least one of the following criteria, in which case they are satisfied over-time:
•
The customer simultaneously receives and consumes the benefits provided by our performance as we
perform;
• Our performance creates or enhances an asset (for example, work in process) that the customer controls as
the asset is created or enhanced; or
• Our performance does not create an asset with an alternative use to us and we have an enforceable right to
payment for performance completed to date.
Over-Time Revenue Recognition. For U.S. Government development and production contracts, there is generally
a continuous transfer of control of the asset to the customer as it is being produced based on FAR clauses in the
contract that provide the customer with lien rights to work in process and allow the customer to unilaterally
terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any
work in process. This also typically applies to our contracts with prime contractors for U.S. Government
development and production contracts, when the above-described FAR clauses are flowed down to us by the prime
contractors.
Our non-U.S. Government development and production contracts, including international direct commercial
contracts and U.S. contracts with state and local agencies, utilities, commercial and transportation organizations,
often do not include the FAR clauses described above. However, over-time revenue recognition is typically
supported either through our performance creating or enhancing an asset that the customer controls as it is created
or enhanced or based on other contractual provisions or relevant laws that provide us with an enforceable right to
payment for our work performed to date plus a reasonable profit if our customer were permitted to and did
terminate the contract for reasons other than our failure to perform as promised.
For performance obligations to provide services that are satisfied over-time, we recognize revenue either on a
straight-line basis, the POC cost-to-cost method or based on the right-to-invoice method (i.e., based on our right to
bill the customer), depending on which method best depicts transfer of control to the customer.
Contract Estimates. Under the POC cost-to-cost method of revenue recognition, a single estimated profit margin
is used to recognize profit for each performance obligation over its period of performance. Recognition of profit on a
contract requires estimates of the total cost at completion and transaction price and the measurement of progress
towards completion. Due to the long-term nature of many of our contracts, developing the estimated total cost at
completion and total transaction price often requires judgment. Factors that must be considered in estimating the
cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor
performance and the risk and impact of delayed performance. Factors that must be considered in estimating the
total transaction price include contractual cost or performance incentives (such as incentive fees, award fees and
_____________________________________________________________________
62
penalties) and other forms of variable consideration, as well as our historical experience and our expectation for
performance on the contract.
At the outset of each contract, we gauge its complexity and perceived risks and establish an estimated total cost
at completion in line with these expectations. We follow a standard EAC process in which we review the progress
and performance on our ongoing contracts at least quarterly and, in many cases, more frequently. If we successfully
retire risks associated with the technical, schedule and cost aspects of a contract, we may lower our estimated total
cost at completion commensurate with the retirement of these risks. Conversely, if we are not successful in retiring
these risks, we may increase our estimated total cost at completion. Additionally, as the contract progresses, our
estimates of total transaction price may increase or decrease if, for example, we receive award fees that are higher
or lower than expected.
When changes in estimated total costs at completion or in estimated total transaction price are determined, the
related impact on operating income is recognized on a cumulative basis. Cumulative EAC adjustments represent the
cumulative effect of the changes on current and periods; revenue and operating margins in future periods are
recognized as if the revised estimates had been used since contract inception. Any anticipated losses on these
contracts are fully recognized in the period in which the losses become evident.
Net EAC adjustments had the following impact to earnings for the periods presented:
Fiscal Year Ended
(In millions, except per share amounts)
December 29, 2023 December 30, 2022 December 31, 2021
Net EAC adjustments, before income taxes
Net EAC adjustments, net of income taxes
Net EAC adjustments, net of income taxes, per diluted share
$
(85) $
(63)
(0.33)
36 $
27
0.14
304
228
1.12
Revenue recognized from performance obligations satisfied in prior periods was $118 million, $110 million and
$402 million in fiscal 2023, 2022 and 2021, respectively.
Bill-and-Hold Arrangements. For certain contracts, the finished product may temporarily be stored at our
location under a bill-and-hold arrangement. Revenue is recognized on bill-and-hold arrangements at the point in
time when the customer obtains control of the product and all of the following criteria have been met: the
arrangement is substantive (for example, the customer has requested the arrangement); the product is identified
separately as belonging to the customer; the product is ready for physical transfer to the customer; and we do not
have the ability to use the product or direct it to another customer. In determining when the customer obtains
control of the product, we consider certain indicators, including whether we have a present right to payment from
the customer, whether title and/or significant risks and rewards of ownership have transferred to the customer and
whether customer acceptance has been received (in the case of arrangements with customer acceptance
provisions).
Backlog. Backlog, which is the equivalent of our remaining performance obligations, represents the future
revenue we expect to recognize as we perform on our current contracts. Backlog comprises both funded backlog
(i.e., firm orders for which funding is authorized and appropriated) and unfunded backlog. Backlog excludes
unexercised contract options and potential orders under ordering-type contracts, such as IDIQ contracts.
At December 29, 2023, our ending backlog was $32.7 billion, of which $22.0 billion was funded backlog. We
expect to recognize approximately 40% of the revenue associated with this backlog by the end of 2024 and
approximately 65% by the end of 2025, with the remainder to be recognized thereafter. At December 30, 2022, our
ending backlog was $22.3 billion, of which $16.2 billion was funded backlog.
Retirement Benefits — We sponsor various pension and other postretirement defined benefit plans.
Accordingly, the funded or unfunded position of each defined benefit plan is recorded in our Consolidated Balance
Sheet. Actuarial gains and losses and prior service costs or credits that have not yet been recognized through
income are recorded in the “Accumulated other comprehensive loss” line item within equity in our Consolidated
Balance Sheet, net of taxes, until they are amortized as a component of net periodic benefit income. The
determination of benefit obligations and the recognition of expenses related to defined benefit plans are dependent
on various assumptions. The major assumptions primarily relate to discount rates, long-term expected rates of
return on plan assets, the rate of future compensation increases, mortality, termination and health care cost trend
rates.
We develop each assumption using relevant Company experience in conjunction with market-related data.
Actuarial assumptions are reviewed annually with third-party consultants and adjusted as appropriate. For the
recognition of net periodic benefit income, the calculation of the long-term expected return on plan assets is
_____________________________________________________________________
63
generally derived using a market-related value of plan assets based on yearly average asset values at the
measurement date over the last five years, to be phased in over five years. Actual results that differ from our
assumptions are accumulated and generally amortized for each plan to the extent required over the estimated
future life expectancy or, if applicable, the future working lifetime of the plan’s active participants. The fair value of
plan assets is determined based on market prices or estimated fair value at the measurement date. The
measurement date for valuing defined benefit plan assets and obligations is the end of the month closest to our
fiscal year end.
We record the service cost component of net periodic benefit income in the “Cost of revenue” and “General and
administrative expenses” line items in our Consolidated Statement of Operations. The non-service cost components
of net periodic benefit income are included in the “Non-service FAS pension income and other, net” line item in our
Consolidated Statement of Operations.
We also provide retirement benefits to many of our U.S.-based employees through defined contribution
retirement plans, including 401(k) plans and certain non-qualified deferred compensation plans. The defined
contribution retirement plans have matching and savings elements. Company contributions to the retirement plans
are based on employees’ savings with no other funding requirements. We may make additional contributions to the
retirement plans at our discretion. Retirement and postretirement benefits also include unfunded limited healthcare
plans for some U.S.-based retirees and employees on long-term disability. We estimate benefits for these plans
using actuarial valuations that are based, in part, on certain key assumptions we make, including the discount rate,
the expected long-term rate of return on plan assets, the rate of future compensation increases, healthcare cost
trend rates and employee turnover and mortality, each appropriately based on the nature of the plans. We accrue
the cost of these benefits during an employee’s active service life, except in the case of our healthcare plans for
disabled employees, the costs of which we accrue when the disabling event occurs.
See Note 9: Retirement Benefits in these Notes for additional information regarding our defined benefit plans.
Environmental Expenditures — We generally capitalize environmental expenditures that increase the life or
efficiency of property or that reduce or prevent environmental contamination. We accrue environmental expenses
resulting from existing conditions that relate to past or current operations. Our accruals for environmental expenses
are recorded on a site-by-site basis when it is probable a liability has been incurred and the amount of the liability
can be reasonably estimated, based on current law and existing technologies available to us. Our accruals for
environmental expenses represent the best estimates related to the investigation and remediation of environmental
media such as water, soil, soil vapor, air and structures, as well as related legal fees, and are reviewed periodically,
at least annually at the year-end balance sheet date, and updated for progress of investigation and remediation
efforts and changes in facts and legal circumstances. If the timing and amount of future cash payments for
environmental liabilities are fixed or reliably determinable, we generally discount such cash flows in estimating our
accrual.
The relevant factors we considered in estimating our potential liabilities under applicable environmental
statutes and regulations included some or all of the following as to each site: incomplete information regarding
particular sites and other potentially responsible parties; uncertainty regarding the extent of investigation or
remediation; our share, if any, of liability for such conditions; the selection of alternative remedial approaches;
changes in environmental standards and regulatory requirements; probable insurance proceeds; cost-sharing
agreements with other parties; and potential indemnification from successor and predecessor owners of these sites.
We do not believe that any uncertainties regarding these relevant factors will materially affect our potential liability
under applicable environmental statutes and regulations. We believe the total amount accrued is appropriate based
on existing facts and circumstances, although we note the total amount accrued may increase or decrease in future
years.
See Note 15: Legal Proceedings, Commitments and Contingencies in these Notes for additional information
regarding our environmental expenditures.
Financial Guarantees and Commercial Commitments — Financial guarantees are contingent commitments
issued to guarantee the performance of a customer to a third party in borrowing arrangements, such as commercial
paper issuances, bond financings and similar transactions.
We have entered into commercial commitments in the normal course of business including surety bonds,
standby letter of credit agreements and other arrangements with financial institutions and customers primarily
related to the guarantee of future performance on certain contracts to provide products and services to customers
and to obtain insurance policies with our insurance carriers.
_____________________________________________________________________
64
As of December 29, 2023, we had commercial commitments on outstanding surety bonds of $536 million and
standby letters of credit of $723 million. There were no other such financial guarantees and commercial
commitments accrued for in our Consolidated Balance Sheet.
Financial Instruments and Risk Management — In the normal course of business, we are exposed to global
market risks, including the effect of changes in foreign currency exchange rates and changes in interest rates. We
use derivative instruments to manage our exposure to such risks and formally document all relationships between
hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking
hedge transactions. To manage our exposure to currency risk and market fluctuation risk associated with anticipated
cash flows that are probable of occurring in the future, we implement cash flow hedges across our business
segments. More specifically, we use foreign currency forward contracts and options to hedge off-balance sheet
future foreign currency commitments, including purchase commitments to suppliers, future committed sales to
customers and intersegment transactions. Notional amounts are used to measure the volume of foreign currency
forward contracts and do not represent exposure to foreign currency losses. At December 29, 2023, we had open
foreign currency forward contracts with an aggregate notional amount of $223 million, hedging certain forecasted
transactions denominated in U.S. Dollars, Canadian Dollars and Australian Dollars. At December 30, 2022, we had
open foreign currency forward contracts with an aggregate notional amount of $275 million, hedging certain
forecasted transactions denominated in Canadian Dollars, U.S. Dollars, British Pounds and Euros.
We may also enter into derivative instruments that are not designated as hedges and do not qualify for hedge
accounting. We recognize all derivatives in our Consolidated Balance Sheet at fair value. These financial instruments
are marked-to-market using forward prices and fair value quotes with the offset to other comprehensive income
(loss) and are categorized in Level 2 of the fair value hierarchy. The cash flow impact of our derivatives is included in
the same category in our Consolidated Statement of Cash Flows as the cash flows of the related hedged items. We
do not hold or issue derivatives for speculative trading purposes.
Derivatives that are not hedges are adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of the derivative are either offset against the change in fair value
of assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings. Gains and losses in accumulated other comprehensive loss are reclassified to
earnings when the related hedged item is recognized in earnings.
Income From Continuing Operations Per Common Share — For all periods presented in our Consolidated
Financial Statements and these Notes, income from continuing operations per share (“EPS”) is computed using the
two-class method. The two-class method of computing EPS is an earnings allocation formula that determines EPS
for common stock and any participating securities according to dividends paid and participation rights in
undistributed earnings. Under the two-class method, income from continuing operations per common share is
computed by dividing the sum of earnings distributed to common shareholders and undistributed earnings allocated
to common shareholders by the weighted-average number of common shares outstanding for the period. Income
from continuing operations per diluted common share (“diluted EPS”) is computed using the more dilutive of the
two-class method or the treasury stock method. In applying the two-class method, undistributed earnings are
allocated to both common shares and participating securities based on the weighted-average shares outstanding
during the period. See Note 2: Earnings Per Share in these Notes for additional information regarding weighted-
average shares outstanding.
Business Segments — We evaluate our business segment’s based on its operating income or loss. Intersegment
revenues are generally transferred at cost to the buying segment, and the sourcing segment recognizes a profit that
is eliminated. The “Corporate eliminations” line item in Note 14: Business Segments in these Notes represents the
elimination of intersegment revenues. Corporate expenses are primarily allocated to our business segments using
an allocation methodology prescribed by U.S. Government regulations for government contractors. The “Unallocated
corporate department (expense) income, net” line item in Note 14: Business Segments in these Notes represents the
portion of corporate expenses that are not included in management’s evaluation of segment operating performance
or elimination of intersegment profits.
In accordance with CAS, we allocate a portion of pension and OPEB plan costs to our U.S. Government
contracts. However, our Consolidated Financial Statements require pension and OPEB plan income or expense to be
calculated in accordance with FAS requirements under GAAP. The “FAS/CAS operating adjustment” line item in Note
14: Business Segments in these Notes represents the difference between the service cost component of FAS
pension and OPEB cost and total CAS pension and OPEB cost. The non-service cost components of FAS pension and
OPEB income or expense are included as component of the “Non-service FAS pension income and other, net” line
item in our Consolidated Statement of Operations. The non-service cost components of net periodic pension and
_____________________________________________________________________
65
postretirement benefit income includes interest cost, expected return on plan assets, amortization of net actuarial
gain or loss and effect of curtailments or settlements under our pension and postretirement benefit plans. See Note
9: Retirement Benefits in these Notes for more information on the composition of non-service cost components of
FAS pension and OPEB income and expense.
Research and Development — Company-funded R&D costs are expensed as incurred and are included in the
“General and administrative expenses” line item in our Consolidated Statement of Operations. These costs were
$480 million, $603 million and $692 million in fiscal 2023, 2022, and 2021, respectively. Customer-funded R&D
costs are incurred pursuant to contractual arrangements, principally U.S. Government-sponsored contracts
requiring us to provide a product or service meeting certain defined performance or other specifications (such as
designs), and such contractual arrangements are accounted for principally by the POC cost-to-cost revenue
recognition method. Customer-funded R&D is included in the “Revenue” and “Cost of revenue” line items in our
Consolidated Statement of Operations.
Accounting Changes or Recent Accounting Pronouncements — Accounting standards updates adopted and/or
issued, but not effective until after December 29, 2023, are not expected to have a material effect on our
Consolidated Financial Statements, and there have been no new accounting changes or recent accounting
pronouncements which became effective during fiscal 2023 that materially impacted our Consolidated Financial
Statements.
NOTE 2: EARNINGS PER SHARE
We define EPS as income from continuing operations per common share attributable to L3Harris common
shareholders divided by either our weighted average number of basic or diluted shares outstanding. Potential
dilutive common shares primarily consist of employee stock options and restricted and performance unit awards.
The weighted average number of shares outstanding used to compute basic and diluted EPS are as follows:
(In millions, except per share amounts)
December 29, 2023 December 30, 2022 December 31, 2021
Basic weighted-average common shares outstanding
Impact of dilutive share-based awards
Diluted weighted-average common shares outstanding
189.6
1.0
190.6
191.8
1.7
193.5
201.3
1.9
203.2
Income from continuing operations per diluted common share excludes the antidilutive impact of 3.7 million,
0.3 million and 0.8 million weighted average share-based awards outstanding in fiscal 2023, 2022 and 2021,
respectively.
Fiscal Year Ended
NOTE 3: CONTRACT ASSETS AND CONTRACT LIABILITIES
Contract assets and contract liabilities are summarized below:
(In millions)
Contract assets(1)
Contract liabilities, current(2)
Contract liabilities, non-current(3)
Net contract assets
December 29, 2023 December 30, 2022
$
$
3,196 $
(1,900)
(94)
1,202 $
2,987
(1,400)
(117)
1,470
_______________
(1)
(2)
(3) The non-current portion of contract liabilities is included as a component of the “Other long-term liabilities” line item in our Consolidated
Includes approximately $385 million of AR contract assets at December 29, 2023.
Includes approximately $319 million of AR contract liabilities at December 29, 2023.
Balance Sheet.
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66
The components of contract assets are summarized below:
(In millions)
Unbilled contract receivables, gross
Unliquidated progress payments and advances
Contract assets
December 29, 2023 December 30, 2022
$
$
6,649 $
(3,453)
3,196 $
4,629
(1,642)
2,987
Contract assets and liabilities as of December 29, 2023 and December 30, 2022 were impacted primarily by the
timing of contractual billing milestones. In fiscal 2023, 2022 and 2021, we recognized $1.25 billion, $1.06 billion
and $930 million, respectively, of revenue related to contract liabilities that were outstanding at the end of the
respective prior fiscal year.
NOTE 4: INVENTORIES
Inventories are summarized below:
(In millions)
Finished products
Work in process
Materials and supplies
Inventories
December 29, 2023 December 30, 2022
$
$
217 $
427
828
1,472 $
181
396
714
1,291
NOTE 5: PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, are summarized below:
(In millions)
December 29, 2023 December 30, 2022
Land
Software capitalized for internal use
Buildings
Machinery and equipment
Less: accumulated depreciation and amortization
Property, plant and equipment, net(1)
$
$
184 $
716
1,605
2,816
5,321
(2,459)
2,862 $
78
686
1,251
2,322
4,337
(2,233)
2,104
_______________
(1)
Includes approximately $95 million, $275 million and $251 million of AR land, buildings and machinery and equipment, respectively, at
December 29, 2023.
Depreciation and amortization expense related to property, plant and equipment was $389 million, $342 million
and $343 million in fiscal 2023, 2022 and 2021, respectively.
There were no impairments of property, plant and equipment in fiscal 2023 or 2022.
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67
NOTE 6: GOODWILL AND INTANGIBLE ASSETS
The assignment of goodwill and changes in the carrying amount of goodwill, by business segment, for fiscal
2023 and 2022 were as follows:
(In millions)
SAS
IMS
CS
AR
Total
Balance at December 31, 2021
Assets of business held for sale(1)
Impairment of goodwill
Currency translation adjustments
$
Balance at December 30, 2022
Reallocation of goodwill in business realignment(2)
Goodwill from TDL acquisition
Goodwill from AJRD acquisition
Goodwill decrease from divestitures(1)
Assets of business held for sale(3)
Impairment of goodwill
Currency translation adjustments
Balance at December 29, 2023
$
5,849 $
(30)
—
(41)
5,778
327
—
—
(9)
—
—
14
6,110 $
8,187 $
—
(447)
(31)
7,709
(327)
—
—
—
(534)
(296)
12
6,564 $
4,153
—
(355)
(2)
3,796
—
1,143
—
—
—
—
1
4,940 $
** $ 18,189
(30)
**
(802)
**
(74)
**
17,283
**
—
—
1,143
—
2,365
2,365
(9)
—
(534)
—
(296)
—
27
—
2,365 $ 19,979
_______________
**
AR is a new reportable segment established in the quarter ended September 29, 2023 which consists of the assets, liabilities and operations
assumed in the AJRD acquisition. As such, there is no comparable prior year information.
(1) During fiscal 2022, we assigned $30 million of goodwill associated with the then pending VIS business divestiture to “Assets of business
held for sale ” in our Consolidated Balance Sheet. During fiscal 2023, we assigned an additional $9 million of goodwill to our VIS business
and completed the divestiture. We derecognized $39 million of goodwill as part of determining the gain on sale. See Note 13: Acquisitions,
Divestitures and Asset Sales in these Notes for further information.
In conjunction with our 2023 business realignment discussed below, we reallocated $327 million of goodwill related to the legacy ADG
reporting unit, which is net of fiscal 2022 impairment charges of $80 million, to our SAS segment from our IMS segment.
(2)
(3) During fiscal 2023, we assigned $534 million of goodwill associated with the pending divestiture of the CAS disposal group to “Assets of
business held for sale” in our Consolidated Balance Sheet. See Note 13: Acquisitions, Divestitures and Asset Sales in these Notes for further
information.
At December 29, 2023 accumulated goodwill impairment losses totaled $80 million, $1,126 million and
$355 million at our SAS, IMS, and CS segments, respectively. At December 30, 2022 accumulated goodwill
impairment losses totaled $80 million, $830 million and $355 million at our SAS, IMS, and CS segments,
respectively.
Reallocation of Goodwill in Business Realignment — Fiscal 2023
Effective in fiscal 2023, we adjusted our reporting to better align our businesses and transferred our ADG
business (a reporting unit) from our IMS segment to our SAS segment (also a reporting unit). In connection with the
realignment, we reduced our reporting units from nine to eight as the ADG reporting unit and all $327 million of
associated goodwill was absorbed by our existing SAS reporting unit given the economic similarities of the two
reporting units. Immediately before the realignment, we performed a qualitative impairment assessment over our
SAS reporting unit and a quantitative impairment assessment over our ADG reporting unit. Immediately after the
realignment, we performed a quantitative impairment assessment over the SAS reporting unit. We prepared
estimates of the fair value of our pre-realignment ADG reporting unit and post-realignment SAS reporting unit based
on a combination of market-based valuation techniques, utilizing quoted market prices, comparable publicly
reported transactions and an income-based valuation technique using projected discounted cash flows. These
assessments indicated no impairment existed either before or after the realignment.
Goodwill from TDL Acquisition — Fiscal 2023
We recorded $1,143 million of goodwill in our Broadband reporting unit within our CS segment in connection
with the acquisition of TDL. See Note 13: Acquisitions, Divestitures and Asset Sales in these Notes for further
information.
Goodwill from AJRD Acquisition — Fiscal 2023
We recorded $2,365 million of goodwill in our AR segment, which is also the AR reporting unit in connection with
the acquisition of AJRD. See Note 13: Acquisitions, Divestitures and Asset Sales in these Notes for further
information.
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68
CAS Disposal Group Pending Divestiture and Impairment — Fiscal 2023
As described in more detail in Note 13: Acquisitions, Divestitures and Asset Sales, on November 27, 2023, we
announced that we entered into a definitive agreement to sell our CAS disposal group, which includes both the CTS
and Commercial Aviation reporting units. As of November 27, 2023, the fair value less costs to sell the CAS disposal
group was $834 million, inclusive of considerations related to noncontrolling interest and accumulated other
comprehensive income.
In connection with the preparation of our financial statements for the fiscal year ended December 29, 2023, we
evaluated the facts and circumstances which impacted the agreed upon selling price of the CAS disposal group and
identified interim indicators of impairment within both reporting units subsequent to our annual impairment testing
date of October 2, 2023. Specifically, supply chain-related operational challenges which negatively impact cash
flows over the short-term forecast period were assessed in combination with our long-term portfolio shaping
strategy to dispose of non-core businesses. As a result, we performed quantitative impairment tests for both
reporting units as of November 27, 2023, utilizing an income approach aligned to market prices for the two reporting
units, as specified in the definitive agreement. As a result of these tests, we determined that the fair value of the CTS
reporting unit was above carrying value, while the fair value of the Commercial Avionics reporting unit was below its
carrying value, and concluded goodwill related to the Commercial Aviation reporting unit was impaired. Therefore
we recorded a non-cash charge for impairment of $296 million associated with the Commercial Aviation reporting
unit in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations.
Goodwill Impairments — Fiscal 2022
During fiscal 2022, we determined that goodwill related to our Broadband, ADG and Electro Optical reporting
units was impaired and we recorded non-cash impairment charges of $355 million, $313 million and $134 million,
respectively, in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement
of Operations. See Note 9: Goodwill in our Fiscal 2022 Form 10-K for further information on our fiscal 2022 goodwill
impairments.
In conjunction with our 2023 business realignment, certain businesses within our ADG reporting unit were
aligned with our Electro Optical and SAS reporting units. As such, fiscal 2022 impairment charges related to Electro
Optical and ADG of $367 million and $80 million, are included in our Electro Optical and SAS reporting units,
respectively, in our comparative financial results for fiscal 2022.
Fiscal 2021 Impairment
During fiscal 2021, we determined the criteria to be classified as held for sale were met with respect to the CPS
business within our Aviation Systems segment and assigned $174 million of goodwill to the disposal group on a
relative fair value basis. In connection with the preparation of our financial statements for fiscal 2021, we concluded
that goodwill related to the CPS business was impaired and we recorded a non-cash impairment charge of
$62 million, which is included in the “Impairment of goodwill and other assets” line item in our Consolidated
Statement of Operations for fiscal 2021. See Note 13: Acquisitions, Divestitures and Asset Sales in these Notes for
additional information.
Intangible Assets
The most significant identifiable intangible asset that is separately recognized for our business combinations is
customer relationships. Our customer relationships are established through written customer contracts (i.e.,
revenue arrangements). The fair value for customer relationships is determined, as of the date of acquisition, based
on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows
arising from the follow-on revenues expected from the customer relationships over the estimated lives, including
the probability of expected future contract renewals and revenues, less a contributory assets charge, all of which is
discounted to present value.
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69
Identifiable intangible assets, net, are summarized below:
(In millions)
December 29, 2023
December 30, 2022
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount (1)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount (2)
Customer relationships
Developed technologies
Trade names — divisions
Other, including contract backlog
Total finite-lived identifiable intangible
assets
In-process research and development
Trade names — corporate
Total identifiable intangible assets, net
$ 8,892 $
856
185
4
9,937
—
1,803
$ 11,740 $
2,733 $ 6,159 $ 6,124 $
443
135
—
413
50
4
566
95
3
3,200
—
—
6,737
—
1,803
6,788
21
1,803
3,200 $ 8,540 $ 8,612 $
2,189 $ 3,935
200
42
—
366
53
3
2,611
—
—
4,177
21
1,803
2,611 $ 6,001
_______________
(1) During fiscal 2023, we assigned $263 million of intangible assets associated with the pending divestiture of the CAS disposal group to
"Assets of business held for sale" in our Consolidated Balance Sheet. See Note 13: Acquisitions, Divestitures and Asset Sales in these Notes
for additional information regarding divestitures and businesses held for sale.
(2) During fiscal 2022, we assigned $10 million of intangible assets associated with the then pending VIS business divestiture to "Assets of
business held for sale" in our Consolidated Balance Sheet. During fiscal 2023, we completed the divestiture of our VIS business. See Note
13: Acquisitions, Divestitures and Asset Sales in these Notes for additional information regarding divestitures and businesses held for sale.
Intangible assets acquired in fiscal 2023 are as follows:
(In millions)
TDL Acquisition
AJRD Acquisition
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Customer relationships
Developed technologies
Trade names — divisions
$
406 $
349
—
62 $
21
—
344 $
328
—
2,720 $
—
120
102 $
—
3
2,618
—
117
The most significant identifiable intangible asset that is separately recognized for our business combinations is
customer relationships. For further description of our accounting policies related to intangible assets acquired in the
TDL and AJRD acquisitions, see Note 13: Acquisitions, Divestitures and Asset Sales.
Amortization expense for identifiable finite-lived intangible assets was $779 million, $605 million and
$627 million in fiscal 2023, 2022 and 2021, respectively, and primarily related to assets acquired in connection with
business combinations.
Future estimated amortization expense for identifiable intangible assets is as follows:
2024
2025
2026
2027
2028
Thereafter
Total
(In millions)
$
$
914
791
694
585
513
3,240
6,737
In-process R&D Impairment - Fiscal 2023
During fiscal 2023, we closed a facility, which triggered an evaluation of the in-process R&D related to the
operations of the closed facility for impairment. As a result we recorded a $21 million non-cash charge for the
impairment of in-process R&D intangible assets which is included in the “Impairment of goodwill and other assets”
line item in our Consolidated Statement of Operations.
_____________________________________________________________________
70
Fiscal 2021 Impairment
During the quarter ended July 2, 2021, we adjusted our Aviation Systems segment reporting to better align our
businesses and separated the CTS business from our CAS reporting unit, creating a new reporting unit within the
CAS sector of our Aviation Systems segment. Immediately before and after our goodwill assignments, we completed
an assessment of any potential goodwill impairment under our former and new reporting unit structure and
determined that no impairment existed.
To test for potential impairment of the long-lived assets, including identifiable intangible assets and property,
plant and equipment, related to CTS, we compared the estimated future cash flows (on an undiscounted basis) to be
generated from the use and hypothetical eventual disposition of the asset group to its carrying value and, as a result,
we determined the carrying value of the CTS asset group was not recoverable. Next, we prepared an estimate of the
fair value of CTS based on a combination of market-based valuation techniques, utilizing quoted market prices,
comparable publicly reported transactions and projected discounted cash flows. We compared the fair value of CTS
to our carrying value and recorded a $145 million non-cash charge for the impairment of CTS long-lived assets,
including $63 million for impairment of identifiable intangible assets, which is included in the “Impairment of
goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2021.
NOTE 7: INCOME TAXES
Income Tax Provision
The provisions for current and deferred income taxes attributable to continuing operations are as follows:
(In millions)
Current:
United States
International
State and local
Total current income taxes
Deferred:
United States
International
State and local
Total deferred income taxes
Total income taxes
December 29, 2023 December 30, 2022 December 31, 2021
Fiscal Year Ended
$
328 $
50
66
444
(380)
10
(51)
(421)
$
23 $
633 $
82
98
813
(523)
(61)
(17)
(601)
212 $
415
70
65
550
(55)
(34)
(21)
(110)
440
A reconciliation of the U.S. statutory income tax rate to our effective income tax rate is as follows:
U.S. statutory income tax rate
State taxes
International income
Non-deductible goodwill impairment
Research and development tax credit
FDII deduction
Changes in valuation allowance
Impact of divestitures and reorganizations
Equity-based compensation(1)
Settlement of tax audits
Other items
Effective income tax rate
December 29, 2023 December 30, 2022 December 31, 2021
Fiscal Year Ended
21.0 %
1.1
—
3.6
(12.5)
(4.4)
0.5
(8.5)
0.2
(1.1)
2.0
1.9 %
21.0 %
2.2
—
14.2
(13.0)
(5.1)
0.1
(1.3)
(0.2)
(0.7)
(0.5)
16.7 %
21.0 %
1.8
0.4
0.6
(5.9)
(1.4)
0.9
4.1
(1.1)
(1.1)
—
19.3 %
_______________
(1)
Includes non-deductible equity-based compensation and excess tax benefits from equity-based compensation.
_____________________________________________________________________
71
As of December 29, 2023, we estimate our outside basis difference in foreign subsidiaries that are considered
indefinitely reinvested to be approximately $1.5 billion. The outside basis difference is comprised predominantly of
purchase accounting adjustments and to a lesser extent, undistributed earnings and other equity adjustments. In
the event of a disposition of the foreign subsidiaries or a distribution, we may be subject to incremental U.S. income
taxes, subject to an adjustment for foreign tax credits, and withholding taxes or income taxes payable to the foreign
jurisdictions. As of December 29, 2023, the determination of the amount of unrecognized deferred tax liability
related to the outside basis difference is not practicable.
Purchase of Tax Credits under IRA
The IRA includes a new transferability provision under Section 6418 of the Internal Revenue Code which
permits, in certain circumstances, the sale of federal income tax credits generated from renewable and alternative
energy sources. During the year ended December 29, 2023, we entered into a binding agreement to purchase tax
credits totaling $51 million for the 2023 tax year for a net purchase price of $0.95 per $1.00 of tax credits, allowing
us to reduce our 2023 federal income taxes payable by the amount of credits we expect to claim on our tax returns
as a result of our binding agreement. We have recorded a liability to the transferor for the amount owed in the “Other
accrued items” line of the Consolidated Balance Sheet. We have recorded an income tax benefit of $2 million for the
difference between the amount paid or to be paid to the transferor and the reduction to our taxes payable in the
“Income taxes” line of the Consolidated Statement of Operations.
Deferred Income Tax Assets (Liabilities)
The components of deferred income tax assets (liabilities) were as follows:
(In millions)
Deferred tax assets, net:
Accruals
Tax loss and credit carryforwards
Operating lease obligation
Capitalized research and experimental expenditures
Other
Valuation allowance(1)
Deferred tax assets, net
Deferred tax liabilities:
Property, plant and equipment
Acquired intangibles
Operating lease right-of-use asset
Other
Deferred tax liabilities
Net deferred tax liabilities
December 29, 2023 December 30, 2022
$
334 $
217
243
1,125
272
(240)
1,951
(252)
(2,143)
(219)
(61)
(2,675)
$
(724) $
227
194
239
646
372
(243)
1,435
(167)
(1,566)
(210)
(138)
(2,081)
(646)
_______________
(1) The valuation allowance has been established to offset certain domestic and foreign deferred tax assets due to uncertainty regarding our
ability to realize them in the future. The net change in our valuation allowance in fiscal 2023 and 2022 was a decrease of $3 million and
$14 million, respectively.
Net deferred tax assets (liabilities) were classified as follows in our Consolidated Balance Sheet:
(In millions)
Deferred income tax assets
Deferred income tax liabilities
Net deferred tax liabilities
December 29, 2023 December 30, 2022
$
$
91 $
(815)
(724) $
73
(719)
(646)
Tax loss and credit carryforwards at December 29, 2023 have expiration dates ranging from less than one year
to no expiration date. A significant portion of the carryforwards are either indefinite or begin expiring in 2035. The
tax-effected amounts of federal, international and state and local operating loss carryforwards at December 29,
2023 were $5 million, $83 million and $4 million, respectively. The tax-effected amounts of federal, international
and state and local capital loss carryforwards were not material at December 29, 2023. There were no international
_____________________________________________________________________
72
credit carryforwards, and $7 million and $110 million of federal and state and local credit carryforwards,
respectively, at December 29, 2023.
Income from continuing operations before income taxes of international subsidiaries was $205 million, $95
million and $29 million in fiscal 2023, 2022 and 2021, respectively. We paid $715 million, $309 million and $358
million in income taxes, net of refunds received, in fiscal 2023, 2022 and 2021, respectively.
Tax Uncertainties
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
(In millions)
December 29, 2023 December 30, 2022 December 31, 2021
Fiscal Year Ended
Balance at beginning of period
$
613 $
587 $
Additions based on tax positions taken during current
period
Additions based on tax positions taken during prior period
Additions from tax positions related to acquired entities
Decreases based on tax positions taken during prior
period
Decreases from lapse in statutes of limitations
Decreases from settlements
Balance at end of fiscal year
$
99
8
86
(133)
(11)
(10)
652 $
124
4
—
(76)
(6)
(20)
613 $
542
115
11
—
(64)
(15)
(2)
587
As of December 29, 2023, we had $652 million of unrecognized tax benefits, of which $509 million would
favorably impact our future tax rates in the event that the tax benefits are eventually recognized. As of December 30,
2022, we had $613 million of unrecognized tax benefits, of which $486 million would favorably impact our future
tax rates in the event that the tax benefits are eventually recognized.
We recognize accrued interest and penalties related to unrecognized tax benefits as part of our income tax
expense. We recognized interest and penalties of $20 million, $12 million and $3 million in fiscal 2023, 2022 and
2021, respectively. We had accrued $80 million for the potential payment of interest and penalties as of
December 29, 2023 (and this amount was not included in the $652 million of unrecognized tax benefits balance at
December 29, 2023 shown above). We had accrued $59 million for the potential payment of interest and penalties
as of December 30, 2022 (and this amount was not included in the $613 million of unrecognized tax benefits
balance at December 30, 2022 shown above).
We file numerous separate and consolidated income tax returns reporting our financial results and, where
appropriate, those of our subsidiaries and affiliates, in the U.S. federal jurisdiction and various state, local and
foreign jurisdictions. Pursuant to the Compliance Assurance Process, the Internal Revenue Service (“IRS”) is
examining our federal tax returns for fiscal 2017, 2018, 2019, 2020 and 2021 and refund claims related to fiscal
2010 through 2016. Legacy L3’s federal tax returns for calendar years 2017 and 2018 are currently under IRS
examination and refund claims related to calendar years 2012, 2013, 2015 and 2016 have been filed with the IRS.
In addition, legacy AJRD refund claims related to calendar year 2019 have been filed with the IRS.
We are currently under examination or contesting proposed adjustments by various state and international tax
authorities for fiscal years ranging from 2013 through 2021. It is reasonably possible that there could be a
significant change to our unrecognized tax benefit balance during the course of the next twelve months as these
examinations continue, other tax examinations commence or various statutes of limitations expire. An estimate of
the range of possible changes is not practicable for the remaining unrecognized tax benefits because of the
significant number of jurisdictions in which we do business and the number of open tax periods under various stages
of examination.
_____________________________________________________________________
73
NOTE 8: DEBT AND CREDIT ARRANGEMENTS
Long-Term Debt
Long-term debt, net, is summarized below:
(In millions)
Variable-rate debt:
Floating rate notes, due March 10, 2023
Term loan, due November 21, 2025
Fixed-rate debt:
3.85% notes, due June 15, 2023 (“3.85% 2023 Notes”)
3.95% notes, due May 28, 2024(1)
3.832% notes, due April 27, 2025(1)(2)
7.00% debentures, due January 15, 2026(3)
3.85% notes, due December 15, 2026(1)
5.40% notes, due January 15, 2027 (“5.4% 2027 Notes”)(1)(2)
6.35% debentures, due February 1, 2028(1)
4.40% notes, due June 15, 2028(1)(2)
2.90% notes, due December 15, 2029(1)
1.80% notes, due January 15, 2031(1)(2)
5.40% notes, due July 31, 2033 (“5.4% 2033 Notes”)(1)(2)
4.854% notes, due April 27, 2035(1)(2)
6.15% notes, due December 15, 2040(1)(2)
5.054% notes, due April 27, 2045(1)(2)
5.60% notes, due July 31, 2053 (“5.6% 2053 Notes”)(1)(2)
Total variable and fixed-rate debt
Financing lease obligations and other debt
Long-term debt, including the current portion of long-term debt
Plus: unamortized bond premium
Less: unamortized discounts and issuance costs
Long-term debt, including the current portion of long-term debt, net
Less: current portion of long-term debt, net
Total long-term debt, net
December 29, 2023 December 30, 2022
$
— $
2,250
250
—
—
350
600
100
550
1,250
26
1,850
400
650
1,500
400
300
500
500
11,226
300
11,526
51
(54)
11,523
(363)
11,160 $
$
800
350
600
100
550
—
26
1,850
400
650
—
400
300
500
—
6,776
222
6,998
70
(25)
7,043
(818)
6,225
_______________
(1) We may redeem these notes, in whole or in part, at our option, at a pre-determined redemption price pursuant to their terms prior to the
applicable maturity date.
(2) Upon change of control combined with a below-investment-grade rating event, we may be required to make an offer to repurchase these
notes at a pre-determined price pursuant to their terms.
(3) The debentures are not redeemable prior to maturity.
The maturities of long-term debt, including the current portion of long-term debt and excluding financing lease
obligations, for the five years following the end of fiscal 2023 and, in total thereafter, are: $355 million in fiscal
2024; $2,855 million in fiscal 2025; $654 million in fiscal 2026; $1,254 million in fiscal 2027; $1,880 million in
fiscal 2028; and $4,277 million thereafter.
Long-Term Debt Issued
Variable-Rate Debt. On November 22, 2022, we established a $2.25 billion, three-year senior unsecured term
loan facility by entering into Term Loan 2025 with a syndicate of lenders that matures on November 21, 2025. The
Term Loan 2025 provides for term loans in up to two separate draws no later than June 30, 2023, with the proceeds
to be used: (i) to finance the acquisition of the TDL product line; (ii) to repay all amounts under the Floating 2023
Notes; (iii) to pay the fees, costs and expenses incurred in connection with the foregoing; and (iv) for general
corporate purposes in an amount up to $40 million.
_____________________________________________________________________
74
At L3Harris’ election, borrowings under Term Loan 2025 will bear interest at: (i) the sum of the term Secured
Overnight Financing Rate (“SOFR”) rate for any tenor comparable to the applicable interest period, plus 0.10%, plus
an applicable margin between 1.125% and 1.875% (initially 1.250%) that varies based on the ratings of our senior
unsecured long-term debt securities (“Senior Debt Ratings”); or (ii) the base rate (as described in L3Harris’ Current
Report on Form 8-K filed with the SEC on August 4, 2022), plus an applicable margin between 0.125% and 0.875%
(initially 0.250%) that varies based on the Senior Debt Ratings. The Term Loan 2025 requires L3Harris to pay a
quarterly unused commitment fee commencing on January 17, 2023 at an applicable rate per annum between
0.090% and 0.250% (initially 0.110%) that varies based on the Senior Debt Ratings. We incurred $2 million of debt
issuance costs related to the issuance of the Term Loan 2025, which will be amortized over the life of the Term Loan
2025 and will be included as a component of the “Interest expense, net” line item in our Consolidated Statement of
Operations. The Term Loan 2025 also contains representations, warranties, covenants and events of default that are
substantially similar to those in the 2022 Credit Agreement, as described above in these Notes.
L3Harris may prepay amounts borrowed under the Term Loan 2025 at any time, and L3Harris is required to
prepay all outstanding term loans ratably from the proceeds of any new indebtedness, subject to certain exceptions
set forth in the Term Loan 2025, including with respect to any proceeds received from: (i) the 2022 Credit
Agreement, as described above in these Notes; (ii) indebtedness incurred in the ordinary course of business; (iii)
indebtedness used to fund any acquisition; (iv) refinancing; (v) commercial paper issuances; (vi) letters of credit; (vii)
working capital facilities of foreign subsidiaries; and (viii) other indebtedness in an aggregate principal amount not
greater than $500 million.
On January 3, 2023, we drew $2 billion on Term Loan 2025 and utilized the proceeds to fund the cash
consideration paid and a portion of the associated transaction and integration costs related to the TDL acquisition.
See Note 13: Acquisitions, Divestitures and Asset Sales in these Notes for further information on the TDL acquisition.
On March 14, 2023, we drew an additional $250 million on Term Loan 2025 and utilized the proceeds to repay
our Floating 2023 Notes.
At December 29, 2023, we had $2.25 billion outstanding under Term Loan 2025. There were no borrowings
outstanding under Term Loan 2025 at December 30, 2022.
Borrowings under Term Loan 2025 bear interest at the sum of the term SOFR for any tenor comparable to the
applicable interest period, plus 0.10%, plus an applicable margin between 1.125% and 1.875% that varies based on
our Senior Debt Ratings. At December 29, 2023, the interest rate on Term Loan 2025 was 6.7%.
Fixed-Rate Debt. On July 31, 2023, we closed the issuance and sale of the AJRD Notes. The AJRD Notes were
used to fund a portion of the purchase price for the AJRD acquisition, which closed on July 28, 2023, and to pay
related fees and expenses.
Interest on the 5.4% 2027 Notes is payable semi-annually in arrears on January 15 and July 15 of each year,
commencing on January 15, 2024. Interest on the 5.4% 2033 Notes and 5.6% 2053 Notes is payable semi-
annually in arrears on January 31 and July 31 of each year, commencing on January 31, 2024.
We may redeem the 5.4% 2027 Notes, 5.4% 2033 Notes and 5.6% 2053 Notes prior to January 15, 2027, April
30, 2033 and January 31, 2053, respectively, in whole or in part, at our option, at a redemption price equal to the
greater of: (i) the sum of the present values of the remaining scheduled payments of the principal and interest
thereon discounted to the redemption date on a semi-annual basis at the “Treasury Rate,” as defined in the AJRD
Notes, plus 15 basis points for the 5.4% 2027 Notes and 25 basis points for the 5.4% 2033 Notes and 5.6% 2053
Notes, less interest accrued to the date of redemption; (ii) or 100% of the principal amount of the respective notes
plus, in either case, accrued interest and unpaid interest thereon to the redemption date. After April 30, 2033 and
January 31, 2053, we may redeem the 5.4% 2033 Notes and the 5.6% 2053 Notes, respectively, at a redemption
price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest thereon to the
redemption date.
Upon a “Change of Control Repurchase Event,” as defined in the AJRD Notes, we may be required to make an
offer to repurchase the AJRD Notes at a price equal to 101% of the aggregate principal amount of the notes being
repurchased, plus accrued interest on the notes being repurchased to, but not including, the date of repurchase.
We incurred $9 million, $13 million, and $6 million of debt issuance costs for the 5.4% 2027 Notes, 5.4% 2033
Notes and 5.6% 2053 Notes, respectively, which are being amortized using the straight line method over the life of
each respective note. Such amortization is included as a component of the “Interest expense, net” line item in our
Consolidated Statement of Operations.
There were no issuances of fixed-rate long-term debt during fiscal 2022.
_____________________________________________________________________
75
Long-Term Debt Repayments
On March 14, 2023, we repaid the entire outstanding $250 million aggregate principal amount of our Floating
2023 Notes through a $250 million draw on Term Loan 2025 as described above under “Long-Term Debt Issued.”
As we intended to issue long term debt to repay the Floating 2023 Notes, these notes were classified as “Long-term
debt, net” in our Consolidated Balance Sheet at December 30, 2022.
On June 15, 2023, we repaid the entire outstanding $800 million aggregate principal amount of our 3.85% 2023
Notes through cash on hand and the issuance of commercial paper during fiscal 2023.
There were no repayments of variable and fixed-rate long-term debt during fiscal 2022.
Fair Value of Debt
The following table presents the carrying amounts and estimated fair values of our long-term debt:
(In millions)
Term Loan 2025(1)
All other long-term debt, net (including current portion)(2)
Long-term debt, including the current portion of long-term
$
December 29, 2023
December 30, 2022
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
2,250 $
9,273
2,250 $
9,199
— $
7,043
—
6,569
debt, net
$
11,523 $
11,449 $
7,043 $
6,569
_______________
(1) The carrying value of Term Loan 2025 approximates fair value due to its variable interest rate.
(2) The fair value was estimated using a market approach based on quoted market prices for our debt traded in the secondary market. If our
long-term debt in our balance sheet were measured at fair value, it would be categorized in Level 2 of the fair value hierarchy.
The fair value of our short-term debt approximates the carrying value due to its short-term nature, with
commercial paper classified as level 2 and other short-term debt classified as level 3 within the fair value hierarchy.
Interest Paid
Total interest paid was $489 million, $296 million and $284 million in fiscal 2023, 2022 and 2021, respectively.
2023 Credit Agreement
On March 10, 2023, we established a $2.40 billion, 364-day senior unsecured revolving credit facility by
entering into a 364-Day Credit Agreement with a syndicate of lenders.
Proceeds of the initial funding of loans under the 2023 Credit Agreement were required to be used to finance a
portion of the purchase price for the acquisition of AJRD and for the related fees, taxes, costs and expenses, and
subsequent borrowings may be used for working capital purposes.
At our election, borrowings under the 2023 Credit Agreement, which are designated in U.S. Dollars, bear interest
at the sum of the term SOFR rate or the Base Rate (as defined in the 2023 Credit Agreement), plus an applicable
margin. In addition to interest payable on the principal amount of indebtedness outstanding, beginning June 6,
2023, we are required to pay a quarterly unused commitment fee that varies based on our Senior Debt Ratings.
The 2023 Credit Agreement also contains representations, warranties, covenants and events of default that are
substantially similar to the existing 2022 Credit Agreement. The 2023 Credit Agreement matures in March 2024,
provided that we may extend the maturity of any loans outstanding under the 2023 Credit Agreement by one year,
subject to the satisfaction of certain conditions.
On July 28, 2023, we borrowed $2.1 billion under the 2023 Credit Agreement and used the proceeds together
with proceeds from the AJRD Notes to fund the AJRD acquisition and to pay related fees and expenses. All
borrowings under the 2023 Credit Agreement were repaid using proceeds from commercial paper during fiscal
2023.
At December 29, 2023 we had no outstanding borrowings and were in compliance with all covenants under the
2023 Credit Agreement. For additional information regarding the 2023 Credit Agreement, see our Current Report on
Form 8-K filed on March 16, 2023.
On January 26, 2024, we replaced the 2023 Credit Agreement with a new $1.5 billion, 364-day senior
unsecured revolving credit facility maturing no later than January 24, 2025.
_____________________________________________________________________
76
2022 Credit Agreement
On July 29, 2022, we established a $2.0 billion, five-year senior unsecured revolving credit facility under the
2022 Credit Agreement, with a syndicate of lenders. The 2022 Credit Facility replaced the 2019 Credit Facility and
provides for revolving loans, swingline loans and letters of credit, with a sub-limit of $200 million for swingline loans
and a sub-limit of $350 million for letters of credit, with the option to request an increase of the maximum amount of
commitments up to $3.0 billion.
At our election, borrowings in U.S. Dollars under the 2022 Credit Agreement will bear interest either based on
the SOFR rate or the Base Rate (each, as defined in the 2022 Credit Agreement), plus an applicable margin. We are
also required to pay a quarterly unused commitment fee and letter of credit fees based on our Senior Debt Ratings.
The 2022 Credit Facility contains certain affirmative covenants, including, but not limited to: reporting
obligations; maintenance of corporate existence and good standing; compliance with laws; maintenance of
properties and insurance; payment of taxes; compliance with ERISA and environmental, anti-money laundering,
sanctions, export controls, anti-corruption and certain other laws; and visitation and inspection by the administrative
agent and the lenders. The 2022 Credit Facility also contains certain negative covenants, including, but not limited
to: limiting certain liens on assets; limiting certain mergers, consolidations or sales of assets; and limiting certain
investments in unrestricted subsidiaries. The 2022 Credit Facility also requires that L3Harris not permit its ratio of
Consolidated Total Indebtedness to Total Capital, each as defined in the 2022 Credit Facility, to be greater than
0.65:1.00.
At December 29, 2023, we had no outstanding borrowings and were in compliance with all covenants under the
2022 Credit Facility.
Commercial Paper Program
On March 14, 2023, we established a new CP Program, which replaced our prior $1.0 billion commercial paper
program. Under the CP Program, we may issue unsecured commercial paper notes up to a maximum aggregate
amount of $3.9 billion, supported by amounts available under the 2022 Credit Agreement and the 2023 Credit
Agreement.
The commercial paper notes are sold at par less a discount representing an interest factor or, if interest bearing,
at par, and the maturities vary but may not exceed 397 days from the date of issue. The commercial paper notes will
rank at least pari passu with all other unsecured and unsubordinated indebtedness.
At December 29, 2023, we had $1.6 billion in outstanding notes under our CP Program, primarily consisting of
amounts used to repay $2.1 billion outstanding under the 2023 Credit Agreement and is included as a component of
the “Short-term debt” line item in our Consolidated Balance Sheet. The outstanding notes have a weighted-average
interest rate of 5.95% and mature at various dates.
Proceeds from issuance of commercial paper with maturities greater than 90 days were $701 million during
fiscal 2023. Repayments of commercial paper with maturities greater than 90 days were $184 million during fiscal
2023. During fiscal 2022, we had no commercial paper borrowings with original maturities more than 90 days from
the date of issuance.
NOTE 9: RETIREMENT BENEFITS
Defined Contribution Plans
As of December 29, 2023, we sponsor numerous defined contribution savings plans, which allow our eligible
employees to contribute a portion of their pre-tax and/or after-tax income in accordance with specified guidelines.
The plans include several match contribution formulas which require us to match a percentage of the employee
contributions up to certain limits, generally totaling 6.0% of employee eligible pay. Matching contributions, net of
forfeitures, charged to expense were $267 million, $226 million and $230 million in fiscal 2023, 2022 and 2021,
respectively.
_____________________________________________________________________
77
Deferred Compensation Plans
We also sponsor certain non-qualified deferred compensation plans. The following table provides the fair value
of our deferred compensation plan investments and liabilities by category and by fair value hierarchy level:
(In millions)
Assets
Deferred compensation plan assets:(1)
Equity and fixed income securities
Investments measured at NAV:
Corporate-owned life insurance
December 29, 2023
December 30, 2022
Total
Level 1
Total
Level 1
$
106 $
106 $
64 $
64
Total fair value of deferred compensation plan assets
$
37
143
33
97
$
Liabilities
Deferred compensation plan liabilities:(2)
Equity securities and mutual funds
Investments measured at NAV:
$
18 $
18 $
8 $
8
Common/collective trusts and guaranteed
investment contracts
Total fair value of deferred compensation plan liabilities
$
274
292
192
200
$
_______________
(1) Represents diversified assets held in “rabbi trusts” primarily associated with our non-qualified deferred compensation plans, which we
include in the “Other current assets” and “Other non-current assets” line items in our Consolidated Balance Sheet, and which are measured
at fair value.
(2) Primarily represents obligations to pay benefits under certain non-qualified deferred compensation plans, which we include in the
“Compensation and benefits” and “Other long-term liabilities” line items in our Consolidated Balance Sheet. Under these plans, participants
designate investment options (including stock and fixed-income funds), which serve as the basis for measurement of the notional value of
their accounts.
Defined Benefit Plans
We sponsor numerous defined benefit pension plans for eligible employees. Benefits for most participants under
the terms of these plans are based on the employee’s years of service and compensation. We fund these plans as
required by statutory regulations and through voluntary contributions. Some of our employees also participate in
other postretirement defined benefit plans such as health care and life insurance plans.
During fiscal 2023, in connection with the July 28, 2023 acquisition of AJRD, we acquired defined benefit plans
with assets valued at $749 million and a PBO of $974 million. See Note 13: Acquisitions, Divestitures and Asset Sales
in these Notes for further information. Additionally, the Aviation Products Pension Plan name was changed to the
Consolidated Pension Plan (“CPP”). The CPP is our largest defined benefit pension plan, with assets valued at $7.5
billion and a PBO of $7.5 billion as of December 29, 2023. On December 31, 2023, the qualified pension plans
acquired with AJRD were merged into the CPP.
During fiscal 2022, we reduced our pension benefit obligations by approximately $64 million by purchasing
group annuity policies and transferring approximately $64 million of pension plan assets to an insurance company.
There was no gain or loss as a result of this transaction.
During fiscal 2021, we reduced our pension benefit obligations by approximately $250 million by purchasing
group annuity policies and transferring approximately $250 million of pension plan assets to an insurance company.
As a result of the annuity purchases, we recognized a pre-tax loss of $4 million in fiscal 2021, which is included as a
component of the “Non-service FAS pension income and other, net” line item in our Consolidated Statement of
Operations. We also recognized a pre-tax curtailment gain of $3 million in fiscal 2021 as a result of employee
terminations, which is included as a component of the “Non-service FAS pension income and other, net” line item in
our Consolidated Statement of Operations.
_____________________________________________________________________
78
Balance Sheet Information
Amounts recognized in our Consolidated Balance Sheet for defined benefit plans reflect the funded status of our
plans. The following table provides a summary of the funded status of our defined benefit plans and the presentation
of such balances within our Consolidated Balance Sheet:
(In millions)
Fair value of plan assets
PBO
Funded status
December 29, 2023
December 30, 2022
Pension
Other
Benefits
Total
Pension
Other
Benefits
Total
$ 8,595 $
265 $ 8,860 $ 7,411 $
242 $ 7,653
(8,563)
(231)
(8,794)
(7,494)
(228)
(7,722)
$
32 $
34 $
66 $
(83) $
14 $
(69)
Consolidated Balance Sheet line item amounts:
Assets of business held for sale
Other non-current assets
Compensation and benefits
Other long-term liabilities
$
$
4 $
— $
4 $
— $
— $
—
193 $
96 $
289 $
144 $
66 $
210
(12)
(153)
(7)
(55)
(19)
(11)
(208)
(216)
(6)
(46)
(17)
(262)
A portion of our PBO includes amounts that have not yet been recognized as expense (or reductions of expense)
in our results of operations. Such amounts are recorded in the “Accumulated other comprehensive loss” line item in
our Consolidated Balance Sheet until they are amortized as a component of net periodic benefit income. The
following table provides a summary of pre-tax amounts recorded within Accumulated other comprehensive loss:
(In millions)
Actuarial loss (gain)
Net prior service (credit) cost
Total PBO not yet recognized as expense
December 29, 2023
December 30, 2022
Pension
Other
Benefits
Total
Pension
Other
Benefits
Total
$
$
162 $
(98) $
64 $
243 $
(100) $
143
(157)
4
(153)
(183)
5
5 $
(94) $
(89) $
60 $
(95) $
(178)
(35)
The following table provides a roll-forward of the PBO for our defined benefit plans:
(In millions)
December 29, 2023
December 30, 2022
Pension
Other
Benefits
Total
Pension
Other
Benefits
Total
Change in benefit obligation
Benefit obligation at beginning of fiscal year $ 7,494 $
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid(1)
Expenses paid
Currency translation adjustment
Acquisitions(2)
Divestiture
Other
33
386
280
(568)
(34)
10
960
—
2
228 $ 7,722 $ 10,007 $
348 $ 10,355
2
11
(1)
(23)
—
—
14
—
—
35
397
279
44
220
2
7
46
227
(2,097)
(107)
(2,204)
(591)
(626)
(22)
(648)
(34)
10
974
—
2
(26)
(28)
—
(8)
8
—
—
—
—
—
(26)
(28)
—
(8)
8
Benefit obligation at end of fiscal year
$ 8,563 $
231 $ 8,794 $ 7,494 $
228 $ 7,722
_______________
(1) Fiscal 2022 includes approximately $64 million associated with the purchase of group annuity policies. The transaction is reflected in
Benefits paid as settlement accounting had not been met.
(2) Benefit obligation assumed in the AJRD acquisition. Net defined benefit plan liability is included in our “Other long-term liabilities” and
“Compensation and benefits” line items in “Acquisition of AJRD” section of Note 13: Acquisitions, Divestitures and Asset Sales.
Actuarial losses in the PBO as of December 29, 2023 were primarily the result of lower discount rates.
_____________________________________________________________________
79
The following table provides a roll-forward of the assets and the ending funded status of our defined benefit
plans:
(In millions)
Change in plan assets
December 29, 2023
December 30, 2022
Pension
Other
Benefits
Total
Pension
Other
Benefits
Total
Plan assets at beginning of fiscal year
$ 7,411 $
242 $ 7,653 $ 9,604 $
320 $ 9,924
Actual return on plan assets
Acquisitions(1)
Employer contributions
Benefits paid(2)
Expenses paid
Currency translation adjustment
Divestiture
Other
1,004
749
20
(568)
(34)
12
—
1
37
—
9
749
29
—
16
(23)
(591)
(626)
—
—
—
—
(34)
12
—
1
(26)
(32)
(10)
1
—
(5)
(22)
—
—
—
—
—
11
(648)
(26)
(32)
(10)
1
1,041
(1,516)
(51)
(1,567)
Plan assets at end of fiscal year
$ 8,595 $
265 $ 8,860 $ 7,411 $
242 $ 7,653
Funded status at end of fiscal year
$
32 $
34 $
66 $
(83) $
14 $
(69)
_______________
(1) Plan assets acquired in the AJRD acquisition. Net defined benefit plan liability is included in “Other long-term liabilities” and “Compensation
and benefits” line items in “Acquisition of AJRD” section of Note 13: Acquisitions, Divestitures and Asset Sales.
(2) Fiscal 2022 includes approximately $64 million associated with the transfer of plan assets to an insurance company. The transaction is
reflected in Benefits paid as settlement accounting had not been met.
The accumulated benefit obligation for all defined benefit pension plans was $8.6 billion at December 29, 2023.
The following tables provide information for benefit plans with accumulated benefit obligations in excess of plan
assets and benefit plans with PBO in excess of plan assets:
(In millions)
Accumulated benefit obligation
Fair value of plan assets
(In millions)
PBO
Fair value of plan assets
December 29, 2023
December 30, 2022
Pension
Other
Benefits
Pension
Other
Benefits
$
225
60
N/A $
N/A
6,698
6,472
N/A
N/A
December 29, 2023
December 30, 2022
Pension
Other
Benefits
Pension
Other
Benefits
$
226 $
62 $
6,699 $
60
—
6,472
52
—
_____________________________________________________________________
80
Statement of Operations Information
The following table provides the components of net periodic benefit income and other amounts recognized in
other comprehensive income in fiscal 2023, 2022 and 2021 as they pertain to our defined benefit plans:
(In millions)
Net periodic benefit income
Operating
Service cost
Non-operating
Interest cost
Expected return on plan assets
Amortization of net actuarial (gain) loss
Amortization of prior service credit
Effect of curtailments or settlements
Non-service cost periodic benefit income
Net periodic benefit income
Net actuarial (gain) loss
Prior service cost
Amortization of net actuarial gain (loss)
Amortization of prior service credit
Currency translation adjustment
Recognized prior service credit
Recognized net actuarial loss
Total change recognized in other comprehensive income
Total impact from net periodic benefit income and
changes in other comprehensive income
Pension
Fiscal Year Ended
December 29, 2023 December 30, 2022 December 31, 2021
$
33 $
44 $
66
386
(633)
(9)
(26)
—
(282)
(249) $
220
(624)
9
(27)
—
(422)
(378) $
$
$
(90) $
—
9
26
—
—
—
(55)
42 $
8
(9)
27
1
—
—
69
188
(621)
30
(28)
1
(430)
(364)
(972)
2
(30)
28
1
4
(4)
(971)
$
(304) $
(309) $
(1,335)
Other changes in plan assets and benefit obligations recognized in other comprehensive income
_____________________________________________________________________
81
Other Benefits
Fiscal Year Ended
December 29, 2023 December 30, 2022 December 31, 2021
$
2 $
2 $
(In millions)
Net periodic benefit income
Operating
Service cost
Non-operating
2
5
(20)
—
1
(14)
(12)
(46)
—
(1)
(47)
(59)
Non-service cost periodic benefit income
Net periodic benefit income
Interest cost
Expected return on plan assets
Amortization of net actuarial gain
Amortization of prior service cost
7
(20)
(7)
1
(19)
(17) $
Other changes in plan assets and benefit obligations recognized in other comprehensive income
(34) $
7
(1)
(28)
Net actuarial gain
Amortization of net actuarial gain
Amortization of prior service cost
11
(20)
(20)
1
(28)
(26) $
(18) $
20
(1)
1
$
$
Total change recognized in other comprehensive income
Total impact from net periodic benefit income and
$
(25) $
(45) $
changes in other comprehensive income
Defined Benefit Plan Assumptions
The determination of the assumptions related to defined benefit plans are based on the provisions of the
applicable accounting pronouncements, review of various market data and discussions with our actuaries. We
develop each assumption using relevant Company experience in conjunction with market-related data. Assumptions
are reviewed annually and adjusted as appropriate.
The following tables provide the weighted-average assumptions used to determine PBO and net periodic benefit
income, as they pertain to our defined benefit pension plans:
Obligation assumptions as of:
Discount rate
Rate of future compensation increase
Cash balance interest crediting rate
Cost assumptions for fiscal periods ended:
Discount rate to determine service cost
Discount rate to determine interest cost
Expected return on plan assets
Rate of future compensation increase
Cash balance interest crediting rate
December 29, 2023 December 30, 2022
5.18 %
3.01 %
4.00 %
4.91 %
3.01 %
4.50 %
December 29, 2023 December 30, 2022 December 31, 2021
2.26 %
1.80 %
7.43 %
3.01 %
3.50 %
5.18 %
5.08 %
7.46 %
3.01 %
4.00 %
2.69 %
2.27 %
7.44 %
3.01 %
3.50 %
Key assumptions for our CPP (our largest defined benefit pension plan with 88% of the total PBO) included a
discount rate for obligation assumptions of 4.92%, a cash balance interest crediting rate of 4.50% and expected
return on plan assets of 7.50% for fiscal 2023, which is being maintained at 7.50% for fiscal 2024. There is also a
frozen pension equity benefit that assumes a 4.25% interest crediting rate.
_____________________________________________________________________
82
The following table provides the weighted-average assumptions used to determine projected benefit obligations
and net periodic benefit income, as they pertain to our other postretirement defined benefit plans:
Obligation assumptions as of:
Discount rate
Rate of future compensation increase
December 29, 2023 December 30, 2022
5.16 %
N/A
4.87 %
N/A
Cost assumptions for fiscal periods ended:
Discount rate to determine service cost
Discount rate to determine interest cost
Rate of future compensation increase
December 29, 2023 December 30, 2022 December 31, 2021
2.49 %
1.42 %
N/A
2.91 %
2.06 %
N/A
5.26 %
5.06 %
N/A
The expected long-term rate of return on plan assets reflects the expected returns for each major asset class in
which the plans invest, the weight of each asset class in the strategic allocation, the correlations among asset
classes and their expected volatilities. Our expected rate of return on plan assets is estimated by evaluating both
historical returns and estimates of future returns. Specifically, the determination of the expected long-term rate of
return takes into consideration: (1) the plan’s actual historical annual return on assets over the past 15-, 20- and 25-
year time periods, (2) historical broad market returns over long-term timeframes weighted by the plan’s strategic
allocation and (3) independent estimates of future long-term asset class returns, weighted by the plan’s strategic
allocation. Based on this approach, the long-term expected annual rate of return on assets is estimated at 7.50% for
fiscal 2024 for the U.S. defined benefit pension plans. The weighted average long-term expected annual rate of
return on assets for all defined benefit pension plans is estimated to be 7.46% for fiscal 2024.
In fiscal 2021, we adopted updated mortality tables, which resulted in an increase in the defined benefit plans’
PBO as of December 31, 2021 and a decrease in the estimated net periodic benefit income beginning with fiscal
2022.
The assumed composite rate of future increases in the per capita healthcare costs (the healthcare trend rate) is
7.05% for fiscal 2024, decreasing ratably to 4.53% by fiscal 2035. To the extent that actual experience differs from
these assumptions, the effect will be accumulated and generally amortized for each plan to the extent required over
the estimated future life expectancy or, if applicable, the future working lifetime of the plan’s active participants.
Investment Policy
The investment strategy for managing defined benefit plan assets is to seek an optimal rate of return relative to
an appropriate level of risk. We manage substantially all defined benefit plan assets on a commingled basis in a
master investment trust. In making these asset allocation decisions, we take into account recent and expected
returns and volatility of returns for each asset class, the expected correlation of returns among the different
investments, as well as anticipated funding and cash flows. To enhance returns and mitigate risk, we diversify our
investments by strategy, asset class, geography and sector and engage a large number of managers to gain broad
exposure to the markets.
The following table provides the current strategic target asset allocation ranges by asset category:
Equity investments
Fixed income investments
Alternative investments
Cash and cash equivalents
Fair Value of Plan Assets
Target Asset
Allocation
35 % — 55%
25 % — 35%
12 % — 30%
0 % — 10%
The following is a description of the valuation techniques and inputs used to measure fair value for major
categories of investments as reflected in the table that follows such description:
•
Domestic and international equities, which include common and preferred shares, domestic listed and
foreign listed equity securities, open-ended and closed-ended mutual funds, real estate investment trusts
and exchange traded funds, are generally valued at the closing price reported on the major market
exchanges on which the individual securities are traded at the measurement date. Because these assets are
traded predominantly on liquid, widely traded public exchanges, equity securities are categorized as Level 1
assets.
_____________________________________________________________________
83
•
•
Private equity funds, which include buy-out, mezzanine, venture capital, distressed asset and secondary
funds, are typically limited partnership investment structures. Private equity funds are valued using a
market approach based on NAV calculated by the funds and are not publicly available. Private equity funds
generally have liquidity restrictions that extend for ten or more years. At December 29, 2023 and
December 30, 2022, our defined benefit plans had future unfunded commitments totaling $550 million and
$568 million, respectively, related to private equity fund investments.
Real estate funds, which include core, core plus, value-add and opportunistic funds, are typically limited
partnership investment structures. Real estate funds are valued using a market approach based on NAV
calculated by the funds and are not publicly available. Real estate funds generally permit redemption on a
quarterly basis with 90 or fewer days-notice. At December 29, 2023, real estate fund investments had no
future unfunded commitments related to our defined benefit plans. At December 30, 2022, our defined
benefit plans had future unfunded commitments totaling $33 million related to real estate fund
investments.
• Hedge funds, which include equity long/short, event-driven, fixed-income arbitrage and global macro
•
strategies, are typically limited partnership investment structures. Limited partnership interests in hedge
funds are valued using a market approach based on NAV calculated by the funds and are not publicly
available. Hedge funds generally permit redemption on a quarterly or more frequent basis with 90 or fewer
days notice. At each of December 29, 2023 and December 30, 2022, our defined benefit plans had no future
unfunded commitments related to hedge fund investments.
Fixed income investments, which include U.S. Government securities, investment and non-investment-
grade corporate bonds and securitized bonds, are generally valued using pricing models that use verifiable,
observable market data such as interest rates, benchmark yield curves and credit spreads, bids provided by
brokers or dealers or quoted prices of securities with similar characteristics. Fixed income investments are
generally categorized as Level 2 assets. Fixed income funds valued at the closing price reported on the
major market exchanges on which the individual fund is traded are categorized as Level 1 assets.
•
• Other is comprised of guaranteed insurance contracts valued at book value, which approximates fair value,
calculated using the prior-year balance adjusted for investment returns, changes in cash flows, changes in
interest rates and corporate owned life insurance policies valued at the accumulated benefit.
Cash and cash equivalents are primarily comprised of short-term money market funds valued at cost, which
approximates fair value, or valued at quoted market prices of identical instruments. Cash and currency are
categorized as Level 1 assets; cash equivalents, such as money market funds or short-term commingled
funds, are categorized as Level 2 assets.
Certain investments that are valued using the NAV per share (or its equivalent) as a practical expedient are
not categorized in the fair value hierarchy and are included in the table to permit reconciliation of the fair
value hierarchy to the aggregate defined benefit plan assets.
•
_____________________________________________________________________
84
The following tables provide the fair value of plan assets held by our defined benefit plans by asset category
and by fair value hierarchy level:
(In millions)
Asset category
Equities:
Domestic equities
International equities
Real estate investment trusts
Fixed income:
Corporate bonds
Government securities
Securitized assets
Fixed income funds
Cash and cash equivalents
Other
Total
Investments measured at NAV:
Equity funds
Fixed income funds
Hedge funds
Private equity funds
Real estate funds
Other
Total investments measured at NAV
Receivables, net
Total fair value of plan assets
(In millions)
Asset category
Equities:
Domestic equities
International equities
Real estate investment trusts
Fixed income:
Corporate bonds
Government securities
Securitized assets
Fixed income funds
Cash and cash equivalents
Total
Investments measured at NAV:
Equity funds
Fixed income funds
Hedge funds
Private equity funds
Real estate funds
Other
Total investments measured at NAV
Payables, net
Total fair value of plan assets
December 29, 2023
Total
Level 1
Level 2
Level 3
$
1,294 $
1,138
214
1,294 $
1,138
214
— $
—
—
1,457
485
164
137
545
61
5,495 $
—
—
—
4
18
—
2,668 $
1,331
485
164
133
527
—
2,640 $
—
—
—
126
—
—
—
—
61
187
1,529
3
396
1,019
379
2
3,328
37
8,860
December 30, 2022
Total
Level 1
Level 2
Level 3
1,275 $
1,044
192
1,275 $
1,002
192
— $
42
—
1,118
320
166
92
148
4,355 $
—
—
—
4
22
2,495 $
995
320
166
88
126
1,737 $
—
—
—
123
—
—
—
—
123
1,661
299
294
696
372
2
3,324
(26)
7,653
$
$
$
_____________________________________________________________________
85
Contributions
Funding requirements under IRS rules are a major consideration in making contributions to our postretirement
benefit plans. With respect to U.S. qualified pension plans, we intend to contribute annually not less than the
required minimum funding thresholds.
The Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006 and
further amended by the Worker, Retiree, and Employer Recovery Act of 2008, the Moving Ahead for Progress in the
21st Century Act (“MAP-21”) and applicable Internal Revenue Code regulations mandate minimum funding
thresholds. The Highway and Transportation Funding Act of 2014, the Bipartisan Budget Act of 2015, the American
Rescue Plan Act of 2021 and the Infrastructure Investment and Jobs Act further extended the interest rate
stabilization provision of MAP-21. As a result of prior voluntary contributions, we made no material contributions to
our U.S. qualified defined benefit pension plans in fiscal 2023, 2022, or 2021. We expect to make contributions of
approximately $35 million to these plans during fiscal 2024, and may consider voluntary contributions thereafter.
Estimated Future Benefit Payments
The following table provides the projected timing of payments for benefits earned to date and benefits expected
to be earned for future service by current active employees under our defined benefit plans:
(In millions)
Fiscal Years:
2024
2025
2026
2027
2028
2029 — 2033
Pension
$
672 $
670
665
660
649
3,072
Other
(1)
Benefits
Total
694
692
686
680
668
3,156
22 $
22
21
20
19
84
_______________
(1) Projected payments for Other Benefits reflect net payments from the Company, which include subsidies that reduce the gross payments by
less than 1%.
Multi-employer Benefit Plans
Certain of our businesses participate in multi-employer defined benefit pension plans. We make cash
contributions to these plans under the terms of collective-bargaining agreements that cover union employees based
on a fixed rate per hour of service worked by the covered employees. The risks of participating in these multi-
employer plans are different from single-employer plans in the following aspects: (1) assets contributed to the
multi-employer plan by one employer may be used to provide benefits to employees of other participating
employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be
borne by the remaining participating employers and (3) if we choose to stop participating in some of our multi-
employer plans, we may be required to pay those plans an amount based on the underfunded status of the plan,
referred to as a withdrawal liability. Cash contributed and expenses recorded for our multi-employer plans were not
material in fiscal 2023, 2022 or 2021.
NOTE 10: STOCK OPTIONS AND OTHER SHARE-BASED COMPENSATION
At December 29, 2023, we had options or other share-based compensation outstanding under two Harris
shareholder-approved employee stock incentive plans (“SIPs”), the Harris Corporation 2005 Equity Incentive Plan
(As Amended and Restated Effective August 27, 2010) and the L3Harris Technologies, Inc. 2015 Equity Incentive
Plan (As Amended and Restated Effective August 28, 2020) (the “2015 EIP”), as well as under employee stock
incentive plans of L3 assumed by L3Harris (collectively, “L3Harris SIPs”). As part of our long-term incentive
compensation program, we have made awards to employees in the form of performance share units, restricted stock
units, nonqualified options under the L3Harris SIPs. We have also awarded restricted stock units in the form of
deferred units to our non-employee directors. We believe that share-based awards more closely align the interests
of participants with those of shareholders.
_____________________________________________________________________
86
Summary of Share-Based Compensation Expense
The following table summarizes the amounts and classification of share-based compensation expense:
(In millions)
Total expense
Included in:
Cost of product sales and services
General and administrative expenses
Income from continuing operations
Tax effect on share-based compensation expense
Total share-based compensation expense after-tax
December 29, 2023 December 30, 2022 December 31, 2021
Fiscal Year Ended
$
$
$
89 $
109 $
129
16 $
73
89
(19)
70 $
19 $
90
109
(27)
82 $
14
115
129
(33)
96
As of December 29, 2023, a total of 12.2 million shares of common stock remained available under our 2015
EIP for future issuance (excluding shares to be issued in respect of outstanding options and other share-based
awards, and with each full-value award (e.g., restricted stock unit awards and performance share unit awards)
counting as 4.6 shares against the total remaining for future issuance). During fiscal 2023, we issued an aggregate of
0.5 million shares of common stock under the terms of our L3Harris SIPs, which is net of shares withheld for tax
purposes.
Stock Options
The following information relates to stock options, including performance stock options, that have been granted
under shareholder-approved L3Harris SIPs. Option exercise prices are equal to or greater than the fair market value
of our common stock on the date the options are granted, using the closing stock price of our common stock.
Options may be exercised for a period of ten years after the date of grant, and options, other than performance stock
options, generally become exercisable in installments, which are typically 33.3% one year from the grant date,
33.3% two years from the grant date and 33.3% three years from the grant date. In certain instances, vesting and
exercisability are also subject to performance criteria.
The fair value as of the grant date of each option award was determined using the Black-Scholes-Merton option-
pricing model which uses assumptions noted in the following table. Expected volatility over the expected term of the
options is based on implied volatility from traded options on our common stock and the historical volatility of our
stock price. The expected term of the options is based on historical observations of our common stock, considering
average years to exercise for all options exercised and average years to cancellation for all options canceled, as well
as average years remaining for vested outstanding options, which is calculated based on the weighted-average of
these three inputs. The risk-free interest rate for periods within the contractual life of the option is based on the U.S.
Treasury yield curve in effect at the time of grant.
A summary of the assumptions used in determining the fair value of the stock option grants under our L3Harris
SIPs is as follows:
Expected dividends
Expected volatility
Risk-free interest rates
Expected term (years)
December 29, 2023 December 30, 2022 December 31, 2021
Fiscal Year Ended
2.17%
28.60%
2.00%
29.09%
3.48% - 4.27% 1.63% - 4.27%
5.04
5.02
1.99%
31.71%
0.75%
5.05
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87
A summary of stock option activity under our L3Harris SIPs as of December 29, 2023 and changes during fiscal
2023 is as follows:
Weighted
Average
Exercise
Price
Per Share
Weighted
Average
Remaining
Contractual
Aggregate
Intrinsic
Term
Value
(In years)
(In millions)
Shares
Stock options outstanding at December 30, 2022
3,306,129 $
162.56
Granted
Exercised
Forfeited or expired
Stock options outstanding at December 29, 2023
Stock options exercisable at December 29, 2023
366,670 $
209.88
(230,702) $
100.03
(191,387) $
210.31
3,250,710 $
169.53
2,669,082 $
160.11
5.42 $
4.74 $
140
138
The weighted-average grant-date fair value per share was $54.63, $53.66 and $42.16 for options granted in
fiscal 2023, 2022 and 2021, respectively. The total intrinsic value of options at the time of exercise was $23 million,
$56 million and $173 million for options exercised in fiscal 2023, 2022 and 2021, respectively.
A summary of the status of our nonvested stock options at December 29, 2023 and changes during fiscal 2023
is as follows:
Nonvested stock options at December 30, 2022
Granted
Vested/forfeited, net
Nonvested stock options at December 29, 2023
Weighted-Average
Grant-Date Fair
Value
Per Share
Shares
685,718 $
366,670 $
(470,760) $
581,628 $
46.76
54.63
43.21
52.72
As of December 29, 2023, there was $19 million of total unrecognized compensation expense related to
nonvested stock options granted under our L3Harris SIPs. This expense is expected to be recognized over a
weighted-average period of 1.90 years. The total fair value of stock options that vested in fiscal 2023, 2022 and
2021 was $14 million, $42 million and $6 million, respectively.
Restricted Stock Unit Awards
The following information relates to awards of restricted stock units that have been granted to employees and
non-employee directors under our L3Harris SIPs. These awards are not transferable until vested and the restrictions
generally lapse upon the achievement of continued employment (or board membership) over a specified time
period.
The fair value as of the grant date of these awards was based on the closing price of our common stock on the
grant date and is amortized to compensation expense over the vesting period. At December 29, 2023, there were
728,052 restricted stock units outstanding which were payable in shares.
A summary of the status of these awards at December 29, 2023 and changes during fiscal 2023 is as follows:
Restricted stock units outstanding at December 30, 2022
Granted
Vested
Forfeited
Restricted stock units outstanding at December 29, 2023
Units
Weighted-Average
Grant Price Per Unit
673,495 $
354,657 $
(223,855) $
(76,245) $
728,052 $
211.16
199.33
198.24
205.77
208.78
As of December 29, 2023, there was $86 million of total unrecognized compensation expense related to these
awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.75
years. The weighted-average grant date price per share or per unit was $199.33, $225.58 and $202.10 for awards
_____________________________________________________________________
88
granted in fiscal 2023, 2022 and 2021, respectively. The total fair value of these awards was $44 million,
$69 million and $19 million for awards that vested in fiscal 2023, 2022 and 2021, respectively.
Performance Share Unit Awards
The following information relates to awards of performance share units that have been granted to employees
under our L3Harris SIPs. At December 29, 2023, all of these awards are subject to performance criteria, such as
meeting predetermined operating income or earnings per share, return on invested capital targets and market
conditions, such as total shareholder return, for a 3-year performance period. These awards also generally vest after
a 3-year performance period. The final determination of the number of shares to be issued in respect of an award is
made by our Board or a committee thereof.
The fair value as of the grant date of awards with market conditions was determined based on a multifactor
Monte Carlo valuation model that simulates our stock price and TSR relative to other companies in the S&P 500, less
a discount to reflect the delay in payments of cash dividend-equivalents that are made only upon vesting. The fair
value of these awards is amortized to compensation expense over the performance period if achievement of the
performance measures is considered probable.
A summary of the status of these awards at December 29, 2023 and changes during fiscal 2023 is as follows:
Performance share units outstanding at December 30, 2022
Granted
Adjustment(1)
Vested
Forfeited
Performance share units outstanding at December 29, 2023
______________
(1) Adjustment for achievement of performance measures.
Units
Weighted-Average
Grant Price
Per Unit(1)
524,343 $
180,118 $
14,771 $
(182,808) $
(56,083) $
480,341 $
224.94
223.09
228.29
228.29
236.80
222.73
As of December 29, 2023, there was $35 million of total unrecognized compensation expense related to these
awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.56
years. The weighted-average grant date price per unit was $223.09, $258.83 and $201.32 for awards granted in
fiscal 2023, 2022 and 2021, respectively. The total fair value of the awards that vested in fiscal 2023 and 2022 was
$42 million and $41 million, respectively. There were no awards that vested in fiscal 2021.
NOTE 11: LEASES
Our operating and finance leases at December 29, 2023 and December 30, 2022 primarily consisted of real
estate leases for office space, warehouses, manufacturing, research and development facilities, telecommunication
tower space and land and equipment leases.
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89
The components of lease costs are as follows:
(In millions)
Operating lease cost
Short-term and equipment lease cost
Variable lease cost
Other, net(1)
Total lease cost
December 29, 2023 December 30, 2022 December 31, 2021
Fiscal Year Ended
$
$
163 $
151 $
23
26
11
21
25
6
223 $
203 $
172
20
20
3
215
______________
(1) Consists of finance lease amortization and interest costs as well as sublease income.
See “Leases” section in Note 1: Significant Accounting Policies in these Notes for the line items in our
Consolidated Statement of Operations where our lease costs are presented.
Lease Impairment — Fiscal 2021
As discussed in more detail in Note 6: Goodwill and Intangible Assets in these Notes, during the quarter ended
July 2, 2021, we tested the CTS reporting unit for potential impairment of the long-lived assets, including
identifiable assets and property, plant and equipment, and recorded a $145 million non-cash charge for the
impairment of CTS long-lived assets, including $19 million for impairment of ROU assets, which is included in the
“Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2022.
Balance Sheet Information
Supplemental operating and finance lease balance sheet information at December 29, 2023 and December 30,
2022 is as follows:
(In millions)
Operating Leases
Other non-current assets
Other accrued items
Other long-term liabilities
Total operating lease liabilities
Finance Leases
Property, plant and equipment
Accumulated amortization
Property, plant and equipment, net
Current portion of long-term debt, net
Long-term debt, net
Total finance lease liabilities
December 29, 2023 December 30, 2022
$
$
$
$
$
$
743 $
120
705
825 $
243 $
(25)
218 $
8 $
243
251 $
756
121
741
862
170
(15)
155
5
165
170
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90
Supplemental Lease Information
Other supplemental lease information for fiscal 2023 and 2022 is as follows:
(In millions, except lease term and discount rate)
December 29, 2023 December 30, 2022
Fiscal Year Ended
Cash paid for amounts included in the measurement of lease liabilities
Net cash provided by operating activities - operating lease payments
$
159 $
Net cash provided by operating activities - finance lease interest payments
Net cash provided by financing activities - finance lease obligation payments
7
6
Assets obtained in exchange for new lease obligations
ROU assets obtained with operating leases
Property, plant and equipment obtained with finance leases
$
144 $
68
Weighted average remaining lease term (in years)
Operating leases
Finance leases
Weighted average discount rate
Operating leases
Finance leases
8.3
17.7
3.9 %
4.3 %
Payments under non-cancelable operating and finance leases at December 29, 2023 were as follows:
148
5
4
123
20
9.3
21.3
3.5 %
3.4 %
(In millions)
2024
2025
2026
2027
2028
Thereafter
Total future lease payments required(1)
Less: imputed interest
Total
Operating Leases
Finance Leases
$
163 $
142
110
103
97
345
960
$
135
825 $
19
41
18
17
18
233
346
95
251
_______________
(1) On December 29, 2023, we had additional future payments on leases of $307 million that had not yet commenced. These leases will
commence between 2024 and 2025, and have lease terms of 4 years to 15 years.
These commitments do not contain any material rent escalations, rent holidays, contingent rent, rent
concessions, leasehold improvement incentives or unusual provisions or conditions. We do not consider any
individual lease material to our operations.
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91
NOTE 12: ACCUMULATED OTHER COMPREHENSIVE LOSS (“AOCL”)
The components of AOCL are summarized below:
(In millions)
Foreign
currency
translation
Net
unrealized
losses on
hedging
derivatives
Unrecognized
postretirement
obligations
Total AOCL
Balance at December 30, 2022
$
(237) $
(79) $
28 $
(288)
Other comprehensive income, before reclassifications to
earnings and income taxes
Income taxes
Other comprehensive income before reclassifications to
earnings, net of income taxes
Losses (gains) reclassified to earnings, before income
taxes(1)
Income taxes
Losses (gains) reclassified to earnings, net of income
taxes
Other comprehensive income, net of income taxes
Balance at December 29, 2023
Balance at December 31, 2021
Other comprehensive loss, before reclassifications to
earnings and income taxes
Income taxes
Other comprehensive loss before reclassifications to
earnings, net of income taxes
Losses (gains) reclassified to earnings, before income
taxes(1)
Income taxes
Losses (gains) reclassified to earnings, net of income
taxes
Other comprehensive (loss) income, net of income taxes
Balance at December 30, 2022
Balance at January 1, 2021
Other comprehensive (loss) income, before
reclassifications to earnings and income taxes
Income taxes
Other comprehensive (loss) income before
reclassifications to earnings, net of income taxes
Losses (gains) reclassified to earnings, before income
taxes(1)
Income taxes
Losses (gains) reclassified to earnings, net of income
taxes
$
$
$
$
Other comprehensive (loss) income, net of income taxes
Balance at December 31, 2021
$
36
—
36
—
—
14
(4)
10
5
(1)
—
36
(201) $
4
14
(65) $
95
(24)
71
(41)
10
(31)
40
68 $
145
(28)
117
(36)
9
(27)
90
(198)
(118) $
(89) $
61 $
(146)
(124)
5
(119)
—
—
—
(119)
(237) $
(10)
2
(8)
22
(4)
18
10
(79) $
(33)
7
(167)
14
(26)
(153)
(9)
2
(7)
(33)
28 $
13
(2)
11
(142)
(288)
(58) $
(80) $
(701) $
(839)
(63)
—
(63)
3
—
(4)
1
(3)
(8)
2
3
(60)
(118) $
(6)
(9)
(89) $
1,013
(255)
946
(254)
758
692
6
(2)
4
762
61 $
1
—
1
693
(146)
_______________
(1) Losses (gains) reclassified to earnings are included in the “Revenue”, “Asset group and business divestiture-related (losses) gains, net,”
“Interest expense, net” and “Non-service FAS pension income and other, net” line items in our Consolidated Statement of Operations.
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92
NOTE 13: ACQUISITIONS, DIVESTITURES AND ASSET SALES
Acquisition of Viasat’s TDL
On January 3, 2023, we completed the acquisition of TDL for a purchase price of $1,958 million. The acquisition
enhances our networking capability and provides access to the ubiquitous Link 16 waveform, better positioning us to
enable the DoD integrated architecture goal in JADC2.
On November 22, 2022, we established Term Loan 2025 with a syndicate of lenders, in part, to finance the
acquisition. See Note 8: Debt and Credit Arrangements in these Notes for further information regarding Term Loan
2025.
Net assets and results of operations of TDL are reflected in our financial results commencing on January 3,
2023, the acquisition date, and are reported within our CS segment, with the exception of acquired intangible
assets, which are recorded in our corporate headquarters.
We accounted for the acquisition of TDL using the acquisition method of accounting, which required us to
measure identifiable assets acquired and liabilities assumed in the acquiree at their fair values as of the acquisition
date, with the excess of the consideration transferred over those fair values recorded as goodwill.
As of the acquisition date, the fair value of consideration transferred consisted of the following:
(In millions)
Purchase price
Estimated net working capital and other adjustments
Cash consideration paid
Settlement of preexisting relationship(1)
Fair value of consideration transferred
January 3, 2023
$
1,958
15
1,973
1
$
1,974
_______________
(1) Prior to the acquisition, we had a preexisting relationship with Viasat’s TDL business in the normal course of business. As of the acquisition
date, our CS segment had a receivable from Viasat’s TDL business with a fair value of $1 million that was settled in connection with the
acquisition.
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93
Our preliminary fair value estimates and assumptions to measure the assets acquired and liabilities assumed
were subject to change as we obtained additional information during the measurement period. We completed our
accounting for the acquisition during the fiscal year ended December 29, 2023. The following table summarizes the
preliminary allocation of the fair value of consideration transferred to assets acquired and liabilities assumed as of
the acquisition date and the adjustments recognized during the measurement period:
(In millions)
Receivables
Contract assets
Inventories
Other current assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred income taxes
Other non-current assets
Total assets acquired
Accounts payable
Contract liabilities
Compensation and benefits
Other accrued items
Other long-term liabilities
Total liabilities assumed
Net assets acquired
Preliminary as of
January 3, 2023
Measurement Period
Adjustments, Net(1),(2)
Adjusted as of
December 29, 2023
$
$
$
$
$
28 $
18
164
9
50
1,014
850
33
18
2,184 $
20 $
28
2
119
41
210 $
— $
11
(18)
—
(1)
129
(95)
2
(1)
27 $
— $
—
—
17
10
27 $
28
29
146
9
49
1,143
755
35
17
2,211
20
28
2
136
51
237
1,974 $
— $
1,974
_______________
(1) Fair value adjustments during the fiscal year ended December 29, 2023 primarily related to refined assumptions in the valuation of customer
relationship intangible assets.
(2) Assets acquired include $11 million of Contract assets that were reclassified from Inventories to Contract assets to conform TDL’s
accounting policies with those of L3Harris, as required under ASC 805. As such, reclassified amounts will not be recognized as revenue in
future periods.
Intangible Assets. All intangible assets acquired in the TDL acquisition are subject to amortization. The fair value
and weighted-average amortization period of identifiable intangible assets acquired as of the acquisition date is as
follows:
Customer relationships:(1)
Backlog
Government programs
Total customer relationships
Developed technology
Total identifiable intangible assets acquired
Total
(In millions)
Useful Lives
(In Years)
$
$
83
323
406
349
755
2
16
17
_______________
(1) TDL had backlog and government programs intangible assets that we classified as customer relationships.
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94
We determined the fair value of assets acquired and liabilities assumed by using available market information
and various valuation methods that require judgment related to estimations. The use of different estimates could
produce different results. The fair value of intangible assets is estimated using the relief from royalty method for the
acquired developed technology and the multi-period excess earnings method for the acquired customer
relationships. Both of these level 3 fair value methods are income-based valuation approaches, which require
judgment to estimate appropriate discount rates, royalty rates related to the developed technology intangible
assets, revenue growth attributable to the intangible assets and remaining useful lives. The fair value of inventory
was estimated using the replacement cost approach and comparative sales method, which require estimates of
replacement cost for raw materials and estimates of expected sales price less costs to complete and dispose of the
inventory, plus a profit margin for efforts incurred for the work in progress and finished goods.
Forward Loss Provision. We have recorded a forward loss provision of $86 million in connection with certain
acquired contracts which was included in the “Other accrued items” line item in our Condensed Consolidated
Balance Sheet. The forward loss provisions will be recognized as a reduction to cost of revenue as we incur costs to
satisfy the associated performance obligations. There will be no net impact on our Condensed Consolidated
Statement of Operations. We recognized $36 million for amortization of the forward loss provision during the fiscal
year ended December 29, 2023.
Off-market Customer Contracts. We have identified certain contractual obligations with customers with
economic returns that are higher or lower than could be realized in market transactions as of the acquisition date
and have recorded liabilities for the acquisition date fair value of the off-market components. The acquisition date
fair value of the off-market components is a net liability of $64 million, consisting of $28 million and $36 million
included in the “Other accrued items” and “Other long-term liabilities” line items in our Condensed Consolidated
Balance Sheet, respectively, and excludes any amounts already recognized in forward loss provisions (see
discussion in the preceding paragraph). We measured the fair value of these components as the amount by which
the terms of the contract with the customer deviates from the terms that a market participant could have achieved
at the acquisition date. The off-market components of these contracts will be recognized as an increase to revenue
as we incur costs to satisfy the associated performance obligations. We recognized $28 million for amortization of
off-market contract liabilities during the fiscal year ended December 29, 2023. Future estimated revenue from the
amortization of off-market contract liabilities (based on the estimated pattern of cash flows to be incurred to satisfy
associated performance obligations) is $21 million in 2024 and immaterial amounts thereafter.
Goodwill. The $1,143 million of goodwill recognized is attributable to the assembled workforce, in addition to
synergies expected to be realized through integration with existing CS segment businesses and growth opportunities
in the space domain. The acquired goodwill is tax deductible. See Note 6: Goodwill and Intangible Assets in these
Notes for further information.
Financial Results. The following table includes revenue and income before income taxes of TDL included in our
Consolidated Statement of Operations for the acquisition date through December 29, 2023 and the comparable
periods of calendar year 2022. The comparable period results do not include any integration synergies or accounting
conformity adjustments and are not necessarily indicative of our results of operations that actually would have been
obtained had the acquisition of TDL been completed for the period presented, or which may be realized in the future.
(In millions)
Revenue
Income before income taxes
Fiscal Year Ended
December 29, 2023 December 30, 2022
$
365 $
131
358
68
Acquisition-Related Costs. Acquisition-related costs have been expensed as incurred. In connection with the
TDL acquisition, we recorded transaction and integration costs of $78 million for the fiscal year ended December 29,
2023, which were included in the General and administrative expenses line item in our Consolidated Statement of
Operations.
Acquisition of AJRD
On July 28, 2023 we acquired AJRD, a technology-based engineering and manufacturing company that develops
and produces missile solutions with technologies for strategic defense, missile defense, and hypersonic and tactical
systems, as well as space propulsion and power systems for national security space and exploration missions. The
acquisition provides us access to a new market. We acquired 100 percent of AJRD for a total net purchase price of
$4,715 million. The acquisition was financed through the issuance and sale of the AJRD Notes and draw down under
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95
the 2023 Credit Agreement. See Note 8: Debt and Credit Arrangements in these Notes for further information
regarding the financing of the AJRD acquisition.
Net assets and results of operations of AJRD are reflected in our financial results commencing on July 28, 2023
and are reported in our newly created AR segment and corporate headquarters. Corporate headquarters include net
assets and results of operations associated with AJRD’s real estate operations and acquired intangible assets.
We accounted for the acquisition of AJRD using the acquisition method of accounting, which required us to
measure identifiable assets acquired and liabilities assumed in the acquiree at their fair values as of the acquisition
date, with the excess of the consideration transferred over those fair values recorded as goodwill. Our preliminary
fair value estimates and assumptions are subject to change as we obtain additional information over the
measurement period and our measurement of certain assets and contingencies, such as intangible assets, property,
plant and equipment, real estate held for development and leasing, loss contracts, environmental matters and
related deferred tax impacts remain preliminary for completion of the related valuations.
As of the acquisition date, the fair value of consideration transferred consisted of the following:
(In millions)
Cash consideration paid for AJRD outstanding common stock & equity awards
AJRD debt settled by L3Harris
Cash consideration paid
Less cash acquired
Fair value of consideration transferred
July 28, 2023
$
$
4,748
257
5,005
(290)
4,715
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96
The following table summarizes the preliminary allocation of the fair value of consideration transferred to assets
acquired and liabilities assumed as of the acquisition date and the measurement period adjustments recorded since
the acquisition date through December 29, 2023:
(In millions)
Receivables
Contract assets
Inventories
Other current assets
Property, plant and equipment
Goodwill
Other intangible assets
Other non-current assets
Total assets acquired
Current portion of long-term debt, net
Accounts payable
Contract liabilities
Compensation and benefits
Income taxes payable
Other accrued items
Long-term debt, net
Deferred income taxes
Other long-term liabilities
Total liabilities assumed
Fair value of consideration transferred
Preliminary
as of July 28, 2023
Measurement Period
Adjustments, Net(1)
Preliminary Adjusted
as of December 29,
2023
$
$
$
$
$
156 $
338
14
117
574
2,348
2,860
609
7,016 $
1
145 $
310
116
6
278
41
398
1,006
2,301 $
— $
(40)
—
29
28
17
(20)
89
103 $
—
— $
15
1
(1)
22
—
120
(54)
103 $
156
298
14
146
602
2,365
2,840
698
7,119
1
145
325
117
5
300
41
518
952
2,404
4,715 $
— $
4,715
_______________
(1) Fair value adjustments during the fiscal year ended December 29, 2023 primarily related to EAC updates, refinements to the environmental
liability and associated recoverable, as well as an update to the deferred tax liability which was offset by the release of a portion of the
uncertain tax position previously booked by AJRD.
We determined the fair value of assets acquired and liabilities assumed by using available market information
and various valuation methods that require judgment related to estimates. Our accounting for the acquisition
remains preliminary. Amounts recorded associated with these assets and liabilities are based on preliminary
calculations and estimates. Our preliminary estimates and assumptions are subject to change as we obtain
additional information during the measurement period (up to one year from the acquisition date). Any potential
adjustments made could be material in relation to the preliminary values presented above.
Intangible Assets. All intangible assets acquired in the AJRD acquisition are subject to amortization. The
preliminary fair value and weighted-average amortization period of identifiable intangible assets acquired as of the
acquisition date is as follows:
Customer relationships:(1)
Backlog
Government programs
Total customer relationships
Trade names
Total identifiable intangible assets acquired
Total
(In millions)
Useful Lives
(In Years)
$
$
350
2,370
2,720
120
2,840
3
15 - 20
15
_______________
(1) AJRD had backlog and government programs intangible assets that we classified as customer relationships.
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97
The fair value of intangible assets is estimated using the relief from royalty method for the acquired trade
names and the multi-period excess earnings method for the acquired customer relationships. Both of these level 3
fair value methods are income-based valuation approaches, which require judgment to estimate appropriate
discount rates, royalty rates related to the trade names intangible assets, revenue growth attributable to the
intangible assets and remaining useful lives.
Forward Loss Provision. We have recorded a preliminary forward loss provision of $62 million which was
included in ”Other accrued items” line item in our Consolidated Balance Sheet. The forward loss provisions will be
recognized as a reduction to cost of revenue as we incur costs to satisfy the associated performance obligations.
There will be no net impact on our Consolidated Statement of Operations. We recognized $8 million from
amortization of the forward loss provision for the acquisition date through December 29, 2023.
Off-market Customer Contracts. We have identified certain contractual obligations with customers with
economic returns that are higher or lower than could be realized in market transactions as of the acquisition date
and have recorded liabilities for the preliminary acquisition date fair value of the off-market components. The
preliminary acquisition date fair value of the off-market components is a net liability of $95 million, consisting of $37
million and $58 million included in the “Other accrued items” and “Other long-term liabilities” line items in our
Consolidated Balance Sheet, respectively, and excludes any amounts already recognized in forward loss provisions
(see discussion in the preceding paragraph). We measured the fair value of these components as the amount by
which the terms of the contract with the customer deviates from the terms that a market participant could have
achieved at the acquisition date. The off-market components of these contracts will be recognized as an increase to
revenue as we incur costs to satisfy the associated performance obligations. We recognized $14 million from
amortization of off-market contract liabilities during the period from the acquisition date through December 29,
2023.
Goodwill. The $2,365 million of goodwill recognized is attributable to AJRD’s market presence as the provider of
advanced propulsion and power systems for nearly every major U.S. space and missile program, the assembled
workforce and established operating infrastructure. The acquired goodwill is not tax deductible. See Note 6:
Goodwill and Intangible Assets in these Notes for further information.
Financial Results. Revenue and income before income taxes of AJRD included in our Consolidated Statement of
Operations for the acquisition date through December 29, 2023 was $1,052 million and $122 million, respectively.
The following table presents unaudited pro forma financial results of the operations acquired with AJRD. The pro
forma results for fiscal year ended December 29, 2023 were prepared as if the acquisition was completed on the
first day of our fiscal 2023, December 31, 2022, and include adjustments to remove costs directly attributable to the
acquisition, such as transaction-related costs and the impact of purchase price adjustments, and corporate
expenses such as pension, interest, and amortization. The pro forma results for fiscal year ended December 30,
2022 were prepared as if the acquisition was completed on the first day of our fiscal 2022, January 1, 2022, and
include adjustments to remove corporate expenses such as pension, interest, and amortization. The pro forma
results do not include any integration synergies and are not necessarily indicative of our results of operations that
actually would have been obtained had the acquisition of AJRD been completed for the period presented, or which
may be realized in the future.
(In millions)
Revenue
Income before income taxes
Fiscal Year Ended
December 29,
2023
December 30,
2022
$
2,337 $
266
2,238
234
Acquisition-Related Costs. Acquisition-related costs have been expensed as incurred. In connection with the
AJRD acquisition, we recorded transaction and integration costs of $83 million for the fiscal year ended December
29, 2023, which were included in the “General and administrative expenses” line item in our Consolidated
Statement of Operations.
Completed Divestiture of VIS — Fiscal 2023
On April 6, 2023, we completed the sale of VIS for a sale price of $70 million and recognized a pre-tax gain of
$26 million included in the “Asset group and business divestiture-related (losses) gains, net” line item in our
Consolidated Statement of Operations for the fiscal year ended December 29, 2023. After selling costs and
purchase price adjustments, the net cash proceeds for the sale of VIS were $71 million. The operating results of VIS
were reported in the SAS segment through the date of divestiture.
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98
The carrying amounts of the assets and liabilities of VIS were classified as held for sale in our Consolidated
Balance Sheet as of December 30, 2022.
Pending Divestiture of CAS Disposal Group — Fiscal 2023
On November 27, 2023, we announced that we entered into a definitive agreement to sell our CAS disposal
group for a cash purchase price of $700 million, with additional contingent consideration of up to $100 million,
subject to customary purchase price adjustments and closing conditions as set forth in the agreement. As of
November 27, 2023, the fair value less costs to sell of the CAS disposal group is $834 million, inclusive of
consideration related to noncontrolling interest and accumulated other comprehensive income. We recognized a
pre-tax loss of $77 million included in the “Asset group and business divestiture-related (losses) gains, net” line
item in our Consolidated Statement of Operations for the fiscal year ended December 29, 2023. CAS, which is part of
our IMS segment, provides integrated aircraft avionics, pilot training and data analytics services for the commercial
aviation industry. The transaction is expected to close in 2024.
In connection with the preparation of our financial statements for the fiscal year ended December 29, 2023, we
concluded that goodwill related to the CAS disposal group was impaired and we recorded a non-cash impairment
charge of $296 million, which is included in the Impairment of goodwill and other assets. See Note 6: Goodwill and
Intangible Assets in these Notes for additional information.
The carrying amounts of the assets and liabilities of the CAS business classified as held for sale in our
Consolidated Balance Sheet as of December 29, 2023 were as follows:
(In millions)
Receivables, net
Contract assets
Inventories
Other current assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Other non-current assets
Valuation allowance
Total assets held for sale
Accounts payable
Contract liabilities
Compensation and benefits
Other accrued items
Other long-term liabilities
Total liabilities held for sale
December 29, 2023
$
$
$
$
80
43
145
33
41
534
263
44
(77)
1,106
111
48
11
38
64
272
Completed Divestitures and Asset Sales — Fiscal 2022
During the fiscal 2022, we completed one business divestiture and one asset sale from our IMS segment for
combined net cash proceeds of $23 million and recognized a pre-tax gain of $8 million associated with the asset
sale included in the “Asset group and business divestiture-related (losses) gains, net” line item in our Consolidated
Statement of Operations for fiscal 2022.
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Completed Divestitures and Asset Sales — Fiscal 2021
The following table presents information regarding business divestitures completed during fiscal 2021, all of
which were reported under our “Other non-reportable businesses” segment through the date of divestiture, which
was formerly our Aviation Systems segment:
Date of Divestiture
(In millions)
Narda-MITEQ business(2)
ESSCO business(3)
Electron Devices business(4)
Voice Switch Enterprise disposal group (“VSE disposal group”)(5) July 30, 2021
Combat Propulsion Systems and related businesses (“CPS
business”)(6)
Military training business(7)
July 2, 2021
July 2, 2021
December 6, 2021
November 26, 2021
October 1, 2021
$
Sale Price
Net Cash
Proceeds(1)
75 $
55
185
20
76
53
173
19
398
1,050
1,783 $
347
1,059
1,727
$
_______________
(1) Net cash proceeds after selling costs and purchase price adjustments.
(2) The Narda-MITEQ business manufactured component, Satellite Communication (“SATCOM”) and radio frequency safety products for both
military and commercial markets.
(3) The ESSCO business manufactured metal space frame ground radomes and composite structures.
(4) The Electron Devices and Narda Microwave-West divisions (“Electron Devices business”) manufactured microwave devices for ground-
based, airborne and SATCOM and radar.
(5) The VSE disposal group provided voice over internet protocol systems for air traffic management communications.
(6) The CPS business engineered, designed and manufactured engines, transmissions, suspensions and turret drive systems for tracked and
wheeled combat vehicle systems.
(7) The military training business provided flight simulation solutions and training services to the DoD and foreign military agencies.
Income Before Income Taxes Attributable to Businesses Divested
Income before income taxes attributable to the CAS disposal group was $53 million, $63 million and $18 million
in fiscal 2023, 2022 and 2021, respectively. There was no significant income before income taxes attributable to
businesses divested or held for sale during fiscal 2022.
In fiscal 2021, we had the following significant income before income taxes attributable to businesses divested
in our Consolidated Statement of Operations:
(In millions)
Electron Devices business
CPS business
Military training business
Fiscal Year Ended
December 31, 2021
$
44
53
35
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100
Asset Sales and Business Divestiture-Related Gains (Losses), net
In fiscal 2023 we recognized a pre-tax loss of $77 million in connection with the pending sale of our CAS
disposal group and a pre-tax gain of $26 million in connection with the sale of VIS. In fiscal 2022, there were no
significant asset group sales or business divestiture-related gains or losses. In fiscal 2021, we had the following pre-
tax gains (losses) associated with businesses divested, which are included in the “Asset group and business
divestiture-related (losses) gains, net” line item in our Consolidated Statement of Operations:
(In millions)
Narda-MITEQ business
ESSCO business
Electron Devices business
VSE disposal group
CPS business(1)
Military training business
Other(2)
Total Business divestiture-related gains (losses), net
Fiscal Year Ended
December 31, 2021
$
$
(9)
31
31
(29)
(19)
217
(2)
220
_______________
(1) During the quarter ended April 2, 2021, upon classifying the CPS business as held for sale, we recorded a non-cash impairment charge of
$62 million, which is included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations for
fiscal 2021. See Note 6: Goodwill and Intangible Assets in these Notes for additional information.
(2) Reflects adjustments to the gains and losses on completed divestitures not shown within the table.
Fair Value of Businesses and Goodwill Allocation
For purposes of allocating goodwill to the disposal groups that represent a portion of a reporting unit, we
determine the fair value of each disposal group based on the respective negotiated selling price, and the fair value of
the retained businesses of the respective reporting unit based on a combination of market-based and income based
valuation techniques, utilizing quoted market prices, 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
in these Notes for additional information regarding the fair value hierarchy and see Note 6: Goodwill and Intangible
Assets in these Notes for additional information regarding the impairment of goodwill related to our business
divestitures.
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101
NOTE 14: BUSINESS SEGMENTS
Business Segment Financial Information
The following table presents revenue and operating income by segment:
(In millions)
Revenue
SAS
IMS
CS
AR
Other non-reportable businesses
Corporate eliminations
Total revenue
Operating Income
SAS
IMS
CS
AR
Other non-reportable businesses
Total segment
Total unallocated corporate expense
Total operating income
December 29, 2023 December 30, 2022 December 31, 2021
Fiscal Year Ended
$
$
$
$
6,856 $
6,630
5,070
1,052
—
(189)
19,419 $
756 $
459
1,229
122
—
2,566
(1,140)
1,426 $
6,384 $
6,626
4,217
**
—
(165)
17,062 $
665 $
494
667
**
—
1,826
(699)
1,127 $
6,315
6,733
4,287
**
683
(204)
17,814
782
845
1,043
**
104
2,774
(665)
2,109
_______________
**
AR is a new reportable segment established in the quarter ended September 29, 2023 which consists of the operations assumed in the AJRD
acquisition. As such, there is no comparable prior year information.
Unallocated Corporate Expense
Total unallocated corporate expense includes corporate items such as a portion of management and
administration, legal, environmental, compensation, retiree benefits, other corporate expenses and eliminations and
the FAS/CAS operating adjustment. Total unallocated corporate expense also includes the portion of corporate costs
not included in management’s evaluation of segment operating performance, such as amortization of acquisition-
related intangibles; additional cost of revenue related to the fair value step-up in inventory sold; merger, acquisition,
and divestiture-related expenses; asset group and business divestiture-related (losses) gains, net; impairment of
goodwill and other assets; gain on sale of property, plant and equipment; LHX NeXt implementation costs; and other
items.
LHX NeXt implementation costs. LHX NeXt is our initiative to transform multiple functions, systems and
processes to increase agility and competitiveness. The LHX NeXt effort is expected to continue for the next three
years with one-time costs for workforce optimization, incremental IT expenses for implementation of new systems,
third party consulting and other costs.
In connection with our LHX NeXt program restructuring activities, we recorded charges of $25 million during
fiscal 2023, included as a component of the “General and administrative expenses” line item in our Consolidated
Statement of Operations. At December 29, 2023 we had remaining liabilities of $4 million which we expect will be
paid in the next twelve months. Our liabilities for restructuring are included in the “Compensation and benefits” line
item in our Consolidated Balance Sheet.
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102
FAS/CAS Pension Operating Adjustment
The table below is a reconciliation of the FAS/CAS operating adjustment:
(In millions)
December 29, 2023 December 30, 2022 December 31, 2021
Fiscal Year Ended
FAS pension service cost
Less: CAS pension cost
FAS/CAS operating adjustment
Non-service FAS pension income(1)
FAS/CAS pension adjustment, net(2)
$
$
(35) $
(145)
110
310
420 $
(46) $
(141)
95
441
536 $
(68)
(191)
123
445
568
_______________
(1) Non-service FAS pension income is included as component of the “Non-service FAS pension income and other, net” line item in our
Consolidated Statement of Operations.
(2) FAS/CAS pension adjustment, net excludes net settlement and curtailment losses recognized in fiscal 2021. See Note 9: Retirement Benefits
in these Notes for additional information on net settlements and curtailments.
See “Business Segments” in Note 1: Significant Accounting Policies in these Notes for additional information
regarding our FAS/CAS operating adjustment accounting policy.
Disaggregation of Revenue
We disaggregate revenue for all four business segments by customer relationship, contract type and
geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by economic factors.
(In millions)
SAS
IMS
CS
AR
Fiscal Year Ended
December 29, 2023
Revenue By Customer Relationship
Prime contractor
Subcontractor
Intersegment
Total segment
Revenue By Contract Type
Fixed-price(1)
Cost-reimbursable
Intersegment
Total segment
Revenue By Geographical Region
United States
International
Intersegment
Total segment
$
$
$
$
$
$
_______________
(1)
Includes revenue derived from time-and-materials contracts.
4,252 $
2,555
49
6,856 $
4,257 $
2,550
49
6,856 $
5,933 $
874
49
6,856 $
4,196 $
2,347
87
6,630 $
5,020 $
1,523
87
6,630 $
4,816 $
1,727
87
6,630 $
3,420 $
1,597
53
5,070 $
4,289 $
728
53
5,070 $
3,482 $
1,535
53
5,070 $
250
802
—
1,052
632
420
—
1,052
1,015
37
—
1,052
_____________________________________________________________________
103
(In millions)
SAS
IMS
CS
AR
Fiscal Year Ended
December 30, 2022
Revenue By Customer Relationship
Prime contractor
Subcontractor
Intersegment
Total segment
Revenue By Contract Type
Fixed-price(1)
Cost-reimbursable
Intersegment
Total segment
Revenue By Geographical Region
United States
International
Intersegment
Total segment
$
$
$
$
$
$
4,005 $
2,330
49
6,384 $
3,811 $
2,524
49
6,384 $
5,623 $
712
49
6,384 $
4,301 $
2,254
71
6,626 $
5,060 $
1,495
71
6,626 $
4,796 $
1,759
71
6,626 $
2,829
1,343
45
4,217 $
3,552
620
45
4,217 $
2,735
1,437
45
4,217 $
**
**
**
—
**
**
**
—
**
**
**
—
_______________
**
AR is a new reportable segment established in the quarter ended September 29, 2023 which consists of the operations assumed in the AJRD
acquisition. As such, there is no comparable prior year information.
Includes revenue derived from time-and-materials contracts.
(1)
(In millions)
SAS
IMS
CS
AR
Fiscal Year Ended
December 31, 2021
Revenue By Customer Relationship
Prime contractor
Subcontractor
Intersegment
Total segment
Revenue By Contract Type
Fixed-price(1)
Cost-reimbursable
Intersegment
Total segment
Revenue By Geographical Region
United States
International
Intersegment
Total segment
$
$
$
$
$
$
3,942 $
2,331
42
6,315 $
3,781 $
2,492
42
6,315 $
5,569 $
704
42
6,315 $
4,474 $
2,187
72
6,733 $
5,231 $
1,430
72
6,733 $
4,782 $
1,879
72
6,733 $
2,886
1,347
54
4,287 $
3,631
602
54
4,287 $
3,001
1,232
54
4,287 $
**
**
**
—
**
**
**
—
**
**
**
—
_______________
**
AR is a new reportable segment established in the quarter ended September 29, 2023 which consists of the operations assumed in the AJRD
acquisition. As such, there is no comparable prior year information.
Includes revenue derived from time-and-materials contracts.
(1)
_____________________________________________________________________
104
(In millions)
December 29, 2023 December 30, 2022 December 31, 2021
Fiscal Year Ended
Geographical Information for Operations
Revenue from U.S. operations
Revenue from international operations
$
17,537 $
1,882
15,373 $
1,689
16,234
1,580
Our products are produced principally in the U.S. with international revenue derived primarily from exports. No
revenue earned from any individual foreign country exceeded 5% of our total revenue in fiscal 2023, 2022 and
2021.
Revenue from U.S. Government customers, including foreign military sales funded through the U.S. Government,
whether directly or through prime contractors, by all segments as a percentage of total revenue were 76%, 74% and
75% in fiscal 2023, 2022 and 2021, respectively. Revenue from services in fiscal 2023 was 28%, 38%, 19% and
29% of total revenue in our SAS, IMS, CS and AR segments, respectively.
Revenue from products and services where the end consumer is located outside the U.S., including foreign
military sales funded through the U.S. Government, whether directly or through prime contractors, was $4.2 billion
(21% of our revenue), $3.9 billion (23% of our revenue) and $3.9 billion (22% of our revenue) in fiscal 2023, 2022
and 2021, respectively. Export revenue and revenue from international operations in fiscal 2023 was principally
from the EMEA and APAC regions and Canada.
Assets by Business Segment
Total assets by business segment are as follows:
(In millions)
Total Assets
SAS
IMS
CS
AR
Corporate(1)
Total Assets
December 29, 2023 December 30, 2022
$
9,085 $
10,631
7,084
4,208
10,679
$
41,687 $
8,838
10,925
5,800
**
7,961
33,524
_______________
**
(1)
AR is a new reportable segment established in the quarter ended September 29, 2023 which consists of assets, liabilities and operations
assumed in the AJRD acquisition. As such, there is no comparable prior year information.
Identifiable intangible assets acquired in connection with business combinations were recorded as corporate assets because they benefited
the entire Company. Identifiable intangible asset balances recorded as corporate assets were $8.5 billion and $6.0 billion at December 29,
2023 and December 30, 2022, respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes,
deferred compensation plan investments, buildings and equipment, real estate held for development and leasing that we acquired with
AJRD, as well as any assets of businesses held for sale.
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105
Other selected financial information by business segment and geographical area is summarized below:
(In millions)
Capital Expenditures
SAS
IMS
CS
AR
Other non-reportable businesses
Corporate
Total Capital Expenditures
Depreciation and Amortization
SAS
IMS
CS
AR
Other non-reportable businesses
Corporate
Total Depreciation and Amortization
Geographical Information for Operations
Long-lived assets of U.S. operations
Long-lived assets of international operations
December 29, 2023 December 30, 2022 December 31, 2021
Fiscal Year Ended
$
$
$
$
$
151 $
149
39
31
—
79
449 $
115 $
73
54
29
—
895
1,166 $
133 $
45
36
**
—
38
252 $
112 $
76
47
**
—
703
938 $
155
69
56
**
4
58
342
109
92
49
**
8
709
967
2,678 $
184
1,896 $
208
1,870
231
_______________
**
AR is a new reportable segment established in the quarter ended September 29, 2023 which consists of the operations assumed in the AJRD
acquisition. As such, there is no comparable prior year information.
In addition to depreciation and amortization expense related to property, plant and equipment, “Depreciation
and Amortization” in the table above also includes $777 million, $596 million and $624 million of amortization
related to identifiable intangible assets, debt premium, debt discount, debt issuance costs and other items in fiscal
2023, 2022 and 2021, respectively.
NOTE 15: LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES
From time to time, as a normal incident of the nature and kind of businesses in which we are or were engaged,
various claims or charges are asserted and litigation or arbitration is commenced by or against us arising from or
related to matters, including but not limited to: product liability; personal injury; patents, trademarks, trade secrets
or other intellectual property; labor and employee disputes; commercial or contractual disputes; strategic
acquisitions or divestitures; the prior sale or use of former products allegedly containing asbestos or other restricted
materials; breach of warranty; or environmental matters. Claimed amounts against us may be substantial, but may
not bear any reasonable relationship to the merits of the claim or the extent of any real risk of court or arbitral
awards. We record accruals for losses related to those matters against us that we consider to be probable and that
can be reasonably estimated (for example, we recorded an additional $31 million charge related to a pre-merger
legal contingency during the quarter ended September 30, 2022). Gain contingencies, if any, are recognized when
they are realized and legal costs generally are expensed when incurred. At December 29, 2023, our accrual for the
potential resolution of lawsuits, claims or proceedings that we consider probable of being decided unfavorably to us
was not material. We cannot at this time estimate the reasonably possible loss or range of loss in excess of our
accrual due to the inherent uncertainties and speculative nature of contested proceedings. Although it is not feasible
to predict the outcome of these matters with certainty, based on available information, in the opinion of
management, settlements, arbitration awards and final judgments, if any, that are considered probable of being
rendered against us in litigation or arbitration in existence at December 29, 2023 are reserved against or would not
have a material adverse effect on our financial condition, results of operations, cash flows or equity.
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106
Tax Audits
Our tax filings are subject to audit by taxing authorities in jurisdictions where we conduct or conducted business.
These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or
ultimately through legal proceedings. We believe we have adequately accrued for any ultimate amounts that are
likely to result from these audits; however, final assessments, if any, could be different from the amounts recorded
in our Consolidated Financial Statements. Additional information regarding audits and examinations by taxing
authorities of our tax filings is set forth in Note 7: Income Taxes in these Notes.
U.S. Government Business
We are engaged in supplying products and services to various departments and agencies of the
U.S. Government. We are therefore dependent on Congressional appropriations and administrative allotment of
funds and may be affected by changes in U.S. Government policies. U.S. Government development and production
contracts typically involve long lead times for design and development, are subject to significant changes in contract
scheduling and may be unilaterally modified or canceled by the U.S. Government. Often these contracts call for
successful design and production of complex and technologically advanced products or systems. We may
participate in supplying products and services to the U.S. Government as either a prime contractor or as a
subcontractor to a prime contractor. Disputes may arise between the prime contractor and the U.S. Government or
between the prime contractor and its subcontractors and may result in litigation or arbitration between the
contracting parties.
Generally, U.S. Government contracts are subject to procurement laws and regulations, including the FAR, which
outline uniform policies and procedures for acquiring products and services by the U.S. Government, and specific
agency acquisition regulations that implement or supplement the FAR, such as the Defense Federal Acquisition
Regulation Supplement. As a U.S. Government contractor, our contract costs are audited and reviewed on a
continuing basis by the Defense Contract Audit Agency (“DCAA”). The DCAA also reviews the adequacy of, and a
U.S. Government contractor’s compliance with, the contractor’s business systems and policies, including the
contractor’s property, estimating, compensation and management information systems. In addition to these routine
audits, from time to time, we may, either individually or in conjunction with other U.S. Government contractors, be
the subject of audits and investigations by other agencies of the U.S. Government. These audits and investigations
are conducted to determine if our performance and administration of our U.S. Government contracts are compliant
with applicable contractual requirements and procurement and other applicable federal laws and regulations,
including ITAR and FCPA. These investigations may be conducted with or without our knowledge or cooperation. We
are unable to predict the outcome of such investigations or to estimate the amounts of resulting claims or other
actions that could be instituted against us or our officers or employees. Under present U.S. Government
procurement laws and regulations, if indicted or adjudged in violation of procurement or other federal laws, a
contractor, such as us, or one or more of our operating divisions or subdivisions, could be subject to fines, penalties,
repayments, or compensatory or treble damages. U.S. Government regulations also provide that certain findings
against a contractor may lead to suspension or debarment from eligibility for awards of new U.S. Government
contracts for a period of time to be determined by the U.S. Government. Suspension or debarment would have a
material adverse effect on us because of our reliance on U.S. Government contracts. In addition, our export
privileges could be suspended or revoked, which also would have a material adverse effect on us. For further
discussion of risks relating to U.S. Government contracts, see “Item 1A. Risk Factors” of this Report.
International
As an international company, we are, from time to time, the subject of investigations relating to our international
operations, including under U.S. export control laws (such as ITAR), the FCPA and other similar U.S. and
international laws.
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107
Commercial Commitments
We have entered into commercial commitments in the normal course of business including surety bonds,
standby letter of credit agreements and other arrangements with financial institutions and customers primarily
relating to the guarantee of future performance on certain contracts to provide products and services to customers
or to obtain insurance policies with our insurance carriers. At December 29, 2023, we had commercial commitments
on outstanding surety bonds, standby letters of credit and other arrangements, as follows:
(In millions)
Surety bonds used for:
Performance
Total surety bonds
Standby letters of credit used for:
Advance payments
Performance
Financial
Total standby letters of credit
Total commitments
Commercial
Commitment Total
Commitments
expiring within
1 Year
$
536 $
536
304
347
72
723
$
1,259 $
396
396
120
137
68
325
721
The surety bonds and standby letters of credit used for performance are primarily related to our Public Safety
business sector. As is customary in bidding for and completing network infrastructure projects for public safety
systems, contractors are required to procure surety bonds and/or standby letters of credit for bids, performance,
warranty and other purposes (collectively, “Performance Bonds”). Such Performance Bonds normally have
maturities of up to three years and are standard in the industry as a way to provide customers a mechanism to seek
redress if a contractor does not satisfy performance requirements under a contract.
Typically, a customer is permitted to draw on a Performance Bond if we do not fulfill all terms of a project
contract. In such an event, we would be obligated to reimburse the financial institution that issued the Performance
Bond for the amounts paid. It has been rare for our Public Safety business sector to have a Performance Bond drawn
upon. In addition, pursuant to the terms under which we procure Performance Bonds, if our credit ratings are
lowered to below “investment grade,” we may be required to provide collateral to support a portion of the
outstanding amount of Performance Bonds. Such a downgrade could increase the cost of the issuance of
Performance Bonds and could make it more difficult to procure Performance Bonds, which would adversely impact
our ability to compete for contract awards. Such collateral requirements could also result in less liquidity for other
operational needs or corporate purposes. In addition, any future disruptions, uncertainty or volatility in financial and
insurance markets could also adversely affect our ability to obtain Performance Bonds and may result in higher
funding costs.
Environmental Matters
We are subject to numerous U.S. federal, state, local and international environmental laws and regulatory
requirements and are involved from time to time in investigations or litigation of various potential environmental
issues. We or companies we have acquired, including AJRD, are responsible, or alleged to be responsible, for
environmental investigation and/or remediation of multiple sites, including sites owned by us and third party sites.
These sites are in various stages of investigation and/or remediation, and in some cases our liability is considered de
minimis. Notices from the U.S. Environmental Protection Agency or equivalent state or international environmental
agencies allege that several sites formerly or currently owned and/or operated by us or companies we have
acquired, and other properties or water supplies that may be or have been impacted from those operations, contain
disposed or recycled materials or wastes and require environmental investigation and/or remediation. These sites
include instances of being identified as a potentially responsible party (“PRP”) under the Comprehensive
Environmental Response, Compensation and Liability Act (commonly known as the “Superfund Act”), the Resource
Conservation Recovery Act and/or equivalent state and international laws, and in some instances, our liability and
proportionate share of costs that may be shared among other PRPs have not been determined largely due to
uncertainties as to the nature and extent of site conditions and our involvement.
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108
As of December 29, 2023, we were named, and continue to be named, as a potentially responsible party at 113
sites where future liabilities could exist. These sites included 14 sites owned by us, 72 sites associated with our
former and current locations or operations and 27 hazardous waste treatment, storage or disposal facility sites not
owned by us that contain hazardous substances allegedly attributable to us from past operations.
Based on an assessment of relevant factors, we estimated that our liability under applicable environmental
statutes and regulations for identified sites was $613 million. The current portion of our estimated environmental
liability is included in the “Other accrued items” line item and the non-current portion is included in the “Other long-
term liabilities” line item in our Consolidated Balance Sheet. Some of these environmental costs are eligible for
future recovery in the pricing of our products and services to the U.S. government and under existing third party
agreements. We consider the recovery probable based on U.S. government contracting regulations and existing third
party agreements. As of December 29, 2023 we had an asset for the recoverable portion of these reserves of $432
million. The current and non-current portion of the recoverable costs are included as a component of the “Other
current assets” and “Other non-current assets” line items, respectively, in our Consolidated Balance Sheet.
The largest environmental matter is the Sacramento, California site. In addition to issued federal and state
orders to clean up groundwater, soil and soil vapor, we are subject to a Partial Consent Decree (“PCD”) related to
this site which requires us, among other things, to conduct a Remedial Investigation and Feasibility Studies to
determine the nature and extent of impacts due to the release of chemicals from the Sacramento, California site,
monitor the American River and offsite public water supply wells, operate groundwater extraction and treatment
facilities that collect groundwater at the site perimeter, and pay certain government oversight costs. The PCD
required a guarantee up to $75 million (in addition to a prior $20 million guarantee) to assure that the Sacramento
remediation activities are fully funded. Obligations under the $75 million aggregate guarantee are limited to
$10 million in any year. Both the $75 million aggregate guarantee and the $10 million annual limitation are subject
to adjustment annually for inflation. As of December 29, 2023, the estimated range of anticipated costs for the
Sacramento, California site related to the PCD and other federal and state orders was $266 million to $399 million
and the accrued amount was $266 million included as a component of the “Other accrued items” and “Other long-
term liabilities” line item in our Consolidated Balance Sheet.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Not applicable.
ITEM 9A.
CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures: We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Our
disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and
communicated to management, including our CEO and CFO as appropriate to allow timely decisions regarding
required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and
procedures, including the possibility of human error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance
of achieving their control objectives, and management necessarily is required to use its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. As required by Rule 13a-15 under the Exchange Act,
as of December 29, 2023, we carried out an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation
of our management, including our CEO and our CFO. Based on this work and other evaluation procedures, our
management, including our CEO and our CFO, has concluded that as of December 29, 2023, our disclosure controls
and procedures were effective.
(b) Changes in Internal Control: We periodically review our internal control over financial reporting (“ICFR”) as
part of our efforts to ensure compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. In
addition, we routinely review our system of ICFR to identify potential changes to our processes and systems that
may improve controls and increase efficiency, while ensuring that we maintain an effective internal control
environment. Changes may include such activities as implementing new, more efficient systems, consolidating the
activities of business units, migrating certain processes to our shared services organizations, formalizing policies
and procedures, improving segregation of duties and increasing monitoring controls. In addition, when we acquire
new businesses, we incorporate our controls and procedures into the acquired business as part of our integration
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109
activities. As part of our acquisition of AJRD, we are in the process of incorporating our controls and procedures with
respect to AJRD’s operations, and we will include internal controls with respect to AJRD’s operations in our
assessment of the effectiveness of our ICFR as of the end of fiscal 2024. Other than changes related to incorporating
our controls and procedures with respect to AJRD operations, there have been no changes in our ICFR that occurred
during the quarter ended December 29, 2023 that have materially affected, or are reasonably likely to materially
affect, our ICFR.
(c) Evaluation of ICFR: Our management is responsible for establishing and maintaining adequate ICFR. Our
management, with the participation of our CEO and our CFO, assessed the effectiveness of our ICFR as of
December 29, 2023. In making this assessment, our management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013
framework). Our management excluded from its assessment of effectiveness of ICFR the internal controls of AJRD,
which we acquired on July 28, 2023, and whose financial statements represent 5% of our total assets, excluding the
preliminary value of goodwill and other intangible assets, as of December 29, 2023, and 5% of our total revenue for
our fiscal year then ended. Our management will include the internal controls of AJRD in its assessment of the
effectiveness of our ICFR as of the end of fiscal 2024. Based on our management’s assessment and those criteria,
our management concluded that our ICFR was effective as of December 29, 2023. “Management’s Report on
Internal Control Over Financial Reporting” is included within “Item 8. Financial Statements and Supplementary
Data” of this Report. The effectiveness of our ICFR was audited by Ernst & Young LLP, our independent registered
public accounting firm, whose unqualified report is included within “Item 8. Financial Statements and
Supplementary Data” of this Report.
ITEM 9B.
OTHER INFORMATION.
Securities Trading Plans of Directors and Executive Officers
We require all executive officers and directors to effect purchase and sale transactions in L3Harris securities
pursuant to a trading plan (each, a “10b5-1 Plan”) intended to satisfy the requirements of Rule 10b5-1 under the
Exchange Act (“Rule 10b5-1”). We limit executive officers to a single 10b5-1 Plan in effect at any time, subject to
limited exceptions in accordance with Rule 10b5-1. In addition, our stock ownership guidelines require executive
officers to maintain ownership of L3Harris securities (excluding stock options and unearned performance share
units) with a value equal to a multiple of their annual salary. Each executive officer identified in the table below is
expected to hold securities considerably in excess of L3Harris’ stock ownership guidelines following the sale of the
maximum number of shares contemplated.
The following table includes the material terms (other than with respect to the price) of each 10b5-1 Plan
adopted or terminated by our executive officers and directors during the quarter ended December 29, 2023:
Name and title
Date of adoption of
10b5-1 Plan(1)
Scheduled expiration
date of 10b5-1 Plan(2)
Aggregate number of shares of common stock to
be purchased or sold(3)
Christopher E. Kubasik
Chair and CEO
December 14, 2023
April 8, 2024
Scott T. Mikuen
December 14, 2023
March 18, 2024
Up to 46,528 shares underlying options
expiring in 2025
Up to 6,392 shares
Senior Vice President,
General Counsel and
Secretary
William H. Swanson
December 13, 2023
May 1, 2024
2,500 shares
Director
Edward J. Zoiss
President, SAS
November 8, 2023
July 26, 2024
Up to 7,217 shares
_______________
(1) Transactions under each Rule 10b5-1 Plan commence no earlier than 90 days after adoption, or such later date as required by Rule 10b5-1.
(2) Each Rule 10b5-1 Plan may expire on such earlier date as all transactions are completed.
(3) Each Rule 10b5-1 Plan provides for shares to be sold on multiple predetermined dates.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
PART III
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110
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information regarding our directors, executive officers and corporate governance is included in our Proxy
Statement for our 2024 Annual Meeting of Shareholders scheduled to be held on April 19, 2024 (our “2024 Proxy
Statement”), which is expected to be filed within 120 days after the end of our fiscal 2023.
(a) Identification of Directors: The information required by this Item with respect to our directors is incorporated
herein by reference to the discussion under the headings Proposal 1: Election of Directors and Nominee Biographies
in our 2024 Proxy Statement.
(b) Identification of Executive Officers: Certain information regarding our executive officers is included in Part I of
this Report under the heading “Information about our Executive Officers” in accordance with General
Instruction G(3) of Form 10-K.
(c) Audit Committee Information; Financial Expert: The information required by this Item with respect to the
Audit Committee of our Board and “audit committee financial experts” is incorporated herein by reference to the
discussions under the headings Corporate Governance and Board Committees— Audit Committee in our 2024 Proxy
Statement.
(d) Delinquent Section 16(a) Reports: Information related to compliance with Section 16(a) of the Exchange Act
is incorporated herein by reference to the discussion under the heading Delinquent Section 16(a) Reports in our 2024
Proxy Statement.
(e) Code of Ethics: All of our directors and employees, including our Chief Executive Officer, Chief Financial
Officer, Principal Accounting Officer and other senior accounting and financial officers, are required to abide by our
Code of Conduct. Our Code of Conduct is posted on our website at https://www.l3harris.com/resources/other/
l3harris-code-conduct and is also available free of charge by written request to our Director of Ethics and
Compliance, L3Harris Technologies, Inc., 1025 West NASA Boulevard, Melbourne, Florida 32919. We intend to
disclose on the Code of Conduct section of our website at https://www.l3harris.com/resources/other/l3harris-code-
conduct any amendment to, or waiver from, our Code of Conduct that is required to be disclosed to shareholders,
within four business days following such amendment or waiver. The information required by this Item with respect
to codes of ethics is incorporated herein by reference to the discussion under the heading Code of Conduct in our
2024 Proxy Statement.
(f) Policy for Nominees: The information required under Item 407(c)(3) of Regulation S-K is incorporated herein
by reference to the discussion under the headings Director Nomination Process and Shareholder Nominations and
Proposals in our 2024 Proxy Statement concerning procedures by which shareholders may recommend nominees to
our Board, submit nominees for inclusion in our proxy materials pursuant to our “proxy access” provision of our By-
Laws or directly propose nominees for consideration pursuant to our By-Laws but not pursuant to the proxy access
provision. No material changes to those procedures have occurred since the disclosure regarding those procedures
in our Proxy Statement for our 2023 Annual Meeting of Shareholders.
(g) Insider Trading Policies: We have adopted an Insider Trading Policy, which governs the purchase, sale, and/
or other dispositions of our securities by directors, officers and employees and other covered persons and is
designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to
us. A copy of our Insider Trading Policy is filed as Exhibit 19 to this Report.
Additional information concerning requirements and procedures for shareholders directly nominating directors
is contained under the heading Shareholder Nominations and Proposals in our 2024 Proxy Statement.
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111
ITEM 11.
EXECUTIVE COMPENSATION.
The information required by this Item with respect to compensation of our directors and executive officers is
incorporated herein by reference to the discussions under the headings Director Compensation and Benefits,
Compensation Discussion and Analysis, Compensation Committee Report, Compensation Tables, CEO Pay Ratio and
Pay Versus Performance in our 2024 Proxy Statement.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table provides information as of December 29, 2023 about our common stock that may be issued,
whether upon the exercise of options, warrants and rights or otherwise, under our existing equity compensation
plans.
Plan Category
Equity compensation plans approved by shareholders(1)
Equity compensation plans not approved by
shareholders
Total
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)(2)
4,459,103
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)(2)
$169.53
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
12,244,466
—
—
—
4,459,103
169.53
12,244,466
_______________
(1) Consists of awards under the L3Harris SIPs.
(2) Under the L3Harris SIPs, in addition to options, we have granted share-based compensation awards in the form of performance share units,
restricted stock units and other similar types of share-based awards. As of December 29, 2023, there were awards outstanding under those
plans with respect to 1,208,393 shares, consisting of awards of (i) 728,052 restricted stock units and (ii) 480,341 performance share units,
for which all 1,208,393 were payable in shares but for which no shares were yet issued and outstanding. The 4,459,103 shares to be issued
upon exercise of outstanding options, warrants and rights as listed in column (a) consisted of shares to be issued in respect of the exercise of
3,250,710 outstanding options and in respect of awards of 1,208,393 performance share units and restricted stock units payable in shares.
Because there is no exercise price associated with awards of performance share units or restricted stock units, all of which are granted to
employees at no cost, such awards are not included in the weighted-average exercise price calculation in column (b).
See Note 10: Stock Options and Other Share-Based Compensation in the Notes for a general description of our
share-based incentive plans.
The other information required by this Item with respect to security ownership of certain of our beneficial
owners and management is incorporated herein by reference to the discussions under the headings Principal
Shareholders and Shares Owned By Directors, Nominees and Executive Officers in our 2024 Proxy Statement.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information required by this Item is incorporated herein by reference to the discussions under the headings
Director Independence Standards and Related Person Transactions in our 2024 Proxy Statement.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item is incorporated herein by reference to the discussion under the heading
Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm in our 2024 Proxy
Statement.
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112
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as a part of this Report:
PART IV
(1) List of Financial Statements Filed as Part of this Report:
The following financial statements and reports of L3Harris Technologies, Inc. and its consolidated
subsidiaries are included in Item 8 of this Report at the page numbers referenced below:
Management’s Report on Internal Control Over Financial Reporting .............................................................
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) on the Consolidated
Financial Statements ..........................................................................................................................................
Report of Independent Registered Public Accounting Firm on the Effectiveness of Internal Control
Over Financial Reporting ....................................................................................................................................
Consolidated Statement of Operations — Fiscal Years Ended December 29, 2023, December 30,
2022 and December 31, 2021 .........................................................................................................................
Consolidated Statement of Comprehensive Income — Fiscal Years Ended December 29, 2023,
December 30, 2022 and December 31, 2021 ..............................................................................................
Consolidated Balance Sheet — December 29, 2023 and December 30, 2022 ............................................
Consolidated Statement of Cash Flows — Fiscal Years Ended December 29, 2023, December 30,
2022 and December 31, 2021 ........................................................................................................................
Consolidated Statement of Equity — Fiscal Years Ended December 29, 2023, December 30, 2022
and December 31, 2021 ...................................................................................................................................
Notes to Consolidated Financial Statements ......................................................................................................
(2) Financial Statement Schedules:
All schedules are omitted because they are not applicable, the amounts are not significant or the
required information is shown in the Consolidated Financial Statements or the Notes thereto.
Page
45
46
50
52
53
54
55
56
57
(3) Exhibits:
The following exhibits are filed herewith or are incorporated herein by reference to exhibits previously
filed with the SEC:
***(2) Agreement and Plan of Merger, dated as of December 17, 2022, by and among L3Harris Technologies,
Inc., Aquila Merger Sub Inc. and Aerojet Rocketdyne Holdings, Inc., incorporated herein by reference to
exhibit 2.1 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on December
19, 2022 (Commission File Number 1-3863)
(3)(a) Restated Certificate of Incorporation of L3Harris Technologies, Inc. (1995), as amended, incorporated
herein by reference to Exhibit 3(a) to the L3Harris Technologies, Inc.’s Quarterly Report on Form 10-Q
filed with the SEC on July 29, 2022. (Commission File Number 1-3863)
(3)(b) By-Laws of L3Harris Technologies, Inc., as amended and restated effective December 8, 2022,
incorporated herein by reference to Exhibit 3(b) to the L3Harris Technologies, Inc.’s Current Report on
Form 8-K filed with the SEC on December 13, 2022. (Commission File Number 1-3863)
(4)(a) Specimen Stock Certificate for L3Harris Technologies, Inc.’s common stock, incorporated herein by
reference to Exhibit 4 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on
July 1, 2019. (Commission File Number 1-3863)
(4)(b) (i) Indenture, dated as of May 1, 1996, between L3Harris Technologies, Inc. (formerly known as Harris
Corporation) and The Bank of New York, as Trustee, relating to unlimited amounts of debt securities
which may be issued from time to time by L3Harris Technologies, Inc. (formerly known as Harris
Corporation) when and as authorized by L3Harris Technologies, Inc.’s (formerly known as Harris
Corporation) Board of Directors or a Committee of the Board, incorporated herein by reference to Exhibit
4 to L3Harris Technologies, Inc.’s (formerly known as Harris Corporation) Registration Statement on
Form S-3, Registration Statement No. 333-03111, filed with the SEC on May 3, 1996.
(ii) Instrument of Resignation from Trustee and Appointment and Acceptance of Successor Trustee,
dated as of November 1, 2002 (effective November 15, 2002), among L3Harris Technologies, Inc.
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113
(formerly known as Harris Corporation), JP Morgan Chase Bank, as Resigning Trustee, and The Bank of
New York, as Successor Trustee, incorporated herein by reference to Exhibit 99.4 to L3Harris
Technologies, Inc.’s (formerly known as Harris Corporation) Quarterly Report on Form 10-Q for the fiscal
quarter ended September 27, 2002. (Commission File Number 1-3863)
(iii) Supplemental Indenture, dated June 2, 2015, among L3Harris Technologies, Inc. (formerly known
as Harris Corporation), Exelis Inc. and The Bank of New York Mellon (as successor to Chemical Bank), to
the Indenture dated as of May 1, 1996 between L3Harris Technologies, Inc. (formerly known as Harris
Corporation) and The Bank of New York (as successor to Chemical Bank), incorporated herein by
reference to Exhibit 4.2 to L3Harris Technologies, Inc.’s (formerly known as Harris Corporation) Current
Report on Form 8-K filed with the SEC on June 2, 2015. (Commission File Number 1-3863)
**(4)(c) (i) Indenture, dated as of October 1, 1990, between L3Harris Technologies, Inc. (formerly known as
Harris Corporation) and U.S. Bank National Association (as successor to National City Bank), as Trustee,
relating to unlimited amounts of debt securities which may be issued from time to time by L3Harris
Technologies, Inc. (formerly known as Harris Corporation) when and as authorized by L3Harris
Technologies, Inc.’s (formerly known as Harris Corporation) Board of Directors or a Committee of the
Board, incorporated herein by reference to Exhibit 4 to L3Harris Technologies, Inc. (formerly known as
Harris Corporation) Registration Statement on Form S-3, Registration Statement No. 33-35315, filed
with the SEC on June 8, 1990.
(ii) Supplemental Indenture, dated June 2, 2015, among L3Harris Technologies, Inc. (formerly known as
Harris Corporation), Exelis Inc. and U.S. Bank National Association (as successor to National City Bank),
to the Indenture dated as of October 1, 1990 between L3Harris Technologies, Inc. (formerly known as
Harris Corporation) and U.S. National Association (as successor to National City Bank), incorporated
herein by reference to Exhibit 4.1 to L3Harris Technologies, Inc.’s (formerly known as Harris
Corporation) Current Report on Form 8-K filed with the SEC on June 2, 2015. (Commission File Number
1-3863)
(4)(d) (i) Indenture, dated as of September 3, 2003, between L3Harris Technologies, Inc. (formerly known as
Harris Corporation) and The Bank of New York Mellon Trust Company, N.A., as successor to The Bank of
New York, as Trustee, relating to unlimited amounts of debt securities which may be issued from time to
time by L3Harris Technologies, Inc. (formerly known as Harris Corporation) when and as authorized by
L3Harris Technologies, Inc.’s (formerly known as Harris Corporation) Board of Directors or a Committee
of the Board, incorporated herein by reference to Exhibit 4(b) to L3Harris Technologies, Inc.'s (formerly
known as Harris Corporation) Registration Statement on Form S-3, Registration Statement No.
333-108486, filed with the SEC on September 3, 2003
(ii) Instrument of Resignation of Trustee, Appointment and Acceptance of Successor Trustee, dated as
of June 2, 2009, among L3Harris Technologies, Inc. (formerly known as Harris Corporation), The Bank of
New York Mellon (formerly known as The Bank of New York) and The Bank of New York Mellon Trust
Company, N.A., as to Indenture dated as of September 3, 2003, incorporated herein by reference to
Exhibit 4(m) to L3Harris Technologies, Inc.'s (formerly known as Harris Corporation) Registration
Statement on Form S-3, Registration Statement No. 333-159688, filed with the SEC on June 3, 2009
(iii) Supplemental Indenture, dated June 2, 2015, among L3Harris Technologies, Inc. (formerly known
as Harris Corporation), Exelis Inc. and The Bank of New York Mellon Trust Company, N.A. (as successor
to The Bank of New York), to the Indenture dated as of September 3, 2003 between L3Harris
Technologies, Inc. (formerly known as Harris Corporation) and The Bank of New York Mellon Trust
Company, N.A. (as successor to The Bank of New York), incorporated herein by reference to Exhibit 4.3
to L3Harris Technologies, Inc.'s (formerly known as Harris Corporation) Current Report on Form 8-K filed
with the SEC on June 2, 2015. (Commission File Number 1-3863)
(4)(e) (i) Subordinated Indenture, dated as of September 3, 2003, between L3Harris Technologies, Inc.
(formerly known as Harris Corporation) and The Bank of New York Mellon Trust Company, N.A., as
successor to The Bank of New York, as Trustee, relating to unlimited amounts of debt securities which
may be issued from time to time by L3Harris Technologies, Inc. (formerly known as Harris Corporation)
when and as authorized by the L3Harris Technologies, Inc.'s (formerly known as Harris Corporation)
Board of Directors or a Committee of the Board, incorporated herein by reference to Exhibit 4(c) to the
L3Harris Technologies, Inc.'s (formerly known as Harris Corporation) Registration Statement on Form
S-3, Registration Statement No. 333-108486, filed with the SEC on September 3, 2003
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114
(ii) Instrument of Resignation of Trustee, Appointment and Acceptance of Successor Trustee, dated as
of June 2, 2009, among L3Harris Technologies, Inc. (formerly known as Harris Corporation), The Bank of
New York Mellon (formerly known as The Bank of New York) and The Bank of New York Mellon Trust
Company, N.A., as to Subordinated Indenture dated as of September 3, 2003, incorporated herein by
reference to Exhibit 4(n) to L3Harris Technologies, Inc.'s (formerly known as Harris Corporation)
Registration Statement on Form S-3, Registration Statement No. 333-159688, filed with the SEC on
June 3, 2009
(4)(f) Form of Floating Rate Global Note due March 2023, incorporated herein by reference to Exhibit 4.1 to
L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on March 13, 2020.
(Commission File Number 1-3863)
(4)(g) Form of 3.832% Global Note due 2025, incorporated herein by reference to Exhibit 4.3 to L3Harris
Technologies, Inc.'s (formerly known as Harris Corporation) Current Report on Form 8-K filed with the
SEC on April 27, 2015. (Commission File Number 1-3863)
(4)(h) Form of 4.400% Global Note due 2028, incorporated herein by reference to Exhibit 4.1 to L3Harris
Technologies, Inc.'s (formerly known as Harris Corporation) Current Report on Form 8-K filed with the
SEC on June 4, 2018. (Commission File Number 1-3863)
(4)(i) Form of 2.90% Global Note due 2029, incorporated herein by reference to Exhibit 1.1 to L3Harris
Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on November 27, 2019.
(Commission File Number 1-3863)
(4)(j) Form of 1.80% Global Note due 2031, incorporated herein by reference to Exhibit 4.1 to L3Harris
Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on November 25, 2020.
(Commission File Number 1-3863)
(4)(k) Form of 4.854% Global Note due 2035, incorporated herein by reference to Exhibit 4.4 to L3Harris
Technologies, Inc.'s (formerly known as Harris Corporation) Current Report on Form 8-K filed with the
SEC on April 27, 2015. (Commission File Number 1-3863)
(4)(l) Form of 6.15% Global Note due 2040, incorporated herein by reference to Exhibit 4.2 to L3Harris
Technologies, Inc.'s (formerly known as Harris Corporation) Current Report on Form 8-K filed with the
SEC on December 3, 2010. (Commission File Number 1-3863)
(4)(m) Form of 5.054% Global Note due 2045, incorporated herein by reference to Exhibit 4.5 to L3Harris
Technologies, Inc.'s (formerly known as Harris Corporation) Current Report on Form 8-K filed with the
SEC on April 27, 2015. (Commission File Number 1-3863)
(4)(n) Registration Rights Agreement, dated as of July 2, 2019, by and among L3Harris Technologies, Inc. (f/k/
a L3Harris Technologies, Inc. (formerly known as Harris Corporation)), BofA Securities, Inc. and Morgan
Stanley & Co. LLC, incorporated herein by reference to Exhibit 4.1 to L3Harris Technologies, Inc.’s
Current Report on Form 8-K filed with the SEC on July 3, 2019. (Commission File Number 1-3863)
(4)(o) Form of New L3Harris 3.850% 2023 Rule 144A Note, incorporated herein by reference to Exhibit 4.4 to
L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 3, 2019.
(Commission File Number 1-3863)
(4)(p) Form of New L3Harris 3.850% 2023 Regulation S Note, incorporated herein by reference to Exhibit 4.5
to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 3, 2019.
(Commission File Number 1-3863)
(4)(q) Form of New L3Harris 3.950% 2024 Rule 144A Note, incorporated herein by reference to Exhibit 4.6 to
L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 3, 2019.
(Commission File Number 1-3863)
(4)(r) Form of New L3Harris 3.950% 2024 Regulation S Note, incorporated herein by reference to Exhibit 4.7
to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 3, 2019.
(Commission File Number 1-3863)
(4)(s) Form of New L3Harris 3.850% 2026 Rule 144A Note, incorporated herein by reference to Exhibit 4.8 to
L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 3, 2019.
(Commission File Number 1-3863)
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115
(4)(t) Form of New L3Harris 3.850% 2026 Regulation S Note, incorporated herein by reference to Exhibit 4.9
to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 3, 2019.
(Commission File Number 1-3863)
(4)(u) Form of New L3Harris 4.400% 2028 Rule 144A Note, incorporated herein by reference to Exhibit 4.10
to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 3, 2019.
(Commission File Number 1-3863)
(4)(v) Form of New L3Harris 4.400% 2028 Regulation S Note, incorporated herein by reference to Exhibit 4.11
to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 3, 2019.
(Commission File Number 1-3863)
(4)(w) Form of 5.400% Global Note due 2027, incorporated herein by reference to Exhibit 4.1 to L3Harris
Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 31, 2023. (Commission File
Number 1-3863)
(4)(x) Form of 5.400% Global Note due 2033, incorporated herein by reference to Exhibit 4.2 to L3Harris
Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 31, 2023. (Commission File
Number 1-3863)
(4)(y) Form of 5.600% Global Note due 2053, incorporated herein by reference to Exhibit 4.3 to L3Harris
Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 31, 2023. (Commission File
Number 1-3863)
(4)(z) Pursuant to Regulation S-K, Item 601(b)(4)(iii)(A), L3Harris Technologies, Inc. by this filing agrees, upon
request, to furnish to the SEC a copy of other instruments defining the rights of holders of long-term
debt of L3Harris Technologies, Inc. or L3 Technologies, Inc.
(4)(aa) Description of L3Harris Technologies, Inc.’s Securities, incorporated herein by reference to Exhibit 4(x)
to the L3Harris Technologies, Inc.’s Annual Report on Form 10-K filed for the fiscal year ended
December 30, 2022. (Commission File Number 1-3863)
*(10)(a) Form of Director and Officer Indemnification Agreement, for use on or after June 29, 2019, incorporated
herein by reference to Exhibit 10.5 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed
with the SEC on July 1, 2019. (Commission File Number 1-3863)
*(10)(b) (i) L3Harris Technologies, Inc. Executive Change in Control Severance Plan, effective as of March 1,
2020, incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s Current Report
on Form 8-K filed with the SEC on March 4, 2020. (Commission File Number 1-3863)
(ii) L3Harris Technologies, Inc. Executive Change in Control Severance Plan, effective as of July 21,
2023, incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s Current Report
on Form 8-K filed with the SEC on July 24, 2023. (Commission File Number 1-3863)
*(10)(c) L3Harris Technologies, Inc. Severance Pay Plan, effective as of March 1, 2020, incorporated herein by
reference to Exhibit 10.2 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC
on March 4, 2020. (Commission File Number 1-3863)
*(10)(d) L3Harris Technologies, Inc. Annual Incentive Plan (Amended and Restated Effective as of August 28,
2020), incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s Current Report
on Form 8-K filed with the SEC on September 1, 2020. (Commission File Number 1-3863)
*(10)(e) (i) 2005 Equity Incentive Plan (As Amended and Restated Effective August 27, 2010), incorporated
herein by reference to Exhibit 10.4 to L3Harris Technologies, Inc.'s (formerly known as Harris
Corporation) Current Report on Form 8-K filed with the SEC on September 2, 2010. (Commission File
Number 1-3863)
(ii) Form of Stock Option Award Agreement Terms and Conditions (as of June 29, 2013) for grants under
the 2005 Equity Incentive Plan (As Amended and Restated Effective August 27, 2010), incorporated
herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.'s (formerly known as Harris
Corporation) Current Report on Form 8-K filed with the SEC on August 31, 2011. (Commission File
Number 1-3863)
*(10)(f) (i) 2015 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.1 to L3Harris
Technologies, Inc.'s (formerly known as Harris Corporation) Current Report on Form 8-K filed with the
SEC on October 28, 2015. (Commission File Number 1-3863)
_____________________________________________________________________
116
(ii) 2015 Equity Incentive Plan Stock Option Award Agreement Terms and Conditions (as of October 23,
2015), incorporated herein by reference to Exhibit 10(f) to L3Harris Technologies, Inc.'s (formerly
known as Harris Corporation) Quarterly Report on Form 10-Q for the fiscal quarter ended January 1,
2016. (Commission File Number 1-3863)
(iii) Non-Employee Director Share Unit Agreement Terms and Conditions (as of June 29, 2019),
incorporated herein by reference to Exhibit 10(f)(x) to L3Harris Technologies, Inc.’s Transition Report on
Form 10-KT for the fiscal year ended January 3, 2020. (Commission File Number 1-3863)
(iv) L3Harris Technologies, Inc. Restricted Unit Award Agreement Terms and Conditions (as of February
5, 2020), incorporated herein by reference to Exhibit 10.3 to L3Harris Technologies, Inc.’s Quarterly
Report on Form 10-Q for the fiscal quarter ended April 3, 2020. (Commission File Number 1-3863)
(v) L3Harris Technologies, Inc. Performance Unit Award Agreement Terms and Conditions (as of
February 28, 2020), incorporated herein by reference to Exhibit 10.4 to L3Harris Technologies, Inc.’s
Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2020. (Commission File Number
1-3863)
(vi) L3Harris Technologies, Inc. Stock Option Award Agreement Terms and Conditions (as of February
28, 2020), incorporated herein by reference to Exhibit 10.5 to L3Harris Technologies, Inc.’s Quarterly
Report on Form 10-Q for the fiscal quarter ended April 3, 2020. (Commission File Number 1-3863)
(vii) L3Harris Technologies, Inc. Restricted Unit Award Agreement Terms and Conditions (as of February
23, 2023), incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2023. (Commission File Number 1-3863)
(viii) L3Harris Technologies, Inc. Performance Unit Award Agreement Terms and Conditions (as of
February 23, 2023), incorporated herein by reference to Exhibit 10.2 to L3Harris Technologies, Inc.’s
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023. (Commission File Number
1-3863)
(ix) L3Harris Technologies, Inc. Stock Option Award Agreement Terms and Conditions (as of February
23, 2023), incorporated herein by reference to Exhibit 10.3 to L3Harris Technologies, Inc.’s Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2023. (Commission File Number 1-3863)
*(10)(g) L3Harris Technologies, Inc. 2015 Equity Incentive Plan (Amended and Restated Effective as of August
28, 2020), incorporated herein by reference to Exhibit 10.2 to L3Harris Technologies, Inc.’s Current
Report on Form 8-K filed with the SEC on September 1, 2020. (Commission File Number 1-3863)
*10(h) L3Harris Retirement Savings Plan (Amended and Restated Effective January 1, 2024)
*(10)(i) (i) L3Harris Excess Retirement Savings Plan, as amended and restated effective January 1, 2020,
incorporated herein by reference to Exhibit 10(h) to L3Harris Technologies, Inc.’s Transition Report on
Form 10-KT for the fiscal year ended January 3, 2020. (Commission File Number 1-3863)
(ii) Amendment Number One to the L3Harris Excess Retirement Savings Plan (Amended and Restated
Effective January 1, 2020), dated December 14, 2020, incorporated herein by reference to Exhibit 10.4
to L3Harris Technologies, Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2,
2021. (Commission File Number 1-3863)
(iii) Amendment Number Two to the L3Harris Excess Retirement Savings Plan (Amended and Restated
Effective January 1, 2020), dated December 31, 2022
(iv) Amendment Number Three to the L3Harris Excess Retirement Savings Plan (Amended and Restated
Effective January 1, 2020), dated December 8, 2023
*(10)(j) L3Harris Technologies, Inc. 2019 Non-Employee Director Deferred Compensation Plan, incorporated
herein by reference to Exhibit 10(j) to L3Harris Technologies, Inc.’s Transition Report on Form 10-KT for
the fiscal year ended January 3, 2020. (Commission File Number 1-3863)
*(10)(k) (i) Amended and Restated Master Trust Agreement and Declaration of Trust, made as of December 2,
2003, by and between L3Harris Technologies, Inc. (formerly known as Harris Corporation) and The
Northern Trust Company, incorporated herein by reference to Exhibit 10(c) to L3Harris Technologies,
Inc.'s (formerly known as Harris Corporation) Quarterly Report on Form 10-Q for the fiscal quarter
ended January 2, 2004. (Commission File Number 1-3863)
_____________________________________________________________________
117
(ii) Amendment to the L3Harris Technologies, Inc. (formerly known as Harris Corporation) Master Trust,
dated May 21, 2009, incorporated herein by reference to Exhibit 10(m)(ii) to L3Harris Technologies,
Inc.'s (formerly known as Harris Corporation) Annual Report on Form 10-K for the fiscal year ended July
3, 2009. (Commission File Number 1-3863)
(iii) Amendment to the L3Harris Technologies, Inc. (formerly known as Harris Corporation) Master Trust,
dated December 8, 2009 and effective December 31, 2009, incorporated herein by reference to Exhibit
4(e)(iii) to L3Harris Technologies, Inc.'s (formerly known as Harris Corporation) Registration Statement
on Form S-8, Registration Statement No. 333-163647, filed with the SEC on December 10, 2009
(iv) Amendment to the L3Harris Technologies, Inc. (formerly known as Harris Corporation) Master Trust,
dated and effective May 3, 2010, incorporated herein by reference to Exhibit 4(e)(iv) to L3Harris
Technologies, Inc.'s (formerly known as Harris Corporation) Registration Statement on Form S-8,
Registration Statement No. 333-222821, filed with the SEC on February 1, 2018
*(10)(l) (i) Master Rabbi Trust Agreement, amended and restated as of December 2, 2003, by and between
L3Harris Technologies, Inc. (formerly known as Harris Corporation) and The Northern Trust Company,
incorporated herein by reference to Exhibit 10(d) to L3Harris Technologies, Inc.'s (formerly known as
Harris Corporation) Quarterly Report on Form 10-Q for the fiscal quarter ended January 2, 2004.
(Commission File Number 1-3863)
(ii) First Amendment to the L3Harris Technologies, Inc. (formerly known as Harris Corporation) Master
Rabbi Trust Agreement, dated September 24, 2004, incorporated herein by reference to Exhibit 10(b) to
L3Harris Technologies, Inc.'s (formerly known as Harris Corporation) Quarterly Report on Form 10-Q for
the fiscal quarter ended October 1, 2004. (Commission File Number 1-3863)
(iii) Second Amendment to the L3Harris Technologies, Inc. (formerly known as Harris Corporation)
Master Rabbi Trust Agreement, dated as of December 8, 2004, incorporated herein by reference to
Exhibit 10.5 to L3Harris Technologies, Inc.'s (formerly known as Harris Corporation) Current Report on
Form 8-K filed with the SEC on December 8, 2004. (Commission File Number 1-3863)
(iv) Third Amendment to the L3Harris Technologies, Inc. (formerly known as Harris Corporation) Master
Rabbi Trust Agreement, dated January 15, 2009 and effective January 1, 2009, incorporated herein by
reference to Exhibit 10(i) to L3Harris Technologies, Inc.'s (formerly known as Harris Corporation)
Quarterly Report on Form 10-Q for the fiscal quarter ended January 2, 2009. (Commission File Number
1-3863)
(v) Fourth Amendment to the L3Harris Technologies, Inc. (formerly known as Harris Corporation) Master
Rabbi Trust Agreement, dated October 27, 2010 and effective as of August 28, 2010, incorporated
herein by reference to Exhibit 10(n) to L3Harris Technologies, Inc.'s (formerly known as Harris
Corporation) Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 2010. (Commission
File Number 1-3863)
(vi) Fifth Amendment to the L3Harris Technologies, Inc. (formerly known as Harris Corporation) Master
Rabbi Trust Agreement, dated and effective as of February 28, 2019, incorporated herein by reference
to Exhibit 10 to L3Harris Technologies, Inc.'s (formerly known as Harris Corporation) Quarterly Report
on Form 10-Q for the fiscal quarter ended March 29, 2019. (Commission File Number 1-3863)
*(10)(m) Letter Agreement with Christopher E. Kubasik, dated as of November 5, 2018, incorporated herein by
reference to Exhibit 10.4 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC
on July 1, 2019. (Commission File Number 1-3863)
*(10)(n) Summary of Annual Compensation of L3Harris Technologies, Inc., Non-Employee Directors effective as
of January 1, 2022, incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s
Current Report on Form 8-K filed with the SEC on August 4, 2021. (Commission File Number 1-3863)
*10(o) Summary of Annual Compensation of L3Harris Technologies, Inc., Non-Employee Directors effective as
of January 1, 2024, incorporated herein by reference to Exhibit 10.2 to L3Harris Technologies, Inc.’s
Current Report on Form 8-K filed with the SEC on July 24, 2023. (Commission File Number 1-3863)
*(10)(p) L3Harris Supplemental Executive Retirement Plan (restated January 1, 2020), incorporated herein by
reference to Exhibit 10(z) to L3Harris Technologies, Inc.’s Annual Report on Form 10-K for fiscal year-
ended January 1, 2021. (Commission File Number 1-3863)
_____________________________________________________________________
118
*(10)(q) L3Harris Salaried Pension Plan (as amended and restated as of December 31, 2021), incorporated
herein by reference to Exhibit 10(x)(ii) to L3Harris Technologies, Inc.’s Annual Report on Form 10-K filed
for the fiscal year ended December 31, 2021. (Commission File Number 1-3863)
*10(r) Link Supplement Nine Component of L3Harris Salaried Pension Plan (as amended and restated effective
December 31, 2021), incorporated herein by reference to Exhibit 10(y)(ii) to L3Harris Technologies,
Inc.’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2021. (Commission File
Number 1-3863)
*10(s) Conditional Waiver, Separation Agreement and Release of All Claims, dated December 22, 2023,
between L3Harris Technologies, Inc. and Michelle L. Turner
*10(t) Offer Letter Agreement dated January 24, 2022, between L3Harris Technologies, Inc. and Michelle L.
Turner, incorporated herein by reference to Exhibit 10.2 to L3Harris Technologies, Inc.’s Quarterly
Report on Form 10-Q for the fiscal quarter ended April 1, 2022. (Commission File Number 1-3863)
***10(u) Revolving Credit Agreement, dated as of July 29, 2022, by and among L3Harris Technologies, Inc. and
the other parties thereto, incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies,
Inc.’s Current Report on Form 8-K filed with the SEC on August 4, 2022. (Commission File Number
1-3863)
***10(v) Loan Agreement, dated as of November 22, 2022, by and among L3Harris Technologies, Inc. and the
other parties thereto, incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s
Current Report on Form 8-K filed with the SEC on November 28, 2022. (Commission File Number
1-3863)
*10(w) Offer Letter, dated August 12, 2022, between L3Harris Technologies, Inc. and Jon Rambeau
incorporated herein by reference to Exhibit 10(b)(b) to L3Harris Technologies, Inc.’s Annual Report on
Form 10-K for fiscal year-ended December 30, 2022. (Commission File Number 1-3863)
***10(x) 364-Day Credit Agreement, dated March 10, 2023, by and among L3Harris Technologies, Inc. and the
other parties thereto, incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s
Current Report on Form 8-K filed with the SEC on March 16, 2023 (Commission File Number 1-3863)
***10(y) Form of Commercial Paper Dealer Agreement, dated March 14, 2023, between L3Harris Technologies,
Inc. and the Dealer party thereto, incorporated herein by reference to Exhibit 10.2 to L3Harris
Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on March 16, 2023 (Commission File
Number 1-3863)
*10(z) Offer Letter, dated November 30, 2023, between L3Harris Technologies, Inc. and Kenneth L. Bedingfield
*10(a)(a) (i) Offer Letter, dated November 4, 2022, between L3Harris Technologies, Inc. and Samir B. Mehta
(ii) Amendment to Offer Letter, dated December 22, 2022, between L3Harris Technologies, Inc. and
Samir B. Mehta
*10(b)(b) Cooperation Agreement, dated December 10, 2023, by and among L3Harris Technologies, Inc., D. E.
Shaw Oculus Portfolios, L.L.C and D. E. Shaw Valence Portfolios, L.L.C., incorporated herein by reference
to Exhibit 10.1 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on
December 11, 2023 (Commission File Number 1-3863)
(21)
(23)
(24)
Subsidiaries of the Registrant
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
Power of Attorney
(31.1)
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
(31.2)
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
(32.1)
Section 1350 Certification of Chief Executive Officer
(32.2)
Section 1350 Certification of Chief Financial Officer
***(97)
Incentive-Based Compensation Recovery Policy
(101)
The financial information from L3Harris Technologies, Inc.’s Annual Report on Form 10-K for the period
from December 31, 2022 to December 29, 2023 formatted in Inline XBRL (Extensible Business
Reporting Language) includes: (i) the Consolidated Balance Sheet, (ii) the Consolidated Statement of
_____________________________________________________________________
119
Operations, (iii) the Consolidated Statement of Comprehensive Income, (iv) the Consolidated Statement
of Changes in Stockholders Equity, (v) the Consolidated Statement of Cash Flows and (vi) the Notes to
the Consolidated Financial Statements.
(104)
Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101.
Management contract or compensatory plan or arrangement.
_______________
*
** Paper filing.
*** Schedules and appendices have been omitted pursuant to Item 601(a)(5) of Regulation S-K. L3Harris Technologies, Inc. hereby undertakes
to furnish supplementally copies of any of the omitted schedules and appendices upon request by the SEC.
ITEM 16.
FORM 10-K SUMMARY.
None.
We have excluded certain exhibits, which are available free of charge on our website at https://www.l3harris.com/investors or by accessing
our filings with the U.S. Securities and Exchange Commission. We also will provide the exhibits in electronic or paper form, free of charge,
upon written request.
_____________________________________________________________________
120
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
L3HARRIS TECHNOLOGIES, INC.
(Registrant)
Date: February 16, 2024
By:
/s/ Christopher E. Kubasik
Christopher E. Kubasik
Chair and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ CHRISTOPHER E. KUBASIK
Christopher E. Kubasik
/s/ KENNETH L. BEDINGFIELD
Kenneth L. Bedingfield
/s/ CORLISS J. MONTESI
Corliss J. Montesi
/s/ SALLIE B. BAILEY
Sallie B. Bailey
/s/ PETER W. CHIARELLI
Peter W. Chiarelli
/s/ THOMAS A. DATTILO
Thomas A. Dattilo
/s/ ROGER B. FRADIN
Roger B. Fradin
/s/ JOANNA L. GERAGHTY
Joanna L. Geraghty
/s/ KIRK S. HACHIGIAN
Kirk S. Hachigian
/s/ HARRY B. HARRIS, JR.
Harry B. Harris, Jr.
/s/ LEWIS HAY III
Lewis Hay III
/s/ RITA S. LANE
Rita S. Lane
/s/ ROBERT B. MILLARD
Robert B. Millard
/s/ EDWARD A. RICE, JR.
Edward A. Rice, Jr.
/s/ WILLIAM H. SWANSON
William H. Swanson
/s/ CHRISTINA L. ZAMARRO
Christina L. Zamarro
Chair and Chief Executive Officer
(Principal Executive Officer)
Senior Vice President and Chief Financial
Officer
(Principal Financial Officer)
Date
February 16,
2024
February 16,
2024
Vice President, Principal Accounting Officer
(Principal Accounting Officer)
February 16,
2024
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
February 16,
2024
February 16,
2024
February 16,
2024
February 16,
2024
February 16,
2024
February 16,
2024
February 16,
2024
February 16,
2024
February 16,
2024
February 16,
2024
February 16,
2024
February 16,
2024
February 16,
2024
_____________________________________________________________________
121
Exhibit 31.1
CERTIFICATION
I, Christopher E. Kubasik, Chair and Chief Executive Officer of L3Harris Technologies, Inc., certify that:
1.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 29, 2023 of L3Harris
Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 16, 2024
/s/ Christopher E. Kubasik
Name:
Title:
Christopher E. Kubasik
Chair and Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Kenneth L. Bedingfield, Senior Vice President and Chief Financial Officer of L3Harris Technologies, Inc., certify
that:
1.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 29, 2023 of L3Harris
Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 16, 2024
/s/ Kenneth L. Bedingfield
Name:
Title:
Kenneth L. Bedingfield
Senior Vice President and Chief Financial Officer
Certification
Pursuant to Section 1350 of Chapter 63 of Title 18 of the
United States Code as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Exhibit 32.1
In connection with the filing of the Annual Report on Form 10-K of L3Harris Technologies, Inc.
(“L3Harris”) for the fiscal year ended December 29, 2023, as filed with the Securities and Exchange Commission
on the date hereof (the “Report”), the undersigned, Christopher E. Kubasik, Chair and Chief Executive Officer of
L3Harris, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of L3Harris as of the dates and for the periods expressed in the Report.
Date: February 16, 2024
/s/ Christopher E. Kubasik
Name:
Title:
Christopher E. Kubasik
Chair and Chief Executive Officer
Certification
Pursuant to Section 1350 of Chapter 63 of Title 18 of the
United States Code as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Exhibit 32.2
In connection with the filing of the Annual Report on Form 10-K of L3Harris Technologies, Inc.
(“L3Harris”) for the fiscal year ended December 29, 2023, as filed with the Securities and Exchange Commission
on the date hereof (the “Report”), the undersigned, Kenneth L. Bedingfield, Senior Vice President and Chief
Financial Officer of L3Harris, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of L3Harris as of the dates and for the periods expressed in the Report.
Date: February 16, 2024
/s/ Kenneth L. Bedingfield
Name:
Title:
Kenneth L. Bedingfield
Senior Vice President and Chief Financial Officer
INFORMATION FOR
SHAREHOLDERS
CORPORATE HEADQUARTERS
L3Harris Technologies
1025 West NASA Boulevard
Melbourne, FL 32919–0001
1–321–727–9100
L3Harris.com
L3HARRIS
T E C H N O L O G I E S
NYSE:LHX
STOCK EXCHANGE
L3Harris stock is listed and traded on the
New York Stock Exchange. Ticker Symbol: LHX
TRANSFER AGENT AND REGISTRAR
Computershare
150 Royall St.
Canton, MA 02021
1–888–261–6777 | Outside the U.S., please dial 1–201–680–6578
www-us.computershare.com/investor
SHAREHOLDER SERVICES
Computershare maintains the records for our registered shareholders
and can assist you with a variety of shareholder-related services
at no charge. The Computershare automated telephone voice
response system, at 1–888–261–6777, is available 24 hours a day,
7 days a week, to conduct a wide variety of secure transactions.
Electronic access to your financial statements and shareholder
communications is available 24 hours a day, 7 days a week, via
Computershare’s website, www-us.computershare.com/investor.
Visit this website to view and print Investment Plan Statements,
Investor Activity Reports, 1099 tax documents, notification
of ACH transmissions, transaction activities, annual meeting
materials and other selected correspondence.
You also can send mail to Computershare at:
Computershare
P.O. Box 43006
Providence, RI 02940-3006
(U.S. mail only)
Computershare
150 Royall St.
Canton, MA 02021
(Overnight delivery only)
2024 ANNUAL MEETING
The annual meeting of shareholders will be held virtually
on April 19, 2024 starting at 1:00 pm E.T.
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP | Orlando, Florida
TELL US WHAT YOU THINK!
Share your Annual Report feedback:
annualreport@L3Harris.com
FORWARD-LOOKING STATEMENTS
This report, including the letter to shareholders,
contains forward-looking statements that are
based on the views of management regarding
future events at the time of publication of this
report. These forward-looking statements,
which include, but are not limited to: our plans,
strategies and objectives for future operations;
new products, services or developments;
future economic conditions; outlook; the value
of contract and program awards; the effect
of acquisitions on our business; our growth
potential; and the potential of the industries
and markets we serve, are subject to known and
unknown risks, uncertainties and other factors
that may cause our actual results to be materially
different from those expressed in or implied by
each forward-looking statement. These risks,
uncertainties and other factors are discussed in
our Form 10-K for the fiscal year ended December
29, 2023.
ANNUAL CERTIFICATIONS
The most recent certifications by our Chief
Executive Officer and Chief Financial Officer
pursuant to sections 302 and 906 of the
Sarbanes-Oxley Act of 2002 were filed as
exhibits to our Form 10-K for the fiscal year
ended December 29, 2023. Our most recent
annual CEO certification regarding L3Harris
compliance with corporate governance listing
standards was submitted to the New York Stock
Exchange in April 2023.
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