FinanceLooker

Excrept from filing document 2023-12-29

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
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
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
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
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
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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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
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
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
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
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
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 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
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
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
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
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
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
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
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
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
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
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 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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
On October 21 2022 we announced that our Board approved a 3 billion share repurchase authorization under our share repurchase 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
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
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
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
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
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
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
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
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
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
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
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
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 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
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 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 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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
At December 29 2023 the Company s goodwill was 20 0 billion As more fully described 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
As described in the consolidated financial statements the Company completed its 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 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 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
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
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
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
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
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
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
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
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 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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 fina
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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
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
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 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 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
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
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
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
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
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

Company Name	L3HARRIS TECHNOLOGIES, INC. /DE/ Vist SEC web-site
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Trading Symbol	LHX