STOCK OPTIONS AND OTHER SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

STOCK OPTIONS AND OTHER SHARE-BASED COMPENSATION

NOTE C— STOCK OPTIONS AND OTHER SHARE-BASED COMPENSATION

At September 30, 2022, we had stock options and other share-based compensation awards outstanding under several employee stock incentive plans (“L3Harris SIPs”). The compensation cost related to our share-based awards that was charged against income was $23 million and $92 million for the quarter and three quarters ended September 30, 2022, respectively, and $33 million and $100 million for the quarter and three quarters ended October 1, 2021, respectively. The aggregate number of shares of our common stock issued under L3Harris SIPs, net of shares withheld for tax purposes, was 0.1 million and 0.7 million for the quarter and three quarters ended September 30, 2022, respectively, and 0.7 million and 1.2 million for the quarter and three quarters ended October 1, 2021, respectively.

There were no significant restricted stock units, stock options or performance stock units awarded during the quarter ended September 30, 2022. Awards granted to participants under L3Harris SIPs during the three quarters ended September 30, 2022 consisted of 0.4 million stock options, 0.2 million performance stock units and 0.3 million restricted stock units. During fiscal 2022, the majority of the options and units were granted on February 25, 2022. The fair value as of the grant date of each stock option award was determined using the Black-Scholes-Merton option-pricing model and the following assumptions: expected dividend yield of 1.92%; expected volatility of 29.11%; risk-free interest rates averaging 1.86%; and expected term of 5.02 years. The fair value as of the grant date of each restricted stock unit award was based on the closing price of our common stock on the grant date. The fair value as of the grant date of each performance stock unit award was determined based on the fair value from a multifactor Monte Carlo valuation model that simulates our stock price and total shareholder return (“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.

See Note 15: Stock Options and Other Share-Based Compensation in the Notes to Consolidated Financial Statements in our Fiscal 2021 Form 10-K for additional information regarding L3Harris SIPs.