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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File Number 1-3863
L3HARRIS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 34-0276860
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1025 West NASA Boulevard
Melbourne,Florida 32919
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (321) 727-9100
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1.00 per shareLHXNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.              þ   Yes   o  No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).          þ   Yes   o  No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ  Accelerated filer ☐
Non-accelerated filer 
¨  
  Smaller reporting company ☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      ☐  Yes   þ  No  
The number of shares outstanding of the registrant’s common stock as of October 21, 2022 was 190,402,795.




L3HARRIS TECHNOLOGIES, INC.
FORM 10-Q
For the Quarter Ended September 30, 2022
TABLE OF CONTENTS
  Page No.
Part I. Financial Information:
Condensed Consolidated Statement of Operations for the Quarter and Three Quarters Ended September 30, 2022 and October 1, 2021
Condensed Consolidated Statement of Comprehensive (Loss) Income for the Quarter and Three Quarters Ended September 30, 2022 and October 1, 2021
Condensed Consolidated Balance Sheet at September 30, 2022 and December 31, 2021
Condensed Consolidated Statement of Cash Flows for the Three Quarters Ended September 30, 2022 and October 1, 2021
Condensed Consolidated Statement of Equity for the Quarter and Three Quarters Ended September 30, 2022 and October 1, 2021
Part II. Other Information:
ITEM 6.      Exhibits
Signatures
This Report contains trademarks, service marks and registered marks of L3Harris Technologies, Inc. and its subsidiaries. All other trademarks are the property of their respective owners.



PART I. FINANCIAL INFORMATION
 ITEM 1.FINANCIAL STATEMENTS (Unaudited).
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 Quarter EndedThree Quarters Ended
(In millions, except per share amounts)September 30, 2022October 1, 2021September 30, 2022October 1, 2021
 
Revenue from product sales and services$4,246 $4,229 $12,484 $13,464 
Cost of product sales and services(3,052)(2,921)(8,819)(9,385)
Engineering, selling and administrative expenses(742)(793)(2,231)(2,485)
Business divestiture-related gains, net— 27 — 192 
Impairment of goodwill and other assets(802)— (802)(207)
Non-operating income, net99 111 313 314 
Interest expense, net(70)(67)(205)(198)
(Loss) income from continuing operations before income taxes(321)586 740 1,695 
Income taxes20 (107)(96)(336)
(Loss) income from continuing operations(301)479 644 1,359 
Discontinued operations, net of income taxes— — — (1)
Net (loss) income(301)479 644 1,358 
Noncontrolling interests, net of income taxes1 2 2 4 
Net (loss) income attributable to L3Harris Technologies, Inc.$(300)$481 $646 $1,362 
Amount attributable to L3Harris Technologies, Inc. common shareholders
(Loss) income from continuing operations$(300)$481 $646 $1,363 
Discontinued operations, net of income taxes— — — (1)
Net (loss) income$(300)$481 $646 $1,362 
Net (loss) income per common share attributable to L3Harris Technologies, Inc. common shareholders
Basic$(1.56)$2.41 $3.36 $6.70 
Diluted$(1.56)$2.39 $3.33 $6.64 
Basic weighted average common shares outstanding191.3 199.5 192.2 203.3 
Diluted weighted average common shares outstanding191.3 201.6 194.0 205.2 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
1

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS) INCOME
(Unaudited) 
 Quarter EndedThree Quarters Ended
(In millions)September 30, 2022October 1, 2021September 30, 2022October 1, 2021
 
Net (loss) income$(301)$479 $644 $1,358 
Other comprehensive (loss) income:
Foreign currency translation loss, net of income taxes(120)(34)(196)(37)
Net unrealized loss on hedging derivatives, net of income taxes(12)(7)(14)— 
Net unrecognized gain on postretirement obligations, net of income taxes— 576 — 574 
Other comprehensive (loss) income, recognized during the period(132)535 (210)537 
Reclassification adjustments for gains included in net (loss) income(2)(3)(10)(1)
Other comprehensive (loss) income, net of income taxes(134)532 (220)536 
Total comprehensive (loss) income(435)1,011 424 1,894 
Comprehensive loss attributable to noncontrolling interests1 2 2 4 
Total comprehensive (loss) income attributable to L3Harris Technologies, Inc.$(434)$1,013 $426 $1,898 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
2

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In millions, except shares)September 30, 2022December 31, 2021
Assets
Current Assets
Cash and cash equivalents$529 $941 
Receivables, net1,138 1,045 
Contract assets3,135 3,021 
Inventories1,339 982 
Inventory prepayments22 48 
Income taxes receivable44 98 
Other current assets224 224 
Total current assets6,431 6,359 
Non-current Assets
Property, plant and equipment, net2,092 2,101 
Operating lease right-of-use assets762 769 
Goodwill17,260 18,189 
Other intangible assets, net6,148 6,640 
Deferred income taxes84 85 
Other non-current assets604 566 
Total non-current assets26,950 28,350 
$33,381 $34,709 
Liabilities and Equity
Current Liabilities
Short-term debt$2 $2 
Accounts payable2,078 1,767 
Contract liabilities1,158 1,297 
Compensation and benefits349 444 
Other accrued items1,002 1,002 
Income taxes payable201 28 
Current portion of long-term debt, net1,063 11 
Total current liabilities5,853 4,551 
Non-current Liabilities
Defined benefit plans346 614 
Operating lease liabilities745 768 
Long-term debt, net5,967 7,048 
Deferred income taxes876 1,344 
Other long-term liabilities1,155 1,065 
Total non-current liabilities9,089 10,839 
Equity
Shareholders’ Equity:
Preferred stock, without par value; 1,000,000 shares authorized; none issued
— — 
Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 191,089,930 and 193,511,401 shares at September 30, 2022 and December 31, 2021, respectively
191 194 
Other capital15,744 16,248 
Retained earnings2,768 2,917 
Accumulated other comprehensive loss(366)(146)
Total shareholders’ equity18,337 19,213 
Noncontrolling interests102 106 
Total equity18,439 19,319 
$33,381 $34,709 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
3

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 Three Quarters Ended
(In millions)September 30, 2022October 1, 2021
Operating Activities
Net income$644 $1,358 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of acquisition-related intangibles454 475 
Depreciation and other amortization243 248 
Share-based compensation92 100 
Share-based matching contributions under defined contribution plans161 165 
Qualified pension plan contributions(4)(5)
Pension and other postretirement benefit plan income(297)(275)
Goodwill and asset impairment charges802 207 
Business divestiture-related gains, net— (192)
Loss on sale of property, plant and equipment5 — 
Gain on sale of asset group(8)— 
Deferred income taxes(454)(102)
(Increase) decrease in:
Receivables, net(93)233 
Contract assets(111)(615)
Inventories(357)(108)
Prepaid expenses and other current assets26 (38)
Increase (decrease) in:
Accounts payable312 270 
Contract liabilities(133)56 
Compensation and benefits(95)(119)
Other accrued items2 72 
Income taxes259 100 
Other(72)35 
Net cash provided by operating activities1,376 1,865 
Investing Activities
Additions to property, plant and equipment(181)(207)
Proceeds from sale of property, plant and equipment, net10 7 
Proceeds from sales of businesses, net5 1,598 
Proceeds from sale of asset group18 — 
Cash used for equity investments(47)— 
Other investing activities7 2 
Net cash (used in) provided by investing activities(188)1,400 
Financing Activities
Net proceeds from borrowings5 5 
Repayments of borrowings(12)(12)
Proceeds from exercises of employee stock options40 94 
Repurchases of common stock(900)(2,875)
Cash dividends(650)(618)
Tax withholding payments associated with vested share-based awards(44)(4)
Other financing activities(5)(3)
Net cash used in financing activities(1,566)(3,413)
Effect of exchange rate changes on cash and cash equivalents(34)(2)
Net decrease in cash and cash equivalents(412)(150)
Cash and cash equivalents, beginning of period941 1,276 
Cash and cash equivalents, end of period$529 $1,126 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
4

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
(In millions, except per share amounts)Common
Stock		Other
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Non-controlling
Interests		Total
Equity
Balance at July 1, 2022$192 $15,814 $3,312 $(232)$104 $19,190 
Net loss— — (300)— (1)(301)
Other comprehensive loss, net of income taxes— — — (134)— (134)
Shares issued under stock incentive plans— 6 — — — 6 
Shares issued under defined contribution plans— 48 — — — 48 
Share-based compensation expense— 23 — — — 23 
Tax withholding payments on share-based awards— (6)— — — (6)
Repurchases and retirement of common stock(1)(141)(29)— — (171)
Cash dividends ($1.12 per share)
— — (215)— — (215)
Other— — — — (1)(1)
Balance at September 30, 2022$191 $15,744 $2,768 $(366)$102 $18,439 
Balance at July 2, 2021$202 $17,863 $2,633 $(835)$113 $19,976 
Net income— — 481 — (2)479 
Other comprehensive gain, net of income taxes— — — 532 — 532 
Shares issued under stock incentive plans— 56 — — — 56 
Shares issued under defined contribution plans— 48 — — — 48 
Share-based compensation expense— 33 — — — 33 
Tax withholding payments on share-based awards— (3)— — — (3)
Repurchases and retirement of common stock(5)(1,150)(170)— — (1,325)
Cash dividends ($1.02 per share)
— — (202)— — (202)
Other— — 1 — (1)— 
Balance at October 1, 2021$197 $16,847 $2,743 $(303)$110 $19,594 
Balance at December 31, 2021$194 $16,248 $2,917 $(146)$106 $19,319 
Net income — — 646 — (2)644 
Other comprehensive loss, net of income taxes— — — (220)— (220)
Shares issued under stock incentive plans— 40 — — — 40 
Shares issued under defined contribution plans1 160 — — — 161 
Share-based compensation expense— 92 — — — 92 
Tax withholding payments on share-based awards— (44)— — — (44)
Repurchases and retirement of common stock(4)(752)(144)— — (900)
Cash dividends ($3.36 per share)
— — (650)— — (650)
Other— — (1)— (2)(3)
Balance at September 30, 2022$191 $15,744 $2,768 $(366)$102 $18,439 
Balance at January 1, 2021$208 $19,008 $2,347 $(839)$117 $20,841 
Net income— — 1,362 — (4)1,358 
Other comprehensive gain, net of income taxes— — — 536 — 536 
Shares issued under stock incentive plans1 93 — — — 94 
Shares issued under defined contribution plans1 164 — — — 165 
Share-based compensation expense— 100 — — — 100 
Tax withholding payments on share-based awards— (4)— — — (4)
Repurchases and retirement of common stock(13)(2,514)(348)— — (2,875)
Cash dividends ($3.06 per share)
— — (618)— — (618)
Other— — — — (3)(3)
Balance at October 1, 2021$197 $16,847 $2,743 $(303)$110 $19,594 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
5

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements (Unaudited) include the accounts of L3Harris Technologies, Inc. and its consolidated subsidiaries. As used in these Notes to Condensed Consolidated Financial Statements (Unaudited) (these “Notes”), the terms “L3Harris,” “Company,” “we,” “our” and “us” refer to L3Harris Technologies, Inc. and its consolidated subsidiaries. Intracompany transactions and accounts have been eliminated in consolidation. The accompanying Condensed Consolidated Financial Statements (Unaudited) have been prepared by L3Harris in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all information and footnotes necessary for a complete presentation of financial condition, results of operations, cash flows and equity in conformity with GAAP for annual financial statements. In the opinion of management, such interim financial statements reflect all adjustments (including normal recurring adjustments) considered necessary for a fair presentation of our financial condition, results of operations, cash flows and equity for the periods presented therein. The results for the quarter and three quarters ended September 30, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period. The balance sheet at December 31, 2021 has been derived from our audited financial statements, but does not include all of the information and footnotes required by GAAP for annual financial statements. We provide complete, audited financial statements in our Annual Report on Form 10-K, which includes information and footnotes required by the rules and regulations of the SEC. The information included in this Quarterly Report on Form 10-Q (this “Report”) should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (our “Fiscal 2021 Form 10-K”).
Segment reorganization and change in accounting policy: We implemented a new organizational structure effective January 1, 2022, resulting in changes to our operating segments, which are also our reportable segments and are referred to as our business segments. The new structure streamlined our business segments from four to three business segments. Our former Aviation Systems segment was eliminated as a business segment.
We updated our business segment reporting and accounting policies for pension and other postretirement benefits plan (“OPEB”) income or expense to better align our presentation of business segment information with our industry peers. Our business segment operating results include pension and OPEB cost under U.S. Government Cost Accounting Standards (“CAS”), as CAS pension and OPEB cost is allocable to and allowable under contracts with the U.S. Government. We no longer assign or allocate Financial Accounting Standards (“FAS”) pension and OPEB income or expense to our business segments. GAAP requires pension and OPEB income or expense to be recognized on a FAS basis. Therefore, we present a “FAS/CAS operating adjustment” outside of business segment results, representing the difference between the service cost component of FAS pension and OPEB income or expense and total CAS pension and OPEB cost or expense. Non-service cost components of FAS pension and OPEB income or expense are included as a component of non-operating income or expense.
The historical results, discussion and presentation of our business segments as set forth in the accompanying Condensed Consolidated Financial Statements (Unaudited) 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 income, balance sheets, statements of cash flows or statements of equity resulting from these changes. See Note S — Business Segment Information in these Notes for further information regarding our new segment structure and pension presentation effective in fiscal 2022.
Supplemental Cash Flow Information
Non-cash investing and financing activities during the three quarters ended October 1, 2021 included a $88 million right-of-use asset we obtained in exchange for a corresponding operating lease liability. These non-cash investing and financing activities are excluded from the “Other investing” and “Other financing” line items in our Condensed Consolidated Statement of Cash Flows (Unaudited). Right-of-use assets for operating leases are included in the “Operating lease right-of-use assets” line item and the corresponding operating lease liabilities are included in the “Other accrued items” and “Operating lease liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited).
Non-cash investing and financing activities during the three quarters ended October 1, 2021 included a $120 million right-of-use asset we obtained in exchange for a corresponding financing lease liability. These non-cash investing and financing activities are excluded from the “Additions to property, plant and equipment” and “Net proceeds from borrowings” line items in our Condensed Consolidated Statement of Cash Flows (Unaudited). Right-of-use assets for finance leases are included in the
6

“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 Condensed Consolidated Balance Sheet (Unaudited).
Use of Estimates
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes and related disclosures. These estimates and assumptions are based on experience and other information available prior to issuance of the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes. Materially different results can occur as circumstances change and additional information becomes known.
Significant Accounting Policies Update
There have been no material changes to our significant accounting policies described in our Fiscal 2021 Form 10-K.
NOTE B— BUSINESS DIVESTITURES AND ASSET SALES
Completed Divestitures and Asset Sales — Three Quarters Ended September 30, 2022
During the three quarters ended September 30, 2022, we completed one business divestiture and one asset sale from our Integrated Mission Systems business 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 “Engineering, selling and administrative expenses” line of our Condensed Consolidated Statement of Operations (Unaudited) for the three quarters ended September 30, 2022.
Completed Divestitures — Three Quarters Ended October 1, 2021
The following table presents information regarding business divestitures completed during the three quarters ended October 1, 2021:
(In millions)
Business Segment Prior to Divestiture / Asset Sale(1)
Date of Divestiture / Asset SaleSale Price
Net Cash Proceeds(2)
CPS business(3)
Other non-reportable businesses(8)
July 2, 2021$398 $347 
Military training business(4)
Other non-reportable businesses(8)
July 2, 20211,050 1,059 
VSE disposal group(5)
Other non-reportable businesses(8)
July 30, 2021(6)
20 19 
Electron Devices business(7)
Other non-reportable businesses(8)
October 1, 2021185 173 
$1,653 $1,598 
_______________
(1)Business segment in which the operating results of each divested business were reported through the date of divestiture.
(2)Net cash proceeds after selling costs and purchase price adjustments.
(3)The Combat Propulsion Systems and related businesses (“CPS business”) engineered, designed and manufactured engines, transmissions, suspensions and turret drive systems for tracked and wheeled combat vehicle systems.
(4)The military training business provided flight simulation solutions and training services to the U.S. Department of Defense and foreign military agencies.
(5)The Voice Switch Enterprise disposal group (“VSE disposal group”) provided voice over internet protocol systems for air traffic management.
(6)The sale of the VSE disposal group was partially closed on July 2, 2021, with the remainder divested on July 30, 2021.
(7)The Electron Devices and Narda Microwave-West divisions (“Electron Devices business”) manufactured microwave devices for ground-based, airborne and satellite communications and radar.
(8)Formerly our Aviation Systems segment.
Income Before Income Taxes Attributable to Businesses Divested: The following table presents the amount of significant income before income taxes attributable to businesses divested in our Condensed Consolidated Statement of Operations (Unaudited):
Quarter EndedThree Quarters Ended
(In millions)October 1, 2021October 1, 2021
Electron Devices business$11 $41 
CPS business— 53 
Military training business— 35 
7

Business Divestiture-Related Gains, net: The “Business divestiture-related gains, net” line item in our Condensed Consolidated Statement of Operations (Unaudited) is comprised of the following pre-tax gains associated with businesses divested:
Quarter EndedThree Quarters Ended
(In millions)October 1, 2021October 1, 2021
Electron Devices business$29 $29 
VSE disposal group(4)(30)
CPS business(1)
— (19)
Military training business2 214 
Other— (2)
Total business divestiture-related gains, net $27 $192 
_______________
(1)During the quarter ended April 2, 2021, upon classifying the CPS business as held for sale, we recorded a non-cash impairment charge of $62 million, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Operations (Unaudited) for the three quarters ended October 1, 2021. See Note I — Goodwill and Other Intangible Assets in these Notes for additional information.
Fair Value of Businesses and Goodwill Allocation
See Note I — Goodwill and Other Intangible Assets in these Notes for additional information regarding the impairment of goodwill related to business divestitures.
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.
8

NOTE D— ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (“AOCI”)
The components of AOCI are summarized below:
(In millions)Foreign currency translationNet unrealized losses on hedging derivativesUnrecognized postretirement obligationsTotal AOCI
Balance at December 31, 2021$(118)$(89)$61 $(146)
Other comprehensive (loss) before reclassifications to earnings, net of income taxes(196)(14)— (210)
Losses (gains) reclassified to earnings, net of income taxes(1)
— 5 (15)(10)
Other comprehensive loss, net of income taxes(196)(9)(15)(220)
Balance at September 30, 2022$(314)$(98)$46 $(366)
Balance at January 1, 2021$(58)$(80)$(701)$(839)
Other comprehensive (loss) income before reclassifications to earnings, net of income taxes(2)
(37)— 574 537 
Losses (gains) reclassified to earnings, net of income taxes(1)
1 (8)6 (1)
Other comprehensive (loss) income, net of income taxes(36)(8)580 536 
Balance at October 1, 2021$(94)$(88)$(121)$(303)
_______________
(1)Losses (gains) reclassified to earnings are included in the “Revenue from product sales and services,” “Business divestiture-related gains, net,” “Interest expense, net” and “Non-operating income, net” line items in our Condensed Consolidated Statement of Operations (Unaudited).
(2)Other comprehensive income before reclassifications to earnings, net of income taxes, for the quarter and three quarters ended October 1, 2021 includes remeasurement of funded status of pension plans after the purchases of group annuity policies. See Note L — Postretirement Benefit Plans in these Notes for further information.
NOTE E— RECEIVABLES, NET
Receivables, net are summarized below:
(In millions)September 30, 2022December 31, 2021
Accounts receivable$1,175 $1,088 
Less: allowances for collection losses(37)(43)
Receivables, net$1,138 $1,045 
We have two receivables sale agreements (“RSAs”) with two separate third-party financial institutions that permit us to sell, on a non-recourse basis, up to $100 million of outstanding receivables per agreement at any given time. From time to time, we have sold certain customer receivables under the RSAs, which we continue to service and collect on behalf of the third-party financial institutions and which we account for as sales of receivables with sale proceeds included in net cash provided by operating activities. We did not have outstanding accounts receivable sold pursuant to the RSAs at September 30, 2022. Outstanding accounts receivable sold pursuant to the RSAs were $99.9 million at December 31, 2021, with net cash proceeds of $99.8 million.
NOTE F— CONTRACT ASSETS AND CONTRACT LIABILITIES
Contract assets include unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers for contracts utilizing the percentage of completion (“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 small portion of the contract price until contract completion. Contract liabilities include advance payments and billings in excess of revenue recognized, including deferred revenue associated with extended product warranties. Contract assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period.
Contract assets and liabilities in the three quarters ended September 30, 2022 were impacted primarily by the timing of contractual billing milestones.
Contract assets and contract liabilities are summarized below:
(In millions)September 30, 2022December 31, 2021
Contract assets$3,135 $3,021 
Contract liabilities, current(1,158)(1,297)
Contract liabilities, non-current(1)
(117)(107)
Net contract assets$1,860 $1,617 
_______________
(1)The non-current portion of contract liabilities is included as a component of the “Other long-term liabilities” line item in our Condensed Consolidated Balance Sheet (Unaudited).
The components of contract assets are summarized below:
(In millions)September 30, 2022December 31, 2021
Unbilled contract receivables, gross$4,737 $4,921