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 March 31, 2023

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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	LHX	New 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 April 21, 2023 was 189,453,379.

L3HARRIS TECHNOLOGIES, INC.

FORM 10-Q

For the Quarter Ended March 31, 2023

TABLE OF CONTENTS

		Page No.
Part I. Financial Information:
	ITEM 1.     Financial Statements (Unaudited):
	Condensed Consolidated Statement of Operations for the Quarters Ended March 31, 2023 and April 1, 2022	2
	Condensed Consolidated Statement of Comprehensive Income for the Quarters Ended March 31, 2023 and April 1, 2022	3
	Condensed Consolidated Balance Sheet at March 31, 2023 and December 30, 2022	4
	Condensed Consolidated Statement of Cash Flows for the Quarters Ended March 31, 2023 and April 1, 2022	5
	Condensed Consolidated Statement of Equity for the Quarters Ended March 31, 2023 and April 1, 2022	6
	Notes to Condensed Consolidated Financial Statements	7
	Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)	20
	ITEM 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	ITEM 3.     Quantitative and Qualitative Disclosures About Market Risk	31
	ITEM 4.     Controls and Procedures	32
Part II. Other Information:
	ITEM 1.      Legal Proceedings	33
	ITEM 1A.   Risk Factors	33
	ITEM 2.      Unregistered Sales of Equity Securities and Use of Proceeds	33
	ITEM 3.      Defaults Upon Senior Securities	34
	ITEM 4.      Mine Safety Disclosures	34
	ITEM 5.     Other Information	34
	ITEM 6.      Exhibits	34
Signatures		36

This Quarterly Report on Form 10-Q (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.

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1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

	Quarter Ended
(In millions, except per share amounts)	March 31, 2023		April 1, 2022
Revenue from product sales and services	$	4,471	$	4,103
Cost of product sales and services	(3,305)		(2,860)
Engineering, selling and administrative expenses	(773)		(745)
Non-operating income, net	82		106
Interest expense, net	(102)		(68)
Income before income taxes	373		536
Income taxes	(34)		(61)
Net income	339		475
Noncontrolling interests, net of income taxes	(2)		—
Net income attributable to L3Harris Technologies, Inc.	$	337	$	475
Net income per common share attributable to L3Harris Technologies, Inc. common shareholders
Basic	$	1.77	$	2.46
Diluted	$	1.76	$	2.44
Basic weighted average common shares outstanding	190.2		193.2
Diluted weighted average common shares outstanding	191.2		195.1

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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2

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited) 

	Quarter Ended
(In millions)	March 31, 2023		April 1, 2022
Net income	$	339	$	475
Other comprehensive income:
Foreign currency translation gain (loss), net of income taxes	7		(3)
Net unrealized gain on hedging derivatives, net of income taxes	5		5
Other comprehensive income, recognized during the period	12		2
Reclassification adjustments for gains included in net income	(12)		(6)
Other comprehensive loss, net of income taxes:	—		(4)
Total comprehensive income	339		471
Comprehensive income attributable to noncontrolling interests	(2)		—
Total comprehensive income attributable to L3Harris Technologies, Inc.	$	337	$	471

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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3

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(In millions, except shares)	March 31, 2023		December 30, 2022
Assets
Current Assets
Cash and cash equivalents	$	545	$	880
Receivables, net of allowances for collection losses of $38 and $40, respectively	1,231		1,251
Contract assets	3,274		2,987
Inventories	1,541		1,291
Income taxes receivable	41		40
Other current assets	307		258
Assets of business held for sale	61		47
Total current assets	7,000		6,754
Non-current Assets
Property, plant and equipment, net	2,133		2,104
Operating lease right-of-use assets	756		756
Goodwill	18,291		17,283
Other intangible assets, net	6,688		6,001
Deferred income taxes	74		73
Other non-current assets	565		553
Total assets	$	35,507	$	33,524
Liabilities and Equity
Current Liabilities
Short-term debt	$	2	$	2
Accounts payable	2,054		1,945
Contract liabilities	1,525		1,400
Compensation and benefits	285		398
Other accrued items	946		818
Income taxes payable	508		376
Current portion of long-term debt, net	811		818
Liabilities of business held for sale	20		19
Total current liabilities	6,151		5,776
Non-current Liabilities
Defined benefit plans	208		262
Operating lease liabilities	735		741
Long-term debt, net	8,220		6,225
Deferred income taxes	570		719
Other long-term liabilities	1,215		1,177
Total liabilities	17,099		14,900
Equity
Shareholders’ Equity:
Preferred stock, without par value; 1,000,000 shares authorized; none issued	—		—
Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 189,360,959 and 190,611,458 shares at March 31, 2023 and December 30, 2022, respectively	189		191
Other capital	15,407		15,677
Retained earnings	2,998		2,943
Accumulated other comprehensive loss	(288)		(288)
Total shareholders’ equity	18,306		18,523
Noncontrolling interests	102		101
Total equity	18,408		18,624
Total liabilities and equity	$	35,507	$	33,524

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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4

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	Quarter Ended
(In millions)	March 31, 2023		April 1, 2022
Operating Activities
Net income	$	339	$	475
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of acquisition-related intangibles	165		152
Depreciation and other amortization	85		80
Share-based compensation	23		28
Share-based matching contributions under defined contribution plans	57		55
Pension and other postretirement benefit plan income	(71)		(99)
Deferred income taxes	(115)		(162)
(Increase) decrease in:
Receivables, net	48		(239)
Contract assets	(269)		(93)
Inventories	(86)		(108)
Other current assets	(40)		(25)
Increase (decrease) in:
Accounts payable	90		(43)
Contract liabilities	97		(16)
Compensation and benefits	(115)		(154)
Other accrued items	63		(12)
Income taxes	130		203
Other operating activities	(51)		(3)
Net cash provided by operating activities	350		39
Investing Activities
Net cash paid for acquired business	(1,973)		—
Additions to property, plant and equipment	(71)		(55)
Cash used for equity investments	(5)		(9)
Other investing activities	1		—
Net cash used in investing activities	(2,048)		(64)
Financing Activities
Proceeds from borrowings, net of issuance cost	2,248		1
Repayments of borrowings	(255)		(5)
Proceeds from exercises of employee stock options	11		30
Repurchases of common stock	(396)		(308)
Cash dividends	(220)		(218)
Tax withholding payments associated with vested share-based awards	(26)		(12)
Other financing activities	(1)		(1)
Net cash provided by (used in) financing activities	1,361		(513)
Effect of exchange rate changes on cash and cash equivalents	2		(1)
Net decrease in cash and cash equivalents	(335)		(539)
Cash and cash equivalents, beginning of period	880		941
Cash and cash equivalents, end of period	$	545	$	402

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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5

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 December 30, 2022	$	191	$	15,677	$	2,943	$	(288)	$	101	$	18,624
Net income	—		—		337		—		2		339
Shares issued under stock incentive plans	—		11		—		—		—		11
Shares issued under defined contribution plans	—		57		—		—		—		57
Share-based compensation expense	—		23		—		—		—		23
Tax withholding payments on share-based awards	—		(26)		—		—		—		(26)
Repurchases and retirement of common stock	(2)		(332)		(62)		—		—		(396)
Cash dividends ($1.14 per share)	—		—		(220)		—		—		(220)
Other	—		(3)		—		—		(1)		(4)
Balance at March 31, 2023	$	189	$	15,407	$	2,998	$	(288)	$	102	$	18,408
Balance at December 31, 2021	$	194	$	16,248	$	2,917	$	(146)	$	106	$	19,319
Net income	—		—		475		—		—		475
Other comprehensive loss, net of income taxes	—		—		—		(4)		—		(4)
Shares issued under stock incentive plans	—		30		—		—		—		30
Shares issued under defined contribution plans	—		55		—		—		—		55
Share-based compensation expense	—		28		—		—		—		28
Tax withholding payments on share-based awards	—		(12)		—		—		—		(12)
Repurchases and retirement of common stock	(1)		(260)		(47)		—		—		(308)
Cash dividends ($1.12 per share)	—		—		(218)		—		—		(218)
Distributions to noncontrolling interests	—		—		—		—		(1)		(1)
Other	—		—		1		—		1		2
Balance at April 1, 2022	$	193	$	16,089	$	3,128	$	(150)	$	106	$	19,366

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE A: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying Condensed Consolidated Financial Statements include the accounts of L3Harris Technologies, Inc. and its consolidated subsidiaries. As used in these Notes to the Condensed Consolidated Financial Statements (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.

The accompanying Condensed Consolidated Financial Statements 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 and are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period.

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 balance sheet at December 30, 2022 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. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with Part II: Item 7. 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 30, 2022 (our "Fiscal 2022 Form 10-K").

Business Realignment. Effective for fiscal 2023, which began December 31, 2022, we adjusted our reporting to better align our businesses and transferred our Agile Development Group (“ADG”) business from our Integrated Mission Systems ("IMS") segment to our Space & Airborne Systems (“SAS”) segment.

The historical results, discussion and presentation of our business segments as set forth in the accompanying Condensed 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 Note G: Goodwill and Other Intangible Assets and Note O: Business Segment Information in these Notes for further information.

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 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 and these Notes. Materially different results can occur as circumstances change and additional information becomes known.

Reclassifications

The classification of certain prior year amounts have been adjusted in our Condensed Consolidated Financial Statements and these Notes to conform to current year classifications.

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7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accounting Standards Updates

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification ("ASC") 2014-09, Revenue from Contracts with Customers (Topic 606). The update will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. The new standard is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. We adopted the new standard effective December 31, 2022. On January 3, 2023, we completed the acquisition of Viasat, Inc.’s (“Viasat”) Tactical Data Link product line (“TDL”) and applied the provisions of ASU 2021-08 in our purchase accounting for TDL. The adoption of the new standard did not have a material impact on our operating results, financial position, or cash flows. For more information regarding the TDL acquisition see Note B: Acquisitions and Divestitures in these Notes for further information.

NOTE B: ACQUISITIONS AND DIVESTITURES

Acquisition of Viasat, Inc.’s TDL

On January 3, 2023, we completed the acquisition of TDL for a purchase price of $1.958 billion. The acquisition qualified as a business acquisition and enhances our networking capability and provides immediate access to the ubiquitous Link 16 waveform, better positioning us to enable the U.S. Department of Defense (“DoD”) integrated architecture goal in joint all-domain command and control (“JADC2”).

In connection with the acquisition, on November 22, 2022, we established a $2.25 billion, three-year senior unsecured term loan facility by entering into a Loan Agreement (“Term Loan 2025”) with a syndicate of lenders. We used borrowings under Term Loan 2025 to finance the acquisition. See Note H: Debt and Credit Arrangements in these Notes for further information regarding Term Loan 2025.

Net assets and results of operations of TDL are reflected in our financial results commencing on January 3, 2023, the acquisition date, and are reported within our Communication Systems (“CS”) segment.

Consideration Transferred. As of the acquisition date, the fair value of consideration transferred consisted of the following:

(In millions)	January 3, 2023
Purchase price	$	1,958
Estimated net working capital and other adjustments	15
Cash consideration paid	1,973
Settlement of preexisting relationship(1)	1
Fair value of consideration transferred	$	1,974

_______________

(1)Prior to the acquisition, we had a preexisting relationship with Viasat’s TDL business in the normal course of business. As of the closing 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.

Purchase Price Allocation. We accounted for the acquisition of TDL using the acquisition method of accounting, with assets acquired and liabilities assumed recorded at a preliminary fair value of consideration transferred of $1.974 billion, based on information currently available, with any excess of the purchase price over the fair value of assets acquired and liabilities assumed recorded as goodwill.

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8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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:

(In millions)	January 3, 2023
Receivables	$	28
Contract assets	18
Inventories	164
Other current assets	9
Property, plant and equipment	50
Operating lease right-of-use assets	12
Goodwill	1,014
Other intangible assets	850
Deferred income tax	33
Other non-current assets	6
Total assets acquired	$	2,184
Accounts payable	$	20
Contract liabilities	28
Compensation and benefits	2
Other accrued items	119
Operating lease liabilities	10
Other long-term liabilities	31
Total liabilities assumed	$	210
Net assets acquired	$	1,974

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); therefore, these provisional measurements of the acquired assets and liabilities assumed are subject to change.

All intangible assets acquired in the TDL acquisition are subject to amortization. The preliminary fair value of identifiable intangible assets acquired as of the acquisition date are as following:

	Total		Useful Lives
	(In millions)		(In Years)
Developed technology	$	358	17
Customer relationships:(1)
Backlog	25		2
Government programs	467		15
Total customer relationships	492
Total identifiable intangible assets acquired	$	850

_______________

(1)TDL had backlog and government programs intangible assets that we classified as customer relationships.

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 are 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.

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9

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of March 31, 2023, we have recorded a preliminary forward loss provision of $83 million in connection with certain acquired contracts of which $83 million 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 sales 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 $8 million in the quarter ended March 31, 2023 for amortization of the loss provision.

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 $57 million, consisting of $31 million and $26 million included in the“Other accrued items” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet, respectively, and exclude 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 $9 million in the quarter ended March 31, 2023 for amortization of off-market contract liabilities. 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 $22 million in the remainder of 2023, $26 million in 2024, and immaterial amounts thereafter.

Goodwill. The $1.014 billion of goodwill recognized is attributable to the assembled workforce, in addition to synergies to be realized through integration with existing CS businesses and growth opportunities in the space domain. The acquired goodwill is tax deductible. See Note G: Goodwill and Other Intangible Assets in these Notes for further information.

Financial Results. Revenue and income before income taxes of TDL included in our Condensed Consolidated Statement of Operations from the acquisition date through March 31, 2023 are $81 million and $26 million, respectively. In the same period of calendar year 2022, revenue and income before income taxes of Viasat’s TDL were $94 million and $8 million, respectively.

Acquisition-Related Costs. Acquisition-related costs have been expensed as incurred. In connection with the TDL acquisition, we recorded $31 million of transaction and integration costs, which are included in Engineering, selling and administrative expenses in our Condensed Consolidated Statement of Operations for the quarter ended March 31, 2023.

Pending Acquisition of Aerojet Rocketdyne Holdings, Inc. (“AJRD”)

On December 17, 2022, we entered into a definitive agreement to acquire AJRD in an all-cash transaction for a purchase price of approximately $4.7 billion. The transaction is expected to close in fiscal 2023. In connection with the pending acquisition, during the quarter ended March 31, 2023, we entered into a revolving credit facility and a commercial paper program. See Note H: Debt and Credit Arrangements in these Notes and Note 3: Acquisitions in our Fiscal 2022 Form 10-K for further information regarding the pending AJRD acquisition and related funding.

Divestiture of Visual Information Solutions (“VIS”)

On December 21, 2022, we entered into a definitive agreement to sell our VIS business. VIS, which is part of our SAS segment, provides commercial geospatial software, technology and services used to extract and analyze reliable, accurate and actionable information from geospatial to terrestrial imagery. During the quarter ended March 31, 2023, we assigned an additional $9 million of goodwill to our VIS business. The carrying amounts of the assets and liabilities of our VIS business are classified as held for sale in our Condensed Consolidated Balance Sheet as of March 31, 2023 and December 30, 2022.

On April 6, 2023, subsequent to the quarter ended March 31, 2023, we completed the sale of VIS for $70 million in cash, subject to customary adjustments. See Note Q: Subsequent Events in these Notes for further information.

NOTE C: STOCK OPTIONS AND OTHER SHARE-BASED COMPENSATION

At March 31, 2023, we had stock options or 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 for the quarters ended March 31, 2023 and April 1, 2022 was $23 million and $28 million, respectively.

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10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Awards granted to participants under L3Harris SIPs and the weighted-average grant-date fair value per share during the quarters ended March 31, 2023 and April 1, 2022 are as follows:

	Quarter Ended March 31, 2023			Quarter Ended April 1, 2022
(In millions, except per share amounts)	Shares	Weighted-Average Grant-Date Fair Value Per Share		Shares	Weighted-Average Grant-Date Fair Value Per Share
Stock options granted(1)	0.4	$	54.81	0.4	$	53.42
Restricted stock and restricted stock units granted(2)	0.1	$	210.84	0.2	$	220.97
Performance share units granted(3)	0.2	$	223.09	0.2	$	258.83

_______________

(1)Other than certain stock options granted in connection with new hires, our stock options generally step-vest in equal amounts over a three-year period.

(2)Other than certain restricted stock units granted in connection with new hires, our restricted stock and restricted stock units generally vest on a three-year cliff.

(3)Our performance share units are subject to performance criteria and generally vest after the three-year performance period.

See Note 15: Stock Options and Other Share-Based Compensation in our Fiscal 2022 Form 10-K for additional information regarding the L3Harris SIPs.

NOTE D: ACCUMULATED OTHER COMPREHENSIVE LOSS (“AOCI”)

The components of AOCI are summarized below:

(In millions)	Foreign currency translation		Net unrealized losses on hedging derivatives		Unrecognized postretirement obligations		Total AOCI
Balance at December 30, 2022	$	(237)	$	(79)	$	28	$	(288)
Other comprehensive income before reclassifications to earnings, net of income taxes	7		5		—		12
Gains reclassified to earnings, net of income taxes(1)	—		(1)		(11)		(12)
Other comprehensive income (loss), net of income taxes	7		4		(11)		—
Balance at March 31, 2023	$	(230)	$	(75)	$	17	$	(288)
Balance at December 31, 2021	$	(118)	$	(89)	$	61	$	(146)
Other comprehensive (loss) income before reclassifications to earnings, net of income taxes	(3)		5		—		2
Gains reclassified to earnings, net of income taxes(1)	—		(1)		(5)		(6)
Other comprehensive (loss) income, net of income taxes	(3)		4		(5)		(4)
Balance at April 1, 2022	$	(121)	$	(85)	$	56	$	(150)

_______________

(1)Gains reclassified to earnings are included in the “Revenue from product sales and services,” “Interest expense, net” and “Non-operating income, net” line items in our Condensed Consolidated Statement of Operations.

NOTE E: 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 contract liabilities are summarized below:

(In millions)	March 31, 2023		December 30, 2022
Contract assets	$	3,274	$	2,987
Contract liabilities, current	(1,525)		(1,400)
Contract liabilities, non-current(1)	(115)		(117)
Net contract assets	$	1,634	$	1,470

_______________

(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.

The components of contract assets are summarized below:

(In millions)	March 31, 2023		December 30, 2022
Unbilled contract receivables, gross	$	5,066	$	4,629
Unliquidated progress payments and advances	(1,792)		(1,642)
Contract assets	$	3,274	$	2,987

Contract assets and liabilities as of March 31, 2023 and December 30, 2022 were impacted primarily by the timing of contractual billing milestones. During the quarters ended March 31, 2023 and April 1, 2022, we recognized $603 million and $517 million, respectively, of revenue related to contract liabilities that were outstanding at the end of the respective prior fiscal year.

NOTE F: INVENTORIES

Inventories are summarized below:

(In millions)	March 31, 2023		December 30, 2022
Finished products(1)	$	315	$	181
Work in process	463		396
Materials and supplies	763		714
Inventories(1)	$	1,541	$	1,291

_______________

(1)Includes approximately $132 million of TDL inventory of which $111 million is included in finished goods at March 31, 2023.

NOTE G: GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The assignment of goodwill and changes in the carrying amount of goodwill, by business segment, were as follows:

(In millions)	IMS		SAS		CS		Total
Balance at December 30, 2022	$	7,709	$	5,778	$	3,796	$	17,283
Reallocation of goodwill in business realignment	(327)		327		—		—
Goodwill from TDL acquisition	—		—		1,014		1,014
Assets of business held for sale(1)	—		(9)		—		(9)
Currency translation adjustments	—		3		—		3
Balance at March 31, 2023	$	7,382	$	6,099	$	4,810	$	18,291

_______________

(1)During the quarter ended March 31, 2023, we assigned an additional $9 million of goodwill to our VIS business which is included in “Assets of business held for sale” in our Condensed Consolidated Balance Sheet at March 31, 2023.

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11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Reallocation of Goodwill in Business Realignment. Effective December 31, 2022, we adjusted our reporting to better align our businesses and transferred our ADG business (a reporting unit) from our IMS segment to our SAS segment (also a reporting unit). In connection with the realignment, we reduced our reporting units from nine to eight as the ADG reporting unit and all $327 million of associated goodwill was absorbed by our existing SAS reporting unit given the economic similarities of the two reporting units. Immediately before the realignment, we performed a qualitative impairment assessment over our SAS reporting unit, and a quantitative impairment assessment over our ADG reporting unit. Immediately after the realignment, we performed a quantitative impairment assessment over the SAS reporting unit. We prepared estimates of the fair value of our pre-realignment ADG reporting unit and post-realignment SAS reporting unit based on a combination of market-based valuation techniques, utilizing quoted market prices, comparable publicly reported transactions, and an income-based valuation technique using projected discounted cash flows. These assessments indicated no impairment existed either before or after the realignment.

Goodwill from TDL Acquisition. In connection with the January 3, 2023 acquisition of TDL, we recorded $1.014 billion of goodwill in our Broadband reporting unit within our CS segment. See Note B: Acquisitions and Divestitures in these Notes for further information.

Intangible Assets

Identifiable intangible assets, net are summarized below:

	March 31, 2023						December 30, 2022
(In millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount(1)
Customer relationships(2)	$	6,616	$	2,328	$	4,288	$	6,124	$	2,189	$	3,935
Developed technologies(3)	924		388		536		566		366		200
Contract backlog	1		1		—		1		1		—
Trade names — divisions	95		55		40		95		53		42
Other	2		2		—		2		2		—
Total finite-lived identifiable intangible assets	7,638		2,774		4,864		6,788		2,611		4,177
In-process research and development	21		—		21		21		—		21
Trade names — corporate	1,803		—		1,803		1,803		—		1,803
Total identifiable intangible assets, net	$	9,462	$	2,774	$	6,688	$	8,612	$	2,611	$	6,001

_______________

(1)During fiscal 2022, we assigned $10 million of intangible assets associated with the pending VIS business divestiture to “Assets of business held for sale” in our Condensed Consolidated Balance Sheet.

(2)Includes $492 million of customer relationship intangible assets acquired from the TDL acquisition and $11 million of accumulated amortization recognized during the quarter ended March 31, 2023. See Note B: Acquisitions and Divestitures in these Notes for additional information.

(3)Includes $358 million of developed technology intangible assets acquired in the TDL acquisition and $5 million of accumulated amortization recognized during the quarter ended March 31, 2023. See Note B: Acquisitions and Divestitures in these Notes for additional information.

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 acquisition, see Note B: Acquisitions and Divestitures in these Notes, and for our accounting policies related to all other intangible assets, see Note 10: Intangible Assets, Net in our Fiscal 2022 Form 10-K.

For the quarters ended March 31, 2023 and April 1, 2022, amortization expense for identifiable finite-lived intangible assets was $165 million and $152 million, respectively, and primarily related to assets acquired in connection with business combinations.

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12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Future estimated amortization expense for identifiable intangible assets is as follows:

	(In millions)
Remainder of 2023	$	652
2024	608
2025	552
2026	493
2027	459
Thereafter	2,100
Total	$	4,864

NOTE H: DEBT AND CREDIT ARRANGEMENTS

Long-Term Debt

Long-term debt, net is summarized below:

(In millions)	March 31, 2023		December 30, 2022
Variable-rate debt:
Floating rate notes, due March 10, 2023 ("Floating 2023 Notes")	$	—	$	250
Term loan, due November 21, 2025	2,250		—
Fixed-rate debt:
3.85% notes, due June 15, 2023 ("3.85% 2023 Notes")	800		800
3.95% notes, due May 28, 2024	350		350
3.832% notes, due April 27, 2025	600		600
7.00% debentures, due January 15, 2026	100		100
3.85% notes, due December 15, 2026	550		550
6.35% debentures, due February 1, 2028	26		26
4.40% notes, due June 15, 2028	1,850		1,850
2.90% notes, due December 15, 2029	400		400
1.80% 2031 Notes, due January 15, 2031	650		650
4.854% notes, due April 27, 2035	400		400
6.15% notes, due December 15, 2040	300		300
5.054% notes, due April 27, 2045	500		500
Total variable and fixed-rate debt	8,776		6,776
Financing lease obligations and other debt	218		222
Total debt	8,994		6,998
Plus: unamortized bond premium	64		70
Less: unamortized discounts and issuance costs	(27)		(25)
Total debt, net	9,031		7,043
Less: current portion of long-term debt, net	(811)		(818)
Total long-term debt, net	$	8,220	$	6,225

Long-Term Debt Issued

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.

On January 3, 2023, we drew $2.0 billion on Term Loan 2025 and utilized the proceeds to fund the cash consideration paid and a portion of the associated transaction and integration costs related to the TDL acquisition. See Note B: Acquisitions and Divestitures in these Notes for further information on the TDL acquisition.

_____________________________________________________________________

13

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On March 14, 2023, we drew an additional $250 million on Term Loan 2025 and utilized the proceeds to repay our Floating 2023 Notes. At March 31, 2023, we had $2.25 billion outstanding under Term Loan 2025. There were no borrowings outstanding under Term Loan 2025 at December 30, 2022.

Borrowings under Term Loan 2025 bear interest at: (i) the sum of the term secured overnight financing rate (“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 ratings of our senior unsecured long-term debt securities (“Senior Debt Ratings”). At March 31, 2023, the interest rate on Term Loan 2025 was 6.2% (6.1% net of the impact of our interest rate cap derivative). See Note 19: Derivative Instruments and Hedging Activities in our Fiscal 2022 Form 10-K for further information on our interest rate cap derivative.

There were no issuances of long-term debt during the quarter ended April 1, 2022.

Long-Term Debt Repayments

On March 14, 2023, we repaid the entire outstanding $250 million aggregate principal amount of our Floating 2023 Notes through a $250 million draw on Term Loan 2025 as described above under “Long-Term Debt Issued.” The Floating 2023 Notes were classified as “Long-term debt, net” in our Condensed Consolidated Balance Sheet as of December 30, 2022.

There were no repayments of long-term debt during the quarter ended April 1, 2022.

2023 Credit Agreement

On March 10, 2023, we established a $2.4 billion, 364-day senior unsecured revolving credit facility ("2023 Credit Facility") by entering into a 364-Day Credit Agreement (“2023 Credit Agreement”) with a syndicate of lenders.

Proceeds of the initial funding of loans under the 2023 Credit Agreement are 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.

At our election, borrowings under the 2023 Credit Agreement, which will be designated in U.S. Dollars, will 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 on June 6, 2023 (or earlier upon an initial funding), we will be 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 Revolving Credit Agreement, dated as of July 29, 2022 (“2022 Credit Agreement”). The 2023 Credit Agreement generally matures on the earlier of 364 days from the initial funding and December 8, 2023, 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. At March 31, 2023, we had no outstanding borrowings and were in compliance with all covenants under our 2023 Credit Agreement. For additional information regarding our 2023 Credit Agreement, see our Current Report on Form 8-K filed on March 16, 2023.

2022 Credit Agreement

On July 29, 2022, we established a $2 billion, five-year senior unsecured revolving credit facility (“2022 Credit Facility”) under the 2022 Credit Agreement, with a syndicate of lenders. At March 31, 2023, we had no outstanding borrowings and were in compliance with all covenants under our 2022 Credit Agreement.

For a description of the 2022 Credit Agreement and related covenants, see Note 12: Credit Arrangements in our Fiscal 2022 Form 10-K.

Commercial Paper Program

On March 14, 2023, we established a new commercial paper program ("CP Program"). Under the CP Program, we may issue unsecured commercial paper notes up to a maximum aggregate amount of $3.4 billion, supported by amounts available under the 2022 Credit Agreement and the 2023 Credit Agreement.

The commercial paper notes will be sold at par less a discount representing an interest factor or, if interest bearing, at par. The maturities of the commercial paper notes will 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. For additional information regarding our CP Program, see our Current Report on Form 8-K filed on March 16, 2023.

_____________________________________________________________________

14

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

At March 31, 2023, we had no outstanding notes under our CP Program.

NOTE I: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

The following tables provide the components of our net periodic benefit income for our defined benefit plans, including defined benefit pension plans and other postretirement defined benefit plans:

	Quarter Ended March 31, 2023				Quarter Ended April 1, 2022
(In millions)	Pension		Other Benefits		Pension		Other Benefits
Net periodic benefit income
Operating
Service cost	$	6	$	—	$	10	$	1
Non-operating
Interest cost	92		3		55		2
Expected return on plan assets	(153)		(5)		(156)		(5)
Amortization of net actuarial (gain) loss	(2)		(5)		2		(2)
Amortization of prior service credit	(7)		—		(6)		—
Non-service cost periodic benefit income	(70)		(7)		(105)		(5)
Net periodic benefit income	$	(64)	$	(7)	$	(95)	$	(4)

The service cost component of net periodic benefit income is included in the “Cost of product sales and services” and “Engineering, selling and administrative expenses” line items in our Condensed Consolidated Statement of Operations. The non-service cost components of net periodic benefit income are included in the “Non-operating income, net” line item in our Condensed Consolidated Statement of Operations.

NOTE J: EARNINGS PER SHARE

Income per common share attributable to L3Harris common shareholders (“EPS”) is computed by dividing earnings to L3Harris common shareholders less earnings allocated to participating securities, if applicable, by the weighted-average number of common shares outstanding for the period. Income per diluted common share attributable to L3Harris common shareholders ("diluted EPS") incorporates potential dilutive common shares, primarily consisting of employee stock options and restricted and performance share unit awards, into the weighted-average number of common shares outstanding.

The weighted average number of common shares outstanding used to compute basic and diluted EPS are as follows:

	Quarter Ended
(In millions)	March 31, 2023	April 1, 2022
Basic weighted average common shares outstanding	190.2	193.2
Impact of dilutive share-based awards