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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 29, 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: (321727-9100
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 20, 2023 was 189,540,249.



L3HARRIS TECHNOLOGIES, INC.
FORM 10-Q
For the Quarter Ended September 29, 2023
TABLE OF CONTENTS
 Page No.
Part I. Financial Information:
Condensed Consolidated Statement of Operations for the Quarter and Three Quarters Ended September 29, 2023 and September 30, 2022
Condensed Consolidated Statement of Comprehensive Income (Loss) for the Quarter and Three Quarters Ended September 29, 2023 and September 30, 2022
Condensed Consolidated Balance Sheet at September 29, 2023 and December 30, 2022
Condensed Consolidated Statement of Cash Flows for the Three Quarters Ended September 29, 2023 and September 30, 2022
Condensed Consolidated Statement of Equity for the Quarter and Three Quarters Ended September 29, 2023 and September 30, 2022
Notes to Condensed Consolidated Financial Statements
Part II. Other Information:
ITEM 2.      Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
ITEM 6.      Exhibits
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.
_____________________________________________________________________
1



PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS.
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 Quarter EndedThree Quarters Ended
(In millions, except per share amounts)September 29, 2023September 30, 2022September 29, 2023September 30, 2022
 
Revenue from product sales and services$4,915 $4,246 $14,079 $12,484 
Cost of product sales and services(3,608)(3,052)(10,371)(8,819)
Engineering, selling and administrative expenses(828)(742)(2,384)(2,239)
Sale of asset group and business divestiture-related gains, net  26 8 
Impairment of goodwill and other assets (802)(78)(802)
Non-operating income, net80 99 245 313 
Interest expense, net(159)(70)(372)(205)
Income (loss) before income taxes400 (321)1,145 740 
Income taxes(18)20 (73)(96)
Net income (loss)382 (301)1,072 644 
Noncontrolling interests, net of income taxes1 1 (3)2 
Net income (loss) attributable to L3Harris Technologies, Inc.$383 $(300)$1,069 $646 
Net income (loss) per common share attributable to L3Harris Technologies, Inc. common shareholders
Basic$2.02 $(1.56)$5.64 $3.36 
Diluted$2.02 $(1.56)$5.61 $3.33 
Basic weighted-average common shares outstanding189.3 191.3 189.6 192.2 
Diluted weighted-average common shares outstanding190.1 191.3 190.6 194.0 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

_____________________________________________________________________
2


L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 Quarter EndedThree Quarters Ended
(In millions)September 29, 2023September 30, 2022September 29, 2023September 30, 2022
 
Net income (loss)$382 $(301)$1,072 $644 
Other comprehensive loss:
Foreign currency translation loss, net of income taxes(45)(120)(10)(196)
Net unrealized (loss) income on hedging derivatives, net of income taxes(3)(12)6 (14)
Other comprehensive loss, recognized during the period(48)(132)(4)(210)
Reclassification adjustments for gains included in net income(10)(2)(29)(10)
Other comprehensive loss, net of income taxes(58)(134)(33)(220)
Total comprehensive income (loss)324 (435)1,039 424 
Comprehensive loss (income) attributable to noncontrolling interest1 1 (3)2 
Total comprehensive income (loss) attributable to L3Harris Technologies, Inc.$325 $(434)$1,036 $426 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
_____________________________________________________________________
3


L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In millions, except shares)September 29, 2023December 30, 2022
Assets
Current assets
Cash and cash equivalents$499 $880 
Receivables, net of allowances for collection losses of $24 and $40, respectively
1,381 1,251 
Contract assets3,477 2,987 
Inventories1,638 1,291 
Income taxes receivable43 40 
Other current assets463 258 
Assets of business held for sale 47 
Total current assets7,501 6,754 
Non-current assets
Property, plant and equipment, net2,818 2,104 
Operating lease right-of-use assets758 756 
Goodwill20,736 17,283 
Other intangible assets, net9,050 6,001 
Deferred income taxes87 73 
Recoverable environmental remediation costs382  
Other non-current assets961 553 
Total assets$42,293 $33,524 
Liabilities and equity
Current liabilities
Short-term debt$2,033 $2 
Accounts payable2,112 1,945 
Contract liabilities1,940 1,400 
Compensation and benefits461 398 
Other accrued items1,190 818 
Income taxes payable383 376 
Current portion of long-term debt, net363 818 
Liabilities of business held for sale  19 
Total current liabilities8,482 5,776 
Non-current liabilities
Defined benefit plans404 262 
Operating lease liabilities736 741 
Long-term debt, net11,140 6,225 
Deferred income taxes812 719 
Reserves for environmental remediation costs524 107 
Other long-term liabilities1,479 1,070 
Total liabilities23,577 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 189,439,991 and 190,611,458 shares at September 29, 2023 and December 30, 2022, respectively
189 191 
Other capital15,470 15,677 
Retained earnings3,278 2,943 
Accumulated other comprehensive loss(321)(288)
Total shareholders’ equity18,616 18,523 
Noncontrolling interests100 101 
Total equity18,716 18,624 
Total liabilities and equity$42,293 $33,524 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
_____________________________________________________________________
4


L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 Three Quarters Ended
(In millions)September 29, 2023September 30, 2022
Operating Activities
Net income$1,072 $644 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of acquisition-related intangibles546 454 
Depreciation and other amortization270 243 
Share-based compensation67 92 
Share-based matching contributions under defined contribution plans172 161 
Pension and other postretirement benefit plan income(209)(297)
Impairment of goodwill and other assets78 802 
Sale of asset group and business divestiture-related gains, net(26)(8)
Deferred income taxes(277)(454)
(Increase) decrease in:
Receivables, net53 (93)
Contract assets(136)(111)
Inventories(195)(357)
Other current assets(87)26 
Increase (decrease) in:
Accounts payable(18)312 
Contract liabilities202 (133)
Compensation and benefits(55)(95)
Other accrued items(27)2 
Income taxes15 259 
Other operating activities(138)(71)
Net cash provided by operating activities1,307 1,376 
Investing Activities
Net cash paid for acquired businesses(6,688) 
Additions to property, plant and equipment(312)(181)
Proceeds from sale of property, plant and equipment, net 10 
Proceeds from sales of businesses, net71 5 
Proceeds from sale of asset group, net 18 
Cash used for equity investments(11)(47)
Other investing activities2 7 
Net cash used in investing activities(6,938)(188)
Financing Activities
Proceeds from borrowings, net of issuance cost7,568 5 
Repayments of borrowings(3,159)(12)
Change in commercial paper, net(1)
2,031  
Proceeds from exercises of employee stock options18 40 
Repurchases of common stock(518)(900)
Cash dividends(652)(650)
Tax withholding payments associated with vested share-based awards(28)(44)
Other financing activities(6)(5)
Net cash provided by (used in) financing activities5,254 (1,566)
Effect of exchange rate changes on cash and cash equivalents(4)(34)
Net decrease in cash and cash equivalents(381)(412)
Cash and cash equivalents, beginning of period880 941 
Cash and cash equivalents, end of period$499 $529 
_______________
(1) See Note H: Debt and Credit Arrangements in the Notes to the Condensed Consolidated Financial Statements.
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
_____________________________________________________________________
5


L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
(In millions, except per share amounts)Common StockOther CapitalRetained EarningsAccumulated Other Comprehensive LossNon-controlling InterestsTotal Equity
Balance at June 30, 2023$189 $15,391 $3,111 $(263)$103 $18,531 
Net income (loss)— — 383 — (1)382 
Other comprehensive loss, net of income taxes— — — (58)— (58)
Shares issued under stock incentive plans— 5 — — — 5 
Shares issued under defined contribution plans— 51 — — — 51 
Share-based compensation expense— 22 — — — 22 
Cash dividends ($1.14 per share)
— — (216)— — (216)
Other— 1 — — (2)(1)
Balance at September 29, 2023$189 $15,470 $3,278 $(321)$100 $18,716 
Balance as of 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 as of September 30, 2022$191 $15,744 $2,768 $(366)$102 $18,439 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
_____________________________________________________________________
6


L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (continued)
(Unaudited)
(In millions, except per share amounts)Common StockOther CapitalRetained EarningsAccumulated Other Comprehensive LossNon-controlling InterestsTotal Equity
Balance at December 30, 2022$191 $15,677 $2,943 $(288)$101 $18,624 
Net income— — 1,069 — 3 1,072 
Other comprehensive loss, net of income taxes— — — (33)— (33)
Shares issued under stock incentive plans— 18 — — — 18 
Shares issued under defined contribution plans1 171 — — — 172 
Share-based compensation expense— 67 — — — 67 
Tax withholding payments on share-based awards— (28)— — — (28)
Repurchases and retirement of common stock(3)(433)(82)— — (518)
Cash dividends ($3.42 per share)
— — (652)— — (652)
Other— (2)— — (4)(6)
Balance at September 29, 2023$189 $15,470 $3,278 $(321)$100 $18,716 
 
Balance as of December 31, 2021$194 $16,248 $2,917 $(146)$106 $19,319 
Net income (loss)— — 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 as of September 30, 2022$191 $15,744 $2,768 $(366)$102 $18,439 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
_____________________________________________________________________
7

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 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 U.S. 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.
Acquisition of Aerojet Rocketdyne Holdings, Inc. (“AJRD”) and New Business Segment. On July 28, 2023 we completed the acquisition of AJRD. Upon completion of the acquisition, we established a new reportable segment, Aerojet Rocketdyne (“AR”). The operations of AJRD are reported in the newly established AR segment and in our corporate segment. The AR segment consists of 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.
See Note B: Acquisitions, Divestitures and Asset Sales 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.
_____________________________________________________________________
8

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 generally results 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 and July 28, 2023 we completed the acquisitions of Viasat, Inc.’s Tactical Data Links product line (“TDL”) and AJRD, respectively. We applied the provisions of ASU 2021-08 in our purchase accounting for both acquisitions, and 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 and AJRD acquisitions, see Note B: Acquisitions, Divestitures and Asset Sales in these Notes.
NOTE B: ACQUISITIONS, DIVESTITURES AND ASSET SALES
Acquisition of Viasat’s TDL
On January 3, 2023, we completed the acquisition of TDL for a purchase price of $1.958 billion. The acquisition, which qualified as a business acquisition, enhances our networking capability and provides 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”).
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, in part, 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.
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. Our preliminary fair value estimates and assumptions are subject to change as we obtain additional information over the measurement period.
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 adjustments15 
Cash consideration paid1,973 
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 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.

_____________________________________________________________________
9

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 and the measurement period adjustments recorded since the acquisition date through September 29, 2023:
January 3, 2023
(In millions)Preliminary
Measurement Period Adjustments, Net1,2
Preliminary
Adjusted
Receivables$28 $— $28 
Contract assets18 11 29 
Inventories164 (10)154 
Other current assets9 — 9 
Property, plant and equipment50 — 50 
Operating lease right-of-use assets12 — 12 
Goodwill1,014 103 1,117 
Other intangible assets850 (95)755 
Deferred income taxes33 3 36 
Other non-current assets6 (1)5 
Total assets acquired$2,184 $11 $2,195 
Accounts payable$20 $— $20 
Contract liabilities28 — 28 
Compensation and benefits2 — 2 
Other accrued items119 1 120 
Operating lease liabilities10 — 10 
Other long-term liabilities31 10 41 
Total liabilities assumed$210 $11 $221 
Net assets acquired$1,974 $ $1,974 
_______________
(1)Fair value adjustments primarily related to refined assumptions in the valuation of customer relationship intangible assets.
(2) Assets acquired include $11 million of Contract assets that were reclassified from Inventories to Contract assets to conform TDL’s accounting policies with those of L3Harris, as required under ASC 805. As such, reclassified amounts will not be recognized as revenue in future periods.
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 assets acquired and liabilities assumed are subject to change.
Intangible Assets. 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 is as follows:
TotalUseful Lives
(In millions)(In Years)
Developed technology$349 17
Customer relationships:(1)
Backlog83 2
Government programs323 16
Total customer relationships406 
Total identifiable intangible assets acquired$755 
_______________
(1)TDL had backlog and government programs intangible assets that we classified as customer relationships.
_____________________________________________________________________
10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We determined the fair value of assets acquired and liabilities assumed by using available market information and various valuation methods that require judgment related to estimations. The use of different estimates could produce different results. The fair value of intangible assets is estimated using the relief from royalty method for the acquired developed technology and the multi-period excess earnings method for the acquired customer relationships. Both of these level 3 fair value methods are income-based valuation approaches, which require judgment to estimate appropriate discount rates, royalty rates related to the developed technology intangible assets, revenue growth attributable to the intangible assets and remaining useful lives. The fair value of inventory was estimated using the replacement cost approach and comparative sales method, which require estimates of replacement cost for raw materials and estimates of expected sales price less costs to complete and dispose of the inventory, plus a profit margin for efforts incurred for the work in progress and finished goods.
Forward Loss Provision. We have recorded a preliminary 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 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 $15 million and $29 million for amortization of the forward loss provision during the quarter and three quarters ended September 29, 2023, respectively.
Off-market Customer Contracts. We have identified certain contractual obligations with customers with economic returns that are higher or lower than could be realized in market transactions as of the acquisition date and have recorded liabilities for the preliminary acquisition date fair value of the off-market components. The preliminary acquisition date fair value of the off-market components is a net liability of $64 million, consisting of $33 million and $31 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 $7 million and $22 million for amortization of off-market contract liabilities during the quarter and three quarters ended September 29, 2023, respectively. 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 $11 million in the remainder of 2023, $22 million in 2024 and immaterial amounts thereafter.
Goodwill. The $1.117 billion of goodwill recognized is attributable to the assembled workforce, in addition to synergies expected to be realized through integration with existing CS segment businesses and growth opportunities in the space domain. The acquired goodwill is tax deductible. See Note G: Goodwill and Other Intangible Assets in these Notes for further information.
Financial Results. The following table includes revenue and income before income taxes of TDL included in our Condensed Consolidated Statement of Operations for the quarter ended September 29, 2023 and for the acquisition date through September 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.
Quarter EndedThree Quarters Ended
(In millions)September 29, 2023September 30, 2022September 29, 2023September 30, 2022
Revenue$97 $105 $261 $290 
Income before income taxes38 30 86 55 
Acquisition-Related Costs. Acquisition-related costs have been expensed as incurred. In connection with the TDL acquisition, we recorded transaction and integration costs of $10 million and $64 million for the quarter and three quarters ended September 29, 2023, respectively, which were included in the Engineering, selling and administrative expenses line item in our Condensed Consolidated Statement of Operations.
Acquisition of AJRD
On July 28, 2023 we acquired AJRD, a technology-based engineering and manufacturing company that develops and produces missile solutions with technologies for strategic defense, missile defense, and hypersonic and tactical systems, as well as space propulsion and power systems for national security space and exploration missions. The acquisition provides us access to a new market. We acquired 100 percent of AJRD for a total net purchase price of
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11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
$4.715 billion. The acquisition was financed through the issuance and sale of $3.25 billion aggregate principal amount of new long-term fixed-rate debt and draw down under the 2023 Credit Agreement. See Note H: Debt and Credit Arrangements in these Notes for further information regarding the financing of the AJRD acquisition.
Net assets and results of operations of AJRD are reflected in our financial results commencing on July 28, 2023, the acquisition date, and are reported in our newly created AR segment and corporate headquarters.
We accounted for the acquisition of AJRD using the acquisition method of accounting, which required us to measure identifiable assets acquired and liabilities assumed in the acquiree at their fair values as of the acquisition date, with the excess of the consideration transferred over those fair values recorded as goodwill. Our preliminary fair value estimates and assumptions are subject to change as we obtain additional information over the measurement period and our measurement of certain assets and contingencies, such as intangible assets, property, plant and equipment, real estate held for development and leasing, loss contracts, environmental matters and related deferred tax impacts remain preliminary for completion of the related valuations.
As of the acquisition date, the fair value of consideration transferred consisted of the following:
(In millions)July 28, 2023
Cash consideration paid for AJRD outstanding common stock & equity awards$4,748 
AJRD debt settled by L3Harris257 
Cash consideration paid5,005 
Less cash acquired(290)
Fair value of consideration transferred$4,715 
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12

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)July 28, 2023
Receivables$156 
Contract assets338 
Inventories14 
Income taxes receivable3 
Other current assets114 
Property, plant and equipment574 
Operating lease right-of-use assets51 
Goodwill2,348 
Other intangible assets2,860 
Recoverable environmental remediation costs383 
Other non-current assets175 
Total assets acquired$7,016 
Accounts payable145 
Contract liabilities310 
Compensation and benefits116 
Income taxes payable6 
Current portion of long-term debt, net1 
Other accrued items278 
Defined benefit plans223 
Operating lease liabilities40 
Long-term debt, net41 
Deferred income taxes398 
Reserves for environmental remediation costs417 
Other long-term liabilities326 
Total liabilities assumed$2,301 
Fair value of consideration transferred$4,715 
We determined the fair value of assets acquired and liabilities assumed by using available market information and various valuation methods that require judgment related to estimates. Due to the timing of the AJRD acquisition, our accounting for the acquisition remains preliminary. Amounts recorded associated with these assets and liabilities are based on preliminary calculations and estimates. Our preliminary estimates and assumptions are subject to change as we obtain additional information during the measurement period (up to one year from the acquisition date). Any potential adjustments made could be material in relation to the preliminary values presented above.
Intangible Assets. All intangible assets acquired in the AJRD acquisition are subject to amortization. The preliminary fair value of identifiable intangible assets acquired as of the acquisition date is as follows:
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13

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
TotalUseful Lives
(In millions)(In Years)
Trade names$120 
10 - 20
Customer relationships:(1)
Backlog360 
3 - 4
Government programs2,380 
15 - 25
Total customer relationships2,740 
Total identifiable intangible assets acquired$2,860 
_______________
(1)AJRD had backlog and government programs intangible assets that we classified as customer relationships.
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.
Reserves for Environmental Remediation Costs and Recoverable Environmental Remediation Costs. See Note P: Legal Proceedings and Contingencies in these Notes for additional information.
Forward Loss Provision. We have recorded a preliminary forward loss provision of $37 million which was included in ”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 $4 million from amortization of the forward loss provision for the acquisition date through September 29, 2023.
Off-market Customer Contracts. We have identified certain contractual obligations with customers with economic returns that are higher or lower than could be realized in market transactions as of the acquisition date and have recorded liabilities for the preliminary acquisition date fair value of the off-market components. The preliminary acquisition date fair value of the off-market components is a net liability of $53 million, consisting of $26 million and $27 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 $4 million from amortization of off-market contract liabilities during the period from the acquisition date through September 29, 2023.
Goodwill. The $2,348 million of goodwill recognized is attributable to AJRD’s market presence as the provider of advanced propulsion and power systems for nearly every major U.S. space and missile program, the assembled workforce and established operating infrastructure. The acquired goodwill is not tax deductible. See Note G: Goodwill and Other Intangible Assets in these Notes for further information.











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14

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Financial Results. Revenue and income before income taxes of AJRD included in our Condensed Consolidated Statement of Operations for the acquisition date through September 29, 2023 was $455 million and $56 million, respectively. The following table presents unaudited pro forma financial results of the operations acquired with AJRD. The pro forma results for the three quarters ended September 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 the three quarters ended September 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.
Three Quarters Ended
(In millions)September 29, 2023September 30, 2022
Revenue$1,740 $1,589 
Income before income taxes156 180 
    
Acquisition-Related Costs. Acquisition-related costs have been expensed as incurred. In connection with the AJRD acquisition, we recorded transaction and integration costs of $45 million and $67 million for the quarter and three quarters ended September 29, 2023, respectively, which were included in the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Operations.
Divestiture of Visual Information Solutions (“VIS”)
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 “Sale of asset group and business divestiture-related gains, net” line item in our Condensed Consolidated Statement of Operations for the quarter and three quarters ended September 29, 2023, respectively. 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.
The carrying amounts of the assets and liabilities of VIS were classified as held for sale in our Condensed Consolidated Balance Sheet as of December 30, 2022.
Completed Divestiture and Asset Sale for the 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 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 “Sale of asset group and business divestiture-related gains, net” line item in our Condensed Consolidated Statement of Operations for the quarter and three quarters ended September 30, 2022.
Fair Value of Businesses and Goodwill Allocation. For purposes of allocating goodwill to the disposal groups that represent a portion of a reporting unit, we determine the fair value of each disposal group based on the respective negotiated selling price, and the fair value of the retained businesses of the respective reporting unit based on a combination of market-based and income based valuation techniques, utilizing quoted market prices, comparable publicly reported transactions and projected discounted cash flows. These fair value determinations are categorized as Level 3 in the fair value hierarchy due to their use of internal projections and unobservable measurement inputs. See Note G: Goodwill and Other Intangible Assets and Note L: Fair Value Measurements in these Notes for additional information.
NOTE C: STOCK OPTIONS AND OTHER SHARE-BASED COMPENSATION
At September 29, 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 quarter and three quarters ended September 29, 2023 was $22 million and $67 million, respectively, and $23 million and $92 million for the quarter and three quarters ended September 30, 2022, respectively.
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15

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 three quarters ended September 29, 2023 and September 30, 2022 are as follows:
Three Quarters Ended September 29, 2023Three Quarters Ended September 30, 2022
(In millions, except per share amounts)SharesWeighted-Average Grant-Date Fair Value
Per Share
SharesWeighted-Average Grant-Date Fair Value
Per Share
Stock options granted(1)
0.4 $209.88 0.4 $231.71 
Restricted stock and restricted stock units granted(2)
0.3 $200.61 0.3 $224.79 
Performance share units grants(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 ratably 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 units generally cliff vest after three-years.
(3)Our performance share units are subject to performance criteria and generally vest after the three-year performance period.
There were no significant grants of stock options, restricted stock units or performance share units to participants under the L3Harris SIPs during the quarters ended September 29, 2023 and September 30, 2022.
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 0.5 million for the quarter and three quarters ended September 29, 2023, respectively, and 0.1 million and 0.7 million for the quarter and three quarters ended September 30, 2022, respectively.
See Note 15: Stock Options and Other Share-Based Compensation in our Fiscal 2022 Form 10-K for additional information regarding the L3Harris SIPs.
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16

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE D: ACCUMULATED OTHER COMPREHENSIVE LOSS ("AOCL")
The components of AOCL are summarized below:
(In millions)Foreign currency translationNet unrealized losses on hedging derivativesUnrecognized postretirement obligationsTotal AOCL
Balance at December 30, 2022$(237)$(79)$28 $(288)
Other comprehensive (loss) income, before reclassifications to earnings and income taxes(10)8  (2)
Income taxes (2) (2)
Other comprehensive (loss) income before reclassifications to earnings, net of income taxes(10)6  (4)
Losses (gains) reclassified to earnings, before income taxes 3 (41)(38)
Income taxes (1)10 9 
Losses (gains) reclassified to earnings, net of income taxes(1)
 2 (31)(29)
Other comprehensive (loss) income, net of income taxes(10)8 (31)(33)
Balance at September 29, 2023$(247)$(71)$(3)$(321)
Balance at December 31, 2021$(118)$(89)$61 $(146)
Other comprehensive loss, before reclassifications to earnings and income taxes(196)(18) (214)
Income taxes 4  4 
Other comprehensive loss before reclassifications to earnings, net of income taxes(196)(14) (210)
Losses (gains) reclassified to earnings, before income taxes 7 (18)(11)
Income taxes (2)3 1 
Losses (gains) reclassified to earnings, net of income taxes(1)
 5 (15)(10)
Other comprehensive loss, net of income taxes(196)(9)(15)(220)
Balance at September 30, 2022$(314)$(98)$46 $(366)
_______________
(1)Losses (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)September 29, 2023December 30, 2022
Contract assets(1)
$3,477 $2,987 
Contract liabilities, current(2)
(1,940)(1,400)
Contract liabilities, non-current(3)
(104)(117)
Net contract assets$1,433 $1,470 
_______________
(1)Includes approximately $386 million of AR contract assets at September 29, 2023.
(2)Includes approximately $315 million of AR contract liabilities at September 29, 2023.
(3)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)September 29, 2023December 30, 2022
Unbilled contract receivables, gross$7,126 $4,629 
Unliquidated progress payments and advances(3,649)(1,642)
Contract assets$3,477 $2,987 
Contract assets and liabilities as of September 29, 2023 and December 30, 2022 were impacted primarily by the timing of contractual billing milestones. Revenue recognized related to contract liabilities that were outstanding at the end of the respective prior fiscal year were $223 million and $1.12 billion for the quarter and three quarters ended September 29, 2023, respectively, and $196 million and $967 million for the quarter and three quarters ended September 30, 2022, respectively.
NOTE F: INVENTORIES
Inventories are summarized below:
(In millions)September 29, 2023December 30, 2022
Finished products(1)
$302 $181 
Work in process513 396 
Materials and supplies823 714 
Inventories(1)
$1,638 $1,291 
_______________
(1)Includes approximately $114 million of TDL inventory of which $70 million is included in finished products at September 29, 2023.
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17

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE G: GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The assignment of goodwill and changes in the carrying amount of goodwill, by business segment, are as follows:
(In millions)SASIMSCSARTotal
Balance at December 30, 2022$5,778 $7,709 $3,796 $ $17,283 
Reallocation of goodwill in business realignment327 (327)   
Goodwill from TDL acquisition— — 1,117 — 1,117 
Goodwill from AJRD acquisition— — — 2,348 2,348 
Goodwill decrease from divestitures(1)
(9)   (9)
Currency translation adjustments(5)2  (3)
Balance at September 29, 2023$6,091 $7,384 $4,913 $2,348 $20,736 
_______________
(1)During the three quarters ended September 29, 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. The assets (including goodwill) of VIS were included in the “Assets of business held for sale” line item in our Condensed Consolidated Balance Sheet at December 30, 2022. See Note B: Acquisitions, Divestitures and Asset Sales in these Notes for further information.
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 $1,117 million of goodwill in our Broadband reporting unit within our CS segment. See Note B: Acquisitions, Divestitures and Asset Sales in these Notes for further information.
Goodwill from AJRD Acquisition. In connection with the July 28, 2023 acquisition of AJRD, we recorded $2,348 million of goodwill in our AR segment, which is also the AR reporting unit. See Note B: Acquisitions, Divestitures and Asset Sales in these Notes for further information.
Fiscal 2022 Impairments. During the quarter ended September 30, 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 ADG and Electro Optical of $367 million and $80 million, are included in our Electro Optical and SAS reporting units, respectively, in our comparative financial results for the quarter and three quarters ended September 30, 2022.
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18

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Intangible Assets
Identifiable intangible assets, net are summarized below:
September 29, 2023December 30, 2022
(In millions)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated Amortization
Net Carrying Amount(1)
Customer relationships
$9,270 $2,658 $6,612 $6,124 $2,189 $3,935 
Developed technologies
915 435 480 566 366 200 
Contract backlog
2 1 1 1 1  
Trade names — divisions
215 61 154 95 53 42 
Other
2 2  2 2  
Total finite-lived identifiable intangible assets10,404 3,157 7,247 6,788 2,611 4,177 
In-process research and development —  21 — 21 
Trade names — corporate1,803 — 1,803 1,803 — 1,803 
Total identifiable intangible assets, net$12,207 $3,157 $9,050 $8,612 $2,611 $6,001 
_______________
(1)During the three quarters ended September 29, 2023, we completed the divestiture of our VIS business. We derecognized $10 million of intangible assets as part of determining the gain on sale that was assigned during fiscal 2022. See Note B: Acquisitions, Divestitures and Asset Sales in these Notes for further information.
Intangible assets acquired are as follows:
TDL AcquisitionAJRD Acquisition
(In millions)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Customer relationships
$406 $46 $360 $2,740 $37 $2,703 
Developed technologies