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SHARE-BASED COMPENSATION
 12 Months Ended
Jan. 03, 2025
Share-Based Payment Arrangement [Abstract]  
SHARE-BASED COMPENSATION NOTE 10: SHARE-BASED COMPENSATION
At January 3, 2025, we had stock options and other share-based compensation outstanding under our 2024
Equity Incentive Plan, which was approved by our shareholders on April 19, 2024, as well as under employee equity
incentive plans assumed by L3Harris (collectively, the “L3Harris SIPs”). As part of our long-term incentive
compensation program, we have made awards to employees in the form of RSUs, PSUs and non-qualified stock
options under the L3Harris SIPs. We have also awarded RSUs in the form of deferred units to our non-employee
directors. We believe that share-based awards more closely align the interests of participants with those of
shareholders.
The following table summarizes the share-based compensation expense recognized in the Consolidated
Statement of Operations:
Fiscal Year Ended
(In millions)
January 3, 2025
December 29, 2023
December 30, 2022
Share-based compensation expense
$97
$89
$109
Amounts recognized in our Consolidated Statement of Operations include:
Cost of revenue
$14
$16
$19
General and administrative expenses
83
73
90
Share-based compensation expense, before income taxes
97
89
109
Income taxes on share-based compensation expense
(20)
(19)
(27)
Share-based compensation expense, net of income taxes
$77
$70
$82
Share-Based Compensation Awards
As of January 3, 2025, a total of 21.2 million shares of common stock remained available under our L3Harris
SIPs for future issuance (excluding shares to be issued in respect of outstanding stock options, with each full-value
award (e.g., RSUs and PSUs) counting as 4.6 shares against the total remaining for future issuance). During fiscal
2024, we issued an aggregate of 1.3 million shares of common stock under the terms of our L3Harris SIPs, which is
net of shares withheld for tax purposes.
RSUs. RSUs granted under our L3Harris SIPs are not transferable until vested and the restrictions generally
lapse upon the achievement of continued employment (or board membership) over a specified time period.
The grant-date fair value of these awards was based on the closing price of our common stock on the grant date
and is amortized to compensation expense over the vesting period. At January 3, 2025, there were  582,326 RSUs
outstanding which were payable in shares.
The following table summarizes the activity of RSUs during fiscal 2024:
(In thousands, except per unit amounts)
Units
Weighted-Average
Grant-Date Price
Per Unit
RSUs outstanding at December 29, 2023
728
$208.78
Granted
158
$211.95
Vested
(227)
$204.42
Forfeited
(77)
$210.18
RSUs outstanding at January 3, 2025
582
$210.28
As of January 3, 2025, there was $57 million of total unrecognized compensation expense related to these
awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.41
years. The weighted-average grant-date price per unit was $211.95, $199.33 and $225.58 for awards granted in
fiscal 2024, 2023 and 2022, respectively. The total fair value of the awards that vested in fiscal 2024, 2023 and
2022 was $46 million, $44 million and $69 million, respectively.
PSUs. At January 3, 2025, all outstanding PSUs granted under our L3Harris SIPs are subject to performance
criteria, such as meeting predetermined operating income or earnings per share, return on invested capital targets
and market conditions, such as total shareholder return, for a three-year performance period. These awards also
generally vest after a three-year performance period. The final determination of the number of shares to be issued in
respect of an award is made by our Board or a committee thereof.
The grant-date fair value of awards with market conditions was determined based on a multifactor Monte Carlo
valuation model that simulates our stock price and TSR relative to other companies in the S&P 500, less a discount
to reflect the delay in payments of cash dividend-equivalents that are made only upon vesting. The fair value of
these awards is amortized to compensation expense over the performance period if achievement of the
performance measures is considered probable.
The following table summarizes the activity of PSUs during fiscal 2024:
(In thousands, except per unit amounts)
Units
Weighted-Average
Grant-Date Price
Per Unit
PSUs outstanding at December 29, 2023
480
$222.73
Granted
172
$230.09
Adjustment for achievement of performance measures
8
$195.07
Vested
(190)
$194.99
Forfeited
(45)
$233.38
PSUs outstanding at January 3, 2025
425
$236.42
As of January 3, 2025, there was $35 million of total unrecognized compensation expense related to these
awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.52
years. The weighted-average grant-date price per unit was $230.09, $223.09 and $258.83 for awards granted in
fiscal 2024, 2023 and 2022, respectively. The total fair value of the awards that vested in fiscal 2024, 2023 and
2022  was $37 million, $42 million and $41 million, respectively.
Stock Options. Exercise prices for stock options, including performance stock options, that have been granted
under the L3Harris SIPs are equal to or greater than the fair market value of our common stock on the grant date,
using the closing stock price of our common stock. Stock options may be exercised for a period of ten years after the
date of grant, and stock options, other than performance stock options, generally become exercisable in
installments, which are typically 33.3% one year from the grant date, 33.3% two years from the grant date and
33.3% three years from the grant date. In certain instances, vesting and exercisability are also subject to
performance criteria.
The grant-date fair value of each stock option award was determined using the Black-Scholes-Merton option-
pricing model which used assumptions noted in the following table:
Fiscal Year Ended
January 3, 2025
December 29, 2023
December 30, 2022
Expected dividends
2.18%
2.17%
2.00%
Expected volatility
25.29%
28.60%
29.09%
Risk-free interest rates
3.80% - 4.64%
3.48% - 4.27%
1.63% - 4.27%
Expected term (years)
5.06
5.04
5.02
Expected volatility over the expected term of the stock options is based on implied volatility from traded stock
options on our common stock and the historical volatility of our stock price. The expected term of the stock options
is based on historical observations of our common stock, considering average years to exercise for all stock options
exercised and average years to cancellation for all stock options canceled, as well as average years remaining for
vested outstanding stock options, which is calculated based on the weighted-average of these three inputs. The
risk-free interest rate for periods within the contractual life of the stock option is based on the U.S. Treasury yield
curve in effect at the time of grant.
The following table summarizes the stock option activity during fiscal 2024:
Shares
(In thousands)
Weighted
Average
Exercise
Price
Per Share
Weighted
Average
Remaining
Contractual
Term             
(In years)
Aggregate
Intrinsic 
Value                         
(In millions)
Stock options outstanding at December 29, 2023
3,251
$169.53
Granted
415
$213.85
Exercised
(1,026)
$129.18
Forfeited or expired
(103)
$218.61
Stock options outstanding at January 3, 2025
2,537
$191.09
5.70
$55
Stock options exercisable at January 3, 2025
1,902
$183.03
4.72
$55
The weighted-average grant-date fair value per share was $50.99, $54.63 and $53.66 for stock options granted
in fiscal 2024, 2023 and 2022, respectively. The total intrinsic value of stock options at the time of exercise was
$100 million, $23 million and $56 million for stock options exercised in fiscal 2024, 2023 and 2022, respectively.
The following table summarizes the unvested stock option activity during fiscal 2024:
(In thousands, except per share amounts)
Shares
Weighted-Average
Grant-Date Fair
Value
Per Share
Unvested stock options at December 29, 2023
582
$52.72
Granted
415
$50.99
Vested/forfeited, net
(362)
$50.59
Unvested stock options at January 3, 2025
635
$52.54
As of January 3, 2025, there was $20 million of total unrecognized compensation expense related to unvested
stock options granted under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average
period of 1.80 years. The total fair value of stock options that vested in fiscal 2024, 2023 and 2022 was $14 million,
$14 million and $42 million, respectively.