ACQUISITIONS AND DIVESTITURES

12 Months Ended

Jan. 03, 2025

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

ACQUISITIONS AND DIVESTITURES

NOTE 13: ACQUISITIONS AND DIVESTITURESAcquisition of Viasat’s TDL

On January 3, 2023, we completed the acquisition of TDL for a purchase price of $1,958 million. The acquisition

enhances our networking capability and provides access to the ubiquitous Link 16 waveform, better positioning us to

enable the DoD integrated architecture goal in JADC2.

On November 22, 2022, we established Term Loan 2025 with a syndicate of lenders, in part, to finance the

acquisition.

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 CS segment, with the exception of acquired intangible

assets, which are recorded in our corporate headquarters.

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.

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 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.

We determined the fair value of assets acquired and liabilities assumed by using available market information

and various valuation methods that require judgement related to estimates. Our preliminary fair value estimates and

assumptions to measure the assets acquired and liabilities assumed were subject to change as we obtained

additional information during the measurement period. We completed our accounting for the acquisition during the

fiscal year ended December 29, 2023. The following table summarizes the allocation of the fair value of

consideration transferred to assets acquired and liabilities assumed as of the acquisition date and the adjustments

recognized during the measurement period:

(In millions)	Preliminary as of January 3, 2023	Measurement Period Adjustments, Net(1),(2)	Final as of December 29, 2023
Receivables	$28	$—	$28
Contract assets	18	11	29
Inventories, net	164	(18)	146
Other current assets	9	—	9
Property, plant and equipment	50	(1)	49
Goodwill	1,014	129	1,143
Other intangible assets	850	(95)	755
Deferred income taxes	33	2	35
Other non-current assets	18	(1)	17
Total assets acquired	$2,184	$27	$2,211
Accounts payable	$20	$—	$20
Contract liabilities	28	—	28
Compensation and benefits	2	—	2
Other current liabilities	119	17	136
Other long-term liabilities	41	10	51
Total liabilities assumed	$210	$27	$237
Net assets acquired	$1,974	$—	$1,974

_______________

(1)Fair value adjustments during the fiscal year ended December 29, 2023 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, net 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.

Intangible Assets. All intangible assets acquired in the TDL acquisition are subject to amortization. The fair value and

weighted-average amortization period of identifiable intangible assets acquired as of the acquisition date is as

follows:

	Total	Useful Lives
	(In millions)	(In Years)
Customer relationships:
Backlog	$83	2
Government programs	323	16
Total customer relationships	406
Developed technology	349	17
Total identifiable intangible assets acquired	$755

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.

Goodwill. The $1,143 million 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 6: Goodwill and 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

Consolidated Statement of Operations for the acquisition date through December 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.

	Fiscal Year Ended
(In millions)	December 29, 2023	December 30, 2022
Revenue	$365	$358
Income before income taxes	131	68

Acquisition-Related Costs. Acquisition-related costs have been expensed as incurred. In connection with the

TDL acquisition, we recorded transaction and integration costs of $15 million and $78 million in fiscal 2024 and

2023, respectively, which were included in the General and administrative expenses line item in our 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 $4,715 million. The acquisition was financed through the issuance and sale of the AJRD Notes and

a draw down under the 2023 Credit Agreement.

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 AR segment, which is also the AR reporting unit, except for certain

assets and liabilities recorded at 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.

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 L3Harris	257
Cash consideration paid	5,005
Less cash acquired	(290)
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 judgement related to estimates. Our preliminary fair value estimates and

assumptions to measure the assets acquired and liabilities assumed were subject to change as we obtained

additional information during the measurement period. We completed our accounting for the acquisition during the

quarter ended September 27, 2024. The following table summarizes the allocation of the fair value of consideration

transferred to assets acquired and liabilities assumed as of the acquisition date and the adjustments recognized

during the measurement period:

(In millions)	Preliminary as of July 28, 2023	Measurement Period Adjustments, Net(1)	Final as of September 27, 2024
Receivables	$156	$—	$156
Contract assets	338	(137)	201
Inventories, net	14	—	14
Other current assets	114	19	133
Income taxes receivable	3	2	5
Property, plant and equipment	574	10	584
Goodwill	2,348	554	2,902
Intangible assets	2,860	—	2,860
Other non-current assets	609	66	675
Total assets acquired	$7,016	$514	$7,530
Current portion of long-term debt, net	$1	$—	$1
Accounts payable	145	—	145
Contract liabilities	310	152	462
Compensation and benefits	116	1	117
Income taxes payable	6	(3)	3
Other current liabilities	278	390	668
Long-term debt, net	41	—	41
Deferred income taxes	398	(52)	346
Other long-term liabilities	1,006	26	1,032
Total liabilities assumed	$2,301	$514	$2,815
Fair value of consideration transferred	$4,715	$—	$4,715

_______________

(1)Fair value adjustments during the measurement period primarily related to EAC updates for circumstances existing at the acquisition date,

including updates to the forward loss provision and off-market customer contract reserve described below, refinements to the fair value of

fixed assets, as well as corresponding adjustments to the deferred tax liability account which was partially offset by the release of a portion

of the uncertain tax position previously recorded by AJRD.

Intangible Assets. All intangible assets acquired in the AJRD acquisition are subject to amortization. The fair

value and weighted-average amortization period of identifiable intangible assets acquired as of the acquisition date

are as follows:

	Total (in millions)	Useful Lives (in years)
Customer relationships:
Backlog	$355	3
Government programs	2,385	15 - 20
Total customer relationships	2,740
Trade names	120	15
Total identifiable intangible assets acquired	$2,860

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.

Forward Loss Provision. In connection with the acquisition, we recorded a forward loss provision of $363 million

which was included in “Other current liabilities” line item in our Consolidated Balance Sheet. Since the completion of

the acquisition of AJRD, we have undertaken significant operational efforts to further understand the root cause of

identified preexisting manufacturing and supply chain challenges resulting in delivery delays, primarily related to

certain Missile Solutions programs. We have identified operational activities necessary to remedy these challenges

and inefficiencies and the incremental costs required as compared to its initial estimates and actual costs incurred.

The incremental forward loss provisions relate to the increased cost estimates of labor and material to remedy the

underlying preexisting technical and supply chain challenges. These cost increases impacted both cost-type and

fixed-price contracts in proportions that are consistent with the ratio of the overall AJRD revenue by contract type.

The forward loss provisions will be recognized as a reduction to cost of sales as we incur actual costs associated

with these estimates in satisfying the associated performance obligations. There will be no net impact on our

Consolidated Statement of Operations. We recognized $125 million and $8 million of amortization related to the

forward loss provision in fiscal 2024 and 2023, respectively.

Off-market Customer Contracts. In connection with the acquisition, we identified certain customer contractual

obligations as of the acquisition date with economic returns that are higher or lower than could be realized in market

transactions and have recorded assets or liabilities for the acquisition date fair value of the off-market components.

The acquisition date fair value of the off-market components is a net liability of $183 million, consisting of $48

million and $135 million included in the “Other current liabilities” and “Other long-term liabilities” line items in our

Consolidated Balance Sheet, respectively, and excludes any amounts already recognized in forward loss provisions

(see discussion in the preceding paragraph). Provisions to off-market customer contracts relate to labor and

material cost increases primarily associated with supply chain and manufacturing challenges and inefficiencies.

These cost increases impacted both cost-type and fixed-price contracts in proportions that are consistent with the

ratio of the overall AJRD revenue by contract type. 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 $58 million and $14

million of amortization related to off-market contract liabilities in fiscal 2024 and 2023, respectively.

Goodwill. The $2,902 million of goodwill recognized is attributable to AJRD’s market presence as one of the two

primary providers of advanced propulsion and power systems for nearly every major U.S. Government space and

missile program, the assembled workforce and established operating infrastructure. The acquired goodwill is not tax

deductible. See Note 6: Goodwill and Intangible Assets in these Notes for further information.

Financial Results. See Note 14: Business Segments in these Notes for the AR segment financial results for fiscal

2024.

Acquisition-Related Costs. Acquisition-related costs have been expensed as incurred and are included in the

“General and administrative expenses” line item in our Consolidated Statement of Operations. In connection with

the AJRD acquisition, we recorded transaction and integration costs of $78 million and $83 million for fiscal 2024

and 2023, respectively.

Pending Divestiture of CAS Disposal Group

During the quarter ended December 29, 2023, we entered into a definitive agreement to sell our CAS disposal

group (“CAS agreement”) for a cash purchase price of $700 million, with additional contingent consideration of up to

$100 million, subject to customary purchase price adjustments and closing conditions as set forth in the agreement.

On November 20, 2024, we entered into an amendment to the CAS agreement (“CAS amendment one”) that,

among other matters, accelerated the contingent consideration so that it becomes payable at closing, resulting in an

upfront cash purchase price of $800 million, subject to customary purchase price adjustments and closing

conditions as set forth in the agreement, and revised certain purchase price adjustment provisions to remove a cap

on working capital payments due to us upon closing. CAS amendment one expired on January 4, 2025, prior to us

completing the sale. Subsequent to our fiscal 2024 year end, on January 8, 2025, we entered into a second

amendment to the CAS agreement (“CAS amendment two”) that includes the same terms as CAS amendment one.

The transaction is expected to close in fiscal 2025, subject to the satisfaction of closing conditions as set forth in the

CAS agreement.

The CAS disposal group, which is part of our IMS segment, provides integrated aircraft avionics, pilot training

and data analytics services for the commercial aviation industry. Income or loss before income taxes attributable to

L3Harris Technologies, Inc. was income of $121 million, loss of $208 million and income of $88 million for fiscal

2024, 2023 and 2022, respectively.

The carrying amounts of the assets and liabilities of the CAS disposal group classified as held for sale in our

Consolidated Balance Sheet were as follows:

(In millions)	January 3, 2025	December 29, 2023
Receivables, net	$99	$80
Contract assets	40	43
Inventories, net	153	145
Other current assets	20	33
Property, plant and equipment, net	47	41
Goodwill	533	534
Intangible assets, net	263	263
Other non-current assets	49	40
Valuation allowance	(73)	(73)
Total assets held for sale	$1,131	$1,106
Current portion of long-term debt	$1	$—
Accounts payable	85	111
Contract liabilities	47	48
Compensation and benefits	6	11
Other current liabilities	35	38
Long-term debt, net	3	—
Other long-term liabilities	58	64
Total liabilities held for sale	$235	$272

In connection with the preparation of our financial statements for fiscal 2023, we concluded that goodwill

related to the CAS disposal group was impaired and we recorded a non-cash impairment charge of $296 million,

which is included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of

Operations. See Note 6: Goodwill and Intangible Assets in these Notes for additional information. Additionally, in

fiscal 2023 we recognized a pre-tax loss of $77 million included in the “General and administrative expenses” and

“Noncontrolling interests, net of income taxes” line items in our Consolidated Statement of Operations.

During the three quarters ended September 27, 2024, we recorded an additional valuation allowance due to an

increase in the carrying value of the CAS disposal group, and additional remaining estimated costs to sell which

resulted in additional pre-tax losses of $44 million, inclusive of amounts attributable to noncontrolling interest.

As of January 3, 2025, the fair value less costs to sell of the CAS disposal group was $896 million, inclusive of

consideration related to noncontrolling interest and accumulated other comprehensive income. As a result, in the

quarter ended January 3, 2025, we recorded a $15 million reversal of the previously recognized pre-tax losses in

our Consolidated Statement of Operations to reduce the cumulative pre-tax losses associated with the CAS disposal

group to $106 million. The pre-tax losses and the amount attributable to noncontrolling interest, after tax, are

included in the “General and administrative expenses” and “Noncontrolling interests, net of income taxes” line

items, in our Consolidated Statement of Operations.

Completed Divestitures

AOT Disposal Group. On January 3, 2025, we completed the divestiture of our AOT disposal group, which

produces high performance specialty metal components for defense, aerospace, and commercial products, for cash

proceeds of $103 million. The operating results of the AOT disposal group were reported in our AR segment through

the date of divestiture. In connection with the sale, we recognized a pre-tax gain of $19 million included in the

“General and administrative expenses” line item in our Consolidated Statement of Operations. The carrying amounts

of assets and liabilities included in the AOT disposal group sale on January 3, 2025 were $112 million and $28

million, respectively.

Antenna Disposal Group. On May 31, 2024, we completed the divestiture of our Antenna disposal group, which

provides a variety of airborne and ground-based antennas and test equipment for cash proceeds of $170 million and

a $25 million note receivable, included in the “Other non-current assets” line item in our Consolidated Balance

Sheet at January 3, 2025. The operating results of the Antenna disposal group were reported in our SAS segment

through the date of divestiture.

The carrying amounts of assets and liabilities included in the Antenna disposal group sale on May 31, 2024 were

$265 million and $65 million, respectively. In connection with the sale, we recorded a non-cash charge for

impairment of goodwill of $14 million and a pre-tax loss of $9 million included in the “Impairment of goodwill and

other assets” and “General and administrative expenses” line items, respectively, in our Consolidated Statement of

Operations for fiscal 2024. See Note 6: Goodwill and Intangible Assets in these Notes for additional information

related to goodwill allocated to the Antenna disposal group and related impairment.

Visual Information Solutions (“VIS”). During fiscal 2023, we completed the divestiture of VIS for net cash

proceeds of $71 million (after selling costs and purchase price adjustments) and recognized a pre-tax gain of $26

million included in the “General and administrative expenses” line item in our Consolidated Statement of

Operations. The operating results of VIS were reported in the SAS segment through the date of divestiture.

Divestiture and Asset Sale. During fiscal 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 “General and administrative expenses” line item in our Consolidated

Statement of Operations.

Fair Value of Businesses

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 1: Significant Accounting Policies

in these Notes for additional information regarding the fair value hierarchy and see Note 6: Goodwill and Intangible

Assets in these Notes for additional information regarding the impairment of goodwill related to our business

divestitures.