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 July ~~3, 2020~~		2, 2021


☐			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 (l) 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

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.~~Act o

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 July ~~31, 2020~~30, 2021 was ~~216,195,394~~200,943,675 shares.

L3HARRIS TECHNOLOGIES, INC.

FORM 10-Q

For the Quarter Ended July ~~3, 2020~~2, 2021

TABLE OF CONTENTS


			Page No.
Part I. Financial Information:
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statement of Income for the Quarter and Two Quarters Ended July 2, 2021 and July 3, 2020 ~~and June 28, 2019~~			1
Condensed Consolidated Statement of Comprehensive Income ~~(Loss)~~ for the Quarter and Two Quarters Ended July 2, 2021 and July 3, 2020 ~~and June 28, 2019~~			2
Condensed Consolidated Balance Sheet at July ~~3, 2020~~2, 2021 and January ~~3, 2020~~1, 2021			3
Condensed Consolidated Statement of Cash Flows for the Two Quarters Ended July 2, 2021 and July 3, 2020 ~~and June 28, 2019~~			4
Condensed Consolidated Statement of Equity for the Quarter and Two Quarters Ended July 2, 2021 and July 3, 2020 ~~and June 28, 2019~~			5
Notes to Condensed Consolidated Financial Statements			6
Report of Independent Registered Public Accounting Firm			3326
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3427
Item 3. Quantitative and Qualitative Disclosures About Market Risk			6041
Item 4. Controls and Procedures			6142

Part II. Other Information:
Item 1. Legal Proceedings			6343
Item 1A. Risk Factors			6343
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			6443
Item 3. Defaults Upon Senior Securities			6544
Item 4. Mine Safety Disclosures			6544
Item 5. Other Information			6544
Item 6. Exhibits			6544

Signature			6645

This Report contains trademarks, service marks and registered marks of L3Harris Technologies, Inc. and its subsidiaries. All other trademarks are the property of their respective owners.

PART I. FINANCIAL INFORMATION

Item 1. Financial ~~Statements.~~Statements (Unaudited).

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited)


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019

(In millions, except per share amounts)										(In millions, except per share amounts)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
		(In millions, except per share amounts)
Revenue from product sales and services	Revenue from product sales and services	$	4,445	$	1,865	$	9,071	$	3,593	Revenue from product sales and services	$	4,668	$	4,445	$	9,235	$	9,071
Cost of product sales and services	Cost of product sales and services	(3,175)		(1,223)		(6,473)		(2,362)		Cost of product sales and services	(3,251)		(3,175)		(6,464)		(6,473)
Engineering, selling and administrative expenses	Engineering, selling and administrative expenses	(904)		(349)		(1,719)		(659)		Engineering, selling and administrative expenses	(891)		(855)		(1,692)		(1,667)
Business divestiture-related gains (losses)										Business divestiture-related gains (losses)	180		(49)		165		(52)
Impairment of goodwill and other assets	Impairment of goodwill and other assets	(70)		—		(394)		—		Impairment of goodwill and other assets	(145)		(70)		(207)		(394)
Non-operating income										Non-operating income	86		105		203		200

Non-operating income		105		48		200		94
Interest income		3		—		8		1
Interest expense		(68)		(39)		(136)		(82)

Interest expense, net										Interest expense, net	(65)		(65)		(131)		(128)
Income from continuing operations before income taxes	Income from continuing operations before income taxes	336		302		557		585		Income from continuing operations before income taxes	582		336		1,109		557
Income taxes	Income taxes	(58)		(33)		(84)		(73)		Income taxes	(169)		(58)		(229)		(84)
Income from continuing operations	Income from continuing operations	278		269		473		512		Income from continuing operations	413		278		880		473
Discontinued operations, net of income taxes	Discontinued operations, net of income taxes	—		(1)		(1)		(1)		Discontinued operations, net of income taxes	0		0		(1)		(1)
Net income	Net income	278		268		472		511		Net income	413		278		879		472
Noncontrolling interests, net of income taxes	Noncontrolling interests, net of income taxes	5		—		28		—		Noncontrolling interests, net of income taxes	0		5		2		28
Net income attributable to L3Harris Technologies, Inc.	Net income attributable to L3Harris Technologies, Inc.	$	283	$	268	$	500	$	511	Net income attributable to L3Harris Technologies, Inc.	$	413	$	283	$	881	$	500

Amounts attributable to L3Harris Technologies, Inc. common shareholders	Amounts attributable to L3Harris Technologies, Inc. common shareholders																	Amounts attributable to L3Harris Technologies, Inc. common shareholders
Income from continuing operations	Income from continuing operations	$	283	$	269	$	501	$	512	Income from continuing operations	$	413	$	283	$	882	$	501
Discontinued operations, net of income taxes	Discontinued operations, net of income taxes	—		(1)		(1)		(1)		Discontinued operations, net of income taxes	0		0		(1)		(1)
Net income	Net income	$	283	$	268	$	500	$	511	Net income	$	413	$	283	$	881	$	500

Net income per common share attributable to L3Harris Technologies, Inc. common shareholders	Net income per common share attributable to L3Harris Technologies, Inc. common shareholders																	Net income per common share attributable to L3Harris Technologies, Inc. common shareholders
Basic	Basic									Basic
Continuing operations	Continuing operations	$	1.31	$	2.26	$	2.31	$	4.32	Continuing operations	$	2.03	$	1.31	$	4.29	$	2.31
Discontinued operations	Discontinued operations	—		—		(0.01)		—		Discontinued operations	0		0		0		(0.01)
		$	1.31	$	2.26	$	2.30	$	4.32		$	2.03	$	1.31	$	4.29	$	2.30
Diluted	Diluted									Diluted
Continuing operations	Continuing operations	$	1.30	$	2.21	$	2.29	$	4.23	Continuing operations	$	2.01	$	1.30	$	4.26	$	2.29
Discontinued operations	Discontinued operations	—		(0.01)		(0.01)		(0.01)		Discontinued operations	0		0		(0.01)		(0.01)
		$	1.30	$	2.20	$	2.28	$	4.22		$	2.01	$	1.30	$	4.25	$	2.28


Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	215.9		118.3		216.7		118.1		Basic weighted average common shares outstanding	203.6		215.9		205.2		216.7
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	217.8		121.1		218.7		120.7		Diluted weighted average common shares outstanding	205.6		217.8		207.1		218.7

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

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ~~(LOSS)~~

(Unaudited)


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019

(In millions)										(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
		(In millions)
Net income	Net income	$	278	$	268	$	472	$	511	Net income	$	413	$	278	$	879	$	472
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation gain (loss), net of income taxes	Foreign currency translation gain (loss), net of income taxes	7		(2)		(60)		1		Foreign currency translation gain (loss), net of income taxes	15		7		(3)		(60)
Net unrealized gain (loss) on hedging derivatives, net of income taxes	Net unrealized gain (loss) on hedging derivatives, net of income taxes	13		(11)		(60)		(19)		Net unrealized gain (loss) on hedging derivatives, net of income taxes	2		13		7		(60)
Net unrecognized gain (loss) on postretirement obligations, net of income taxes		1		(477)		—		(478)
Net unrecognized (loss) gain on postretirement obligations, net of income taxes										Net unrecognized (loss) gain on postretirement obligations, net of income taxes	(2)		1		(2)		0
Other comprehensive income (loss) recognized during the period										Other comprehensive income (loss) recognized during the period	15		21		2		(120)
Reclassification adjustments for losses included in net income										Reclassification adjustments for losses included in net income	4		6		2		4
Other comprehensive income (loss), net of income taxes	Other comprehensive income (loss), net of income taxes	21		(490)		(120)		(496)		Other comprehensive income (loss), net of income taxes	19		27		4		(116)
Total comprehensive income (loss)		299		(222)		352		15
Total comprehensive income										Total comprehensive income	432		305		883		356
Comprehensive loss attributable to noncontrolling interests	Comprehensive loss attributable to noncontrolling interests	5		—		28		—		Comprehensive loss attributable to noncontrolling interests	0		5		2		28
Total comprehensive income (loss) attributable to L3Harris Technologies, Inc.		$	304	$	(222)	$	380	$	15
Total comprehensive income attributable to L3Harris Technologies, Inc.										Total comprehensive income attributable to L3Harris Technologies, Inc.	$	432	$	310	$	885	$	384

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

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)


		July 3, 2020		January 3, 2020

(In millions, except shares)						(In millions, except shares)	July 2, 2021		January 1, 2021
		(In millions, except shares)
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	1,947	$	824	Cash and cash equivalents	$	2,029	$	1,276
Receivables		1,148		1,216
Receivables, net						Receivables, net	1,197		1,344
Contract assets	Contract assets	2,281		2,459		Contract assets	2,648		2,437
Inventories	Inventories	859		1,219		Inventories	872		973
Inventory prepayments						Inventory prepayments	66		61
Income taxes receivable	Income taxes receivable	203		202		Income taxes receivable	49		295
Other current assets	Other current assets	400		392		Other current assets	249		246
Assets of disposal groups held for sale	Assets of disposal groups held for sale	88		—		Assets of disposal groups held for sale	479		35
Total current assets	Total current assets	6,926		6,312		Total current assets	7,589		6,667
Non-current Assets	Non-current Assets					Non-current Assets
Property, plant and equipment		2,015		2,117
Property, plant and equipment, net						Property, plant and equipment, net	2,026		2,102
Operating lease right-of-use assets	Operating lease right-of-use assets	890		837		Operating lease right-of-use assets	669		766
Goodwill	Goodwill	19,015		20,001		Goodwill	18,234		18,876
Other intangible assets		8,336		8,458
Other intangible assets, net						Other intangible assets, net	6,958		7,908
Deferred income taxes	Deferred income taxes	120		102		Deferred income taxes	111		119
Other non-current assets	Other non-current assets	550		509		Other non-current assets	477		522
Total non-current assets	Total non-current assets	30,926		32,024		Total non-current assets	28,475		30,293
		$	37,852	$	38,336		$	36,064	$	36,960
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current Liabilities	Current Liabilities					Current Liabilities
Short-term debt	Short-term debt	$	2	$	3	Short-term debt	$	3	$	2
Accounts payable	Accounts payable	1,094		1,261		Accounts payable	1,406		1,406
Contract liabilities	Contract liabilities	1,106		1,214		Contract liabilities	1,205		1,198
Compensation and benefits	Compensation and benefits	423		460		Compensation and benefits	404		496
Other accrued items	Other accrued items	1,218		790		Other accrued items	1,044		1,066
Income taxes payable	Income taxes payable	57		24		Income taxes payable	148		49
Current portion of long-term debt, net	Current portion of long-term debt, net	666		257		Current portion of long-term debt, net	11		10
Liabilities of disposal groups held for sale	Liabilities of disposal groups held for sale	21		—		Liabilities of disposal groups held for sale	243		13
Total current liabilities	Total current liabilities	4,587		4,009		Total current liabilities	4,464		4,240
Non-current Liabilities	Non-current Liabilities					Non-current Liabilities
Defined benefit plans	Defined benefit plans	1,664		1,819		Defined benefit plans	1,714		1,906
Operating lease liabilities	Operating lease liabilities	773		781		Operating lease liabilities	672		734
Long-term debt, net	Long-term debt, net	6,273		6,694		Long-term debt, net	7,061		6,943
Deferred income taxes	Deferred income taxes	1,466		1,481		Deferred income taxes	1,081		1,237
Other long-term liabilities	Other long-term liabilities	863		808		Other long-term liabilities	1,096		1,059
Total non-current liabilities	Total non-current liabilities	11,039		11,583		Total non-current liabilities	11,624		11,879
Equity	Equity					Equity
Shareholders’ Equity:	Shareholders’ Equity:					Shareholders’ Equity:
Preferred stock, without par value; 1,000,000 shares authorized; NaN issued	Preferred stock, without par value; 1,000,000 shares authorized; NaN issued	—		—		Preferred stock, without par value; 1,000,000 shares authorized; NaN issued	0		0
Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 216,087,421 shares at July 3, 2020 and 218,226,614 shares at January 3, 2020		216		218
Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 201,643,891 and 208,230,353 shares at July 2, 2021 and January 1, 2021, respectively						Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 201,643,891 and 208,230,353 shares at July 2, 2021 and January 1, 2021, respectively	202		208
Other capital	Other capital	20,260		20,694		Other capital	17,863		19,008
Retained earnings	Retained earnings	2,250		2,183		Retained earnings	2,633		2,347
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(624)		(508)		Accumulated other comprehensive loss	(835)		(839)
Total shareholders’ equity	Total shareholders’ equity	22,102		22,587		Total shareholders’ equity	19,863		20,724
Noncontrolling interests	Noncontrolling interests	124		157		Noncontrolling interests	113		117
Total equity	Total equity	22,226		22,744		Total equity	19,976		20,841
		$	37,852	$	38,336		$	36,064	$	36,960

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

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


		Two Quarters Ended							Two Quarters Ended
		July 3, 2020		June 28, 2019

(In millions)						(In millions)	July 2, 2021		July 3, 2020
		(In millions)
Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	472	$	511	Net income	$	879	$	472
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		515		129
Amortization of acquisition-related intangibles						Amortization of acquisition-related intangibles	320		353
Depreciation and other amortization						Depreciation and other amortization	164		162
Share-based compensation	Share-based compensation	40		29		Share-based compensation	67		40
Share-based matching contributions under defined contribution plans	Share-based matching contributions under defined contribution plans	122		42		Share-based matching contributions under defined contribution plans	117		122
Qualified pension plan contributions	Qualified pension plan contributions	(4)		(1)		Qualified pension plan contributions	(4)		(4)
Pension and other postretirement benefit plan income	Pension and other postretirement benefit plan income	(160)		(74)		Pension and other postretirement benefit plan income	(188)		(160)
Investment and asset impairment charges						Investment and asset impairment charges	242		394
Business divestiture-related (gains) losses						Business divestiture-related (gains) losses	(165)		52

Impairment of goodwill and other assets		394		—

Divestiture-related losses		52		—

Deferred income taxes	Deferred income taxes	(109)		41		Deferred income taxes	(151)		(109)
(Increase) decrease in:	(Increase) decrease in:					(Increase) decrease in:
Accounts receivable	Accounts receivable	(59)		19		Accounts receivable	62		(59)
Contract assets	Contract assets	43		22		Contract assets	(438)		43
Inventories	Inventories	175		13		Inventories	46		175

Prepaid expenses and other current assets						Prepaid expenses and other current assets	(21)		(27)
Increase (decrease) in:	Increase (decrease) in:					Increase (decrease) in:
Accounts payable	Accounts payable	(116)		17		Accounts payable	69		(116)
Contract liabilities	Contract liabilities	(80)		17		Contract liabilities	86		(80)
Compensation and benefits	Compensation and benefits	(29)		33		Compensation and benefits	(80)		(29)
Income taxes	Income taxes	92		(96)		Income taxes	309		92
Other accrued items	Other accrued items	(60)		(10)		Other accrued items	8		65
Other	Other	47		24		Other	59		(51)
Net cash provided by operating activities	Net cash provided by operating activities	1,335		716		Net cash provided by operating activities	1,381		1,335
Investing Activities	Investing Activities					Investing Activities
Net additions of property, plant and equipment		(108)		(94)
Additions of property, plant and equipment						Additions of property, plant and equipment	(128)		(108)
Proceeds from sale of property, plant and equipment						Proceeds from sale of property, plant and equipment	4		0
Proceeds from sales of businesses, net	Proceeds from sales of businesses, net	963		—		Proceeds from sales of businesses, net	1,430		963

Other investing activities	Other investing activities	(10)		2		Other investing activities	1		(10)

Net cash provided by (used in) investing activities		845		(92)
Net cash provided by investing activities						Net cash provided by investing activities	1,307		845
Financing Activities	Financing Activities					Financing Activities
Net proceeds from borrowings	Net proceeds from borrowings	248		1		Net proceeds from borrowings	5		248
Repayments of borrowings	Repayments of borrowings	(254)		(305)		Repayments of borrowings	(10)		(254)
Proceeds from exercises of employee stock options	Proceeds from exercises of employee stock options	37		32		Proceeds from exercises of employee stock options	38		37
Repurchases of common stock	Repurchases of common stock	(700)		—		Repurchases of common stock	(1,550)		(700)
Cash dividends	Cash dividends	(367)		(162)		Cash dividends	(416)		(367)

Other financing activities	Other financing activities	(6)		(5)		Other financing activities	(4)		(6)
Net cash used in financing activities	Net cash used in financing activities	(1,042)		(439)		Net cash used in financing activities	(1,937)		(1,042)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(15)		2		Effect of exchange rate changes on cash and cash equivalents	2		(15)
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	1,123		187		Net increase in cash and cash equivalents	753		1,123
Cash and cash equivalents, beginning of year	Cash and cash equivalents, beginning of year	824		343		Cash and cash equivalents, beginning of year	1,276		824
Cash and cash equivalents, end of quarter	Cash and cash equivalents, end of quarter	$	1,947	$	530	Cash and cash equivalents, end of quarter	$	2,029	$	1,947

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

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)


(In millions, except per share amounts)														(In millions, except per share amounts)	Common Stock		Other Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interests		Total Equity

Balance at April 2, 2021														Balance at April 2, 2021	$	205	$	18,487	$	2,529	$	(854)	$	115	$	20,482

Net income														Net income	—		—		413		—		0		413
Other comprehensive income														Other comprehensive income	—		—		—		19		—		19

		Common Stock		Other Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interests		Total Equity

Shares issued under stock incentive plans														Shares issued under stock incentive plans	1		27		—		—		—		28
Shares issued under defined contribution plans														Shares issued under defined contribution plans	1		59		—		—		—		60
Share-based compensation expense														Share-based compensation expense	—		34		—		—		—		34

Repurchases and retirement of common stock														Repurchases and retirement of common stock	(5)		(744)		(101)		—		—		(850)
Cash dividends ($1.02 per share)														Cash dividends ($1.02 per share)	—		—		(207)		—		—		(207)

Other														Other	—		0		(1)		—		(2)		(3)
Balance at July 2, 2021														Balance at July 2, 2021	$	202	$	17,863	$	2,633	$	(835)	$	113	$	19,976

Balance at April 3, 2020														Balance at April 3, 2020	$	216	$	20,182	$	2,151	$	(651)	$	129	$	22,027
Net income														Net income	—		—		283		—		(5)		278
Other comprehensive income														Other comprehensive income	—		—		—		27		—		27

Shares issued under stock incentive plans														Shares issued under stock incentive plans	—		4		—		—		—		4
Shares issued under defined contribution plans														Shares issued under defined contribution plans	0		51		—		—		—		51
Share-based compensation expense														Share-based compensation expense	—		24		—		—		—		24

Cash dividends ($.85 per share)														Cash dividends ($.85 per share)	—		—		(184)		—		—		(184)

Other														Other	—		(1)		—		—		—		(1)
Balance at July 3, 2020														Balance at July 3, 2020	$	216	$	20,260	$	2,250	$	(624)	$	124	$	22,226

(In millions, except per share amounts)														(In millions, except per share amounts)	Common Stock		Other Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interests		Total Equity
Balance at January 1, 2021														Balance at January 1, 2021	$	208	$	19,008	$	2,347	$	(839)	$	117	$	20,841

Net income														Net income	—		—		881		—		(2)		879
Other comprehensive income														Other comprehensive income	—		—		—		4		—		4
Shares issued under stock incentive plans														Shares issued under stock incentive plans	1		37		—		—		—		38
Shares issued under defined contribution plans														Shares issued under defined contribution plans	1		116		—		—		—		117
Share-based compensation expense														Share-based compensation expense	—		67		—		—		—		67

Repurchases and retirement of common stock														Repurchases and retirement of common stock	(8)		(1,364)		(178)		—		—		(1,550)
Cash dividends ($2.04 per share)														Cash dividends ($2.04 per share)	—		—		(416)		—		—		(416)

Other														Other	—		(1)		(1)		—		(2)		(4)
Balance at July 2, 2021														Balance at July 2, 2021	$	202	$	17,863	$	2,633	$	(835)	$	113	$	19,976
		(In millions, except per share amounts)
Balance at January 3, 2020	Balance at January 3, 2020	$	218	$	20,694	$	2,183	$	(508)	$	157	$	22,744	Balance at January 3, 2020	$	218	$	20,694	$	2,183	$	(508)	$	157	$	22,744

Net income	Net income	—		—		217		—		(23)		194		Net income	—		—		500		—		(28)		472
Other comprehensive loss	Other comprehensive loss	—		—		—		(141)		—		(141)		Other comprehensive loss	—		—		—		(116)		—		(116)

Net gain from postretirement obligations and hedging derivatives reclassified to earnings		—		—		—		(2)		—		(2)
Shares issued under stock incentive plans		1		32		—		—		—		33
Shares issued under defined contribution plans				71		—		—		—		71
Share-based compensation expense				16		—		—		—		16
Repurchases and retirement of common stock		(3)		(631)		(66)		—		—		(700)
Cash dividends ($.85 per share)		—		—		(183)		—		—		(183)

Distributions to noncontrolling interests		—		—		—		—		(5)		(5)

Balance at April 3, 2020		216		20,182		2,151		(651)		129		22,027

Net income		—		—		283		—		(5)		278
Other comprehensive loss		—		—		—		21		—		21

Net gain from postretirement obligations, hedging derivatives and foreign currency translation reclassified to earnings		—		—		—		6		—		6
Shares issued under stock incentive plans	Shares issued under stock incentive plans	—		4		—		—		—		4		Shares issued under stock incentive plans	1		36		—		—		—		37
Shares issued under defined contribution plans	Shares issued under defined contribution plans	—		51		—		—		—		51		Shares issued under defined contribution plans	—		122		—		—		—		122
Share-based compensation expense	Share-based compensation expense	—		24		—		—		—		24		Share-based compensation expense	—		40		—		—		—		40

Cash dividends ($.85 per share)		—		—		(184)		—		—		(184)
Repurchases and retirement of common stock														Repurchases and retirement of common stock	(3)		(631)		(66)		—		—		(700)

Cash dividends ($1.70 per share)														Cash dividends ($1.70 per share)	—		—		(367)		—		—		(367)

Other	Other	—		(1)		—		—		—		(1)		Other	—		(1)		—		—		(5)		(6)
Balance at July 3, 2020	Balance at July 3, 2020	$	216	$	20,260	$	2,250	$	(624)	$	124	$	22,226	Balance at July 3, 2020	$	216	$	20,260	$	2,250	$	(624)	$	124	$	22,226

Balance at December 28, 2018		$	118	$	1,681	$	1,824	$	(211)	$	—	$	3,412
Net income		—		—		243		—		—		243
Other comprehensive loss		—		—		—		(6)		—		(6)
Shares issued under stock incentive plans		—		7		—		—		—		7
Shares issued under defined contribution plans		—		23		—		—		—		23
Share-based compensation expense		—		14		—		—		—		14
Repurchases and retirement of common stock		—		(5)		—		—		—		(5)
Cash dividends ($.685 per share)		—		—		(81)		—		—		(81)
Balance at March 29, 2019		118		1,720		1,986		(217)		—		3,607
Net income		—		—		268		—		—		268
Other comprehensive loss		—		—		—		(490)		—		(490)
Shares issued under stock incentive plans		—		25		—		—		—		25
Shares issued under defined contribution plans		1		19		—		—		—		20
Share-based compensation expense		—		14		—		—		—		14

Cash dividends ($.685 per share)		—		—		(81)		—		—		(81)
Balance at June 28, 2019		$	119	$	1,778	$	2,173	$	(707)	$	—	$	3,363

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note A — Significant Accounting Policies and Recent Accounting Standards

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (Unaudited) include the accounts of L3Harris Technologies, Inc. and its consolidated subsidiaries. As used in these Notes to Condensed Consolidated Financial Statements (Unaudited) (these “Notes”), the terms “L3Harris,” “Company,” “we,” “our” and “us” refer to L3Harris Technologies, Inc. and its consolidated subsidiaries. Intracompany transactions and accounts have been eliminated in consolidation. The accompanying Condensed Consolidated Financial Statements (Unaudited) have been prepared by L3Harris, without an audit, in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all information and footnotes necessary for a complete presentation of financial condition, results of operations, cash flows and equity in conformity with GAAP for annual financial statements. In the opinion of management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of our financial condition, results of operations, ~~and~~ cash flows and equity for the periods presented therein. The results for the quarter and two quarters ended July ~~3, 2020~~2, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period. The balance sheet at January ~~3, 2020~~1, 2021 has been derived from our audited financial statements, but does not include all of the information and footnotes required by GAAP for annual financial statements. We provide complete, audited financial statements in our ~~Transition~~Annual Report on Form ~~10-KT for the fiscal transition period from June 29, 2019 to January 3, 2020 (our “Fiscal Transition Period Form 10-KT”),~~10-K, which includes information and footnotes required by the rules and regulations of the SEC. The information included in this Quarterly Report on Form 10-Q (this “Report”) should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in our ~~Fiscal Transition Period~~Annual Report on Form ~~10-KT.~~

On October 12, 2018, Harris Corporation, a Delaware corporation (“Harris”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with L3 Technologies, Inc., a Delaware corporation (“L3”), and Leopard Merger Sub Inc., a Delaware corporation and a newly formed, direct wholly owned subsidiary of Harris (“Merger Sub”), pursuant to which Harris and L3 agreed to combine their respective businesses in an all-stock merger, at the closing of which Merger Sub would merge with and into L3, with L3 continuing as the surviving corporation and a direct wholly owned subsidiary of Harris (the “L3Harris Merger”).

~~The closing of the L3Harris Merger occurred on June 29, 2019 (the “Closing Date”), the day after Harris’ fiscal 2019 ended and the first day of~~10-K for the fiscal ~~transition period~~year ended January 3,1, 2021 (our “Fiscal 2020 ~~(the “Fiscal Transition Period”~~Form 10-K”). Upon completion of the L3Harris Merger, Harris was renamed “L3Harris Technologies, Inc.” (“L3Harris”), and each share of L3 common stock converted into the right to receive 1.30 shares (“Exchange Ratio”) of L3Harris common stock. Shares of L3Harris common stock, which previously traded under ticker symbol “HRS” on the New York Stock Exchange prior to completion of the L3Harris Merger, are traded under ticker symbol “LHX” following completion of the L3Harris Merger. L3Harris was owned on a fully diluted basis approximately 54 percent by Harris shareholders and 46 percent by L3 shareholders immediately following the completion of the L3Harris Merger.

Because of the L3Harris Merger, the quarter and two quarters ended July 3, 2020 reflect the results of the combined company, while the quarter and two quarters ended June 28, 2019 reflect the results of only Harris operating businesses.

We accounted for the L3Harris Merger under the acquisition method of accounting. Under the acquisition method of accounting, we were required to measure identifiable assets acquired, liabilities assumed and any noncontrolling interests in the acquiree at their fair values as of the Closing Date. The excess of the consideration transferred over those fair values was recorded as goodwill. See ~~Note B — Business Combination~~ ~~in these Notes for additional information related to the L3Harris Merger.~~

We implemented a new organizational structure effective on June 29, 2019, which resulted in changes to our operating segments, which are also reportable segments and referred to as our business segments. The historical results, discussion and presentation of our business segments as set forth in the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes reflect the impact of these changes for all periods presented in order to present segment information on a comparable basis. There is no impact on our previously reported consolidated statements of income, balance sheets, statements of cash flows or statements of equity resulting from these changes.

On September 13, 2019, we completed the divestiture of the Harris Night Vision business to Elbit Systems of America, LLC, a subsidiary of Elbit Systems Ltd., for $350 million (net cash proceeds of $343 million after selling costs and purchase price adjustments). The Harris Night Vision business was not included in any of the operating segments in our new

organizational structure and the operating results of the Harris Night Vision business through the date of the divestiture are discussed and presented as part of “Other non-reportable business segments” in this Report.

On May 4, 2020, we completed the divestiture of the Security & Detection Systems and MacDonald Humfrey Automation solutions business (“airport security and automation business”) to Leidos, Inc. for $1 billion (net cash proceeds of $951 million after selling costs and estimated purchase price adjustments), subject to final customary purchase price adjustments as set forth in the definitive sale agreement. The airport security and automation business provides solutions used by the aviation and transportation industries, regulatory and customs authorities, government and law enforcement agencies and commercial and other high-security facilities. The operating results of the airport security and automation business through the date of divestiture are reported as part of our Aviation Systems segment.

On May 15, 2020, we completed the divestiture of our Applied Kilovolts and Analytical Instrumentation business for net cash proceeds of $12 million, after selling costs and estimated purchase price adjustments, subject to final customary purchase price adjustments as set forth in the definitive sale agreement. The operating results of the Applied Kilovolts and Analytical Instrumentation business through the date of divestiture are reported as part of our Space and Airborne Systems segment.

On March 20, 2020, we entered into a definitive sale agreement to sell our EOTech business for $42 million, subject to customary adjustments and closing conditions as set forth in the definitive agreement. The EOTech business, which is reported as part of our Communications Systems segment, manufactures holographic sighting systems, magnified field optics and accessories for military, law enforcement and commercial markets around the world. The assets and liabilities of the EOTech business were classified as held for sale in our Condensed Consolidated Balance Sheet (Unaudited) at July 3, 2020. We completed the divestiture of the EOTech business on July 31, 2020.

During the quarter ended July 3, 2020, we determined the criteria to be classified as held for sale were met with respect to another business within our Aviation Systems segment (“other AS disposal group”); consequently, the assets and liabilities of the other AS disposal group were classified as held for sale in our Condensed Consolidated Balance Sheet (Unaudited) at July 3, 2020. The income before income taxes of the other AS disposal group were not material for the quarter and two quarters ended July 3, 2020. We expect to complete the divestiture of the other AS disposal group by the end of 2020.

~~See~~ ~~Note C — Business Divestitures and Assets Sales~~ ~~and~~ ~~Note X — Subsequent Events~~ ~~in these Notes for more information regarding the divestitures.~~

Amounts contained in this Report may not always add to totals due to rounding.

L3Harris Merger

As discussed in more detail in our Fiscal 2020 Form 10-K, Harris Corporation (“Harris”) and L3 Technologies, Inc. (“L3”) combined their respective businesses on June 29, 2019, in an all-stock merger (“L3Harris Merger”) that resulted in our combined Company, L3Harris Technologies, Inc.

L3Harris Merger-related expenses for the quarter and two quarters ended July 2, 2021 and July 3, 2020 were as follows:


	Quarter Ended				Two Quarters Ended
(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020

Additional cost of sales related to fair value step-up in inventory sold	$	0	$	16	$	0	$	31
Restructuring charges	0		7		0		7
Integration costs, recognized as incurred	20		37		41		68
Total L3Harris Merger-related expenses	$	20	$	60	$	41	$	106

Because the L3Harris Merger benefited the entire Company as opposed to any individual business segment, the above costs were not allocated to any business segment. All of the above costs were recorded in the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited), except for the additional cost of sales related to fair value step-up in inventory sold, which is included in the “Cost of product sales and services” line item in our Condensed Consolidated Statement of Income (Unaudited).

For additional information, see Note 5: “Business Combination” in the Notes to Consolidated Financial Statements in our Fiscal 2020 Form 10-K.

Divestitures

See Note B — Business Divestitures in these Notes for information regarding the following businesses divested or classified as held for sale in fiscal 2020 and 2021:

•Airport security and automation business, divested on May 4, 2020;

•Applied Kilovolts and Analytical Instrumentation business, divested on May 15, 2020;

•EOTech business, divested on July 31, 2020;

•Military training business, divested on July 2, 2021;

•Combat Propulsion Systems and related businesses (“CPS business”), divested on July 2, 2021;

•Voice Switch Enterprise disposal group (“VSE disposal group”), definitive agreement entered into on February 23, 2021 and divestiture partially completed during the quarter ended July 2, 2021, with the remainder classified as held for sale;

•Electron Devices and Narda Microwave-West divisions (“Electron Devices business”), definitive agreement entered into on July 2, 2021 and classified as held for sale during the quarter ended July 2, 2021; and

•Aerospace Products disposal groups (“AP disposal groups”), classified as held for sale during the quarter ended July 2, 2021.

Supplemental Cash Flow Information

Non-cash investing and financing activities during the two quarters ended July 2, 2021 included a $120 million right-of-use asset we obtained in exchange for a corresponding finance lease liability. These non-cash investing and financing activities are excluded from the “Additions of property, plant and equipment” and “Net proceeds from borrowings” line items in our Condensed Consolidated Statement of Cash Flows (Unaudited). There were no material non-cash investing or financing activities during the two quarters ended July 3, 2020. Right-of-use assets for finance leases are included in the “Property, plant and equipment, net” line item and the corresponding finance lease liabilities are included in the “Current portion of long-term debt, net” and “Long-term debt, net” line items in our Condensed Consolidated Balance Sheet (Unaudited).

Reclassifications

The classification of certain prior-year amounts have been adjusted in our Condensed Consolidated Financial Statements (Unaudited) to conform to current-year classifications. Reclassifications include finance lease liabilities that were previously included in the “Other accrued items” and “Other long-term liabilities” line items and are now reflected in the “Current portion of long-term debt, net” and “Long-term debt, net” line items in our Condensed Consolidated Balance Sheet (Unaudited).

Use of Estimates

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes and related disclosures. These estimates and assumptions are based on experience and other information available prior to issuance of the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes. Materially different results can occur as circumstances change and additional information becomes known.

Significant Accounting Policies Update

There have been no material changes to our significant accounting policies described in our Fiscal ~~Transition Period~~2020 Form ~~10-KT, except as described in “Adoption of New Accounting Standards” below.~~

~~Adoption of New Accounting Standards~~

~~Effective January 3, 2020, we adopted Accounting Standards Update 2016-13,~~ 10-K.~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ ~~on a modified retrospective basis~~. ~~The new standard~~replaces the existing impairment model, under which impairment of receivables is recognized when it becomes probable a loss has been incurred, with a model that requires recognition of expected credit losses over the estimated life of an asset at inception and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Adopting this standard did not have a material impact on our financial condition, results of operations or cash flows.

Note B — Business ~~Combination~~Divestitures

2021 Divestitures

Held for Sale Businesses

Electron Devices business. On ~~October 12, 2018, Harris~~July 2, 2021, we entered into a definitive agreement to sell our Electron Devices business to an affiliate of Arlington Capital Partners for $185 million, subject to customary purchase price adjustments and closing conditions as set forth in the ~~Merger Agreement~~definitive agreement. The Electron Devices business, which is reported as part of our Aviation Systems segment, manufactures microwave devices for ground-based, airborne and satellite communications and radar. We expect to complete the sale of the Electron Devices business in the second half of fiscal 2021.

Aerospace Products disposal groups. During the quarter ended July 2, 2021, we determined the criteria to be classified as held for sale were met with L3respect to 2 businesses within our Aviation Systems segment, which we refer to together in this Report as the “AP disposal groups”. We expect to complete the sale of the AP disposal groups in the next twelve months.

VSE disposal group. On February 23, 2021, we entered into a definitive agreement to sell the VSE disposal group for $20 million, subject to customary purchase price adjustments and ~~Merger Sub, pursuant~~closing conditions as set forth in the definitive agreement. The definitive agreement includes provisions to accommodate, as necessary, closing the transactions contemplated by the agreement on a deferred basis if local consents and regulatory approvals in certain jurisdictions are obtained at a later date than in other jurisdictions.

The VSE disposal group, which ~~Harris and L3 agreed to combine their respective businesses~~is reported as part of our Aviation Systems segment, provides voice over internet protocol systems for air traffic management communications. During the quarter ended July 2, 2021, as contemplated by the definitive agreement, we consummated transactions in ~~an all-stock merger, at~~several jurisdictions for net cash proceeds of $2 million. (We consummated the closing ~~of which Merger Sub would merge with and into L3, with L3 continuing as~~in the ~~surviving corporation and a direct wholly owned subsidiary of Harris.~~

~~The closing of the L3Harris Merger occurred~~final jurisdiction on June 29, 2019. Upon completion of the L3Harris Merger, Harris was renamed “L3Harris Technologies, Inc.” and each share of L3 common stock converted into the right to receive 1.30 shares of L3Harris common stock. L3Harris was owned on a fully diluted basis approximately 54 percent by Harris shareholders and 46 percent by L3 shareholders immediately following the completion of the L3Harris Merger.July 30, 2021).

L3 was a prime contractor in intelligence, surveillance and reconnaissance (“ISR”) systems, aircraft sustainment (including modifications and fleet management of special mission aircraft), simulation and training, night vision and image intensification equipment, and security and detection systems. L3 also was a leading provider of a broad range of communication, electronic and sensor systems used on military, homeland security and commercial platforms. L3 employed approximately 31,000 employees and its customers included the U.S. Department of Defense and its prime contractors, the U.S. Intelligence Community, the U.S. Department of Homeland Security, foreign governments and domestic and foreign commercial customers.

In connection with completion of the L3Harris Merger, we issued to L3 shareholders 104 million shares of L3Harris common stock, the trading price of which was $189.13 per share as of the Closing Date. In addition, we issued L3Harris share-based awards in replacement of certain outstanding L3 share-based awards held by employees.

~~Our calculation of consideration transferred is summarized below:~~


~~(In millions, except exchange ratio and per share amounts)~~	~~June 29, 2019~~
~~Outstanding shares of L3 common stock as of June 28, 2019~~	~~79.63~~
~~L3 restricted stock unit awards settled in shares of L3Harris common stock~~	~~0.41~~
~~L3 performance unit awards settled in shares of L3Harris common stock~~	~~0.04~~
	~~80.08~~
~~Exchange Ratio~~	~~1.30~~
~~Shares of L3Harris common stock issued for L3 outstanding common stock~~	~~104.10~~
~~Price per share of L3Harris common stock as of June 28, 2019~~	$	~~189.13~~
~~Fair value of L3Harris common stock issued for L3 outstanding common stock~~	$	~~19,689~~
~~Fair value of replacement RSUs attributable to merger consideration~~	10
~~Fair value of L3Harris stock options issued to replace L3 outstanding stock options~~	~~101~~
~~Withholding tax liability incurred for converted L3 share-based awards~~	45
~~Fair value of replacement award consideration~~	~~156~~
~~Fair value of total consideration~~	~~19,845~~
~~Less cash acquired~~	~~(1,195)~~
~~Total net consideration transferred~~	$	~~18,650~~

~~Our preliminary~~Because the divestiture of the VSE disposal group represents the disposal of a portion of a reporting unit within our Aviation Systems segment, we assigned $14 million of goodwill to the VSE disposal group on a relative fair value estimates and assumptions to measure the assets acquired, liabilities assumed and noncontrolling interests in L3 were subject to change as we obtained additional information during the measurement period. We completed our accounting for the L3Harris Mergerbasis during the quarter ended July 3, ~~2020. The following table summarizes~~2020 when the ~~fair value amounts recognized as of the Closing Date~~held for ~~each major class of asset acquired or liability assumed and noncontrolling interests, as well as adjustments made during the measurement period:~~

Preliminary Fair Value as of September 27, 2019 Measurement Period Adjustments Adjusted Fair Value as of July 3, 2020
(In millions)
Receivables $ 849 $ (20) $ 829
Contract assets 1,708 (57) 1,651
Inventories 1,056 (73) 983
Other current assets 517 (16) 501
Property, plant and equipment 1,176 43 1,219
Operating lease right-of-use assets 704 108 812
Goodwill 15,423 (841) 14,582
Other intangible assets 6,768 1,690 8,458
Other non-current assets 327 (13) 314
Total assets acquired $ 28,528 $ 821 $ 29,349
Accounts payable $ 898 $ (13) $ 885
Contract liabilities 722 4 726
Other current liabilities 772 301 1,073
Operating lease liabilities 715 45 760
Defined benefit plans 1,411 — 1,411
Long-term debt, net 3,548 — 3,548
Other long-term liabilities 1,661 480 2,141
Total liabilities assumed 9,727 817 10,544
Net assets acquired 18,801 4 18,805
Noncontrolling interests (151) (4) (155)
Total net consideration transferred $ 18,650 $ — $ 18,650

~~Additionally, we acquired certain off-market customer contracts in~~sale criteria were met. In connection with the ~~L3Harris Merger, and~~preparation of our financial statements for fiscal 2020, we ~~have recorded liabilities as well as separate identifiable intangible~~recognized a $32 million pre-tax loss to reduce the net assets ~~for~~of the ~~acquisition-date~~VSE disposal group to fair value less costs to sell, which included a non-cash goodwill impairment charge of $14 million (based on the excess of the carrying value of the ~~off-market components of these customer contracts. In aggregate, the acquisition-date fair value of the off-market components is a~~business over estimated net liability of $139 million. We measured the fair value of these components as the present value of the amount by which the terms of the contract with the customer deviate from the terms that a market participant could have achieved at the Closing Date. The off-market components of these contracts will be recognized ascash proceeds, after estimated purchase price adjustments) and an ~~increase to, or reduction of, revenue as we incur costs to satisfy the associated performance obligations. We recognized $17~~$18 million ~~and $40 million of revenue in~~non-cash remeasurement loss. During the quarter and two quarters ended July ~~3, 2020,~~2, 2021, we recorded additional pre-tax losses of $18 million and $26 million, respectively, for ~~amortization of net off-market contract liabilities (including the cumulative effect of amortization that would have been recognized~~non-cash remeasurement losses. The non-cash goodwill impairment is included in the Fiscal Transition Period). We recognized $13 million for amortization of net off-market contract liabilities in the Fiscal Transition Period. Future estimated revenue from the amortization of net off-market contract liabilities (based on the estimated pattern of cash flows to be incurred to satisfy associated performance obligations) is as follows: $18 million in the remainder of 2020, $20 million in 2021, $15 million in 2022, $10 million in 2023 and $23 million thereafter.

The goodwill resulting from the L3Harris Merger is primarily associated with L3’s market presence and leading positions, growth opportunities in the markets in which L3 businesses operate, experienced work force and established operating infrastructures. Most of the goodwill related to the L3Harris Merger is nondeductible for tax purposes.

~~See~~ ~~Note K — Goodwill and Other Intangible Assets~~ ~~in these Notes for more information regarding the allocation~~“Impairment of goodwill ~~by business segment.~~

~~The following table provides further detail of the fair value~~ and ~~weighted-average amortization period of identified intangible assets acquired by major intangible asset class:~~

Weighted Average Amortization Period Total
(In years) (In millions)
Identifiable intangible assets acquired:
Customer relationships (Government) 14 $ 5,082
Customer relationships (Commercial) 15 860
Contract backlog 3 19
Trade names — divisions 9 123
Developed technologies 7 550
Total intangible assets subject to amortization 13 6,634
Trade names — Corporate indefinite 1,803
In-process research and development n/a 21
Total identifiable intangible assets $ 8,458

~~L3Harris Merger-related charges were as follows:~~

Quarter Ended Two Quarters Ended
July 3, 2020 June 28, 2019 July 3, 2020 June 28, 2019
(In millions)
Pre-merger L3Harris integration costs $ — $ 17 $ — $ 30
Transaction costs — 19 — 22
Additional cost of sales related to the fair value step-up in inventory sold 16 — 31 —
Restructuring - workforce reduction 7 — 7 —
Integration costs recognized as incurred 37 — 68 —
$ 60 $ 36 $ 106 $ 52

The carrying amounts of the major classes of assets and liabilities for the ~~additional cost~~businesses classified as held for sale included in our Condensed Consolidated Balance Sheet (Unaudited) at July 2, 2021 were as follows:


(In millions)	Electron Devices business		AP disposal groups		VSE disposal group		Consolidated Total

Receivables, net	$	25	$	19	$	1	$	45
Contract assets	65		11		7		83
Inventories	17		28		1		46
Other current assets	3		2		0		5
Property, plant and equipment, net	28		15		1		44
Goodwill	15		11		0		26
Other intangible assets	60		31		5		96
Deferred taxes	0		1		0		1
Other non-current assets	96		37		0		133
Assets of disposal group held for sale	$	309	$	155	$	15	$	479

Accounts payable	$	14	$	9	$	1	24
Contract liabilities	52		2		1		55
Other accrued items	36		11		0		47
Other non-current liabilities	78		37		0		115
Deferred taxes	0		2		0		2
Liabilities of disposal group held for sale	$	180	$	61	$	2	$	243

The carrying amounts of ~~sales related~~the assets and liabilities of the VSE disposal group classified as held for sale in our Consolidated Balance Sheet were $35 million and $13 million, respectively, at January 1, 2021.

Completed Divestitures

CPS business. On July 2, 2021, we completed the divestiture of the CPS business to RENK AG for $398 million (net proceeds of $347 million after selling costs and estimated purchase price adjustments, including $6 million of accrued selling costs). The CPS business engineers, designs and manufactures engines, transmissions, suspensions and turret drive systems for tracked and wheeled combat vehicle systems. The operating results of the CPS business through the date of divestiture were reported as part of our Aviation Systems segment.

Because the then-pending divestiture of the CPS business represented the disposal of a portion of a reporting unit within our Aviation Systems segment, we assigned $174 million of goodwill to the CPS business on a relative fair value ~~step-up~~basis during the quarter ended April 2, 2021, when the held for sale criteria were met, and we recognized a non-cash goodwill impairment charge of $62 million (based on the excess of the carrying value of the business over estimated net cash proceeds, after estimated purchase price adjustments), which is included in ~~inventory sold.~~the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited).

~~Pro Forma Results~~

Military training business. On July 2, 2021, we completed the divestiture of the military training business to CAE USA Inc., a subsidiary of CAE Inc., for $1,050 million (net proceeds of $1,057 million after selling costs and estimated purchase price adjustments, including $17 million of accrued selling costs). The ~~following summary, prepared on a pro forma basis, presents our unaudited consolidated~~military training business provides flight simulation solutions and training services to the U.S. Department of Defense (“DoD”) and foreign military agencies. The operating results of ~~operations for~~ the ~~quarter and two quarters ended June 28, 2019~~military training business through the date of divestiture were reported as if the L3Harris Merger had been completed as of June 30, 2018, the first day of Harris’ fiscal 2019, after including any post-acquisition adjustments directly attributable to the acquisition, such as the sale of Harris’ Night Vision business, and after including the impact of pro forma adjustments such as amortization of intangible assets as well as the related income tax effects. This pro forma presentation does not include any impact of transaction synergies. The pro forma results are not necessarily indicativepart of our results of operations that actually would have been obtained had the combination of Harris and L3 been completed on the assumed date or for the period presented, or which may be realized in the future.

Quarter Ended Two Quarters Ended
June 28, 2019 June 28, 2019
(In millions)
Revenue from product sales and services — as reported $ 1,865 $ 3,593
Revenue from product sales and services — pro forma 4,448 8,834
Income from continuing operations — as reported 269 512
Income from continuing operations — pro forma 417 817
Aviation Systems segment.

108

~~Note C — Business~~2020 Divestitures ~~and Assets Sales~~

~~Airport security and automation~~EOTech business. On ~~May 4,~~July 31, 2020, we completed the divestiture of ~~our airport security and automation~~the EOTech business ~~to Leidos, Inc.~~ for ~~$1 billion~~$42 million (net cash proceeds of ~~$951~~$40 million after selling costs and estimated purchase price adjustments), subject to final customary purchase price ~~adjustments as set forth in the definitive sale agreement,~~adjustments. The EOTech business manufactures holographic sighting systems, magnified field optics and recognized a pre-tax loss of $26 million, which is included in the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited). The airport security and automation business provides solutions used by the aviation and transportation industries, regulatory and customs authorities, government andaccessories for military, law enforcement ~~agencies~~ and commercial ~~and other high-security facilities.~~markets around the world. The operating results of the ~~airport security and automation~~EOTech business through the date of divestiture ~~are~~were reported as part of our ~~Aviation~~Communication Systems segment. The airport security and automation business had a net loss before income taxes of $3 million for the quarter ended July 3, 2020 and net income before income taxes of $9 million for the two quarters ended July 3, 2020.

Because the then-pending divestiture of the airport security and automation business would represent the disposal of a portion of a reporting unit within our Aviation Systems segment, we assigned $531 million of goodwill to the airport security and automation business disposal group on a relative fair value basis. In connection with the preparation of our financial statements for the quarter ended April 3, 2020, we tested goodwill assigned to the disposal group and goodwill assigned to the retained businesses of the reporting unit for impairment and concluded that 0 goodwill impairment existed at the time the held for sale criteria were met in late January 2020. However, indicators of potential impairment of goodwill related to the retained businesses of the reporting unit were present at April 3, 2020 and July 3, 2020 due to the downturn in the commercial aviation market that resulted from the novel COVID-19 strain of coronavirus (“COVID-19”) pandemic and its impact on global air traffic and customer demand. See ~~Note K — Goodwill and Other Intangible Assets~~ ~~in these Notes for additional information regarding goodwill impairment.~~

Applied Kilovolts and Analytical Instrumentation business.On May 15, 2020, we completed the divestiture of ~~our~~the Applied Kilovolts and Analytical Instrumentation business for net cash proceeds of $12 million, after selling costs and ~~estimated~~ purchase price adjustments, subject to final customary purchase price adjustments as set forth in the definitive sale agreement. The operating results of the Applied Kilovolts and Analytical Instrumentation business through the date of divestiture are reported as part of our Space and Airborne Systems segment. Income before income taxes for the Applied Kilovolts and Analytical Instrumentation business was not material for the quarter or two quarters ended July 3, 2020.

adjustments. In connection with the preparation of our financial statements for the quarter ended April 3, 2020, we tested goodwill assigned to the Applied Kilovolts and Analytical Instrumentation business disposal group and goodwill assigned to the retained businesses of the reporting unit for impairment and concluded that goodwill related to the disposal group was impaired. As a result, we recorded a non-cash impairment charge of $5 million, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) ~~for~~. The operating results of the ~~two quarters ended July 3, 2020.~~

~~EOTech business.~~ ~~On March 20, 2020, we entered into a definitive agreement to sell our EOTech~~Applied Kilovolts and Analytical Instrumentation business ~~for $42 million, subject to customary purchase price adjustments and customary closing conditions as set forth in~~through the ~~definitive agreement. The EOTech business, which is~~date of divestiture were reported as part of our ~~Communication~~Space and Airborne Systems ~~segment, manufactures holographic sighting systems, magnified field optics~~segment.

Airport security and accessories for military, law enforcement and commercial markets around the world. The assets and liabilities of the EOTech business disposal group were classified as held for sale in our Condensed Consolidated Balance Sheet (Unaudited) at July 3, 2020.automation business.

~~In connection with the preparation of our financial statements for the quarter ended April 3,~~On May 4, 2020, we tested goodwill assigned to the EOTech business disposal group and goodwill assigned to the retained businesses of the reporting unit for impairment and concluded that 0 goodwill impairment existed at the time the held for sale criteria were met. The carrying amounts of assets and liabilities of the EOTech business disposal group that were classified as held for sale in our Condensed Consolidated Balance Sheet (Unaudited) at July 3, 2020 were $46 million and $7 million, respectively. We completed the ~~sale of the EOTech business on July 31, 2020.~~

~~Other AS Disposal Group.~~ During the quarter ended July 3, 2020, we determined the criteria to be classified as held for sale were met with respect to another business within our Aviation Systems segment – the other AS disposal group. The income before income taxes of the other AS disposal group were not material for the quarter and two quarters ended July 3, 2020.

~~Because the potential~~ divestiture of the ~~other AS disposal group would represent the disposal of a portion of a reporting unit within our Aviation Systems segment, we assigned $14 million of goodwill~~airport security and automation business to ~~the other AS disposal group on a relative fair value basis during the quarter ended July 3, 2020, when the held~~Leidos, Inc. for sale criteria were met. In connection with the preparation of our financial statements for the quarter ended July 3, 2020, we recognized a $28 million loss to reduce the assets of the other AS disposal group to fair value, which included a non-cash goodwill impairment charge of $14 million (based on the excess of the carrying value of the business over estimated net cash proceeds, after estimated purchase price adjustments) and a $14 million non-cash remeasurement loss to reduce the remaining assets to fair value. These charges are included in the “Impairment of goodwill and other assets” and “Engineering, selling and administrative expenses” line items in our Condensed

Consolidated Statement of Income (Unaudited) for the quarter ended July 3, 2020. The carrying amounts of assets and liabilities of the other AS disposal group that were classified as held for sale in our Condensed Consolidated Balance Sheet (Unaudited) at July 3, 2020 were $42 million and $14 million, respectively. We expect to complete the sale of the other AS disposal group by the end of 2020.

~~Harris Night Vision.~~ On September 13, 2019, we completed the sale of the Harris Night Vision business, a global supplier of high-performance, vision-enhancing products for U.S. and allied military and security forces and commercial customers, for $350 million$1 billion (net cash proceeds of ~~$343~~$987 million after selling costs and purchase price adjustments)~~, subject to final customary purchase price adjustments pursuant to a definitive agreement we entered into on April 4, 2019 as part~~. The airport security and automation business provides solutions used by the aviation and transportation industries, regulatory and customs authorities, government and law enforcement agencies and commercial and other high-security facilities. The operating results of the ~~regulatory process in connection with~~airport security and automation business through the ~~L3Harris Merger, and recognized a pre-tax gain~~date of $229 million. During the quarter ended July 3, 2020, we finalized the purchase price adjustments and recognized a non-cash adjustment of $12 million related to working capital, which decreased the gain initially recognized.

~~Through fiscal 2019, the Harris Night Vision business was~~divestiture were reported as part of our ~~former Communication~~Aviation Systems segment. As a result of the then-pending divestiture, the Harris Night Vision business was not included in any of our new business segments and, consequently, the operating results of the business are included in “Other non-reportable business segments” for the quarter and two quarters ended June 28, 2019 in this Report. Income before income taxes for the Harris Night Vision business was $8 million and $14 million for the quarter and two quarters ended June 28, 2019, respectively.

For purposes of allocating goodwill to the disposal groups, ~~above,~~ we determined the fair value of each disposal group based on the respective negotiated selling price (or estimated net cash proceeds, in the case of no negotiated selling price), and the fair value of the retained businesses of the respective reporting unit based on a combination of market-based valuation techniques, utilizing quoted market prices and 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 the Notes to Consolidated Financial Statements in our Fiscal ~~Transition Period~~2020 Form ~~10-KT~~10-K for additional information regarding the fair value hierarchy. For additional information regarding the impairment of goodwill related to our business and disposal group divestitures, see Note I — Goodwill and Other Intangible Assets in these Notes.

The following table presents the amount of income (loss) before income taxes attributable to businesses divested or held for sale in our Condensed Consolidated Statement of Income (Unaudited):


	Quarter Ended				Two Quarters Ended
(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020

Electron Devices business	$	11	$	6	$	30	$	15


CPS business	27		13		53		29
Military training business	18		16		35		40


Airport security and automation business	0		(3)		0		9

The “Business divestiture-related gains (losses)” line item in our Condensed Consolidated Statement of Income (Unaudited) is comprised of the following pre-tax gains (losses) associated with businesses divested or held for sale:


	Quarter Ended				Two Quarters Ended
(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020

VSE disposal group(1)	$	(18)	$	(14)	$	(26)	$	(14)
CPS business(2)	(12)		0		(19)		0
Military training business	212		0		212		0


Airport security and automation business	0		(23)		0		(26)
Other(3)	(2)		(12)		(2)		(12)
Total Business divestiture-related gain (losses)	$	180	$	(49)	$	165	$	(52)

_______________

(1)During the quarter ended July 3, 2020, upon classifying the VSE disposal group as held for sale, we recorded a non-cash impairment charge of $14 million, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the quarter ended July 3, 2020. We recognized an $18 million non-cash remeasurement loss related to the VSE disposal group during the year ended January 1, 2021.

(2)During the quarter ended April 2, 2021, upon classifying the CPS business as held for sale, we recorded a non-cash impairment charge of $62 million, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited). See Note I — Goodwill and Other Intangible Assets in these Notes for additional information.

(3)Reflects adjustments to the gains and losses on completed divestitures not shown above, including for fiscal 2020, $12 million for finalization of purchase price adjustments and recognition of a non-cash adjustment related to working capital, which decreased the gain initially recognized on the sale of the Harris Night Vision business divested on September 13, 2019.

Note DC — Stock Options and Other Share-Based Compensation

As of July ~~3, 2020,~~2, 2021, we had options or other share-based compensation outstanding under 2 Harris shareholder-approved stock incentive plans (“SIPs”), the Harris Corporation 2005 Equity Incentive Plan (As Amended and Restated Effective August 27, 2010) and the ~~Harris Corporation~~L3Harris Technologies, Inc. 2015 Equity Incentive Plan (As Amended and Restated Effective as of August 28, 2020) (the “2015 EIP”), as well as under employee stock incentive plans of L3 assumed by L3Harris (collectively, “L3Harris SIPs”). We believe that share-based awards more closely align the interests of participants with those of shareholders.

The compensation cost related to our share-based awards that was charged against income was $34 million and $67 million for the quarter and two quarters ended July 2, 2021, respectively, and $24 million and $40 million for the quarter and two quarters ended July 3, 2020, ~~respectively, and $15 million and $29 million for the quarter and two quarters ended June 28, 2019,~~ respectively. The aggregate number of shares of our common stock ~~that we~~ issued under ~~the terms of~~ L3Harris SIPs, net of shares withheld for tax purposes, was ~~47,990~~0.4 million and ~~498,173~~0.5 million for the quarter and two quarters ended July ~~3, 2020,~~2, 2021, respectively, and ~~372,195 and 519,371~~0.5 million for the two quarters ended July 3, 2020. Shares issued for the quarter ~~and two quarters~~ ended ~~June 28, 2019, respectively.~~July 3, 2020 were not material.

Awards granted to participants under L3Harris SIPs during the quarter ended July ~~3, 2020~~2, 2021 consisted of ~~39,941~~0.1 million restricted stock units and 0 stock options or performance stock units. Awards granted to participants under L3Harris SIPs during the two quarters ended July ~~3, 2020~~2, 2021 consisted of ~~246,307 restricted~~0.5 million stock options, 0.2 million performance stock units ~~583,200 stock options~~ and ~~203,606 performance~~0.2 million restricted stock units. The fair value as of the grant date of each stock option award was determined using the Black-Scholes-Merton option-pricing model and the following assumptions: expected dividend yield of ~~1.55~~1.99 percent; expected volatility of ~~22.74~~31.71 percent; risk-free interest rates averaging ~~0.89~~0.75 percent; and expected term of ~~5.04~~5.05 years. The fair value as of the grant date of each restricted stock unit award was based on the closing price of our common stock on the grant date. The fair value as of the grant date of each performance stock unit award was determined based on the fair value from a multifactor Monte Carlo valuation model that simulates our stock price and total shareholder return (“TSR”) relative to companies in our TSR peer group.

~~Note E — Restructuring and Other Exit Costs~~

We record charges for restructuring and other exit activities related to sales or terminations of product lines, closures or relocations of business activities, changes in management structure and fundamental reorganizations that affect the nature and focus of operations. Such charges include termination benefits, contract termination costs and costs to consolidate facilities or relocate employees. We record these charges at their fair value when incurred. In cases where employees are required to render service until they are terminated in order to receive the termination benefits and will be retained beyond the minimum retention period, we record the expense ratably over the future service period. These charges are included as a component of the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited).

~~L3Harris Merger-Related Restructuring Costs~~

During the quarter and two quarters ended July 3, 2020, we recorded $7 million of restructuring charges in connection with the L3Harris Merger. At July 3, 2020, we had liabilities of $30 million associated with these and previous L3Harris Merger-related restructuring actions, of which substantially all will be paid in the next twelve months.

~~COVID-19-Related Restructuring Costs~~

During the quarter and two quarters ended July 3, 2020, we recorded $11 million and $14 million, respectively, of restructuring charges, including workforce reductions and other exit costs within our Aviation Systems segment associated with the COVID-19-related downturn in our Commercial Aviation Solutions sector and its impact on global air traffic and customer operations. During the quarter and two quarters ended July 3, 2020, we also recorded $1 million of restructuring charges for workforce reductions in our Communication Systems segment associated with the COVID-19 impact to local and state government customers of our Public Safety sector. At July 3, 2020, we had liabilities of $12 million associated with COVID-19-related restructuring actions, of which substantially all will be paid in the next twelve months.

~~Other Restructuring and Exit Costs~~

Prior to the L3Harris Merger, we had liabilities for lease obligations associated with exited facilities with remaining terms of three years or less, of which $6 million remained outstanding at July 3, 2020.

Our liabilities for restructuring and other exit costs are included in the “Other accrued items” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited). Changes to our liabilities for restructuring and other exit costs during the two quarters ended July 3, 2020 were as follows:

Employee severance-related costs Facilities consolidation and other exit costs Total
(In millions)
Balance at January 3, 2020 $ 58 $ 7 $ 65
Additional provisions 22 — 22
Payments (38) (1) (39)
Total changes (16) (1) (17)
Balance at July 3, 2020 $ 42 $ 6 $ 48

Note FD — Accumulated Other Comprehensive Income (Loss) (“AOCI”)

The components of AOCI are summarized below:

Foreign currency translation Net unrealized losses on hedging derivatives Unrecognized postretirement obligations Total AOCI
(In millions)
Balance at January 3, 2020 $ (81) $ (55) $ (372) $ (508)
Other comprehensive loss, before income taxes (60) (80) — (140)
Income taxes — 20 — 20
Other comprehensive loss (60) (60) — (120)
Amounts reclassified to earnings from AOCI, before income taxes 7 7 (10) 4
Income taxes — (2) 2 —
Amounts reclassified to earnings from AOCI 7 5 (8) 4
Balance at July 3, 2020 $ (134) $ (110) $ (380) $ (624)
Balance at December 28, 2018 $ (107) $ (19) $ (85) $ (211)
Other comprehensive income (loss), before income taxes 1 (26) (636) (661)
Income taxes — 7 158 165
Other comprehensive income (loss) 1 (19) (478) (496)
Balance at June 28, 2019 $ (106) $ (38) $ (563) $ (707)


(In millions)	Foreign currency translation		Net unrealized losses on hedging derivatives		Unrecognized postretirement obligations		Total AOCI

Balance at January 1, 2021	$	(58)	$	(80)	$	(701)	$	(839)
Other comprehensive (loss) income, before income taxes	(3)		9		(3)		3
Income taxes	0		(2)		1		(1)
Other comprehensive (loss) income before reclassifications to earnings, net of income taxes	(3)		7		(2)		2
Losses (gains) reclassified to earnings(1)	2		(8)		8		2
Income taxes	0		2		(2)		0
Losses (gains) reclassified to earnings, net of income taxes	2		(6)		6		2
Other comprehensive (loss) income, net of income taxes	(1)		1		4		4
Balance at July 2, 2021	$	(59)	$	(79)	$	(697)	$	(835)

Balance at January 3, 2020	$	(81)	$	(55)	$	(372)	$	(508)
Other comprehensive loss, before income taxes	(60)		(80)		0		(140)
Income taxes	0		20		0		20
Other comprehensive loss before reclassifications to earnings, net of income taxes	(60)		(60)		0		(120)
Losses (gains) reclassified to earnings(1)	7		7		(10)		4
Income taxes	0		(2)		2		0
Losses (gains) reclassified to earnings, net of income taxes	7		5		(8)		4
Other comprehensive loss, net of income taxes	(53)		(55)		(8)		(116)
Balance at July 3, 2020	$	(134)	$	(110)	$	(380)	$	(624)

_______________

(1)Losses (gains) reclassified to earnings are included in the “Revenue from product sales and services,” “Business divestiture-related gains (losses),” “Interest expense, net” and “Non-operating income” line items in our Condensed Consolidated Statement of Income (Unaudited).

Note GE — Receivables, net

Receivables, net are summarized below:

July 3, 2020 January 3, 2020
(In millions)
Accounts receivable $ 1,173 $ 1,228
Less allowance for credit losses (25) (12)
$ 1,148 $ 1,216

In the two quarters ended July 3, 2020, we recorded charges of $10 million to our provision for doubtful accounts at our Aviation Systems segment to reflect an increase in expected credit losses associated with the COVID-19-related downturn in our Commercial Aviation Solutions sector and its impact on global air traffic and customer operations.


(In millions)	July 2, 2021		January 1, 2021

Accounts receivable	$	1,227	$	1,369
Less allowance for credit losses	(30)		(25)
Receivables, net	$	1,197	$	1,344

We have a2 receivables sale ~~agreement~~agreements (“~~RSA”~~RSAs”) with a third-party financial ~~institution~~institutions that ~~permits~~permit us to sell, on a non-recourse basis, up to $100 million each of outstanding receivables at any given time. From time to time, we have sold certain customer receivables under the ~~RSA,~~RSAs, which we continue to service and collect on behalf of the third-party financial ~~institution~~institutions and which we account for as sales of receivables with sale proceeds included in net cash from operating activities. Outstanding accounts receivable sold pursuant to the ~~RSA~~RSAs were not material at July ~~3, 2020~~2, 2021 or January ~~3, 2020.~~ 1, 2021.

Note HF — Contract Assets and Contract Liabilities

Contract assets include unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers for contracts utilizing the percentage of completion (“POC”) cost-to-cost revenue recognition method. We bill customers as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, upon achievement of contractual milestones or upon deliveries and, in certain arrangements, the customer may withhold payment of a small portion of the contract price until contract completion. Contract liabilities include advance payments and billings in excess of

revenue recognized, including deferred revenue associated with extended product warranties. Contract assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period.

Contract assets and liabilities in the two quarters ended July ~~3, 2020~~2, 2021 were impacted primarily by reclassifications to assets and liabilities of disposal groups held for sale, ~~a decrease~~accelerated progress payments due to the U.S. Government’s temporary increase in the ~~receipt of advance payments,~~progress payment rate from 80 percent to 90 percent and the timing of contractual billing ~~milestones and the impairment loss described below.~~milestones. See Note CB — Business Divestitures ~~and Assets Sales~~ in these Notes for additional information regarding assets and liabilities classified as held for sale.

Contract assets and contract liabilities are summarized below:


		July 3, 2020		January 3, 2020

(In millions)						(In millions)	July 2, 2021		January 1, 2021
		(In millions)
Contract assets	Contract assets	$	2,281	$	2,459	Contract assets	$	2,648	$	2,437
Contract liabilities, current	Contract liabilities, current	(1,106)		(1,214)		Contract liabilities, current	(1,205)		(1,198)
Contract liabilities, non-current⁽¹⁾	Contract liabilities, non-current⁽¹⁾	(76)		(87)		Contract liabilities, non-current(1)	(98)		(73)
Net contract assets	Net contract assets	$	1,099	$	1,158	Net contract assets	$	1,345	$	1,166

_______________

(1)The non-current portion of contract liabilities is included as a component of the “Other long-term liabilities” line item in our Condensed Consolidated Balance Sheet (Unaudited).

The components of contract assets are summarized below:


		July 3, 2020		January 3, 2020

(In millions)						(In millions)	July 2, 2021		January 1, 2021
		(In millions)
Unbilled contract receivables, gross	Unbilled contract receivables, gross	$	3,890	$	3,690	Unbilled contract receivables, gross	$	4,377	$	4,268
Progress payments and advances		(1,609)		(1,231)
		$	2,281	$	2,459
Unliquidated progress payments and advances						Unliquidated progress payments and advances	(1,729)		(1,831)
Contract assets						Contract assets	$	2,648	$	2,437

Impairment losses related to our contract assets were not material for the quarter ~~ended July 3, 2020 or the quarter~~ or two quarters ended ~~June 28, 2019. In~~July 2, 2021 or July 3, 2020. Contract liabilities recognized as revenue that were outstanding at the end of the prior fiscal year were $219 million and $727 million for the quarter and two quarters ended July ~~3, 2020, we recorded impairment losses of $13~~2, 2021, respectively, and $301 million ~~at our Aviation Systems segment to reflect an increase in expected credit losses associated with the COVID-19-related downturn in our Commercial Aviation Solutions sector~~ and ~~its impact on global air traffic and customer operations. For~~$785 million for the quarter and two quarters ended July 3, 2020, we recognized as revenue $265 million and $749 million of contract liabilities, respectively, that were outstanding at January 3, 2020. For the quarter and two quarters ended June 28, 2019, we recognized as revenue $28 million and $80 million of contract liabilities, respectively, that were outstanding at June 29, 2018.respectively.

Note IG — Inventories

Inventories are summarized below:


		July 3, 2020		January 3, 2020

(In millions)						(In millions)	July 2, 2021		January 1, 2021
		(In millions)
Finished products	Finished products	$	177	$	216	Finished products	$	145	$	136
Work in process	Work in process	199		386		Work in process	292		367
Raw materials and supplies	Raw materials and supplies	483		617		Raw materials and supplies	435		470
		$	859	$	1,219
Total inventories						Total inventories	$	872	$	973

Note JH — Property, Plant and Equipment, net

Property, plant and equipment, net are summarized below:


		July 3, 2020		January 3, 2020

(In millions)						(In millions)	July 2, 2021		January 1, 2021
		(In millions)
Land	Land	$	90	$	90	Land	$	81	$	90
Software capitalized for internal use	Software capitalized for internal use	357		287		Software capitalized for internal use	500		417
Buildings	Buildings	1,041		1,073		Buildings	1,186		1,097
Machinery and equipment	Machinery and equipment	2,166		2,194		Machinery and equipment	2,137		2,265
		3,654		3,644			3,904		3,869
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(1,639)		(1,527)		Less accumulated depreciation and amortization	(1,878)		(1,767)
		$	2,015	$	2,117
Total property, plant and equipment, net						Total property, plant and equipment, net	$	2,026	$	2,102

Depreciation and amortization expense related to property, plant and equipment was $80 million and $164 million for the quarter and two quarters ended July 2, 2021, respectively, and $78 million and $154 million for the quarter and two quarters ended July 3, 2020, ~~respectively,~~respectively.

As discussed in more detail in Note I — Goodwill and ~~$36~~Other Intangible Assets in these Notes, in conjunction with, and in advance of, the tests of goodwill related to our Commercial Training Solutions reporting unit (“CTS reporting unit”), we recorded an $82 million non-cash impairment charge for long-lived assets, consisting of $19 million, $56 million and ~~$70~~$7 million of impairment charges for right of use assets, property, plant and equipment and software, respectively, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the quarter and two quarters ended ~~June 28, 2019, respectively.~~July 2, 2021.

Note KI — Goodwill and Other Intangible Assets

Goodwill

~~As discussed in~~ ~~Note V — Business Segment Information~~ in these Notes, after the completion of the L3Harris Merger, we adjusted our segment reporting to reflect our new organizational structure effective for the quarter ended September 27, 2019. Immediately before and after our goodwill assignments, we completed an assessment of any potential goodwill impairment under our former and new segment reporting structure and determined that 0 impairment existed.

The assignment of goodwill by business segment, and changes in the carrying amount of goodwill by business segment, ~~for the two quarters ended July 3, 2020,~~ were as follows:


(In millions)												(In millions)	Integrated Mission Systems		Space and Airborne Systems		Communication Systems		Aviation Systems		Total
		Integrated Mission Systems		Space and Airborne Systems		Communication Systems		Aviation Systems		Total
Balance at January 1, 2021												Balance at January 1, 2021	$	6,499	$	5,232	$	4,153	$	2,992	$	18,876
Goodwill decrease from divestitures(1)												Goodwill decrease from divestitures(1)	0		0		0		(538)		(538)
Decrease from reclassification to assets of disposal group held for sale(2)												Decrease from reclassification to assets of disposal group held for sale(2)	0		0		0		(26)		(26)
Impairment of goodwill												Impairment of goodwill	0		0		0		(62)		(62)
Currency translation adjustments												Currency translation adjustments	1		(13)		1		(5)		(16)

Balance at July 2, 2021												Balance at July 2, 2021	$	6,500	$	5,219	$	4,154	$	2,361	$	18,234
		(In millions)
Balance at January 3, 2020	Balance at January 3, 2020	$	5,768	$	5,131	$	4,243	$	4,859	$	20,001	Balance at January 3, 2020	$	5,768	$	5,131	$	4,243	$	4,859	$	20,001
Goodwill decrease from divestitures⁽¹⁾	Goodwill decrease from divestitures⁽¹⁾	—		(2)		—		(531)		(533)		Goodwill decrease from divestitures(1)	0		(2)		0		(531)		(533)
Decrease from reclassification to assets of disposal group held for sale⁽²⁾	Decrease from reclassification to assets of disposal group held for sale⁽²⁾	—		—		(9)		—		(9)		Decrease from reclassification to assets of disposal group held for sale(2)	0		0		(9)		0		(9)
Impairment of goodwill	Impairment of goodwill	—		(5)		—		(364)		(369)		Impairment of goodwill	0		(5)		0		(364)		(369)
Currency translation adjustments	Currency translation adjustments	3		(7)		(2)		(5)		(11)		Currency translation adjustments	3		(7)		(2)		(5)		(11)
Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed)⁽³⁾		740		124		(81)		(847)		(64)
Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed)												Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed)	740		124		(81)		(847)		(64)
Balance at July 3, 2020	Balance at July 3, 2020	$	6,511	$	5,241	$	4,151	$	3,112	$	19,015	Balance at July 3, 2020	$	6,511	$	5,241	$	4,151	$	3,112	$	19,015

_______________

(1)During the ~~quarter~~two quarters ended July 2, 2021, we completed the divestitures of our CPS business and military training business and derecognized $538 million of goodwill as part of determining the gain or loss on the sales of these businesses. During the two quarters ended July 3, 2020, we completed the divestitures of our airport security and automation business and our Applied Kilovolts and Analytical Instrumentation business and derecognized $533 million of goodwill as ~~the~~ part of determining the gain or loss on the ~~sale~~sales of these businesses. ~~See~~ ~~Note C — Business Divestitures and Assets Sales~~ ~~in these Notes for additional information.~~

(2)~~In connection with~~During the ~~then-pending divestiture of our EOTech business,~~two quarters ended July 2, 2021 and July 3, 2020, we assigned $26 million and $9 million, respectively, of goodwill associated with pending divestitures to “Assets of disposal groups held for sale” in our Condensed Consolidated Balance Sheet (Unaudited) ~~as of July 3, 2020.~~. SeeNote CB — Business Divestitures ~~and Assets Sales~~ in these Notes for additional information.

~~(3)~~CPS Business Impairment. During the quarter ended April 2, 2021, we determined the criteria to be classified as held for sale were met with respect to the CPS business within our Aviation Systems segment and assigned $174 million of goodwill to the disposal group on a relative fair value basis. In connection with the preparation of our financial statements for the quarter ended April 2, 2021, we concluded that goodwill related to the CPS business was impaired and we recorded a non-cash impairment charge of $62 million, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited). See Note B — Business ~~Combination~~Divestitures in these Notes for additional ~~information regarding adjustments to previously estimated fair values of assets acquired and liabilities assumed.~~information.

Commercial Aviation Solutions ~~Impairment~~

~~Quarter Ended April 3, 2020:~~ Impairment.Indications of potential impairment of goodwill related to our Commercial Aviation Solutions ~~reporting unit~~sector (which is part of our Aviation Systems segment) were present at April 3, 2020 due to ~~COVID-19~~COVID and its impact on global air traffic and customer operations, ~~which resulted~~resulting in a decrease in ~~the~~ fiscal 2020 outlook for the ~~reporting unit.~~sector, which we

considered to be a triggering event requiring an interim impairment test. Consequently, in connection with the preparation of our financial statements for the quarter ended April 3, 2020, we performed a quantitative impairment ~~test on an interim basis.~~test. To test for potential impairment of goodwill related to ~~our~~

Commercial Aviation Solutions ~~reporting unit,~~sector, we prepared an estimate of the fair value of the ~~reporting unit~~sector based on a combination of market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions, and projected discounted cash flows. Our methodology for determining the fair value of the sector placed the greatest weight on the expected fair value technique, and was dependent on our best estimates of future sales, operating costs and balance sheet metrics under a range of scenarios for future economic conditions. We assigned a probability to each scenario to calculate a set of probability-weighted projected cash flows, and an appropriate discount rate reflecting the risk in the projected cash flows was used to discount the expected cash flows to present value.

As adverse global economic and market conditions attributable to COVID, including projected declines and subsequent recovery in commercial air traffic and original equipment manufacturer production volumes, continued to develop during fiscal 2020, we continued to monitor for facts and circumstances that could negatively impact key valuation assumptions in determining the fair value of Commercial Aviation Solutions, including valuations, expectations regarding the timing of a return to pre-COVID commercial flight activity and the associated level of uncertainty, long-term revenue and profitability projections, discount rates and general industry, market and macroeconomic conditions. As a result, we determined indications of further impairment of assets related to Commercial Aviation Solutions existed as of July 3, 2020.

As a result of ~~this~~these impairment ~~test,~~tests, we concluded that goodwill related to our Commercial Aviation Solutions ~~reporting unit~~sector was impaired as of April 3, 2020 and July 3, 2020, and we recorded a non-cash impairment ~~charge~~charges of $296 million and $54 million, respectively (including $28 million and $8 million, respectively, attributable to noncontrolling ~~interests)~~interest), in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the quarter and two quarters ended ~~April~~July 3, 2020. The goodwill impairment ~~charge is~~charges were primarily not deductible for tax purposes.

~~Quarter Ended July 3, 2020:~~ Indications of potential impairment of goodwill related to our Commercial Aviation Solutions reporting unit (which is part of our Aviation Systems segment) were present at July 3, 2020. Although our cash flow projections for the Commercial Aviation Solutions reporting unit did not change significantly compared with the projected cash flows used in our analysis as of April 3, 2020, we determined it was more-likely-than-not that the fair value of our Commercial Aviation Solutions reporting unit was less than its carrying amount as of July 3, 2020 due the amount by which the fair value of the Commercial Aviation Solutions reporting unit exceeded its carrying amount as of April 3, 2020 and heightened uncertainty regarding the timing of expected recovery for the overall commercial aviation market. Consequently, in connection with the preparation of our financial statements for the quarter ended July 3, 2020, we performed a quantitative test on an interim basis. To test for potential impairment of goodwill related to our Commercial Aviation Solutions reporting unit, we prepared an estimate of the fair value of the reporting unit based on a combination of market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions, and projected discounted cash flows. As a result of this impairment test, we concluded that goodwill related to our Commercial Aviation Solutions reporting unit was impaired as of July 3, 2020, primarily due to a significant increase in the weighted-average cost of capital (“WACC”) rate used to discount the projected cash flows of our Commercial Aviation Solutions reporting unit to their present values, and we recorded a non-cash impairment charge of $54 million (including $8 million attributable to noncontrolling interests) in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the quarter ended July 3, 2020. The goodwill impairment charge is primarily not deductible for tax purposes.

~~Other AS~~VSE Disposal Group ~~Impairment~~

Impairment.During the quarter ended July 3, 2020, we determined the criteria to be classified as held for sale were met with respect to the ~~other AS~~VSE disposal group within our Aviation Systems ~~segment. We~~segment and assigned $14 million of goodwill to the ~~other AS~~VSE disposal group on a relative fair value ~~basis during the quarter ended July 3, 2020, when the held for sale criteria were met.~~basis. In connection with the preparation of our financial statements for the quarter ended July 3, 2020, we concluded that goodwill related to the ~~other AS~~VSE disposal group was impaired and recorded a non-cash impairment charge of $14 million, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the quarter ended July 3, 2020.

Identifiable Intangible Assets

The most significant identifiable intangible asset that is separately recognized for our business combinations is customer relationships. Our customer relationships are established through written customer contracts (revenue arrangements). The fair value for a customer ~~relationship~~relationships is determined, as of the date of acquisition, ~~of such relationship,~~ based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows arising from the follow-on sales expected from the customer ~~relationship~~relationships over ~~its~~the estimated ~~life,~~lives, including the probability of expected future contract renewals and sales, less a contributory asset charge, all of which is discounted to present value. We assess the recoverability of the carrying value of our finite-lived identifiable intangible assets whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. We assess the recoverability of the carrying value of indefinite-lived identifiable intangible assets annually, or under certain circumstances more frequently, such as when events and circumstances indicate there may be an impairment.

~~In conjunction with,~~Commercial Training Solutions Impairment. During the quarter ended July 2, 2021, we adjusted our Aviation Systems segment reporting to better align our businesses and ~~in advance of,~~separated the ~~interim tests of goodwill related to~~Commercial Training Solutions (“CTS”) business from our Commercial Aviation Solutions reporting unit, creating a new reporting unit within the Commercial Aviation Solutions sector of our Aviation Systems segment. Immediately before and after our goodwill assignments, we ~~also performed recoverability tests~~completed an assessment of any potential goodwill impairment under our former and new reporting unit structure and determined that 0 impairment existed.

To test for potential impairment of the long-lived assets, ~~of our Commercial Aviation Solutions reporting unit,~~ including identifiable intangible assets and property, plant and ~~equipment. To test these long-lived assets for recoverability,~~equipment, related to CTS, we compared the estimated future cash flows (on an undiscounted basis) to be generated from the use and hypothetical eventual disposition of the asset group to its carrying value and, ~~concluded that~~as a result, we determined the carrying value of the CTS asset group was not recoverable. Next, we prepared an estimate of the fair value of CTS based on a combination of market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions and projected discounted cash flows. We compared the fair value of CTS to our carrying value and recorded a $145 million non-cash charge for the impairment of CTS long-lived assets, including $63 million for impairment of identifiable intangible assets, which is included in the “Impairment of goodwill and other assets” line item in our ~~Commercial Aviation Solutions reporting unit were 0t impaired as~~Condensed Consolidated Statement of ~~April 3, 2020 or~~Income (Unaudited) for the quarter and two quarters ended July ~~3, 2020.~~2, 2021. See Note H — Property, Plant and Equipment, net in these Notes for additional information.

1714

~~Intangible~~Identifiable intangible assets are summarized below:


		July 3, 2020										January 3, 2020											July 2, 2021				January 1, 2021
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount⁽¹⁾		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
(In millions)														(In millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount(1)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
		(In millions)
Customer relationships	Customer relationships	$	6,911	$	950	$	5,961	$	6,518	$	653	$	5,865	Customer relationships	$	6,207	$	1,450	$	4,757	$	6,863	$	1,257	$	5,606
Developed technologies	Developed technologies	667		222		445		768		183		585		Developed technologies	603		286		317		653		261		392
Contract backlog	Contract backlog	19		13		6		—		—		—		Contract backlog	13		13		0		19		17		2
Trade names — divisions	Trade names — divisions	138		40		98		165		35		130		Trade names — divisions	108		48		60		129		45		84
Other	Other	4		2		2		10		4		6		Other	3		3		0		3		3		0
Total intangible assets subject to amortization		7,739		1,227		6,512		7,461		875		6,586
Total identifiable intangible assets subject to amortization														Total identifiable intangible assets subject to amortization	6,934		1,800		5,134		7,667		1,583		6,084
In-process research and development	In-process research and development	21		—		21		69		—		69		In-process research and development	21		—		21		21		—		21
L3 trade name		1,803		—		1,803		1,803		—		1,803
Total intangibles assets		$	9,563	$	1,227	$	8,336	$	9,333	$	875	$	8,458
Trade names — corporate														Trade names — corporate	1,803		—		1,803		1,803		—		1,803
Total identifiable intangible assets														Total identifiable intangible assets	$	8,758	$	1,800	$	6,958	$	9,491	$	1,583	$	7,908

_______________

(1)During the ~~quarter~~two quarters ended July ~~3, 2020,~~2, 2021, we ~~completed the divestitures of the airport security and automation business and Applied Kilovolts and Analytical Instrumentation business and~~ derecognized ~~$286~~$486 million of ~~intangibles as part of the gain or loss on the sale of these businesses. Additionally, in connection~~intangible assets associated with ~~2 pending~~completed divestitures weand reclassified ~~$15~~$91 million of ~~intangibles~~intangible assets associated with pending divestitures to “Assets of disposal groups held for sale” in our Condensed Consolidated Balance Sheet (Unaudited) ~~as of July 3, 2020.~~. See Note CB — Business Divestitures ~~and Assets Sales~~ in these Notes for additional information regarding divestitures.

~~For~~Amortization expense for identifiable intangible assets, which primarily relates to the L3Harris Merger, was $156 million and $320 million for the quarter and two quarters ended July 2, 2021, respectively, and was $209 million and $367 million for the quarter and two quarters ended July 3, 2020, amortization expense related to intangible assets was $209 million and $367 million, respectively, and primarily related to the L3Harris Merger. For the quarter and two quarters ended June 28, 2019, amortization expense related to intangible assets was $27 million and $56 million, respectively, and primarily related to our acquisition of Exelis Inc. in the fourth quarter of fiscal 2015.respectively.

Future estimated amortization expense for ~~amortizable~~identifiable intangible assets subject to amortization is as follows:


	(In millions)

Year 1	$	~~441~~610
Year 2	~~684~~606
Year 3	~~679~~587
Year 4	~~657~~543
Year 5	~~611~~494
Thereafter	~~3,440~~2,294
Total	$	~~6,512~~5,134

Note LJ — Accrued Warranties

Our liability for standard product warranties is included as a component of the “Other accrued items” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited). Changes in our liability for standard product warranties during the two quarters ended July ~~3, 2020~~2, 2021 were as follows:


	(In millions)

Balance at January ~~3, 2020~~1, 2021	$	~~112~~133
~~Adjustments to previously estimated fair value of warranty liabilities assumed~~	19
Decrease from ~~reclassification to liabilities of disposal group held for sale~~divestitures	~~(8)~~(5)
Accruals for product warranties issued during the period	2722
Settlements made during the period	~~(31)~~(27)
~~Other, including foreign currency translation adjustments~~	1
Balance at July ~~3, 2020~~2, 2021	$	~~120~~123

1815

~~Note M — Debt~~

~~Long-term debt is summarized below:~~

July 3, 2020 January 3, 2020
(In millions)
Variable-rate debt:
Floating rate notes, due April 30, 2020 $ — $ 250
Floating rate notes, due March 10, 2023 250 —
Total variable-rate debt 250 250
Fixed-rate debt:
4.95% notes, due February 15, 2021 650 650
3.85% notes, due June 15, 2023 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
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
Other 55 49
Total fixed-rate debt 6,581 6,575
Total debt 6,831 6,825
Plus: unamortized bond premium 136 154
Less: unamortized discounts and issuance costs (28) (28)
Total debt, net 6,939 6,951
Less: current portion of long-term debt, net (666) (257)
Total long-term debt, net $ 6,273 $ 6,694

~~For additional information on our long-term debt, see~~ ~~Note 14: “Debt”~~ ~~in the Notes to Consolidated Financial Statements in our Fiscal Transition Period Form 10-KT.~~

~~Long-Term Debt Repaid in the Quarter Ended July 3, 2020~~

~~During the quarter ended July 3, 2020, we repaid at maturity the entire outstanding $250 million aggregate principal amount of our Floating Rate Notes due April 30, 2020.~~

~~Long-Term Debt Issued in the Quarter Ended April 3, 2020~~

During the quarter ended April 3, 2020, we completed the issuance and sale of $250 million in aggregate principal amount of Floating Rate Notes due March 10, 2023 (the “Floating Rate Notes 2023”). The Floating Rate Notes 2023 bear interest at a floating rate, reset quarterly, equal to three-month LIBOR rate plus 0.75% per year. Interest on the Floating Rate Notes 2023 is payable quarterly in arrears on March 10, June 10, September 10 and December 10 of each year, commencing on June 10, 2020. The Floating Rate Notes 2023 are unsecured and unsubordinated and rank equally in right of payment with all other unsecured and unsubordinated indebtedness. The Floating Rate Notes 2023 are not redeemable at our option prior to maturity. Debt issuance costs related to the issuance of the Floating Rate Notes 2023 were not material. We used the net proceeds from the sale of the Floating Rate Notes 2023 to repay at maturity the aggregate principal amount of our Floating Rate Notes due April 30, 2020 as described above under “Long-Term Debt Repaid in the Quarter Ended July 3, 2020”.

~~Debt Exchange~~

In connection with the L3Harris Merger, on July 2, 2019, we settled our previously announced exchange offers in which eligible holders of L3 senior notes (“L3 Notes”) could exchange such outstanding notes for (1) up to $3.35 billion aggregate

principal amount of new notes issued by L3Harris (“New L3Harris Notes) and (2) one dollar in cash for each $1,000 of principal amount. Each series of the New L3Harris Notes issued has an interest rate and maturity date that is identical to the L3 Notes.

Aggregate Principal Amount of L3 Notes (prior to debt exchange) Aggregate Principal Amount of New L3Harris Notes Issued Aggregate Principal Amount of Remaining L3 Notes
(In millions)
4.95% notes due February 15, 2021 (“4.95% 2021 Notes”) $ 650 $ 501 $ 149
3.85% notes due June 15, 2023 (“3.85% 2023 Notes”) 800 741 59
3.95% notes due May 28, 2024 (“3.95% 2024 Notes”) 350 326 24
3.85% notes due December 15, 2026 (“3.85% 2026 Notes”) 550 535 15
4.40% notes due June 15, 2028 (“4.40% 2028 Notes”)

1,000 918 82
Total $ 3,350 $ 3,021 $ 329

On March 31, 2020, we commenced offers to eligible holders (“Exchange Offers”) to exchange any and all outstanding notes issued by L3Harris as set forth in the table above (the “Original Notes”), which were previously issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), for an equal principal amount of new notes registered under the Securities Act (the “Exchange Notes”).

The Exchange Notes were offered to satisfy L3Harris’ obligations under the registration rights agreement entered into as part of the issuance of the Original Notes, which occurred in exchange for the L3 Notes as described above.

The terms of the Exchange Notes issued in the Exchange Offers are substantially identical to the terms of the corresponding series of the Original Notes, except that the Exchange Notes are registered under the Securities Act and the transfer restrictions, registration rights and related additional interest provisions applicable to the Original Notes do not apply to the Exchange Notes. Each series of Exchange Notes is part of the same corresponding series of the Original Notes and were issued under the same base indenture.

The Exchange Offers expired at 5:00 p.m., New York City time, on May 1, 2020. On May 5, 2020, we settled the Exchange Offers and issued Exchange Notes for validly tendered Original Notes for over 99.9% of the 4.95% 2021 Notes, 3.85% 2023 Notes, 3.95% 2024 Notes, and 3.85% 2026 Notes and approximately 98.9% of the 4.40% 2028 Notes.

Note NK — 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 July 3, 2020						Two Quarters Ended July 3, 2020							Quarter Ended July 2, 2021				Two Quarters Ended July 2, 2021
		Pension		Other Benefits		Pension		Other Benefits

(In millions)										(In millions)	Pension		Other Benefits		Pension		Other Benefits
		(In millions)
Net periodic benefit income	Net periodic benefit income									Net periodic benefit income
Service cost	Service cost	$	16	$	1	$	32	$	1	Service cost	$	18	$	0	$	36	$	1
Interest cost	Interest cost	68		2		137		4		Interest cost	46		2		92		3
Expected return on plan assets	Expected return on plan assets	(157)		(5)		(315)		(10)		Expected return on plan assets	(157)		(5)		(312)		(10)
Amortization of net actuarial loss (gain)		3		(1)		5		(1)
Amortization of net actuarial loss										Amortization of net actuarial loss	10		0		19		0
Amortization of prior service credit	Amortization of prior service credit	(7)		—		(14)		—		Amortization of prior service credit	(7)		0		(14)		0
Contractual termination benefits⁽¹⁾		—		—		1		—

Net gain from curtailments and settlements										Net gain from curtailments and settlements	(3)		0		(3)		0
Net periodic benefit income	Net periodic benefit income	$	(77)	$	(3)	$	(154)	$	(6)	Net periodic benefit income	$	(93)	$	(3)	$	(182)	$	(6)


	Quarter Ended July 3, 2020				Two Quarters Ended July 3, 2020
(In millions)	Pension		Other Benefits		Pension		Other Benefits

Net periodic benefit income
Service cost	$	16	$	1	$	32	$	1
Interest cost	68		2		137		4
Expected return on plan assets	(157)		(5)		(315)		(10)
Amortization of net actuarial loss (gain)	3		(1)		5		(1)
Amortization of prior service credit	(7)		0		(14)		0
Contractual termination cost(1)	0		0		1		0

Net periodic benefit income	$	(77)	$	(3)	$	(154)	$	(6)

_______________

(1)~~Contractual~~For the two quarters ended July 3, 2020, includes contractual termination benefits related to facility rationalization as part of restructuring activities in connection with the L3Harris Merger integration. See Note ~~E — Restructuring~~4: “Restructuring and Other Exit ~~Costs~~Costs” in ~~these~~the Notes to Consolidated Financial Statements in our Fiscal 2020 Form 10-K for ~~additional information regarding restructuring activities.~~further information.

Quarter Ended June 28, 2019 Two Quarters Ended June 28, 2019
Pension Other Benefits Pension Other Benefits
(In millions)
Net periodic benefit income
Service cost $ 9 $ (1) $ 18 $ —
Interest cost 52 2 104 4
Expected return on plan assets (96) (4) (191) (8)
Amortization of net actuarial gain — (1) — (3)
Effect of curtailments or settlements 1 — 1 —
Net periodic benefit income $ (34) $ (4) $ (68) $ (7)
During the quarter ended July 2, 2021, we undertook an initiative to de-risk pension obligations by purchasing a group annuity policy and transferring approximately $169 million of pension plan assets to an insurance company thereby reducing our defined benefit obligations by approximately $169 million. As a result of the annuity purchase, we recognized a pre-tax Financial Accounting Standard settlement gain of $3 million in the quarter ended July 2, 2021, which is included as a component of the “Non-operating income” line item in our Condensed Consolidated Statement of Income (Unaudited).

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 Income (Unaudited). The non-service cost components of net periodic benefit income are included in the “Non-operating income” line item in our Condensed Consolidated Statement of Income (Unaudited), except for contractual termination benefits which are included in ~~restructuring in~~ the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited).

~~We made a $302 million voluntary contribution to our U.S. qualified defined benefit pension plans during the quarter ended September 27, 2019.~~ As a result of ~~this voluntary contribution, as well as $700 million of~~prior voluntary contributions, ~~made in fiscal 2018 and 2017,~~ we ~~made 0 contributions to our U.S. qualified defined benefit pension plans during the quarter and two quarters ended July 3, 2020 and the quarter and two quarters ended April 3, 2020. We~~ are ~~also~~ 0t required to make any contributions to ~~our U.S. qualified defined benefit pension~~these plans during the remainder of fiscal ~~2020.~~2021 and for several years thereafter.

2116

Note OL — Income From Continuing Operations Per Share

The computations of income from continuing operations per common share attributable to L3Harris common shareholders are as follows:


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
(In millions, except per share amounts)										(In millions, except per share amounts)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020

Income from continuing operations (A)										Income from continuing operations (A)	$	413	$	283	$	882	$	501
		July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019

		(In millions, except per share amounts)
Income from continuing operations		$	283	$	269	$	501	$	512
Adjustments for participating securities outstanding		—		(1)		—		(2)
Income from continuing operations used in per basic and diluted common share calculations (A)		$	283	$	268	$	501	$	510

Basic weighted average common shares outstanding (B)	Basic weighted average common shares outstanding (B)	215.9		118.3		216.7		118.1		Basic weighted average common shares outstanding (B)	203.6		215.9		205.2		216.7
Impact of dilutive share-based awards	Impact of dilutive share-based awards	1.9		2.8		2.0		2.6		Impact of dilutive share-based awards	2.0		1.9		1.9		2.0
Diluted weighted average common shares outstanding (C)	Diluted weighted average common shares outstanding (C)	217.8		121.1		218.7		120.7		Diluted weighted average common shares outstanding (C)	205.6		217.8		207.1		218.7
Income from continuing operations per basic common share (A)/(B)	Income from continuing operations per basic common share (A)/(B)	$	1.31	$	2.26	$	2.31	$	4.32	Income from continuing operations per basic common share (A)/(B)	$	2.03	$	1.31	$	4.29	$	2.31
Income from continuing operations per diluted common share (A)/(C)	Income from continuing operations per diluted common share (A)/(C)	$	1.30	$	2.21	$	2.29	$	4.23	Income from continuing operations per diluted common share (A)/(C)	$	2.01	$	1.30	$	4.26	$	2.29

Potential dilutive common shares primarily consist of employee stock options, restricted stock units and performance stock units. Income from continuing operations per diluted common share excludes the anti-dilutive impact of ~~1,526,155~~1.7 million and ~~1,244,779~~1.6 million weighted average share-based awards outstanding for the quarter and two quarters ended July 2, 2021, respectively, and 1.5 million and 1.2 million weighted average share-based awards outstanding for the quarter and two quarters ended July 3, 2020, ~~respectively, and 262,174 and 264,079 weighted average share-based awards outstanding for the quarter and two quarters ended June 28, 2019,~~ respectively.

Note PM — Non-Operating Income

The components of non-operating income were as follows:


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019
(In millions)										(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
		(In millions)
Pension adjustment⁽¹⁾	Pension adjustment⁽¹⁾	$	98	$	46	$	195	$	93	Pension adjustment(1)	$	114	$	98	$	225	$	195

Impairment of equity method investment										Impairment of equity method investment	(35)		0		(35)		0
Other	Other	7		2		5		1		Other	7		7		13		5
		$	105	$	48	$	200	$	94
Total non-operating income										Total non-operating income	$	86	$	105	$	203	$	200

~~_______________~~______________

(1)Pension adjustment recorded in the “Non-operating income” line item in our Condensed Consolidated Statement of Income (Unaudited) represents the non-service component of net periodic pension and postretirement benefit costs, which includes interest cost, expected return on plan assets, amortization of net actuarial gain and effect of curtailments or settlements.

Note QN — Income Taxes

Our effective tax rate (income taxes as a percentage of income from continuing operations before income taxes) was 29.0 percent for the quarter ended July 2, 2021 compared with 17.3 percent infor the quarter ended July 3, ~~2020 compared with 10.9 percent in~~2020. During the quarter ended ~~June 28, 2019. In~~July 2, 2021, our effective tax rate was unfavorably impacted by non-deductible goodwill from completed business divestitures and the unfavorable impact of valuation allowances in certain foreign jurisdictions, partially offset by the favorable impact of research and development (“R&D”) credits, favorable resolution of specific audit uncertainties and the favorable impact of excess tax benefits related to equity-based compensation. During the quarter ended July 3, 2020, our effective tax rate benefited from the favorable impact of ~~research and development (“~~R~~&D”)~~&D credits and the favorable impact of a net reduction ~~of $12 million~~ in our uncertain tax position balance, partially offset by the unfavorable impact of non-deductible goodwill impairment charges. ~~In the quarter ended June 28, 2019, our effective tax rate benefited from the favorable impact of excess tax benefits related to equity-based compensation.~~

Our effective tax rate was 20.6 percent for the two quarters ended July 2, 2021 compared with 15.1 percent infor the two quarters ended July 3, ~~2020 compared with 12.5 percent in~~2020. Our effective tax rate for the two quarters ended ~~June 28, 2019.~~July 2, 2021 was impacted by the items described above for the quarter ended July 2, 2021. In addition to the items noted above for the quarter ended July 3, 2020, our effective tax rate for the two quarters ended July 3, 2020 ~~was impacted by~~benefited from the favorable impact of excess tax benefits related to equity-based compensation. In addition to the items noted above for the quarter ended June 28, 2019, our effective tax rate for the two quarters ended June 28, 2019 benefited from favorable adjustments recorded upon the filing of our Federal tax returns.

Note RO — Fair Value Measurements

Fair value is defined as the price that would be received for an asset or the price that would be paid to transfer a liability in the principal market or most advantageous market in an orderly transaction between market participants at the measurement date. Entities are required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring

fair value, and to utilize a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Observable inputs other than quoted prices included within Level 1, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices that are observable or are derived principally from, or corroborated by, observable market data by correlation or other means.

•Level 3 — Unobservable inputs that are supported by little or no market activity, are significant to the fair value of the assets or liabilities, and reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability developed using the best information available in the circumstances.

In certain instances, fair value is estimated using quoted market prices obtained from external pricing services. In obtaining such data from the external pricing services, we have evaluated the methodologies used to develop the estimate of fair value in order to assess whether such valuations are representative of fair value, including net asset value (“NAV”). Additionally, in certain circumstances, the NAV reported by an asset manager may be adjusted when sufficient evidence indicates NAV is not representative of fair value.

The following table presents assets and liabilities measured at fair value on a recurring basis (at least annually) at July ~~3, 2020~~2, 2021 and January ~~3, 2020:~~1, 2021:


		July 3, 2020										January 3, 2020									July 2, 2021						January 1, 2021
		Total		Level 1		Level 2		Total		Level 1		Level 2

(In millions)														(In millions)	Total		Level 1		Level 2		Total		Level 1		Level 2
		(In millions)
Assets	Assets													Assets
Deferred compensation plan assets:⁽¹⁾	Deferred compensation plan assets:⁽¹⁾													Deferred compensation plan assets:(1)
Equity and fixed-income securities	Equity and fixed-income securities	$	57	$	57	$	—	$	58	$	58	$	—	Equity and fixed-income securities	$	73	$	73	$	0	$	67	$	67	$	0
Investments measured at NAV:	Investments measured at NAV:													Investments measured at NAV:

Corporate-owned life insurance	Corporate-owned life insurance	29						29						Corporate-owned life insurance	33						31
Total fair value of deferred compensation plan assets	Total fair value of deferred compensation plan assets	$	86	$	57	$	—	$	87	$	58	$	—	Total fair value of deferred compensation plan assets	$	106	$	73	$	0	$	98	$	67	$	0

Derivatives (foreign currency forward contracts)	Derivatives (foreign currency forward contracts)	15		—		15		10		—		10		Derivatives (foreign currency forward contracts)	$	18	$	0	$	18	$	24	$	0	$	24
Total assets measured at fair value		$	101	$	57	$	15	$	97	$	58	$	10

Liabilities	Liabilities													Liabilities
Deferred compensation plan liabilities:⁽²⁾	Deferred compensation plan liabilities:⁽²⁾													Deferred compensation plan liabilities:(2)
Equity securities and mutual funds	Equity securities and mutual funds	$	2	$	2	$	—	$	2	$	2	$	—	Equity securities and mutual funds	$	5	$	5	$	0	$	4	$	4	$	0
Investments measured at NAV:	Investments measured at NAV:													Investments measured at NAV:
Common/collective trusts and guaranteed investment contracts	Common/collective trusts and guaranteed investment contracts	75						69						Common/collective trusts and guaranteed investment contracts	141						116
Total fair value of deferred compensation plan liabilities	Total fair value of deferred compensation plan liabilities	$	77	$	2	$	—	$	71	$	2	$	—	Total fair value of deferred compensation plan liabilities	$	146	$	5	$	0	$	120	$	4	$	0
Derivatives (foreign currency forward contracts)	Derivatives (foreign currency forward contracts)	15		—		15		8		—		8		Derivatives (foreign currency forward contracts)	$	3	$	0	$	3	$	4	$	0	$	4
Derivatives (treasury lock contracts)		130		—		130		56		—		56

Total liabilities measured at fair value		$	222	$	2	$	145	$	135	$	2	$	64

_______________

(1)Represents diversified assets held in a “rabbi trust” associated with our non-qualified deferred compensation plans, which we include in the “Other current assets” and “Other non-current assets” line items in our Condensed Consolidated Balance Sheet (Unaudited) and which are measured at fair value.

(2)Primarily represents obligations to pay benefits under certain non-qualified deferred compensation plans, which we include in the “Compensation and benefits” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited). Under these plans, participants designate investment options (including stock and fixed-income funds), which serve as the basis for measurement of the notional value of their accounts.

The following table presents the carrying amounts and estimated fair values of our significant financial instruments that were not measured at fair value (carrying amounts of other financial instruments not listed in the table below approximate fair value due to the short-term nature of those items):

July 3, 2020 January 3, 2020
Carrying
Amount Fair
Value Carrying
Amount Fair
Value
(In millions)
Long-term debt (including current portion)⁽¹⁾
$ 6,939 $ 7,907 $ 6,951 $ 7,536


	July 2, 2021				January 1, 2021
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Long-term debt (including current portion)(1)	$	7,072	$	7,872	$	6,953	$	7,986

_______________

(1)Fair value was estimated using a market approach based on quoted market prices for our debt traded in the secondary market. If our long-term debt in our balance sheet were measured at fair value, it would be categorized in Level 2 of the fair value hierarchy.

See Note CB — Business Divestitures ~~and Assets Sales~~ and Note KI — Goodwill and Other Intangible Assets in these Notes for information regarding fair value measurements associated with goodwill.

Note SP — Derivative Instruments and Hedging Activities

In the normal course of business, we are exposed to global market risks, including the effect of changes in foreign currency exchange ~~rates and changes in interest~~ rates. We use derivative instruments to manage our exposure to such risks and formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking hedge transactions. We also may enter into derivative instruments that are not designated as hedges and do not qualify for hedge accounting. We recognize all derivatives in our Condensed Consolidated Balance Sheet (Unaudited) at fair value. We do not hold or issue derivatives for speculative trading purposes.

~~Exchange-Rate Risk — Fair Value Hedges~~

To manage the exposure in our balance sheet to risks from changes in foreign currency exchange rates, we implement fair value hedges. More specifically, we have used foreign currency forward contracts and options to hedge certain balance sheet items, including foreign currency denominated accounts receivable and inventory. Changes in the value of the derivatives and the related hedged items are reflected in earnings, in the “Cost of product sales and services” line item in our Condensed Consolidated Statement of Income (Unaudited).

As of July 3, 2020, we had 0 outstanding foreign currency forward contracts to hedge balance sheet items. The net gains or losses on foreign currency forward contracts designated as fair value hedges were not material in the quarter or two quarters ended July 3, 2020 or in the quarter or two quarters ended June 28, 2019. In addition, 0 amounts were recognized in earnings in the quarter or two quarters ended July 3, 2020 or in the quarter or two quarters ended June 28, 2019 related to hedged firm commitments that no longer qualify as fair value hedges.

Exchange-Rate Risk — Cash Flow ~~Hedges~~

Hedges. To manage our exposure to currency risk and market fluctuation risk associated with anticipated cash flows that are probable of occurring in the future, we implement cash flow hedges. More specifically, we use foreign currency forward contracts and options to hedge off-balance sheet future foreign currency commitments, including purchase commitments to suppliers, future committed sales to customers and ~~intersegment~~inter-segment transactions. These derivatives are used to hedge currency exposures from cash flows anticipated across our business segments. We also hedge U.S. Dollar payments to suppliers to maintain our anticipated profit margins in our international operations. These derivatives have only nominal intrinsic value at the time of purchase and have a high degree of correlation to the anticipated cash flows they are designated to hedge. Hedge effectiveness is determined by the correlation of the anticipated cash flows from the hedging instruments and the anticipated cash flows from the future foreign currency commitments through the maturity dates of the derivatives used to hedge these cash flows. These financial instruments are marked-to-market using forward prices and fair value quotes with the offset to other comprehensive income (loss). Gains and losses in AOCI are reclassified to earnings when the related hedged item is recognized in earnings. The cash flow impact of our derivatives is included in the same category in our Condensed Consolidated Statement of Cash Flows (Unaudited) as the cash flows of the related hedged items. Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent exposure to foreign currency losses. At July ~~3, 2020,~~2, 2021, we had open foreign currency forward contracts with an aggregate notional amount of ~~$572~~$611 million, hedging certain forecasted transactions denominated in U.S. Dollars, Canadian Dollars, British Pounds, Australian Dollars and Euros. At January 1, 2021, we had open foreign currency forward contracts with an aggregate notional amount of $488 million, hedging certain forecasted transactions denominated in U.S. Dollars, Canadian Dollars, British Pounds, Euros, Australian Dollars and New Zealand ~~Dollars to hedge certain forecasted transactions.~~Dollars.

At July ~~3, 2020,~~2, 2021, our foreign currency forward contracts had maturities through 2025.

The table below presents the fair values of our derivatives designated as foreign currency hedging instruments in our Condensed Consolidated Balance Sheet (Unaudited) at July ~~3, 2020~~2, 2021 and January ~~3, 2020:~~1, 2021.


		July 3, 2020		January 3, 2020

(In millions)						(In millions)	July 2, 2021		January 1, 2021
		(In millions)
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:					Derivatives designated as hedging instruments:
Foreign currency forward contracts⁽¹⁾	Foreign currency forward contracts⁽¹⁾					Foreign currency forward contracts(1)
Other current assets	Other current assets	$	11	$	8	Other current assets	$	15	$	21
Other non-current assets	Other non-current assets	4		2		Other non-current assets	3		3
Other accrued items	Other accrued items	13		6		Other accrued items	3		4
Other long-term liabilities		2		2

_______________

(1)See Note RO — Fair Value Measurements in these Notes for a description of the fair value hierarchy related to our foreign currency forward contracts.

Net unrealized gains before income taxes recognized in other comprehensive loss from foreign currency derivatives designated as cash flow hedges were $4 million and $9 million, respectively, for the quarter and two quarters ended July 2, 2021. During the quarter and two quarters ended July 3, 2020, we recognized a $10 million net unrealized gain and a $6 million net unrealized loss, respectively, before income taxes in other comprehensive loss from foreign currency derivatives designated as cash flow hedges. During the quarter and two quarters ended ~~June 28, 2019,~~July 2, 2021, the net ~~unrealized~~ gain ~~or loss recognized in other comprehensive income (loss)~~reclassified from AOCI into earnings from foreign currency derivatives designated as cash flow hedges was ~~not material.~~

$8 million and $15 million, respectively. During the quarter and two quarters ended July 3, 2020, ~~and the quarter and two quarters ended June 28, 2019,~~ the net gain or loss reclassified from AOCI into earnings from foreign currency derivatives designated as cash flow hedges was not material. At July 2, 2021, the estimated amount of existing net gains to be reclassified into earnings within the next twelve months was $14 million.

Gains and losses from foreign currency derivatives designated as cash flow hedges are included in the line item in our Condensed Consolidated Statement of Income (Unaudited) associated with the hedged transaction, with the exception of any losses resulting from discontinued cash flow hedges, which are included in the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited).

~~At July 3, 2020, the estimated amount of existing losses to be reclassified into earnings within the next twelve months was $2 million before income taxes.~~

~~Interest-Rate Risk — Cash Flow Hedges~~

At July 3, 2020, we had 2 treasury lock agreements (“treasury locks”) with third-party financial institution counterparties with a combined notional amount of $650 million. These treasury locks were initiated in January 2019 (and assumed by us in connection with the L3Harris Merger) to hedge against fluctuations in interest payments due to changes in the benchmark interest rate (10-year U.S. Treasury rate) associated with the anticipated issuance of long-term fixed-rate notes (“New Notes”) to redeem or repay at maturity the entire $650 million outstanding principal amount of our 4.95% Notes due February 15, 2021 (“4.95% 2021 Notes”).

We designated these treasury locks as cash flow hedges against fluctuations in interest payments on the New Notes due to changes in the benchmark interest rate prior to issuance, which we expect to occur before the date of maturity of the 4.95% 2021 Notes. If the benchmark interest rate increases during the period of the agreement, the treasury locks position becomes an asset and we receive a cash payment from the counterparty when we terminate the treasury locks upon issuance of the New Notes. Conversely, if the benchmark interest rate decreases, the treasury locks position becomes a liability and we will make a cash payment to the counterparty when we terminate the treasury locks upon issuance of the New Notes. The fair value of the treasury locks is measured using a pricing model that utilizes observable market data such as the benchmark interest rate. See ~~Note R — Fair Value Measurements~~ ~~in these Notes for additional information.~~

At July 3, 2020, the combined fair value of these treasury locks was a liability of $130 million, which is included in the “Other expenses and accruals” line item in our Condensed Consolidated Balance Sheet (Unaudited). The unrealized after-tax loss associated with these treasury locks included in the “Accumulated other comprehensive loss” line item in our Condensed Consolidated Balance Sheet (Unaudited) was $71 million and $16 million at July 3, 2020 and January 3, 2020, respectively.

~~Net gains or losses from cash flow hedges recognized in earnings were not material in the quarter or two quarters ended July 3, 2020 or in the quarter or two quarters ended June 28, 2019.~~

Note TQ — Changes in Estimates

Contract ~~Estimates~~

Estimates. Under the POC cost-to-cost method of revenue recognition, a single estimated profit margin is used to recognize profit for each performance obligation over its period of performance. Recognition of profit on a contract requires estimates of the total cost at completion and transaction price ~~as well as~~and the measurement of progress towards completion. Due to the long-term nature of many of our contracts, developing the estimated total cost at completion and total transaction price often requires judgment. Factors that must be considered in estimating the cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance. Factors that must be considered in estimating the total transaction price include contractual cost or performance incentives (such as incentive fees, award fees and penalties) and other forms of variable consideration as well as our historical experience and our expectation for performance on the contract. These variable amounts generally are awarded upon achievement of certain negotiated performance metrics, program milestones or cost targets and can be based upon customer discretion. We include such estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

At the outset of each contract, we gauge its complexity and perceived risks and establish an estimated total cost at completion in line with these expectations. After establishing the estimated total cost at completion, we follow a standard Estimate at Completion (“EAC”) process in which we review the progress and performance on our ongoing contracts at least quarterly and, in many cases, more frequently. If we successfully retire risks associated with the technical, schedule and cost aspects of a contract, we may lower our estimated total cost at completion commensurate with the retirement of these risks. Conversely, if we are not successful in retiring these risks, we may increase our estimated total cost at completion. Additionally, as the contract progresses, our estimates of total transaction price may increase or decrease if, for example, we receive award fees that are higher or lower than expected. When adjustments in estimated total costs at completion or in estimated total transaction price are determined, the related impact on operating income is recognized using the cumulative catch-up method, which recognizes in the current period the cumulative effect of such adjustments for all prior periods. Any anticipated losses on these contracts are fully recognized in the period in which the losses become evident.

Net EAC adjustments had the following impact to earnings for the periods presented:


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019
(In millions, except per share amounts)										(In millions, except per share amounts)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
		(In millions, except per share amounts)
Net EAC adjustments, before income taxes	Net EAC adjustments, before income taxes	$	98	$	12	$	201	$	18	Net EAC adjustments, before income taxes	$	80	$	98	$	162	$	201
Net EAC adjustments, net of income taxes	Net EAC adjustments, net of income taxes	$	73	$	9	$	151	$	13	Net EAC adjustments, net of income taxes	$	60	$	73	$	122	$	151
Net EAC adjustments, net of income taxes, per diluted share		$	0.34	$	0.07	$	0.69	$	0.10

Net EAC adjustments, net of income taxes, per diluted common share										Net EAC adjustments, net of income taxes, per diluted common share	$	0.29	$	0.34	$	0.59	$	0.69

Revenue recognized from performance obligations satisfied in prior periods was $107 million and $215 million for the quarter and two quarters ended July 2, 2021, respectively, and $102 million and $238 million for the quarter and two quarters ended July 3, 2020, ~~respectively, and $25 million and $43 million for the quarter and two quarters ended June 28, 2019,~~ respectively.

Note UR — Backlog

Backlog, which is the equivalent of our remaining performance obligations, represents the future revenue we expect to recognize as we perform on our current contracts. Backlog comprises both funded backlog (i.e., firm orders for which funding is authorized and appropriated) and unfunded backlog. Backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as indefinite delivery, indefinite quantity contracts.

At July ~~3, 2020,~~2, 2021, our ending backlog was ~~$19.8~~$20.2 billion. We expect to recognize approximately ~~two-thirds~~66 percent of the revenue associated with this backlog ~~within~~by the ~~next twelve months~~end of 2022 and approximately ~~three-fourths~~78 percent by the end of 2023, with the ~~revenue associated with this backlog within the next three years.~~remainder to be recognized thereafter. At January ~~3, 2020,~~1, 2021, our ending backlog was ~~$20.6~~$21.7 billion, including ~~$380 million~~$1.1 billion of backlog associated with ~~the airport security and automation business, which was~~businesses that were divested during the quarter ended July ~~3, 2020.~~2, 2021.

Note VS — Business Segment Information

~~We adjusted our segment reporting due to the L3Harris Merger to reflect our new organizational structure that was effective June 29, 2019 and announced July 1, 2019.~~ We structure our operations primarily around the products, systems and services we sell and the markets we serve, and we report the financial results of our continuing operations in the following 4 operating segments, which are also our reportable segments and are referred to as our business segments:

•Integrated Mission Systems, including multi-mission ~~ISR~~intelligence, surveillance and reconnaissance (“ISR”) and communication systems; integrated electrical and electronic systems for maritime platforms; and advanced electro-optical and infrared solutions;

•Space and Airborne Systems, including space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; avionics; and electronic warfare;

•Communication Systems, including tactical communications; broadband communications; integrated vision solutions; public safety and ~~public safety;~~global communications solutions; and

•Aviation Systems, including defense ~~aviation products;~~aviation; commercial aviation products; commercial ~~and military~~ pilot training; and mission networks for air traffic management.

~~The historical~~See Note B — Business Divestitures in these Notes for information relating to the following businesses divested or classified as held for sale in fiscal 2020 and 2021:

•Airport security and automation business, divested on May 4, 2020, the results ~~discussion and presentation~~of which were reported as part of our Aviation Systems segment through the date of divestiture;

•Applied Kilovolts and Analytical Instrumentation business, ~~segments~~divested on May 15, 2020, the results of which were reported as ~~set forth in this Report reflect~~part of our Space and Airborne Systems segment through the ~~impact~~date of ~~these adjustments for all periods presented. There is no impact~~divestiture;

•EOTech business, divested on July 31, 2020, the results of which were reported as part of our ~~previously~~Communication Systems segment through the date of divestiture;

•Military training business, divested on July 2, 2021, the results of which were reported ~~consolidated statements~~as part of ~~income, balance sheets, statements~~our Aviation Systems segment through the date of ~~cash flows or statements~~divestiture;

•CPS business, divested on July 2, 2021, the results of ~~equity resulting from these adjustments. As noted in~~which were reported as part of our Aviation Systems segment through the date of divestiture;

• ~~Note C — Business Divestitures~~VSE disposal group, definitive agreement entered into on February 23, 2021 and ~~Assets Sales~~ ~~and elsewhere in these Notes,~~divestiture partially completed during the quarter ended July ~~3, 2020, we~~2, 2021, with the remainder classified as held for sale and expected to be completed in the ~~divestiture~~second half of ~~our airport security and automation business,~~fiscal 2021, the ~~operating~~ results of which ~~through the date of divestiture~~ are reported as part of our Aviation Systems ~~segment,~~segment;

•Electron Devices business, definitive agreement entered into on July 2, 2021 and classified as held for sale, expected to be completed during the ~~divestiture~~second half of ~~our Applied Kilovolts and Analytical Instrumentation business,~~fiscal 2021, the ~~operating~~ results of which ~~through the date of divestiture~~ are reported as part of our ~~Space~~Aviation Systems segment; and ~~Airborne~~

•AP disposal groups, classified as held for sale during the quarter ended July 2, 2021, expected to be completed during the next twelve months, the results of which are reported as part of our Aviation Systems segment.

The accounting policies of our business segments are the same as those described in Note 1: “Significant Accounting Policies” in the Notes to Consolidated Financial Statements in our Fiscal ~~Transition Period~~2020 Form ~~10-KT.~~10-K. We evaluate each business segment’s performance based on its operating income or loss, which we define as profit or loss from operations before income taxes, including pension income and excluding interest income and expense, royalties and related intellectual property expenses, equity method investment income or loss and gains or losses from securities and other investments. Intersegment sales are generally transferred at cost to the buying segment, and the sourcing segment ~~may recognize~~recognizes a profit that is eliminated. The “Corporate eliminations” line item in the table below represents the elimination of intersegment sales. Corporate expenses are primarily allocated to our ~~operating~~business segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. The “Unallocated corporate expenses” line item in the table below represents the portion of corporate expenses not allocated to our business segments and elimination of intersegment profits. The “Pension adjustment” line item in the table below represents the reconciliation of the non-service components of net periodic pension and postretirement benefit costs, which are a component of segment operating income but are included in the “Non-operating income” line item in our Condensed Consolidated Statement of Income (Unaudited). The

non-service components of net periodic pension and postretirement benefit costs include interest cost, expected return on plan assets, ~~and~~ amortization of net actuarial gain or ~~loss.~~loss, and effect of curtailments or settlements.

Segment revenue, segment operating income (loss) and a reconciliation of segment operating income to total income from continuing operations before income taxes are as follows:


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019

(In millions)										(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
		(In millions)
Revenue	Revenue									Revenue
Integrated Mission Systems	Integrated Mission Systems	$	1,331	$	11	$	2,701	$	25	Integrated Mission Systems	$	1,494	$	1,331	$	2,945	$	2,701
Space and Airborne Systems	Space and Airborne Systems	1,249		1,019		2,441		1,975		Space and Airborne Systems	1,287		1,249		2,523		2,441
Communication Systems	Communication Systems	1,112		609		2,206		1,189		Communication Systems	1,127		1,112		2,239		2,206
Aviation Systems	Aviation Systems	800		186		1,811		330		Aviation Systems	809		800		1,623		1,811
Other non-reportable business segments⁽¹⁾		—		44		—		79

Corporate eliminations	Corporate eliminations	(47)		(4)		(88)		(5)		Corporate eliminations	(49)		(47)		(95)		(88)
Total revenue										Total revenue	$	4,668	$	4,445	$	9,235	$	9,071
		$	4,445	$	1,865	$	9,071	$	3,593
Income From Continuing Operations Before Income Taxes	Income From Continuing Operations Before Income Taxes											Income From Continuing Operations Before Income Taxes
Segment Operating Income (Loss):	Segment Operating Income (Loss):									Segment Operating Income (Loss):
Integrated Mission Systems	Integrated Mission Systems	$	224	$	3	$	425	$	6	Integrated Mission Systems	$	229	$	224	$	469	$	425
Space and Airborne Systems	Space and Airborne Systems	235		195		456		369		Space and Airborne Systems	253		235		493		456
Communication Systems	Communication Systems	265		176		515		343		Communication Systems	287		265		568		515
Aviation Systems	Aviation Systems	31		19		(146)		36		Aviation Systems	35		31		163		(146)
Other non-reportable business segments⁽¹⁾		—		8		—		14
Unallocated corporate expenses⁽²⁾		(116)		(1)		(149)		(1)
L3Harris Merger-related transaction and integration expenses		(37)		(36)		(68)		(52)

Other unallocated corporate expenses(1)										Other unallocated corporate expenses(1)	(70)		(53)		(110)		(78)
L3Harris Merger-related integration expenses										L3Harris Merger-related integration expenses	(20)		(37)		(41)		(68)
Amortization of acquisition-related intangibles⁽³⁾⁽²⁾	Amortization of acquisition-related intangibles⁽³⁾⁽²⁾	(208)		(25)		(353)		(50)		Amortization of acquisition-related intangibles⁽³⁾⁽²⁾	(156)		(208)		(320)		(353)
Business divestiture-related gains (losses)										Business divestiture-related gains (losses)	180		(49)		165		(52)
Impairment of goodwill and other assets										Impairment of goodwill and other assets	(63)		(14)		(125)		(19)
Pension adjustment	Pension adjustment	(98)		(46)		(195)		(93)		Pension adjustment	(114)		(98)		(225)		(195)
Non-operating income	Non-operating income	105		48		200		94		Non-operating income	86		105		203		200
Net interest expense		(65)		(39)		(128)		(81)
Total		$	336	$	302	$	557	$	585

Interest expense, net										Interest expense, net	(65)		(65)		(131)		(128)
Total income from continuing operations before income taxes										Total income from continuing operations before income taxes	$	582	$	336	$	1,109	$	557

_______________

(1)~~Includes~~For the ~~operating results~~quarter and two quarters ended July 2, 2021, includes $46 million and $53 million, respectively, of ~~the Harris Night Vision business prior to the divestiture on September 13, 2019. See~~ ~~Note C — Business Divestitures and Assets Sales~~ ~~in these Notes for more information.~~

~~(2)Unallocated corporate expenses for~~divestiture-related expenses. For the quarter and two quarters ended July 3, 2020, ~~includes:~~includes (i) $16 million and $31 million, respectively, of additional cost of sales related to ~~the~~ fair value step-up in inventory ~~sold (see~~ ~~Note B — Business Combination~~ ~~in these Notes for more information);~~sold; (ii) ~~$58~~$9 million of other divestiture-related expenses; and $61 million, respectively, of divestiture-related expenses, including a $26 million loss on sale of business, a $14 million non-cash remeasurement loss on a potential divestiture, a $12 million non-cash adjustment to the gain on sale of business and other items; (iii) ~~a $14 million non-cash goodwill impairment charge related to a potential divestiture; and (iv)~~ $7 million of ~~L3Harris integration-related~~ restructuring charges. Unallocated corporate expenses for the two quarters ended July 3, 2020 also includes a $5 million non-cash goodwill impairment charge related to the divestiture of the Applied Kilovolts and Analytical Instrumentation business.

~~(3)~~(2)Includes ~~$183 million and $303 million of~~ amortization of identifiable intangible assets acquired as a result of the L3Harris Merger of $131 million and $271 million for the quarter and two quarters ended July 2, 2021, respectively, and $183 million and $303 million for the quarter and two quarters ended July 3, 2020, respectively. Also includes ~~$25 million and $50 million of~~ amortization of identifiable intangible assets acquired as a result of our acquisition of Exelis Inc. of $25 million and $49 million for the ~~quarters~~quarter and two quarters ended ~~June 28, 2019,~~July 2, 2021, respectively, and $25 million and $50 million for the quarter and two quarters ended July 3, 2020, respectively. Because the L3Harris Merger and the acquisition of Exelis Inc. benefited the entire Company as opposed to any individual segment, the amortization of identifiable intangible assets acquired was not allocated to any segment.

Disaggregation of Revenue

~~All four segments~~We disaggregate revenue for all 4 business segments by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Integrated Mission Systems: Integrated Mission Systems revenue is primarily derived from U.S. Government development and production contracts and is generally recognized over time using the POC cost-to-cost revenue recognition method.


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019

(In millions)										(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
		(In millions)
Revenue By Customer Relationship	Revenue By Customer Relationship									Revenue By Customer Relationship
Prime contractor	Prime contractor	$	858	$	4	$	1,807	$	12	Prime contractor	$	1,020	$	856	$	2,027	$	1,807
Subcontractor	Subcontractor	473		7		894		13		Subcontractor	460		462		889		869
Intersegment										Intersegment	14		13		29		25
		$	1,331	$	11	$	2,701	$	25		$	1,494	$	1,331	$	2,945	$	2,701
Revenue By Contract Type	Revenue By Contract Type									Revenue By Contract Type
Fixed-price⁽¹⁾	Fixed-price⁽¹⁾	$	998	$	11	$	2,023	$	25	Fixed-price(1)	$	1,147	$	997	$	2,239	$	2,021
Cost-reimbursable	Cost-reimbursable	333		—		678		—		Cost-reimbursable	333		321		677		655
Intersegment										Intersegment	14		13		29		25
		$	1,331	$	11	$	2,701	$	25		$	1,494	$	1,331	$	2,945	$	2,701
Revenue By Geographical Region	Revenue By Geographical Region									Revenue By Geographical Region
United States	United States	$	1,038	$	6	$	2,143	$	15	United States	$	1,034	$	1,026	$	2,054	$	2,119
International	International	293		5		558		10		International	446		292		862		557
Intersegment										Intersegment	14		13		29		25
		$	1,331	$	11	$	2,701	$	25		$	1,494	$	1,331	$	2,945	$	2,701

_______________

(1)Includes revenue derived from time-and-materials contracts.

Space and Airborne Systems: Space and Airborne Systems revenue is primarily derived from U.S. Government development and production contracts and is generally recognized over time using the POC cost-to-cost revenue recognition method.


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019

(In millions)										(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
		(In millions)
Revenue By Customer Relationship	Revenue By Customer Relationship									Revenue By Customer Relationship
Prime contractor	Prime contractor	$	674	$	590	$	1,332	$	1,162	Prime contractor	$	733	$	674	$	1,416	$	1,333
Subcontractor	Subcontractor	575		429		1,109		813		Subcontractor	552		572		1,103		1,102
Intersegment										Intersegment	2		3		4		6
		$	1,249	$	1,019	$	2,441	$	1,975		$	1,287	$	1,249	$	2,523	$	2,441
Revenue By Contract Type	Revenue By Contract Type									Revenue By Contract Type
Fixed-price⁽¹⁾	Fixed-price⁽¹⁾	$	702	$	601	$	1,372	$	1,132	Fixed-price(1)	$	740	$	701	$	1,455	$	1,370
Cost-reimbursable	Cost-reimbursable	547		418		1,069		843		Cost-reimbursable	545		545		1,064		1,065
Intersegment										Intersegment	2		3		4		6
		$	1,249	$	1,019	$	2,441	$	1,975		$	1,287	$	1,249	$	2,523	$	2,441
Revenue By Geographical Region	Revenue By Geographical Region									Revenue By Geographical Region
United States	United States	$	1,054	$	886	$	2,057	$	1,732	United States	$	1,102	$	1,049	$	2,162	$	2,050
International	International	195		133		384		243		International	183		197		357		385
Intersegment										Intersegment	2		3		4		6
		$	1,249	$	1,019	$	2,441	$	1,975		$	1,287	$	1,249	$	2,523	$	2,441

_______________

(1)Includes revenue derived from time-and-materials contracts.

Communication Systems: Communication Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems and services.


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
(In millions)										(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
		July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019

		(In millions)
Revenue By Customer Relationship⁽¹⁾
Revenue By Customer Relationship										Revenue By Customer Relationship
Prime contractor	Prime contractor	$	749			$	1,489			Prime contractor	$	783	$	748	$	1,512	$	1,488
Subcontractor	Subcontractor	363				717				Subcontractor	330		353		702		699
Intersegment										Intersegment	14		11		25		19
		$	1,112			$	2,206				$	1,127	$	1,112	$	2,239	$	2,206
Revenue By Contract Type⁽¹⁾	Revenue By Contract Type⁽¹⁾									Revenue By Contract Type⁽¹⁾
Fixed-price⁽²⁾⁽¹⁾	Fixed-price⁽²⁾⁽¹⁾	$	951			$	1,869			Fixed-price⁽²⁾⁽¹⁾	$	954	$	945	$	1,894	$	1,858
Cost-reimbursable	Cost-reimbursable	161				337				Cost-reimbursable	159		156		320		329
Intersegment										Intersegment	14		11		25		19
		$	1,112			$	2,206				$	1,127	$	1,112	$	2,239	$	2,206
Revenue by Geographical Region
Revenue By Geographical Region										Revenue By Geographical Region
United States	United States	$	844	$	355	$	1,678	$	702	United States	$	786	$	835	$	1,618	$	1,664
International	International	268		254		528		487		International	327		266		596		523
Intersegment										Intersegment	14		11		25		19
		$	1,112	$	609	$	2,206	$	1,189		$	1,127	$	1,112	$	2,239	$	2,206

~~______________~~_______________

(1) Prior to the L3Harris Merger, Communication Systems did not recognize significant revenue for customer-specific products and systems, and currently, such customer arrangements primarily exist at operating businesses acquired in connection with the L3Harris Merger. The “Revenue by Customer Relationship” and “Revenue by Contract Type” disaggregation categories were added beginning in the Fiscal Transition Period to best depict how the nature, amount, timing and uncertainty of revenue and cash flows from these types of customer arrangements are affected by economic factors.

~~(2)~~ Includes revenue derived from time-and-materials contracts.

Aviation Systems: Aviation Systems revenue is primarily derived from fixed-price contracts and is generally recognized at the point in time when products are received and accepted by the customer for standard products offered to multiple customers and over time for customer-specific products, systems and services.


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019

(In millions)										(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
		(In millions)
Revenue By Customer Relationship	Revenue By Customer Relationship									Revenue By Customer Relationship
Prime contractor	Prime contractor	$	514	$	180	$	1,178	$	320	Prime contractor	$	520	$	515	$	1,056	$	1,179
Subcontractor	Subcontractor	286		6		633		10		Subcontractor	270		265		530		594
Intersegment										Intersegment	19		20		37		38
		$	800	$	186	$	1,811	$	330		$	809	$	800	$	1,623	$	1,811
Revenue By Contract Type	Revenue By Contract Type									Revenue By Contract Type
Fixed-price⁽¹⁾	Fixed-price⁽¹⁾	$	627	$	164	$	1,468	$	286	Fixed-price(1)	$	641	$	610	$	1,280	$	1,439
Cost-reimbursable	Cost-reimbursable	173		22		343		44		Cost-reimbursable	149		170		306		334
Intersegment										Intersegment	19		20		37		38
		$	800	$	186	$	1,811	$	330		$	809	$	800	$	1,623	$	1,811
Revenue By Geographical Region	Revenue By Geographical Region									Revenue By Geographical Region
United States	United States	$	696	$	178	$	1,445	$	321	United States	$	679	$	676	$	1,361	$	1,408
International	International	104		8		366		9		International	111		104		225		365
Intersegment										Intersegment	19		20		37		38
		$	800	$	186	$	1,811	$	330		$	809	$	800	$	1,623	$	1,811

~~______________~~_______________

(1)Includes revenue derived from time-and-materials contracts.

3024

Total assets by business segment are summarized below:


		July 3, 2020		January 3, 2020

(In millions)						(In millions)	July 2, 2021		January 1, 2021
		(In millions)
Total Assets	Total Assets					Total Assets
Integrated Mission Systems	Integrated Mission Systems	$	8,675	$	7,896	Integrated Mission Systems	$	9,152	$	8,906
Space and Airborne Systems	Space and Airborne Systems	6,899		6,829		Space and Airborne Systems	7,058		6,943
Communication Systems	Communication Systems	5,719		5,930		Communication Systems	5,871		5,746
Aviation Systems	Aviation Systems	5,269		7,569		Aviation Systems	4,042		5,026
Corporate⁽¹⁾	Corporate⁽¹⁾	11,290		10,112		Corporate(1)	9,941		10,339
		$	37,852	$	38,336
Total Assets						Total Assets	$	36,064	$	36,960

_______________

(1)Identifiable intangible assets acquired in connection with the L3Harris Merger ~~in the quarter ended September 27,~~on June 29, 2019 and our acquisition of Exelis Inc. in fiscal 2015 were recorded as Corporate assets because they benefited the entire Company as opposed to any individual segment. Identifiable intangible asset balances recorded as Corporate assets were approximately ~~$8.3~~$7.0 billion and ~~$8.5~~$7.9 billion at July ~~3, 2020~~2, 2021 and January ~~3, 2020,~~1, 2021, respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred compensation plan investments, buildings and equipment, as well as any assets and liabilities from discontinued operations and divestitures. See Note CB — Business Divestitures ~~and Assets Sales~~ in these Notes for additional information.

Note WT — Legal Proceedings and Contingencies

From time to time, as a normal incident of the nature and kind of businesses in which we are or were engaged, various claims or charges are asserted and litigation or arbitration is commenced by or against us arising from or related to matters, including, but not limited to: product liability; personal injury; patents, trademarks, trade secrets or other intellectual property; labor and employee disputes; commercial or contractual disputes; strategic acquisitions or divestitures; the prior sale or use of former products allegedly containing asbestos or other restricted materials; breach of warranty; or environmental matters. Claimed amounts against us may be substantial but may not bear any reasonable relationship to the merits of the claim or the extent of any real risk of court or arbitral awards. We record accruals for losses related to those matters against us that we consider to be probable and that can be reasonably estimated. Gain contingencies, if any, are recognized when they are realized, and legal costs generally are expensed when incurred. At July ~~3, 2020,~~2, 2021, our accrual for the potential resolution of lawsuits, claims or proceedings that we consider probable of being decided unfavorably to us was not material. Although it is not feasible to predict the outcome of these matters with certainty, it is reasonably possible that some lawsuits, claims or proceedings may be disposed of or decided unfavorably to us and in excess of the amounts currently accrued. Based on available information, in the opinion of management, settlements, arbitration awards and final judgments, if any, that are considered probable of being rendered against us in litigation or arbitration in existence at July ~~3, 2020~~2, 2021 are reserved against or would not have a material adverse effect on our financial condition, results of operations, cash flows or ~~cash flows.~~equity.

EnvironmentalMatters

: We are subject to numerous U.S. Federal, state, local and international environmental laws and regulatory requirements and are involved from time to time in investigations or litigation of various potential environmental issues. We or companies we have acquired are responsible, or alleged to be responsible, for environmental investigation and/or remediation of multiple sites. These sites are in various stages of investigation and/or remediation and in some cases our liability is considered de minimis. Notices from the U.S. Environmental Protection Agency (“EPA”) or equivalent state or international environmental agencies allege that a number of sites formerly or currently owned and/or operated by us or companies we have acquired, and other properties or water supplies that may be or have been impacted from those operations, contain disposed or recycled materials or wastes and require environmental investigation and/or remediation. These sites include instances of being identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as the “Superfund Act”) and/or equivalent state and international laws. For example, in June 2014, the U.S. Department of Justice, ~~(the “DOJ”),~~ Environment and Natural Resources Division, notified several potentially responsible parties, including Exelis Inc., of potential responsibility for contribution to the environmental investigation and remediation of multiple locations in Alaska. In addition, in March 2016, the EPA notified over 100 potentially responsible parties, including Exelis Inc., of potential liability for the cost of remediation for the 8.3-mile stretch of the Lower Passaic River, estimated by the EPA to be $1.38 billion, but the parties’ respective allocations have not been determined. Although it is not feasible to predict the outcome of these environmental claims made against us, based on available information, in the opinion of our management, any payments we may be required to make as a result of environmental claims made against us in existence at July ~~3, 2020~~2, 2021 are reserved against, covered by insurance or would not have a material adverse effect on our financial condition, results of operations, cash flows or ~~cash flows.~~equity.

3125

~~Note X — Subsequent Events~~

~~EOTech business divestiture~~

On July 31, 2020, we completed the divestiture of our EOTech business for net cash proceeds of approximately $42 million, before estimated transaction expenses and estimated adjustments in respect of net cash and working capital, and subject to post-closing finalization of those adjustments as set forth in the definitive sale agreement. We expect to use the net cash proceeds from the sale for general corporate purposes and potential repurchases of shares of our common stock.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of L3Harris Technologies, Inc.

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of L3Harris Technologies, Inc. (the Company) as of July ~~3, 2020,~~2, 2021, the related condensed consolidated statements of income, comprehensive income ~~(loss),~~ and equity for the quarters and two quarters ended July 2, 2021 and July 3, 2020, ~~and June 28, 2019,~~ the condensed consolidated statements of cash flows for the two quarters ended July 2, 2021 and July 3, 2020, ~~and June 28, 2019,~~ and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of January ~~3, 2020,~~1, 2021, the related consolidated statements of income, comprehensive income, cash flows and equity for the ~~two quarters~~year then ended, and the related notes (not presented herein); and in our report dated March ~~3, 2020,~~1, 2021, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January ~~3, 2020,~~1, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Ernst & Young LLP

Orlando, Florida

August 4, ~~2020~~2021

3326

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW

The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations. This MD&A is provided as a supplement to, should be read in conjunction with, and is qualified in its entirety by reference to, our Condensed Consolidated Financial Statements (Unaudited) and accompanying Notes appearing elsewhere in this Report (the “Notes”). In addition, reference should be made to our audited Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Fiscal 2020 Form ~~10-KT for the Fiscal Transition Period from June 29, 2019 to January 3, 2020 (our “Fiscal Transition Period Form 10-KT”).~~10-K. Except for the historical information contained herein, the discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below in this MD&A under “Forward-Looking Statements and Factors that May Affect Future Results.”

~~COVID-19~~COVID

~~The pandemic from the novel COVID-19 strain of coronavirus (“COVID-19”) and attempts~~Attempts to contain ~~it,~~and reduce the spread of COVID, such as mandatory closures, “shelter-in-place” orders and travel and quarantine restrictions, have caused significant disruptions and adverse effects on the U.S. and global economies, such as impacts to supply chains, customer demand, international trade and capital markets. InOur response ~~we have increased~~has involved increasing our focus on keeping our employees safe while ~~continuing~~striving to ~~strive to~~maintain continuity of operations, meet customer commitments and support suppliers. For example, we instituted numerous types of precautions, protocols and other arrangements designed to protect employees from COVID infections and to comply with applicable regulations and we have instituted work-from-home (for employees who are able to work remotely) and social distancing arrangements; canceled travel and external events; procured personal protective equipment (“PPE”); implemented health screening procedures at all facilities; staggered work shifts, redesigned work stations and implemented stringent cleaning protocols;also maintained an active dialog, and in some cases developed plans, with key suppliers ~~and developed plans~~in an effort to mitigate supply chain ~~risks; and shifted~~risks or otherwise minimize the ~~timing of share repurchases, which bolstered liquidity in support of employees, suppliers and customers. As part of maintaining our increased focus on~~impact from those areas and seeking to maintain continuity of operations, we have implemented more detailed safety precautions and protocols for on-site work, such as daily health assessments and mandatory face coverings. We also have allowed certain essential business travel to resume, and we expect to utilize a phased approach based on local conditions for transitioning employees from work-from-home arrangements to on site work.risks. The U.S. Government response to COVID has included identifying the Defense Industrial Base as a Critical Infrastructure Sector and enhancing cash flow and liquidity for the Defense Industrial Base, such as by increasing progress payments and accelerating contract ~~awards. As a part of the Defense Industrial Base, these actions have~~awards, which enabled us to keep our U.S. production facilities largely operational in support of national security commitments to U.S. Government customers (as part of the Defense Industrial Base) and to accelerate ~~more than $235 million in~~ payments to small business suppliers, which we expect to continue while the U.S. Government’s responsive actions remain in ~~45 states.~~effect.

Although we believe that ~~the~~a large percentage of our revenue, earnings and cash ~~flows~~flow that is derived from sales to the U.S. Government, whether directly or through prime contractors, will be relatively predictable, in part due to the U.S. Government’s responsive actions ~~taken by the U.S. Government~~ described above, our commercial ~~international~~ and ~~public safety~~international businesses are at a higher risk of adverse COVID-related impacts, ~~related~~and we cannot eliminate all potential impacts to ~~the COVID-19 pandemic.~~our business from supply chain risks, such as longer lead times and shortages of electronics and other components. For example, the severe decline in global air traffic from travel restrictions and the resulting downturn in the commercial aviation market and its impact on customer operations has significantly reduced demand for flight training, flight simulators and commercial avionics products in our ~~Commercial Aviation Solutions sector within our~~ Aviation Systems segment. As a result, we temporarily closed some of our flight training facilities, initiated restructuring and other actions to align our resources with the outlook for the commercial aviation market (including workforce reduction and facility consolidation) and also have recognized $69 million and $394 million of charges for impairment of goodwill and other assets and other COVID-19-related impacts in the quarter and two quarters ended July 3, 2020, respectively.

The extent of these disruptions and impacts, including on our ability to perform under U.S. Government ~~contracts~~ and other contracts within agreed timeframes and ultimately on our results of operations and cash flows, will depend on future developments, including ~~the severity and duration of the pandemic~~further COVID-related impacts and associated containment and mitigation actions taken by ~~the U.S. Government, state and local government officials and international governments,~~governmental authorities and consequences thereof, and global air traffic demand and governmental subsidies to airlines, and potential impacts to our business from supply chain risks, all of which are uncertain and ~~unpredictable.~~

~~The impact of COVID-19 may also~~unpredictable, could exacerbate other risks discussed in Item 1A. “Risk Factors” of our Fiscal ~~Transition Period~~2020 Form ~~10-KT,~~10-K, any of which could have a material effect on us. We continue to work with our customers, employees, suppliers, subcontractors, distributors, resellers and communities to address the impact of the pandemic. We continue to assess possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences. For further information regarding the impact, and the risks of the impact, of ~~COVID-19~~COVID on the Company, see ~~Part II, Item~~“Item 1A. ~~“Risk~~Risk Factors” ~~in this Report.~~

of our Fiscal 2020 Form 10-K.

KEY DEVELOPMENTS

The following is a list of the remaining sections of this MD&A, together with our perspective on their contents, which we hope will assist in reading these pages:

•Results of Operations — an analysis of our consolidated results of operations and the results in each of our business segments, to the extent the segment results are helpful to an understanding of our business as a whole, ~~on both an “as reported” basis and a “pro forma basis” (as defined in “Results of Operations” in this MD&A),~~ for the periods presented in our Condensed Consolidated ~~Financial Statements~~Statement of Income (Unaudited).

•Liquidity, Capital Resources and Financial Strategies— an analysis of cash flows, funding of pension plans, common stock repurchases, dividends, capital structure and resources, off-balance sheet arrangements and commercial commitments and contractual obligations.

•Critical Accounting Policies and Estimates — information about accounting policies that require critical judgments and estimates and about accounting standards that have been issued, but are not yet effective for us, and their potential impact on our financial condition, results of operations, cash flows and ~~cash flows.~~equity.

•Forward-Looking Statements and Factors that May Affect Future Results — cautionary information about forward-looking statements and a description of certain risks and uncertainties that could cause our actual results to differ materially from our historical results or our current expectations or projections.

~~As discussed in~~ ~~Note V — Business Segment Information~~ in the Notes, we implemented a new organizational structure effective on June 29, 2019, which resulted in changes to our operating segments, which are also reportable segments and referred to as our business segments. The historical results, discussion and presentation of our business segments as set forth in this MD&A reflect the impact of these changes for all periods presented in order to present segment information on a comparable basis. There is no impact on our previously reported consolidated statements of income, balance sheets, statements of cash flows or statements of equity resulting from these changes.

We report the financial results of our continuing operations in the following four segments, which are also referred to as

our business segments:

•Integrated Mission Systems, including multi-mission ~~intelligence, surveillance and reconnaissance~~ISR and communication systems; integrated electrical and electronic systems for maritime platforms; and advanced electro-optical and infrared solutions;

•Space and Airborne Systems, including space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; avionics; and electronic warfare;

•Communication Systems, including tactical communications; broadband communications; integrated vision solutions; public safety and ~~public safety;~~global communications solutions; and

•Aviation Systems, including defense ~~aviation products;~~aviation; commercial aviation products; commercial ~~and military~~ pilot training; and mission networks for air traffic management.

On May 4, 2020, we completed the divestiture of our Security & Detection Systems and MacDonald Humfrey Automation solutions business (“airport security and automation business”) to Leidos, Inc. for net cash proceeds of approximately $1 billion (net cash proceeds of $951 million after selling costs and estimated purchase price adjustments), subject to post-closing finalization of those adjustments as set forthSee Note B — Business Divestitures in the ~~definitive~~Notes for information regarding the following businesses divested or classified as held for sale ~~agreement. The airport~~in fiscal 2020 and 2021:

•Airport security and automation business, ~~provides solutions used by~~divested on May 4, 2020, the ~~aviation and transportation industries, regulatory and customs authorities, government and law enforcement agencies and commercial and other high-security facilities. The operating~~ results of ~~the airport security and automation business through the date of divestiture are~~which were reported as part of our Aviation Systems ~~segment.~~segment through the date of divestiture;

~~On May 15, 2020, we completed the divestiture of our~~ •Applied Kilovolts and Analytical Instrumentation business, ~~for net cash proceeds of $12 million, after selling costs and estimated purchase price adjustments, subject to final customary purchase price adjustments as set forth in~~divested on May 15, 2020, the ~~definitive sale agreement. The operating~~ results of ~~the Applied Kilovolts and Analytical Instrumentation business are~~which were reported as part of our Space and Airborne Systems ~~segment.~~segment through the date of divestiture;

~~On March 20, 2020, we entered into a definitive agreement to sell our~~ •EOTech business, ~~for $42 million, subject to customary adjustments and closing conditions as set forth in~~divested on July 31, 2020, the ~~definitive agreement. The EOTech business,~~results of which iswere reported as part of our Communication Systems segment ~~manufactures holographic sighting systems, magnified field optics~~through the date of divestiture;

•Military training business, divested on July 2, 2021, the results of which were reported as part of our Aviation Systems segment through the date of divestiture;

•CPS business, divested on July 2, 2021, the results of which were reported as part of our Aviation Systems segment through the date of divestiture;

•VSE disposal group, definitive agreement entered into on February 23, 2021 and ~~accessories for military, law enforcement and commercial markets around~~divestiture partially completed during the ~~world. The assets and liabilities of~~quarter ended July 2, 2021, with the ~~EOTech business were~~remainder classified as held for sale and expected to be completed in the second half of fiscal 2021, the results of which are reported as part of our ~~Condensed Consolidated Balance Sheet (Unaudited) as of July 3, 2020. We completed the divestiture of the EOTech~~Aviation Systems segment;

•Electron Devices business, definitive agreement entered into on July ~~31, 2020.~~

~~During the quarter ended July 3, 2020, we determined the criteria to be~~2, 2021 and classified as held for sale, ~~were met with respect~~expected to ~~another business within~~be completed during the second half of fiscal 2021, the results of which are reported as part of our Aviation Systems ~~segment (“other AS~~segment; and

•AP disposal ~~group”); consequently, the assets and liabilities of our other AS disposal group were~~groups, classified as held for sale induring the quarter ended July 2, 2021, expected to be completed during the next twelve months, the results of which are reported as part of our ~~Condensed Consolidated Balance Sheet (Unaudited) at~~Aviation Systems segment.

3528

July 3, 2020. The income before income taxes of our other AS disposal group was not material for the quarter or two quarters ended July 3, 2020. We expect to complete the sale of the other AS disposal group by the end of 2020.

~~See~~ ~~Note C — Business Divestitures and Assets Sales~~ ~~in the Notes for additional detail regarding recent divestitures.~~

~~Amounts contained in this Report may not always add to totals due to rounding.~~

RESULTS OF OPERATIONS

~~As discussed further in~~ ~~Note A — Significant Accounting Policies and Recent Accounting Standards~~ in the Notes, we completed the L3Harris Merger on June 29, 2019. Because of the L3Harris Merger, the quarter and two quarters ended July 3, 2020 reflect the results of the combined company, while the quarter and two quarters ended June 28, 2019 reflect the results of only Harris operating businesses. Due to the significance of the L3 operating businesses included in the combined company results following the L3Harris Merger, the reported results for the quarter and two quarters ended July 3, 2020 and the quarter and two quarters ended June 28, 2019 generally are not comparable. Therefore, to assist with a discussion of the consolidated results of operations for the quarter and two quarters ended July 3, 2020 and June 28, 2019 on a more comparable basis, certain supplemental unaudited pro forma combined income statement information prepared in accordance with the requirements of Article 11 of Regulation S-X (referred to in this MD&A as “pro forma”) also is provided (see “Supplemental Unaudited Pro Forma Condensed Combined Income Statement Information” ~~below in this MD&A).~~

~~Highlights~~

Consolidated operating results for the quarter ended July 3, 2020, in each case compared with the quarter ended June 28, 2019 on both an “as reported” basis (reflecting the results of only Harris operating businesses for the prior period) and a “pro forma” basis (also reflecting the results of L3 operating businesses for the prior period), included:

~~Consolidated — as reported~~

•~~Revenue increased 138 percent to $4.4 billion from $1.9 billion;~~

•~~Gross margin increased 98 percent to $1,270 million from $642 million;~~

•~~Income from continuing operations increased 3 percent to $278 million from $269 million; and~~

•~~Income from continuing operations per diluted common share attributable to L3Harris Technologies, Inc. common shareholders decreased 41 percent to $1.30 from $2.21.~~

~~Consolidated — pro forma~~

•~~Revenue was flat at $4.4 billion;~~

•~~Gross margin decreased 8 percent to $1,270 million from $1,386 million;~~

•~~Income from continuing operations decreased 33 percent to $278 million from $417 million; and~~

•~~Income from continuing operations per diluted common share attributable to L3Harris Technologies, Inc. common shareholders decreased 29 percent to $1.30 from $1.82.~~

Consolidated Results of Operations


		Quarter Ended																									Quarter Ended					Two Quarters Ended
		July 3, 2020			June 28, 2019			% Inc/(Dec)		June 28, 2019			% Inc/(Dec)

(In millions, except per share amounts)															(In millions, except per share amounts)	July 2, 2021			July 3, 2020			% Inc/(Dec)		July 2, 2021			July 3, 2020			% Inc/(Dec)
		As Reported															Pro Forma
		(Dollars in millions, except per share amounts)
Revenue:	Revenue:														Revenue:
Integrated Mission Systems	Integrated Mission Systems	$	1,331		$	11		*		$	1,240		7	%	Integrated Mission Systems	$	1,494		$	1,331		12	%	$	2,945		2,701			9	%
Space and Airborne Systems	Space and Airborne Systems	1,249			1,019			23	%	1,200			4	%	Space and Airborne Systems	1,287			1,249			3	%	2,523			2,441			3	%
Communication Systems	Communication Systems	1,112			609			83	%	1,086			2	%	Communication Systems	1,127			1,112			1	%	2,239			2,206			1	%
Aviation Systems	Aviation Systems	800			186			*		965			(17)	%	Aviation Systems	809			800			1	%	1,623			1,811			(10)	%
Other non-reportable business segments		—			44			(100)	%	—			*

Corporate eliminations	Corporate eliminations	(47)			(4)			*		(43)			9	%	Corporate eliminations	(49)			(47)			4	%	(95)			(88)			8	%
Total revenue	Total revenue	4,445			1,865			138	%	4,448			—	%	Total revenue	4,668			4,445			5	%	9,235			9,071			2	%
Cost of product sales and services	Cost of product sales and services	(3,175)			(1,223)			160	%	(3,062)			4	%	Cost of product sales and services	(3,251)			(3,175)			2	%	(6,464)			(6,473)			—	%
Gross margin	Gross margin	1,270			642			98	%	1,386			(8)	%	Gross margin	1,417			1,270			12	%	2,771			2,598			7	%
% of total revenue	% of total revenue	29		%	34		%			31		%			% of total revenue	30		%	29		%			30		%	29		%
Engineering, selling and administrative expenses	Engineering, selling and administrative expenses	(904)			(349)			159	%	(908)			—	%	Engineering, selling and administrative expenses	(891)			(855)			4	%	(1,692)			(1,667)			1	%
% of total revenue	% of total revenue	20		%	19		%			20		%			% of total revenue	19		%	19		%			18		%	18		%
Business divestiture-related gains (losses)															Business divestiture-related gains (losses)	180			(49)			*		165			(52)			*
Impairment of goodwill and other assets	Impairment of goodwill and other assets	(70)			—			*		—			*		Impairment of goodwill and other assets	(145)			(70)			107	%	(207)			(394)			(47)	%
Non-operating income	Non-operating income	105			48			119	%	62			69	%	Non-operating income	86			105			(18)	%	203			200			1	%
Net interest expense		(65)			(39)			67	%	(63)			3	%
Interest expense, net															Interest expense, net	(65)			(65)			—	%	(131)			(128)			2	%
Income from continuing operations before income taxes	Income from continuing operations before income taxes	336			302			11	%	477			(30)	%	Income from continuing operations before income taxes	582			336			73	%	1,109			557			99	%
Income taxes	Income taxes	(58)			(33)			76	%	(60)			(3)	%	Income taxes	(169)			(58)			191	%	(229)			(84)			173	%
Effective tax rate	Effective tax rate	17		%	11		%			13		%			Effective tax rate	29		%	17		%			21		%	15		%
Income from continuing operations	Income from continuing operations	278			269			3	%	417			(33)	%	Income from continuing operations	413			278			49	%	880			473			86	%
Noncontrolling interests, net of income taxes	Noncontrolling interests, net of income taxes	5			—			*		(6)			(183)	%	Noncontrolling interests, net of income taxes	—			5			*		2			28			*
Income from continuing operations attributable to L3Harris Technologies, Inc. common shareholders	Income from continuing operations attributable to L3Harris Technologies, Inc. common shareholders	$	283		$	269		5	%	$	411		(31)	%	Income from continuing operations attributable to L3Harris Technologies, Inc. common shareholders	$	413		$	283		46	%	$	882		$	501		76	%
% of total revenue	% of total revenue	6		%	14		%			9		%			% of total revenue	9		%	6		%			10		%	6		%
Income from continuing operations per diluted common share attributable to L3Harris Technologies, Inc. common shareholders	Income from continuing operations per diluted common share attributable to L3Harris Technologies, Inc. common shareholders	$	1.30		$	2.21		(41)	%	$	1.82		(29)	%	Income from continuing operations per diluted common share attributable to L3Harris Technologies, Inc. common shareholders	$	2.01		$	1.30		55	%	$	4.26		$	2.29		86	%

~~_______________~~_________________

*Not meaningful

Two Quarters Ended
July 3,
2020 June 28,
2019 % Inc/(Dec) June 28,
2019 % Inc/(Dec)
As Reported Pro Forma
(Dollars in millions, except per share amounts)
Revenue:
Integrated Mission Systems $ 2,701 $ 25 * $ 2,602 4 %
Space and Airborne Systems 2,441 1,975 24 % 2,312 6 %
Communication Systems 2,206 1,189 86 % 2,127 4 %
Aviation Systems 1,811 330 * 1,879 (4) %
Other non-reportable business segments — 79 (100) % — *
Corporate eliminations (88) (5) * (86) 2 %
Total revenue 9,071 3,593 152 % 8,834 3 %
Cost of product sales and services (6,473) (2,362) 174 % (6,181) 5 %
Gross margin 2,598 1,231 111 % 2,653 (2) %
% of total revenue 29 % 34 % 30 %
Engineering, selling and administrative expenses (1,719) (659) 161 % (1,707) 1 %
% of total revenue 19 % 18 % 19 %
Impairment of goodwill and other assets (394) — * — *
Non-operating income 200 94 113 % 117 71 %
Net interest expense (128) (81) 58 % (130) (2) %
Income from continuing operations before income taxes 557 585 (5) % 933 (40) %
Income taxes (84) (73) 15 % (116) (28) %
Effective tax rate 15 % 12 % 12 %
Income from continuing operations 473 512 (8) % 817 (42) %
Noncontrolling interests, net of income taxes 28 — * (12) (333) %
Income from continuing operations attributable to L3Harris Technologies, Inc. common shareholders $ 501 $ 512 (2) % $ 805 (38) %
% of total revenue 6 % 14 % 9 %
Income from continuing operations per diluted common share attributable to L3Harris Technologies, Inc. common shareholders $ 2.29 $ 4.23 (46) % $ 3.57 (36) %

~~_______________~~

* Not meaningful

~~As Reported~~

Revenue

~~Second~~One Quarter ~~2020 Compared With Second Quarter 2019:~~ Comparison:The increase in revenue for the quarter ended July ~~3, 2020~~2, 2021 compared with ~~the quarter ended June 28, 2019 was primarily due to the inclusion of $2.6 billion of revenue (net of intercompany sales eliminations) from L3 operations in operating results for~~ the quarter ended July 3, 2020 ~~and~~was primarily due to organic revenue growth in ~~in our Space and Airborne Systems and Communication Systems segments.~~all four business segments, partially offset by $49 million lower revenue from the impact of completed business divestitures.

~~First~~ Two Quarters ~~2020 Compared With First Two Quarters 2019:~~Comparison: The increase in revenue for the two quarters ended July ~~3, 2020~~2, 2021 compared with the two quarters ended ~~June 28, 2019~~July 3, 2020 was primarily due to the same reasons as noted above in the one quarter comparison for revenue, also partially offset by lower revenue in the ~~quarters~~quarter ended ~~July 3, 2020~~April 2, 2021 in our Aviation Systems segment from the continued COVID-related downturn in the commercial aviation market and ~~June 28, 2019.~~its impact on customer operations.

See “Discussion of Business Segment Results of Operations” below in this MD&A for further information.

3829

Gross Margin Percentage

~~Second~~One Quarter ~~2020 Compared With Second Quarter 2019:~~Comparison: The increase in gross margin for the quarter ended July 3, 2020 compared with the quarter ended June 28, 2019 was primarily due to the inclusion of L3 operations in operating results for the quarter ended July 3, 2020 and organic revenue growth in our Space and Airborne Systems and Communication Systems segments. The decrease in gross margin as a percentage of total revenue (“gross margin percentage”) for the quarter ended July ~~3, 2020~~2, 2021 compared with the quarter ended ~~June 28, 2019~~July 3, 2020 was primarily due to ~~a mix~~operational excellence, integration benefits and the absence in the quarter ended July 2, 2021 of ~~program revenue and product sales with relatively lower gross margin percentage, $25 million of amortization of identifiable intangible assets acquired as~~ a ~~result of the L3Harris Merger and~~ $16 million ofcharge for additional cost of sales related to ~~the~~ fair value step-up in inventory sold recorded in the quarter ended July 3, ~~2020, partially offset by productivity and integration savings.~~2020.

~~First~~ Two Quarters ~~2020 Compared With First Two Quarters 2019:~~ Comparison:The increase in gross margin for the two quarters ended July 3, 2020 compared with the two quarters ended June 28, 2019 was primarily due to the inclusion of L3 operations in operating results for the two quarters ended July 3, 2020. The decrease in gross margin percentage for the two quarters ended July ~~3, 2020~~2, 2021 compared with the two quarters ended ~~June 28, 2019~~July 3, 2020 was primarily due to operational excellence, integration benefits and the absence in the two quarters ended July 2, 2021 of a ~~mix of program revenue and product sales with relatively lower gross margin percentage, $42 million of amortization of identifiable intangible assets acquired as a result of~~charge comparable to the ~~L3Harris Merger and~~ $31 million offor additional cost of sales related to ~~the~~ fair value step-up in inventory sold recorded in the two quarters ended July 3, ~~2020, partially offset by productivity and integration savings.~~2020.

See the “Discussion of Business Segment Results of Operations” discussion below in this MD&A for further information.

Engineering, Selling and Administrative ~~Expenses~~ (“ESA”) Expenses and Percentage

~~Second~~One Quarter ~~2020 Compared With Second Quarter 2019:~~Comparison: The ~~increases~~increase in ESA expenses and comparability of ESA expense as a percentage of total revenue (“ESA percentage”) for the quarter ended July ~~3, 2020~~2, 2021 compared with the quarter ended ~~June 28, 2019~~July 3, 2020 were primarily due to the inclusion of L3 operations in operating results, $158 million of amortization of identifiable intangible assets acquired as a result of the L3Harris Merger, $58 million of divestiture expenses and losses, $37 million of ~~integration costs associated with the L3Harris Merger~~higher divestiture-related expenses and ~~$20~~increased investments in R&D, partially offset by $44 million of ~~restructuring charges for workforce reductions and other exit costs.~~lower amortization of acquisition-related intangible assets in the quarter ended July 2, 2021.

~~First~~ Two Quarters ~~2020 Compared With First Two Quarters 2019:~~ Comparison:The ~~increases~~increase in ESA expenses and comparability of ESA percentage for the two quarters ended July ~~3, 2020~~2, 2021 compared with the two quarters ended ~~June 28, 2019~~July 3, 2020 were primarily due to the ~~inclusion of L3 operations~~same reasons as noted above in ~~operating results, $261 million of amortization of identifiable intangible assets acquired~~the one quarter comparison as ~~a result of the L3Harris Merger, $68 million of~~well as lower integration costs ~~associated with~~and the ~~L3Harris Merger, $61 million~~absence in the two quarters ended July 2, 2021 of ~~divestiture expenses and losses and $26 million of~~COVID-related restructuring charges ~~for workforce reductions~~ and ~~other~~ exit ~~costs.~~costs recorded in the two quarters ended July 3, 2020.

See the “Discussion of Business Segment Results of Operations” discussion below in this MD&A for further information.

Business Divestiture-Related Gains and Losses

The "Business divestiture-related gains (losses)" line item is comprised of the following pre-tax gains (losses) associated with businesses divested or held for sale:


	Quarter Ended				Two Quarters Ended
(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
VSE disposal group	$	(18)	$	(14)	$	(26)	$	(14)
CPS business	(12)		—		(19)		—
Military training business	212		—		212		—


Airport security and automation business	—		(23)		—		(26)
Other	(2)		(12)		(2)		(12)
Total Business divestiture-related gain (losses)	$	180	$	(49)	$	165	$	(52)

See Note B — Business Divestitures in the Notes for further information.

Impairment of Goodwill and Other Assets

~~Second~~One Quarter ~~2020 Compared With Second Quarter 2019:~~Comparison: Impairment of goodwill and other assets for the quarter ended July 2, 2021 included $145 million of non-cash charges for impairment of identifiable intangible and other long-lived assets related to our CTS reporting unit. Impairment of goodwill and other assets for the quarter ended July 3, 2020 ~~reflects~~included $56 million of non-cash charges for impairment of goodwill and other assets in our Commercial Aviation Solutions sector ~~associated with~~due to the ~~COVID-19-related~~COVID-related downturn in the commercial aviation market and its impact on customer operations and a $14 million non-cash charge for impairment of goodwill in connection with the then-pending divestiture of the VSE disposal group.

Two Quarters Comparison: Impairment of goodwill and other assets for the two quarters ended July 2, 2021 included a $62 million non-cash charge for impairment ~~charge~~of goodwill associated with ~~a potential divestiture.~~

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ the divestiture of the CPS business and $145 million of non-cash charges for impairment of identifiable intangible and other long-lived assets related to our CTS reporting unit. Impairment of goodwill and other assets for the two quarters ended July 3, 2020 ~~reflects~~included $375 million of non-cash charges for impairment of goodwill and other assets in our Commercial Aviation Solutions sector associated with the ~~COVID-19-related~~COVID-related downturn in the commercial aviation market and its impact on customer operations, a $14 million non-cash charge for impairment of goodwill associated with ~~a potential~~the then-pending divestiture of the VSE disposal group and a $5 million non-cash charge for impairment of goodwill recorded ~~in the quarter ended April 3, 2020~~ in connection with the then-pending divestiture of our Applied Kilovolts and Analytical Instrumentation business.

See Note CB — Business Divestitures ~~and Assets Sales,Note G — Receivables~~, ~~Note H — Contract Assets and Contract Liabilities~~ and Note KI — Goodwill and Other Intangible Assets in the Notes for further information.

Non-Operating Income

~~Second~~One Quarter ~~2020 Compared With Second Quarter 2019:~~Comparison: The ~~increase~~decrease in non-operating income infor the quarter ended July 2, 2021 compared with the quarter ended July 3, 2020 ~~compared with the quarter ended June 28, 2019~~ was primarily due to a $35 million charge for impairment of our equity investment in a nonconsolidated affiliate, partially offset by an increase in the non-service cost components of ~~pension and other postretirement~~net periodic benefit ~~plan income, reflecting the inclusion of income from benefit plans assumed in connection with the L3Harris Merger.~~income.

~~First~~ Two Quarters ~~2020 Compared With First Two Quarters 2019:~~ Comparison:The increase in non-operating income infor the two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020, ~~compared with the two quarters ended June 28, 2019 was primarily due to the same reason as noted above regarding~~reflects a charge for impairment of our equity investment in a nonconsolidated affiliate recorded in the quarter ended July ~~3, 2020.~~2, 2021, offset by an increase in the non-service cost components of net periodic benefit income.

See Note PM — Non-Operating Income and Note NK — Postretirement Benefit Plans in the Notes for further information.

~~Net~~ Interest Expense, net

~~Second~~One Quarter ~~2020 Compared With Second Quarter 2019:~~Comparison: ~~The increase in~~Interest expense, net ~~interest expense in~~for the quarter ended July ~~3, 2020 compared~~2, 2021 was comparable with ~~the quarter ended June 28, 2019 was primarily due to higher average debt levels as a result of the assumption of $3.5 billion of debt in connection with the L3Harris Merger.~~

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ ~~The increase in net interest expense in the two quarters ended July 3, 2020 compared with the two quarters ended June 28, 2019 was primarily due to the same reason as noted above regarding~~ the quarter ended July 3, 2020.

~~See~~ ~~Note M — Debt~~Two Quarters Comparison: inInterest expense, net remained largely unchanged for the ~~Notes and~~two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020.

See Note 14: “Debt” in the Notes to Consolidated Financial Statements in our Fiscal ~~Transition Period~~2020 Form ~~10-KT~~10-K for further information.

Income Taxes

~~Second~~One Quarter ~~2020 Compared With Second Quarter 2019:~~Comparison: Our effective tax rate (income taxes as a percentage of income from continuing operations before income taxes) was 29.0 percent for the quarter ended July 2, 2021 compared with 17.3 percent for the quarter ended July 3, ~~2020 compared with 10.9 percent for the quarter ended June 28, 2019. Our effective tax rate for~~2020. During the quarter ended July ~~3, 2020 benefited~~2, 2021, our effective tax rate was unfavorably impacted by non-deductible goodwill from completed business divestitures and the unfavorable impact of valuation allowances in certain foreign jurisdictions, partially offset by the favorable impact of ~~research~~R&D credits, favorable resolution of specific audit uncertainties and development (“R&D”) credits and the favorable impact of a net reduction in our uncertain tax position balance, partially offset the unfavorable impact of non-deductible goodwill impairment charges. Our effective tax rate for the quarter ended June 28, 2019 benefited from the favorable impact of excess tax benefits related to equity-based compensation.

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ ~~Our effective tax rate was 15.1 percent for the two quarters ended July 3, 2020 compared with 12.5 percent for the two quarters ended June 28, 2019. In addition to the items noted above for~~ During the quarter ended July 3, 2020, our effective tax rate for the two quarters ended July 3, 2020 was impacted by the favorable impact of excess tax benefits related to equity-based compensation. In addition to the items noted above for the quarter ended June 28, 2019, our effective tax rate for the two quarters ended June 28, 2019 benefited from favorable adjustments recorded upon the filing of our Federal tax returns.

~~Income From Continuing Operations~~

~~Second Quarter 2020 Compared With Second Quarter 2019:~~ The increase in income from continuing operations for the quarter ended July 3, 2020 compared with the quarter ended June 28, 2019 was primarily due to the combined effects of the reasons noted above in this “As Reported” discussion regarding the quarters ended July 3, 2020 and June 28, 2019.

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ The decrease in income from continuing operations for the two quarters ended July 3, 2020 compared with the two quarters ended June 28, 2019 was primarily due to the combined effects of the reasons noted above in this “As Reported” discussion regarding the two quarters ended July 3, 2020 and June 28, 2019.

~~Income From Continuing Operations Per Diluted Common Share Attributable to L3Harris Common Shareholders~~

~~Second Quarter 2020 Compared With Second Quarter 2019:~~ The decrease in income from continuing operations per diluted common share attributable to L3Harris common shareholders for the quarter ended July 3, 2020 compared with the quarter ended June 28, 2019 was primarily due to lower income from continuing operations, as discussed above, and an increase in diluted weighted average common shares outstanding as a result of approximately 104 million shares issued in connection with the L3Harris Merger.

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ The decrease in income from continuing operations per diluted common share attributable to L3Harris common shareholders for the two quarters ended July 3, 2020 compared with the two quarters ended June 28, 2019 was primarily due to lower income from continuing operations, as discussed above, and an increase in diluted weighted average common shares outstanding as a result of approximately 104 million shares issued in connection with the L3Harris Merger.

~~Pro Forma~~

~~Revenue~~

~~Second Quarter 2020 Compared With Second Quarter 2019:~~ Revenue for the quarter ended July 3, 2020 was comparable with pro forma revenue for the quarter ended June 28, 2019 as higher revenue in Integration Mission Systems, Space and Airborne Systems and Communication Systems was offset by lower revenue in Aviation Systems primarily due to the COVID-19-related downturn in our Commercial Aviation Solutions sector and its impact on customer operations and the revenue impact of the divestiture of our airport security and automation business on May 4, 2020. For the quarter ended July 3,

~~2020 and quarter ended June 28, 2019, we recognized $24 million and $130 million, respectively, of revenue in our Aviation Systems segment from our airport security and automation business.~~

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ The increase in revenue for the two quarters ended July 3, 2020 compared with pro forma revenue for the two quarters ended June 28, 2019 was primarily due to higher revenue in Integration Systems, Space and Airborne Systems and Communication Systems, partially offset by lower revenue in Aviation Systems primarily due to the COVID-19-related downturn in our Commercial Aviation Solutions sector and its impact on customer operations and the revenue impact of the divestiture of our airport security and automation business on May 4, 2020. For the two quarters ended July 3, 2020 and two quarters ended June 28, 2019, we recognized $148 million and $238 million, respectively, of revenue in our Aviation Systems segment from our airport security and automation business.

~~See “Discussion of Business Segment Results of Operations” below in this MD&A for further information.~~

~~Gross Margin~~

~~Second Quarter 2020 Compared With Second Quarter 2019:~~ The decreases in gross margin and gross margin percentage in the quarter ended July 3, 2020 compared with pro forma gross margin for the quarter ended June 28, 2019 were primarily due to a mix of revenue with lower relative gross margin percentage and the gross margin impact of the divestiture of the airport security and automation business on May 4, 2020, partially offset by productivity and integration savings.

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ The decreases in gross margin and gross margin percentage in the two quarters ended July 3, 2020 compared with pro forma gross margin and gross margin percentage for the two quarters ended June 28, 2019 were primarily due to a mix of revenue with lower relative gross margin percentage, partially offset productivity and integration savings.

~~ESA Expenses~~

~~Second Quarter~~ ~~2020 Compared With Second Quarter 2019:~~ The slight decrease in ESA expenses in the quarter ended July 3, 2020 compared with pro forma ESA expense for the quarter ended June 28, 2019 was primarily due to cost management and productivity and integration savings, partially offset by ~~$58 million~~ ~~of dive~~stiture expenses and losses, $33 million of additional amortization of identifiable intangible assets acquired as a result of the L3Harris Merger and $20 million of restructuring charges for workforce reductions and other exit costs.

~~ESA percentage in the quarter ended July 3, 2020 was comparable with the quarter ended June 28, 2019.~~

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ The slight increase in ESA expenses in the two quarters ended July 3, 2020 compared with pro forma ESA expense for the two quarters ended June 28, 2019 was primarily due to $61 million of divestiture expenses and losses, $33 million of additional of amortization of identifiable intangible assets acquired as a result of the L3Harris Merger and $26 million of restructuring charges for workforce reductions and other exit costs.

~~ESA percentage in the two quarters ended July 3, 2020 was comparable with the two quarters ended June 28, 2019.~~

~~Impairment of Goodwill and Other Assets~~

~~Second Quarter 2020 Compared With Second Quarter 2019:~~ ~~Impairment of goodwill and other assets for the quarter ended July 3, 2020 on a pro forma basis reflects the same charges as noted above for the quarter ended July 3, 2020 on an as reported basis.~~

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ Impairment of goodwill and other assets for the two quarters ended July 3, 2020 on a pro forma basis reflects the same charges as noted above for the two quarters ended July 3, 2020 on an as reported basis.

~~See~~ ~~Note C — Business Divestitures and Assets Sales~~ ~~and~~ ~~Note K — Goodwill and Other Intangible Assets~~ ~~in the Notes for further information.~~

~~Non-Operating Income~~

~~Second Quarter 2020 Compared With Second Quarter 2019:~~ The increase in non-operating income for the quarter ended July 3, 2020 compared with pro forma non-operating income for the quarter ended June 28, 2019 was primarily due to an increase in the non-service cost components of pension and other postretirement benefit plan income.

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ The increase in non-operating income for the two quarters ended July 3, 2020 compared with pro forma non-operating income for the two quarters ended June 28, 2019 was primarily due to an increase in the non-service cost components of pension and other postretirement benefit plan income.

~~Net Interest Expense~~

~~Second Quarter 2020 Compared With Second Quarter 2019:~~ ~~Net interest expense for the quarter ended July 3, 2020 was largely unchanged compared with pro forma net interest expense for the quarter ended June 28, 2019.~~

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ ~~Net interest expense for the two quarters ended July 3, 2020 was largely unchanged compared with pro forma net interest expense for the two quarters ended June 28, 2019.~~

~~See “Supplemental Unaudited Pro Forma Condensed Combined Income Statement Information” below in this MD&A for further information.~~

~~Income Taxes~~

~~Second Quarter 2020 Compared With Second Quarter 2019:~~ Our effective tax rate was 17.3 percent for the quarter ended July 3, 2020 compared with a 12.6 percent pro forma effective tax rate for the quarter ended June 28, 2019. Our effective tax rate for the quarter ended July 3, 2020 benefited from the favorable impact of R&D credits and the favorable impact of a net reduction in our uncertain tax position balance, partially offset by the unfavorable impact of non-deductible goodwill impairment charges.

~~First~~ Two Quarters ~~2020 Compared With First Two Quarters 2019:~~Comparison: Our effective tax rate was 20.6 percent for the two quarters ended July 2, 2021 compared with 15.1 percent for the two quarters ended July 3, ~~2020 compared with a 12.4 percent pro forma~~2020. Our effective tax rate for the two quarters ended ~~June 28, 2019.~~July 2, 2021 was impacted by the items described above in the one quarter comparison for income taxes. In addition to the items noted above in the one quarter comparison for ~~the quarter ended July 3, 2020,~~income taxes, our effective tax rate for the two quarters ended July 3, 2020 ~~was impacted by~~benefited from the favorable impact of excess tax benefits related to equity-based compensation.

See “Supplemental Unaudited Pro Forma Condensed Combined Income Statement Information” below in this MD&A for information regarding our pro forma effective tax rate for the quarter and two quarters ended June 28, 2019.

Income From Continuing Operations

~~Second~~One Quarter ~~2020 Compared With Second Quarter 2019:~~Comparison: The ~~decrease~~increase in income from continuing operations for the quarter ended July ~~3, 2020~~2, 2021 compared with ~~pro forma income from continuing operations for~~ the quarter ended ~~June 28, 2019~~July 3, 2020 was primarily due to the combined effects of the reasons noted above in ~~this “Pro Forma” discussion regarding~~ the ~~quarters ended July 3, 2020 and June 28, 2019.~~one quarter comparison paragraphs.

~~First~~ Two Quarters ~~2020 Compared With First Two Quarters 2019:~~Comparison: The ~~decrease~~increase in income from continuing operations for the two quarters ended July ~~3, 2020~~2, 2021 compared with ~~pro forma income from continuing operations for~~ the two quarters ended ~~June 28, 2019~~July 3, 2020 was primarily due to the combined effects of the reasons noted above in ~~this “Pro Forma” discussion regarding~~ the two quarters ~~ended July 3, 2020 and June 28, 2019, particularly the charges for impairment of goodwill and other assets in the two quarters ended July 3, 2020.~~comparison paragraphs.

Income From Continuing Operations Per Diluted Common Share Attributable to L3Harris Common Shareholders

~~Second~~One Quarter ~~2020 Compared With Second Quarter 2019:~~Comparison: The ~~decrease~~increase in income from continuing operations per diluted common share attributable to L3Harris common shareholders for the quarter ended July 2, 2021 compared with the quarter ended July 3, 2020 ~~compared with pro forma~~was primarily due to higher income from continuing operations ~~per diluted common share for the quarter ended June 28, 2019 was primarily due to lower income from continuing operations, as discussed above, partially offset by a decrease in our~~and fewer diluted weighted average common shares outstanding ~~from~~due to the repurchases of shares of our common stock ~~repurchased~~ under our repurchase program ~~since~~in the ~~L3Harris Merger.~~four quarters ended July 2, 2021.

~~First~~ Two Quarters ~~2020 Compared With First Two Quarters 2019:~~Comparison: The ~~decrease~~increase in income from continuing operations per diluted common share attributable to L3Harris common shareholders for the two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020 ~~compared with pro forma~~was primarily due to higher income from continuing operations ~~per diluted common share for the two quarters ended June 28, 2019 was primarily due to lower income from continuing operations, as discussed above, partially offset by a decrease in our~~and fewer diluted weighted average common shares outstanding ~~from~~due to the repurchases of shares of our common stock ~~repurchased~~ under our repurchase program ~~since~~in the ~~L3Harris Merger.~~four quarters ended July 2, 2021.

See “Common Stock Repurchases” below in this MD&A for information regarding our share repurchase program.

~~Supplemental Unaudited Pro Forma Condensed Combined Income Statement Information~~

The following supplemental unaudited pro forma condensed combined income statement information prepared in accordance with the requirements of Article 11 of Regulation S-X provides further information supporting the preparation of the supplemental unaudited pro forma condensed combined financial information for the quarter and two quarters ended June 28, 2019 provided above in the “Consolidated Results of Operations” discussion in this MD&A and has been prepared to give effect to the L3Harris Merger under the acquisition method of accounting. It combines the historical results of operations of Harris and L3 and reflects the L3Harris Merger as if it closed on June 30, 2018, the first day of Harris’ fiscal 2019, and gives effect to pro forma events that are (a) directly attributable to the L3Harris Merger, (b) factually supportable and (c) expected to have a continuing impact on our results of operations. The adjustments include adjustments to reflect the sale of the Harris Night Vision business, which is directly attributable to the L3Harris Merger, but do not include any adjustments for the use of proceeds from such sale, because the use is not directly attributable to the L3Harris Merger. The pro forma condensed combined income statement information is provided for informational and supplemental purposes only, and does not purport to indicate what L3Harris’ results of operations would have been, or L3Harris’ future results of operations, had the L3Harris Merger actually occurred on June 30, 2018. The supplemental unaudited pro forma condensed combined income statement information should be read in conjunction with other sections of this MD&A, our Condensed Consolidated Financial Statements (Unaudited) and the Notes appearing elsewhere in this Report.

Unaudited Pro Forma Condensed Combined Statement of Income
For the quarter ended June 28, 2019
Historical
Harris Historical
L3 Pro Forma
Adjustments Note
References Pro Forma
Combined
(In millions, except per share amounts)
Revenue from product sales and services $ 1,865 $ 2,631 $ (4) a $ 4,448
(44) b
Cost of product sales and services (1,223) (1,868) 4 a (3,062)
30 b
(5) c
Engineering, selling and administrative expenses (349) (442) 6 b (908)
(125) c
29 d
(2) e
2 f
(27) j
Merger, acquisition and divestiture related expenses — (27) 27 j —
Non-operating income 48 — 14 j 62
Interest and other income, net — 11 10 g —
(21) j
Debt retirement charge — (3) 3 j —
Interest income — — 4 j 4
Interest expense (39) (38) 3 h (67)
7 i
Income from continuing operations before income taxes 302 264 (89) 477
Income taxes (33) (50) 23 k (60)
Income from continuing operations 269 214 (66) 417
Noncontrolling interest, net of income taxes — (6) — (6)
Income from continuing operations attributable to common shareholders $ 269 $ 208 $ (66) $ 411
Income from continuing operations per basic common share attributable to common shareholders $ 2.26 $ 1.85
Income from continuing operations per diluted common share attributable to common shareholders $ 2.21 $ 1.82
Basic weighted average common shares outstanding 118.3 104.1 l 222.4
Diluted weighted average common shares outstanding 121.1 104.6 l 225.7

Unaudited Pro Forma Condensed Combined Statement of Income
For the two quarters ended June 28, 2019
Historical
Harris Historical
L3 Pro Forma
Adjustments Note
References Pro Forma
Combined
(In millions, except per share amounts)
Revenue from product sales and services $ 3,593 $ 5,331 $ (11) a $ 8,834
(79) b
Cost of product sales and services (2,362) (3,875) 11 a (6,181)
54 b
(9) c
Engineering, selling and administrative expenses (659) (824) 11 b (1,707)
(228) c
38 d
(4) e
4 f
(45) j
Merger, acquisition and divestiture related expenses — (45) 45 j —
Non-operating income 94 — 23 j 117
Interest and other income, net — 15 19 g —
(34) j
Debt retirement charge — (3) 3 j —
Interest income 1 — 8 j 9
Interest expense (82) (75) 4 h (139)
14 i
Income from continuing operations before income taxes 585 524 (176) 933
Income taxes (73) (87) 44 k (116)
Income from continuing operations 512 437 (132) 817
Noncontrolling interest, net of income taxes — (12) — (12)
Income from continuing operations attributable to common shareholders $ 512 $ 425 $ (132) $ 805
Income from continuing operations per basic common share attributable to common shareholders $ 4.32 $ 3.62
Income from continuing operations per diluted common share attributable to common shareholders $ 4.23 $ 3.57
Basic weighted average common shares outstanding 118.1 104.1 l 222.2
Diluted weighted average common shares outstanding 120.7 104.6 l 225.3

~~Notes:~~

a.~~Reflects the elimination of intercompany balances and transactions between L3 and Harris.~~

b.~~Reflects the sale of the Harris Night Vision business.~~

c.Reflects the net increase in amortization expense related to the fair value of acquired finite-lived identifiable intangible assets and the elimination of historical amortization expense recognized by L3 for the quarter and two quarters ended June 28, 2019. Assumptions and details are as follows:

Weighted Average Amortization Period
Fair Value ⁽¹⁾
Quarter ended June 28, 2019 Two Quarters ended June 28, 2019
(In years) (In millions)
Identifiable Intangible Assets Acquired:
Customer relationships 15 $ 5,417 $ 122 $ 222
Trade names — Divisions 9 123 3 6
Adjustment to engineering, selling and administrative expenses 125 228
Developed technology 7 562 17 33
Less: L3 historical amortization (12) (24)
Adjustment to cost of product sales and services 5 9
Total net adjustment to amortization expense $ 130 $ 237
_________
⁽¹⁾As of May 4, 2020, the date of filing our Current Report on Form 8-K.

d.Represents the elimination of transaction costs, which were included in merger, acquisition and divestiture related expenses in L3’s historical statement of operations and in engineering, selling and administrative expenses in Harris’ historical statement of income.

e.In connection with the L3Harris Merger, on October 12, 2018, each company entered into a letter of agreement with its chief executive officer, to outline the terms of each such person’s role and compensation arrangements following the merger. Amounts shown reflect the increase in compensation expense as a result of these modified arrangements.

f.~~Reflects the impact of change-in-control payments under certain post-retirement and share-based and deferred compensation arrangements.~~

g.~~Reflects the elimination of amortization of net actuarial losses from accumulated comprehensive loss related to L3’s postretirement benefit plans as part of purchase accounting.~~

h.~~Reflects the elimination of amortization of deferred debt issuance costs as part of purchase accounting.~~

i.~~Reflects amortization of the increase to L3’s long-term debt based on a $172 million fair value adjustment.~~

j.~~Certain amounts from L3’s historical statement of operations data were reclassified to conform their presentation to that of Harris. These reclassifications include:~~

1.~~Merger, acquisition and divestiture-related expenses, which were reclassified to engineering, selling and administrative expenses; and~~

2.~~Interest and other income, net, which was reclassified to interest income.~~

k.Represents the income tax impact of the pro forma adjustments, using the blended worldwide tax rates for L3, in the case of pro forma adjustments to L3’s historical results, and the federal and state statutory tax rates for Harris, in the case of pro forma adjustments to Harris’ historical results. As a result, the combined statutory tax rate used to tax-effect the pro forma adjustments was approximately 25.8 percent and 25.0 percent for the quarter and two quarters ended June 28, 2019, respectively. This tax rate does not represent the combined company’s effective tax rate, which will include other tax charges and benefits, and does not take into account any historical or possible future tax events that may impact the combined company following the consummation of the L3Harris Merger.

l.Increase in common stock due to shares of L3Harris common stock issued for outstanding L3 common stock and in respect of vested L3 restricted stock units and L3 performance stock units. Diluted shares also include the dilutive impact of L3Harris stock options issued in replacement of L3 stock options calculated using the treasury stock method.

Discussion of Business Segment Results of Operations

Integrated Mission Systems


		Quarter Ended																								Quarter Ended					Two Quarters Ended
		July 3, 2020			June 28, 2019			% Inc/(Dec)	June 28, 2019			% Inc/(Dec)

(In millions)														(In millions)	July 2, 2021			July 3, 2020			% Inc/(Dec)		July 2, 2021			July 3, 2020			% Inc/(Dec)
		As Reported														Pro Forma
		(Dollars in millions)
Revenue	Revenue	$	1,331		$	11		*	$	1,240		7	%	Revenue	$	1,494		$	1,331		12	%	$	2,945		$	2,701		9	%

Segment operating income	Segment operating income	$	224		$	3		*	$	162		38	%	Segment operating income	$	229		$	224		2	%	$	469		$	425		10	%
% of revenue	% of revenue	17		%	27		%		13		%			% of revenue	15		%	17		%			16		%	16		%

Two Quarters Ended
July 3,
2020 June 28,
2019 % Inc/(Dec) June 28,
2019 % Inc/(Dec)
As Reported Pro Forma
(Dollars in millions)
Revenue $ 2,701 $ 25 * $ 2,602 4 %
Segment operating income $ 425 $ 6 * $ 327 30 %
% of revenue 16 % 24 % 13 %

~~_______~~

*Not meaningful

~~As Reported~~

One Quarter Comparison: The ~~changes~~increase in segment revenue for the quarter ended July 2, 2021 compared with the quarter ended July 3, 2020 was primarily due to $148 million of higher revenue in ISR, driven by aircraft missionization on a recently awarded North Atlantic Treaty Organization program and $21 million of higher revenue in Maritime, reflecting a ramp on key platforms, partially offset by lower revenue in Electro Optical due to product delivery timing.

The increase in segment operating income for the quarter ended July 2, 2021 compared with the quarter ended July 3, 2020 was primarily due to higher revenue and integration benefits and operational excellence, partially offset by a mix of program revenue and product sales with relatively lower operating margin percentage for the quarter ended July 2, 2021, which resulted in a decrease in operating income as a percentage of revenue (“operating margin percentage”).

Two Quarters Comparison: The increases in segment revenue and operating income in the ~~quarter and~~two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020 ~~compared with the quarter and two quarters ended June 28, 2019, respectively,~~ were primarily due to the ~~inclusion of L3 operations~~same reasons as noted above in ~~segment~~the one quarter comparison regarding this segment. Segment operating ~~results~~margin percentage for the ~~quarter and~~two quarters ended July 2, 2021 was comparable with the two quarters ended July 3, 2020. ~~Because the Integrated Mission~~

Space and Airborne Systems ~~segment is almost entirely comprised of L3 businesses, comparisons to prior-year segment operating metrics are not meaningful.~~

~~Pro Forma~~


	Quarter Ended								Two Quarters Ended
(In millions)	July 2, 2021			July 3, 2020			% Inc/(Dec)		July 2, 2021			July 3, 2020			% Inc/(Dec)


Revenue	$	1,287		$	1,249		3	%	$	2,523		$	2,441		3	%





Segment operating income	$	253		$	235		8	%	$	493		$	456		8	%
% of revenue	20		%	19		%			20		%	19		%

~~Second~~One Quarter ~~2020 Compared With Second Quarter 2019:~~Comparison: The increase in segment revenue infor the quarter ended July 2, 2021 compared with the quarter ended July 3, 2020 was primarily due to $47 million of higher revenue in Space, reflecting a ramp in missile defense and other responsive programs and growth in Intel and Cyber from classified programs, partially offset by lower revenue in Mission Avionics, reflecting F-35 program timing, and lower revenue in Electronic Warfare due to lower F-16 volume.

The increases in segment operating income and segment operating margin percentage for the quarter ended July 2, 2021 compared with the quarter ended ~~June 28, 2019~~July 3, 2020 were primarily due to higher revenue, operational excellence, including program performance, higher pension income and integration benefits, partially offset by increased investments in R&D.

Two Quarters Comparison: The increase in segment revenue for the two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020 was primarily due to ~~$54~~$80 million of higher revenue in ~~Maritime~~Space from a ramp in missile defense and ~~$40 million higher~~other responsive programs and growth in Intel and Cyber from classified programs, partially offset by lower revenue in ~~Electro Optical.~~Electronic Warfare due to lower F-16 volume.

The increases in segment operating income and operating margin percentage infor the ~~quarter~~two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020 ~~compared with the quarter ended June 28, 2019~~ were primarily due to higher ~~volume,~~ ~~productivity and~~revenue, integration benefits and higher pension income, partially offset by a mix of ~~program revenue~~programs with relatively lower operating margin ~~percentage~~percentage.

Communication Systems


	Quarter Ended								Two Quarters Ended
(In millions)	July 2, 2021			July 3, 2020			% Inc/(Dec)		July 2, 2021			July 3, 2020			% Inc/(Dec)


Revenue	$	1,127		$	1,112		1	%	$	2,239		$	2,206		1	%





Segment operating income	$	287		$	265		8	%	$	568		$	515		10	%
% of revenue	25		%	24		%			25		%	23		%

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~

One Quarter Comparison: The increase in segment revenue infor the ~~two quarters~~quarter ended July 2, 2021 compared with the quarter ended July 3, 2020 ~~compared with the two quarters ended June 28, 2019~~ was primarily due to $23 million of higher revenue in Tactical Communications, reflecting increased international demand, $17 million of higher revenue in Global Communications Solutions and organic growth in Integrated Vision Solutions driven by the ~~same reasons as noted above regarding this segment for~~continued ramp in DoD modernization, partially offset by the ~~quarters~~impact of the divestiture on July 31, 2020 of the EOTech business (which generated $20 million of revenue in the quarter ended July 3, ~~2020~~2020), $7 million of lower revenue in Public Safety due to residual COVID-related impacts and ~~June 28, 2019.~~lower revenue in Broadband Communications from lower volume on legacy unmanned programs.

The increases in segment operating income and operating margin percentage for the quarter ended July 2, 2021 compared with the quarter ended July 3, 2020 were primarily due to a mix of program revenue and product sales with relatively higher operating margin percentage for the quarter ended July 2, 2021, operational excellence and integration benefits.

Two Quarters Comparison: The increases in segment revenue, operating income and operating margin percentage for the two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020 ~~compared with the two quarters ended June 28, 2019 were primarily driven by~~ ~~productivity and integration savings and higher pension income, partially offset by a mix of program revenue with relatively lower operating margin percentage.~~

~~Space and Airborne Systems~~

Quarter Ended
July 3,
2020 June 28,
2019 % Inc/(Dec) June 28,
2019 % Inc/(Dec)
As Reported Pro Forma
(Dollars in millions)
Revenue $ 1,249 $ 1,019 23 % $ 1,200 4 %
Segment operating income $ 235 $ 195 21 % $ 228 3 %
% of revenue 19 % 19 % 19 %

Two Quarters Ended
July 3,
2020 June 28,
2019 % Inc/(Dec) June 28,
2019 % Inc/(Dec)
As Reported Pro Forma
(Dollars in millions)
Revenue $ 2,441 $ 1,975 24 % $ 2,312 6 %
Segment operating income $ 456 $ 369 24 % $ 426 7 %
% of revenue 19 % 19 % 18 %

~~As Reported~~

~~The increases in segment revenue and operating income in the quarter and two quarters ended July 3, 2020 compared with the quarter and two quarters ended June 28, 2019, respectively,~~ were primarily due to the ~~inclusion of L3 operations in segment operating results for the quarter and two quarters ended July 3, 2020 as well as the~~ same reasons as noted ~~below regarding~~above in the one quarter comparison for this ~~segment and operating income. Segment operating margin percentages for the quarter and two quarters ended July 3, 2020 were comparable with the quarter and two quarters ended June 28, 2019.~~segment.

~~Pro Forma~~Aviation Systems


	Quarter Ended								Two Quarters Ended
(In millions)	July 2, 2021			July 3, 2020			% Inc/(Dec)		July 2, 2021			July 3, 2020			% Inc/(Dec)


Revenue	$	809		$	800		1	%	$	1,623		$	1,811		(10)	%





Segment operating income (loss)	$	35		$	31		13	%	$	163		$	(146)		*
% of revenue	4		%	4		%			10		%	(8)		%

_________________

~~Second~~*Not meaningful

One Quarter ~~2020 Compared With Second Quarter 2019:~~Comparison: The increase in segment revenue infor the quarter ended July 2, 2021 compared with the quarter ended July 3, 2020 ~~compared with the quarter ended June 28, 2019~~ was primarily due to ~~$94~~$16 million of higher revenue in Defense Aviation, reflecting a ramp in fuzing and ordnance systems, increased training and avionics product sales volume in the commercial aerospace business and $5 million of higher revenue in Mission ~~Avionics driven by a ramp in production on the F-35 platform and $33 million of higher revenue~~Networks from ~~growth on classified programs in Intel and Cyber,~~increased Federal Aviation Administration volume, partially offset by $24 million of lower revenue ~~in Space, reflecting~~from the ~~delayed ramp of a follow on U.S. Air Force space domain awareness program following the wind down~~divestiture of the ~~predecessor program.~~airport security and automation businesses on May 4, 2020.

The increase in segment operating income and comparability of operating margin percentage for the quarter ended July 2, 2021 compared with the quarter ended July 3, 2020 were primarily due to operational excellence, cost management, integration benefits and the absence in the quarter ended July 2, 2021 of COVID-related restructuring charges and exit costs recorded in the quarter ended July 3, 2020, ~~compared with the quarter ended June 28, 2019 reflects higher volume and productivity savings, partially~~mostly offset by a ~~mix~~$26 million increase in charges for impairment of ~~program revenue with a relatively lower operating margin percentage.~~assets.

~~First~~ Two Quarters ~~2020 Compared With First Two Quarters 2019:~~Comparison: The ~~increase~~decrease in segment revenue infor the two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020 ~~compared with the two quarters ended June 28, 2019~~ was primarily due to $43 million of lower commercial aerospace revenue, which included a $147 million revenue impact from the ~~same reasons as noted above regarding this segment for the quarters ended July 3,~~airport security and automation business divestiture on May 4, 2020 and ~~June 28, 2019.~~lower revenue from the COVID-related downturn in the commercial aviation market and its impact on customer operations, and lower revenue in Military Training primarily due to program timing. These drivers were partially offset by $27 million of higher revenue in Defense Aviation and $20 million of higher revenue in Mission Networks reflecting higher U.S. Federal Aviation Administration volume.

The increases in segment operating income and operating margin percentage for the two quarters ended July 2, 2021 compared with the segment operating loss and operating margin percentage in the two quarters ended July 3, 2020 ~~compared with the two quarters ended June 28, 2019~~ were primarily due to ~~productivity savings, partially offset by a mix of program revenue with a relatively lower gross margin.~~

~~Communication Systems~~

Quarter Ended
July 3,
2020 June 28,
2019 % Inc/(Dec) June 28,
2019 % Inc/(Dec)
As Reported Pro Forma
(Dollars in millions)
Revenue $ 1,112 $ 609 83 % $ 1,086 2 %
Segment operating income $ 265 $ 176 51 % $ 239 11 %
% of revenue 24 % 29 % 22 %

Two Quarters Ended
July 3,
2020 June 28,
2019 % Inc/(Dec) June 28,
2019 % Inc/(Dec)
As Reported Pro Forma
(Dollars in millions)
Revenue $ 2,206 $ 1,189 86 % $ 2,127 4 %
Segment operating income $ 515 $ 343 50 % $ 465 11 %
% of revenue 23 % 29 % 22 %

~~As Reported~~

The increases in segment revenue and operating income in the quarter and two quarters ended July 3, 2020 compared with the quarter and two quarters ended June 28, 2019, respectively, was primarily due to the inclusion of L3 operations in segment operating results during the quarter and two quarters ended July 3, 2020 and the same reasons as noted ~~below regarding revenue and operating income~~above in the one quarter comparison for this segment ~~on a pro forma basis.~~

~~The decreases in segment operating income percentages in~~as well as the ~~quarter and two quarters ended July 3, 2020 compared~~

~~with the quarter and two quarters ended June 28, 2019 were primarily due to a mix~~absence of ~~product sales and program revenue with a~~

~~relatively lower operating margin percentage.~~

~~Pro Forma~~

~~Second Quarter 2020 Compared With Second Quarter 2019:~~ ~~The increase in revenue in the quarter ended July 3, 2020 compared with the quarter ended June 28, 2019 was primarily due to $40~~$375 million of ~~higher Tactical Communications revenue, reflecting a ramp-up in U.S. DoD modernization programs~~non-cash charges for impairment of goodwill and lower sales volume for international tactical radios, and $13 million of higher revenue in Integrated Vision Systems, partially offset by lower revenue in Public Safety, reflecting COVID-19-related pressures on state and local government municipality customers.

The increases in segment operating income and operating margin percentage in the quarter ended July 3, 2020 compared with the quarter ended June 28, 2019 were primarily due to higher volume, productivity and integration savings and cost management, partially offset by a mix of product sales and program revenue with a relatively lower operating margin percentage and the impact of COVID-19.

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ ~~The increase in revenue~~other assets in the two quarters ended July 3, 2020 ~~compared with the two quarters ended June 28, 2019 was primarily due the same reasons as noted above regarding this segment for the quarters ended July 3, 2020 and June 28, 2019.~~

The increases in segment operating income and operating margin percentage in the two quarters ended July 3, 2020 compared with the two quarters ended June 28, 2019 were primarily due the same reasons as noted above regarding this segment for the quarters ended July 3, 2020 and June 28, 2019.

~~Additional Information on Known Trends and Uncertainties~~

Revenue and operating income in the Public Safety sector has been and we expect will continue to be adversely impacted by COVID-19-related pressures on state and local government municipality customers, including reduced staffing, limited remote work technology capabilities, significant reductions in near-term tax revenues and competing budget priorities. We currently expect revenue in our Public Safety sector to decrease by approximately $75 million in calendar year 2020 compared with calendar year 2019; however, the ultimate extent of the COVID-19-related impact to our Public Safety sector remains uncertain and unpredictable.

~~Aviation Systems~~

Quarter Ended
July 3,
2020 June 28,
2019 % Inc/(Dec) June 28,
2019 % Inc/(Dec)
As Reported Pro Forma
(Dollars in millions)
Revenue $ 800 $ 186 * 965 (17) %
Segment operating income $ 31 $ 19 * 109 (72) %
% of revenue 4 % 10 % 11 %

Two Quarters Ended
July 3,
2020 June 28,
2019 % Inc/(Dec) June 28,
2019 % Inc/(Dec)
As Reported Pro Forma
(Dollars in millions)
Revenue $ 1,811 $ 330 * 1,879 (4) %
Segment operating income (loss) $ (146) $ 36 * 214 (168) %
% of revenue (8) % 11 % 11 %

~~__________~~

*Not meaningful

~~As Reported~~

The changes in segment revenue, operating income and operating margin percentage in the quarter and two quarters ended July 3, 2020 compared with the quarter and two quarters ended June 28, 2019, respectively, were primarily due to the inclusion of L3 operations in segment operating results for the quarter and two quarters ended July 3, 2020. Because the majority of our Aviation Systems segment is comprised of L3 businesses, comparisons to prior-year segment operating metrics are not meaningful.

The segment operating loss in the two quarters ended July 3, 2020 compared with segment operating income in the two quarters ended June 28, 2019 was primarily due to $68 million and $393 million of charges for impairment of goodwill and other assets, restructuring charges and other exit costs recorded in the quarter and two quarters ended July 3, 2020, respectively, in our Commercial Aviation Solutions sector due to theCOVID-related downturn in the commercial aviation market and its impact on customer operations, partially offset by the inclusion of L3 operations in segment operating results (principally Defense Aviation Products and Military Training operations) in the quarter and two quarters ended July 3, 2020.operations.

~~Pro Forma~~

~~Second~~

Unallocated Corporate Expenses


	Quarter Ended						Two Quarters Ended
(In millions)	July 2, 2021		July 3, 2020		% Inc/(Dec)		July 2, 2021		July 3, 2020		% Inc/(Dec)

Other unallocated corporate expenses	$	70	$	53	32	%	$	110	$	78	41	%
L3Harris Merger-related integration expenses	20		37		(46)	%	41		68		*
Amortization of acquisition-related intangibles	156		208		(25)	%	320		353		(9)	%
Business divestiture-related (gains) losses	(180)		49		*		(165)		52		*
Impairment of goodwill and other assets	63		14		*		125		19		*

_________________

*Not meaningful

One Quarter ~~2020 Compared With Second Quarter 2019:~~Comparison: The ~~decrease~~increase in ~~segment revenue in~~other unallocated corporate expenses for the quarter ended July ~~3, 2020~~2, 2021 compared with the quarter ended June 28, 2019 was primarily due to lower revenue in Commercial Aviation Solutions due to the downturn in the commercial aviation market and its impact on customer operations, partially offset by $49 million higher revenue in Defense Aviation Products, reflecting growth in classified programs, and the revenue impact of the airport security and automation business divestiture on May 4, 2020. For the quarter ended July 3, 2020 and quarter ended June 28, 2019, we recognized $24 million and $130 million, respectively, of revenue from the airport security and automation business.

The decrease in segment operating income in the quarter ended July 3, 2020 compared with the quarter ended June 28, 2019 was primarily due to lower volume in the Commercial Aviation Solutions sector due to the downturn in the commercial aviation market and its impact on customer operations, the divestiture of the airport security and automation business in the quarter ended July 3, 2020, $56 million of impairment of goodwill and other assets, a mix of revenue with relative lower operating margin percentage and $12 million of restructuring charges to reduce our workforce and consolidate facilities in our Commercial Aviation Solutions sector due to the downturn in the commercial aviation market mentioned above, partially offset by productivity improvements primarily in Defense Aviation Products, integration benefits and higher pension income. Segment operating margin percentage in the quarter ended July 3, 2020 was ~~comparable with the quarter ended June 28, 2019 reflecting the combined impacts of the revenue and operating income items noted above.~~

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ ~~The decrease in segment revenue in the two quarters ended July 3, 2020 compared with the two quarters ended June 28, 2019 was~~ primarily due to ~~lower revenue in Commercial~~

~~Aviation Solutions due to the same reasons as noted above regarding this segment for the quarters ended July 3, 2020 and June 28, 2019 as well as $34 million higher revenue in Mission Networks.~~

~~The segment operating loss in the two quarters ended July 3, 2020 compared with segment operating income in the two quarters ended June 28, 2019 was primarily due to $375~~$37 million of impairment of goodwill and other assets recorded in the two quarters ended July 3, 2020 in the Commercial Aviation Solutions sector due to the downturn in the commercial aviation market and its impact on customer operations, the divestiture of the airport security and automation business in the quarter ended July 3, 2020 and $18 million of restructuring charges to reduce our workforce and consolidate facilities in our Commercial Aviation Solutions sector due to the downturn in the commercial aviation market mentioned above,higher divestiture-related expenses, partially offset by ~~productivity and integration benefits, higher pension income and higher volume~~.

~~Additional Information on Known Trends and Uncertainties~~

~~Revenue and operating income from our Commercial Aviation Solutions sector are expected to decline for~~ the ~~remainder~~absence of fiscal 2020 due to decreased commercial training and commercial avionics sales volume, reflecting the COVID-19 pandemic and its impact on global air traffic and customer operations. We currently expect revenue in our Commercial Aviation Solutions sector to decrease by approximately $300 million in calendar year 2020 compared with calendar year 2019; however, the ultimate extent of the COVID-19-related impact to our Commercial Aviation Solutions sector remains uncertain and unpredictable. In addition, the sale of our airport security and automation businesses on May 4, 2020 will decrease segment revenue and operating income in calendar year 2020 compared with calendar year 2019. Revenue from the airport security and automation businesses in the quarter and two quarters ended July 3, 2020 was approximately $24 million and $148 million, respectively, compared with $130 million and $238 million for the quarter and two quarters ended June 28, 2019, respectively, on a pro forma basis.

~~Unallocated Corporate Expense~~

Quarter Ended
July 3,
2020 June 28,
2019 % Inc/(Dec) June 28,
2019 % Inc/(Dec)
As Reported Pro Forma
(Dollars in millions)
Unallocated corporate expenses $ 116 $ 1 * $ 3 *
L3Harris Merger-related transaction and integration expenses 37 36 3 % 35 6 %
Amortization of acquisition-related intangibles 208 25 732 % 167 25 %

Two Quarters Ended
July 3,
2020 June 28,
2019 % Inc/(Dec) June 28,
2019 % Inc/(Dec)
As Reported Pro Forma
(Dollars in millions)
Unallocated corporate expenses $ 149 $ 1 * $ 5 *
L3Harris Merger-related transaction and integration expenses 68 52 31 % 60 13 %
Amortization of acquisition-related intangibles 353 50 606 % 312 13 %

~~_____________~~

*Not meaningful

~~Second Quarter 2020 Compared With Second Quarter 2019:~~ The increase in unallocated corporate expenses in the quarter ended July 3, 2020 compared with the quarter ended June 28, 2019 (on both an as reported and pro forma basis) was primarily due to $58 million of divestiture expenses and losses, $16 million of additional cost of sales related to ~~the~~ fair value step-up in inventory sold ~~$14 million of goodwill impairment associated with a potential divestiture,~~ and $7 million of ~~L3Harris integration-related~~ restructuring charges ~~for workforce reductions.~~recorded in the quarter ended July 3, 2020.

~~First~~ Two Quarters ~~2020 Compared With First Two Quarters 2019:~~Comparison: The increase in other unallocated corporate ~~expense~~expenses for the two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020 was primarily due to $44 million of higher divestiture-related expenses and a $15 million accrual for a value-added tax obligation in the two quarters ended July 2, 2021, partially offset by $31 million of additional cost of sales related to fair value step-up in inventory sold and $7 million of restructuring charges recorded in the two quarters ended July 3, 2020 compared with the two quarters ended June 28, 2019 on both an as reported and pro forma basis was primarily due to the same reasons as noted above regarding unallocated corporate expenses for the quarters ended July 3, 2020 and June 28, 2019.

2020.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL STRATEGIES

Cash Flows


		Two Quarters Ended							Two Quarters Ended
		July 3, 2020		June 28, 2019

(In millions)						(In millions)	July 2, 2021		July 3, 2020
		(In millions)
Net cash provided by operating activities	Net cash provided by operating activities	$	1,335	$	716	Net cash provided by operating activities	$	1,381	$	1,335
Net cash provided by (used in) investing activities		845		(92)
Net cash provided by investing activities						Net cash provided by investing activities	1,307		845
Net cash used in financing activities	Net cash used in financing activities	(1,042)		(439)		Net cash used in financing activities	(1,937)		(1,042)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(15)		2		Effect of exchange rate changes on cash and cash equivalents	2		(15)
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	1,123		187		Net increase in cash and cash equivalents	753		1,123
Cash and cash equivalents, beginning of year	Cash and cash equivalents, beginning of year	824		343		Cash and cash equivalents, beginning of year	1,276		824
Cash and cash equivalents, end of quarter	Cash and cash equivalents, end of quarter	$	1,947	$	530	Cash and cash equivalents, end of quarter	$	2,029	$	1,947

Cash and cash equivalents

The $753 million net increase in cash and cash equivalents in the two quarters ended July 2, 2021 was primarily due to:

•$1,381 million of net cash provided by operating activities;

•$1,430 million of net proceeds from sales of businesses; and

•$38 million of proceeds from exercises of employee stock options; partially offset by

•$1,550 million used to repurchase shares of our common stock;

•$416 million used to pay cash dividends; and

•$128 million used for additions of property, plant and equipment.

The $1,123 million net increase in cash and cash equivalents ~~from the end of the Fiscal Transition Period to the end of~~in the two quarters ended July 3, 2020 was primarily due to:

•$1,335 million of net cash provided by operating activities;

•$963 million of net proceeds from sales of businesses;

•$248 million of net proceeds from borrowings from issuance of Floating Rate Notes due March 10, 2023; and

•$37 million of proceeds from exercises of employee stock options; partially offset by

•$700 million used to repurchase shares of our common stock;

•$367 million used to pay cash dividends;

•$254 million of repayments of borrowings, including $250 million used for repayment at maturity of the entire principal amount of our Floating Rate Notes due April 30, 2020; and

•$108 million used for ~~net additions of property, plant and equipment.~~

~~The $187 million net increase in cash and cash equivalents from the end of the quarter ended December 28, 2018 to the end of the quarter ended June 28, 2019 was primarily due to:~~

•~~$716 million of net cash provided by operating activities; and~~

•~~$32 million of proceeds from exercises of employee stock options; partially offset by~~

•~~$304 million of net repayment of borrowings;~~

•~~$162 million used to pay cash dividends; and~~

•~~$94 million used for net~~ additions of property, plant and equipment.

At July ~~3, 2020,~~2, 2021, we had cash and cash equivalents of ~~$1,947~~$2,029 million, including $1,430 million of net proceeds from sales of businesses received on July 2, 2021, and we have a senior unsecured $2 billion revolving credit facility that expires in June 2024 (all of which was available to us as of July ~~3, 2020)~~2, 2021). Additionally, we had ~~$6.9~~$7.1 billion of long-term debt outstanding at July ~~3, 2020, the majority of which was assumed in connection with the L3Harris Merger in the Fiscal Transition Period and the acquisition of Exelis Inc. in the fourth quarter of fiscal 2015.~~2, 2021. Our ~~$1,947~~$2,029 million of cash and cash equivalents at July ~~3, 2020~~2, 2021 included ~~$389~~$248 million held by our foreign subsidiaries, a significant portion of which we believe can be repatriated to the U.S. with minimal tax cost.

Given our current cash position, outlook for funds generated from operations, credit ratings, available credit facility, cash needs and debt structure, we have not experienced to date, and do not expect to experience, any material issues with liquidity, although we can give no assurances concerning our future liquidity, particularly in light of our overall level of debt, U.S. Government budget uncertainties and the state of global commerce and general political and financial uncertainty. ~~For further information regarding COVID-19-related risks and uncertainties, see Part II, Item 1A. “Risk Factors” in this Report.~~

We cannot predict the on-going impact that ~~COVID-19,~~COVID, among other potential risks and uncertainties, will have on our cash from operations. ~~However, based~~For further information regarding COVID-related risks and uncertainties, see Item 1A. “Risk Factors” of our Fiscal 2020 Form 10-K.

Based on our current business plan and revenue prospects, we believe that our existing cash, funds generated from operations, our credit facility and access to the public and private debt and equity markets will be sufficient to provide for our anticipated working capital requirements, capital expenditures, dividend payments, repurchases under our share repurchase program and repayments of our debt securities at maturity for the next twelve months and the reasonably foreseeable future thereafter. Our total capital expenditures for fiscal ~~2020~~2021 are expected to be approximately ~~$370~~$365 million. We anticipate tax payments in fiscal ~~2020~~2021 to be approximately equal to ~~or marginally less than~~ our tax expense for the same period, subject to

adjustment for certain timing ~~differences.~~differences and divestitures. Other than those cash outlays noted in “Contractual Obligations” in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Fiscal ~~Transition Period~~2020 Form ~~10-KT~~10-K and in the “Commercial Commitments and Contractual Obligations” section below in this MD&A, capital expenditures, dividend payments, repurchases under our share repurchase program and L3Harris Merger-related integration ~~and other~~ costs, ~~and cash payments to counterparties upon termination of yield-based treasury lock agreements (see~~ ~~Note S — Derivative Instruments and Hedging Activities~~ ~~in the Notes for additional information regarding derivative instruments),~~ we do not anticipate any significant cash outlays during the remainder of fiscal ~~2020.~~2021. For further information regarding ~~COVID-19-related~~COVID-related risks and uncertainties, see ~~Part II,~~ Item 1A. “Risk Factors” ~~in this Report.~~of our Fiscal 2020 Form 10-K.

There can be no assurance, however, that our business will continue to generate cash flows at current levels or that the cost or availability of future borrowings, if any, under our commercial paper program or our credit facility or in the debt markets will not be impacted by any potential future credit or capital markets disruptions. For example, the commercial paper market was temporarily disrupted in March 2020 as a result of COVID-19, and although commercial paper markets are currently functioning in a normal manner, depending on future market conditions and volatility, commercial paper may not be available on favorable terms or at all, or in the capacity desired. If we are unable to maintain cash balances, generate cash flow from operations or borrow under our commercial paper program or our credit facility sufficient to service our obligations, we may be required to reduce capital expenditures, reduce or eliminate strategic acquisitions, reduce or terminate our share repurchases, reduce or eliminate dividends, refinance all or a portion of our existing debt, obtain additional financing or sell assets. Our ability to make principal payments or pay interest on or refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the defense, government and other markets we serve and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.

Net cash provided by operating activities: The ~~$619~~$46 million increase in net cash provided by operating activities infor the two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020 ~~compared with the two quarters ended June 28, 2019~~ was primarily due to the impact of higher income (excluding the impact of non-cash items such as depreciation and amortization, ~~and~~ impairment of goodwill and other ~~assets), reflecting the inclusion of~~assets and gains related to business divestitures) and a $30 million decrease in cash ~~flows from L3 operations, and $188 million of less cash used to pay~~ income ~~taxes,~~tax payments, partially offset by a ~~$125~~$138 million increase in cash used to fund working ~~capital.~~capital (i.e., accounts receivable, contract assets, inventories, accounts payable and contract liabilities) for the two quarters ended July 2, 2021.

Net cash ~~used in~~provided by investing activities: The ~~$937~~$462 million increase in net cash provided by investing activities infor the two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020 ~~compared with the two quarters ended June 28, 2019~~ was primarily due to ~~$963~~an increase of $467 million ofin net proceeds from sales of businesses, ~~including $951 million of net cash proceeds from the sale of the airport security and automation business,~~ partially offset by a ~~$14~~$16 million increase in cash used for net additions of property, plant and ~~equipment and $10 million used for an investment purchase.~~equipment.

Net cash used in financing activities: The ~~$603~~$895 million increase in net cash used in financing activities infor the two quarters ended July 2, 2021 compared with the two quarters ended July 3, 2020 ~~compared with the two quarters ended June 28, 2019~~ was primarily due to ~~a $700~~an $850 million increase in cash used to repurchase ~~shares of our~~ common stock and ana $49 million increase ~~of $205 million~~ in cash dividends paid ~~partially offset by $247 million more~~ in ~~net proceeds from borrowings.~~the two quarters ended July 2, 2021.

Funding of Pension Plans

Funding requirements under applicable laws and regulations are a major consideration in making contributions to our U.S. pension plans. Although we have significant discretion in making voluntary contributions, the Employee Retirement Income

Security Act of 1974, as amended by the Pension Protection Act of 2006 and further amended by the Worker, Retiree, and Employer Recovery Act of 2008, the Moving Ahead for Progress in the 21st Century Act (“MAP-21”), and applicable Internal Revenue Code regulations mandate minimum funding thresholds. The Highway and Transportation Funding Act of 2014, the Bipartisan Budget Act of 2015, and the American Rescue Plan Act of 2021 further extended the interest rate stabilization provision of MAP-21. Failure to satisfy the minimum funding thresholds could result in restrictions on our ability to amend the plans or make benefit payments. With respect to our U.S. qualified defined benefit pension plans, we intend to contribute annually not less than the required minimum funding thresholds.

The Highway and Transportation Funding Act of 2014 and the Bipartisan Budget Act of 2015 further extended the interest rate stabilization provision of MAP-21 until 2020. We made a voluntary contribution of $302 million to our U.S. qualified defined benefit pension plans during the Fiscal Transition Period. As a result of prior voluntary contributions, we are not required to make any contributions to our U.S. qualified defined benefit pension plans ~~during the remainder of~~in fiscal ~~2020.~~2021 and for several years thereafter.

Future required contributions primarily will depend on the actual annual return on assets and the discount rate used to measure the benefit obligation at the end of each year. Depending on these factors, and the resulting funded status of our pension plans, the level of future statutory required minimum contributions could be material. We had net unfunded defined benefit plan obligations of $1.7 billion at July ~~3, 2020.~~2, 2021. See Note 15: “Pension and Other Postretirement Benefits” in the Notes to ~~the~~ Consolidated Financial Statements in our Fiscal ~~Transition Period~~2020 Form ~~10-KT~~10-K and Note NK — Postretirement Benefit Plans in the Notes for further information regarding our pension plans.

Common Stock Repurchases

On January 28, 2021, we announced that our Board of Directors approved a $6 billion share repurchase authorization under our share repurchase program that was in addition to the remaining unused authorization of $210 million as of January 1, 2021. During the two quarters ended July 2, 2021, we used $1.55 billion to repurchase 7.7 million shares of our common stock under our share repurchase program at an average price per share of $201.50. During the two quarters ended July 3, 2020, we used $700 million to repurchase ~~3,277,559~~3.3 million shares of our common stock under our ~~current~~share repurchase program at an average price per share of ~~$213.57, including commissions of $.02 per share. During the two quarters ended June 28, 2019, we did not repurchase any shares of our common stock under our prior repurchase program.~~$213.57. During the two quarters ended July 2, 2021 and July 3, 2020, ~~and June 28, 2019, $1~~$2 million and $5$1 million, respectively, in shares of our common stock were delivered to us or withheld by us to satisfy withholding taxes on employee share-based awards. Shares purchased by us are ~~canceled~~cancelled and retired.

At July ~~3, 2020,~~2, 2021, we had a remaining, unused authorization of approximately ~~$1.8~~$4.7 billion under our ~~current~~share repurchase program, which does not have an expiration date. Repurchases under our ~~current~~share repurchase program may be made through open-market transactions, private transactions, transactions structured through investment banking institutions or any combination thereof. The level of our repurchases depends on a number of factors, including our financial condition, capital requirements, cash flows, results of operations, future business prospects ~~impacts of COVID-19~~ and other factors our Board and management may deem relevant. The timing, volume and nature of repurchases are subject to market conditions, applicable securities laws and other factors and are at our discretion and may be suspended or discontinued at any time. Additional information regarding our current repurchase program is set forth in this Report under Part ~~II.~~II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds.”

Dividends

On ~~February~~January 28, ~~2020,~~2021, our Board of Directors increased the quarterly per share cash dividend rate on our common stock from ~~$.75 per share~~$.85 to ~~$.85 per share,~~$1.02, for an annualized per share cash dividend rateof ~~$3.40 per share,~~$4.08, which was our ~~nineteenth~~twentieth consecutive annual increase in our quarterly cash dividend rate. ~~Our annualized cash dividend rate was $3.00 per share in~~During the ~~Fiscal Transition Period. Quarterly~~two quarters ended July 2, 2021 and July 3, 2020, we paid cash dividends ~~are typically paid in March, June, September~~of $416 million and ~~December.~~$367 million, respectively. We currently expect that cash dividends will continue to be paid in the near future, but we can give no assurances concerning payment of future dividends or future dividend ~~increases, which could be impacted by, among other things, the COVID-19 pandemic.~~increases. The declaration of dividends and the amount thereof will depend on a number of factors, including our financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors our Board of Directors may deem relevant.

Capital Structure and Resources

2019 Credit Agreement: We have a $2 billion, 5-year senior unsecured revolving credit facility (the “2019 Credit Facility”) under a Revolving Credit Agreement (the “2019 Credit Agreement”) entered into on June 28, 2019 with a syndicate of lenders. For a description of the 2019 Credit Facility and the 2019 Credit Agreement, see Note 13: “Credit Arrangements” in the Notes to Consolidated Financial Statements in our Fiscal ~~Transition Period~~2020 Form ~~10-KT.~~10-K.

We were in compliance with the covenants in the 2019 Credit Agreement at July ~~3, 2020,~~2, 2021, including the covenant requiring that we not permit our ratio of consolidated total indebtedness to total capital, each as defined in the 2019 Credit Agreement, to be greater than 0.65 to 1.00. At July ~~3, 2020,~~2, 2021, we had no borrowings outstanding under the 2019 Credit Agreement.

~~Exchange Offer:~~ On March 31, 2020, we commenced offers to eligible holders to exchange any and all outstanding notes previously issued by L3Harris pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (“Original Notes”) for an equal principal amount of new notes registered under the Securities Act (the “Exchange Notes”). The terms of the Exchange Notes are substantially identical to the terms of the corresponding series of the Original Notes, except that the Exchange Notes are registered under the Securities Act of 1933, as amended, and the transfer restrictions, registration rights and related special interest provisions applicable to the Original Notes do not apply to the Exchange Notes. The Exchange Offers expired at 5:00 p.m., New York City time, on May 1, 2020 (“Expiration Date”). On May 5, 2020, we settled the Exchange Offers and issued Exchange Notes for validly tendered Original Notes. See ~~Note M — Debt~~ ~~in the Notes for additional information.~~

Long-Term Debt: For a description of our long-term variable-rate and fixed-rate debt, see Note ~~M — Debt~~ ~~in the Notes. As discussed in~~ ~~Note M — Debt~~14: “Debt” in the Notes to Consolidated Financial Statements in ~~the first quarter of fiscal~~our Fiscal 2020 we completed the issuance and sale of $250 million in aggregate principal amount of Floating Rate Notes due March 10, 2023 and used the net proceeds from the sale to repay at maturity the $250 million in aggregate principal amount of our Floating Rate Notes due April 30, 2020.Form 10-K.

Short-Term Debt: Our short-term debt was $3 million at July ~~3, 2020~~2, 2021 and ~~January 3, 2020 was~~ $2 million ~~and $3 million, respectively,~~at January 1, 2021, in each case consisting of local borrowing by international subsidiaries for working capital needs.

Other Agreements: We have ~~a RSA~~two RSAs with a third-party financial ~~institution~~institutions that ~~permits~~permit us to sell, on a non-recourse basis, up to $100 million each of outstanding receivables at any given time. From time to time, we have sold certain customer receivables

under the ~~RSA,~~RSAs, which we continue to service and collect on behalf of the third-party financial ~~institution~~institutions and which we account for as sales of receivables with sale proceeds included in net cash from operating activities. The impact to net cash from operating activities from these transactions was not material in the two quarters ended July 2, 2021 or July 3, 2020.

Off-Balance Sheet Arrangements

In accordance with the definition under SEC rules, any of the following qualify as off-balance sheet arrangements:

•Any obligation under certain guarantee contracts;

•A retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;

•Any obligation, including a contingent obligation, under certain derivative instruments; and

•Any obligation, including a contingent obligation, under a material variable interest in an unconsolidated entity that is held by, and material to, the registrant, where such entity provides financing, liquidity, market risk or credit risk support to the registrant, or engages in leasing, hedging or R&D services with the registrant.

As of July ~~3, 2020,~~2, 2021, we were not participating in any material transactions that generated relationships with unconsolidated entities or financial partnerships, including variable interest entities, and we did not have any material retained or contingent interest in assets as defined above. As of July ~~3, 2020,~~2, 2021, we did not have material financial guarantees or other contractual commitments that we believe are reasonably likely to adversely affect our financial condition, results of operations, or cash flows or equity, and we were not a party to any related party transactions that materially affect our financial condition, results of operations, cash flows or ~~cash flows.~~equity.

We have, from time to time, divested certain of our businesses and assets. In connection with these divestitures, we often provide representations, warranties and/or indemnities to cover various risks and unknown liabilities, such as environmental liabilities and tax liabilities. We cannot estimate the potential liability from such representations, warranties and indemnities because they relate to unknown conditions. We do not believe, however, that the liabilities relating to these representations, warranties and indemnities will have a material adverse effect on our financial condition, results of operations, cash flows or ~~cash flows.~~equity.

Due to our downsizing of certain operations pursuant to acquisitions, divestitures, restructuring plans or otherwise, certain properties leased by us have been sublet to third parties. If any of these third parties vacates any of these premises, we would be legally obligated under master lease arrangements. We believe that the financial risk of default by such ~~sublessees~~sub-lessees is individually and in the aggregate not material to our financial condition, results of operations, cash flows or ~~cash flows.~~equity.

Commercial Commitments and Contractual Obligations

The amounts disclosed in our Fiscal ~~Transition Period~~2020 Form ~~10-KT~~10-K include our commercial commitments and contractual obligations. ~~Except for changes in our debt as described under “Capital Structure and Resources” in this MD&A as well as other changes resulting from the L3Harris Merger,~~There were no material changes ~~occurred~~ during the two quarters ended July ~~3, 2020~~2, 2021 in our contractual cash obligations to repay debt, to purchase goods and services, to make payments under operating leases or our commercial commitments, or in our contingent liabilities on outstanding surety bonds, standby letters of credit or other arrangements as disclosed in our Fiscal ~~Transition Period~~2020 Form ~~10-KT.~~10-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our Condensed Consolidated Financial Statements (Unaudited) and accompanying Notes are prepared in accordance with GAAP. Preparing financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and backlog as well as disclosures of contingent assets and liabilities. Actual results may differ from our estimates. These estimates and assumptions are affected by the application of our accounting policies. Critical accounting policies and estimates are those that require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies and estimates for us include: (i) revenue recognition on contracts and contract estimates; (ii) postretirement benefit plans; (iii) ~~provisions for excess and obsolete inventory losses; (iv)~~ impairment testing of goodwill; ~~(v)~~(iv) accounting for business combinations; and ~~(vi)~~(v) income taxes and tax valuation allowances. For additional discussion of our critical accounting policies and estimates, see “Critical Accounting Policies and Estimates” in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Fiscal ~~Transition Period~~2020 Form ~~10-KT.~~10-K.

Revenue Recognition

A significant portion of our business is derived from development and production contracts. Revenue and profit related to development and production contracts are generally recognized over time, typically using the ~~percentage of completion (“POC”)~~POC cost-to-cost method of revenue recognition, whereby we measure our progress ~~toward~~towards completion of the performance ~~obligations~~obligation based on the ratio of costs incurred to date to estimated ~~total~~ costs at completion under the contract. Because costs incurred represent work performed, we believe this method best depicts the transfer of control of the asset to the customer. Under the POC cost-to-cost method of revenue recognition, a single estimated profit margin is used to recognize profit for each performance obligation over its period of performance. Recognition of profit on a contract requires estimates of the total cost at completion

and transaction price ~~as well as~~and the measurement of progress towards completion. Due to the long-term nature of many of our contracts, developing the estimated total cost at completion and total transaction price often requires judgment. Factors that must be considered in estimating the cost of the work to be completed include: the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance. Factors that must be considered in estimating the total transaction price include contractual cost or performance incentives (such as incentive fees, award fees and penalties) and other forms of variable consideration as well as our historical experience and our expectation for performance on the contract. These variable amounts generally are awarded upon achievement of certain negotiated performance metrics, program milestones or cost targets and can be based upon customer discretion. We include such estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

At the outset of each contract, we gauge its complexity and perceived risks and establish an estimated total cost at completion in line with these expectations. After establishing the estimated total cost at completion, we follow a standard ~~Estimate at Completion (“EAC”)~~EAC process in which we review the progress and performance on our ongoing contracts at least quarterly and, in many cases, more frequently. If we successfully retire risks associated with the technical, schedule and cost aspects of a contract, we may lower our estimated total cost at completion commensurate with the retirement of these risks. Conversely, if we are not successful in retiring these risks, we may increase our estimated total cost at completion. Additionally, as the contract progresses, our estimates of total transaction price may increase or decrease if, for example, we receive award fees that are higher or lower than expected. When adjustments in estimated total costs at completion or in estimated total transaction price are determined, the related impact on operating income is recognized using the cumulative catch-up method, which recognizes in the current period the cumulative effect of such adjustments for all prior periods. Any anticipated losses on these contracts are fully recognized in the period in which the losses become evident.

EAC adjustments resulted in the following impacts to operating income for the periods presented:


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019

(In millions)										(In millions)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
		(In millions)
Favorable adjustments	Favorable adjustments	$	161	$	38	$	343	$	70	Favorable adjustments	$	165	$	161	$	327	$	343
Unfavorable adjustments	Unfavorable adjustments	(63)		(26)		(142)		(52)		Unfavorable adjustments	(85)		(63)		(165)		(142)
Net operating income adjustments	Net operating income adjustments	$	98	$	12	$	201	$	18	Net operating income adjustments	$	80	$	98	$	162	$	201

~~Second Quarter 2020 Compared With Second Quarter 2019:~~ The net favorable impact to operating income from EAC adjustments in the quarter and two quarters ended July ~~3, 2020 reflect~~2, 2021 reflected benefits of operational performance on programs, including additional retirement of risks and schedule improvements, achievement of incentive payments and realization of synergy ~~savings. The net favorable EAC adjustments were realized in~~savings across all four of our business ~~segments across numerous contracts.~~segments. There were no EAC adjustments on any individual program with impacts to operating income in the quarters and two quarters ended July 2, 2021 or July 3, 2020 ~~or June 28, 2019~~ that were material to our results of operations on a consolidated or segment basis for such periods.

~~First Two Quarters 2020 Compared With First Two Quarters 2019:~~ The net favorable EAC adjustments in the two quarters ended July 3, 2020 reflect benefits of operational performance on programs, including retirement of risks and schedule improvements, achievement of incentive payments and realization of synergy savings. The net favorable EAC adjustments were realized in all four of our business segments across numerous contracts. There were no EAC adjustments on any individual program with impacts to operating income in the two quarters ended July 3, 2020 or June 28, 2019 that were material to our results of operations on a consolidated or segment basis for such periods.

We recognize revenue from numerous contracts with multiple performance obligations. For these contracts, we allocate the transaction price to each performance obligation based on the relative standalone selling price of the good or service underlying each performance obligation. The standalone selling price represents the amount for which we would sell the good or service to a customer on a standalone basis (i.e., not sold as a bundled sale with any other products or services). The allocation of transaction price among separate performance obligations may impact the timing of revenue recognition but will not change the total revenue recognized on the contract.

A substantial majority of our revenue is derived from contracts with the U.S. Government, including foreign military sales contracts. These contracts are subject to the Federal Acquisition Regulations and the prices of our contract deliverables are typically based on our estimated or actual costs plus a reasonable profit margin. As a result, the standalone selling prices of the goods and services in these contracts are typically equal to the selling prices stated in the contract, thereby eliminating the need to allocate (or reallocate) the transaction price to the multiple performance obligations. In our non-U.S. Government contracts, when standalone selling prices are not directly observable, we also generally use the expected cost plus a margin approach to determine standalone selling price. In determining the appropriate margin under the cost plus margin approach, we consider

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historical margins on similar products sold to similar customers or within similar geographies where objective evidence is available. We may also consider our cost structure and profit objectives, the nature of the proposal, the effects of customization of pricing, our practices used to establish pricing of bundled products, the expected technological life of the product, margins earned on similar contracts with different customers and other factors to determine the appropriate margin.

Goodwill

Goodwill in our Condensed Consolidated Balance Sheet (Unaudited) as of July ~~3, 2020~~2, 2021 and January ~~3, 2020~~1, 2021 was ~~$19.0~~$18.2 billion and ~~$20.0~~$18.9 billion, respectively. Goodwill is not amortized. We perform annual (or under certain circumstances, more frequent) impairment tests of our goodwill. We identify potential impairment by comparing the fair value of each of our reporting units with its carrying amount, including goodwill, which is adjusted for allocations of Corporate assets and liabilities as appropriate. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

~~2020 Interim Impairment Tests~~

~~We test~~Commercial Aviation Solutions goodwill for impairment at a level within the Company referred to as the reporting unit, which is our business segment level or one level below the business segment. Some of our segments are comprised of several reporting units. Allocation of goodwill to several reporting units could make itallocation: As described in more ~~likely that we will have an impairment charge~~detail in Note I — Goodwill and Other Intangible Assets and elsewhere in the ~~future. An impairment charge~~Notes, during the quarter ended July 2, 2021, we adjusted our Aviation Systems segment reporting to ~~one of~~better align our ~~reporting units could have a material impact on our financial condition~~businesses and ~~results of operations.~~

~~Quarter Ended April 3, 2020:~~ ~~Indications of potential impairment of goodwill related to~~separated the CTS business from our Commercial Aviation Solutions reporting unit, ~~(which is part~~creating a new CTS reporting unit within the Commercial Aviation Solutions sector of our Aviation Systems ~~segment) were present at April 3, 2020 due~~segment. We assigned $68 million of goodwill to ~~COVID-19~~the CTS reporting unit and ~~its impact~~$779 million of goodwill to the Commercial Aviation Solutions reporting unit on ~~global air traffic~~a relative fair value basis. In conjunction with the relative fair value allocation, we tested goodwill assigned to each new reporting unit and ~~customer operations, which resulted~~concluded that no goodwill impairment existed as of July 2, 2021.

CPS business goodwill allocation: As described in ~~a decrease~~more detail in Note B — Business Divestitures in the ~~fiscal 2020 outlook for~~Notes, we entered into a definitive agreement to sell our CPS business on March 1, 2021. Because the then-pending divestiture of the CPS business represented the disposal of a portion of a reporting unit within our Aviation Systems segment, we assigned $174 million of goodwill to the CPS business disposal group on a relative fair value basis. In conjunction with the relative fair value allocation, we tested goodwill assigned to the CPS business disposal group and goodwill assigned to the retained businesses of the reporting ~~unit. Consequently, in~~unit for impairment and concluded that goodwill related to the CPS business disposal group was impaired. In connection with the preparation of our financial statements for the quarter ended April 3, 2020, we performed a quantitative impairment test on an interim basis. To test for potential impairment of goodwill related to our Commercial Aviation Solutions reporting unit, we prepared an estimate of the fair value of the reporting unit based on a combination of market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions, and projected discounted cash flows. Given the level of uncertainty as of April 3, 2020 in the outlook for the commercial aviation industry caused by the impact of the COVID-19 pandemic on global air traffic, our methodology for determining the fair value of the reporting unit placed the greatest weight on the expected fair value technique, and was dependent on our best estimates of future sales, operating costs and balance sheet metrics under a range of scenarios for future economic conditions. We assigned a probability to each scenario to calculate a set of probability-weighted projected cash flows, and an appropriate discount rate reflecting the risk in the projected cash flows was used to discount the expected cash flows to present value.

~~As a result of this impairment test, we concluded that goodwill related to our Commercial Aviation Solutions reporting unit was impaired as of April 3, 2020 and~~2, 2021, we recorded a non-cash impairment charge of ~~$296~~$62 million, ~~(including $28 million attributable to noncontrolling interests)~~which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the ~~quarter ended April 3, 2020.~~

~~Quarter Ended July 3, 2020:~~ Indications of potential impairment of goodwill related to our Commercial Aviation Solutions reporting unit (which is part of our Aviation Systems segment) were present at July 3, 2020. Although our cash flow projections for the Commercial Aviation Solutions reporting unit did not change significantly compared with the projected cash flows used in our analysis as of April 3, 2020, we determined it was more-likely-than-not that the fair value of our Commercial Aviation Solutions reporting unit was less than its carrying amount as of July 3, 2020 due the amount by which the fair value of the Commercial Aviation Solutions reporting unit exceeded its carrying amount as of April 3, 2020 and heightened uncertainty regarding the timing of expected recovery for the overall commercial aviation market. Consequently, in connection with the preparation of our financial statements for the quartertwo quarters ended July 3, 2020, we performed a quantitative test on an interim basis. To test for potential impairment of goodwill related to our Commercial Aviation Solutions reporting unit, we prepared an estimate of the fair value of the reporting unit based on a combination of market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions, and projected discounted cash flows. Given the level of current uncertainty in the outlook for the commercial aviation industry caused by the impact of the COVID-19 pandemic on global air traffic, our methodology for determining the fair value of the reporting unit placed the greatest weight on the expected fair value technique, and was dependent on our best estimates of future sales, operating costs and balance sheet metrics under a range of scenarios for future economic conditions. We assigned a probability to each scenario to calculate a set of probability-weighted projected cash flows, and an appropriate discount rate reflecting the risk in the projected cash flows was used to discount the expected cash flows to present value. As a result of this impairment test, we concluded that goodwill related to our Commercial Aviation Solutions reporting unit was impaired as of July 3, 2020, primarily due to a significant increase in the weighted-average cost of capital (“WACC”) rate used to discount the projected cash flows of our Commercial Aviation Solutions reporting unit to their present values, and we recorded a non-cash impairment charge of $54 million (including $8 million attributable to noncontrolling interests) in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the quarter ended July 3, 2020.2, 2021.

~~See~~Electron Devices business goodwill allocation: ~~Note K — Goodwill and Other Intangible Assets~~ ~~in the Notes for additional information.~~

As of July 3, 2020, the estimated fair values for each of our other reporting units exceed their carrying values. However, for six of those reporting units, which have approximately $10 billion of goodwill in aggregate, the estimated fair value of the reporting unit exceeded the carrying value of the reporting unit by less than 10 percent, primarily due to the limited amount of time that has elapsed since the carrying values were established in connection with the L3Harris Merger. We are monitoring the impacts of COVID-19 on the fair value of our reporting units and do not currently anticipate any further material goodwill impairment charges as a result of COVID-19. However, an impairment of goodwill could result from a number of circumstances, including different assumptions used in determining the fair value of the reporting units, future deterioration in the business, including from the impact of COVID-19, or a sharp increase in interest rates without a corresponding increase in future revenue.

~~Airport Security and Automation Business Goodwill Allocation~~

As described in more detail in Note CB — Business Divestitures ~~and Assets Sales~~ in the Notes, we entered into a definitive agreement to sell our ~~airport security and automation~~Electron Devices business on ~~February 4, 2020 and completed~~July 2, 2021. Because the ~~sale on May 4, 2020. Because the~~pending divestiture of the ~~airport security and automation~~Electron Devices business represented the disposal of a portion of a reporting unit within our Aviation Systems segment, we assigned ~~$531~~$15 million of goodwill to the ~~airport security and automation business~~Electron Devices disposal group on a relative fair value basis. ~~The~~In conjunction with the relative fair value allocation, we tested goodwill assigned to the Electron Devices business disposal group and goodwill assigned to the retained businesses of the reporting unit for impairment and concluded that no goodwill impairment existed.

AP disposal groups goodwill allocations: As described in more detail in Note B — Business Divestitures in the Notes, during the quarter ended July 2, 2021, we determined the criteria to be classified as held for sale were met with respect to two businesses in our Aviation Systems segment. Because the potential divestiture of the two businesses in the AP disposal groups represented the disposal of a portion of a reporting unit within our Aviation Systems segment, we assigned $11 million of goodwill to the AP disposal groups on a relative fair value basis. In conjunction with the relative fair value allocation, we tested goodwill assigned to the AP disposal groups and goodwill assigned to the retained businesses of the reporting unit for impairment and concluded that no goodwill impairment existed at the time the held for sale criteria were met.

For purposes of allocating goodwill to each disposal group above, we determined the fair value of the ~~airport security and automation business~~ disposal group ~~was determined~~ based on the negotiated or expected selling price and the fair value of the retained businesses of the reporting unit ~~was determined~~ based on a combination of market-based valuation techniques, utilizing quoted market prices and 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. ~~In conjunction with~~See Note 1: “Significant Accounting Policies” in the ~~relative~~Notes to Consolidated Financial Statements in our Fiscal 2020 Form 10-K for additional information regarding the fair value ~~allocation,~~hierarchy.

Impairment of long-lived assets

During the quarter ended July 2, 2021, we ~~tested goodwill assigned~~adjusted our Aviation Systems segment reporting to better align our businesses and separated the ~~disposal group and goodwill assigned to the retained businesses of the~~CTS business from our Commercial Aviation Solutions reporting unit, creating a new CTS reporting unit within the Commercial Aviation Solutions sector of our Aviation Systems segment. To test for potential impairment ~~and concluded that no goodwill impairment existed at~~of the ~~time the held for sale criteria were met in late January 2020.~~

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~~EOTech Business Goodwill Allocation~~

~~As described in more detail in~~ ~~Note C — Business Divestitures~~long-lived assets, including identifiable intangible assets and ~~Assets Sales~~ inproperty, plant and equipment, related to CTS, we compared the ~~Notes, we entered into a definitive agreement~~estimated future cash flows (on an undiscounted basis) to ~~sell our EOTech business on March 20, 2020~~be generated from the use and ~~completed the sale on July 31, 2020. Because the then-pending divestiture~~hypothetical eventual disposition of the ~~EOTech business represented~~asset group to its carrying value and, as a result, we determined the ~~disposal of a portion of a reporting unit within our Communication Systems segment, we assigned $9 million of goodwill to the EOTech business disposal group on a relative fair value basis. The fair~~carrying value of the ~~EOTech business disposal~~CTS asset group was ~~determined based on the negotiated selling price, and~~not recoverable. Next, we prepared an estimate of the fair value of ~~the retained businesses of the reporting unit was determined~~CTS based on a combination of market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions and projected discounted cash flows. ~~These fair value determinations are categorized as Level 3 in~~We compared the fair value ~~hierarchy due~~of CTS to ~~their use of internal projections and unobservable measurement inputs. In conjunction with the relative fair~~our carrying value ~~allocation, we tested goodwill assigned to the disposal group and goodwill assigned to the retained businesses of the reporting unit for impairment and concluded that no goodwill impairment existed.~~

~~Other AS Disposal Group Allocation~~

~~As described in more detail in~~ ~~Note C — Business Divestitures and Assets Sales~~ in the Notes, during the quarter ended July 3, 2020, we determined the criteria to be classified as held for sale were met with respect to another business within our Aviation Systems segment (“other AS disposal group”). The income before income taxes of the other AS disposal group were not material for the quarter and two quarters ended July 3, 2020. We assigned $14 million of goodwill to the other AS disposal group on a relative fair value basis during the quarter ended July 3, 2020, when the held for sale criteria were met. In connection with the preparation of our financial statements for the quarter ended July 3, 2020, we concluded that goodwill related to the other AS disposal group was impaired and recorded a $145 million non-cash charge for the impairment ~~charge~~ of ~~$14~~CTS long-lived assets, including $63 million for impairment of identifiable intangible assets, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the quarter and two quarters ended July ~~3, 2020.~~

~~Accounting for Business Combinations~~

We follow the acquisition method of accounting to record identifiable assets acquired, liabilities assumed and noncontrolling interests in the acquiree recognized in connection with acquired businesses at their estimated fair value as of the date of acquisition. Amounts recorded associated with these assets and liabilities are based on preliminary calculations, and our estimates and assumptions are subject to change as we obtain additional information during the measurement period (up to one year from the closing date of the business combination).

Intangible assets from business combinations are recognized at their estimated fair values as of the date of acquisition and generally consist of customer relationships, trade names, developed technology and in-process R&D. Determination of the estimated fair value of intangible assets requires judgment. The fair value of customer contractual relationships is determined based on estimates and judgments regarding future after-tax earnings and cash flows arising from follow-on sales on contract renewals expected from customer contractual relationships over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory asset charge, all of which is discounted to present value. The fair value of trade name intangible assets is determined utilizing the relief from royalty method. Under this form of the income approach, a royalty rate based on observed market royalties is applied to projected revenue supporting the trade name and discounted to present value using an appropriate discount rate. Intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment testing. Finite-lived intangible assets are amortized to expense over their useful lives, generally ranging from three to twenty years. The fair value of identifiable intangible assets acquired in connection with the L3Harris Merger was approximately $8.5 billion.

We assess the recoverability of finite-lived intangible assets whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. We evaluate the recoverability of such assets based on the expectations of undiscounted cash flows of the assets. If the sum of expected future undiscounted cash flows were less than the carrying amount of the asset, a loss would be recognized for the difference between the fair value and the carrying amount.2, 2021. See Note BH — ~~Business Combination~~Property, Plant and Equipment, net and Note KI — Goodwill and Other Intangible Assetsin the Notes for additional information.

~~Impact of Recently Issued Accounting Standards~~

~~Accounting standards that have been recently issued, but are not yet effective for us, are described in~~ ~~Note A — Significant Accounting Policies and Recent Accounting Standardsin the Notes, which describes the potential impact that these standards are expected to have on our financial condition, results of operations and cash flows.~~

FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This Report contains forward-looking statements that involve risks and uncertainties, as well as assumptions that may not materialize or prove to be correct, which could cause our results to differ materially from those expressed in or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to, statements concerning: our plans, strategies and objectives for future

operations; new products, systems, technologies, services or developments; future economic conditions, performance or outlook; future political conditions; the outcome of contingencies; the potential level of share repurchases, dividends or pension contributions; potential acquisitions or divestitures; the value of contract awards and programs; expected cash flows or capital expenditures; our beliefs or expectations; activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future, including expected ~~COVID-19-related~~COVID-related impacts in our Public Safety and Commercial Aviation Solutions ~~sectors;~~sector; and assumptions underlying any of the foregoing. Forward-looking statements may be identified by their use of forward-looking terminology, such as “believes,” “expects,” “may,” “should,” “would,” “will,” “intends,” “plans,” “estimates,” “anticipates,” “projects” and similar words or expressions. You should not place undue reliance on these forward-looking statements, which reflect our management’s opinions only as of the date of filing of this Report and are not guarantees of future performance or actual results. Forward-looking statements are made in reliance on the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The following are some of the factors we believe could cause our actual results to differ materially from our historical results or our current expectations or projections:

•~~The COVID-19 pandemic~~COVID and ongoing attempts to contain and reduce its spread could have a material adverse effect on our business operations, financial condition, results of operations, cash flows and ~~cash flows.~~equity.

•We depend on U.S. Government customers for a significant portion of our revenue, and the loss of these relationships, a reduction in U.S. Government funding or a change in U.S. Government spending priorities could have an adverse impact on our business, financial condition, results of operations, cash flows and ~~cash flows.~~equity.

•We depend significantly on U.S. Government contracts, which often are only partially funded, subject to immediate termination, and heavily regulated and audited. The termination or failure to fund, or negative audit findings for, one or more of these contracts could have an adverse impact on our business, financial condition, results of operations, cash flows and ~~cash flows.~~equity.

•The U.S. Government’s budget deficit and the national debt, as well as any inability of the U.S. Government to complete its budget process for any government fiscal year and consequently having to shut down or operate on funding levels equivalent to its prior fiscal year pursuant to a “continuing resolution,” could have an adverse impact on our business, financial condition, results of operations, cash flows and ~~cash flows.~~

•We could be negatively impacted by a security breach, through cyber attack, cyber intrusion, insider threats or otherwise, or other significant disruption of our IT networks and related systems or of those we operate for certain of our customers.

•~~Our ability to successfully manage ongoing business and organizational changes could impact our business results.~~equity.

•Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts. In particular, our fixed-price contracts could subject us to losses in the event of cost overruns or a significant increase in inflation.

•~~We use estimates in accounting for many of our programs,~~Our commercial aviation products, systems and ~~changes in our estimates~~services businesses are affected by global demand and economic factors that could ~~adversely affect our future financial results.~~

•~~We derive a significant portion of our revenue from international operations and are subject to the risks of doing business internationally, including fluctuations in currency exchange rates.~~

•~~The level of returns on defined benefit plan assets, changes in interest rates and other factors could affect~~negatively impact our financial ~~condition, results of operations and cash flows in future periods.~~

•~~We may not be successful in obtaining the necessary export licenses to conduct certain operations abroad, and Congress may prevent proposed sales to certain foreign governments.~~

•Disputes with our subcontractors or the inability of our subcontractors to perform, or our key suppliers to timely deliver our components, parts or services, could cause our products, systems or services to be produced or delivered in an untimely or unsatisfactory manner.

•~~Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents or business partners.~~

•~~Our future success will depend on our ability to develop new products, systems, services and technologies that achieve market acceptance in our current and future markets.~~results.

•We participate in markets that are often subject to uncertain economic conditions, which makes it difficult to estimate growth in our markets and, as a result, future income and expenditures.

•We cannot predict the consequences of future geo-political events, but they may adversely affect the markets in which we operate, our ability to insure against risks, our operations or our profitability.

•~~Strategic transactions,~~We derive a significant portion of our revenue from international operations and are subject to the risks of doing business internationally, including ~~mergers, acquisitions and divestitures, involve significant risks and uncertainties that~~fluctuations in currency exchange rates.

•We are subject to government investigations, which could ~~adversely affect~~have a material adverse effect on our business, financial condition, results of operations, cash flows and equity.

•Our future success will depend on our ability to develop new products, systems, services and technologies that achieve market acceptance in our current and future markets.

•We must attract and retain key employees, and any failure to do so could seriously harm us.

•Some of our workforce is represented by labor unions, so a prolonged work stoppage could harm our business.

•Disputes with our subcontractors or key suppliers, or their inability to perform or timely deliver our components, parts or services, could cause our products, systems or services to be produced or delivered in an untimely or unsatisfactory manner.

•We have significant operations in locations that could be materially and adversely impacted in the event of a natural disaster or other significant disruption.

•Changes in estimates we use in accounting for many of our programs could adversely affect our future financial results.

•Our level of indebtedness and our ability to make payments on or service our indebtedness and our unfunded defined benefit plans liability may materially adversely affect our financial and operating activities or our ability to incur additional debt.

•A downgrade in our credit ratings could materially adversely affect our business.

•The level of returns on defined benefit plan assets, changes in interest rates and other factors could materially adversely affect our financial condition, results of operations, cash ~~flows.~~flows and equity in future periods.

•Changes in our effective tax rate may have an adverse effect on our results of operations.

•We may not be successful in obtaining the necessary export licenses to conduct certain operations abroad, and Congress may prevent proposed sales to certain foreign governments.

•Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents or business partners.

•The outcome of litigation or arbitration in which we are involved from time to time is unpredictable, and an adverse decision in any such matter could have a material adverse effect on our financial condition, results of operations, ~~and cash flows.~~

•~~We are subject to government investigations, which could have a material adverse effect on our business, financial condition, results of operations,~~ cash flows and ~~future prospects.~~equity.

•Third parties have claimed in the past and may claim in the future that we are infringing directly or indirectly upon their intellectual property rights, and third parties may infringe upon our intellectual property rights.

•~~Our commercial aviation products, systems and services business is affected by global demand and economic factors that could negatively impact our financial results.~~

•We face certain significant risk exposures and potential liabilities that may not be covered adequately by insurance or indemnity.

•~~Changes in our effective tax rate may have an adverse effect on our results of operations.~~

•Our level of indebtedness and our ability to make payments on or service our indebtedness and our unfunded defined benefit plans liability may adversely affect our financial and operating activities or our ability to incur additional debt.

•~~A downgrade in our credit ratings could materially adversely affect our business.~~

•Unforeseen environmental issues could have a material adverse effect on our business, financial condition, results of operations, cash flows and ~~cash flows.~~equity.

•~~We have~~Strategic transactions, including mergers, acquisitions and divestitures, involve significant ~~operations in locations~~risks and uncertainties that could ~~be materially~~adversely affect our business, financial condition, results of operations, cash flows and ~~adversely impacted in the event of a natural disaster or other significant disruption.~~equity.

•Changes in future business or other market conditions could cause business investments and/or recorded goodwill or other long-term assets to become impaired, resulting in substantial losses and write-downs that would materially adversely affect our results of ~~operations.~~

•~~We must attract~~operations and ~~retain key employees, and any failure to do so could seriously harm us.~~

•~~Some of our workforce is represented by labor unions, so our business could be harmed in the event of a prolonged work stoppage.~~financial condition.

•We may fail to realize all of the anticipated benefits of the L3Harris Merger or those benefits may take longer to realize than expected. We may also encounter significant difficulties in integrating the businesses.

•~~Certain business uncertainties arising from the L3Harris Merger could adversely affect our businesses and operations.~~

•~~We have incurred and will incur direct and indirect costs as a result of the L3Harris Merger.~~

Additional details and discussions concerning some of the factors that could affect our forward-looking statements or future results are set forth in our Fiscal ~~Transition Period~~2020 Form ~~10-KT~~10-K under Item 1A. “Risk Factors” and in Part ~~II.~~II, Item 1A. “Risk Factors” in this Report. The foregoing list of factors and the factors set forth in Item 1A. “Risk Factors” included in our Fiscal ~~Transition Period~~2020 Form ~~10-KT~~10-K and in Part ~~II.~~II, Item 1A. “Risk Factors” in this Report are not exhaustive. Additional risks and uncertainties not known to us or that we currently believe not to be material also may adversely impact our business, financial condition, results of operations, cash flows and ~~cash flows.~~equity. Should any risks or uncertainties develop into actual events, these developments could have a material adverse effect on our business, financial condition, results of operations, cash flows and ~~cash flows.~~equity. The forward-looking statements contained in this Report are made as of the date of filing of this Report, and we disclaim any intention or obligation, other than imposed by law, to update or revise any forward-looking statements or to update the reasons actual results could differ materially from those projected in the forward-looking statements, whether as a result of new information, future events or developments or otherwise.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

In the normal course of business, we are exposed to risks associated with foreign currency exchange rates and changes in interest rates. We employ established policies and procedures governing the use of financial instruments to manage our exposure to such risks. There were no material changes during the two quarters ended July ~~3, 2020~~2, 2021 with respect to the

information appearing in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Fiscal ~~Transition Period~~2020 Form ~~10-KT.~~10-K.

Foreign Exchange and Currency: Our U.S. and foreign businesses enter into contracts with customers, subcontractors or vendors that are denominated in currencies other than functional currencies of such businesses. We use foreign currency forward contracts and options to hedge both balance sheet and off-balance sheet future foreign currency commitments. Factors that could impact the effectiveness of our hedging programs for foreign currency include the accuracy of sales estimates, volatility of currency markets and the cost and availability of hedging instruments. A 10 percent change in currency exchange rates for our foreign currency derivatives held at July ~~3, 2020~~2, 2021 would not have had a material impact on the fair value of such instruments or our results of operations or cash flows. This quantification of exposure to the market risk associated with foreign currency financial instruments does not take into account the offsetting impact of changes in the fair value of our foreign currency denominated assets, liabilities and firm commitments. See Note SP — Derivative Instruments and Hedging Activities in the Notes for additional information.

Interest Rates: As of July ~~3, 2020,~~2, 2021, we had long-term fixed-rate debt obligations. The fair value of these obligations is impacted by changes in interest rates; however, a 10 percent change in interest rates for our long-term fixed-rate debt obligations at July ~~3, 2020~~2, 2021 would not have had a material impact on the fair value of these obligations. There is no interest-rate risk associated with ~~these~~long-term fixed-rate debt obligations on our results of operations or cash flows unless existing obligations are refinanced upon maturity at then-current interest rates, because the interest rates are fixed until maturity, and because our long-term fixed-rate debt is not putable to us (i.e., not required to be redeemed by us prior to maturity). We can give no assurances, however, that interest rates will not change significantly or have a material effect on the fair value of our long-term debt obligations over the next twelve months.

As of July ~~3, 2020,~~2, 2021, we also had long-term variable-rate debt obligations of $250 million of Floating Rate Notes due March 10, 2023. These debt obligations bear interest that is variable based on certain short-term indices, thus exposing us to interest-rate risk; however, a 10 percent change in interest rates for these debt obligations at July ~~3, 2020~~2, 2021 would not have had a material impact on our results of operations or cash flows. See Note ~~M — Debt~~14: “Debt” in the Notes to Consolidated Financial Statements in our Fiscal 2020 Form 10-K for further information.

We use derivative instruments from time to time to manage our exposure to interest rate risk associated with our anticipated issuance of new long-term fixed-rate notes to repay at maturity our existing long-term fixed-rate debt obligations. If the derivative instrument is designated as a cash flow hedge, gains and losses from changes in the fair value of such instrument are deferred and included as a component of accumulated other comprehensive loss and reclassified to interest expense in the period in which the hedged transaction affects earnings.

As of July 3, 2020, we had two outstanding treasury lock agreements, with an aggregate notional amount of $650 million, to hedge our exposure to fluctuations in the benchmark interest rate (10-year U.S. Treasury rate) associated with our anticipated issuance of long-term fixed-rate notes to redeem or repay at maturity the entire $650 million outstanding principal amount of the 4.95% Notes due February 15, 2021 (“4.95% 2021 Notes”). We designated these treasury locks as cash flow hedges against fluctuations in interest payments on the 4.95% 2021 Notes due to changes in the benchmark interest rate prior to issuance, which we expect to occur before the date of maturity of the 4.95% 2021 Notes. An unrealized after-tax loss of $71 million associated with these treasury locks was deferred in accumulated other comprehensive loss at July 3, 2020. A 10 percent change in the 10-year U.S. Treasury rate at July 3, 2020 would ~~not have had a material impact on the fair value of these treasury lock agreements or our results of operations or cash flows. See~~ ~~Note S — Derivative Instruments and Hedging Activities~~ ~~in the Notes for additional information.~~

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures: We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives, and management necessarily is required to use its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by Rule 13a-15 under the Exchange Act, as of July ~~3, 2020,~~2, 2021, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based on this work and other evaluation procedures, our management, including our Chief Executive Officer and our Chief Financial Officer, has concluded that as of July ~~3, 2020,~~2, 2021, our disclosure controls and procedures were effective.

(b) Changes in Internal Control: We periodically review our internal control over financial reporting as part of our efforts to ensure compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. In addition, we routinely review our system of internal control over financial reporting to identify potential changes to our processes and systems that may improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating the activities of business units, migrating certain processes to our shared services organizations, formalizing policies and procedures, improving segregation of duties and increasing monitoring controls. In addition, when we acquire new businesses, we incorporate our controls and

procedures into the acquired business as part of our integration activities. As part of our integration with L3, we are in the process of incorporating our controls and procedures with respect to L3’s operations, and we will include internal controls with respect to L3’s operations in our assessment of the effectiveness of our internal control over financial reporting as of the end of 2020. We evaluated the impacts of COVID-19 on our ability to maintain effective internal controls and concluded that our internal control environment was not materially affected during the quarter ended July 3, 2020. Other than continuing to

~~incorporate our controls and procedures with respect to L3’s operations, there~~There have been no changes in our internal control over financial reporting that occurred during the quarter ended July ~~3, 2020~~2, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

6242

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

~~General.~~See ~~From time to time, as a normal incident of the nature~~Note T — Legal Proceedings and kind of businesses in which we are or were engaged, various claims or charges are asserted and litigation or arbitration is commenced by or against us arising from or related to matters, including, but not limited to: product liability; personal injury; patents, trademarks, trade secrets or other intellectual property; labor and employee disputes; commercial or contractual disputes; strategic acquisitions or divestitures; the prior sale or use of former products allegedly containing asbestos or other restricted materials; breach of warranty; or environmental matters. Claimed amounts against us may be substantial, but may not bear any reasonable relationship to the merits of the claim or the extent of any real risk of court or arbitral awards. We record accruals for losses related to those matters against us that we consider to be probable and that can be reasonably estimated. Gain contingencies, if any, are recognized when they are realized and legal costs generally are expensed when incurred. At July 3, 2020, our accrual for the potential resolution of lawsuits, claims or proceedings that we consider probable of being decided unfavorably to us was not material. Although it is not feasible to predict the outcome of these matters with certainty, it is reasonably possible that some lawsuits, claims or proceedings may be disposed of or decided unfavorably to us and in excess of the amounts currently accrued. Based on available information,Contingencies in the ~~opinion~~Notes for discussion regarding material legal proceedings and contingencies. Except as set forth in such discussion, there have been no material developments in legal proceedings as reported in Item 3. “Legal Proceedings” of ~~management, settlements, arbitration awards and final judgments, if any, that are considered probable of being rendered against us in litigation or arbitration in existence at July 3,~~our Fiscal 2020 ~~are reserved against or would not have a material adverse effect on our financial condition, results of operations or cash flows.~~

~~Tax Audits.~~ Our tax filings are subject to audit by taxing authorities in jurisdictions where we conduct or conducted business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or ultimately through legal proceedings. We believe we have adequately accrued for any ultimate amounts that are likely to result from these audits; however, final assessments, if any, could be different from the amounts recorded in our Condensed Consolidated Financial Statements (Unaudited).Form 10-K.

Item 1A. Risk Factors.

Investors should carefully review and consider the information regarding certain factors that could materially affect our business, results of operations, financial condition, ~~and~~ cash flows and equity as set forth in ~~Part I,~~ Item 1A. “Risk Factors” of our Fiscal ~~Transition Period~~2020 Form ~~10-KT. Other than the additional risk factors we have set forth below, there~~10-K. There have been no material changes to the risk factors disclosed in our Fiscal ~~Transition Period~~2020 Form ~~10-KT.~~10-K. We may disclose changes to our risk factors or disclose additional risk factors from time to time in our future filings with the SEC. Additional risks and uncertainties not presently known to us or that we currently believe not to be material also may adversely impact our business, financial condition, results of operations, cash flows and ~~cash flows.~~

~~The COVID-19 pandemic could have a material adverse effect on our business operations, financial condition, results of operations and cash flows.~~

~~In March 2020, COVID-19 was recognized as a pandemic by the World Health Organization and declared a national~~

emergency by the U.S. Government. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it is impacting our workforce, communities, suppliers, subcontractors, distributors, resellers and customers. The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption, which will adversely affect our business operations and may materially and adversely affect our financial condition, results of operations and cash flows.

In addition to volatility in the overall demand environment for our products, systems and services, we have restricted the operations of our facilities, and we may continue to restrict operations if we deem it necessary or if recommended or mandated by governmental authorities which would have a further adverse impact on us. For example, we have temporarily closed some of our flight training facilities in Europe and several other locations and implemented certain travel restrictions, which have disrupted how we operate our business, and we have also recognized $69 million and $394 million of charges for impairment of goodwill and other assets and other COVID-19-related impacts in the quarter and two quarters ended July 3, 2020, respectively.~~The COVID-19 pandemic may also impact our supply chains, including the ability of suppliers and vendors to provide their products and services to us.~~

Further, our management is focused on mitigating the effects of COVID-19, which has required and will continue to require, a large investment of time and resources across our enterprise and will delay other value-added services or initiatives. Additionally, many of our employees are currently working remotely. An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cyber security risks, and impair our ability to manage our business.

If our responses to the pandemic are unsuccessful, or if customers do not perceive our response to be adequate for the United States or our international markets, we could suffer damage to our reputation, which could adversely affect our business.

The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including: the severity and transmission rate of the virus; the ultimate geographic spread of the virus; the duration of the outbreak; the extent and effectiveness of containment actions; governmental, business and other actions (which could include limitations on our operations or mandates to provide products, systems or services); the impacts on our supply chain; the impact of the pandemic on economic activity; the extent and duration of the effect on customer demand and buying patterns; the effects of additional business or facility closures or other changes to our operations; the health of and the effect on our workforce and our ability to meet staffing needs in our businesses and facilities, particularly if members of our workforce are quarantined as a result of exposure; any impairment in value of our tangible or intangible assets which could be recorded as a result of a weaker economic conditions; and the potential effects on our internal controls, including those over financial reporting, as a result of changes in working environments such as shelter-in-place and similar orders that are applicable to our employees and business partners, among others. In addition, disruptions or turmoil in the credit or financial markets or impacts on our credit ratings from the pandemic could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted.

In addition, we cannot predict the impact that COVID-19 will have on our workforce, communities, suppliers, subcontractors, distributors, resellers or customers, and each of their financial conditions; however, any material effect on these parties could adversely impact us. The impact of COVID-19 may also exacerbate other risks discussed in Item 1A. “Risk Factors” of our Fiscal Transition Period Form 10-KT, any of which could have a material effect on us. This situation continues to evolve, sometimes rapidly, and additional impacts may arise that we are not aware of currently.equity.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

During the quarter ended July ~~3, 2020,~~2, 2021, we ~~did not repurchase any~~repurchased 3.9 million shares of our common stock under our ~~current~~share repurchase ~~program.~~program for $850 million at an average share price of $217.97, excluding commissions of $0.02 per share. The level of our repurchases depends on a number of factors, including our financial condition, capital requirements, cash flows, results of operations, future business prospects ~~impacts of COVID-19~~ and other factors our Board of Directors and management may deem relevant. We have announced that we currently expect to repurchase up to $3.4 billion in shares under our repurchase program in fiscal 2021, but we can give no assurances regarding the level and timing of share repurchases. The timing, volume and nature of repurchases are subject to market conditions, applicable securities laws and other factors and are at our discretion and may be suspended or discontinued at any time. Shares repurchased by us are ~~canceled~~cancelled and retired. The following table sets forth information with respect to repurchases by us of our common stock during the quarter ended July ~~3, 2020:~~2, 2021:


Period*	Period*	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs ⁽¹⁾	Maximum approximate dollar value of shares that may yet be purchased under the plans or programs ⁽¹⁾		Period*	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (1)	Maximum approximate dollar value of shares that may yet be purchased under the plans or programs (1)

Month No. 1	Month No. 1							Month No. 1
(April 4, 2020 - May 1, 2020)
(April 3, 2021 - April 30, 2021)						(April 3, 2021 - April 30, 2021)
Repurchase program⁽¹⁾	Repurchase program⁽¹⁾	—	—		—	$	1,800,204,462	Repurchase program(1)	—	$	—	—	$	5,510,459,057
Employee transactions⁽²⁾	Employee transactions⁽²⁾	4,596	$	188.60	—	—		Employee transactions(2)	11,274	207.33		—	—
Month No. 2	Month No. 2							Month No. 2
(May 2, 2020 - May 29, 2020)
(May 1, 2021 - May 28, 2021)						(May 1, 2021 - May 28, 2021)
Repurchase program⁽¹⁾	Repurchase program⁽¹⁾	—	$	—	—	$	1,800,204,462	Repurchase program(1)	2,077,422	$	216.18	2,077,422	$	5,061,368,423

Employee transactions⁽²⁾	Employee transactions⁽²⁾	4,363	$	188.89	—	—		Employee transactions(2)	20,798	214.72		—	—
Month No. 3	Month No. 3							Month No. 3
(May 30, 2020 - July 3, 2020)
(May 29, 2021 - July 2, 2021)						(May 29, 2021 - July 2, 2021)
Repurchase program⁽¹⁾	Repurchase program⁽¹⁾	—	$	—	—	$	1,800,204,462	Repurchase program(1)	1,821,807	$	220.01	1,821,807	$	4,660,543,994
Employee transactions⁽²⁾	Employee transactions⁽²⁾	5,162	$	193.85	—	—		Employee transactions(2)	18,259	219.87		—	—
Total	Total	14,121			—	$	1,800,204,462	Total	3,949,560			3,899,229	$	4,660,543,994

_______________

*Periods represent our fiscal ~~months.~~months

(1)On ~~July 1, 2019,~~January 28, 2021, we announced that our Board of Directors approved a $4$6 billion share repurchase ~~program (our “2019 Repurchase Program”) replacing~~authorization under our ~~prior~~ share repurchase program ~~and authorizing us~~that was in addition to the remaining unused authorization of $210 million as of January 1, 2021. We repurchase ~~up to $4 billion in~~ shares of our common stock through open-market purchases, private transactions, transactions structured through investment banking institutions or any combination thereof. As of July ~~3, 2020, $1,800,204,462~~2, 2021, $4.7 billion (as reflected in the table above) was the approximate dollar amount of our common stock that ~~could~~can still be purchased under our ~~2019 Repurchase Program,~~share repurchase program, which does not have a stated expiration date.

(2)Represents a combination of: (a) shares of our common stock delivered to us in satisfaction of the tax withholding obligation of holders of performance units, restricted units or restricted shares that vested during the quarter and (b) performance units, restricted units or restricted shares returned to us upon retirement or employment termination of employees. Our equity incentive plans provide that the value of shares delivered to us to pay the exercise price of options or to cover tax withholding obligations shall be the closing price of our common stock on the date the relevant transaction occurs.

6443

Sales of Unregistered Equity Securities

During the second quarter ~~ended July 3, 2020,~~of fiscal 2021, we did not issue or sell any unregistered equity securities.

Item 3. Defaults Upon Senior Securities.

Not Applicable.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

Not Applicable.

Item 6. Exhibits.

EXHIBIT INDEX

The following exhibits are filed herewith or incorporated by reference to exhibits previously filed with the SEC:


(3)	(a) Restated Certificate of Incorporation of L3Harris Technologies, Inc. (1995), as amended,, incorporated herein by reference to Exhibit 10 .A 3(a) to the Company’s Quarterly Report on Form 10 -Q 10-Q filed with the SEC on May 7,, 2020. (Commission File Number 1-3863)
	(b) Amended and Restated By-Laws of L3Harris Technologies, Inc., incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 7, 2020. (Commission File Number 1-3863)
*(10.1)		Amendment ~~Three~~3 to the L3Harris Retirement Savings Plan (amended and restated ~~as of~~effective January 1, ~~2020)~~2021), dated May 1, 2020.*12, 2021
*(10.2)		Amendment ~~Four~~4 to the L3Harris Retirement Savings Plan (amended and restated ~~as of~~effective January 1, ~~2020)~~2021), dated July 8, 2020.*May 12, 2021
(15)	Letter Regarding Unaudited Interim Financial Information
(31.1)	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive ~~Officer.~~Officer
(31.2)	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial ~~Officer.~~Officer
(32.1)	Section 1350 Certification of Chief Executive ~~Officer.~~Officer
(32.2)	Section 1350 Certification of Chief Financial ~~Officer.~~Officer
(101)	The financial information from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July ~~3, 2020~~2, 2021 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Statement of Income, (ii) the Condensed Consolidated Statement of Comprehensive Income, ~~(Loss),~~ (iii) the Condensed Consolidated Balance Sheet, (iv) the Condensed Consolidated Statement of Cash Flows, (v) the Condensed Consolidated Statement of Equity, and (vi) the Notes to the Condensed Consolidated Financial Statements.
(104)	Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101.

_______________

* Management contract or compensatory plan or ~~arrangement.~~arrangement

6544

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

L3HARRIS TECHNOLOGIES, INC.

(Registrant)

Date: August 4, ~~2020~~2021

By:

/s/ Jesus Malave Jr.

Jesus Malave Jr.

Senior Vice President and Chief Financial Officer

(principal financial officer and duly authorized officer)

6645


	Preliminary Fair Value as of September 27, 2019		Measurement Period Adjustments		Adjusted Fair Value as of July 3, 2020

	(In millions)
Receivables	$	849	$	(20)	$	829
Contract assets	1,708		(57)		1,651
Inventories	1,056		(73)		983
Other current assets	517		(16)		501
Property, plant and equipment	1,176		43		1,219
Operating lease right-of-use assets	704		108		812
Goodwill	15,423		(841)		14,582
Other intangible assets	6,768		1,690		8,458
Other non-current assets	327		(13)		314
Total assets acquired	$	28,528	$	821	$	29,349

Accounts payable	$	898	$	(13)	$	885
Contract liabilities	722		4		726
Other current liabilities	772		301		1,073
Operating lease liabilities	715		45		760
Defined benefit plans	1,411		—		1,411
Long-term debt, net	3,548		—		3,548
Other long-term liabilities	1,661		480		2,141
Total liabilities assumed	9,727		817		10,544
Net assets acquired	18,801		4		18,805
Noncontrolling interests	(151)		(4)		(155)
Total net consideration transferred	$	18,650	$	—	$	18,650


	Weighted Average Amortization Period	Total

	(In years)	(In millions)
Identifiable intangible assets acquired:
Customer relationships (Government)	14	$	5,082
Customer relationships (Commercial)	15	860
Contract backlog	3	19
Trade names — divisions	9	123
Developed technologies	7	550
Total intangible assets subject to amortization	13	6,634
Trade names — Corporate	indefinite	1,803
In-process research and development	n/a	21
Total identifiable intangible assets		$	8,458



	Employee severance-related costs		Facilities consolidation and other exit costs		Total

	(In millions)
Balance at January 3, 2020	$	58	$	7	$	65
Additional provisions	22		—		22
Payments	(38)		(1)		(39)

Total changes	(16)		(1)		(17)
Balance at July 3, 2020	$	42	$	6	$	48


	Aggregate Principal Amount of L3 Notes (prior to debt exchange)		Aggregate Principal Amount of New L3Harris Notes Issued		Aggregate Principal Amount of Remaining L3 Notes

	(In millions)
4.95% notes due February 15, 2021 (“4.95% 2021 Notes”)	$	650	$	501	$	149
3.85% notes due June 15, 2023 (“3.85% 2023 Notes”)	800		741		59
3.95% notes due May 28, 2024 (“3.95% 2024 Notes”)	350		326		24
3.85% notes due December 15, 2026 (“3.85% 2026 Notes”)	550		535		15
4.40% notes due June 15, 2028 (“4.40% 2028 Notes”)	1,000		918		82
Total	$	3,350	$	3,021	$	329


	Quarter Ended June 28, 2019						Two Quarters Ended June 28, 2019
	Pension		Other Benefits		Pension		Other Benefits

	(In millions)
Net periodic benefit income
Service cost	$	9	$	(1)	$	18	$	—
Interest cost	52		2		104		4
Expected return on plan assets	(96)		(4)		(191)		(8)
Amortization of net actuarial gain	—		(1)		—		(3)
Effect of curtailments or settlements	1		—		1		—
Net periodic benefit income	$	(34)	$	(4)	$	(68)	$	(7)


Unaudited Pro Forma Condensed Combined Statement of Income
For the quarter ended June 28, 2019
	Historical Harris		Historical L3		Pro Forma Adjustments		Note References	Pro Forma Combined

	(In millions, except per share amounts)
Revenue from product sales and services	$	1,865	$	2,631	$	(4)	a	$	4,448
					(44)		b
Cost of product sales and services	(1,223)		(1,868)		4		a	(3,062)
					30		b
					(5)		c
Engineering, selling and administrative expenses	(349)		(442)		6		b	(908)
					(125)		c
					29		d
					(2)		e
					2		f
					(27)		j


Merger, acquisition and divestiture related expenses	—		(27)		27		j	—
Non-operating income	48		—		14		j	62
Interest and other income, net	—		11		10		g	—
					(21)		j
Debt retirement charge	—		(3)		3		j	—
Interest income	—		—		4		j	4
Interest expense	(39)		(38)		3		h	(67)
					7		i
Income from continuing operations before income taxes	302		264		(89)			477
Income taxes	(33)		(50)		23		k	(60)
Income from continuing operations	269		214		(66)			417
Noncontrolling interest, net of income taxes	—		(6)		—			(6)
Income from continuing operations attributable to common shareholders	$	269	$	208	$	(66)		$	411

Income from continuing operations per basic common share attributable to common shareholders	$	2.26						$	1.85
Income from continuing operations per diluted common share attributable to common shareholders	$	2.21						$	1.82
Basic weighted average common shares outstanding	118.3				104.1		l	222.4
Diluted weighted average common shares outstanding	121.1				104.6		l	225.7


Unaudited Pro Forma Condensed Combined Statement of Income
For the two quarters ended June 28, 2019
	Historical Harris		Historical L3		Pro Forma Adjustments		Note References	Pro Forma Combined

	(In millions, except per share amounts)
Revenue from product sales and services	$	3,593	$	5,331	$	(11)	a	$	8,834
					(79)		b
Cost of product sales and services	(2,362)		(3,875)		11		a	(6,181)
					54		b
					(9)		c
Engineering, selling and administrative expenses	(659)		(824)		11		b	(1,707)
					(228)		c
					38		d
					(4)		e
					4		f
					(45)		j


Merger, acquisition and divestiture related expenses	—		(45)		45		j	—
Non-operating income	94		—		23		j	117

Interest and other income, net	—		15		19		g	—
					(34)		j
Debt retirement charge	—		(3)		3		j	—
Interest income	1		—		8		j	9
Interest expense	(82)		(75)		4		h	(139)
					14		i
Income from continuing operations before income taxes	585		524		(176)			933
Income taxes	(73)		(87)		44		k	(116)
Income from continuing operations	512		437		(132)			817
Noncontrolling interest, net of income taxes	—		(12)		—			(12)
Income from continuing operations attributable to common shareholders	$	512	$	425	$	(132)		$	805

Income from continuing operations per basic common share attributable to common shareholders	$	4.32						$	3.62
Income from continuing operations per diluted common share attributable to common shareholders	$	4.23						$	3.57
Basic weighted average common shares outstanding	118.1				104.1		l	222.2
Diluted weighted average common shares outstanding	120.7				104.6		l	225.3


	Weighted Average Amortization Period	Fair Value ⁽¹⁾		Quarter ended June 28, 2019		Two Quarters ended June 28, 2019

	(In years)	(In millions)
Identifiable Intangible Assets Acquired:
Customer relationships	15	$	5,417	$	122	$	222
Trade names — Divisions	9	123		3		6
Adjustment to engineering, selling and administrative expenses				125		228
Developed technology	7	562		17		33
Less: L3 historical amortization				(12)		(24)
Adjustment to cost of product sales and services				5		9
Total net adjustment to amortization expense				$	130	$	237
_________
⁽¹⁾As of May 4, 2020, the date of filing our Current Report on Form 8-K.