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 ~~April 1, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from _______________ to ______________

Commission File Number 1-3863

L3HARRIS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware									34-0276860
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

1025 West NASA Boulevard

Melbourne,

Florida

32919

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (321) 727-9100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $1.00 per share

LHX

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No

The number of shares outstanding of the registrant’s common stock as of April ~~22, 2022~~21, 2023 was ~~192,874,623.~~189,453,379.

L3HARRIS TECHNOLOGIES, INC.

FORM 10-Q

For the Quarter Ended ~~April 1, 2022~~March 31, 2023

TABLE OF CONTENTS


		Page No.

Part I. Financial Information:
	ITEM 1 . 1. Financial Statements (Unaudited):
	C ~~ondensed C~~on ~~solidated~~Condensed Consolidated Statement of ~~Income~~Operations for the ~~Quarter~~Quarters Ended March 31, 2023 and April 1, 2022 ~~and April 2, 2021~~	1
	C ~~ondensed Consolidated Statement of Comprehensive Income~~ ~~for the Quarter Ended April 1, 2022 and April 2, 2021~~	2
	Condensed Consolidated ~~Balance Sheet~~ atStatement of Comprehensive Income for the Quarters Ended March 31, 2023 and April 1, 2022 ~~and December 31, 2021~~	3
	C ~~ondensed Consolidated Statement of Cash Flow~~s ~~for the Quarter Ended April 1,~~Condensed Consolidated Balance Sheet at March 31, 2023 and December 30, 2022 ~~and April 2, 2021~~	4
	C ~~ondensed Consolidated~~Condensed Consolidated Statement of ~~Equity~~Cash Flows forfor the ~~Quarter~~Quarters Ended March 31, 2023 and April 1, 2022 ~~and April 2, 2021~~	5
	~~Notes to~~Condensed Consolidated Statement of Equity ~~Condensed~~f ~~Consolidated Financial Statements~~or the Quarters Ended March 31, 2023 and April 1, 2022	6
	Notes to Condensed Consolidated Financial Statements	7
	Report of Independent Registered Public Accounting Firm (PCAOB ID:42)	1820
	ITEM 2 . 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1921
	ITEM 3 . 3. Quantitative and Qualitative Disclosures About Market Risk	2831
	ITEM 4 . 4. Controls and Procedures	2832

Part II. Other Information:
	ITEM 1 . 1. Legal Proceedings	3033
	ITEM 1A. Risk Factors	3033
	ITEM 2 . 2. Unregistered Sales of Equity Securities and Use of Proceeds	3033
	ITEM 3 . 3. Defaults Upon Senior Securities	3134
	ITEM 4. Mine Safety Disclosures	3134
	ITEM 5 . O ~~ther~~ 5. Other Information	3134
	ITEM 6. Exhibits	3134

Signatures		3236

This Quarterly Report on Form 10-Q (this “Report”) contains trademarks, service marks and registered marks of L3Harris Technologies, Inc. and its subsidiaries. All other trademarks are the property of their respective owners.

PART I. FINANCIAL INFORMATION


ITEM 1.			FINANCIAL ~~STATEMENTS (Unaudited).~~STATEMENTS.

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF ~~INCOME~~OPERATIONS

(Unaudited)


		Quarter Ended					Quarter Ended
(In millions, except per share amounts)	(In millions, except per share amounts)	April 1, 2022		April 2, 2021				(In millions, except per share amounts)	March 31, 2023		April 1, 2022

Revenue from product sales and services	Revenue from product sales and services	$	4,103	$	4,567			Revenue from product sales and services	$	4,471	$	4,103
Cost of product sales and services	Cost of product sales and services	(2,892)		(3,213)				Cost of product sales and services	(3,305)		(2,860)
Engineering, selling and administrative expenses	Engineering, selling and administrative expenses	(713)		(801)				Engineering, selling and administrative expenses	(773)		(745)
Business divestiture-related losses		—		(15)
Impairment of goodwill and other assets		—		(62)
Non-operating income		106		117

Non-operating income, net								Non-operating income, net	82		106
Interest expense, net	Interest expense, net	(68)		(66)				Interest expense, net	(102)		(68)
Income from continuing operations before income taxes		536		527
Income before income taxes								Income before income taxes	373		536
Income taxes	Income taxes	(61)		(60)				Income taxes	(34)		(61)
Income from continuing operations		475		467
Discontinued operations, net of income taxes		—		(1)

Net income	Net income	475		466				Net income	339		475
Noncontrolling interests, net of income taxes	Noncontrolling interests, net of income taxes	—		2				Noncontrolling interests, net of income taxes	(2)		—
Net income attributable to L3Harris Technologies, Inc.	Net income attributable to L3Harris Technologies, Inc.	$	475	$	468			Net income attributable to L3Harris Technologies, Inc.	$	337	$	475

Amount attributable to L3Harris Technologies, Inc. common shareholders
Income from continuing operations		$	475	$	469
Discontinued operations, net of income taxes		—		(1)
Net income		$	475	$	468

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	$	1.77	$	2.46
Continuing operations		$	2.46	$	2.27
Discontinued operations		—		(0.01)

		$	2.46	$	2.26
Diluted	Diluted							Diluted	$	1.76	$	2.44
Continuing operations		$	2.44	$	2.25
Discontinued operations		—		—
		$	2.44	$	2.25

Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	193.2		206.7				Basic weighted average common shares outstanding	190.2		193.2
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	195.1		208.5				Diluted weighted average common shares outstanding	191.2		195.1

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

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)


		Quarter Ended				Quarter Ended
(In millions)	(In millions)	April 1, 2022		April 2, 2021			(In millions)	March 31, 2023		April 1, 2022

Net income	Net income	$	475	$	466		Net income	$	339	$	475
Other comprehensive income (loss):
Foreign currency translation loss, net of income taxes		(3)		(18)
Other comprehensive income:							Other comprehensive income:
Foreign currency translation gain (loss), net of income taxes							Foreign currency translation gain (loss), net of income taxes	7		(3)
Net unrealized gain on hedging derivatives, net of income taxes	Net unrealized gain on hedging derivatives, net of income taxes	5		5			Net unrealized gain on hedging derivatives, net of income taxes	5		5

Other comprehensive income (loss), recognized during the period		2		(13)
Other comprehensive income, recognized during the period							Other comprehensive income, recognized during the period	12		2
Reclassification adjustments for gains included in net income	Reclassification adjustments for gains included in net income	(6)		(2)			Reclassification adjustments for gains included in net income	(12)		(6)
Other comprehensive loss, net of income taxes		(4)		(15)
Other comprehensive loss, net of income taxes:							Other comprehensive loss, net of income taxes:	—		(4)
Total comprehensive income	Total comprehensive income	471		451			Total comprehensive income	339		471
Comprehensive loss attributable to noncontrolling interests		—		2
Comprehensive income attributable to noncontrolling interests							Comprehensive income attributable to noncontrolling interests	(2)		—
Total comprehensive income attributable to L3Harris Technologies, Inc.	Total comprehensive income attributable to L3Harris Technologies, Inc.	$	471	$	453		Total comprehensive income attributable to L3Harris Technologies, Inc.	$	337	$	471

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

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)
(In millions, except shares) April 1, 2022 December 31, 2021
Assets
Current Assets
Cash and cash equivalents $ 402 $ 941
Receivables, net 1,283 1,045
Contract assets 3,113 3,021
Inventories 1,090 982
Inventory prepayments 58 48
Income taxes receivable 54 98
Other current assets 249 224
Total current assets 6,249 6,359
Non-current Assets
Property, plant and equipment, net 2,078 2,101
Operating lease right-of-use assets 775 769
Goodwill 18,194 18,189
Other intangible assets, net 6,486 6,640
Deferred income taxes 91 85
Other non-current assets 571 566
Total non-current assets 28,195 28,350
$ 34,444 $ 34,709
Liabilities and Equity
Current Liabilities
Short-term debt $ 3 $ 2
Accounts payable 1,723 1,767
Contract liabilities 1,275 1,297
Compensation and benefits 290 444
Other accrued items 997 1,002
Income taxes payable 187 28
Current portion of long-term debt, net 262 11
Total current liabilities 4,737 4,551
Non-current Liabilities
Defined benefit plans 524 614
Operating lease liabilities 777 768
Long-term debt, net 6,795 7,048
Deferred income taxes 1,189 1,344
Other long-term liabilities 1,056 1,065
Total non-current liabilities 10,341 10,839
Equity
Shareholders’ Equity:
Preferred stock, without par value; 1,000,000 shares authorized; none issued — —
Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 192,805,539 and 193,511,401 shares at April 1, 2022 and December 31, 2021, respectively 193 194
Other capital 16,089 16,248
Retained earnings 3,128 2,917
Accumulated other comprehensive loss (150) (146)
Total shareholders’ equity 19,260 19,213
Noncontrolling interests 106 106
Total equity 19,366 19,319
$ 34,444 $ 34,709


(In millions, except shares)	March 31, 2023		December 30, 2022

Assets
Current Assets
Cash and cash equivalents	$	545	$	880
Receivables, net of allowances for collection losses of $38 and $40, respectively	1,231		1,251
Contract assets	3,274		2,987
Inventories	1,541		1,291
Income taxes receivable	41		40
Other current assets	307		258
Assets of business held for sale	61		47
Total current assets	7,000		6,754
Non-current Assets
Property, plant and equipment, net	2,133		2,104
Operating lease right-of-use assets	756		756
Goodwill	18,291		17,283
Other intangible assets, net	6,688		6,001
Deferred income taxes	74		73
Other non-current assets	565		553

Total assets	$	35,507	$	33,524

Liabilities and Equity
Current Liabilities
Short-term debt	$	2	$	2
Accounts payable	2,054		1,945
Contract liabilities	1,525		1,400
Compensation and benefits	285		398
Other accrued items	946		818
Income taxes payable	508		376
Current portion of long-term debt, net	811		818
Liabilities of business held for sale	20		19
Total current liabilities	6,151		5,776
Non-current Liabilities
Defined benefit plans	208		262
Operating lease liabilities	735		741
Long-term debt, net	8,220		6,225
Deferred income taxes	570		719
Other long-term liabilities	1,215		1,177

Total liabilities	17,099		14,900
Equity
Shareholders’ Equity:
Preferred stock, without par value; 1,000,000 shares authorized; none issued	—		—
Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 189,360,959 and 190,611,458 shares at March 31, 2023 and December 30, 2022, respectively	189		191
Other capital	15,407		15,677
Retained earnings	2,998		2,943
Accumulated other comprehensive loss	(288)		(288)
Total shareholders’ equity	18,306		18,523
Noncontrolling interests	102		101
Total equity	18,408		18,624
Total liabilities and equity	$	35,507	$	33,524

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

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)
Quarter Ended
(In millions) April 1, 2022 April 2, 2021
Operating Activities
Net income $ 475 $ 466
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of acquisition-related intangibles 152 164
Depreciation and other amortization 80 87
Share-based compensation 28 33
Share-based matching contributions under defined contribution plans 55 57
Qualified pension plan contributions (2) (2)
Pension and other postretirement benefit plan income (99) (92)
Impairment of goodwill and other assets — 62
Business divestiture-related losses — 15
Deferred income taxes (162) (22)
(Increase) decrease in:
Receivables, net (239) 213
Contract assets (93) (272)
Inventories (108) 61
Prepaid expenses and other current assets (25) (85)
Increase (decrease) in:
Accounts payable (43) 15
Contract liabilities (16) 9
Compensation and benefits (154) (161)
Other accrued items (12) 71
Income taxes 203 72
Other (1) (30)
Net cash provided by operating activities 39 661
Investing Activities
Additions to property, plant and equipment (55) (67)
Proceeds from sale of property, plant and equipment, net — 3
Other investing activities (9) 3
Net cash used in investing activities (64) (61)
Financing Activities
Net proceeds from borrowings 1 1
Repayments of borrowings (5) (1)
Proceeds from exercises of employee stock options 30 10
Repurchases of common stock (308) (700)
Cash dividends (218) (209)
Tax withholding payments associated with vested share-based awards (12) (1)
Other financing activities (1) —
Net cash used in financing activities (513) (900)
Effect of exchange rate changes on cash and cash equivalents (1) —
Net decrease in cash and cash equivalents (539) (300)
Cash and cash equivalents, beginning of period 941 1,276
Cash and cash equivalents, end of period $ 402 $ 976


	Quarter Ended
(In millions)	March 31, 2023		April 1, 2022

Operating Activities
Net income	$	339	$	475
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of acquisition-related intangibles	165		152
Depreciation and other amortization	85		80
Share-based compensation	23		28
Share-based matching contributions under defined contribution plans	57		55
Pension and other postretirement benefit plan income	(71)		(99)


Deferred income taxes	(115)		(162)
(Increase) decrease in:
Receivables, net	48		(239)
Contract assets	(269)		(93)
Inventories	(86)		(108)
Other current assets	(40)		(25)
Increase (decrease) in:
Accounts payable	90		(43)
Contract liabilities	97		(16)
Compensation and benefits	(115)		(154)
Other accrued items	63		(12)
Income taxes	130		203
Other operating activities	(51)		(3)
Net cash provided by operating activities	350		39
Investing Activities
Net cash paid for acquired business	(1,973)		—
Additions to property, plant and equipment	(71)		(55)



Cash used for equity investments	(5)		(9)
Other investing activities	1		—
Net cash used in investing activities	(2,048)		(64)
Financing Activities
Proceeds from borrowings, net of issuance cost	2,248		1
Repayments of borrowings	(255)		(5)
Proceeds from exercises of employee stock options	11		30
Repurchases of common stock	(396)		(308)
Cash dividends	(220)		(218)
Tax withholding payments associated with vested share-based awards	(26)		(12)
Other financing activities	(1)		(1)
Net cash provided by (used in) financing activities	1,361		(513)
Effect of exchange rate changes on cash and cash equivalents	2		(1)
Net decrease in cash and cash equivalents	(335)		(539)
Cash and cash equivalents, beginning of period	880		941
Cash and cash equivalents, end of period	$	545	$	402

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

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

Balance at December 30, 2022														Balance at December 30, 2022	$	191	$	15,677	$	2,943	$	(288)	$	101	$	18,624
Net income														Net income	—		—		337		—		2		339

Shares issued under stock incentive plans														Shares issued under stock incentive plans	—		11		—		—		—		11
Shares issued under defined contribution plans														Shares issued under defined contribution plans	—		57		—		—		—		57
Share-based compensation expense														Share-based compensation expense	—		23		—		—		—		23
Tax withholding payments on share-based awards														Tax withholding payments on share-based awards	—		(26)		—		—		—		(26)
Repurchases and retirement of common stock														Repurchases and retirement of common stock	(2)		(332)		(62)		—		—		(396)
Cash dividends ($1.14 per share)														Cash dividends ($1.14 per share)	—		—		(220)		—		—		(220)

Other														Other	—		(3)		—		—		(1)		(4)
Balance at March 31, 2023														Balance at March 31, 2023	$	189	$	15,407	$	2,998	$	(288)	$	102	$	18,408

Balance at December 31, 2021	Balance at December 31, 2021	$	194	$	16,248	$	2,917	$	(146)	$	106	$	19,319	Balance at December 31, 2021	$	194	$	16,248	$	2,917	$	(146)	$	106	$	19,319
Net income	Net income	—		—		475		—		—		475		Net income	—		—		475		—		—		475
Other comprehensive loss, net of income taxes	Other comprehensive loss, net of income taxes	—		—		—		(4)		—		(4)		Other comprehensive loss, net of income taxes	—		—		—		(4)		—		(4)
Shares issued under stock incentive plans	Shares issued under stock incentive plans	—		30		—		—		—		30		Shares issued under stock incentive plans	—		30		—		—		—		30
Shares issued under defined contribution plans	Shares issued under defined contribution plans	—		55		—		—		—		55		Shares issued under defined contribution plans	—		55		—		—		—		55
Share-based compensation expense	Share-based compensation expense	—		28		—		—		—		28		Share-based compensation expense	—		28		—		—		—		28
Tax withholding payments on share-based awards	Tax withholding payments on share-based awards	—		(12)		—		—		—		(12)		Tax withholding payments on share-based awards	—		(12)		—		—		—		(12)
Repurchases and retirement of common stock	Repurchases and retirement of common stock	(1)		(260)		(47)		—		—		(308)		Repurchases and retirement of common stock	(1)		(260)		(47)		—		—		(308)
Cash dividends ($1.12 per share)	Cash dividends ($1.12 per share)	—		—		(218)		—		—		(218)		Cash dividends ($1.12 per share)	—		—		(218)		—		—		(218)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	—		—		—		—		(1)		(1)		Distributions to noncontrolling interests	—		—		—		—		(1)		(1)
Other	Other	—		—		1		—		1		2		Other	—		—		1		—		1		2
Balance at April 1, 2022	Balance at April 1, 2022	$	193	$	16,089	$	3,128	$	(150)	$	106	$	19,366	Balance at April 1, 2022	$	193	$	16,089	$	3,128	$	(150)	$	106	$	19,366

Balance at January 1, 2021		$	208	$	19,008	$	2,347	$	(839)	$	117	$	20,841
Net income		—		—		468		—		(2)		466
Other comprehensive loss, net of income taxes		—		—		—		(15)		—		(15)
Shares issued under stock incentive plans		—		10		—		—		—		10
Shares issued under defined contribution plans		—		57		—		—		—		57
Share-based compensation expense		—		33		—		—		—		33

Repurchases and retirement of common stock		(3)		(620)		(77)		—		—		(700)
Cash dividends ($1.02 per share)		—		—		(209)		—		—		(209)

Other		—		(1)		—		—		—		(1)
Balance at April 2, 2021		$	205	$	18,487	$	2,529	$	(854)	$	115	$	20,482

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE ~~A —~~A: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ~~AND RECENT ACCOUNTING STANDARDS~~

~~Basis~~Principles of ~~Presentation~~Consolidation

The accompanying Condensed Consolidated Financial Statements ~~(Unaudited)~~ include the accounts of L3Harris Technologies, Inc. and its consolidated subsidiaries. As used in these Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~ (these ~~“Notes”~~"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.~~ eliminated.

The accompanying Condensed Consolidated Financial Statements ~~(Unaudited)~~ have been prepared by L3Harris in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all information and footnotes necessary for a complete presentation of financial condition, results of operations, cash flows and equity in conformity with GAAP for annual financial ~~statements.~~ statements and are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period.

In the opinion of management, such interim financial statements reflect all adjustments (including normal recurring adjustments) considered necessary for a fair presentation of our financial condition, results of operations, cash flows and equity for the periods presented therein. The ~~results for the quarter ended April 1, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period. The~~ balance sheet at December ~~31, 2021~~30, 2022 has been derived from our audited financial statements, but does not include all of the information and footnotes required by GAAP for annual financial statements. ~~We provide complete, audited financial statements in our Annual Report on Form 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”)~~accompanying Condensed Consolidated Financial Statements should be read in conjunction with ~~the Management’s~~Part II: Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December ~~31, 2021~~30, 2022 (our ~~“Fiscal 2021~~"Fiscal 2022 Form ~~10-K”~~10-K").

~~Segment reorganization:~~Business Realignment. ~~We implemented a new organizational structure effective January 1,~~Effective for fiscal 2023, which began December 31, 2022, ~~resulting in changes to~~we adjusted our operating segments, which are also our reportable segments and are referred to as our business segments. The new structure streamlined our business segments from 4 business segments to 3 business segments. Our former Aviation Systems segment was eliminated as a business segment.

~~We updated our business segment~~ reporting ~~and accounting policies for pension and other postretirement benefits plan (“OPEB”) income or expense~~ to better align our ~~presentation of~~businesses and transferred our Agile Development Group (“ADG”) business ~~segment information with~~from our ~~industry peers. Our business~~Integrated Mission Systems ("IMS") segment operating results include pension and OPEB cost under U.S. Government Cost Accounting Standards (“CAS”), as CAS pension and OPEB cost is allocable to and allowable under contracts with the U.S. Government. We no longer assign or allocate Financial Accounting Standards (“FAS”) pension and OPEB income or expense to our business segments. U.S. GAAP requires pension and OPEB income or expense to be recognized on a FAS basis. Therefore, we present a “FAS/CAS pension adjustment” outside of business segment results, representing the difference between the service cost component of FAS pension and OPEB income or expense and total CAS pension and OPEB cost or expense. Non-service cost components of FAS pension and OPEB income or expense is included as a component of non-operating income or expense.Space & Airborne Systems (“SAS”) segment.

The historical results, discussion and presentation of our business segments as set forth in the accompanying Condensed Consolidated Financial Statements ~~(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,~~operations, balance sheets, statements of cash flows or statements of equity resulting from these changes.

See Note ~~Q —~~G: Goodwill and Other Intangible Assets and Note O: Business Segment Information in these Notes for further ~~information regarding our new segment structure and pension presentation effective in fiscal 2022.~~information.

~~Supplemental Cash Flow Information~~

Non-cash investing and financing activities during the quarter ended April 2, 2021 included a $120 million right-of-use asset we obtained in exchange for a corresponding financing lease liability. These non-cash investing and financing activities are excluded from the “Additions to property, plant and equipment” and “Net proceeds from borrowings” line items in our Condensed Consolidated Statement of Cash Flows (Unaudited). 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).

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.

Reclassifications

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Significant~~ Accounting ~~Policies~~Standards Updates

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

NOTE B: ACQUISITIONS AND DIVESTITURES

Acquisition of Viasat, Inc.’s TDL

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

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

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

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


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

_______________

(1)Prior to the acquisition, we had a preexisting relationship with Viasat’s TDL business in the normal course of business. As of the closing date, our CS segment had a receivable from Viasat’s TDL business with a fair value of $1 million that was settled in connection with the acquisition.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes the preliminary allocation of the fair value of consideration transferred to assets acquired and liabilities assumed as of the acquisition date:


(In millions)	January 3, 2023

Receivables	$	28
Contract assets	18
Inventories	164
Other current assets	9
Property, plant and equipment	50
Operating lease right-of-use assets	12
Goodwill	1,014
Other intangible assets	850
Deferred income tax	33
Other non-current assets	6
Total assets acquired	$	2,184

Accounts payable	$	20
Contract liabilities	28
Compensation and benefits	2
Other accrued items	119
Operating lease liabilities	10
Other long-term liabilities	31
Total liabilities assumed	$	210

Net assets acquired	$	1,974

Our preliminary estimates and assumptions are subject to change as we obtain additional information during the measurement period (up to one year from the acquisition date); therefore, these provisional measurements of the acquired assets and liabilities assumed are subject to change.

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


	Total		Useful Lives
	(In millions)		(In Years)

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

_______________

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

We determined the fair value of assets acquired and liabilities assumed by using available market information and various valuation methods that require judgment related to estimations. The use of different estimates could produce different results. The fair value of intangible assets are estimated using the relief from royalty method for the acquired developed technology and the multi-period excess earnings method for the acquired customer relationships. Both of these level 3 fair value methods are income-based valuation approaches, which require judgment to estimate appropriate discount rates, royalty rates related to the developed technology intangible assets, revenue growth attributable to the intangible assets and remaining useful lives. The fair value of inventory was estimated using the replacement cost approach and comparative sales method, which require estimates of replacement cost for raw materials and estimates of expected sales price less costs to complete and dispose of the inventory, plus a profit margin for efforts incurred for the work in progress and finished goods.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of March 31, 2023, we have recorded a preliminary forward loss provision of $83 million in connection with certain acquired contracts of which $83 million was included in the “Other accrued items” line item in our Condensed Consolidated Balance Sheet. The forward loss provisions will be recognized as a reduction to cost of sales as we incur costs to satisfy the associated performance obligations. There will be no net impact on our Condensed Consolidated Statement of Operations. We recognized $8 million in the quarter ended March 31, 2023 for amortization of the loss provision.

We have identified certain contractual obligations with customers with economic returns that are higher or lower than could be realized in market transactions as of the acquisition date and have recorded liabilities for the preliminary acquisition date fair value of the off-market components. The preliminary acquisition date fair value of the off-market components is a net liability of $57 million, consisting of $31 million and $26 million included in the“Other accrued items” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet, respectively, and exclude any amounts already recognized in forward loss provisions (see discussion in the preceding paragraph). We measured the fair value of these components as the amount by which the terms of the contract with the customer deviates from the terms that a market participant could have achieved at the acquisition date. The off-market components of these contracts will be recognized as an increase to revenue as we incur costs to satisfy the associated performance obligations. We recognized $9 million in the quarter ended March 31, 2023 for amortization of off-market contract liabilities. Future estimated revenue from the amortization of off-market contract liabilities (based on the estimated pattern of cash flows to be incurred to satisfy associated performance obligations) is $22 million in the remainder of 2023, $26 million in 2024, and immaterial amounts thereafter.

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

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

Acquisition-Related Costs.Acquisition-related costs have been ~~no material changes~~expensed as incurred. In connection with the TDL acquisition, we recorded $31 million of transaction and integration costs, which are included in Engineering, selling and administrative expenses in our Condensed Consolidated Statement of Operations for the quarter ended March 31, 2023.

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

On December 17, 2022, we entered into a definitive agreement to ~~our significant accounting policies described~~acquire AJRD in an all-cash transaction for a purchase price of approximately $4.7 billion. The transaction is expected to close in fiscal 2023. In connection with the pending acquisition, during the quarter ended March 31, 2023, we entered into a revolving credit facility and a commercial paper program. See Note H: Debt and Credit Arrangements in these Notes and Note 3: Acquisitions in our Fiscal ~~2021~~2022 Form ~~10-K.~~10-K for further information regarding the pending AJRD acquisition and related funding.

Divestiture of Visual Information Solutions (“VIS”)

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

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

NOTE ~~B —~~C: STOCK OPTIONS AND OTHER SHARE-BASED COMPENSATION

At ~~April 1, 2022,~~March 31, 2023, we had stock options or other share-based compensation awards outstanding under ~~2 Harris shareholder-approved~~several employee stock incentive plans (“~~SIPs”), the Harris Corporation 2005 Equity Incentive Plan (As Amended and Restated Effective August 27, 2010) and the~~ L3Harris Technologies, Inc. 2015 Equity Incentive Plan (As Amended and Restated Effective August 28, 2020) (the “2015 EIP”), as well as under employee stock incentive plans of L3 Technologies, Inc. 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 $28 million and $33 million~~ for the quarters ended March 31, 2023 and April 1, 2022 ~~and April 2, 2021, respectively. The aggregate number of shares of our common stock issued under L3Harris SIPs, net of shares withheld for tax purposes,~~ was ~~0.4~~$23 million and ~~0.1~~$28 million, ~~for the quarters ended April 1, 2022 and April 2, 2021,~~ respectively.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Awards granted to participants under L3Harris SIPs and the weighted-average grant-date fair value per share during the ~~quarter~~quarters ended March 31, 2023 and April 1, 2022 ~~consisted of 0.4 million~~are as follows:


	Quarter Ended March 31, 2023			Quarter Ended April 1, 2022
(In millions, except per share amounts)	Shares	Weighted-Average Grant-Date Fair Value Per Share		Shares	Weighted-Average Grant-Date Fair Value Per Share

Stock options granted(1)	0.4	$	54.81	0.4	$	53.42
Restricted stock and restricted stock units granted(2)	0.1	$	210.84	0.2	$	220.97
Performance share units granted(3)	0.2	$	223.09	0.2	$	258.83

_______________

(1)Other than certain stock options ~~0.2 million performance~~granted in connection with new hires, our stock options generally step-vest in equal amounts over a three-year period.

(2)Other than certain restricted stock units ~~and 0.2 million~~granted in connection with new hires, our restricted stock ~~units. The majority of the options~~ and units were granted on February 25, 2022. 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 1.92%; expected volatility of 29.11%; risk-free interest rates averaging 1.86%; and expected term of 5.02 years. The fair value as of the grant date of each restricted stock ~~unit award was based~~units generally vest on a three-year cliff.

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

See Note 15: Stock Options and Other Share-Based Compensation in our ~~common stock on~~Fiscal 2022 Form 10-K for additional information regarding 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 other companies in the S&P 500, less a discount to reflect the delay in payments of cash dividend-equivalents that are made only upon vesting. The fair value of these awards is amortized to compensation expense over the performance period if achievement of the performance measures is considered probable.L3Harris SIPs.

NOTE ~~C —~~D: ACCUMULATED OTHER COMPREHENSIVE ~~INCOME (LOSS)~~LOSS (“AOCI”)

The components of AOCI are summarized below:


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

Balance at December 30, 2022										Balance at December 30, 2022	$	(237)	$	(79)	$	28	$	(288)
Other comprehensive income before reclassifications to earnings, net of income taxes										Other comprehensive income before reclassifications to earnings, net of income taxes	7		5		—		12
Gains reclassified to earnings, net of income taxes(1)										Gains reclassified to earnings, net of income taxes(1)	—		(1)		(11)		(12)
Other comprehensive income (loss), net of income taxes										Other comprehensive income (loss), net of income taxes	7		4		(11)		—
Balance at March 31, 2023										Balance at March 31, 2023	$	(230)	$	(75)	$	17	$	(288)

Balance at December 31, 2021	Balance at December 31, 2021	$	(118)	$	(89)	$	61	$	(146)	Balance at December 31, 2021	$	(118)	$	(89)	$	61	$	(146)

Other comprehensive (loss) income before reclassifications to earnings, net of income taxes	Other comprehensive (loss) income before reclassifications to earnings, net of income taxes	(3)		5		—		2		Other comprehensive (loss) income before reclassifications to earnings, net of income taxes	(3)		5		—		2

Gains reclassified to earnings, net of income taxes		—		(1)		(5)		(6)
Gains reclassified to earnings, net of income taxes(1)										Gains reclassified to earnings, net of income taxes(1)	—		(1)		(5)		(6)
Other comprehensive (loss) income, net of income taxes	Other comprehensive (loss) income, net of income taxes	(3)		4		(5)		(4)		Other comprehensive (loss) income, net of income taxes	(3)		4		(5)		(4)
Balance at April 1, 2022	Balance at April 1, 2022	$	(121)	$	(85)	$	56	$	(150)	Balance at April 1, 2022	$	(121)	$	(85)	$	56	$	(150)

Balance at January 1, 2021		$	(58)	$	(80)	$	(701)	$	(839)

Other comprehensive (loss) income before reclassifications to earnings, net of income taxes		(18)		5		—		(13)

(Gains) losses reclassified to earnings, net of income taxes		—		(3)		1		(2)
Other comprehensive (loss) income, net of income taxes		(18)		2		1		(15)
Balance at April 2, 2021		$	(76)	$	(78)	$	(700)	$	(854)

_______________

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

NOTE ~~D — RECEIVABLES, NET~~

~~Receivables, net are summarized below:~~

(In millions) April 1, 2022 December 31, 2021
Accounts receivable $ 1,324 $ 1,088
Less: allowances for collection losses (41) (43)
Receivables, net $ 1,283 $ 1,045

We have 2 receivables sale agreements (“RSAs”) with two separate third-party financial institutions that 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 RSAs, which we continue to service and collect on behalf of the third-party financial 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 RSAs was $99 million at April 1, 2022 and $100 million at December 31, 2021, with net cash proceeds of $98 million and $100 million, respectively.

~~NOTE E —~~E: CONTRACT ASSETS AND CONTRACT LIABILITIES

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

Contract assets and ~~liabilities in the quarter ended April 1, 2022 were impacted primarily by the timing of contractual billing milestones.~~

~~Contract assets and~~ contract liabilities are summarized below:


(In millions)	(In millions)	April 1, 2022		December 31, 2021		(In millions)	March 31, 2023		December 30, 2022

Contract assets	Contract assets	$	3,113	$	3,021	Contract assets	$	3,274	$	2,987
Contract liabilities, current	Contract liabilities, current	(1,275)		(1,297)		Contract liabilities, current	(1,525)		(1,400)
Contract liabilities, non-current(1)	Contract liabilities, non-current(1)	(114)		(107)		Contract liabilities, non-current(1)	(115)		(117)
Net contract assets	Net contract assets	$	1,724	$	1,617	Net contract assets	$	1,634	$	1,470

_______________

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

The components of contract assets are summarized below:


(In millions)	(In millions)	April 1, 2022		December 31, 2021		(In millions)	March 31, 2023		December 30, 2022

Unbilled contract receivables, gross	Unbilled contract receivables, gross	$	4,530	$	4,825	Unbilled contract receivables, gross	$	5,066	$	4,629
Unliquidated progress payments and advances	Unliquidated progress payments and advances	(1,417)		(1,804)		Unliquidated progress payments and advances	(1,792)		(1,642)
Contract assets	Contract assets	$	3,113	$	3,021	Contract assets	$	3,274	$	2,987

~~Impairment losses related to our contract~~Contract assets and liabilities as of March 31, 2023 and December 30, 2022 were ~~not material for~~impacted primarily by the ~~quarters ended April 1, 2022 and April 2, 2021.~~timing of contractual billing milestones. During the quarters ended March 31, 2023 and April 1, 2022, ~~and April 2, 2021,~~ we recognized $603 million and $517 million, ~~and $508 million,~~ respectively,, of revenue related to contract liabilities that were outstanding at the end of the respective prior fiscal year.

NOTE ~~F —~~F: INVENTORIES

Inventories are summarized below:


(In millions)	(In millions)	April 1, 2022		December 31, 2021		(In millions)	March 31, 2023		December 30, 2022

Finished products(1)	Finished products(1)	$	159	$	141	Finished products(1)	$	315	$	181
Work in process	Work in process	326		335		Work in process	463		396
Raw materials and supplies		605		506
Materials and supplies						Materials and supplies	763		714
Inventories(1)	Inventories(1)	$	1,090	$	982	Inventories(1)	$	1,541	$	1,291

_______________

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

NOTE ~~G — PROPERTY, PLANT~~G: GOODWILL AND ~~EQUIPMENT, NET~~OTHER INTANGIBLE ASSETS

~~Property, plant and equipment, net are summarized below:~~
(In millions) April 1, 2022 December 31, 2021
Land $ 80 $ 79
Software capitalized for internal use 584 576
Buildings 1,250 1,236
Machinery and equipment 2,191 2,177
4,105 4,068
Less: accumulated depreciation and amortization (2,027) (1,967)
Property, plant and equipment, net $ 2,078 $ 2,101
Goodwill

~~Depreciation and amortization expense related to property, plant and equipment was $83 million and $84 million for the quarters ended April 1, 2022 and April 2, 2021, respectively.~~

~~NOTE H — GOODWILL~~

The assignment of goodwill ~~by business segment,~~ and changes in the carrying amount of goodwill, by business segment, were as follows:
(In millions) Integrated Mission Systems Space & Airborne Systems Communication Systems
Aviation Systems(1)
Total
Balance at December 31, 2021 - As Reported $ 6,485 $ 5,202 $ 4,153 $ 2,349 $ 18,189
Transfer of goodwill in segment reorganization(1)
1,702 647 — (2,349) —
Balance at December 31, 2021 - After Reallocation 8,187 5,849 4,153 — 18,189
Currency translation adjustments 6 (2) 1 — 5
Balance at April 1, 2022 $ 8,193 $ 5,847 $ 4,154 $ — $ 18,194


(In millions)	IMS		SAS		CS		Total

Balance at December 30, 2022	$	7,709	$	5,778	$	3,796	$	17,283
Reallocation of goodwill in business realignment	(327)		327		—		—
Goodwill from TDL acquisition	—		—		1,014		1,014
Assets of business held for sale(1)	—		(9)		—		(9)

Currency translation adjustments	—		3		—		3
Balance at March 31, 2023	$	7,382	$	6,099	$	4,810	$	18,291

_______________

(1)As a result of our new organizational structure, effective January 1, 2022, streamlining our operations from 4 business segments to 3 business segments, we transferred goodwill previously held by our eliminated Aviation Systems segment to our remaining business segments as of January 1, 2021, the earliest period presented in these Notes. See additional information below and “Segment Reorganization” in. ~~Note A — Significant Accounting Policies and Recent Accounting Standards~~ ~~in these Notes.~~

~~Fair Value of Businesses~~

~~Segment reorganization:~~ We implemented a new organizational structure effective January 1, 2022, resulting in changes to our operating segments, which are also our reportable segments and are referred to as our business segments. The new structure streamlined our business segments from 4 business segments to 3 business segments. As a result of the segment reorganization, we realigned our reporting units from 11 to 9 reporting units, which are our business segments or one level below the business segment. For our realigned reporting units, immediately before and after our goodwill assignments, we completed an assessment of any potential goodwill impairment under our former and new reporting unit structure and determined that no impairment existed.

~~Combat Propulsion Systems and related businesses (“CPS business”) impairment.~~ During the quarter ended ~~April 2, 2021,~~March 31, 2023, we ~~determined the criteria to be classified as held for sale were met with respect to the CPS business within our other non-reportable business segment and~~ assigned ~~$174~~an additional $9 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~~VIS business ~~was impaired and we recorded a non-cash impairment charge of $62 million,~~ which is included in ~~the “Impairment~~“Assets of ~~goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited).~~

~~See~~ ~~Note 1: “Significant Accounting Policies”~~ ~~and~~ ~~Note 3: “Business Divestitures and Asset Sales”~~ ~~in the Notes to Consolidated Financial Statement in our Fiscal 2021 Form 10-K~~business held for ~~additional information regarding the fair value hierarchy and our business divestitures, respectively.~~

~~NOTE I — 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~~sale” in our Condensed Consolidated Balance Sheet at March 31, 2023.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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

Intangible Assets

Identifiable intangible assets, net are summarized below:


	March 31, 2023						December 30, 2022
(In millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount(1)

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

_______________

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

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

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

The most significant identifiable intangible asset that is separately recognized for our business combinations is customer relationships. For further description of our accounting policies related to intangible assets acquired in the TDL acquisition, see Note B: Acquisitions and Divestitures in these Notes, and for our accounting policies related to all other intangible assets, see Note 10: Intangible Assets, Net in our Fiscal 2022 Form 10-K.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


	(In millions)

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

NOTE H: DEBT AND CREDIT ARRANGEMENTS

Long-Term Debt

Long-term debt, net is summarized below:


(In millions)	March 31, 2023		December 30, 2022

Variable-rate debt:
Floating rate notes, due March 10, 2023 ("Floating 2023 Notes")	$	—	$	250
Term loan, due November 21, 2025	2,250		—

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

Long-Term Debt Issued

On November 22, 2022, we established a $2.25 billion, three-year senior unsecured term loan facility by entering into Term Loan 2025 with a syndicate of lenders that matures on November 21, 2025.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Borrowings under Term Loan 2025 bear interest at: (i) the sum of the term secured overnight financing rate (“SOFR”) for any tenor comparable to the applicable interest period, plus 0.10%, plus an applicable margin between 1.125% and 1.875% that varies based on ratings of our senior unsecured long-term debt securities (“Senior Debt Ratings”). At March 31, 2023, the interest rate on Term Loan 2025 was 6.2% (6.1% net of the impact of our interest rate cap derivative). See Note 19: Derivative Instruments and Hedging Activities in our Fiscal 2022 Form 10-K for further information on our interest rate cap derivative.

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

Long-Term Debt Repayments

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

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

2023 Credit Agreement

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

Proceeds of the initial funding of loans under the 2023 Credit Agreement are required to be used to finance a portion of the purchase price for the acquisition of AJRD and for the fees, taxes, costs and related expenses related to it, and thereafter may be used for working capital purposes.

At our election, borrowings under the 2023 Credit Agreement, which will be designated in U.S. Dollars, will bear interest at the sum of the term SOFR rate or the Base Rate (as defined in the 2023 Credit Agreement), plus an applicable margin. In addition to interest payable on the principal amount of indebtedness outstanding, beginning on June 6, 2023 (or earlier upon an initial funding), we will be required to pay a quarterly unused commitment fee that varies based on our Senior Debt Ratings.

The 2023 Credit Agreement also contains representations, warranties, covenants and events of default that are substantially similar to the existing Revolving Credit Agreement, dated as of July 29, 2022 (“2022 Credit Agreement”). The 2023 Credit Agreement generally matures on the earlier of 364 days from the initial funding and December 8, 2023, provided that we may extend the maturity of any loans outstanding under the 2023 Credit Agreement by one year, subject to the satisfaction of certain conditions. At March 31, 2023, we had no outstanding borrowings and were ~~as follows:~~in compliance with all covenants under our 2023 Credit Agreement. For additional information regarding our 2023 Credit Agreement, see our Current Report on Form 8-K filed on March 16, 2023.

~~(In millions)~~

~~Balance at December 31, 2021~~

~~117~~

~~Accruals for product warranties issued during the period~~

~~Settlements made during the period~~

~~(30)~~

~~Other, including foreign currency translation adjustments~~

~~(2)~~

~~Balance at April 1, 2022~~

~~102~~

2022 Credit Agreement

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

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

Commercial Paper Program

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

The commercial paper notes will be sold at par less a discount representing an interest factor or, if interest bearing, at par. The maturities of the commercial paper notes will vary, but may not exceed 397 days from the date of issue. The commercial paper notes will rank at least pari passu with all other unsecured and unsubordinated indebtedness. For additional information regarding our CP Program, see our Current Report on Form 8-K filed on March 16, 2023.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE ~~J —~~I: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

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


		Quarter Ended April 1, 2022				Quarter Ended April 2, 2021					Quarter Ended March 31, 2023				Quarter Ended April 1, 2022
(In millions)	(In millions)	Pension		Other Benefits		Pension		Other Benefits		(In millions)	Pension		Other Benefits		Pension		Other Benefits

Net periodic benefit income	Net periodic benefit income									Net periodic benefit income
Operating	Operating									Operating
Service cost	Service cost	$	10	$	1	$	18	$	1	Service cost	$	6	$	—	$	10	$	1
Non-operating	Non-operating									Non-operating
Interest cost	Interest cost	55		2		46		1		Interest cost	92		3		55		2
Expected return on plan assets	Expected return on plan assets	(156)		(5)		(155)		(5)		Expected return on plan assets	(153)		(5)		(156)		(5)
Amortization of net actuarial loss (gain)		2		(2)		9		—
Amortization of net actuarial (gain) loss										Amortization of net actuarial (gain) loss	(2)		(5)		2		(2)
Amortization of prior service credit	Amortization of prior service credit	(6)		—		(7)		—		Amortization of prior service credit	(7)		—		(6)		—

Non-service cost periodic benefit income	Non-service cost periodic benefit income	(105)		(5)		(107)		(4)		Non-service cost periodic benefit income	(70)		(7)		(105)		(5)
Net periodic benefit income	Net periodic benefit income	$	(95)	$	(4)	$	(89)	$	(3)	Net periodic benefit income	$	(64)	$	(7)	$	(95)	$	(4)

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

We made no material contributions to our U.S. qualified defined benefit pension plans during the quarters ended April 1, 2022 and April 2, 2021. As a result of prior voluntary contributions, we are not required to make any contributions to these plans during fiscal 2022 and for several years thereafter.Operations.

NOTE ~~K —~~J: EARNINGS PER SHARE

Income ~~from continuing operations~~ per common share attributable to L3Harris common shareholders (“EPS”) is computed using the two-class method, which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends paid and participation rights in undistributed earnings. Under the two-class method, EPS is computed by dividing ~~the sum of~~ earnings ~~distributed~~ to L3Harris common shareholders ~~and undistributed~~less earnings allocated to ~~L3Harris common shareholders~~participating securities, if applicable, by the weighted-average number of common shares outstanding for the period. Income ~~from continuing operations~~ per diluted common share attributable to L3Harris common shareholders (“("diluted ~~EPS”~~EPS") ~~is computed using~~

the more dilutive of the two-class method or the treasury stock method. Under the treasury stock method, diluted EPS is computed by dividing net income attributable to L3Harris common shareholders by the weighted-average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted-average shares outstanding during the period.

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

Quarter Ended
(In millions) April 1, 2022 April 2, 2021
Basic weighted average common shares outstanding 193.2 206.7
Impact of dilutive share-based awards 1.9 1.8
Diluted weighted average common shares outstanding 195.1 208.5

~~Potential~~incorporates potential dilutive common shares, primarily ~~consist~~consisting of employee stock options and restricted and performance share unit ~~awards.~~ awards, into the weighted-average number of common shares outstanding.

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


	Quarter Ended
(In millions)	March 31, 2023	April 1, 2022

Basic weighted average common shares outstanding	190.2	193.2
Impact of dilutive share-based awards	1.0	1.9
Diluted weighted average common shares outstanding	191.2	195.1

Diluted EPS excludes the antidilutive impact of ~~0.2~~1.2 million and ~~1.6~~0.2 million weighted average share-based awards outstanding for the quarters ended March 31, 2023 and April 1, 2022, ~~and April 2, 2021,~~ respectively.

NOTE ~~L —~~K: INCOME TAXES

Our effective tax rate ~~(income taxes as a percentage of income from continuing operations before income taxes)~~ was 9.1% for the quarter ended March 31, 2023 compared with 11.3% for the quarter ended April 1, ~~2022 compared with 11.4% for~~2022. For the quarter ended ~~April 2, 2021.~~March 31, 2023, our effective tax rate benefited from the favorable impacts of research and development (“R&D”) credits, foreign-derived intangible income (“FDII”) deductions and the resolution of specific audit uncertainties. For the quarter ended April 1, 2022, our effective tax rate benefited from the favorable impact of ~~Research and Development (“~~R~~&D”)~~&D credits, the reduction in deferred tax liabilities on the outside basis of certain foreign subsidiaries due to an internal restructuring, incremental ~~foreign-derived intangible income (“FDII”)~~FDII benefit resulting from the requirement to capitalize and amortize R&D expenses beginning in fiscal 2022, the resolution of specific audit uncertainties, and excess tax benefits related to equity-based compensation. For the quarter ended April 2, 2021, our effective tax rate benefited from the favorable impact of R&D credits, the resolution of specific audit uncertainties and the recognition of deferred tax assets on the outside basis of entities held-for-sale.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE ~~M —~~L: FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received ~~for~~to sell an asset or ~~the price that would be~~ paid to transfer a liability in the principal market or(or most advantageous market, in the absence of a principal market) for the asset or liability 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 ~~April 1, 2022~~March 31, 2023 and December ~~31, 2021:~~30, 2022:


		April 1, 2022				December 31, 2021				March 31, 2023				December 30, 2022
(In millions)	(In millions)	Total		Level 1		Total		Level 1			(In millions)	Total		Level 1		Total		Level 1

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	$	72	$	72	$	77	$	77		Equity and fixed income securities	$	67	$	67	$	64	$	64
Investments measured at NAV:	Investments measured at NAV:										Investments measured at NAV:

Corporate-owned life insurance	Corporate-owned life insurance	35				35					Corporate-owned life insurance	34				33

Total fair value of deferred compensation plan assets	Total fair value of deferred compensation plan assets	$	107			$	112				Total fair value of deferred compensation plan assets	$	101			$	97

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	$	7	$	7	$	6	$	6		Equity securities and mutual funds	$	7	$	7	$	8	$	8
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	170				177					Common/collective trusts and guaranteed investment contracts	193				192
Total fair value of deferred compensation plan liabilities	Total fair value of deferred compensation plan liabilities	$	177			$	183				Total fair value of deferred compensation plan liabilities	$	200			$	200

_______________

(1)Represents diversified assets held in a ~~rabbi trust~~“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).~~Sheet. 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the carrying amounts and estimated fair values of ~~our significant financial instruments~~long-term debt that ~~were~~is not ~~measured~~carried 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):~~our Condensed Consolidated Balance Sheet:


		April 1, 2022				December 31, 2021				March 31, 2023				December 30, 2022
(In millions)	(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value			(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Long-term debt (including current portion)(1)		$	7,057	$	7,174	$	7,059	$	7,701
All other long-term debt, net (including current portion)(1)											All other long-term debt, net (including current portion)(1)	$	6,781	$	6,489	$	7,043	$	6,569
Term Loan 2025(2)											Term Loan 2025(2)	2,250		2,250		—		—
Total debt, net											Total debt, net	$	9,031	$	8,739	$	7,043	$	6,569

_______________

(1)The 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 was~~ measured at fair value, it would be categorized in Level 2 of the fair value hierarchy.

(2)The carrying value of Term Loan 2025 approximates fair value due to its variable interest rate.

See Note ~~H —~~G: Goodwill and Other Intangible Assets and Note B: Acquisitions and Divestitures in these Notes and Note ~~3: “Business~~4: Business Divestitures and Asset ~~Sales”~~Sales ~~in the Notes to Consolidated Financial Statement~~ in our Fiscal ~~2021~~2022 Form 10-K for additional information regarding fair value measurements associated with goodwill.

NOTE ~~N — 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. 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 — Cash Flow 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 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 April 1, 2022, we had open foreign currency forward contracts with an aggregate notional amount of $298 million, hedging certain forecasted transactions denominated in U.S. Dollars, Canadian Dollars, Euros, British Pounds and Australian Dollars. At December 31, 2021, we had open foreign currency forward contracts with an aggregate notional amount of $328 million, hedging certain forecasted transactions denominated in U.S. Dollars, Canadian Dollars, British Pounds, Euros and Australian Dollars.

~~At April 1, 2022, our foreign currency forward contracts had maturities through 2025.~~

The following table presents the fair values of our derivatives designated as foreign currency hedging instruments in our Condensed Consolidated Balance Sheet (Unaudited) at April 1, 2022 and December 31, 2021:

(In millions) April 1, 2022 December 31, 2021
Foreign currency forward contracts(1)
Other current assets $ 3 $ 2
Other non-current assets 2 1
Other accrued items 4 5

~~_______________~~

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

~~The impact of any derivative related activities on our income statement was not material for the quarters ended April 1, 2022 and April 2, 2021.~~

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 the 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).

~~NOTE O —~~M: CHANGES IN ESTIMATES

~~Under~~Many of our contracts utilize the POC cost-to-cost method of revenue ~~recognition, a~~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 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~~completion. Due to the long-term nature of many of these ~~expectations.~~contracts, developing these estimates often requires judgment. 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. IfAs the contracts progress, we may successfully retire risks ~~associated with the technical, schedule~~or complexities and ~~cost aspects of a contract,~~may add additional risks, and 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~~adjust our estimated total cost at completion. ~~Additionally, as the contract progresses,~~For additional discussion of our ~~estimates~~revenue recognition policies and our EAC process, see “Critical Accounting Estimates” in Part II: Item 7. Management's Discussion and Analysis 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 effectFinancial Condition and Results 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.~~

Operations
of our Fiscal 2022 Form 10K.

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


		Quarter Ended				Quarter Ended
(In millions, except per share amounts)	(In millions, except per share amounts)	April 1, 2022		April 2, 2021			(In millions, except per share amounts)	March 31, 2023		April 1, 2022

Net EAC adjustments, before income taxes(1)	Net EAC adjustments, before income taxes(1)	$	46	$	82		Net EAC adjustments, before income taxes(1)	$	(56)	$	46
Net EAC adjustments, net of income taxes	Net EAC adjustments, net of income taxes	35		62			Net EAC adjustments, net of income taxes	(42)		35
Net EAC adjustments, net of income taxes, per diluted share	Net EAC adjustments, net of income taxes, per diluted share	0.18		0.30			Net EAC adjustments, net of income taxes, per diluted share	(0.22)		0.18

_______________

(1)Excludes charges related to an impairment of a customer contract of $18 million which is included in the “Revenue from product sales and services” and “Cost of product sales and services” line items in our Condensed Consolidated Statement of Operations for the quarter ended March 31, 2023.

Revenue recognized from performance obligations satisfied in prior periods was ~~$58~~$36 million and ~~$108~~$58 million for the quarters ended March 31, 2023 and April 1, 2022, ~~and April 2, 2021,~~ respectively.

NOTE ~~P —~~N: 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 ~~April 1, 2022,~~March 31, 2023, our ending backlog was ~~$21.1~~$24.5 billion. We expect to recognize approximately ~~51%~~45% of the revenue associated with this backlog by the end of ~~2022~~2023 and approximately ~~75%~~70% by the end of ~~2023,~~2024, with the remainder to be recognized thereafter. At December ~~31, 2021,~~30, 2022, our ending backlog was ~~$21.1~~$22.3 billion.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE ~~Q —~~O: BUSINESS SEGMENT INFORMATION

~~Effective for fiscal 2022, which began January 1, 2022,~~We structure our operations primarily around the products, systems and services we sell and the markets we serve and report our financial results in the following 3three reportable segments:

•~~Integrated Mission Systems,~~IMS: including multi-mission intelligence, surveillance and reconnaissance (“ISR”) systems; integrated electrical and electronic systems for maritime platforms; advanced electro-optical and infrared ~~(“EO/IR”)~~ solutions; fuzing and ordnance systems; commercial aviation products; and commercial pilot training operations;

•~~Space & Airborne Systems,~~SAS: including space payloads, sensors and full-mission solutions; classified intelligence and cyber; avionics; electronic warfare; and mission networks for air traffic management operations; and

•~~Communication Systems,~~CS: including tactical communications with global communications solutions; broadband communications; tactical data links; integrated vision solutions; ~~and~~ public safety radios, and system applications and equipment.

~~We structure our operations primarily around the products, systems and services we sell and the markets we serve.~~ Business Realignment. Effective ~~January 1,~~December 31, 2022, we ~~have streamlined~~adjusted our reporting to better align our businesses and transferred our ADG business ~~segments~~ from ~~4 business segments~~our IMS segment to ~~3 business segments. As a result of the segment reorganization, the Aviation Systems segment was eliminated as a business~~our SAS segment. As part of our new business segment structure, the ongoing operations that had been part of our former Aviation Systems segment were integrated into the remaining segments. Defense aviation, commercial aviation products and commercial pilot training operations were moved into our Integrated Mission Systems segment; and mission networks for air traffic management operations was moved into our Space & Airborne Systems segment.

Acquisition of Viasat, Inc.’s TDL. On January 3, 2023, we completed the acquisition of TDL, which is reported within our CS segment. See Note ~~3: “Business~~B: Acquisitions and Divestitures ~~and Asset Sales”~~ in ~~the~~these Notes ~~to Consolidated Financial Statement in our Fiscal 2021 Form 10-K~~ for additional information ~~relating to businesses divested in fiscal 2021.~~regarding our acquisition of TDL.

~~The accounting policies of our business segments are the same as those described in~~ ~~Note 1: “Significant Accounting Policies”~~ ~~in the Notes to Consolidated~~Business Segment Financial Statements in our Fiscal 2021 Form 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 CAS pension cost 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 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 business segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. The unallocated items in the table below represent the portion of corporate expenses not allocated to our business segments and elimination of intersegment profits.

In accordance with CAS, we allocate a portion of pension and other postretirement benefit plan costs to our U.S. Government contracts. However, our consolidated financial statements require pension and other postretirement benefit plan income or expense be calculated in accordance with FAS requirements under GAAP. The “FAS/CAS pension adjustment” line item in the table below represents the difference between the service cost component of FAS pension and OPEB expense and total CAS

pension and OPEB cost. The net non-service cost components of FAS pension and OPEB income are included as an income component in the “Non-operating income” line item in our Condensed Consolidated Statement of Income (Unaudited). See ~~Note J — Postretirement Benefit Plans~~ ~~for more information on the composition of non-service components of FAS pension and OPEB income and expense.~~Information

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

Quarter Ended
(In millions) April 1, 2022 April 2, 2021
Revenue
Integrated Mission Systems $ 1,721 $ 1,751
Space & Airborne Systems 1,450 1,460
Communication Systems 963 1,112
Other non-reportable businesses — 284
Corporate eliminations (31) (40)
Total revenue $ 4,103 $ 4,567
Income from Continuing Operations before Income Taxes
Segment Operating Income:
Integrated Mission Systems $ 255 $ 234
Space & Airborne Systems 172 192
Communication Systems 229 270
Other non-reportable businesses — 52
656 748
Unallocated Items:
Unallocated corporate department expense, net(1)
(7) (33)
L3Harris Merger-related transaction, integration and other expenses and losses (20) (21)
Amortization of acquisition-related intangibles(2)
(152) (164)
Business divestiture-related losses — (15)
Impairment of goodwill and other assets — (62)
Other items (1) (7)
FAS/CAS pension adjustment(3)
22 30
(158) (272)
Non-operating income 106 117
Net interest expense (68) (66)
Income from continuing operations before income taxes $ 536 $ 527


	Quarter Ended
(In millions)	March 31, 2023		April 1, 2022

Revenue from Product Sales and Services
IMS	$	1,700	$	1,659
SAS	1,655		1,517
CS	1,163		963

Corporate eliminations	(47)		(36)
Total revenue from product sales and services	$	4,471	$	4,103

Income before Income Taxes
Segment Operating Income:
IMS	$	185	$	251
SAS	187		177
CS	266		229

Total segment operating income	638		657

Unallocated Items:
Unallocated corporate department expense, net(1)	(6)		(4)
Amortization of acquisition-related intangibles(2)	(165)		(152)
Acquisition-related transaction and integration expenses	(40)		—
L3Harris merger-related integration expenses	—		(24)
Impairment of other assets	(18)		—
Additional cost of sales related to the fair value step-up in inventory sold	(15)		—

Enterprise transformation program	(13)		—



Pre-acquisition and other divestiture-related expenses	(10)		(1)
FAS/CAS operating adjustment(3)	22		22
Total unallocated items	(245)		(159)
Non-operating income, net	82		106
Interest expense, net	(102)		(68)
Income before income taxes	$	373	$	536

_______________

(1)~~For the quarter ended April 2, 2021, includes a $15 million accrual for a value added tax obligation.~~Includes certain corporate-level expenses that are not included in management’s evaluation of segment operating performance.

(2)Includes amortization of identifiable intangible assets acquired ~~as a result of the all-stock merger between Harris Corporation and L3 Technologies, Inc. (the “L3Harris Merger”) and the acquisition of Exelis Inc. (“Exelis”).~~in connection with business combinations. Because ~~the L3Harris Merger and the acquisition of Exelis~~our acquisitions benefited the entire Company, ~~as opposed to any individual segment,~~ the amortization of identifiable intangible assets acquired was not allocated to any segment.

(3)Represents the difference between the service cost component of ~~FAS~~Financial Accounting Standards ("FAS") pension and ~~OPEB income~~other postretirement benefits (“OPEB”) cost and total ~~CAS~~U.S. Government Cost Accounting Standards (“CAS”) pension and OPEB cost and replaces the “Pension adjustment” line item previously presented, which included the non-service components of FAS pension and OPEB income. See Net FAS/CAS ~~pension~~operating adjustment table below.

FAS/CAS Pension Operating Adjustment

In accordance with CAS, we allocate a portion of pension and OPEB plan costs to our U.S. Government contracts. However, our Condensed Consolidated Financial Statements require pension and OPEB plan income or expense be calculated in accordance with FAS requirements under GAAP. The “FAS/CAS operating adjustment” line item in the table below represents the difference between the service cost component of FAS pension and OPEB cost and total CAS pension and OPEB cost. The non-service cost components of FAS pension and OPEB income or expense are included as component of the “Non-operating income, net” line item in our Condensed Consolidated Statement of Operations. See Note I: Pension and Other Postretirement Benefit Plans in these Notes for more information on the composition of non-service cost components of FAS pension and OPEB income and expense.

The table below is a reconciliation of the FAS/CAS ~~pension~~operating adjustment:
Quarter Ended
(In millions) April 1, 2022 April 2, 2021
FAS pension service cost $ (11) $ (18)
Less: CAS pension cost (33) (48)
FAS/CAS pension adjustment 22 30
Non-service FAS pension income 110 111
Net FAS/CAS pension adjustment(1)
$ 132 $ 141
~~_______________~~

~~(1)Net FAS/CAS pension adjustment excludes net settlement and curtailment losses recognized in fiscal 2021.~~


	Quarter Ended
(In millions)	March 31, 2023		April 1, 2022

FAS pension service cost	$	(6)	$	(11)
Less: CAS pension cost	(28)		(33)
FAS/CAS operating adjustment	22		22
Non-service FAS pension income	77		110
FAS/CAS pension adjustment, net	$	99	$	132

Disaggregation of Revenue

We disaggregate revenue for all 3three 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.


																Quarter Ended
		Quarter Ended												March 31, 2023						April 1, 2022
(In millions)	(In millions)	April 1, 2022						April 2, 2021							(In millions)	IMS		SAS		CS		IMS		SAS		CS
		Integrated Mission Systems		Space & Airborne Systems		Communication Systems		Integrated Mission Systems		Space & Airborne Systems		Communication Systems

Revenue By Customer Relationship	Revenue By Customer Relationship														Revenue By Customer Relationship
Prime contractor	Prime contractor	$	1,131	$	931	$	656	$	1,189	$	876	$	728		Prime contractor	$	1,154	$	1,010	$	807	$	1,086	$	977	$	656
Subcontractor	Subcontractor	574		513		296		550		581		373			Subcontractor	525		632		343		557		530		296
Intersegment	Intersegment	16		6		11		12		3		11			Intersegment	21		13		13		16		10		11
Total revenue															Total revenue	$	1,700	$	1,655	$	1,163	$	1,659	$	1,517	$	963
		$	1,721	$	1,450	$	963	$	1,751	$	1,460	$	1,112
Revenue By Contract Type	Revenue By Contract Type														Revenue By Contract Type
Fixed-price(1)	Fixed-price(1)	$	1,277	$	863	$	797	$	1,294	$	914	$	940		Fixed-price(1)	$	1,286	$	1,022	$	978	$	1,261	$	880	$	797
Cost-reimbursable	Cost-reimbursable	428		581		155		445		543		161			Cost-reimbursable	393		620		172		382		627		155
Intersegment	Intersegment	16		6		11		12		3		11			Intersegment	21		13		13		16		10		11
Total revenue															Total revenue	$	1,700	$	1,655	$	1,163	$	1,659	$	1,517	$	963
		$	1,721	$	1,450	$	963	$	1,751	$	1,460	$	1,112
Revenue By Geographical Region	Revenue By Geographical Region														Revenue By Geographical Region
United States	United States	$	1,244	$	1,279	$	625	$	1,275	$	1,274	$	832		United States	$	1,257	$	1,454	$	791	$	1,182	$	1,342	$	625
International	International	461		165		327		464		183		269			International	422		188		359		461		165		327
Intersegment	Intersegment	16		6		11		12		3		11			Intersegment	21		13		13		16		10		11
		$	1,721	$	1,450	$	963	$	1,751	$	1,460	$	1,112
Total revenue															Total revenue	$	1,700	$	1,655	$	1,163	$	1,659	$	1,517	$	963

_______________

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

Assets by Business Segment

Total assets by business segment are as follows:

(In millions) April 1, 2022 December 31, 2021
Total Assets
Integrated Mission Systems $ 11,811 $ 11,830
Space & Airborne Systems 8,573 8,151
Communication Systems 6,083 6,035
Other non-reportable businesses — 3
Corporate(1)
7,977 8,690
$ 34,444 $ 34,709


(In millions)	March 31, 2023		December 30, 2022

Total Assets
IMS	$	10,914	$	11,283
SAS	9,169		8,475
CS	7,119		5,800

Corporate(1)	8,305		7,966
Total Assets	$	35,507	$	33,524

_______________

(1)Identifiable intangible assets acquired in connection with ~~the L3Harris Merger in the two quarters ended January 3, 2020 and our acquisition of Exelis in fiscal 2015~~business combinations were recorded as ~~Corporate~~corporate assets because they benefited the entire ~~Company as opposed to any individual segment.~~Company. Identifiable intangible asset balances recorded as ~~Corporate~~corporate assets were ~~$6.5~~$6.7 billion and ~~$6.6~~$6.0 billion at ~~April 1, 2022~~March 31, 2023 and December ~~31, 2021,~~30, 2022, 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 of ~~discontinued operations and divestitures.~~business held for sale.

NOTE ~~R —~~P: 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 ~~April 1, 2022,~~March 31, 2023, 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 ~~April 1, 2022~~March 31, 2023 are reserved against or would not have a material adverse effect on our financial condition, results of operations, cash flows or equity.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Environmental Matters

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 several 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, Environment and Natural Resources Division, notified several potentially responsible parties, including Exelis, Inc. (“Exelis”), which we acquired in 2015, 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, of potential liability for the cost of remediation for the 8.3-mile stretch of the Lower Passaic River in New Jersey, estimated by the EPA to be $1.38 billion. During the fourth quarter of fiscal 2021, the EPA further announced an interim plan to remediate sediment in the upper nine miles of the of the Lower Passaic River with an estimated cost of $441 million. The potential responsible parties’ respective allocations for the Lower Passaic River remediation 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 ~~April 1, 2022~~March 31, 2023 are reserved against, covered by insurance or would not have a material adverse effect on our financial condition, results of operations, cash flows or equity.

NOTE Q: SUBSEQUENT EVENTS

On April 6, 2023, we completed the sale of our VIS business for $70 million, subject to customary adjustments.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the 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. and subsidiaries (“the Company”) as of ~~April 1, 2022,~~March 31, 2023, the related condensed consolidated statements of ~~income,~~operations, comprehensive income, cash flows and equity for the quarters ended March 31, 2023 and April 1, 2022, ~~and April 2, 2021,~~ and the related notes (collectively referred to as the ~~“condensed~~"condensed consolidated interim financial ~~statements”~~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”~~("PCAOB"), the consolidated balance sheet of the Company as of December ~~31, 2021,~~30, 2022, the related consolidated statements of ~~income,~~operations, comprehensive income, cash flows and equity for the year then ended, and the related notes (not presented herein); and in our report dated February ~~25, 2022,~~24, 2023, 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 December ~~31, 2021,~~30, 2022, 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~~Company's management. We are a public accounting firm registered with the PCAOB and are 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 ~~U.S. Securities and Exchange Commission~~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

April ~~29, 2022~~

28, 2023

1820


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”).~~Notes. In addition, reference should be made to our audited Consolidated Financial Statements and accompanying Notes to our Consolidated Financial Statements andPart II: Item 7. ~~“Management’s~~Management's Discussion and Analysis of Financial Condition and Results of ~~Operations” included~~Operations in our Fiscal ~~2021~~2022 Form 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.”

~~KEY DEVELOPMENTS~~We are the Trusted Disruptor for the global aerospace and defense industry. With customers’ mission-critical needs in mind, we deliver end-to-end technology solutions connecting the space, air, land, sea and cyber domains. We support government and commercial customers in more than 100 countries, with our largest customers being various departments and agencies of the U.S. Government and their prime contractors. Our products and services have defense and civil government applications, as well as commercial applications. We generally sell directly to our customers, and we utilize agents and intermediaries to sell and market some products and services, especially in international markets.

U.S. and International Budget Environment

Our largest customers are various departments and agencies of the U.S. Government — the percentage of our revenue that was derived from sales to U.S. Government customers, including foreign military sales funded through the U.S. Government, whether directly or through prime contractors, was 77% for the quarter ended March 31, 2023.

On December 29, 2022, the President signed the National Defense Authorization Act, providing $858 billion of national defense funding for the 2023 U.S. Government fiscal year (“GFY”), of which $816 billion was allotted to the DoD. On March 13, 2023, the DoD released details around President Biden’s 2024 GFY $886 billion national defense budget request. This budget request includes $842 billion for the DoD, a proposed increase of approximately 3% over the enacted GFY 2023 DoD budget. Many of our offerings funded in the enacted GFY 2023 DoD budget are also supported by the President’s 2024 GFY DoD budget request, including responsive satellites, ISR aircraft, tactical communications and maritime solutions.

The ~~following is a list~~President’s 2024 GFY budget request and the overall defense spending environment in both the U.S. and internationally reflects the continued impacts of the ~~remaining sections of this MD&A, together with our perspective on their contents, which we hope will assist~~conflicts in ~~reading these pages:~~

•~~Results of Operations— an analysis of our consolidated results of operations~~Ukraine, and geopolitical tensions across Asia and the ~~results~~Middle East. Changes to U.S. Government or international spending priorities have and could in ~~each~~the future impact our business.

In addition, it is expected that without Congressional action, the current statutory legal limit on U.S. debt will be exceeded by June 2023, and the Federal budget and debt ceiling could be the subject of considerable Congressional debate. Future changes in spending priorities arising from any Congressional action on the Federal budget and debt ceiling or otherwise could adversely affect our business segments, to the extent the segment operating results are helpful to an understanding of our business as a whole, for the periods presented in our Condensed Consolidated Statement of Income (Unaudited).

•~~Liquidity, Capital Resources~~existing programs and ~~Financial Strategies— an analysis of cash flows, funding of pension plans, common stock repurchases, dividends, capital structure~~future contracts and ~~resources, material cash requirements and commercial commitments.~~

•~~Critical Accounting Policies and Estimates~~ — a discussion of accounting policies and estimates that require the most judgment and a discussion of accounting pronouncements that have been issued but not yet implemented by us and their potential impact on our financial condition and results of ~~operations, cash flows and equity.~~operations.

•~~Forward-Looking Statements and Factors that May Affect Future Results~~ ~~— cautionary information about forward-looking statements and a description of certain~~See our U.S. Government funding risks and ~~uncertainties that could cause~~the discussion of our ~~actual results~~international business risks within Part I: Item 1A. Risk Factors in our Fiscal 2022 Form 10-K.

Economic Environment

The macroeconomic environment continues to ~~differ materially from~~present challenges, which have impacted and may continue to impact our ~~historical results or our current expectations or projections.~~

Effective January 1, 2022, we streamlined our business segments from four business segments to three business segments. As a result of the segment reorganization, the Aviation Systems segment was eliminated as a business segment. Effective for fiscal 2022, which began January 1, 2022, we reported our financial resultsfuture results. Rising inflation in the ~~following three reportable segments:~~U.S. has led to higher input costs. The ongoing uncertainty related to the impacts of inflation, as well as increased interest rates, raise the cost of borrowing for the Federal government.

•~~Integrated Mission Systems, including multi-mission ISR systems; integrated electrical~~To the extent feasible, we continue to proactively deploy operational improvement strategies and ~~electronic systems~~have consistently followed the practice of adjusting our prices to reflect the impact of inflation on salaries and fringe benefits for ~~maritime platforms; advanced EO/IR solutions; fuzing~~employees and ~~ordnance systems; commercial aviation products;~~the cost of purchased materials and ~~commercial pilot training operations;~~

•Space & Airborne Systems, including space payloads, sensors and full-mission solutions; classified intelligence and cyber; avionics; electronic warfare; and mission networks for air traffic management operations; and

•Communication Systems, including tactical communications with global communications solutions; broadband communications; integrated vision solutions; and public safety radios, system applications and equipment.

~~The following businesses were divested or classified as held for sale at April 1, 2022 and April 2, 2021:~~

•~~Space and Navigation business, definitive agreement entered into on February 14, 2022 for a selling price of $5 million and classified as held for sale during the quarter ended April 1, 2022, expected~~services; our fixed-price contracts could subject us to ~~be completed~~losses in the ~~second quarter~~event of ~~fiscal 2022, the results~~cost overruns or a significant increase in or a sustained period of ~~which are reported as part of our Space & Airborne Systems segment;~~

•CPS business, definitive agreement entered into on March 1, 2021 and classified as held for sale during the quarter ended April 2, 2021 and divested on July 2, 2021, the results of which are reported as part of other non-reportable businesses through the date of divestiture;

•Military training business, definitive agreement entered into on February 27, 2021 and classified as held for sale during the quarter ended April 2, 2021 and divested on July 2, 2021, the results of which are reported as part of other non-reportable businesses through the date of divestiture; and

•Voice Switch Enterprise disposal group (“VSE disposal group”), definitive agreement entered into on February 23, 2021 and classified as held for sale during the quarter ended April 2, 2021 and partially divested on July 2, 2021, with the remainder divested on July 30, 2021, the results of which are reported as part of other non-reportable businesses through the date of divestiture.increased inflation.

1921

KEY DEVELOPMENTS

Business Realignment. Effective for fiscal 2023, we adjusted our reporting to better align our businesses and transferred our ADG business (representing $83 million and $70 million of revenue for the quarters ended March 31, 2023 and April 1, 2022, respectively) from our IMS segment to our SAS segment. See Note ~~3: “Business Divestitures~~A: Basis of Presentation and ~~Asset Sales”~~Summary of Significant Accounting Policies in the Notes for further information.

Acquisition of Viasat, Inc.’s TDL. On January 3, 2023, we completed the acquisition of the TDL which is reported within our CS segment. See Note B: Acquisitions and Divestitures in the Notes for further information regarding the TDL acquisition.

Pending Acquisition of AJRD. On March 15, 2023, in connection with our definitive agreement to ~~Consolidated Financial Statement in our Fiscal 2021 Form 10-K~~acquire AJRD, we and AJRD each received a request for additional information ~~regarding businesses divested~~and documentary material (the "Second Request") from the Federal Trade Commission (the “FTC”), which extends the waiting period for review under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, until 30 days after we and AJRD have each certified substantial compliance with the Second Request (unless extended voluntarily by the parties or earlier terminated by the FTC). We are responding to the Second Request and expect the transaction to close in fiscal ~~2021.~~2023.

RESULTS OF OPERATIONS

Consolidated Results of Operations

Quarter Ended
(Dollars in millions, except per share amounts) April 1, 2022 April 2, 2021 % Inc/(Dec)

Revenue
Integrated Mission Systems $ 1,721 $ 1,751 (2) %
Space & Airborne Systems 1,450 1,460 (1) %
Communication Systems 963 1,112 (13) %
Other non-reportable businesses — 284 *
Corporate eliminations (31) (40) (23) %
Total revenue 4,103 4,567 (10) %
Total cost of product sales and services (2,892) (3,213) (10) %
% of total revenue 70 % 70 %
Gross margin 1,211 1,354 (11) %
% of total revenue 30 % 30 %
Engineering, selling and administrative expenses (713) (801) (11) %
% of total revenue 17 % 18 %
Business divestiture-related losses — (15) *
Impairment of goodwill and other assets — (62) *
Non-operating income 106 117 (9) %
Net interest expense (68) (66) 3 %
Income from continuing operations before income taxes 536 527 2 %
Income taxes (61) (60) 2 %
Effective tax rate 11 % 11 %
Income from continuing operations 475 467 2 %
Noncontrolling interests, net of income taxes — 2 *
Income from continuing operations attributable to L3Harris common shareholders $ 475 $ 469 1 %
% of total revenue 12 % 10 %
Income from continuing operations per diluted common share attributable to L3Harris common shareholders $ 2.44 $ 2.25 8 %


	Quarter Ended
(Dollars in millions, except per share amounts)	March 31, 2023			April 1, 2022			% Inc/(Dec)

Revenue from product sales and services
IMS	$	1,700		$	1,659		2	%
SAS	1,655			1,517			9	%
CS	1,163			963			21	%

Corporate eliminations	(47)			(36)			*
Revenue from product sales and services	4,471			4,103			9	%
Cost of product sales and services	(3,305)			(2,860)			16	%
% of total revenue	74		%	70		%
Gross margin	1,166			1,243			(6)	%
% of total revenue	26		%	30		%
Engineering, selling and administrative expenses	(773)			(745)			4	%
% of total revenue	17		%	18		%


Non-operating income, net	82			106			*
Interest expense, net	(102)			(68)			*
Income before income taxes	373			536			(30)	%
Income taxes	(34)			(61)			*
Effective tax rate	9		%	11		%
Net income	339			475			(29)	%
Noncontrolling interests, net of income taxes	(2)			—			*
Net income attributable to L3Harris Technologies, Inc.	$	337		$	475		(29)	%
% of total revenue	8		%	12		%
Net income per diluted common share attributable to L3Harris Technologies, Inc. common shareholders	$	1.76		$	2.44		(28)	%

~~_________________~~_______________

*Not meaningful

Revenue and Gross Margin

Revenue ~~declined 10%~~increased 9% in the ~~first~~ quarter ~~of fiscal 2022~~ended March 31, 2023 compared to the ~~first~~ quarter ~~of fiscal 2021~~ended April 1, 2022 from ~~the impact of prior year divestitures that totaled $268~~higher revenue across all segments as CS, SAS and IMS revenues increased $200 million, ~~continued supply chain disruptions including impacts arising from electronic component shortages within Communication Systems, award timing~~$138 million, and ~~airborne program transitions.~~ $41 million, respectively.

Gross margin ~~decreased in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 from volume effects across our business segments~~ and ~~supply chain disruptions. Gross~~gross margin as a percentage of revenue ~~(“gross margin percentage”) was comparable.~~decreased in the quarter ended March 31, 2023 compared to the quarter ended April 1, 2022, largely due to a net change in EAC adjustments and higher mix of lower-margin revenue, partially offset in the increases in volume noted above.

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

Engineering, Selling and Administrative Expenses

~~The decrease in engineering,~~Engineering, selling and administrative expenses(“ESA”) expenses were as follows:


	Quarter Ended
(In millions)	March 31, 2023		April 1, 2022

Amortization of acquisition-related intangibles	$	(142)	$	(134)
Company-sponsored R&D costs	(114)		(156)
L3Harris merger-related integration expenses	—		(24)
Acquisition-related transaction and integration expenses	(40)		—
Pre-acquisition and other divestiture-related expenses	(10)		(1)
Enterprise transformation program	(13)		—
Other ESA expenses	(454)		(430)
Total ESA expenses	$	(773)	$	(745)

Non-Operating Income, Net

Non-operating income, net were as follows:


	Quarter Ended
(In millions)	March 31, 2023		April 1, 2022

Non-service FAS pension income(1)	$	77	$	110


Other, net	5		(4)
Non-operating income, net	$	82	$	106

_______________

(1)Includes interest cost, expected return on plan assets, amortization of net actuarial gains under our pension and ~~ESA expense as a percentage of revenue (“ESA percentage”)~~ postretirement benefit plans. See Note I: Pension and Other Postretirement Benefit Plans in the ~~first~~Notes for more information on the composition of non-service cost components of FAS pension and OPEB income and expense.

Interest Expense, Net

Interest expense, net increased in the quarter ~~of fiscal 2022~~ended March 31, 2023 compared with the ~~first~~ quarter ended April 1, 2022 due to of ~~2021 was~~$35 million of incremental interest expense in the quarter ended March 31, 2023, primarily due to ~~$10 million of lower amortization of identifiable intangible assets acquired as a result of~~ the L3Harris Merger, $8 million decrease in “FAS/CAS pension adjustment” and $6 million of lower divestiture-related expenses as well as the absence of a $15 million charge related to a value added tax obligation and $29 million of costs related to divested businesses in the first quarter of 2021.

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

~~Business Divestiture-Related Losses~~

There were no business divestiture-related gains or losses recorded in the first quarter of fiscal 2022. Business divestiture-related losses in the first quarter of fiscal 2021 reflected a $7 million non-cash remeasurement lossoutstanding borrowings on the ~~then-pending divestiture of the CPS business and an $8 million non-cash remeasurement loss on the then-pending divestiture of the VSE disposal group.~~variable rate Term Loan 2025.

See Note ~~3: “Business Divestitures~~H: Debt and ~~Asset Sales”~~ ~~in the Notes to Consolidated Financial Statements in our Fiscal 2021 Form 10-K for further information.~~

~~Impairment of Goodwill and Other Assets~~

No impairment charges were recorded in the first quarter of fiscal 2022. Impairment of goodwill and other assets in the first quarter of fiscal 2021 reflected $62 million of non-cash charges for the impairment of goodwill and other assets associated with the divestiture of the CPS business.

~~See~~ ~~Note 3: “Business Divestitures and Asset Sales”~~ ~~in the Notes to Consolidated Financial Statements in our Fiscal 2021 Form 10-K and~~ ~~Note H — Goodwill~~Credit Arrangements in the Notes ~~for further information.~~

~~Non-Operating Income~~

The decrease in non-operating income in the first quarter of fiscal 2022 compared with the first quarter of fiscal 2021 was primarily due to losses related to investments in the first quarter of fiscal 2022 compared with gains related to investments in the first quarter of fiscal 2021.

~~Net Interest Expense~~

~~Our net interest expense increased in the first quarter of fiscal 2022 compared with the first quarter of fiscal 2021 primarily due to lower interest income in the first quarter of fiscal 2022.~~

~~See~~ ~~Note 13: “Debt”~~ ~~in the Notes to Consolidated Financial Statements in our Fiscal 2021 Form 10-K~~ for further information.

Income Taxes

Our effective tax rate ~~(income taxes as a percentage of income from continuing operations before income taxes)~~ was 9.1% for the quarter ended March 31, 2023 compared with 11.3% for the ~~first~~ quarter ~~of fiscal 2022 compared with 11.4% for the first quarter of fiscal 2021.~~ended April 1, 2022. For the ~~first~~ quarter ended March 31, 2023, our effective tax rate benefited from the favorable impacts of ~~fiscal~~R&D credits, FDII deductions and the resolution of specific audit uncertainties. For the quarter ended April 1, 2022, weour effective tax rate benefited from the favorable impact of R&D credits, the reduction in deferred tax liabilities on the outside basis of certain foreign subsidiaries due to an internal restructuring, incremental FDII benefit resulting from the requirement to capitalize and amortize R&D expenses beginning in fiscal 2022, the resolution of specific audit uncertainties, and excess tax benefits related to equity-based compensation. For the first quarter of fiscal 2021, our effective tax rate benefited from the favorable impact of R&D credits, the resolution of specific audit uncertainties and the recognition of deferred tax assets on the outside basis of entities held-for-sale.

Net Income ~~From Continuing Operations~~

The ~~increase~~decrease in net income ~~from continuing operations~~ in the ~~first~~ quarter ~~of fiscal 2022~~ended March 31, 2023 compared with the ~~first~~ quarter ~~of fiscal 2021~~ended April 1, 2022 was ~~primarily~~ due to the combined effects of ~~the~~ reasons noted in the sections ~~above regarding fiscal 2022 and 2021.~~above.

Net Income Per Diluted ~~EPS~~Common Share Attributable to L3Harris Technologies, Inc. Common Shareholders

~~Diluted EPS~~Net income per diluted common share attributable to L3Harris Technologies, Inc. common shareholders in the ~~first~~ quarter ~~of fiscal 2022 increased~~ended March 31, 2023 decreased compared with the ~~first~~ quarter ~~of fiscal 2021 primarily~~ended April 1, 2022 due to ~~to higher~~lower net income, ~~and~~partially offset by fewer diluted weighted average common shares outstanding, primarily reflecting the repurchases ~~of shares~~ of our common stock under our share repurchase program induring the ~~first~~ quarter ofended March 31, 2023 and fiscal 2022 share repurchases subsequent to April 1, 2022.

See the “Common Stock Repurchases” discussion below in this MD&A for further information.

Discussion of Business Segment Results of Operations

~~Integrated Mission Systems Segment (“IMS”)~~
Quarter Ended
(Dollars in millions) April 1, 2022 April 2, 2021 % Inc/(Dec)
Revenue $ 1,721 $ 1,751 (2 %)
Operating income 255 234 9 %
Operating income as a percentage of revenue (“operating margin”) 14.8 % 13.4 %
IMS


	Quarter Ended
(Dollars in millions)	March 31, 2023			April 1, 2022			% Inc/(Dec)

Revenue	$	1,700		$	1,659		2	%
Operating income	185			251			(26)	%
Operating income as a percentage of revenue ("operating margin")	11		%	15		%

The increase in IMS revenue ~~decreased 2%, driven~~for the quarter ended March 31, 2023 compared with the quarter ended April 1, 2022 was primarily ~~by declines of $35~~due to $64 million higher revenue in ISR ~~reflecting lower~~from aircraft procurement and ~~delivery~~missionization and higher volumes within Electro Optical and Commercial Aviation, partially offset by a decrease of $20 million within Maritime from lower classified and services revenues.

The decrease in IMS operating income for the quarter ended March 31, 2023 compared with the quarter ended April 1, 2022 was primarily due to a higher volume ~~that outweighed~~of lower-margin domestic ISR revenue and a net change in EAC adjustments primarily in ISR due, in part, to atypically high net favorable adjustments in the prior-year period.

SAS


	Quarter Ended
(Dollars in millions)	March 31, 2023			April 1, 2022			% Inc/(Dec)

Revenue	$	1,655		$	1,517		9	%
Operating income	187			177			6	%
Operating margin	11		%	12		%

The increase in SAS revenue for the quarter ended March 31, 2023 compared with the quarter ended April 1, 2022 was primarily due to $91 million higher ~~production and modification activity~~revenue in Space Systems from a ramp on ~~an aircraft missionization program and $47~~new programs, $55 million in ~~fuzing~~Mission Avionics from an increase in production revenues and ~~ordnance systems~~modest increases in Mission Networks and ~~other related programs, reflecting lower volume. The declines~~Intel and Cyber. Such increases were partially offset by ana decrease of $28 million in Electronic Warfare from lower volume and program execution.

The increase in SAS operating income for the quarter ended March 31, 2023 compared with the quarter ended April 1, 2022 was due to higher volumes partially offset by development program mix in Space Systems and lower volume and program execution in Electronic Warfare.


	Quarter Ended
(Dollars in millions)	March 31, 2023			April 1, 2022			% Inc/(Dec)

Revenue	$	1,163		$	963		21	%
Operating income	266			229			16	%
Operating margin	23		%	24		%

The increase in CS revenue ~~of $24 million in Electro Optical, reflecting higher WESCAM volumes, $22 million in Maritime~~for the quarter ended March 31, 2023 compared with the quarter ended April 1, 2022 was primarily due to $106 million higher revenue ~~on Virginia-class and classified programs and $10~~in Broadband Communications, principally from the TDL acquisition, $101 million in ~~Commercial Aviation Solutions, from a continued aerospace market recovery.~~

~~IMS operating margin expanded 140 basis points to 14.8% from favorable program~~Tactical Communications and ~~product mix.~~

~~Space & Airborne Systems Segment (“SAS”)~~
Quarter Ended
(Dollars in millions) April 1, 2022 April 2, 2021 % Inc/(Dec)
Revenue $ 1,450 $ 1,460 (1 %)
Operating income 172 192 (10 %)
Operating margin 11.9 % 13.2 %

SAS revenue decreased 1%, driven primarily by declines in our airborne businesses, due to production transitions and lower development on the F-35 program, $16 million decline in Intel & Cyber due to award timing and $8$38 million in ~~Mission Networks due to updates on certain Federal Aviation Administration (“FAA”) programs. The decrease was~~Public Safety, both from higher volumes driven by improved electronic component availability. Such increases were partially offset by a ~~$60~~decrease of $36 million ~~increase~~related to program execution in ~~revenue in Space, reflecting growth in responsive satellite programs.~~

~~SAS operating margin contracted 130 basis points to 11.9% from strong program performance in the prior year and unfavorable program mix.~~

~~Communication Systems Segment (“CS”)~~

Quarter Ended
(Dollars in millions) April 1, 2022 April 2, 2021 % Inc/(Dec)
Revenue $ 963 $ 1,112 (13 %)
Operating income 229 270 (15 %)
Operating margin 23.8 % 24.3 %

~~CS revenue decreased 13%. Tactical Communications declined $59 million primarily due to supply chain impacts arising from electronic component shortages, which also affected~~ Integrated Vision ~~Solutions and Public Safety, and $72 million in Broadband Communications due to lower volume on legacy platforms.~~

~~CS operating margin contracted 50 basis points to 23.8% primarily due to volume and supply chain impacts at the segment, as noted in the discussion above regarding CS revenue.~~Solutions.

2224

~~Unallocated Corporate Expenses~~

Quarter Ended
(Dollars in millions) April 1, 2022 April 2, 2021 % Inc/(Dec)
Unallocated corporate department expense, net(1)
$ (7) $ (33) (79 %)
L3Harris Merger-related transaction, integration and other expenses and losses (20) (21) (5 %)
Amortization of acquisition-related intangibles (152) (164) (7 %)
Business divestiture-related losses — (15) *
Impairment of goodwill and other assets — (62) *
Other items (1) (7) *
~~______________~~

~~(1)For~~The increase in CS operating income for the quarter ended March 31, 2023 compared with the quarter ended April ~~2, 2021, includes a $15 million accrual for a value added tax obligation.~~1, 2022 was due to higher volumes including the TDL acquisition partially offset by program execution in Integrated Vision Solutions.

Unallocated Corporate Expenses


	Quarter Ended
(Dollars in millions)	March 31, 2023		April 1, 2022		% Inc/(Dec)

Unallocated corporate department expense, net(1)	$	(6)	$	(4)	50	%
Amortization of acquisition-related intangibles(2)	(165)		(152)		9	%
Acquisition-related transaction and integration expenses	(40)		—		*
L3Harris merger-related integration expenses	—		(24)		*
Impairment of other assets	(18)		—		*
Additional cost of sales related to the fair value step-up in inventory sold	(15)		—		*
Enterprise transformation program	(13)		—		*




Pre-acquisition and other divestiture-related expenses	(10)		(1)		*
FAS/CAS operating adjustment(3)	22		22		—	%

_______________

*Not meaningful

(1) Includes certain corporate-level expenses that are not included in management’s evaluation of segments operating performance.

(2) Includes amortization of identifiable intangible assets acquired in connection with business combinations. Because our acquisitions benefited the entire Company, the amortization of identifiable intangible assets acquired was not allocated to any segment.

(3) Represents the difference between the service cost component of FAS pension and OPEB cost and total CAS pension and OPEB cost and replaces the “Pension adjustment” line item previously presented, which included the non-service components of FAS pension and OPEB income. See Note O: Business Segment Information in the Notes for additional information regarding the FAS/CAS operating adjustment.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL STRATEGIES

Cash Flows
Quarter Ended
(In millions) April 1, 2022 April 2, 2021
Net cash provided by operating activities $ 39 $ 661
Net cash used in investing activities (64) (61)
Net cash used in financing activities (513) (900)
Effect of exchange rate changes on cash and cash equivalents (1) —
Net decrease in cash and cash equivalents (539) (300)
Cash and cash equivalents, beginning of period 941 1,276
Cash and cash equivalents, end of period $ 402 $ 976


	Quarter Ended
(In millions)	March 31, 2023		April 1, 2022

Cash and cash equivalents, beginning of period	$	880	$	941
Operating activities:
Net income	339		475
Non-cash adjustments	144		52
Changes in working capital	(120)		(499)
Other, net	(13)		11
Net cash provided by operating activities	350		39
Net cash used in investing activities	(2,048)		(64)
Net cash provided by (used in) financing activities	1,361		(513)
Effect of exchange rate changes on cash and cash equivalents	2		(1)
Net decrease in cash and cash equivalents	(335)		(539)
Cash and cash equivalents, end of period	$	545	$	402

Net cash provided by operating activities

The $311 million increase in net cash provided by operating activities in the quarter ended March 31, 2023 compared with the quarter ended April 1, 2022 was primarily due to $379 million less cash used to fund net working capital (i.e., receivables, contract assets, inventories, accounts payable and contract liabilities) and a decrease in net income, excluding the impact of non-cash adjustments.

Net cash used in investing activities

The $1,984 million increase in net cash used in investing activities in the quarter ended March 31, 2023 compared with the quarter ended April 1, 2022 was primarily due to the $1,973 million cash used for the acquisition of TDL during the first quarter of fiscal 2023.

Net cash provided by (used in) financing activities

The $1,874 million increase in net cash provided by financing activities in the quarter ended March 31, 2023 compared with net cash used in financing activities in the quarter ended April 1, 2022 was primarily due to $2.0 billion in borrowings on our Term Loan 2025 utilized for the TDL acquisition, partially offset by an $88 million increase in cash used to repurchase our common stock under our share repurchase program, a $14 million increase in tax withholding payments associated with vested share-based awards and a $19 million decrease in proceeds from exercises of employee stock options.

Cash and cash ~~equivalents:~~ equivalents

At ~~April 1, 2022~~March 31, 2023, we had cash and cash equivalents of ~~$402~~$545 million, ~~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 April 1, 2022). Additionally, we had $7.1 billion of net long-term debt outstanding at April 1, 2022, the majority of which we incurred in connection with the L3Harris Merger during the two quarters ended January 3, 2020 and the acquisition of Exelis in the fourth quarter of fiscal 2015. Our $402 million of cash and cash equivalents at April 1, 2022 included $211includes $295 million held by our foreign subsidiaries, a significant portion of which we believe can be repatriated to the U.S. with minimal tax cost.

Capital Structure and Resources

Below describes significant changes to our credit arrangements and debt during the quarter ended March 31, 2023.

Credit Arrangements

Credit Agreements. On March 10, 2023, we established a $2.4 billion 2023 Credit Facility to finance a portion of the purchase price for the pending acquisition of AJRD. At March 31, 2023, we had no outstanding borrowings and were in compliance with all covenants under our 2023 Credit Agreement.

Commercial Paper Program.On March 14, 2023, we established a $3.4 billion CP Program, supported by amounts available under the 2022 Credit Agreement and the 2023 Credit Agreement. The Company expects to terminate the existing $1.0 billion commercial paper program in the second quarter of Fiscal 2023. At March 31, 2023, we had no outstanding notes under our CP Program.

Further information about our Credit Agreements and CP Program can be found in Note H: Debt and Credit Arrangements in the Notes.

Debt

At March 31, 2023, we had $9.0 billion of outstanding long-term debt, net, including the current portion of long-term debt, net and financing lease obligations, the majority of which we incurred in connection with merger and acquisition activity.

Long-Term Debt Issued. We issued long-term debt of $2.25 billion under Term Loan 2025 during the quarter ended March 31, 2023.

Long-Term Debt Repayments. On March 14, 2023, we repaid the entire outstanding $250 million aggregate principal amount of our Floating 2023 Notes through a $250 million draw on Term Loan 2025.

For a description of our long-term debt, see Note H: Debt and Credit Arrangements in the Notes and Note 13: Debt in our Fiscal 2022 Form 10-K.

Liquidity Assessment

Given our current cash position, outlook for funds generated from operations, credit ratings, available credit ~~facility,~~facilities, cash needs and debt structure, we have not experienced to date, and do not expect to experience, any material issues for the next 12 months and in the longer term 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 global financial uncertainty. ~~We cannot predict the on-going impact that COVID, among other potential risks and uncertainties, will have on our cash from operating activities.~~ Additionally, ~~the~~ provisions in the Tax Cuts and Jobs Act of 2017 ~~require~~required that, beginning in ~~fiscal~~ 2022, ~~research and experimental~~R&D expenditures be capitalized and amortized over five years. In the future, Congress may consider legislation that would defer the amortization requirement to later years, ~~which~~possibly with retroactive effect. In the meantime, we ~~estimate~~ will ~~have an approximately $600 million~~continue to ~~$700 million impact to cash from operating activities in fiscal 2022~~make additional Federal tax payments based on the ~~provisions currently in effect, however, there was no~~current tax law. The impact toof this tax law on our cash from ~~operating activities during~~operations depends on the ~~first quarter~~amount of ~~2022.~~R&D expenditures incurred and whether the Internal Revenue Service issues guidance on the provision which differs from our current interpretation, among other things. SeePart I: Item 1A. ~~“Risk Factors” of~~Risk Factors in our Fiscal ~~2021~~2022 Form 10-K and Part ~~II,~~II. Item 1A. ~~“Risk Factors” in~~Risk Factors of this Report.

Based on our current business plan and revenue prospects, we believe that our existing cash, funds generated from operations, our senior unsecured credit ~~facility~~facilities, our CP Program 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, the pending acquisition of AJRD 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 ~~2022~~2023 are expected to be approximately ~~$330~~$275 million. We intend to retire the 3.85% 2023 Notes with cash on hand and commercial paper issuances. We anticipate tax payments infor fiscal ~~2022~~2023 to be approximately equal to or marginally less than our tax expense for fiscal 2023, excluding the ~~same period, absent~~impact of R&D capitalization and subject to adjustment for timing differences. For additional information regarding our income taxes, see Note 22: Income Taxes in our Fiscal 2022 Form 10-K. Other than ~~those~~operating expenses, cash ~~outlays noted~~requirements for fiscal 2023 are expected to consist primarily of capital expenditures, R&D payments, dividend payments, repurchases under our share repurchase program, and expenditures for the pending acquisition of AJRD. See “Capital Structure and Resources” and “Commercial Commitments” in ~~“Material Cash Requirements” in~~Part II: Item 7. ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations in our Fiscal ~~2021~~2022 Form 10-K ~~and in the “Material Cash Requirements and Commercial Commitments” section below in this MD&A, capital expenditures, dividend payments and repurchases under~~for further information regarding our ~~share repurchase program, we do not anticipate any significant~~ cash ~~outlays during the remainder of fiscal 2022.~~

There can be no assurance 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. 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 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 $622 million decrease in net cash provided by operating activities in the first quarter of fiscal 2022 compared with the first quarter of fiscal 2021 was primarily due to a $525 million increase in cash used to fund working capital (i.e., accounts receivable, contract assets, inventories, accounts payable and contract liabilities) and the impact of $87 million of lower income (excluding the impact of non-cash items such as depreciation and amortization, impairment of goodwill and other assets and gains related to business divestitures).

~~Net cash used in investing activities:~~ The $3 million increase in net cash used in investing activities in the first quarter of fiscal 2022 compared with the first quarter of fiscal 2021 was primarily due to a $12 million increase in cash used in other investing activities which primarily relate to a strategic investment, partially offset by a $9 million decrease of net cash used for additions of property, plant and equipment in fiscal 2022.

~~Net cash used in financing activities:~~ The $387 million decrease in net cash used in financing activities in the first quarter of fiscal 2022 compared with the first quarter of fiscal 2021 was primarily due to a $392 million decrease in cash used to repurchase our common stock under our share repurchase program and a $20 million increase in proceeds from exercises of employee stock options, partially offset by a $11 million increase in cash used for tax withholding payments associated with vested share-based awards, a $9 million increase in cash used to pay dividends and a $4 million increase in cash used for repayments of borrowings.requirements.

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, the American Rescue Plan Act of 2021 and the Infrastructure Investment and Jobs Act 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 no less than the required minimum funding thresholds. As a result of prior voluntary contributions and plan performance, we are not required to make any contributions to our U.S. qualified defined benefit pension plans in fiscal ~~2022 and~~2023 or 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 ~~$524~~$208 million as of ~~April 1, 2022.~~March 31, 2023. See Note 14: ~~“Pension~~Pension and Other Postretirement ~~Benefits”~~Benefits ~~in the Notes to Consolidated Financial Statements~~ in our Fiscal ~~2021~~2022 Form 10-K and Note ~~J —~~I: Pension and Other Postretirement Benefit Plans in the Notes for further information regarding our pension plans.

Common Stock Repurchases

During the ~~first~~ quarter ~~of fiscal 2022,~~ended March 31, 2023, we used ~~$308~~$396 million to repurchase ~~1.3~~1.9 million shares of our common stock under our share repurchase program at an average price per share of ~~$231.39,~~$211.08, including commissions of $0.02 per share. During the ~~first~~ quarter ~~of fiscal 2021, we used $700~~ended March 31, 2023, $26 million to repurchase 3.8 million shares of our common stock under our share repurchase program at an average price per share of $184.54, including commissions of $0.02 per share. During the first quarter of fiscal 2022 and 2021, $12 million and $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 repurchased by us are cancelled and retired.

On January 28, 2021, we announced that our Board of Directors approved a new $6 billion share repurchase authorization under our repurchase program that was in addition to the remaining unused authorization of $210 million at January 1, 2021, under our prior repurchase program, for a total unused authorization of $6.2 billion.

Our repurchase program does not have a stated ~~expiration. At April 1, 2022, we had a remaining unused authorization under~~expiration date and authorizes us to repurchase shares of our ~~repurchase program of $2.2 billion under our share repurchase program. Repurchases under our share repurchase program may be made~~common stock through ~~open-market transactions,~~open market purchases, private transactions, transactions structured through investment banking institutions or any combination thereof. ~~The~~At March 31, 2023, we had a remaining unused authorization under our repurchase program of $4.1 billion. We have announced that share repurchases will be moderated in the near-term, but the level and timing of our

repurchases depends on a number of factors, including our financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors our Board ~~and~~of Directors or management may deem relevant. The timing, volume and nature of repurchases are also 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~~Unregistered Sales of Equity Securities and Use of ~~Proceeds.”~~Proceeds of this Report.

Dividends

On February ~~25, 2022,~~24, 2023, we announced that our Board of Directors increased the quarterly per share cash dividend rate on our common stock from ~~$1.02~~$1.12 to ~~$1.12,~~$1.14, commencing with the dividend declared by our Board of Directors for the first quarter of fiscal ~~2022,~~2023, for an annualized per share cash dividend rateof ~~$4.48,~~$4.56, which was our ~~twenty-first~~twenty-second consecutive annual increase in our quarterly cash dividend rate. Quarterly cash dividends are typically paid in March, June, September and December. We paid ~~$218~~$220 million in cash dividends during the quarter ended March ~~2022.~~31, 2023. We currently expect ~~that~~to continue paying and increasing the rates of 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~~. increases. The annual declaration of dividends by our Board of Directors 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 (as amended, 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 12: “Credit Arrangements”~~ ~~in the Notes to Consolidated Financial Statements in our Fiscal 2021 Form 10-K.~~

We were in compliance with the covenants in the 2019 Credit Agreement at April 1, 2022, 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 April 1, 2022, we had no borrowings outstanding under the 2019 Credit Agreement.

~~Long-Term Debt:~~ ~~For a description of our long-term variable-rate and fixed-rate debt, see~~ ~~Note 13: “Debt”~~ ~~in the Notes to Consolidated Financial Statements in our Fiscal 2021 Form 10-K.~~

~~Short-Term Debt:~~ ~~Our short-term debt was $3 million at April 1, 2022 and $2 million December 31, 2021, consisting of local borrowing by international subsidiaries for working capital needs.~~

~~Other Agreements:~~ We have two RSAs with two separate third-party financial institutions that permit us to sell, on a non-recourse basis, up to an aggregate of $100 million of outstanding receivables at any given time. From time to time, we have sold certain customer receivables under the RSAs, which we continue to service and collect on behalf of the third-party financial institution and we account for as sales of receivables with sale proceeds included in net cash from operating activities. Outstanding accounts receivable sold pursuant to the RSAs was $99 million at April 1, 2022 and $100 million at December 31, 2021, with net cash proceeds of $98 million and $100 million, respectively.

Material Cash Requirements and Commercial Commitments

The amounts disclosed in our Fiscal ~~2021~~2022 Form 10-K include our material cash requirements and commercial commitments. ~~There~~Except for the $2.25 billion in borrowings under Term Loan 2025, our CP Program and our 2023 Credit Facility established during the quarter ended March 31, 2023, there were no material changes ~~during the first quarter of fiscal 2022 in~~to our material cash requirements from 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 agreements or other arrangements with financial institutions and customers primarily relating to the guarantee of future performance on certain contracts to provide products and services to customers or to obtain insurance policies with our insurance carriers as disclosed in our Fiscal ~~2021~~2022 Form 10-K. Further information about our Credit Agreements and CP Program can be found in “Capital Structure and Resources” in this section and Note H: Debt and Credit Arrangements in the Notes.

There can be no assurance 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 CP Program, our credit facilities, term loan or in the debt markets will not be impacted by any potential future credit or capital markets disruptions. If we are unable to maintain cash balances, generate cash flow from operations or borrow under our CP Program, our credit facilities or term loan 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 affecting the defense, government and other markets we serve and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.

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~~There have been no material changes 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) impairment testing of goodwill; (iv) accounting for business combinations; and (v) income taxes and tax valuation allowances. For additional discussion of our critical accounting ~~policies and~~ estimates ~~see~~disclosed in “Critical Accounting ~~Policies and~~ Estimates” in Part II: Item 7. ~~“Management’s~~Management's Discussion and Analysis of Financial Condition and Results of ~~Operations” in~~Operations of our Fiscal ~~2021~~2022 Form ~~10-K.~~10-K, except for, as set forth below.

Goodwill

We test our goodwill for impairment annually as of the first day of our fourth fiscal quarter, or under certain circumstances, more frequently, such as when events or circumstances indicate there may be impairment or when we reorganize our reporting structure such that the composition of one or more of our reporting units is affected.

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~~Revenue Recognition~~

~~A significant portion~~Fiscal 2023 Impairment Tests. Effective December 31, 2022, we adjusted our reporting to better align our businesses and transferred our ADG business (a reporting unit) from our IMS segment to our SAS segment (also a reporting unit). In connection with the realignment, we reduced our reporting units from nine to eight as the ADG reporting unit and all $327 million of associated goodwill was absorbed by our ~~business is derived from development and production contracts. Revenue and profit related to development and production contracts are generally recognized over time, typically using~~existing SAS reporting unit given the ~~POC cost-to-cost method of revenue recognition, whereby we measure our progress towards completion~~economic similarities of the ~~performance obligation based on~~two reporting units. Immediately before the ~~ratio of costs incurred to date to estimated costs at completion under~~realignment, we performed a qualitative impairment assessment over our SAS reporting unit, and a quantitative impairment assessment over our ADG reporting unit. Immediately after the ~~contract. Because costs incurred represent work~~realignment, we performed ~~we believe this method best depicts~~a quantitative impairment assessment over 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 requiresSAS reporting unit. We prepared estimates of the ~~total cost~~fair value of our pre-realignment ADG reporting unit and post-realignment SAS reporting unit based on a combination of market-based valuation techniques, utilizing quoted market prices, comparable publicly reported transactions, and an income-based valuation technique using projected discounted cash flows. These assessments indicated no impairment existed either before or after the realignment.

TDL Acquisition Goodwill. In connection with the January 3, 2023 acquisition of TDL, we recorded $1.014 billion of goodwill in our Broadband reporting unit within our CS segment.

ADG At-Risk Goodwill. As of December 31, 2022, prior to the business realignment, our ADG reporting unit had goodwill of $327 million and approximately 8% clearance. As noted above, ADG and all associated goodwill was absorbed by our existing SAS reporting unit and no impairment existed either before or after the realignment.

See Note B: Acquisitions and Divestitures and Note G: Goodwill and Other Intangible Assets in the Notesfor additional information.

Business Combinations

We follow the acquisition method of accounting to record identifiable assets acquired, liabilities assumed and noncontrolling interests recognized in connection with acquired businesses at ~~completion~~their estimated fair value as of the date of acquisition.

Identifiable intangible assets from business combinations are recognized at their estimated fair values as of the date of acquisition and ~~transaction price~~consist of customer relationships and developed technology. Determination of the estimated fair value of identifiable intangible assets requires judgment. The fair value of intangible assets are estimated using the relief from royalty method for the acquired developed technology and the ~~measurement~~multi-period excess earnings method for the acquired customer relationships. Both of ~~progress towards completion. Due~~these fair value methods are income-based valuation approaches, which require judgment to estimate appropriate discount rates, royalty rates related to the ~~long-term nature~~developed technology intangible assets, revenue growth attributable to the intangible assets and remaining useful lives. Finite-lived identifiable intangible assets are amortized to expense over their useful lives, generally ranging from two to seventeen years. The fair value of ~~many of our contracts, developing the estimated total cost at completion~~identifiable intangible assets acquired in connection with TDL was $850 million.

See Note B: Acquisitions 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~~Divestitures and ~~complexity of the work to be performed, subcontractor performance~~Note G: Goodwill 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 amountsOther Intangible Assets in the ~~transaction price to the extent it is probable that a significant reversal~~Notes for additional information.

Impact of ~~cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.~~Recently Issued Accounting Pronouncements

~~At the outset~~See Note A: Basis of ~~each contract, we gauge its complexity~~Presentation 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 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 aspectsSummary 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 recognizesSignificant Accounting Policies in the ~~current period the cumulative effect of such adjustments~~ Notesfor ~~all prior periods. Any anticipated losses on these contracts are fully recognized in the period in~~new accounting pronouncements which ~~the losses become evident.~~

~~EAC adjustments had the following impacts to operating income for the periods presented:~~

Quarter Ended
(In millions) April 1, 2022 April 2, 2021
Favorable adjustments $ 135 $ 162
Unfavorable adjustments (89) (80)
Net operating income adjustments $ 46 $ 82

The net favorable impact to operating income from EAC adjustments in the first quarter ended April 1, 2022 reflected benefits of operational performance on programs, including additional retirement of risks and material and labor cost savings. There were no individual impacts to operating income due to EAC adjustments in the first quarter of 2022 or 2021 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 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 Regulation (“FAR”) 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 margin approach to determine standalone selling price. In determining the appropriate margin under the cost plus margin approach, we consider 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, ourbecame effective during fiscal 2023.

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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.

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;~~contingencies or litigation; environmental remediation cost estimates; the potential level of share repurchases, dividends or pension contributions; potential acquisitions or divestitures; the integration of our acquisitions; the value of contract awards and programs; expected revenue; 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-related impacts to our businesses;~~future; 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,” “could,” “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. Factors that might cause our results to differ materially from those expressed in or implied by these forward-looking statements, from our current expectations or projections or from our historical results include, but are not limited to, those discussed in Part I: Item 1A. Risk Factors in our Fiscal 2022 Form 10-K and in Part II. Item 1A. Risk Factors of this Report. All forward-looking statements are qualified by, and should be read in conjunction with, those risk factors. 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~~(“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended ~~(the “Exchange~~(“Exchange Act”). , and 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, whether as a result of new information, future events or developments or otherwise, after the date of filing of this Report or, in the case of any document incorporated by reference, the date of that document.

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:~~

•projections. Other factors besides those listed here also could adversely affect us. See ~~The effects~~Part I: Item 1A. Risk Factors in our Fiscal 2022 Form 10-K and Part II. Item 1A. Risk Factors of ~~COVID could have a material adverse effect on~~this Report for more information regarding factors that might cause our ~~business operations, financial condition,~~ results ~~of operations, cash flows and equity.~~to differ materially from those expressed in or implied by the forward-looking statements contained in this Report.

•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 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 or sustained period of increased inflation.

•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 equity.

•The U.S. Government’s budget deficit and the national debt, as well as ~~any inability~~a breach 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,”debt ceiling, could have an adverse impact on our business, financial condition, results of operations, cash flows and equity.

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

•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.~~

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

•We derive a significant portion of our revenue from international operations and are subject to the risks of doing business internationally.

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

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

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

•Our future success will depend on our ability to develop new products ~~systems,~~and 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.~~

•~~To the extent some of our workforce is or becomes represented by labor unions, 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.~~condition and 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 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.

•Market conditions or volatility could impact our business, financial condition, results of operations and cash flows.

•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 and equity in future periods.

•Changes in our effective tax rate or additional tax exposures may have an adverse effect on our results of ~~operations.~~operations and cash flows.

•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.

•Unforeseen environmental issues, including regulations related to GHG emissions or change in customer sentiment related to environmental sustainability, could have a material adverse effect on our business, financial condition, results of operations, cash flows and equity.

•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, cash flows and 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.

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

•~~Unforeseen environmental issues, including regulations related~~We are subject to ~~greenhouse gas emissions~~risks relating to the pending acquisition of AJRD, and acquisition of AJRD cannot be guaranteed to close in the expected time frame or ~~change in customer sentiment related to environmental sustainability, could have a material adverse effect on~~at all.

•Challenges arising from the expanded operations from the acquisition of TDL and the pending acquisition of AJRD may affect our ~~business, financial condition, results of operations, cash flows and equity.~~future results.

•Strategic transactions, including mergers, acquisitions and divestitures, involve significant risks and uncertainties that could adversely affect our business, financial condition, results of operations, cash flows and 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 and financial condition.

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 2021 Form 10-K under Item 1A. “Risk Factors” and in Part 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 2021 Form 10-K and in Part 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 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 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 the risks associated with foreign currency exchange rates, ~~and~~ changes in interest ~~rates. We employ established policies~~rates and ~~procedures governing the use of financial instruments to manage~~market return fluctuations on our ~~exposure to such risks.~~defined benefit plans. There were no material changes during the quarter ended ~~April 1, 2022~~March 31, 2023 with respect to the information appearing in Part ~~II,~~II: Item ~~7A, “Quantitative~~7A. Quantitative and Qualitative Disclosures ~~about~~About Market ~~Risk” of~~Risk in our Fiscal ~~2021~~2022 Form 10-K.


ITEM 4.			CONTROLS AND PROCEDURES.

~~(a)~~ Evaluation of Disclosure Controls and ~~Procedures:~~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~~forms 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 ("CEO") and Chief Financial Officer ("CFO"), 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 ~~April 1, 2022,~~March 31, 2023, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and ~~procedures. This evaluation was carried out~~procedures under the supervision and with the participation of our management, including our ~~Chief Executive Officer~~CEO and our ~~Chief Financial Officer. Based on this work~~CFO, and ~~other evaluation procedures, our management, including our Chief Executive Officer and our Chief Financial Officer, has~~have concluded that as of ~~April 1, 2022~~March 31, 2023 our disclosure controls and procedures were ~~effective at the reasonable assurance level.~~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. Control

There have been no changes in our internal control over financial reporting ~~that occurred~~(“ICFR”) during the quarter ended ~~April 1, 2022~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Tactical Data Links acquisition is being integrated into the existing CS segment systems and processes from an ICFR perspective.

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PART II. OTHER INFORMATION


ITEM 1.			LEGAL PROCEEDINGS.

See Note ~~R —~~P: Legal Proceedings and Contingenciesin the 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 Part I: Item 3. ~~“Legal Proceedings” of~~Legal Proceedings in our Fiscal ~~2021~~2022 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, cash flows and equity as set forth in Part I: Item 1A. ~~“Risk Factors” of~~Risk Factors in our Fiscal ~~2021~~2022 Form 10-K. There have been no material changes to the risk factors disclosed in our Fiscal ~~2021~~2022 Form 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 equity.


ITEM 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Issuer Purchases of Equity Securities

During the quarter ended April 1, 2022, we repurchased 1.3 million shares of our common stock under our share repurchase program for $308 million at an average share price of $231.37, excluding commissions of $0.02 per share. The level and timing of our repurchases depends 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 and management may deem relevant. We have announced that we currently expect to repurchase up to $1.5 billion in shares under our repurchase program in fiscal 2022, 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 cancelled and retired.

The following table sets forth information with respect to repurchases by us of our common stock during the quarter ended ~~April 1, 2022:~~
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)
($ in millions)
Month No. 1
(January 1, 2022-January 28, 2022)
Repurchase program(1)
273,155 $ 218.71 273,155 $2,476
Employee transactions(2)
106,690 $ 217.54 — —
Month No. 2
(January 29, 2022-February 25, 2022)
Repurchase program(1)
506,083 $ 214.76 506,083 $2,367
Employee transactions(2)
46,142 $ 222.47 — —
Month No. 3
(February 26, 2022-April 1, 2022)
Repurchase program(1)
551,348 $ 252.88 551,348 $2,228
Employee transactions(2)
120,224 $ 263.87 — —
Total 1,603,642 1,330,586 $2,228
March 31, 2023:


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) ($ in millions)
Month No. 1
(December 31, 2022 - January 27, 2023)
Repurchase program(1)	—	$	—	—	$	4,452
Employee transactions(2)	18,970	$	205.76	—	—
Month No. 2
(January 28, 2023 - February 24, 2023)
Repurchase program(1)	936,777	$	212.16	936,777	$	4,254
Employee transactions(2)	4,082	$	211.79	—	—
Month No. 3
(February 25, 2023 - March 31, 2023)
Repurchase program(1)	940,522	$	209.96	940,522	$	4,056
Employee transactions(2)	168,366	$	209.59	—	—
Total	2,068,717			1,877,299	$	4,056

_______________

* Periods represent our fiscal months.

(1) On ~~January 28, 2021,~~October 21, 2022, we announced that our Board of Directors approved a $6$3 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. We~~1.5 billion at that time. Our repurchase program does not have an expiration date and authorizes us to repurchase shares of our common stock through ~~open-market~~open market purchases, private transactions, transactions structured through investment banking institutions or any combination thereof. As of ~~April 1, 2022, $2.2~~March 31, 2023, the remaining unused authorization under our repurchase programs was $4.1 billion (as reflected in the table above) ~~was the approximate dollar amount of our common stock that can still be purchased under our 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~~stock 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.

Sales of Unregistered Equity Securities

During the first quarter of fiscal ~~2022,~~2023, we did not issue or sell any unregistered equity securities.


ITEM 3.			DEFAULTS UPON SENIOR ~~SECURITIES~~SECURITIES.

None.


ITEM 4.			MINE SAFETY DISCLOSURES.

Not applicable.


ITEM 5.			OTHER INFORMATION.

None.


ITEM 6.			EXHIBITS.

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

~~(3)(a~~(2))** R ~~estated~~ ~~Certificate~~Agreement and Plan of ~~Incorporation~~Merger, dated as of ~~L3Harris Technologies, Inc. (1995), as amended~~.

~~(3)(~~b ) ~~Amended~~December 17, 2022, by and ~~Restated By-Laws of~~among L3Harris Technologies, Inc., ~~as amended~~.Aquila Merger Sub Inc. and Aerojet Rocketdyne Holdings, Inc., incorporated herein by reference to exhibit 2.1 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on December 19, 2022. (Commission File Number 1-3863)

*(1 ~~(10.1)~~0.1 ~~Conditional Waiver, Separation Agreement and Release of All Claims, dated January 21, 2022,~~ )~~between~~ ~~L3Harris Technologies, Inc.~~ ~~and Jesus Malave~~.

*~~(10.2)Offer Letter Agreement~~ ~~dated~~ ~~January~~24 ~~, 2022,~~ ~~between~~ L3Harris Technologies, Inc. Restricted Unit Award Agreement Terms and Conditions (as of February 23, 2023).M ~~ichelle L. Turner~~.

(10.2)* L3Harris Technologies, Inc. Performance Unit Award Agreement Terms and Conditions (as of February 23, 2023).

(10.3)* L3Harris Technologies, Inc. Stock Option Award Agreement Terms and Conditions (as of February 23, 2023).

(10.34 ) ~~Amendment Ten~~*A mendment Twelve to the L3Harris Retirement Savings Plan ~~(Amended~~(as amended and ~~Restated Effective~~restated effect ive January 1, 2021) dated March 281, 2023.~~, 2022~~.

(10 15.5 )**364-Day Credit Agreement, dated March 10, 2023, by and among L3Harris Technologies, Inc. and the other parties thereto, incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on March 16, 2023. (Commission File Number 1-3863)

(1 0.6 )**Form of Commercial Paper Dealer Agreement, dated March 14, 2023, between L3Harris Technologies, Inc. and the Dealer party thereto , incorporated herein by reference to Exhibit 10.2 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on March 16, 2023. (Commission File Number 1-3863)

(15) Letter Regarding Unaudited Interim Financial ~~Information~~.Information.

(31.1) Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

(31.2) Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

(32.1) Section 1350 Certification of Chief Executive Officer.

(32.2) Section 1350 Certification of Chief Financial Officer.

(101) The financial information from L3Harris Technologies, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~April 1, 2022~~March 31, 2023 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Statement of ~~Income,~~Operations, (ii) the Condensed Consolidated Statement of Comprehensive Income, (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 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.

** Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. L3Harris Technologies, Inc. hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the SEC.

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SIGNATURES

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: April ~~29, 2022~~28, 2023

By:

/s/ M~~ICHELLE~~MICHELLE L. TTURNER~~URNER~~

Michelle L. Turner

Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)

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