UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 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 ~~October~~April 21, ~~2022~~2023 was ~~190,402,795.~~189,453,379.

L3HARRIS TECHNOLOGIES, INC.

FORM 10-Q

For the Quarter Ended ~~September 30, 2022~~March 31, 2023

TABLE OF CONTENTS


		Page No.

Part I. Financial Information:
	ITEM 1. Financial Statements (Unaudited):
	Condensed Consolidated Statement of Operations for the ~~Quarter and Three~~ Quarters Ended ~~September 30,~~March 31, 2023 and April 1, 2022 ~~and October 1, 2021~~	1
	~~Condensed Consolidated Statement of Comprehensive~~ ~~(Loss)~~ ~~Income~~ ~~for the Quarter and Three Quarters Ended September 30, 2022 and October 1, 2021~~	2
	Condensed Consolidated ~~Balance Sheet~~ ~~at September 30,~~Statement of Comprehensive Income for the Quarters Ended March 31, 2023 and April 1, 2022 ~~and December 31, 2021~~	3
	Condensed Consolidated ~~Statement of Cash Flows~~ ~~for the Three Quarters Ended September~~Balance Sheet at March 31, 2023 and December 30, 2022 ~~and October 1, 2021~~	4
	Condensed Consolidated Statement of ~~Equity f~~Cash Flows orfor the ~~Quarter and Three~~ Quarters Ended ~~September 30,~~March 31, 2023 and April 1, 2022 ~~and October 1, 2021~~	5
	~~Notes to~~ Condensed Consolidated ~~Financial Statements~~Statement of Equity for 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. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1921
	ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	3331
	ITEM 4. Controls and Procedures	3332

Part II. Other Information:
	ITEM 1. Legal Proceedings	3433
	ITEM 1A. Risk Factors	3433
	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	3533
	ITEM 3. Defaults Upon Senior Securities	3534
	ITEM 4. Mine Safety Disclosures	3534
	ITEM 5. Other Information	3534
	ITEM 6. Exhibits	3534

Signatures		3736

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 OPERATIONS

(Unaudited)


		Quarter Ended				Three Quarters Ended					Quarter Ended
(In millions, except per share amounts)	(In millions, except per share amounts)	September 30, 2022		October 1, 2021		September 30, 2022		October 1, 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	$	4,246	$	4,229	$	12,484	$	13,464	Revenue from product sales and services	$	4,471	$	4,103
Cost of product sales and services	Cost of product sales and services	(3,052)		(2,921)		(8,819)		(9,385)		Cost of product sales and services	(3,305)		(2,860)
Engineering, selling and administrative expenses	Engineering, selling and administrative expenses	(742)		(793)		(2,231)		(2,485)		Engineering, selling and administrative expenses	(773)		(745)
Business divestiture-related gains, net		—		27		—		192
Impairment of goodwill and other assets		(802)		—		(802)		(207)
Non-operating income, net		99		111		313		314

Non-operating income, net										Non-operating income, net	82		106
Interest expense, net	Interest expense, net	(70)		(67)		(205)		(198)		Interest expense, net	(102)		(68)
(Loss) income from continuing operations before income taxes		(321)		586		740		1,695
Income before income taxes										Income before income taxes	373		536
Income taxes	Income taxes	20		(107)		(96)		(336)		Income taxes	(34)		(61)
(Loss) income from continuing operations		(301)		479		644		1,359
Discontinued operations, net of income taxes		—		—		—		(1)
Net (loss) income		(301)		479		644		1,358

Net income										Net income	339		475
Noncontrolling interests, net of income taxes	Noncontrolling interests, net of income taxes	1		2		2		4		Noncontrolling interests, net of income taxes	(2)		—
Net (loss) income attributable to L3Harris Technologies, Inc.		$	(300)	$	481	$	646	$	1,362
Net income attributable to L3Harris Technologies, Inc.										Net income attributable to L3Harris Technologies, Inc.	$	337	$	475

Amount attributable to L3Harris Technologies, Inc. common shareholders
(Loss) income from continuing operations		$	(300)	$	481	$	646	$	1,363
Discontinued operations, net of income taxes		—		—		—		(1)
Net (loss) income		$	(300)	$	481	$	646	$	1,362

Net (loss) 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	$	(1.56)	$	2.41	$	3.36	$	6.70	Basic	$	1.77	$	2.46

Diluted	Diluted	$	(1.56)	$	2.39	$	3.33	$	6.64	Diluted	$	1.76	$	2.44

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

Basic weighted average common shares outstanding		191.3		199.5		192.2		203.3
Diluted weighted average common shares outstanding		191.3		201.6		194.0		205.2

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

L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES

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

(Unaudited)
Quarter Ended Three Quarters Ended
(In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Net (loss) income $ (301) $ 479 $ 644 $ 1,358
Other comprehensive (loss) income:
Foreign currency translation loss, net of income taxes (120) (34) (196) (37)
Net unrealized loss on hedging derivatives, net of income taxes (12) (7) (14) —
Net unrecognized gain on postretirement obligations, net of income taxes — 576 — 574
Other comprehensive (loss) income, recognized during the period (132) 535 (210) 537
Reclassification adjustments for gains included in net (loss) income (2) (3) (10) (1)
Other comprehensive (loss) income, net of income taxes (134) 532 (220) 536
Total comprehensive (loss) income (435) 1,011 424 1,894
Comprehensive loss attributable to noncontrolling interests 1 2 2 4
Total comprehensive (loss) income attributable to L3Harris Technologies, Inc. $ (434) $ 1,013 $ 426 $ 1,898


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

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

Other comprehensive income, recognized during the period	12		2
Reclassification adjustments for gains included in net income	(12)		(6)
Other comprehensive loss, net of income taxes:	—		(4)
Total comprehensive income	339		471
Comprehensive income attributable to noncontrolling interests	(2)		—
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) September 30, 2022 December 31, 2021
Assets
Current Assets
Cash and cash equivalents $ 529 $ 941
Receivables, net 1,138 1,045
Contract assets 3,135 3,021
Inventories 1,339 982
Inventory prepayments 22 48
Income taxes receivable 44 98
Other current assets 224 224
Total current assets 6,431 6,359
Non-current Assets
Property, plant and equipment, net 2,092 2,101
Operating lease right-of-use assets 762 769
Goodwill 17,260 18,189
Other intangible assets, net 6,148 6,640
Deferred income taxes 84 85
Other non-current assets 604 566
Total non-current assets 26,950 28,350
$ 33,381 $ 34,709
Liabilities and Equity
Current Liabilities
Short-term debt $ 2 $ 2
Accounts payable 2,078 1,767
Contract liabilities 1,158 1,297
Compensation and benefits 349 444
Other accrued items 1,002 1,002
Income taxes payable 201 28
Current portion of long-term debt, net 1,063 11
Total current liabilities 5,853 4,551
Non-current Liabilities
Defined benefit plans 346 614
Operating lease liabilities 745 768
Long-term debt, net 5,967 7,048
Deferred income taxes 876 1,344
Other long-term liabilities 1,155 1,065
Total non-current liabilities 9,089 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 191,089,930 and 193,511,401 shares at September 30, 2022 and December 31, 2021, respectively 191 194
Other capital 15,744 16,248
Retained earnings 2,768 2,917
Accumulated other comprehensive loss (366) (146)
Total shareholders’ equity 18,337 19,213
Noncontrolling interests 102 106
Total equity 18,439 19,319
$ 33,381 $ 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)


		Three Quarters Ended					Quarter Ended
(In millions)	(In millions)	September 30, 2022		October 1, 2021		(In millions)	March 31, 2023		April 1, 2022

Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	644	$	1,358	Net income	$	339	$	475
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of acquisition-related intangibles	Amortization of acquisition-related intangibles	454		475		Amortization of acquisition-related intangibles	165		152
Depreciation and other amortization	Depreciation and other amortization	243		248		Depreciation and other amortization	85		80
Share-based compensation	Share-based compensation	92		100		Share-based compensation	23		28
Share-based matching contributions under defined contribution plans	Share-based matching contributions under defined contribution plans	161		165		Share-based matching contributions under defined contribution plans	57		55
Qualified pension plan contributions		(4)		(5)
Pension and other postretirement benefit plan income	Pension and other postretirement benefit plan income	(297)		(275)		Pension and other postretirement benefit plan income	(71)		(99)

Goodwill and asset impairment charges		802		207

Business divestiture-related gains, net		—		(192)
Loss on sale of property, plant and equipment		5		—
Gain on sale of asset group		(8)		—

Deferred income taxes	Deferred income taxes	(454)		(102)		Deferred income taxes	(115)		(162)
(Increase) decrease in:	(Increase) decrease in:					(Increase) decrease in:
Receivables, net	Receivables, net	(93)		233		Receivables, net	48		(239)
Contract assets	Contract assets	(111)		(615)		Contract assets	(269)		(93)
Inventories	Inventories	(357)		(108)		Inventories	(86)		(108)
Prepaid expenses and other current assets		26		(38)
Other current assets						Other current assets	(40)		(25)
Increase (decrease) in:	Increase (decrease) in:					Increase (decrease) in:
Accounts payable	Accounts payable	312		270		Accounts payable	90		(43)
Contract liabilities	Contract liabilities	(133)		56		Contract liabilities	97		(16)
Compensation and benefits	Compensation and benefits	(95)		(119)		Compensation and benefits	(115)		(154)
Other accrued items	Other accrued items	2		72		Other accrued items	63		(12)
Income taxes	Income taxes	259		100		Income taxes	130		203
Other		(72)		35
Other operating activities						Other operating activities	(51)		(3)
Net cash provided by operating activities	Net cash provided by operating activities	1,376		1,865		Net cash provided by operating activities	350		39
Investing Activities	Investing Activities					Investing Activities
Net cash paid for acquired business						Net cash paid for acquired business	(1,973)		—
Additions to property, plant and equipment						Additions to property, plant and equipment	(71)		(55)

Additions to property, plant and equipment		(181)		(207)
Proceeds from sale of property, plant and equipment, net		10		7
Proceeds from sales of businesses, net		5		1,598

Proceeds from sale of asset group		18		—

Cash used for equity investments	Cash used for equity investments	(47)		—		Cash used for equity investments	(5)		(9)
Other investing activities	Other investing activities	7		2		Other investing activities	1		—
Net cash (used in) provided by investing activities		(188)		1,400
Net cash used in investing activities						Net cash used in investing activities	(2,048)		(64)
Financing Activities	Financing Activities					Financing Activities
Net proceeds from borrowings		5		5
Proceeds from borrowings, net of issuance cost						Proceeds from borrowings, net of issuance cost	2,248		1
Repayments of borrowings	Repayments of borrowings	(12)		(12)		Repayments of borrowings	(255)		(5)

Proceeds from exercises of employee stock options	Proceeds from exercises of employee stock options	40		94		Proceeds from exercises of employee stock options	11		30
Repurchases of common stock	Repurchases of common stock	(900)		(2,875)		Repurchases of common stock	(396)		(308)
Cash dividends	Cash dividends	(650)		(618)		Cash dividends	(220)		(218)

Tax withholding payments associated with vested share-based awards	Tax withholding payments associated with vested share-based awards	(44)		(4)		Tax withholding payments associated with vested share-based awards	(26)		(12)
Other financing activities	Other financing activities	(5)		(3)		Other financing activities	(1)		(1)
Net cash used in financing activities		(1,566)		(3,413)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	1,361		(513)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(34)		(2)		Effect of exchange rate changes on cash and cash equivalents	2		(1)
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(412)		(150)		Net decrease in cash and cash equivalents	(335)		(539)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	941		1,276		Cash and cash equivalents, beginning of period	880		941
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	529	$	1,126	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 July 1, 2022		$	192	$	15,814	$	3,312	$	(232)	$	104	$	19,190
Net loss		—		—		(300)		—		(1)		(301)
Other comprehensive loss, net of income taxes		—		—		—		(134)		—		(134)
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	—		6		—		—		—		6		Shares issued under stock incentive plans	—		11		—		—		—		11
Shares issued under defined contribution plans	Shares issued under defined contribution plans	—		48		—		—		—		48		Shares issued under defined contribution plans	—		57		—		—		—		57
Share-based compensation expense	Share-based compensation expense	—		23		—		—		—		23		Share-based compensation expense	—		23		—		—		—		23
Tax withholding payments on share-based awards	Tax withholding payments on share-based awards	—		(6)		—		—		—		(6)		Tax withholding payments on share-based awards	—		(26)		—		—		—		(26)
Repurchases and retirement of common stock	Repurchases and retirement of common stock	(1)		(141)		(29)		—		—		(171)		Repurchases and retirement of common stock	(2)		(332)		(62)		—		—		(396)
Cash dividends ($1.12 per share)		—		—		(215)		—		—		(215)
Cash dividends ($1.14 per share)														Cash dividends ($1.14 per share)	—		—		(220)		—		—		(220)

Other	Other	—		—		—		—		(1)		(1)		Other	—		(3)		—		—		(1)		(4)
Balance at September 30, 2022		$	191	$	15,744	$	2,768	$	(366)	$	102	$	18,439

Balance at July 2, 2021		$	202	$	17,863	$	2,633	$	(835)	$	113	$	19,976
Net income		—		—		481		—		(2)		479
Other comprehensive gain, net of income taxes		—		—		—		532		—		532
Shares issued under stock incentive plans		—		56		—		—		—		56
Shares issued under defined contribution plans		—		48		—		—		—		48
Share-based compensation expense		—		33		—		—		—		33
Tax withholding payments on share-based awards		—		(3)		—		—		—		(3)
Repurchases and retirement of common stock		(5)		(1,150)		(170)		—		—		(1,325)
Cash dividends ($1.02 per share)		—		—		(202)		—		—		(202)

Other		—		—		1		—		(1)		—
Balance at October 1, 2021		$	197	$	16,847	$	2,743	$	(303)	$	110	$	19,594
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	—		—		646		—		(2)		644		Net income	—		—		475		—		—		475
Other comprehensive loss, net of income taxes	Other comprehensive loss, net of income taxes	—		—		—		(220)		—		(220)		Other comprehensive loss, net of income taxes	—		—		—		(4)		—		(4)
Shares issued under stock incentive plans	Shares issued under stock incentive plans	—		40		—		—		—		40		Shares issued under stock incentive plans	—		30		—		—		—		30
Shares issued under defined contribution plans	Shares issued under defined contribution plans	1		160		—		—		—		161		Shares issued under defined contribution plans	—		55		—		—		—		55
Share-based compensation expense	Share-based compensation expense	—		92		—		—		—		92		Share-based compensation expense	—		28		—		—		—		28
Tax withholding payments on share-based awards	Tax withholding payments on share-based awards	—		(44)		—		—		—		(44)		Tax withholding payments on share-based awards	—		(12)		—		—		—		(12)
Repurchases and retirement of common stock	Repurchases and retirement of common stock	(4)		(752)		(144)		—		—		(900)		Repurchases and retirement of common stock	(1)		(260)		(47)		—		—		(308)
Cash dividends ($3.36 per share)		—		—		(650)		—		—		(650)

Cash dividends ($1.12 per share)														Cash dividends ($1.12 per share)	—		—		(218)		—		—		(218)
Distributions to noncontrolling interests														Distributions to noncontrolling interests	—		—		—		—		(1)		(1)
Other	Other	—		—		(1)		—		(2)		(3)		Other	—		—		1		—		1		2
Balance at September 30, 2022		$	191	$	15,744	$	2,768	$	(366)	$	102	$	18,439

Balance at January 1, 2021		$	208	$	19,008	$	2,347	$	(839)	$	117	$	20,841
Net income		—		—		1,362		—		(4)		1,358
Other comprehensive gain, net of income taxes		—		—		—		536		—		536
Shares issued under stock incentive plans		1		93		—		—		—		94
Shares issued under defined contribution plans		1		164		—		—		—		165
Share-based compensation expense		—		100		—		—		—		100
Tax withholding payments on share-based awards		—		(4)		—		—		—		(4)
Repurchases and retirement of common stock		(13)		(2,514)		(348)		—		—		(2,875)
Cash dividends ($3.06 per share)		—		—		(618)		—		—		(618)

Other		—		—		—		—		(3)		(3)
Balance at October 1, 2021		$	197	$	16,847	$	2,743	$	(303)	$	110	$	19,594
Balance at April 1, 2022														Balance at April 1, 2022	$	193	$	16,089	$	3,128	$	(150)	$	106	$	19,366

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 and three quarters ended September 30, 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 and change in accounting policy:~~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 four to three 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. GAAP requires pension and OPEB income or expense to be recognized on a FAS basis. Therefore, we present a “FAS/CAS operating 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 are 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 ~~S —~~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 three quarters ended October 1, 2021 included a $88 million right-of-use asset we obtained in exchange for a corresponding operating lease liability. These non-cash investing and financing activities are excluded from the “Other investing” and “Other financing” line items in our Condensed Consolidated Statement of Cash Flows (Unaudited). Right-of-use assets for operating leases are included in the “Operating lease right-of-use assets” line item and the corresponding operating lease liabilities are included in the “Other accrued items” and “Operating lease liabilities” line items in our Condensed Consolidated Balance Sheet (Unaudited).

Non-cash investing and financing activities during the three quarters ended October 1, 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.

~~Significant Accounting Policies Update~~Reclassifications

~~There~~The classification of certain prior year amounts have been ~~no material changes to our significant accounting policies described~~adjusted in our ~~Fiscal~~Condensed Consolidated Financial Statements and these Notes to conform to current year classifications.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accounting Standards Updates

In October 2021, ~~Form 10-K.~~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— BUSINESS~~B: ACQUISITIONS AND DIVESTITURES ~~AND ASSET SALES~~

~~Completed 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 ~~Asset Sales — Three Quarters Ended September 30, 2022~~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”).

~~During~~In connection with the ~~three quarters ended September 30,~~acquisition, on November 22, 2022, we ~~completed one~~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 ~~divestiture and one asset sale~~in the normal course of business. As of the closing date, our CS segment had a receivable from ~~our Integrated Mission Systems~~Viasat’s TDL business ~~segment for combined net cash proceeds~~with a fair value of ~~$23~~$1 million ~~and recognized a pre-tax gain of $8 million associated~~that was settled in connection with the ~~asset sale~~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 ~~“Engineering, selling and administrative expenses”~~“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 (Unaudited)~~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 ~~three quarters ended September 30, 2022.~~

~~Completed Divestitures — Three Quarters Ended October 1, 2021~~

~~The following table presents information regarding business divestitures completed during the three quarters ended October 1, 2021:~~

(In millions)
Business Segment Prior to Divestiture / Asset Sale(1)
Date of Divestiture / Asset Sale Sale Price
Net Cash Proceeds(2)
CPS business(3)
Other non-reportable businesses(8)
July 2, 2021 $ 398 $ 347
Military training business(4)
Other non-reportable businesses(8)
July 2, 2021 1,050 1,059
VSE disposal group(5)
Other non-reportable businesses(8)
July 30, 2021(6)
20 19
Electron Devices business(7)
Other non-reportable businesses(8)
October 1, 2021 185 173
$ 1,653 $ 1,598

~~_______________~~

~~(1)Business segment in which the operating results of each divested business were reported through the~~preliminary acquisition date ~~of divestiture.~~

~~(2)Net cash proceeds after selling costs and purchase price adjustments.~~

~~(3)~~The Combat Propulsion Systems and related businesses (“CPS business”) engineered, designed and manufactured engines, transmissions, suspensions and turret drive systems for tracked and wheeled combat vehicle systems.

~~(4)The military training business provided flight simulation solutions and training services to the U.S. Department of Defense and foreign military agencies.~~

~~(5)The Voice Switch Enterprise disposal group (“VSE disposal group”) provided voice over internet protocol systems for air traffic management.~~

~~(6)The sale~~fair value of the ~~VSE disposal group was partially closed on July 2, 2021, with~~off-market components. The preliminary acquisition date fair value of the ~~remainder divested on July 30, 2021.~~

~~(7)The Electron Devices~~off-market components is a net liability of $57 million, consisting of $31 million and ~~Narda Microwave-West divisions (“Electron Devices business”) manufactured microwave devices for ground-based, airborne~~$26 million included in the“Other accrued items” and ~~satellite communications and radar.~~

~~(8)Formerly our Aviation Systems segment.~~

~~Income Before Income Taxes Attributable to Businesses Divested:~~ ~~The following table presents the amount of significant income before income taxes attributable to businesses divested~~“Other long-term liabilities” line items in our Condensed Consolidated ~~Statement~~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 ~~Operations (Unaudited):~~

Quarter Ended Three Quarters Ended
(In millions) October 1, 2021 October 1, 2021
Electron Devices business $ 11 $ 41
CPS business — 53
Military training business — 35

~~Business Divestiture-Related Gains, net:~~ ~~The “Business divestiture-related gains, net” line item in our Condensed Consolidated Statement of Operations (Unaudited) is comprised~~these components as the amount by which the terms of the ~~following pre-tax gains~~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 ~~with businesses divested:~~

Quarter Ended Three Quarters Ended
(In millions) October 1, 2021 October 1, 2021
Electron Devices business $ 29 $ 29
VSE disposal group (4) (30)
CPS business(1)
— (19)
Military training business 2 214
Other — (2)
Total business divestiture-related gains, net $ 27 $ 192
~~_______________~~

~~(1)During~~performance obligations. We recognized $9 million in the quarter ended ~~April 2, 2021, upon classifying~~March 31, 2023 for amortization of off-market contract liabilities. Future estimated revenue from the ~~CPS business as held for sale, we recorded a non-cash impairment charge~~amortization of ~~$62~~off-market contract liabilities (based on the estimated pattern of cash flows to be incurred to satisfy associated performance obligations) is $22 million ~~which is included~~ in the ~~“Impairment~~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 ~~other assets” line item~~growth opportunities in ~~our Condensed Consolidated Statement of Operations (Unaudited) for~~ the ~~three quarters ended October 1, 2021.~~space domain. The acquired goodwill is tax deductible. See Note ~~I —~~G: Goodwill and Other Intangible Assets in these Notes for ~~additional~~further information.

~~Fair Value~~Financial Results. Revenue and income before income taxes of ~~Businesses~~TDL included in our Condensed Consolidated Statement of Operations from the acquisition date through March 31, 2023 are $81 million and ~~Goodwill Allocation~~$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 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 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 ~~I — Goodwill~~H: Debt and ~~Other Intangible Assets~~Credit Arrangements in these Notes and Note 3: Acquisitions in our Fiscal 2022 Form 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 ~~additional information regarding the impairment of goodwill related to business divestitures.~~further information.

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

At ~~September 30, 2022,~~March 31, 2023, we had stock options ~~and~~or other share-based compensation awards outstanding under several employee stock incentive plans (“L3Harris SIPs”). The compensation cost related to our share-based awards that was charged against income for the quarters ended March 31, 2023 and April 1, 2022 was $23 million and ~~$92~~$28 million, for the quarter and three quarters ended September 30, 2022, respectively, and $33 million and $100 million for the quarter and three quarters ended October 1, 2021, respectively. The aggregate number of shares of our common stock issued under L3Harris SIPs, net of shares withheld for tax purposes, was 0.1 million and 0.7 million for the quarter and three quarters ended September 30, 2022, respectively, and 0.7 million and 1.2 million for the quarter and three quarters ended October 1, 2021, respectively.

~~There were no significant restricted stock units, stock options or performance stock units awarded during the quarter ended September 30, 2022.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Awards granted to participants under L3Harris SIPs and the weighted-average grant-date fair value per share during the ~~three~~ quarters ended ~~September 30,~~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 0.3 million~~granted in connection with new hires, our restricted stock ~~units. During fiscal 2022, 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 our common stock on the grant date. The fair value as of the grant date of each~~three-year 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.period.

See Note 15: Stock Options and Other Share-Based Compensation in ~~the Notes to Consolidated Financial Statements in~~ our Fiscal ~~2021~~2022 Form 10-K for additional information regarding the L3Harris SIPs.

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

The components of AOCI are summarized below:

(In millions) Foreign currency translation Net unrealized losses on hedging derivatives Unrecognized postretirement obligations Total AOCI
Balance at December 31, 2021 $ (118) $ (89) $ 61 $ (146)
Other comprehensive (loss) before reclassifications to earnings, net of income taxes (196) (14) — (210)
Losses (gains) reclassified to earnings, net of income taxes(1)
— 5 (15) (10)
Other comprehensive loss, net of income taxes (196) (9) (15) (220)
Balance at September 30, 2022 $ (314) $ (98) $ 46 $ (366)
Balance at January 1, 2021 $ (58) $ (80) $ (701) $ (839)
Other comprehensive (loss) income before reclassifications to earnings, net of income taxes(2)
(37) — 574 537
Losses (gains) reclassified to earnings, net of income taxes(1)
1 (8) 6 (1)
Other comprehensive (loss) income, net of income taxes (36) (8) 580 536
Balance at October 1, 2021 $ (94) $ (88) $ (121) $ (303)


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

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

Balance at December 31, 2021	$	(118)	$	(89)	$	61	$	(146)
Other comprehensive (loss) income before reclassifications to earnings, net of income taxes	(3)		5		—		2
Gains reclassified to earnings, net of income taxes(1)	—		(1)		(5)		(6)
Other comprehensive (loss) income, net of income taxes	(3)		4		(5)		(4)
Balance at April 1, 2022	$	(121)	$	(85)	$	56	$	(150)

_______________

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

~~(2)~~Other comprehensive income before reclassifications to earnings, net of income taxes, for the quarter and three quarters ended October 1, 2021 includes remeasurement of funded status of pension plans after the purchases of group annuity policies. See ~~Note L — Postretirement Benefit Plans~~ ~~in these Notes for further information.~~Operations.

NOTE ~~E— RECEIVABLES, NET~~

~~Receivables, net are summarized below:~~

(In millions) September 30, 2022 December 31, 2021
Accounts receivable $ 1,175 $ 1,088
Less: allowances for collection losses (37) (43)
Receivables, net $ 1,138 $ 1,045

We have two 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 of outstanding receivables per agreement 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 provided by operating activities. We did not have outstanding accounts receivable sold pursuant to the RSAs at September 30, 2022. Outstanding accounts receivable sold pursuant to the RSAs were $99.9 million at December 31, 2021, with net cash proceeds of $99.8 million.

~~NOTE F—~~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 three quarters ended September 30, 2022 were impacted primarily by the timing of contractual billing milestones.~~

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


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

Contract assets	Contract assets	$	3,135	$	3,021	Contract assets	$	3,274	$	2,987
Contract liabilities, current	Contract liabilities, current	(1,158)		(1,297)		Contract liabilities, current	(1,525)		(1,400)
Contract liabilities, non-current(1)	Contract liabilities, non-current(1)	(117)		(107)		Contract liabilities, non-current(1)	(115)		(117)
Net contract assets	Net contract assets	$	1,860	$	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)	September 30, 2022		December 31, 2021		(In millions)	March 31, 2023		December 30, 2022

Unbilled contract receivables, gross	Unbilled contract receivables, gross	$	4,737	$	4,921	Unbilled contract receivables, gross	$	5,066	$	4,629
Unliquidated progress payments and advances	Unliquidated progress payments and advances	(1,602)		(1,900)		Unliquidated progress payments and advances	(1,792)		(1,642)
Contract assets	Contract assets	$	3,135	$	3,021	Contract assets	$	3,274	$	2,987

Contract assets and liabilities as of March 31, 2023 and December 30, 2022 were impacted primarily by the timing of contractual billing milestones. During the quarters ended March 31, 2023 and April 1, 2022, we recognized as$603 million and $517 million, respectively, of revenue related to contract liabilities that were outstanding at the end of the respective prior fiscal year were $196 million and $967 million for the quarter and three quarters ended September 30, 2022, respectively, and $94 million and $821 million for the quarter and three quarters ended October 1, 2021, respectively.year.

NOTE G—F: INVENTORIES

Inventories are summarized below:


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

Finished products(1)	Finished products(1)	$	191	$	141	Finished products(1)	$	315	$	181
Work in process	Work in process	464		335		Work in process	463		396
Raw materials and supplies		684		506
Materials and supplies						Materials and supplies	763		714
Inventories(1)	Inventories(1)	$	1,339	$	982	Inventories(1)	$	1,541	$	1,291

_______________

~~NOTE H— PROPERTY, PLANT AND EQUIPMENT, NET~~(1)

~~Property, plant and equipment, net are summarized below:~~
(In millions) September 30, 2022 December 31, 2021
Land $ 79 $ 79
Software capitalized for internal use 674 576
Buildings 1,240 1,236
Machinery and equipment 2,249 2,177
4,242 4,068
Less: accumulated depreciation and amortization (2,150) (1,967)
Property, plant and equipment, net $ 2,092 $ 2,101

Depreciation and amortization expense related to property, plant and equipment was $84 million and $250 million for the quarter and three quarters ended September 30, 2022, respectively, and $85 million and $249 million for the quarter and three quarters ended October 1, 2021, respectively.

~~As discussed in more detail in~~ ~~Note I — Goodwill and Other Intangible Assets~~ in these Notes, in conjunction with, and in advance of, the tests of goodwill related to our Commercial Training Solutions (“CTS”) reporting unit, we recorded an $82 million non-cash impairment charge for long-lived assets, consisting of $19 million, $56 million and $7Includes approximately $132 million of ~~impairment charges for right~~TDL inventory of ~~use assets, property, plant and equipment and software, respectively,~~ which $111 million is included in ~~the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Operations (Unaudited) for the three quarters ended October 1, 2021.~~finished goods at March 31, 2023.

NOTE I—G: GOODWILL AND OTHER INTANGIBLE ASSETS

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
Reallocation 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
Impairment of goodwill (447) — (355) — (802)
Currency translation adjustments (48) (77) (2) — (127)
Balance at September 30, 2022 $ 7,692 $ 5,772 $ 3,796 $ — $ 17,260


(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 four business segments to three business segments, we reallocated goodwill previously held by our former 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.~~

~~New Organizational Structure~~

Effective January 1, 2022, we implemented a new organizational structure resulting in changes to our operating segments (which are also our reportable segments and are referred to as our business segments) and reporting units (which are our business segments or one level below our business segments). Implementing the new structure reduced our business segments, from four to three, and our reporting units from eleven to nine. As a result, we reassigned goodwill to our new reporting unit structure on a relative fair value basis, tested goodwill related to impacted reporting units immediately before and after the reassignment and determined that no impairment existed.

~~Precision Engagement Business Allocation and Impairment~~

During the quarter ended ~~September 30, 2022,~~March 31, 2023, we ~~realigned our precision engagement business from our Agile Development Group (“ADG”) reporting unit to our Electro Optical reporting unit. In connection with the realignment, we transferred $325~~assigned an additional $9 million of goodwill ~~associated with the precision engagement business~~ to our ~~Electro Optical reporting unit on a relative fair value basis. Immediately before and after the reassignment, we tested goodwill assigned to each reporting unit. As a result~~VIS business which is included in “Assets of ~~these tests, concurrently with the preparation of our financial statements~~business held for the quarter ended September 30, 2022, we concluded that goodwill related to our ADG reporting unit was impaired immediately before the reassignment and recorded a non-cash charge of $313 million for the impairment in the “Impairment of goodwill and other assets” line itemsale” in our Condensed Consolidated Statement of Operations (Unaudited). The impairment of goodwill was due to lower sales volume in our precision engagement business, reflecting U.S. Government spending priorities with respect to precision weapons, and higher interest rates. ADG and Electro Optical are both part of our Integrated Mission Systems segment.

~~Broadband, Electro Optical and ADG Interim Tests~~

Indications of potential impairment of goodwill related to our Broadband, Electro Optical and ADG reporting units were present as of September 30, 2022. Consequently, in connection with the preparation of our financial statements for the quarter ended September 30, 2022, we performed interim tests of each of these reporting unit’s goodwill for impairment. We determined that goodwill related to our Broadband and Electro Optical reporting units was impaired and goodwill related to our ADG reporting unit was not impaired as of September 30, 2022.

~~Broadband and Electro Optical goodwill impairments:~~ As a result of the interim tests of goodwill related to our Broadband and Electro Optical reporting units, we recorded $489 million of non-cash charges for the impairment of goodwill ($355 million related to Broadband and $134 million related to Electro Optical) in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Operations (Unaudited). Broadband is part of our Communications Systems segment (as noted above Electro Optical is part of our Integrated Mission Systems segment). The impairment of goodwill related to our Electro Optical reporting unit was due to persistently lower demand in the precision engagement business and an associated decrease in our outlook for the business, as well as rising interest rates. The impairment of goodwill related to our Broadband reporting unit was due to lower volume on legacy platforms, which also resulted in a decrease in our outlook for the reporting unit, and higher interest rates.Balance Sheet at March 31, 2023.

~~CPS Business Impairment~~

During the quarter ended April 2, 2021, we determined the criteria to be classified as held for sale were met with respect to the CPS business within our other non-reportable business segment and assigned $174 million of goodwill to the disposal group on a relative fair value basis. In connection with the preparation of our financial statements for the quarter ended April 2, 2021, we concluded that goodwill related to the CPS business was impaired and we recorded a non-cash impairment charge of $62

1011

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~million, which is included~~Reallocation of Goodwill in ~~the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Operations (Unaudited).~~

~~CTS Impairment~~Business Realignment.

~~During the quarter ended July 2, 2021,~~Effective December 31, 2022, we adjusted our ~~Aviation Systems segment~~ reporting to better align our businesses and ~~separated the CTS~~transferred our ADG business (a reporting unit) from our ~~Commercial Aviation Solutions~~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 ~~creating a new~~and all $327 million of associated goodwill was absorbed by our existing SAS reporting unit ~~within~~given the ~~Commercial Aviation Solutions sector~~economic similarities of ~~our Aviation Systems segment.~~the two reporting units. Immediately before ~~and after~~the realignment, we performed a qualitative impairment assessment over our ~~goodwill assignments, we completed an assessment of any potential goodwill impairment under our former and new~~SAS reporting unit, ~~structure~~ and ~~determined that no~~a quantitative impairment ~~existed.~~

~~To test for potential~~assessment over our ADG reporting unit. Immediately after the realignment, we performed a quantitative impairment ofassessment over the long-lived assets, including identifiable intangible assets and property, plant and equipment, related to CTS, we compared the estimated future cash flows (on an undiscounted basis) to be generated from the use and hypothetical eventual disposition of the asset group to its carrying value and, as a result, we determined the carrying value of the CTS asset group was not recoverable. Next, weSAS reporting unit. We prepared ~~an estimate~~estimates of the fair value of ~~CTS~~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, ~~and~~ comparable publicly reported transactions, and an income-based valuation technique using projected discounted cash flows. ~~We compared~~These assessments indicated no impairment existed either before or after the ~~fair value~~realignment.

Goodwill from TDL Acquisition. In connection with the January 3, 2023 acquisition of ~~CTS to~~TDL, we recorded $1.014 billion of goodwill in our ~~carrying value~~Broadband reporting unit within our CS segment. See Note B: Acquisitions and ~~recorded a $145 million non-cash charge~~Divestitures in these Notes for ~~the impairment of CTS long-lived assets, including $63 million for impairment of identifiable~~further information.

Intangible Assets

Identifiable intangible assets, ~~which is included in~~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 ~~“Impairment~~pending VIS business divestiture to “Assets of ~~goodwill and other assets” line item~~business held for sale” in our Condensed Consolidated ~~Statement~~Balance Sheet.

(2)Includes $492 million of ~~Operations (Unaudited) for~~customer relationship intangible assets acquired from the ~~three quarters~~TDL acquisition and $11 million of accumulated amortization recognized during the quarter ended ~~October 1, 2021.~~March 31, 2023. See Note ~~H — Property, Plant~~B: Acquisitions and ~~Equipment, net~~Divestitures in these Notes for additional information.

~~Fair Value Determinations~~(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.

~~Fair value determinations~~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 ~~determined~~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 ~~a combination~~ratings of ~~market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions, and projected discounted cash flows.~~

~~NOTE J— ACCRUED WARRANTIES~~

~~Our liability for standard product warranties is included as a component~~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 ~~“Other accrued items”~~impact of our interest rate cap derivative). See Note 19: Derivative Instruments and ~~“Other~~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 ~~liabilities” line items~~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 ~~(Unaudited). Changes in our liability for standard product warranties~~as of December 30, 2022.

There were no repayments of long-term debt during the ~~three quarters~~quarter ended ~~September 30, 2022 were as follows:~~

~~(In millions)~~

~~Balance at December 31, 2021~~

~~117~~

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

~~Settlements made during the period~~

~~(45)~~

~~Other, including foreign currency translation adjustments~~

~~(8)~~

~~Balance at September 30, 2022~~

April 1, 2022.

~~NOTE K— CREDIT AGREEMENTS~~2023 Credit Agreement

On ~~July 29, 2022,~~March 10, 2023, we established a ~~new $2~~$2.4 billion, ~~5-year~~364-day senior unsecured revolving credit facility ~~maturing in July 2027 (the “2022~~("2023 Credit ~~Facility”~~Facility") ~~pursuant to~~by entering into a ~~Revolving~~364-Day Credit Agreement ~~(the “2022~~(“2023 Credit Agreement”) with a syndicate of lenders. The 2022 Credit Facility replaces our prior $2 billion, 5-year senior unsecured revolving credit facility established in June 2019 (the “2019 Credit Facility”) and provides for revolving loans, swingline loans and letters of credit, with a sub-limit of $200 million for swingline loans and a sub-limit of $350 million for letters of credit, with the option to request an increase

Proceeds of the ~~maximum amount~~initial funding of ~~commitments up~~loans under the 2023 Credit Agreement are required to ~~$3 billion.~~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, ~~under the 2022 Credit Agreement~~ will bear interest ~~either based on~~at the ~~secured overnight funding~~sum of the term SOFR rate or the Base Rate (as defined in the ~~2022~~2023 Credit Agreement), plus an applicable margin.

~~We are also~~ 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 ~~and letter of credit fees~~that varies based on our Senior Debt Ratings.

WeThe 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 in compliance with all covenants under ~~the~~ 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.

2022 Credit Agreement ~~at September 30,~~

On July 29, 2022, ~~including the covenant requiring that~~ we ~~not permit our ratio of consolidated total indebtedness to total capital, each as defined in the~~ established a $2 billion, five-year senior unsecured revolving credit facility (“2022 Credit ~~Agreement, to be greater than 0.65 to 1.00. At September 30, 2022, we had no borrowings outstanding under the 2022 Credit Agreement.~~

~~The covenants~~Facility”) under the 2022 Credit Agreement, ~~are substantially similar to the~~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 ~~2019~~2022 Credit ~~Facility. See~~Agreement and related covenants, see Note 12: Credit Arrangementsin our Fiscal ~~2021~~2022 Form ~~10-K for~~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.~~information regarding our CP Program, see our Current Report on Form 8-K filed on March 16, 2023.

1114

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE L—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 September 30, 2022 Three Quarters Ended September 30, 2022
(In millions) Pension Other Benefits Pension Other Benefits
Net periodic benefit income
Operating
Service cost $ 10 $ 1 $ 32 $ 2
Non-operating
Interest cost 55 1 165 5
Expected return on plan assets (156) (5) (468) (16)
Amortization of net actuarial loss (gain) 2 (1) 7 (5)
Amortization of prior service (credit) cost (7) — (21) 1
Non-service cost periodic benefit income (106) (5) (317) (15)
Net periodic benefit income $ (96) $ (4) $ (285) $ (13)
Quarter Ended October 1, 2021 Three Quarters Ended October 1, 2021
(In millions) Pension Other Benefits Pension Other Benefits
Net periodic benefit income
Operating
Service cost $ 16 $ 1 $ 52 $ 2
Non-operating
Interest cost 47 1 139 4
Expected return on plan assets (155) (5) (467) (15)
Amortization of net actuarial loss 7 — 26 —
Amortization of prior service credit (cost) (7) 1 (21) 1
Effect of curtailments or settlements 7 — 4 —
Non-service cost periodic benefit income (101) (3) (319) (10)
Net periodic benefit income $ (85) $ (2) $ (267) $ (8)

During the quarter and three quarters ended October 1, 2021, we undertook an initiative to de-risk pension obligations by purchasing a group annuity policy and transferring approximately $81 million and $250 million, respectively, of pension plan assets to an insurance company thereby reducing our defined benefit obligations by approximately $81 million and $250 million, respectively. As a result of the annuity purchase, we recognized pre-tax Financial Accounting Standard settlement losses of $7 million and $4 million in the quarter and three quarters ended October 1, 2021, respectively, which are included as a component of the “Non-operating income, net” line item in our Condensed Consolidated Statement of Operations (Unaudited).


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

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


Non-service cost periodic benefit income	(70)		(7)		(105)		(5)
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 ~~Operations (Unaudited).~~Operations. The non-service cost components of net periodic benefit income are included in the “Non-operating income, net” line item in our Condensed Consolidated Statement of ~~Operations (Unaudited).~~

We made no material contributions to our U.S. qualified defined benefit pension plans during the quarter or three quarters ended September 30, 2022 or October 1, 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 M—J: EARNINGS PER SHARE

~~(Loss) income from continuing operations~~Income 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. ~~(Loss) income from continuing operations~~Income per diluted common share attributable to L3Harris common shareholders (“("diluted ~~EPS”~~EPS") is

~~computed using the more~~incorporates potential dilutive common shares, primarily consisting of ~~the two-class method or the treasury~~employee stock ~~method. Under the treasury stock method, diluted EPS is computed by dividing net (loss) income attributable to L3Harris common shareholders by~~options and restricted and performance share unit awards, into 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.outstanding.

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


		Quarter Ended		Three Quarters Ended			Quarter Ended
(In millions)	(In millions)	September 30, 2022	October 1, 2021	September 30, 2022	October 1, 2021	(In millions)	March 31, 2023	April 1, 2022

Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	191.3	199.5	192.2	203.3	Basic weighted average common shares outstanding	190.2	193.2
Impact of dilutive share-based awards	Impact of dilutive share-based awards	—	2.1	1.8	1.9	Impact of dilutive share-based awards	1.0	1.9
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	191.3	201.6	194.0	205.2	Diluted weighted average common shares outstanding	191.2	195.1

~~Potential dilutive common shares primarily consist of employee stock options and restricted and performance unit awards.~~ Diluted EPS excludes the antidilutive impact of ~~1.9~~1.2 million and ~~0.3~~0.2 million weighted average share-based awards outstanding for the ~~quarter and three~~ quarters ended ~~September 30,~~March 31, 2023 and April 1, 2022, ~~respectively, and 1.1 million weighted average share-based awards outstanding for the three quarters ended October 1, 2021. The anti-dilutive impact of weighted average share-based awards outstanding~~respectively.

NOTE K: INCOME TAXES

Our effective tax rate was 9.1% for the quarter ended ~~October 1, 2021 was immaterial.~~

~~NOTE N— INCOME TAXES~~

~~Our effective tax rate (income taxes as a percentage of (loss) income from continuing operations before income taxes) was 6.2% on the loss from continuing operations~~March 31, 2023 compared with 11.3% for the quarter ended ~~September 30, 2022 compared with 18.3% on the income from continuing operationsfor the quarter ended October~~April 1, ~~2021.~~2022. For the quarter ended ~~September 30, 2022,~~March 31, 2023, our effective tax rate benefited from the favorable impacts of ~~Research~~research and ~~Development~~development (“R&D”) credits, ~~incremental~~ foreign-derived intangible income (“FDII”) deductions and the ~~release~~resolution of ~~a valuation allowance in a foreign jurisdiction resulting from an internal restructuring, partially offset by the unfavorable impact of non-deductible goodwill impairments.~~specific audit uncertainties. For the quarter ended ~~October~~April 1, ~~2021,~~2022, our effective tax rate ~~was unfavorably impacted by non-deductible goodwill~~benefited from ~~completed business divestitures and the unfavorable impact of valuation allowances in certain foreign jurisdictions, partially offset by~~ the favorable impact of R&D credits, ~~favorable adjustments upon finalization of our Federal tax return,~~ the ~~favorable impact of excess tax benefits related to equity-based compensation and the favorable resolution of specific audit uncertainties.~~

Our effective tax rate was 13.0% for the three quarters ended September 30, 2022 compared with 19.8% for the three quarters ended October 1, 2021. Our effective tax rate for the three quarters ended September 30, 2022 was favorably impacted by a reduction in ~~the~~ deferred tax liabilities on the outside basis of certain foreign subsidiaries due to an internal restructuring, incremental FDII benefit resulting from the ~~favorable impact~~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 and the items described above for the quarter ended September 30, 2022. Our effective tax rate for the three quarters ended October 1, 2021 were impacted by the items described above for the quarter ended October 1, 2021.compensation.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE O—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 ~~September 30, 2022~~March 31, 2023 and December ~~31, 2021:~~30, 2022:


		September 30, 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	$	59	$	59		$	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	32					35						Corporate-owned life insurance	34				33

Total fair value of deferred compensation plan assets	Total fair value of deferred compensation plan assets	$	91				$	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	164					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	$	171				$	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:


		September 30, 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)		$	7,030	$	6,494	$	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 ~~I —~~G: Goodwill and Other Intangible Assetsand Note B: Acquisitions and Divestitures in these Notes and Note 3:4: Business Divestitures and Asset Sales in ~~the Notes to Consolidated Financial Statements in~~ our Fiscal ~~2021~~2022 Form 10-K for additional information regarding fair value measurements associated with goodwill.

NOTE ~~P— 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 (loss) income. 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 September 30, 2022, we had open foreign currency forward contracts with an aggregate notional amount of $347 million, hedging certain forecasted transactions denominated in Canadian Dollars, U.S. Dollars, British Pounds, Euros 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 September 30, 2022, our foreign currency forward contracts had maturities through 2025.~~

Net unrealized losses recognized in other comprehensive loss were $20 million and $30 million for the quarter and three quarters ended September 30, 2022, respectively, and $10 million for the quarter ended October 1, 2021. Net unrealized gains and losses recognized in other comprehensive income were not material for the three quarters ended October 1, 2021.

~~At September 30, 2022, the estimated amount of existing net losses to be reclassified into earnings within the next twelve months was $22 million.~~

Gains and losses from foreign currency derivatives designated as cash flow hedges are included in the line item in our Condensed Consolidated Statement of Operations (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 Operations (Unaudited).

~~NOTE Q—~~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. If~~quarterly and, in many cases, more frequently. As 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				Three Quarters Ended					Quarter Ended
(In millions, except per share amounts)	(In millions, except per share amounts)	September 30, 2022		October 1, 2021		September 30, 2022		October 1, 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)	$	—	$	85	$	58	$	247	Net EAC adjustments, before income taxes(1)	$	(56)	$	46
Net EAC adjustments, net of income taxes	Net EAC adjustments, net of income taxes	—		64		44		186		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	—		0.32		0.23		0.91		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 ~~$23~~$36 million and ~~$113~~$58 million for the ~~quarter and three~~ quarters ended ~~September 30,~~March 31, 2023 and April 1, 2022, ~~respectively, and $102 million and $317 million for the quarter and three quarters ended October 1, 2021,~~ respectively.

NOTE R—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 ~~September 30, 2022,~~March 31, 2023, our ending backlog was ~~$21.4~~$24.5 billion. We expect to recognize approximately ~~59%~~45% of the revenue associated with this backlog by the end of 2023 and approximately ~~79%~~70% by the end of 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 S—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 three 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, 2022, we have 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. 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. Fuzing and ordnance systems, 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.

~~During the quarter ended September 30,~~December 31, 2022, we adjusted our reporting ~~within our Integrated Mission Systems segment~~ to better align our businesses and transferred our ~~precision engagement~~ADG business ~~which includes fuzing and ordnance systems,~~ from our ~~ADG reporting unit~~IMS segment to our ~~Electro Optical reporting unit.~~SAS 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 ~~B — Business~~B: Acquisitions and Divestitures ~~and Asset Sales~~ in these Notes for additional information ~~relating to businesses divested and asset sales during the quarter and three quarters ended September 30, 2022 and October 1, 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~~Information

Segment revenue, segment operating income ~~or loss, which we define as profit or loss from operations~~and a reconciliation of segment operating income to total income before income taxes ~~including CAS pension cost and excluding interest income and expense, royalties and related intellectual property~~are as follows:


	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)Includes certain corporate-level expenses ~~equity method investment income or loss and gains or losses from securities and other investments. Intersegment sales~~that are ~~generally transferred at cost to~~not included in management’s evaluation of segment operating performance.

(2)Includes amortization of identifiable intangible assets acquired in connection with business combinations. Because our acquisitions benefited the ~~buying segment, and~~entire Company, the ~~sourcing segment recognizes a profit that is eliminated. The “Corporate eliminations” line item in the table below represents the elimination~~amortization 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 expensesidentifiable intangible assets acquired was not allocated to ~~our business segments~~any segment.

(3)Represents the difference between the service cost component of Financial Accounting Standards ("FAS") pension and ~~elimination~~other postretirement benefits (“OPEB”) cost and total 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 ~~intersegment profits.~~FAS pension and OPEB income. See Net FAS/CAS operating adjustment table below.

FAS/CAS Pension Operating Adjustment

In accordance with CAS, we allocate a portion of pension and ~~other postretirement benefit~~OPEB plan costs to our U.S. Government contracts. However, our ~~consolidated financial statements~~Condensed Consolidated Financial Statements require pension and ~~other postretirement benefit~~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 ~~expense~~cost and total CAS pension and OPEB cost. The ~~net~~ non-service cost components of FAS pension and OPEB income or expense are included as ~~an income~~ component inof the “Non-operating income, net” line item in our Condensed Consolidated Statement of ~~Operations (Unaudited).~~Operations. See Note ~~L —~~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.

~~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 Three Quarters Ended
(In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
Revenue
Integrated Mission Systems $ 1,710 $ 1,649 $ 5,104 $ 5,192
Space & Airborne Systems 1,502 1,494 4,450 4,464
Communication Systems 1,068 1,030 3,024 3,269
Other non-reportable businesses — 95 — 661
Corporate eliminations (34) (39) (94) (122)
Total revenue $ 4,246 $ 4,229 12,484 $ 13,464
(Loss) Income from Continuing Operations before Income Taxes
Segment Operating (Loss) Income:
Integrated Mission Systems $ (225) $ 232 $ 247 $ 608
Space & Airborne Systems 172 187 539 583
Communication Systems (97) 258 370 804
Other non-reportable businesses — 7 — 100
(150) 684 1,156 2,095
Unallocated Items:
Unallocated corporate department income (expense), net(1)
20 (1) 34 (55)
L3Harris Merger-related transaction, integration and other expenses and losses (21) (35) (72) (79)
Amortization of acquisition-related intangibles(2)
(151) (155) (454) (475)
Business divestiture-related gains, net — 27 — 192
Charges for severance and other termination costs (29) — (29) —
Charge related to an additional pre-merger legal contingency (31) — (31) —
Impairment of goodwill and other assets — — — (125)
Gain on sale of asset group — — 8 —
Acquisition and other divestiture-related expenses (10) (8) (45) (64)
FAS/CAS operating adjustment(3)
22 30 65 90
(200) (142) (524) (516)
Non-operating income, net 99 111 313 314
Net interest expense (70) (67) (205) (198)
(Loss) income from continuing operations before income taxes $ (321) $ 586 $ 740 $ 1,695

~~_______________~~

~~(1)~~For the quarter ended September 30, 2022, $11 million of income from greenhouse gas (“GHG”) emission reduction projects and $10 million of income from our deferred compensation plans. For the three quarters ended September 30, 2022, $20 million of income from our deferred compensation plans and $11 million of income from GHG emission reduction projects. For the three quarters ended October 1, 2021, includes a $15 million accrual for a value added tax obligation and $9 million of loss related to our deferred compensation plans.

~~(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”). Because the L3Harris Merger and the acquisition of Exelis 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 pension and OPEB income 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 Net FAS/CAS operating adjustment table below.

The table below is a reconciliation of the FAS/CAS operating adjustment:
Quarter Ended Three Quarters Ended
(In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
FAS pension service cost $ (11) $ (17) $ (34) $ (54)
Less: CAS pension cost (33) (47) (99) (144)
FAS/CAS operating adjustment 22 30 65 90
Non-service FAS pension income 111 104 332 329
FAS/CAS pension adjustment, net(1)
$ 133 $ 134 $ 397 $ 419
~~_______________~~

~~(1)FAS/CAS pension adjustment, net 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 three 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
(In millions) September 30, 2022 October 1, 2021
Integrated Mission Systems Space & Airborne Systems Communication Systems Integrated Mission Systems Space & Airborne Systems Communication Systems
Revenue By Customer Relationship
Prime contractor $ 1,138 $ 963 $ 690 $ 1,080 $ 939 $ 681
Subcontractor 558 533 364 555 551 334
Intersegment 14 6 14 14 4 15
$ 1,710 $ 1,502 $ 1,068 $ 1,649 $ 1,494 $ 1,030
Revenue By Contract Type
Fixed-price(1)
$ 1,270 $ 914 $ 899 $ 1,224 $ 907 $ 871
Cost-reimbursable 426 582 155 411 583 144
Intersegment 14 6 14 14 4 15
$ 1,710 $ 1,502 $ 1,068 $ 1,649 $ 1,494 $ 1,030
Revenue By Geographical Region
United States $ 1,295 $ 1,332 $ 706 $ 1,276 $ 1,326 $ 719
International 401 164 348 359 164 296
Intersegment 14 6 14 14 4 15
$ 1,710 $ 1,502 $ 1,068 $ 1,649 $ 1,494 $ 1,030


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

Revenue By Customer Relationship
Prime contractor	$	1,154	$	1,010	$	807	$	1,086	$	977	$	656
Subcontractor	525		632		343		557		530		296
Intersegment	21		13		13		16		10		11
Total revenue	$	1,700	$	1,655	$	1,163	$	1,659	$	1,517	$	963

Revenue By Contract Type
Fixed-price(1)	$	1,286	$	1,022	$	978	$	1,261	$	880	$	797
Cost-reimbursable	393		620		172		382		627		155
Intersegment	21		13		13		16		10		11
Total revenue	$	1,700	$	1,655	$	1,163	$	1,659	$	1,517	$	963

Revenue By Geographical Region
United States	$	1,257	$	1,454	$	791	$	1,182	$	1,342	$	625
International	422		188		359		461		165		327
Intersegment	21		13		13		16		10		11
Total revenue	$	1,700	$	1,655	$	1,163	$	1,659	$	1,517	$	963

Three Quarters Ended
(In millions) September 30, 2022 October 1, 2021
Integrated Mission Systems Space & Airborne Systems Communication Systems Integrated Mission Systems Space & Airborne Systems Communication Systems
Revenue By Customer Relationship
Prime contractor $ 3,351 $ 2,835 $ 2,037 $ 3,454 $ 2,736 $ 2,193
Subcontractor 1,709 1,597 954 1,699 1,720 1,036
Intersegment 44 18 33 39 8 40
$ 5,104 $ 4,450 $ 3,024 $ 5,192 $ 4,464 $ 3,269
Revenue By Contract Type
Fixed-price(1)
$ 3,777 $ 2,675 $ 2,530 $ 3,868 $ 2,762 $ 2,765
Cost-reimbursable 1,283 1,757 461 1,285 1,694 464
Intersegment 44 18 33 39 8 40
$ 5,104 $ 4,450 $ 3,024 $ 5,192 $ 4,464 $ 3,269
Revenue By Geographical Region
United States $ 3,763 $ 3,922 $ 1,962 $ 3,833 $ 3,916 $ 2,337
International 1,297 510 1,029 1,320 540 892
Intersegment 44 18 33 39 8 40
$ 5,104 $ 4,450 $ 3,024 $ 5,192 $ 4,464 $ 3,269

~~__________~~_______________

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

Assets by Business Segment

Total assets by business segment are as follows:

(In millions) September 30, 2022 December 31, 2021
Total Assets
Integrated Mission Systems $ 11,357 $ 11,830
Space & Airborne Systems 8,349 8,151
Communication Systems 5,844 6,035
Other non-reportable businesses — 3
Corporate(1)
7,831 8,690
$ 33,381 $ 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 ~~$6.1~~$6.7 billion and ~~$6.6~~$6.0 billion at ~~September~~March 31, 2023 and December 30, 2022, ~~and December 31, 2021,~~ respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred compensation plan investments, buildings and equipment, as well as any assets of ~~discontinued operations and divestitures.~~business held for sale.

NOTE T—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; or compliance with government procurement or related legal or regulatory requirements.~~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 (for example, we recorded an additional $31 million charge related to a pre-merger legal contingency during the quarter ended September 30, 2022).~~estimated. Gain contingencies, if any, are recognized when they are realized and legal costs generally are expensed when incurred. At ~~September 30, 2022,~~March 31, 2023, our accrual for the potential resolution of lawsuits, claims, ~~investigations~~ 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 ~~investigations~~ 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 ~~or resulting from claims or investigations~~ in existence at ~~September 30, 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��~~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 ~~September 30, 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 U—Q: SUBSEQUENT EVENTS

~~Pending Acquisition~~On April 6, 2023, we completed the sale of ~~TDL product line~~

~~On October 3, 2022, we entered into a definitive agreement to acquire Viasat, Inc.’s tactical data links (“TDL”) product line~~our VIS business for ~~a purchase price of approximately $1.96 billion,~~$70 million, subject to customary adjustments.

The acquisition, which we plan to fund with debt financing, is expected to close in the first half of 2023, subject to required regulatory approvals and clearances and other customary closing conditions, although we can give no assurances regarding the timing or occurrence of closing.

~~Share Repurchase Authorization~~

~~On October 21, 2022, we announced that our Board of Directors approved an additional $3.0 billion share repurchase authorization, bringing the total authorization to $4.5 billion.~~

1719

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 ~~September 30, 2022,~~March 31, 2023, the related condensed consolidated statements of operations, comprehensive income, cash flows and equity for the ~~quarter and three~~ quarters ended ~~September 30,~~March 31, 2023 and April 1, 2022, ~~and October 1, 2021, the condensed consolidated statements of cash flows for the three quarters ended September 30, 2022 and October 1, 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 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 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

~~October 31, 2022~~

April 28, 2023

1820


ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

We are an agile global aerospace and defense technology innovator, delivering end-to-end solutions that meet customers’ mission-critical needs. We provide advanced defense and commercial technologies across 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, systems and services have defense and civil government applications, as well as commercial applications.

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.”

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

~~For~~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 ~~government~~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, ~~(“PBR”) proposed $773 billion of DoD funding, a 4% increase above the amount enacted for the 2022~~including responsive satellites, ISR aircraft, tactical communications and maritime solutions.

The President’s 2024 GFY budget request and the Senate Appropriations Subcommittee on Defense has supported a $37 billion plus-up to the PBR, representing a 9% increase year over year, with a currently expected range of DoD budget proposals from $773 billion to $819 billion. Additionally, at the end of the 2022 GFY, Congress passed a Continuing Resolution (“CR”) through December 16, 2022; however based on recent trends, there is uncertainty about whether Congress will pass a budget or the government will continue to operate under the CR. When the government operates under a CR, all programs of record are funded at the prior year’s appropriated levels, and the DoD is prohibited from starting new programs. As part of the CR, an additional Ukraine aid package was enacted for $12 billion, bringing supplemental funding for the country to over $65 billion, a portion of which we believe to be addressable by our capabilities. Notwithstanding the increased supplemental funding, a CR represents a risk that we are monitoring and could impact the availability of funding for new contracts from the U.S. Government. See also the discussion of U.S. Government funding risks within “Item 1A, Risk Factors” includedoverall defense spending environment in ~~our Fiscal 2021 Form 10-K.~~

In international markets, the North Atlantic Treaty Organization (“NATO”) continues to evolve its strategy on multiple levels. Several countries, including Finland and Sweden, are pursuing NATO membership, while existing NATO members such as the U.K. and France have in recent months committed to increased spending beyond the 2% of gross domestic product target. Recently, additional countries, such as Japan, have followed similar paths with expanded defense budgets. The expectation of increased spending in international markets provides us with the opportunity to offer a range of solutions to international customers, but international sales remain dependent on economic, social and political conditions that may differ from those in the United States as well as changes in export controls and other trade regulations in the United States. See also the discussion of our international business risks within “Item 1A, Risk Factors” included in our Fiscal 2021 Form 10-K.

~~Even with the increases in expected DoD budget proposals and with the overall demand environment~~ both in the U.S. and internationally ~~reflecting~~reflects the ~~conflict~~continued impacts of the conflicts in Ukraine, and geopolitical tensions ~~changes~~across Asia and the Middle East. Changes to U.S. Government or international spending priorities have and could in the future impact our business. ~~A decline in demand for fuzing~~

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 ~~ordnance systems due to reduced U.S. Government spending for precision weapons was largely responsible for charges for impairment~~the Federal budget and debt ceiling could be the subject of ~~goodwill in our IMS segment. See~~ ~~Note I — Goodwill and Other Intangible Assets~~ ~~in the Notes for further information. Other~~considerable Congressional debate. Future changes in spending priorities inarising from any Congressional action on the ~~future~~Federal budget and debt ceiling or otherwise could adversely affect our existing programs and future contracts and impact our financial condition and results of operations.

See our U.S. Government funding risks and the discussion of our international business risks within Part I: Item 1A. Risk Factors in our Fiscal 2022 Form 10-K.

Economic Environment

The macroeconomic environment continues to present challenges, which have impacted and may continue to impact our future results. Rising inflation in the U.S. has led to higher input costs. The ~~on-going~~ongoing uncertainty related to the impacts of inflation, as well as increased interest rates, ~~which raises~~raise the cost of borrowing for the ~~federal government, could in~~Federal government.

To the ~~future impact government spending priorities~~extent feasible, we continue to proactively deploy operational improvement strategies and the demand for our products. Higher interest rates have also had an impact on the fair value of our reporting units and contributed to charges for impairment of goodwill at our IMS and CS segments. See ~~Note I — Goodwill and Other Intangible Assets~~ ~~in the Notes for further information.~~

~~While we~~ have consistently followed the practice of adjusting our prices to reflect the impact of inflation on salaries and fringe benefits for employees and the cost of purchased materials and ~~services,~~services; our fixed-price contracts could subject us to losses in the event of cost overruns or a significant increase in or a sustained period of increased inflation. Management has worked to mitigate supply chain and labor market challenges, with modest improvements in the supply chain sequentially for Tactical Communications, the company’s largest product-based business, and a stable headcount within our company. However due to uncertainty in the current environment, there can be no assurances that we will not see further impacts in our financial condition and results of operations.

KEY DEVELOPMENTS

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. Business Realignment. Effective for fiscal ~~2022, which began January~~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, ~~we reported our financial results in the following three reportable segments:~~

•Integrated Mission Systems, including multi-mission ISR systems; integrated electrical and electronic systems for maritime platforms; advanced EO/IR solutions; fuzing and ordnance systems; commercial aviation products; 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 business divestitures and asset sales were completed in the three quarters ended September 30, 2022 and October 1, 2021:~~

•On April 29, 2022, we completed one business divestiture, the results of which are reported as part of our Integrated Mission Systems segment through the date of divestiture, and on May 31, 2022, and we completed the sale of certain assetsrespectively) from our ~~Integrated Mission Systems segment;~~

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

•CPS business, definitive agreement entered into on March 1, 2021, 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, 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

•VSE disposal group, definitive agreement entered into on February 23, 2021, classified as held for sale during the quarter ended July 3, 2020 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.

IMS segment to our SAS segment. See Note ~~B — 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 acquire AJRD, we and AJRD each received a request for additional information ~~regarding asset sales~~ and ~~businesses divested~~documentary material (the "Second Request") from the Federal Trade Commission (the “FTC”), which extends the waiting period for ~~sale during~~review under the ~~quarter~~Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, until 30 days after we and ~~three quarters ended September 30, 2022~~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 ~~October 1, 2021.~~expect the transaction to close in fiscal 2023.

RESULTS OF OPERATIONS

Consolidated Results of Operations
Quarter Ended Three Quarters Ended
(Dollars in millions, except per share amounts) September 30, 2022 October 1, 2021 % Inc/(Dec) September 30, 2022 October 1, 2021 % Inc/(Dec)

Revenue
Integrated Mission Systems $ 1,710 $ 1,649 4 % $ 5,104 $ 5,192 (2) %
Space & Airborne Systems 1,502 1,494 1 % 4,450 4,464 — %
Communication Systems 1,068 1,030 4 % 3,024 3,269 (7) %
Other non-reportable businesses — 95 * — 661 *
Corporate eliminations (34) (39) (13) % (94) (122) (23) %
Total revenue 4,246 4,229 — % 12,484 13,464 (7) %
Total cost of product sales and services (3,052) (2,921) 4 % (8,819) (9,385) (6) %
% of total revenue 72 % 69 % 71 % 70 %
Gross margin 1,194 1,308 (9) % 3,665 4,079 (10) %
% of total revenue 28 % 31 % 29 % 30 %
Engineering, selling and administrative expenses (742) (793) (6) % (2,231) (2,485) (10) %
% of total revenue 17 % 19 % 18 % 18 %
Business divestiture-related gains, net — 27 * — 192 *
Impairment of goodwill and other assets (802) — * (802) (207) *
Non-operating income, net 99 111 (11) % 313 314 — %
Net interest expense (70) (67) 4 % (205) (198) 4 %
(Loss) income from continuing operations before income taxes (321) 586 * 740 1,695 (56) %
Income taxes 20 (107) * (96) (336) (71) %
Effective tax rate 6.2 % 18.3 % 13.0 % 19.8 %
(Loss) income from continuing operations (301) 479 * 644 1,359 (53) %
Noncontrolling interests, net of income taxes 1 2 * 2 4 *
(Loss) income from continuing operations attributable to L3Harris common shareholders $ (300) $ 481 * $ 646 $ 1,363 (53) %
% of total revenue (7) % 11 % 5 % 10 %
Diluted EPS $ (1.56) $ 2.39 * $ 3.33 $ 6.64 (50) %

~~_________________~~


	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

~~One Quarter Comparison:~~ Revenue ~~remained flat~~increased 9% in the quarter ended ~~September 30, 2022~~March 31, 2023 compared to the quarter ended ~~October~~April 1, ~~2021, as~~2022 from higher revenue across ~~our~~all segments ~~was offset by $95~~as CS, SAS and IMS revenues increased $200 million, ~~of lower revenue from the impact of completed business divestitures in the quarter ended October 1, 2021.~~ $138 million, and $41 million, respectively.

Gross margin and gross margin as a percentage of revenue ~~(“gross margin percentage”)~~ decreased in the quarter ended ~~September 30, 2022~~March 31, 2023 compared to the quarter ended ~~October~~April 1, ~~2021,~~2022, largely due to a net change in EAC adjustments and higher ~~input cost (labor, material and overhead) and supply chain disruptions that adversely impacted program performance and mix.~~

~~Three Quarters Comparison:~~ ~~Revenue decreased 7%~~mix of lower-margin revenue, partially offset in the ~~three quarters ended September 30, 2022 compared to the three quarters ended October 1, 2021, from the impact of $633 million of lower revenue from completed business divestitures~~increases in the three quarters ended October 1, 2021 and supply chain disruptions. Gross margin and gross margin percentage decreased in the three quarters ended September 30, 2022 compared to the three quarters ended October 1, 2021 primarily due to the reasonsvolume noted ~~above in the one quarter comparison.~~above.

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

Engineering, Selling and Administrative Expenses

~~One Quarter Comparison:~~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~~postretirement benefit plans. See Note I: Pension and Other Postretirement Benefit Plans in the 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, ~~as a percentage of revenue (“ESA percentage”) decreased~~net increased in the quarter ended ~~September 30, 2022~~March 31, 2023 compared with the quarter ended ~~October~~April 1, ~~2021, primarily from $44~~2022 due to of $35 million of lower expenses related to compensation, $19 million of lower R&D expenses and $15 million of lower costs from the impact of completed business divestitures, partially offset by a $31 million charge related to an additional pre-merger legal contingency and a $29 million chargeincremental interest expense in the quarter ~~for severance and other benefit payments related~~ended March 31, 2023, primarily due to ~~employees that accepted a voluntary retirement plan with an effective retirement date of September 30, 2022.~~

~~Three Quarters Comparison:~~ ~~ESA expenses decreased in~~ the ~~three quarters ended September 30, 2022 compared with~~outstanding borrowings on the three quarters ended October 1, 2021, primarily from $94 million of lower expenses related to compensation, $80 million of lower costs from the impact of completed business divestitures, $62 million of lower R&D expenses and $15 million of lower divestiture-related expenses, partially offset by a $31 million charge related to an additional pre-merger legal contingency and a $29 million charge in the quarter for severance and other benefit payments related to employees that accepted a voluntary retirement plan with an effective retirement date of September 30, 2022. ESA percentage was flat in the three quarters ended September 30, 2022 compared with the three quarters ended October 1, 2021.

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

~~Business Divestiture-Related Gains~~

The “Business divestiture-related gains, net” line item in our Condensed Consolidated Statement of Operations (Unaudited) is comprised of the following pre-tax gains associated with businesses divested. There were no significant gains or losses during the quarter or three quarters ended September 30, 2022.
Quarter Ended Three Quarters Ended
(In millions) October 1, 2021 October 1, 2021
Electron Devices business $ 29 $ 29
VSE disposal group (4) (30)
CPS business(1)
— (19)
Military training business 2 214
Other — (2)
Total business divestiture-related gains, net $ 27 $ 192
~~_______________~~

~~(1)~~During the quarter ended April 2, 2021, upon classifying the CPS business as held for sale, we recorded a non-cash impairment charge of $62 million, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Operations (Unaudited) for the three quarters ended October 1, 2021. See ~~Note I — Goodwill and Other Intangible Assets~~ ~~in the Notes for additional information.~~variable rate Term Loan 2025.

See Note ~~B — Business Divestitures~~H: Debt and ~~Asset Sales~~ ~~in the Notes for further information.~~

~~Impairment of Goodwill and Other Assets~~

~~One Quarter Comparison:~~ Impairment of goodwill and other assets in the quarter ended September 30, 2022 reflected non-cash impairment charges for goodwill of $355 million, $313 million and $134 million associated with our Broadband, ADG and Electro Optical reporting units, respectively. No impairment charges were recorded in the quarter ended October 1, 2021.

~~Three Quarters Comparison:~~ Impairment of goodwill and other assets in the three quarters ended September 30, 2022 reflected non-cash impairment charges for goodwill of $355 million, $313 million and $134 million associated with our Broadband, ADG and Electro Optical reporting units, respectively. Impairment of goodwill and other assets in the three quarters ended October 1, 2021 reflected a $62 million non-cash impairment charge for goodwill associated with the divestiture of the CPS business and $145 million of non-cash impairment charges for identifiable intangible and other long-lived assets related to the CTS business.

~~See~~ ~~Note B — Business Divestitures and Asset Sales~~ ~~and~~ ~~Note I — Goodwill and Other Intangible Assets~~Credit Arrangements in the Notes for further information.

~~Non-Operating Income, Net~~

~~One Quarter Comparison:~~ Non-operating income, net decreased in the quarter ended September 30, 2022 compared with the quarter ended October 1, 2021, primarily from an $11 million increase in losses recorded for our equity investments in nonconsolidated affiliates.

~~Three Quarters Comparison:~~ Non-operating income, net remained flat in the three quarters ended September 30, 2022 compared with the three quarters ended October 1, 2021, as a $30 million increase in market value related to our rabbi trust assets and $12 million increase in losses recorded for our equity investments in unconsolidated affiliates were offset by a $35 million charge for impairment of our equity investment in a nonconsolidated affiliate and a $7 million FAS pension settlement charge during the quarter ended July 2, 2021.

~~Net Interest Expense~~

~~One Quarter Comparison and Three Quarters Comparison:~~ Net interest expense increased in the quarter and three quarters ended September 30, 2022 compared with the quarter and three quarters ended October 1, 2021 primarily due to lower interest income in the quarter and three quarters ended September 30, 2022.

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

Income Taxes

~~One Quarter Comparison:~~ Our effective tax rate ~~(income taxes as a percentage of (loss) income from continuing operations before income taxes)~~ was ~~6.2% on the loss from continuing operations~~9.1% for the quarter ended ~~September 30, 2022~~March 31, 2023 compared with ~~18.3% on the income from continuing operations~~11.3% for the quarter ended ~~October~~April 1, ~~2021.~~2022. For the quarter ended ~~September 30, 2022,~~March 31, 2023, our effective tax rate benefited from the favorable impacts of R&D credits, ~~incremental foreign-derived intangible income (“FDII”)~~FDII deductions and the ~~release~~resolution of ~~a valuation allowance in a foreign jurisdiction resulting from an internal restructuring, partially offset by the unfavorable impact of non-deductible goodwill impairments.~~specific audit uncertainties. For the quarter ended ~~October~~April 1, ~~2021,~~2022, our effective tax rate ~~was unfavorably impacted by non-deductible goodwill~~benefited from ~~completed business divestitures and the unfavorable impact of valuation allowances in certain foreign jurisdictions, partially offset by~~ the favorable ~~impacts~~impact of R&D credits, ~~favorable adjustments upon finalization of our Federal tax return,~~ the ~~favorable impact of excess tax benefits related to equity-based compensation and the favorable resolution of specific audit uncertainties.~~

~~Three Quarters Comparison:~~ Our effective tax rate was 13.0% for the three quarters ended September 30, 2022 compared with 19.8% for the three quarters ended October 1, 2021. Our effective tax rate for the three quarters ended September 30, 2022 was favorably impacted by a reduction in ~~the~~ deferred tax liabilities on the outside basis of certain foreign subsidiaries due to an internal restructuring, incremental FDII benefit resulting from the ~~favorable impact~~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 and the items described above~~compensation.

Net Income

The decrease in ~~the one quarter comparison of~~net income ~~taxes. Our effective tax rate for the three quarters ended October 1, 2021 was impacted by the items described above in the one quarter comparison of income taxes.~~

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”) which includes implementation of a new 15% corporate alternative minimum tax, a 1% excise tax on stock buybacks and tax incentives for energy and climate initiatives. These provisions are effective beginning January 1, 2023 and we expect them to be immaterial to our financial results, financial position and cash flows.

~~(Loss) Income From Continuing Operations~~

~~One Quarter Comparison:~~ ~~The loss from continuing operations~~ in the quarter ended ~~September 30, 2022~~March 31, 2023 compared with the ~~income from continuing operations for the~~ quarter ended ~~October~~April 1, ~~2021~~2022 was ~~primarily~~ due to a net loss from continuing operations in the quarter ended September 30, 2022 from the impact of non-cash impairment charges for goodwill recorded within our Broadband, ADG and Electro Optical reporting units, as noted in the impairment of goodwill and other assets section above.

~~Three Quarters Comparison:~~ Income from continuing operations decreased in the three quarters ended September 30, 2022 compared with the three quarters ended October 1, 2021 primarily due to the loss from continuing operations in the quarter ended September 30, 2022, as discussed in the one quarter comparison above, in addition to the combined effects of ~~the~~ reasons noted in the sections ~~above regarding the three quarters ended September 30, 2022 and three quarters ended October 1, 2021.~~above.

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

~~One Quarter Comparison:~~ ~~Diluted EPS~~Net income per diluted common share attributable to L3Harris Technologies, Inc. common shareholders in the quarter ended ~~September 30, 2022~~March 31, 2023 decreased compared with the quarter ended ~~October~~April 1, ~~2021 due to a net loss from continuing operations in the quarter ended September 30,~~ 2022 primarily from the impact of non-cash impairment charges for goodwill recorded within our Broadband, ADG and Electro Optical reporting units, as noted in the impairment of goodwill and other assets section above.

~~Three Quarters Comparison:~~ ~~Diluted EPS attributable to L3Harris common shareholders in the three quarters ended September 30, 2022 decreased compared with the three quarters ended October 1, 2021,~~ due to lower net income, ~~resulting from the combined effects of the reasons noted in the sections above in this MD&A,~~ partially offset by ~~lower~~fewer diluted weighted average of common shares outstanding, primarily reflecting the repurchases ~~of shares~~ of our common stock under our share repurchase program induring the quarter ended March 31, 2023 and ~~three quarters ended September 30,~~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 Three Quarters Ended
(Dollars in millions) September 30, 2022 October 1, 2021 % Inc/(Dec) September 30, 2022 October 1, 2021 % Inc/(Dec)
Revenue $ 1,710 $ 1,649 4 % $ 5,104 $ 5,192 (2) %
Operating (loss) income (225) 232 (197) % 247 608 (59) %
Operating (loss) income as a percentage of revenue (“operating margin”) (13.2) % 14.1 % 4.8 % 11.7 %
IMS

~~One Quarter Comparison:~~


	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 for the quarter ended ~~September 30, 2022~~March 31, 2023 compared with the quarter ended ~~October~~April 1, 2021 increased 4%, reflecting an increase of $73 million in ISR, largely from $59 million of revenue for newly-awarded Armed Overwatch program and an increase of $15 million in Commercial Aviation Solutions2022 was primarily due to ~~$18~~$64 million of higher revenue ~~related to the sale of end-of-life inventory,~~in ISR from aircraft procurement and missionization and higher volumes within Electro Optical and Commercial Aviation, partially offset by a decrease of ~~$13~~$20 million within Maritime from lower classified and services revenues.

The decrease in ~~Maritime primarily due to material delays as well as program timing.~~

IMS operating ~~margin~~income for the quarter ended ~~September 30, 2022~~March 31, 2023 compared with the quarter ended ~~October~~April 1, ~~2021 contracted to (13.2)%,~~2022 was primarily due to ~~non-cash impairment charges for goodwill totaling $447 million, in addition to~~a higher ~~input costs, material delays and mix, partially offset by the sale~~volume of ~~end-of-life inventory and higher volumes in Commercial Aviation during the quarter ended September 30, 2022.~~

~~Three Quarters Comparison:~~ ~~IMS~~lower-margin domestic ISR revenue for three quarters ended September 30, 2022 compared with three quarters ended October 1, 2021 decreased 2%, reflecting a decrease of $91 million in Electro Optical, primarily from lower volume on fuzing and ordnance systems and other related programs, as well as a decline in WESCAM airborne turret delivery volumes resulting from supply chain disruptions and a ~~decrease of $21 million~~net change in ~~Maritime~~EAC adjustments primarily in ISR due, in part, to ~~material delays as well as program timing. These decreases were partially offset by an increase of $53 million~~atypically high net favorable adjustments in ~~Commercial Aviation Solutions, largely due to $33 million of higher revenue related to~~ the ~~sale of end-of-life inventory as well as an~~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 ~~pilot training center volume.~~

IMS operating margin for three quarters ended September 30, 2022 compared with three quarters ended October 1, 2021 contracted 690 basis points to 4.8%, primarily due to non-cash charges for goodwill impairment totaling $447 million during the quarter ended September 30, 2022 compared with a non-cash charge for goodwill impairment of $62 million associated with the divestiture of the CPS business and a non-cash charge for identifiable intangible and other long-lived assets of $145 million related to our CTS business recorded during the three quarters ended October 1, 2021. In addition, IMS operating margin declined from higher input costs, material delays and mix, partially offset by the sale of end-of-life inventory and higher volumes in Commercial Aviation Solutions during the three quarters ended September 30, 2022.

~~See~~ ~~Note I — Goodwill and Other Intangible Assets~~ ~~in the Notes for further information related to the charges for goodwill impairment.~~

~~Space & Airborne Systems Segment (“SAS”)~~
Quarter Ended Three Quarters Ended
(Dollars in millions) September 30, 2022 October 1, 2021 % Inc/(Dec) September 30, 2022 October 1, 2021 % Inc/(Dec)
Revenue $ 1,502 $ 1,494 1 % $ 4,450 $ 4,464 — %
Operating income 172 187 (8) % 539 583 (8) %
Operating margin 11.5 % 12.5 % 12.1 % 13.1 %

~~One Quarter Comparison:~~ SAS revenue for the quarter ended ~~September 30, 2022~~March 31, 2023 compared with the quarter ended ~~October~~April 1, ~~2021 increased 1%,~~2022 was primarily ~~driven by~~due to $91 million higher revenue in Space Systems from a ramp on new programs, $55 million in Mission Avionics from an increase in production revenues and modest increases in Mission Networks and Intel and Cyber. Such increases were partially offset by a decrease of ~~$68~~$28 million in ~~Space, reflecting growth~~Electronic Warfare from lower volume and program execution.

The increase in ~~responsive satellite programs, that more than offset a $40 million decline in our airborne businesses, reflecting transitions from development to production on the F-35 and F-18 programs.~~

SAS operating ~~margin~~income for the quarter ended ~~September 30, 2022~~March 31, 2023 compared with the quarter ended ~~October~~April 1, ~~2021 contracted 100 basis points to 11.5% primarily from a $22 million increase in unfavorable EAC adjustments,~~2022 was due to higher ~~input costs~~volumes partially offset by development program mix in Space Systems and lower volume and program ~~performance, mainly~~execution in Electronic ~~Warfare~~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 for the quarter ended March 31, 2023 compared with the quarter ended April 1, 2022 was primarily due to $106 million higher revenue in Broadband Communications, principally from the TDL acquisition, $101 million in Tactical Communications and ~~Space businesses, and new program ramps,~~$38 million in Public Safety, both from higher volumes driven by improved electronic component availability. Such increases were partially offset by a decrease of $36 million related to program execution in ~~R&D expenses.~~

Integrated Vision Solutions.

~~Three Quarters Comparison:~~ ~~SAS revenue for three quarters ended September 30, 2022 compared with three quarters ended October 1, 2021 remained flat, primarily driven by an~~The increase ~~of $181 million~~ in Space, reflecting growth in responsive satellite programs, partially offset by a $145 million decline in our airborne businesses, reflecting transitions from development to production on the F-35 and F-18 programs and $42 million decline in Intel & Cyber primarily due to classified program transitions.

~~SAS~~CS operating margin for three quarters ended September 30, 2022 compared with three quarters ended October 1, 2021 contracted 100 basis points to 12.1% primarily from a $62 million decrease in net favorable EAC adjustments, due to higher input costs and program performance, mainly in Electronic Warfare and Space businesses, and new program ramps, partially offset by a decrease in R&D expenses.

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

Quarter Ended Three Quarters Ended
(Dollars in millions) September 30, 2022 October 1, 2021 % Inc/(Dec) September 30, 2022 October 1, 2021 % Inc/(Dec)
Revenue $ 1,068 $ 1,030 4 % $ 3,024 $ 3,269 (7) %
Operating (loss) income (97) 258 (138) % 370 804 (54) %
Operating margin (9.1) % 25.0 % 12.2 % 24.6 %

~~One Quarter Comparison:~~ ~~CS revenue~~income for the quarter ended ~~September 30, 2022~~March 31, 2023 compared with the quarter ended ~~October~~April 1, ~~2021 increased 4%, reflecting an increase of $94 million in Tactical Communications, primarily~~2022 was due to ~~an increase in volume,~~higher volumes including the TDL acquisition partially offset by ~~a decrease of $37 million in Broadband Communications due to lower volume on legacy platforms and a decrease of $27 million~~program execution in Integrated Vision ~~Solutions (“IVS”) primarily from program timing and lower sales volume.~~

CS operating margin for the quarter ended September 30, 2022 compared with the quarter ended October 1, 2021 contracted to (9.1)%, primarily due to a non-cash charge for impairment of goodwill of $355 million recorded in our Broadband reporting unit, in addition to higher input costs and lower margin on new program ramp.

~~Three Quarters Comparison:~~ CS revenue for three quarters ended September 30, 2022 compared with three quarters ended October 1, 2021 decreased 7%, reflecting a decrease of $178 million in Broadband Communications from lower volume on legacy platforms, a decrease of $31 million in Tactical Communications due to supply chain disruptions and a decrease of $44 million in IVS primarily from program timing and lower sales volume.

CS operating margin for three quarters ended September 30, 2022 compared with three quarters ended October 1, 2021 contracted to 12.2%, primarily due to the non-cash charge for impairment of goodwill of $355 million recorded in our Broadband reporting unit during the quarter ended September 30, 2022, in addition to supply chain disruptions, higher input costs and lower margin on new program ramp.

~~See~~ ~~Note I — Goodwill and Other Intangible Assets~~ ~~in the Notes for further information on the impairment charge for goodwill.~~

Solutions.

Unallocated Corporate Expenses

Quarter Ended Three Quarters Ended
(Dollars in millions) September 30, 2022 October 1, 2021 % Inc/(Dec) September 30, 2022 October 1, 2021 % Inc/(Dec)
Unallocated corporate department income (expense), net(1)
$ 20 $ (1) * $ 34 $ (55) *
L3Harris Merger-related transaction, integration and other expenses and losses (21) (35) (40) % (72) (79) (9) %
Amortization of acquisition-related intangibles (151) (155) (3) % (454) (475) (4) %
Charges for severance and other termination costs (29) — * (29) — *
Charge related to an additional pre-merger legal contingency (31) — * (31) — *
Business divestiture-related gains, net — 27 * — 192 *
Impairment of goodwill and other assets — — * — (125) *
Gain on sale of asset group — — * 8 — *
Acquisition and other divestiture-related expenses (10) (8) 25 % (45) (64) (30) %
FAS/CAS operating adjustment(2)
22 30 (27) % 65 90 (28) %


	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) ~~For~~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 ~~quarter ended September 30, 2022, includes $11 million~~entire Company, the amortization of income from greenhouse gas (“GHG”) emission reduction projects and $10 million of income from our deferred compensation plans. For the three quarters ended September 30, 2022, includes $20 million of income from our deferred compensation plans and $11 million of income from GHG emission reduction projects. For the three quarters ended October 1, 2021, includes a $15 million accrual for a value added tax obligation and $9 million of loss relatedidentifiable intangible assets acquired was not allocated to ~~our deferred compensation plans.~~any segment.

~~(2)~~(3) Represents the difference between the service cost component of FAS pension and OPEB ~~income~~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 ~~Net~~Note O: Business Segment Information in the Notes for additional information regarding the FAS/CAS operating ~~adjustment table below.~~adjustment.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL STRATEGIES

Cash Flows
Three Quarters Ended
(In millions) September 30, 2022 October 1, 2021
Net cash provided by operating activities $ 1,376 $ 1,865
Net cash (used in) provided by investing activities (188) 1,400
Net cash used in financing activities (1,566) (3,413)
Effect of exchange rate changes on cash and cash equivalents (34) (2)
Net decrease in cash and cash equivalents (412) (150)
Cash and cash equivalents, beginning of period 941 1,276
Cash and cash equivalents, end of period $ 529 $ 1,126


	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 ~~September 30, 2022~~March 31, 2023, we had cash and cash equivalents of ~~$529~~$545 million, ~~and a senior unsecured $2 billion revolving credit facility that matures in July 2027 (all of~~ which was available to us as of September 30, 2022). Additionally, we had $7.0 billion of net long-term debt outstanding at September 30, 2022. Our $529 million of cash and cash equivalents at September 30, 2022 included $208includes $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. 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 up~~continue to ~~a $600 million impact to cash from operating activities in fiscal 2022~~make additional Federal tax payments based on the ~~provisions currently in effect. During the quarter ended September 30, 2022, we made a~~current tax ~~payment~~law. The impact of ~~$205 million related to~~this tax law on our ~~research and experimental expenditures, which had an impact to~~ cash from ~~operating activities.~~operations depends on the amount of 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, ~~the 2022 Credit Facility~~our senior unsecured credit 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 ~~$300~~$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 $489 million decrease in net cash provided by operating activities in the three quarters ended September 30, 2022 compared with the three quarters ended October 1, 2021 was primarily due to a $240 million increase in cash used to pay income taxes, primarily from the impact of R&D related tax policy, a $218 million increase in cash used to fund working capital (i.e., accounts receivable, contract assets, inventories, accounts payable and contract liabilities), a $70 million increase in cash used to fund other accrued items (i.e. other expenses and accruals, payroll related taxes and warranty reserve), partially offset by the impact of $47 million of higher net income (excludes 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) provided by investing activities:~~ The $1,588 million increase in net cash used in investing activities in the three quarters ended September 30, 2022 compared with the three quarters ended October 1, 2021 was primarily due to a $1,593 million decrease in net cash proceeds from sales of businesses and a $47 million increase in cash used for equity investments, partially offset by a $18 million increase in proceeds from sale of asset group and a $26 million decrease of net cash used for additions of property, plant and equipment in fiscal 2022.

~~Net cash used in financing activities:~~ The $1,847 million decrease in net cash used in financing activities in the three quarters ended September 30, 2022 compared with the three quarters ended October 1, 2021 was primarily due to a $1,975 million decrease in cash used to repurchase our common stock under our share repurchase program, partially offset by a $54 million decrease in proceeds from exercises of employee stock options, a $40 million increase in tax withholding payments associated with vested share-based awards and a $32 million increase in cash used to pay dividends.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 ~~$346~~$208 million as of ~~September 30, 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 ~~L —~~I: Pension and Other Postretirement Benefit Plans in the Notes for further information regarding our pension plans.

Common Stock Repurchases

During the ~~three quarters~~quarter ended ~~September 30, 2022,~~March 31, 2023, we used ~~$900~~$396 million to repurchase ~~3.9~~1.9 million shares of our common stock under our share repurchase program at an average price per share of ~~$233.77,~~$211.08, including commissions of $0.02 per share. During the ~~three quarters~~quarter ended ~~October 1, 2021, we used $2.88 billion to repurchase 13.5~~March 31, 2023, $26 million shares of our common stock under our share repurchase program at an average price per share of $213.47, including commissions of $0.02 per share. During the three quarters ended September 30, 2022 and October 1, 2021, $44 million and $4 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 share repurchase program that was in addition to the remaining unused authorization of $210 million at January 1, 2021, under our prior share repurchase program, for a total unused authorization of $6.2 billion.

Our ~~share~~ repurchase program does not have a stated ~~expiration. At September 30, 2022, we had a remaining unused authorization under~~expiration date and authorizes us to repurchase shares of our share repurchase program of $1.6 billion. On October 21, 2022, we announced that our Board of Directors approved an additional $3.0 billion share repurchase authorization. Repurchases under our share repurchase program may be madecommon 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 share~~ 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 ~~$650~~$220 million in cash dividends during the ~~three quarters~~quarter ended ~~September 30, 2022.~~March 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~~

~~Credit Agreement:~~ On July 29, 2022, we established our new $2 billion, 5-year senior unsecured 2022 Credit Facility under the 2022 Credit Agreement with a syndicate of lenders. For a description of the 2022 Credit Facility and the 2022 Credit Agreement, see ~~Note K— Credit Arrangements~~ ~~in the Notes.~~

We were in compliance with all covenants under the 2022 Credit Agreement at September 30, 2022, including the covenant requiring that we not permit our ratio of consolidated total indebtedness to total capital, each as defined in the 2022 Credit Agreement, to be greater than 0.65 to 1.00. At September 30, 2022, we had no borrowings outstanding under the 2022 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 $2 million at September 30, 2022 and $2 million at 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. We did not have outstanding accounts receivable sold pursuant to the RSAs at September 30, 2022. Outstanding accounts receivable sold pursuant to the RSAs were $99.9 million at December 31, 2021, with net cash proceeds of $99.8 million.

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 three quarters ended September 30, 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.

~~On October 3, 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 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 ~~entered into~~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 ~~definitive agreement~~portion of our existing debt, obtain additional financing or sell assets. Our ability to ~~acquire Viasat, Inc.’s TDL product line for~~make principal payments or pay interest on or refinance our indebtedness depends on our future performance and financial results, which, to a ~~purchase price of approximately $1.96 billion,~~certain extent, are subject to ~~customary adjustments. We plan to fund~~general conditions affecting the acquisition of the TDL product line with debt financing, which may include amounts under the 2022 Credit Facility, new issuances of long or short term debt or other sources we may identify. The acquisition of the TDL product line is expected to close in the first half of 2023, subject to required regulatory approvals and clearancesdefense, government and other ~~customary closing conditions, although~~markets we ~~can give no assurances regarding the timing or occurrence of closing.~~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.~~

~~Revenue Recognition~~

A significant portion of our business is derived from development and production contracts. Revenue and profit related to development and production contracts are generally recognized over time, typically using the POC cost-to-cost method of revenue recognition, whereby we measure our progress towards completion of the performance obligation based on the ratio of costs incurred to date to estimated costs at completion under the contract. Because costs incurred represent work performed, we believe this method best depicts the transfer of control of the asset to the customer. Under the POC cost-to-cost method of revenue recognition, a single estimated profit margin is used to recognize profit10-K, except 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 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. If we successfully retire risks associated with the technical, schedule and cost aspects of a contract, we may lower our estimated total cost at completion commensurate with the retirement of these risks. Conversely, if we are not successful in retiring these risks, we may increase our estimated total cost at completion. Additionally, as the contract progresses, our estimates of total transaction price may increase or decrease if, for example, we receive award fees that are higher or lower than expected. When adjustments in estimated total costs at completion or in estimated total transaction price are determined, the related impact on operating income is recognized using the cumulative catch-up method, which recognizes in the current period the cumulative effect of such adjustments for all prior periods. Any anticipated losses on these contracts are fully recognized in the period in which the losses become evident.

set forth below.

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

Quarter Ended Three Quarters Ended
(In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
Favorable adjustments $ 108 $ 158 $ 342 $ 485
Unfavorable adjustments (108) (73) (284) (238)
Net operating income adjustments $ — $ 85 $ 58 $ 247

In the quarter ended September 30, 2022 there was no impact to operating income from EAC adjustments. The net favorable impact to operating income from EAC adjustments in the three quarters ended September 30, 2022 reflected benefits of operational performance on programs, including additional retirement of risks and material and labor cost savings. There were no individual program impacts to operating income due to EAC adjustments in the quarter or three quarters ended September 30, 2022 or October 1, 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, our practices used to establish pricing of bundled products, the expected technological life of the product, margins earned on similar contracts with different customers and other factors to determine the appropriate margin.

Goodwill

~~Goodwill as of September 30, 2022 and December 31, 2021 was $18.2 billion and $18.9 billion, respectively.~~ 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. ~~Events or circumstances may include a significant deterioration in overall economic conditions, changes in the~~

Fiscal 2023 Impairment Tests. Effective December 31, 2022, we adjusted our reporting to better align our businesses and transferred our ADG business ~~climate of~~(a reporting unit) from our ~~industry, a decline in~~IMS segment to our ~~market capitalization, operating performance indicators, competition, reorganizations of our business or the disposal of all or a portion of~~SAS segment (also a reporting unit. We identify potential impairment by comparing the fair value of each of our reporting units with its carrying amount, including goodwill, which is adjusted for allocations of Corporate assets and liabilities as appropriate. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

~~Precision engagement business allocation and impairment:During the quarter ended September 30, 2022, we realigned our precision engagement business from our ADG reporting unit to our Electro Optical reporting unit.~~unit). In connection with the realignment, we ~~transferred $325~~reduced our reporting units from nine to eight as the ADG reporting unit and all $327 million of associated goodwill ~~associated with the precision engagement business to~~was absorbed by our ~~Electro Optical~~existing SAS reporting unit ~~on a relative fair value basis.~~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 ~~after the reassignment, we tested goodwill assigned to each reporting unit. As~~ a ~~result of these tests, concurrently with the preparation of our financial statements for the quarter ended September 30, 2022, we concluded that goodwill related to~~quantitative impairment assessment over our ADG reporting ~~unit was impaired immediately before~~unit. Immediately after the ~~reassignment and recorded~~realignment, we performed a ~~non-cash charge~~quantitative impairment assessment over the SAS reporting unit. We prepared estimates of ~~$313 million for~~ the impairment in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Operations (Unaudited). The impairment of goodwill was due to lower sales volume in our precision engagement business, reflecting U.S. Government spending priorities with respect to precision weapons, and higher interest rates.

~~Broadband, Electro Optical and ADG interim tests:~~Indications of potential impairment of goodwill related to our Broadband, Electro Optical and ADG reporting units were present as of September 30, 2022. Consequently, in connection with the preparationfair value of our financial statements for the quarter ended September 30, 2022, we performed interim tests of each of these reporting unit’s goodwill for impairment. We determined that goodwill related our Broadband and Electro Optical reporting units was impaired and goodwill related to ourpre-realignment ADG reporting unit ~~was not impaired.~~

~~Broadband~~ and ~~Electro Optical goodwill impairments:~~ As a result of the interim tests of goodwill related to our Broadband and Electro Optical reporting units, we recorded $489 million of non-cash charges for the impairment of goodwill ($355 million related to Broadband and $134 million related to Electro Optical) in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Operations (Unaudited). The impairment of goodwill related to our Electro Opticalpost-realignment SAS reporting unit was due to persistently lower demand and associated decrease in our outlook for the precision engagement business, and rising interest rates. The impairment of goodwill related to our Broadband reporting unit was due to lower volume on legacy platforms, which also resulted in decreased in out outlook for the reporting unit, and higher interest rates.

~~Goodwill-related fair value estimates:Fair value determinations described above under the heading “Goodwill” in this Critical Accounting Policies MD&A were determined~~ based on a combination of market-based valuation techniques, utilizing quoted market prices, ~~and~~ comparable publicly reported transactions, and an income-based valuation technique using projected discounted cash flows. ~~The process~~These assessments indicated no impairment existed either before or after the realignment.

TDL Acquisition Goodwill. In connection with the January 3, 2023 acquisition of ~~evaluating the potential impairment~~TDL, we recorded $1.014 billion of goodwill ~~is highly subjective~~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 ~~requires significant judgment. Material changes~~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 ~~these estimates could occur~~the Notesfor additional information.

Business Combinations

We follow the acquisition method of accounting to record identifiable assets acquired, liabilities assumed and ~~result~~noncontrolling interests recognized in ~~additional impairments in future periods. If~~connection with acquired businesses at their estimated fair value as of the ~~discount rate used for~~date of acquisition.

Identifiable intangible assets from business combinations are recognized at their estimated fair values as of the ~~impairment analysis increased by 25 basis points~~date of acquisition and consist of customer relationships and developed technology. Determination of the ~~total impairment would have increased by approximately $200 million.~~

~~An impairment of goodwill could result from a number of circumstances, including different assumptions used in determining the~~estimated fair value of identifiable intangible assets requires judgment. The fair value of intangible assets are estimated using the ~~reporting units; changes~~relief from royalty method for the acquired developed technology and the multi-period excess earnings method for the acquired customer relationships. Both of these fair value methods are income-based valuation approaches, which require judgment to ~~U.S. Government spending priorities or ability~~estimate appropriate discount rates, royalty rates related to ~~win competitively awarded contracts;~~ the ~~rescission~~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 ~~significant contract awards as a result of competitors protesting or challenging contracts awarded to us; or an increase~~identifiable intangible assets acquired in ~~interest rates without a corresponding increase in future revenue.~~connection with TDL was $850 million.

~~At-risk goodwill:~~See Note B: Acquisitions and Divestitures and Note G: Goodwill and Other Intangible Assets in the Notes for additional information.

Impact of Recently Issued Accounting Pronouncements

See Note A: Basis of Presentation and Summary of Significant Accounting Policies in the Notes ~~Because the carrying values of our Broadband, ADG and Electro Optical reporting units equaled their fair values immediately after the non-cash impairment charges recorded~~for new accounting pronouncements which became effective during the quarter ended September 30, 2022, goodwill associated with these reporting units remains at increased risk of impairment. The carrying value of goodwill associated with our Broadband, ADG and Electro Optical reporting units was $1,540 million, $328 million and $2,197 million, respectively.fiscal 2023.

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; 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 Part I: Item 1A. Risk Factors in our Fiscal 2022 Form 10-K and Part II. Item 1A. Risk Factors of this Report for more information regarding factors that might cause our results 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.

•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.

•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.

•~~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.~~

•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.

•~~The acquisition of the TDL product line cannot be guaranteed~~Changes in future business or other market conditions could cause business investments and/or recorded goodwill or other long-term assets to ~~close~~become impaired, resulting in ~~the expected time frame or at all.~~

~~Additional details~~substantial losses and ~~discussions concerning some of the factors~~write-downs that ~~could~~would materially adversely 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.condition.


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 ~~three quarters~~quarter ended ~~September 30, 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 ~~September 30, 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 ~~September 30, 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 ~~September 30, 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.

3332

PART II. OTHER INFORMATION


ITEM 1.			LEGAL PROCEEDINGS.

See Note ~~T —~~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 ~~other than the amendment below,~~ 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.

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 generate revenue through various fixed-price, cost-plus and time-and-material contracts. For a general description of our U.S. Government contracts and subcontracts, including a discussion of revenue generated thereunder and of cost-reimbursable versus fixed-price contracts, see “Item 1. Business - Principal Customers; Government Contracts” of our Fiscal 2021 Form 10-K. For a description of our revenue recognition policies, see “Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Critical Accounting Policies and Estimates - Revenue Recognition” of our Fiscal 2021 Form 10-K.

In fiscal 2021, 74% of our revenue was derived from fixed-price contracts which allow us to benefit from cost savings, but subject us to the risk of potential cost overruns, including due to greater than anticipated or a sustained period of increased inflation or unexpected delays, particularly for firm fixed-price contracts because we assume all of the cost burden. If our initial estimates are incorrect, we can lose money (or make more or less money than estimated) on these contracts. U.S. Government contracts can expose us to potentially large losses because the U.S. Government can hold us responsible for completing a project or, in certain circumstances, paying the entire cost of its replacement by another provider regardless of the size or foreseeability of any cost overruns that occur over the life of the contract. Because many of these contracts involve new technologies and applications and can last for years, unforeseen events, such as technological difficulties, fluctuations in the price of raw materials, a significant increase in or sustained period of increased inflation, problems with our suppliers, labor market conditions and cost overruns, can result in the contractual price becoming less favorable or even unprofitable to us over time (which, especially in the case of sharp and significant sustained inflation, could happen quickly), and increased interest rates resulting from inflationary pressures can also impact the fair value of these contracts. Furthermore, if we do not meet contract deadlines or specifications, we may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages or suffer major losses if the customer exercises its right to terminate. In addition, some of our contracts have provisions relating to cost controls and audit rights, and if we fail to meet the terms specified in those contracts, we may not realize their full benefits. Cost overruns would adversely impact our results of operations, which are dependent on our ability to maximize our earnings from our contracts, and the potential risk would be greater if our contracts shifted toward a greater percentage of fixed-price contracts, particularly firm fixed-price contracts. In addition, changes in contract financing policy for fixed-price contracts, such as changes in performance and progress payments policies, including a reversal or modification of the U.S. Department of Defense’s March 2020 increase to the applicable progress payment rate from 80% to 90%, could significantly affect the timing of our cash flows.

In fiscal 2021, 26% of our revenue was derived from cost-plus and time-and-material contracts, substantially all of which are with U.S. Government customers. Sales to foreign government and commercial customers are generally under fixed-price arrangements and are included in our fixed-price contract sales. For a cost-plus contract, we are paid our allowable incurred costs plus a profit, which can be fixed or variable depending on the contract’s fee arrangement up to predetermined funding levels established by our customers. For a time-and-material contract, we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (which include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. Therefore, on cost-plus and time-and-material type contracts, we do not bear the risks of unexpected cost overruns, provided that we do not incur costs that exceed the predetermined funded amounts.

To the extent feasible, we have consistently followed the practice of adjusting our prices to reflect the impact of inflation on salaries and fringe benefits for employees and the cost of purchased materials and services. However, reports show a sharp increase in inflation since late 2021. Our fixed-price contracts could subject us to losses in the event of cost overruns or such a significant increase in or a sustained period of increased inflation.

~~Any or all of the foregoing could have a negative impact on 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 September 30, 2022, we repurchased 0.7 million shares of our common stock under our share repurchase program for $171 million at an average share price of $229.60, 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. Given the current macroeconomic environment, we will continue to evaluate the amount of shares to be repurchased under our repurchase program in fiscal 2022. 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 ~~September 30, 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
(July 2, 2022-July 29, 2022)
Repurchase program(1)
334,100 $ 227.47 334,100 $1,731
Employee transactions(2)
7,634 $ 233.27 — —
Month No. 2
(July 30, 2022-August 26, 2022)
Repurchase program(1)
60,000 $ 232.13 60,000 $1,717
Employee transactions(2)
28,305 $ 239.88 — —
Month No. 3
(August 27, 2022-September 30, 2022)
Repurchase program(1)
351,200 $ 231.20 351,200 $1,635
Employee transactions(2)
28,749 $ 231.20 — —
Total 809,988 745,300 $1,635
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 ~~September 30, 2022, $1.6~~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. On October 21, 2022, we announced that our Board of Directors approved an additional $3.0 billion share repurchase authorization..

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


ITEM 3.			DEFAULTS UPON SENIOR 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) Restated Certificate~~(2)**Agreement and Plan of ~~Incorporation~~Merger, dated as of December 17, 2022, by and among L3Harris Technologies, Inc. ~~(1995)~~, ~~as amended,~~Aquila Merger Sub Inc. and Aerojet Rocketdyne Holdings, Inc., incorporated herein by reference to ~~Exhibit 3(a)~~exhibit 2.1 to L3Harris Technologies, Inc.’s ~~Quarterly~~Current Report on Form ~~10-Q~~8-K filed with the SEC on ~~July 29,~~December 19, 2022. (Commission File Number 1-3863)

~~(3)(b) Amended and Restated By-Laws of~~ (1 0.1 )*L3Harris Technologies, Inc.~~, as amended., incorporated herein by reference to Exhibit 3(b) to L3Harris Technologies, Inc.’s Quarterly Report on Form 10-Q filed with the SEC on July 29, 2022. (Commission File Number 1-3863)~~ Restricted Unit Award Agreement Terms and Conditions (as of February 23, 2023).

~~(10.1) Revolving~~(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).

(10.4 )*A mendment Twelve to the L3Harris Retirement Savings Plan (as amended and restated effect ive January 1, 2021) dated March 1, 2023.

(10 .5 )**364-Day Credit Agreement, dated ~~as of July 29, 2022,~~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 ~~August 4, 2022.~~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.

(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 ~~September 30, 2022~~March 31, 2023 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Statement of Operations, (ii) the Condensed Consolidated Statement of Comprehensive ~~(Loss)~~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.

3635

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: ~~October 31, 2022~~April 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)

3736


(In millions)	Business Segment Prior to Divestiture / Asset Sale(1)	Date of Divestiture / Asset Sale	Sale Price		Net Cash Proceeds(2)






CPS business(3)	Other non-reportable businesses(8)	July 2, 2021	$	398	$	347
Military training business(4)	Other non-reportable businesses(8)	July 2, 2021	1,050		1,059
VSE disposal group(5)	Other non-reportable businesses(8)	July 30, 2021(6)	20		19
Electron Devices business(7)	Other non-reportable businesses(8)	October 1, 2021	185		173
			$	1,653	$	1,598


(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
Reallocation 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
Impairment of goodwill	(447)		—		(355)		—		(802)
Currency translation adjustments	(48)		(77)		(2)		—		(127)
Balance at September 30, 2022	$	7,692	$	5,772	$	3,796	$	—	$	17,260


	Quarter Ended September 30, 2022				Three Quarters Ended September 30, 2022
(In millions)	Pension		Other Benefits		Pension		Other Benefits

Net periodic benefit income
Operating
Service cost	$	10	$	1	$	32	$	2
Non-operating
Interest cost	55		1		165		5
Expected return on plan assets	(156)		(5)		(468)		(16)
Amortization of net actuarial loss (gain)	2		(1)		7		(5)
Amortization of prior service (credit) cost	(7)		—		(21)		1


Non-service cost periodic benefit income	(106)		(5)		(317)		(15)
Net periodic benefit income	$	(96)	$	(4)	$	(285)	$	(13)


	Quarter Ended October 1, 2021				Three Quarters Ended October 1, 2021
(In millions)	Pension		Other Benefits		Pension		Other Benefits

Net periodic benefit income
Operating
Service cost	$	16	$	1	$	52	$	2
Non-operating
Interest cost	47		1		139		4
Expected return on plan assets	(155)		(5)		(467)		(15)
Amortization of net actuarial loss	7		—		26		—
Amortization of prior service credit (cost)	(7)		1		(21)		1

Effect of curtailments or settlements	7		—		4		—
Non-service cost periodic benefit income	(101)		(3)		(319)		(10)
Net periodic benefit income	$	(85)	$	(2)	$	(267)	$	(8)