filings.toolsL3Harris Technologies 10-K 2023-12-29
Filed 2024-02-20. 24 sections, 607K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
| ☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 29, 2023
OR
| ☐ | 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 |
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
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. Yes ☑ 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). Yes ☑ 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting common equity held by non-affiliates of the registrant at June 30, 2023 was $37,362,290,944 (based on the quoted closing sale price per share of the stock on the New York Stock Exchange). For purposes of this calculation, the registrant has assumed that its directors and executive officers as of June 30, 2023 are affiliates.
The number of shares outstanding of the registrant’s common stock as of February 9, 2024 was 190,107,856.
Documents Incorporated by Reference:
Portions of the registrant’s definitive Proxy Statement for the 2024 Annual Meeting of Shareholders scheduled to be held on April 19, 2024, which will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 29, 2023, are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent described therein.
L3HARRIS TECHNOLOGIES, INC.
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 29, 2023
TABLE OF CONTENTS
Exhibits
This Annual Report on Form 10-K contains trademarks, service marks and registered marks of L3Harris Technologies, Inc. and its subsidiaries. All other trademarks are the property of their respective owners.
Cautionary Statement Regarding Forward-Looking Statements
This Annual Report on Form 10-K (this “Report”), including “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that involve risks and uncertainties, as well as assumptions that may not materialize or prove 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 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 “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “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 Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “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.
Amounts contained in this Report may not always add to totals due to rounding.
PART I
Item 1. BUSINESS.
General
L3Harris Technologies, Inc. is the Trusted Disruptor for the 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 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.
Our fiscal year ends on the Friday nearest December 31. Each of our fiscal years ended December 29, 2023 (“fiscal 2023”), December 30, 2022 (“fiscal 2022”) and December 31, 2021 (“fiscal 2021”) included 52 weeks. Unless the context otherwise requires, the terms “we,” “our,” “us,” “Company” and “L3Harris” as used in this Report mean L3Harris Technologies, Inc. and its subsidiaries.
We structure our operations primarily around the products, systems and services we sell and the markets we serve, and we report the financial results of our continuing operations in four operating segments, which are also our reportable segments: Space & Airborne Systems (“SAS”); Integrated Mission Systems (“IMS”); Communication Systems (“CS”); and Aerojet Rocketdyne (“AR”), established in connection with the fiscal 2023 acquisition of Aerojet Rocketdyne Holdings, Inc. (“AJRD”), discussed further below. Throughout this form 10-K, we also refer to our operating segments as our business segments. See Note 14: Business Segments in the Notes to Consolidated Financial Statements in this Report (the “Notes”) for further information regarding our business segments, including how we define segment operating income or loss.
Business Realignment. Effective for fiscal 2023, we adjusted our reporting to better align our businesses and transferred our Agile Development Group (“ADG”) business from our IMS segment to our SAS segment. On October 1, 2023, we combined our Electronic Warfare sector and the majority of the ADG sector within our SAS segment to
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create a new sector, Advanced Combat Systems (“ACS”). The remaining portion of the ADG sector was combined with our Space Systems sector within our SAS segment.
The historical results, discussion and presentation of our business segments as set forth in the accompanying Consolidated Financial Statements and the 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 operations, balance sheets, statements of cash flows or statements of equity resulting from these changes. See Note 6: Goodwill and Intangible Assets and Note 14: Business Segments in the Notes for further information.
Description of Business Segments
Our business segments provide a wide-range of products, systems and services to various customers and are described below. For financial information with respect to our business segments, including revenue, operating income and total assets, and with respect to our operations outside the United States, see Note 14: Business Segments in the Notes, and for additional information with respect to our business segments, see “Discussion of Business Segment Results of Operations” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report. For a discussion of certain risks affecting our business segments, including risks relating to our U.S. Government contracts and subcontracts, see “Item 1. Business - Government Contracts,” “Item 1A. Risk Factors” and “Item 3. Legal Proceedings” of this Report.
SAS
SAS is a leading provider of full mission solutions as a prime and subsystem integrator in the space, airborne and cyber domains. We provide top-tier capabilities in the design, development, integration, production and sustainment of major weapons systems for defense primes and national security, civil government, and international customers in the following business sectors:
Space Systems: End-to-end mission solutions in support of intelligence, surveillance and reconnaissance (“ISR”); position, navigation and timing; weather and climate monitoring; missile defense and ground-based space surveillance networks.
Intel & Cyber: Situational awareness, intelligence systems and advanced wireless solutions for classified intelligence and defense customers.
Mission Avionics: Sensors, processors, hardened electronics, release systems and antennas for aircraft platforms.
Mission Networks: Communications and networking solutions for air traffic management.
ACS: Threat warning and countermeasures for airborne, ground and maritime platforms. Also includes ADG, an innovation accelerator and collaboration initiative established to rapidly address near-peer, national security threats.
IMS
IMS is a leading provider of differentiated mission capabilities and prime systems integration for the air, land and sea domains. We deliver top-tier capabilities in the design, development, integration, production, modernization and sustainment of ISR, passive sensing and targeting, electronic attack, autonomy, power and communications, networks and sensors for national security and international customers in the following business sectors:
ISR: Airborne passive sensing and targeting, mission systems development, integration and life-cycle management for strategic reconnaissance, national command and control, tactical surveillance, electronic attack, agile strike, mobility, and classified platforms.
Maritime: Passive sensing and targeting, autonomy and manned and unmanned teaming, power and communications, undersea sensors and networks and classified capabilities for manned platforms and unmanned surface and undersea vessels.
Electro Optical: Passive sensing and targeting; laser imaging and sensor systems; space communications and avionics; and fuzing, navigation and range-testing solutions on platforms spanning all domains.
Commercial Aviation Solutions: Integrated aircraft avionics, pilot training and data analytics services for the commercial aviation industry. On November 27, 2023, we announced that we entered into a definitive agreement to sell Commercial Aviation Solutions (“CAS disposal group”). See Note 13: Acquisitions, Divestitures and Asset Sales in the Notes for further information.
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CS
CS enables warfighters across all domains with solutions critical to mission success even in the most contested environments. We are a leading provider of resilient communication solutions for the U.S. Department of Defense (“DoD”), international, federal and state agency customers in the following business sectors:
Tactical Communications: Design, manufacture and sustainment of resilient and secure communication solutions that include tactical radios, software, satellite terminals and end-to-end battlefield systems.
Broadband Communications: Design, manufacture and sustainment of resilient and secure communication solutions that include ISR and tactical data links, software and integrated broadband networks. Includes the operations of Tactical Data Links product line (“TDL”), acquired from Viasat, Inc. (“Viasat”) on January 3, 2023. See Note 13: Acquisitions, Divestitures and Asset Sales in the Notes for further information.
Integrated Vision Solutions (“IVS”): Design, manufacture and sustainment of a full suite of helmet-mounted integrated night vision goggles with leading-edge image intensifier tubes and weapon-mounted sights, aiming lasers, and range finders.
Public Safety: State-of-art communication equipment, systems and applications for federal agencies, state and local government first responders, utilities and transit agencies.
AR
On July 28, 2023, we acquired AJRD, a technology-based engineering and manufacturing company. AR is a leading provider of propulsion, power and armament products and systems to U.S. government, including the DoD, National Aeronautics and Space Administration (“NASA”) and major aerospace and defense prime contractors in the following business sectors:
Missile Solutions: Propulsion technologies and armament systems for strategic defense, missile defense, hypersonic and tactical systems.
Space Propulsion and Power Systems: Premier propulsion and power systems for national security, space and exploration missions.
International Business
In fiscal 2023, revenue from products and services where the end consumer is located outside the U.S., including foreign military sales funded through the U.S. Government, whether directly or through prime contractors, was $4.2 billion (21% of our revenue) and came from a large number of countries with no single foreign country accounting for more than 5% of our total revenue. For financial information regarding our domestic and international operations, including long-lived assets, see Note 14: Business Segments in the Notes.
The majority of our international marketing activities are conducted through subsidiaries that operate in the Europe, Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”) regions and Canada. We also have established international marketing organizations and several regional sales offices. For further information regarding our international subsidiaries, see Exhibit 21 of this Report.
Competitive Conditions and Trends in Market Demand
We operate in highly-competitive markets that are sensitive to technological advances. Some of our competitors in each of our markets are larger than we are and can maintain higher levels of expenditures for research and development (“R&D”). We concentrate on the opportunities that we believe are compatible with our resources, overall technological capabilities and objectives. Principal competitive factors are product and system quality and reliability; technological capabilities; service; past performance; ability to develop and implement complex, integrated solutions; ability to meet delivery schedules; and cost-effectiveness. We frequently “partner” or are involved in subcontracting and teaming relationships with companies that are, from time to time, competitors on other programs. We compete domestically and internationally against large defense companies; principally BAE Systems, Boeing, General Dynamics, Lockheed Martin, Northrop Grumman, RTX; Thales; and non-traditional defense contractors.
For further discussion of trends in market demand, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report.
Backlog
Company-wide total backlog was $32.7 billion at December 29, 2023, inclusive of backlog from the acquisitions of TDL and AJRD, compared with $22.3 billion at December 30, 2022. We expect to recognize approximately 40% of the revenue associated with Company-wide total backlog by the end of 2024 and approximately 65% of the
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revenue associated with Company-wide total backlog by the end of 2025, with the remainder to be recognized thereafter.
See Note 1: Significant Accounting Policies in the Notes for additional information regarding Company-wide total backlog.
Research and Development
We conduct R&D activities using our own funds (company-funded R&D) and under contractual arrangements (customer-funded R&D), such as designs. See Note 1: Significant Accounting Policies in the Notes for further information on company-funded R&D.
Intellectual Property
We own a large portfolio of patents, trade secrets, know-how, confidential information, trademarks, copyrights and other intellectual property and we routinely apply for new patents, trademarks and copyrights. We also license intellectual property to and from third parties. For discussion of risks relating to intellectual property, see “Item 1A. Risk Factors” of this Report. With regard to certain patents, the U.S. Government has an irrevocable, non-exclusive, royalty-free license, pursuant to which the U.S. Government may use or authorize others to use the inventions covered by such patents. Pursuant to similar arrangements, the U.S. Government may consent to our use of inventions covered by patents owned by other persons. Numerous trademarks used on or in connection with our products are also considered to be valuable assets.
Government Regulations
Our company is subject to various federal, state, local and international laws and regulations relating to the development, manufacture, sale and distribution of our products and services, and it is our policy to comply with the applicable laws in each jurisdiction in which we conduct business. Regulations include, but are not limited to, those related to import and export controls, corruption, bribery, the protection of the environment, government procurement, wireless communications, competition, product safety, workplace health and safety, employment, labor and data privacy. The following describes significant regulations that may impact our businesses. For further discussion of risks relating to government regulations, see “Item 1A. Risk Factors” of this Report.
Government Contracts. In fiscal 2023, 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 76% and no other customer accounted for more than 5% of our revenue. Additional information regarding customers for each of our segments is provided under “Item 1. Business — Description of Business Segments” of this Report.
Cost-type contracts: Our U.S. Government cost-reimbursable contracts provide for the reimbursement of allowable costs plus payment of a fee and fall into three basic types: (i) cost-plus fixed-fee contracts, which provide for payment of a fixed fee irrespective of the final cost of performance; (ii) cost-plus incentive-fee contracts, which provide for payment of a fee that may increase or decrease, within specified limits, based on actual results compared with contractual targets relating to factors such as cost, performance and delivery schedule; and (iii) cost-plus award-fee contracts, which provide for payment of an award fee determined at the customer’s discretion based on our performance against pre-established performance criteria. Under our U.S. Government cost-reimbursable contracts, we are reimbursed periodically for allowable costs and are paid a portion of the fee based on contract progress. Some costs have been made partially or wholly unallowable for reimbursement by statute or regulation. Examples include certain merger and acquisition costs, lobbying costs, charitable contributions, interest expense and certain litigation defense costs.
Fixed-price contracts: Our U.S. Government fixed-price contracts are either firm fixed-price contracts or fixed-price incentive contracts. Under our U.S. Government firm fixed-price contracts, we agree to perform a specific scope of work or sell a specific product for a fixed price and, as a result, benefit from cost savings or carry the burden of cost overruns. Under our U.S. Government fixed-price incentive contracts, we share with the U.S. Government both savings accrued for performance at less than target cost as well as costs incurred in excess of target cost up to a negotiated ceiling price, which is higher than the target cost, but carry the entire burden of costs exceeding the negotiated ceiling price. Under such incentive contracts, profit may also be adjusted up or down depending on whether specified performance objectives are met. Under our U.S. Government firm fixed-price and fixed-price incentive contracts, we generally receive either milestone payments totaling 100% of the contract price or monthly progress payments in amounts equaling 80% of costs incurred under the contract. The remaining amounts, including profits or incentive fees, are billed upon delivery and final acceptance of end items and deliverables under the contract.
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Our production contracts are mainly fixed-price contracts and development contracts are generally cost-reimbursable contracts, although we have some fixed-price development contracts. Time-and-material contracts are considered fixed-price contracts as they specify a fixed hourly rate for each labor hour charged.
For further discussion of risks relating to U.S. Government contracts, see “Item 1A. Risk Factors,” “Item 3. Legal Proceedings” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report.
Environmental. Our operations are subject to and affected by U.S. federal, state, local and foreign laws and regulations regarding discharge of materials into the environment or otherwise relating to the protection of the environment. We have previously announced our environmental sustainability goals: to reduce greenhouse gas (“GHG”) emissions by 30% and water usage by 20% from 2019 levels and achieve a 75% solid waste diversion rate (away from landfills) by 2026. We invested in renewable energy and other solutions to achieve our GHG emission reduction target and our other environmental sustainability goals. We took a step towards our goal by entering into a virtual power purchase agreement, which has been operational since 2021. In 2023, we measured our performance against these goals and exceeded our GHG emissions and water use reduction targets and are progressing towards our solid waste diversion rate from landfill goal. Additional information is provided in our Sustainability Report, which can be found on our Company website, and is not incorporated by reference into this Report.
We have incurred, and based on currently available information, we expect to continue to incur capital and operating costs to comply with existing and pending environmental laws and regulations. See “Item 1A. Risk Factors” and “Item 3. Legal Proceedings” of this Report and Note 1: Significant Accounting Policies and Note 15: Legal Proceedings, Commitments and Contingencies in the Notes.
Materials, Suppliers and Seasonality
Because of the diversity of our products and services, as well as the wide geographic dispersion of our facilities, we use numerous sources for the wide array of materials, such as electronic components, printed circuit boards, metals and plastics needed for our operations and products. We depend on suppliers and subcontractors for a large number of components and subsystems. For example, in our AR segment we are reliant on a limited number of certified suppliers of cases and igniters, in part because of the extensive qualification and safety requirements on explosive and missile-related components. We also rely on a limited number of certified microelectronics component suppliers for our products. We have experienced component shortages from vendors as a result of pandemics, natural disasters, or the shifting regulatory landscape. These events or regulations may cause a spike in demand for certain electronic components, such as lead-free components, resulting in industry-wide supply chain disruptions. For further discussion of risks relating to subcontractors and suppliers, see “Item 1A. Risk Factors” of this Report.
We do not consider any material portion of our business to be seasonal. Various factors can affect the distribution of our revenue between accounting periods, including the timing of contract awards and the timing and availability of U.S. Government funding, as well as the timing of product deliveries and customer acceptance.
Human Capital
Our success depends on our highly-educated and skilled workforce. Attracting, developing, motivating and retaining highly-skilled people, particularly those with technical, engineering and science backgrounds, is critical to our ability to execute our strategic priorities. We use human capital measures to set goals and monitor performance in several areas, including employee health and safety; talent acquisition, development and retention; and diversity, equity and inclusion (“DE&I”).
Workforce Demographics. We had approximately 50,000 employees at December 29, 2023, including approximately 20,000 engineers and scientists. Of our total employees, 89% are located in the U.S. and a significant number of our employees possess a U.S. Government security clearance. As of December 29, 2023, approximately 2,800, or 6%, of our U.S. employees were covered by various collective bargaining agreements, which we expect will be renegotiated as they expire, as we historically have done without significant disruption to operating activities.
Health and Safety. We prioritize the safety of our employees through maintaining a proactive safety culture and implementing programs designed to eliminate workplace incidents, risks and hazards. Throughout the year, we review and monitor our performance closely to reduce Occupational Safety and Health Administration reportable incidents. With these efforts, in the last 3 years, we have reduced our total recordable injury rate (“TRIR”) and lost day injury rate (“LDIR”) by 37% and 41%, respectively. For fiscal 2023, our TRIR declined by 24% and LDIR declined by 29%, compared with the previous year, while numerous of our locations reached one year or more without a recordable injury.
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Talent Acquisition, Development and Retention. Our talent strategy focuses on attracting new perspectives, ideas and capabilities, recognizing and rewarding performance, and developing, engaging and retaining high-performing employees. We strive to attract employees in all stages of their careers. In addition to hiring approximately 6,400 new employees (excluding acquisition in fiscal 2023), we were recognized with more than 15 employer awards or recognitions from external organizations in fiscal 2023. Our development philosophy centers around creating broad experiences, setting “SMART” (specific, measurable, achievable, realistic, and timely) performance goals and offering continuous feedback and learning opportunities. We provide formal and informal development aligned with individual learning styles including self-directed personal and professional development through e-learning, books and videos; professional certification support; leadership development programs developed in partnership with leading universities; rotational programs; and on-the-job learning. Annually and quarterly, we assign learning content that supports our “e3” (excellence, everywhere, everyday) operating system, Code of Conduct, ethical standards, compliance with laws applicable to our business and responsibility for safety and environmental goals. We maintain a robust succession planning process whereby we regularly review our internal talent pipeline and adjust individual development plans accordingly. We offer competitive salaries and comprehensive benefit packages, including health care, retirement planning and employer retirement contributions, educational assistance, child and elder back-up care, paid parental leave and a discretionary paid time off program. In addition, we offer caregiver time-off and pre-retirement programs. Also, we have a robust and comprehensive listening strategy centered around multiple employee surveys, enabling us to gain real-time insights into the employee experience. By prioritizing engagement and utilizing the power of feedback, we continuously evolve our workplace culture to ensure that individuals feel engaged, valued and inspired to perform at their best.
DE&I. Our success as the industry’s Trusted Disruptor depends on our ability to continue to innovate and develop new solutions to solve our customers’ most critical challenges. We believe that having a strong, talented workforce and culture with a diverse array of experiences, perspectives and backgrounds is essential to driving innovation. We have established two clear long-term goals: half of our workforce will be female and at least one third will be people of color. We progress toward these goals through growing diverse talent, enabling a culture of inclusivity and equity, and ensuring we clearly communicate our DE&I efforts internally and externally. We support a variety of science, technology, engineering and mathematics (“STEM”) initiatives to further develop our employees and build talent pipelines within our communities. We also have an established diversity council, co-chaired by our Chief Executive Officer (“CEO”) and comprised of employee resource group (“ERG”) leadership and executives from across the Company, to evaluate and influence the strategies, policies and steps we take to advance DE&I. We now offer eleven ERGs - adding two new groups this year - that bring together employees from all backgrounds to foster professional development, community outreach and employee engagement opportunities. We also further develop inclusive behaviors and culture through ongoing learning throughout the year, encouraging conversation and action through initiatives like our annual “Day of Understanding” event, our “Six Signature Traits for Inclusive Leadership” training and the launch of our new “DE&I Champions” program. Finally, we celebrate the unique voices of our employees through our “I am L3Harris” and “Inclusive Leadership” internal communication series. We continue to improve the diversity of our workforce and work toward our long-term goals.
The table below provides the makeup of our workforce at December 29, 2023:
| Overall | Executive | ||||||||||
| Persons of color(1) | 29% | 18% | |||||||||
| Female population(1) | 25% | 36% | |||||||||
| Veterans(1) | 16% | 15% | |||||||||
| Persons with disabilities(1) | 10% | 9% | |||||||||
| Generational breakout(2): | |||||||||||
| Boomers (1945-1964) | 21% | 20% | |||||||||
| Generation X (1965-1980) | 34% | 59% | |||||||||
| Millennials (1981-1996) | 36% | 21% | |||||||||
| Generation Z (after 1996) | 9% | —% |
(1) Based on employee self-identification
(2) Age ranges align with Pew Research Center definitions.
Additional information regarding our human capital strategy is available in our DE&I Annual Report that can be found on our company website. Information on our website, including our DE&I Annual Report, is not incorporated by reference into this Report.
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Available Information
Our principal executive offices are located at 1025 West NASA Boulevard, Melbourne, Florida 32919. Our website address is https://www.l3harris.com.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, current reports on Form 8-K and amendments to such reports are available free of charge on our website https://www.l3harris.com/investors, as soon as reasonably practicable after these reports are electronically filed with or furnished to the U.S. Securities and Exchange Commission (“SEC”). We also will provide the reports in electronic or paper form, free of charge, upon written request. Our website and the information posted thereon are not incorporated into this Report or any current or other periodic report that we file with or furnish to the SEC.
Item 1A. RISK FACTORS.
We have described many of the trends and other factors that we believe could impact our business and future results in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report. In addition, our business, financial condition, results of operations, cash flows and equity are subject to, and could be materially adversely affected by, various risks and uncertainties, including, without limitation, those set forth below, any one of which could cause our actual results to vary materially from recent results or our anticipated future results.
Macroeconomic, Industry and Governmental Risks
We depend on winning business in competitive markets from U.S. Government customers for a significant portion of our revenue. We are highly dependent on revenue from U.S. Government customers, primarily defense-related programs with the DoD and a broad range of programs with the U.S. Intelligence Community and other U.S. Government departments and agencies. The percentage of our revenue derived from sales to U.S. Government customers, including foreign military sales funded through the U.S. Government, both directly and through prime contractors, was 76% in fiscal 2023.
The market for sales to U.S. Government customers is highly competitive, and the U.S. Government often chooses to use contractors other than us, for example, as part of competitive bidding processes (through which we expect that a majority of the business we seek will be awarded), or otherwise due to our competitors’ ongoing efforts to expand their business relationships with the U.S. Government. The U.S. Government has increasingly relied on certain types of contracts that are subject to multiple competitive bidding processes, including multi-vendor indefinite delivery, indefinite quantity (“IDIQ”), government-wide acquisition contracts (“GWACs”), General Services Administration Schedules and other multi-award contracts, which has resulted in greater competition and increased pricing pressure. Some of our competitors have greater financial resources than we do and may have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas. We may not be able to continue to win competitively awarded contracts or to obtain task orders under multi-award contracts. Further, competitive bidding processes involve significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us or may be split with competitors, and the risk that we may fail to accurately estimate the resources and costs required to fulfill any contract awarded to us. For these reasons and others, we may choose not to bid in certain competitive bidding processes, which would result in the potential loss of opportunities. Additionally, bid protests from unsuccessful bidders can extend the time until work on a contract can begin and may result in significant expense or delay, contract modification or contract rescission as a result of our competitors protesting or challenging contracts awarded to us.
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 U.S. Government programs must compete with programs managed by other government contractors and with other policy imperatives for consideration for limited resources and for uncertain levels of funding during the budget and appropriations process. Although multi-year contracts may be authorized and appropriated in connection with major procurements, Congress generally appropriates funds on a U.S. Government fiscal year (“GFY”) basis. Procurement funds are typically made available for obligation over the course of one to three years. Consequently, programs often initially receive only partial funding, and additional funds are obligated only as Congress authorizes further appropriations.
We cannot predict the extent to which total funding and/or funding for individual programs will be included, increased, or reduced as part of the annual appropriations process ultimately approved by Congress and the President or in separate supplemental appropriations or continuing resolutions, as applicable. Budget and appropriations decisions made by the U.S. Government are outside of our control and have long-term consequences for our business. U.S. Government spending priorities and levels remain uncertain and difficult to predict and are
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affected by numerous factors, including the U.S. Government’s budget deficit and the national debt. A change in U.S. Government spending priorities or an increase in non-procurement spending at the expense of our programs, or a reduction in total U.S. Government spending on an absolute or inflation-adjusted basis, could have material adverse consequences on our current or future business.
For GFY 2024, the federal government is currently being funded under a Continuing Resolution (“CR”). The CR funds Agriculture, Energy-Water, Military-Construction-VA and Transportation-HUD through March 1, 2024 and the other portions of the federal government, including the DoD, through March 8, 2024. This is the third CR in GFY2024. Pursuant to the Fiscal Responsibility Act (P.L., 118-5), if a final GFY2024 appropriations bill is not enacted by April 30, 2024, then spending cuts would go into effect and discretionary spending limits would be revised to reflect GFY 2023 enacted levels for defense and nondefense categories and decrease by 1%. In addition, if Congress does not enact a full-year GFY2024 appropriations bill, the U.S. Government may not be able to fulfill its funding obligations, and there could be significant disruption to all discretionary programs and corresponding impacts on the entire defense industry, which could adversely affect our business, results of operations, financial condition and cash flow. Any inability of the U.S. Government to complete its budget process for any GFY and resulting operation on funding levels equivalent to its prior fiscal year pursuant to a CR or shut down, also could have material adverse consequences on our current or future business. For more information see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - U.S. and International Budget Environment” of this Report.
Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts. Our fixed-price contracts, particularly those for development programs, 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 - Government Contracts” of this Report. 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 Estimates - Revenue Recognition” of this Report.
In fiscal 2023, 73% of our revenue was derived from fixed-price contracts that 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 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. Fixed-price U.S. Government contracts can expose us to potentially large losses because the U.S. Government can hold u
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Item 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
Item 1C. CYBERSECURITY.
Risk Management and Strategy
We assess and identify material risks from cybersecurity threats primarily through the work of our Information Security organization as part of our enterprise risk management (“ERM”) process. The ERM process, administered by management with input from each business segment and function, continually monitors material risks facing L3Harris, including cybersecurity threats. Our Chief Information Officer (“CIO”), has extensive experience leading information technology for global organizations across aerospace, defense and industrials, works directly with our CEO and other members of senior management to assess cybersecurity threats as part of the ERM process. The CIO also oversees the internal cybersecurity organization of more than 100 full-time employees headed by our Chief Information Security Officer (our “Cybersecurity Team”).
Risks related to cybersecurity threats are reflected in an enterprise risk “heat map,” along with other material risks identified through the ERM process, and any mitigation plans developed to manage such risks are reported to our Board. The “heat map” includes risks related to cybersecurity threats to L3Harris and our customers, suppliers, vendors, subcontractors or other third parties, and the possibility of a data breach of our confidential, personal and proprietary information through a cybersecurity incident impacting L3Harris or any third party. We could be negatively impacted by a security breach, through cyber-attack, cyber intrusion, insider threats, supply chain incidents, or otherwise, or other significant disruption of our IT networks and related systems or of those we operate for certain of our customers. See “Item 1A - Risk Factors” in this Report for further discussion of specific risks related to cybersecurity threats.
To actively manage cybersecurity risks identified as part of the ERM process or otherwise and to manage emerging cybersecurity threats in real time, management has implemented an ISO 27001 certified Information Security Management System. Our Cybersecurity Team operates a Security Operations Center that continuously monitors activity, frequently scans applications and systems for vulnerabilities to risk from cybersecurity threats and creates action plans to address and track identified cybersecurity threats until they have been remediated. Activities and cybersecurity incidents are reported to our CIO, who briefs senior management, including our CEO, as well the Innovation and Cyber Committee of our Board (the “Innovation and Cyber Committee”) and the Audit Committee of our Board (the “Audit Committee”), as appropriate. Our Cybersecurity Team also routinely engages with third parties, including government agencies focused on cyber resiliency, to manage risks from cybersecurity threats. For example, we are members of the DoD Defense Industrial Base Collaborative Information Sharing Environment, the National Defense Information Sharing and Analysis Center, and the National Security Agency Enduring Security Framework. These organizations share real-time cybersecurity threat information and best practices in protecting, detecting and recovering from cybersecurity threats.
We also have a counterintelligence and insider threat program to detect potential external and internal threats, conducted by purposeful or unwitting actors. As a government contractor, we must comply with extensive cybersecurity regulations, including the Defense Federal Acquisition Regulation Supplement (“DFARS”) related to adequately safeguarding controlled unclassified information (“CUI”) and reporting cybersecurity incidents to the DoD. The policies and implemented controls reflect our adherence to these requirements and have been assessed by external organizations, including industry partners and the federal government.
To mitigate cybersecurity risk introduced from our supply chain, we have a dedicated Cybersecurity - Supply Chain Risk Management team. This team assesses new suppliers against best cybersecurity practices, ensures cybersecurity regulations are contractually obligated and coordinates mitigation actions across the company if a supplier is impacted by a cybersecurity incident. They utilize industry monitoring services to identify potential supply chain incidents and work closely with our Cybersecurity team to understand the latest threats affecting our industry.
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Additionally, as part of our processes to manage risks related to a breach in our information systems, management requires employees to take annual cybersecurity training and shares regular awareness updates regarding cybersecurity threats. Our Cybersecurity Team regularly tests employees throughout the year to assess the effectiveness of the cybersecurity training. We also periodically conduct penetration testing of our network, hold tabletop exercises of cyber incidents, and undertake cybersecurity assessments led by Internal Audit to improve our risk mitigation and assist in the determination of a potential material impact caused by a cybersecurity incident.
Governance
The Audit Committee provides regular oversight and review of our ERM process and other guidelines and policies governing the processes by which our CEO and senior management assess our exposure to risk, including risk from cybersecurity threats. The Innovation and Cyber Committee receives regular briefings from our CIO, Chief Information Security Officer and other members of senior management on cybersecurity threats and related matters and assists the Audit Committee in its oversight and review of our ERM process.
The Innovation and Cyber Committee reviews our cybersecurity risk across the enterprise at least annually, including IT, supply chain and products and our cybersecurity strategy framework and operational posture. The Innovation and Cyber Committee also reviews our IT, data security and other systems, processes, policies, procedures and controls at least annually to (a) identify, assess, monitor and mitigate cybersecurity risks; (b) identify measures to protect and safeguard against cybersecurity threats and breaches of confidential information and data and IT infrastructure and our other assets or assets of our customers or other third parties in our possession or custody; (c) support the response and management of cybersecurity threats and data breach incidents; and (d) aid in compliance with legal and regulatory requirements governing cybersecurity or data security reporting requirements. The Innovation and Cyber Committee reports its activities to the full Board on a regular basis and makes such recommendations to the Board and management with respect to risks from cybersecurity threats and other matters as it deems necessary or appropriate.
Item 2. PROPERTIES.
As of December 29, 2023, we operated approximately 300 locations in the U.S., Canada, EMEA, APAC and South America, consisting of approximately 27 million square feet of manufacturing, administrative, R&D, warehousing, engineering and office space, of which we owned approximately 12 million square feet and leased approximately 15 million square feet. As of December 29, 2023, we had major operations at the following locations:
SAS — Palm Bay, Melbourne and Malabar, Florida; Rochester and Amityville, New York; Clifton, New Jersey; Van Nuys, San Diego, San Leandro and Menlo Park, California; Colorado Springs, Colorado; Herndon, Virginia; Fort Wayne, Indiana; Wilmington, Massachusetts; and Alpharetta, Georgia.
IMS — Greenville, Waco, Rockwall and Plano, Texas; Mirabel and Waterdown, Canada; Camden, New Jersey; Anaheim, California; Mason and Cincinnati, Ohio; Tulsa, Oklahoma; Salt Lake City, Utah; Philadelphia, Pennsylvania; Crawley, United Kingdom; and Grand Rapids, Michigan.
CS — Salt Lake City, Utah; Rochester, New York; Londonderry, New Hampshire; Lynchburg, Virginia; Tempe, Arizona; Carlsbad, California; Farnborough, United Kingdom; Brisbane, Australia; Sunrise, Florida; and Abu Dhabi, United Arab Emirates.
AR — Camden, Arkansas; Chatsworth, California; Huntsville, Alabama; West Palm Beach, Florida; Orange, Virginia; Redmond, Washington; Orlando, Florida; Hancock County, Mississippi; and Jonesborough, Tennessee.
Corporate — Melbourne, Florida; and Washington, D.C.
Our facilities are suitable and adequate for their intended purposes, are well-maintained, are generally in regular use and have capacities adequate for current and projected needs. We will, from time to time, acquire additional facilities, expand existing facilities and dispose of existing facilities or parts thereof, as management deems necessary. See Note 5: Property, Plant and Equipment, Net and Note 11: Leases in the Notes for more information on our owned properties and our lease obligations, respectively.
Item 3. LEGAL PROCEEDINGS.
See Note 15: Legal Proceedings, Commitments and Contingencies included in our Notes for information relating to our legal proceedings.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS.
The name, age, position held with us and principal occupation and employment during at least the past five years for each of our executive officers as of February 16, 2024 were as follows:
| Name and Age | Position Currently Held and Past Business Experience | |||||||
| Kenneth L. Bedingfield, 51 | Chief Financial Officer (“CFO”) since December 11, 2023. Before joining L3Harris, Mr. Bedingfield worked at Epirus, Inc. (“Epirus”) as CEO from December 2022 to December 2023, President and Chief Operating Officer from August 2022 to December 2022, and as CFO from June 2020 to December 2022. Prior to Epirus, Mr. Bedingfield worked at Northrop Grumman Corporation (“Northrop Grumman”) most recently as CFO from 2015 to 2020, Aerospace Sector CFO from 2013 to 2015, and Corporate Controller and Chief Accounting Officer from 2011 to 2013. Prior to Northrop Grumman, Mr. Bedingfield spent 17 years at KPMG, serving as the Partner of the Aerospace & Defense Audit Practice. | |||||||
| Christopher E. Kubasik, 62 | Chair and CEO since June 29, 2022. Vice Chair and CEO from June 29, 2021. Vice Chair, President and Chief Operating Officer from June 29, 2019 to June 29, 2021. Served with L3 Technologies, Inc. (“L3”), as Chairman, CEO and President from May 2018 to June 2019; as CEO and President from January 2018 to May 2018. | |||||||
| Samir B. Mehta, 51 | President, CS since January 2023. Before joining L3Harris, Mr. Mehta worked at Collins Aerospace, a subsidiary of RTX, as President of Advanced Structures from 2018 to 2022 and President, Aftermarket from 2017 to 2018. Prior to RTX, Mr. Mehta spent over 17 years with Sikorsky Aircraft, notably serving as President, Defense Systems and Services. | |||||||
| Scott T. Mikuen, 62 | Senior Vice President, General Counsel and Secretary since February 2013. General Counsel since 2010 and Secretary since 2004. Mr. Mikuen joined L3Harris as finance counsel in 1996. | |||||||
| Corliss J. Montesi, 59 | Vice President and Principal Accounting Officer since August 2021. Vice President, Internal Audit from June 2020 to August 2021. Before joining L3Harris, Ms. Montesi worked at Stanley Black and Decker as Vice President, Functional Transformation – Shared Services from 2018 to 2019; and as Vice President, Corporate Controller from 2014 to 2018. | |||||||
| Ross S. Niebergall, 60 | President, AR since July 2023. Vice President, AR Integration from March 2023 to July 2023. Vice President and Chief Technology Officer from July 2017 to March 2023. Before joining L3Harris, Mr. Niebergall worked at RTX, for over 10 years, notably serving as the Vice President and Deputy for Development Programs, Engineering and Technology from 2016 to 2017 and CEO of Thales Raytheon Systems from 2014 to 2016. | |||||||
| Melanie Rakita, 46 | Vice President and Chief Human Resources Officer since April 2023. Vice President, Human Resources for IMS from February 2023 to March 2023, for SAS from July 2019 to February 2023, and for Electronic Systems from February 2018 to June 2019. Vice President of Talent and Inclusion from February 2017 to February 2018. Vice President, Critical Networks from November 2015 to February 2017. Before joining L3Harris, Ms. Rakita worked for United Technologies Corporation from 2008 to 2015. | |||||||
| Jonathan P. Rambeau, 51 | President, IMS since October 2022. Before joining L3Harris, Mr. Rambeau worked at Lockheed Martin for 26 years, notably serving as Vice President and General Manager, Integrated Warfare Systems and Sensors of the Rotary and Mission Systems business from 2020 to 2022 and Vice President and General Manager, C6ISR, Rotary and Mission Systems from 2016 to 2020. | |||||||
| Sean J. Stackley, 66 | Senior Vice President, Strategy & Growth since October 2022. President, IMS from June 2019 to October 2022. Served with L3 as Senior Vice President and President of Communications & Networked Systems Segment from September 2018 to June 2019; and as Corporate Vice President, Strategic Advance Programs and Technologies from January 2018 to September 2018. Before joining L3 in January 2018, (Hon.) Mr. Stackley spent four decades in public service, including a 27-year career with the U.S. Navy, where he most recently was Acting Secretary of the Navy from January 2017 to July 2017 and Secretary of the Navy for Research, Development and Acquisition from 2008 to 2017. | |||||||
| Edward J. Zoiss, 59 | President, SAS since June 2019. President, Electronic Systems from July 2015 to June 2019. Vice President and General Manager, Defense Programs, Government Communications Systems from June 2013 to July 2015. | |||||||
There is no family relationship between any of our executive officers or directors. All of our executive officers are elected annually and serve at the pleasure of our Board.
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PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock, par value $1.00 per share, is listed and traded on the New York Stock Exchange (“NYSE”), under the ticker symbol “LHX.” According to the records of our transfer agent, as of February 9, 2024, there were 9,667 holders of record of our common stock.
Dividends
We paid per share cash dividends on our common stock of $1.14 each quarterly period of fiscal 2023, $1.12 each quarterly period of fiscal 2022 and $1.02 each quarterly period of fiscal 2021. Our annualized per share cash dividend rate was $4.56 in fiscal 2023, $4.48 in fiscal 2022 and $4.08 in fiscal 2021. Quarterly cash dividends are typically paid in March, June, September and December. We currently expect to continue paying cash dividends in the near future, but we can give no assurances concerning payment of future dividends or future dividend increases. The declaration of dividends by our Board 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 may deem relevant.
L3Harris Stock Performance Graph
The following performance graph is not deemed to be filed with the SEC or subject to the liabilities of Section 18 of the Exchange Act, and should not be deemed to be incorporated by reference into any other previous or future filings by us under the Securities Act or the Exchange Act.
The performance graph and table below compare the fiscal year in the period ended June 28, 2019, the fiscal transition period for the two quarters ended January 3, 2020, fiscal 2020, fiscal 2021, fiscal 2022 and fiscal 2023 cumulative total shareholder return (“TSR”) of our common stock (the common stock of Harris Corporation prior to the L3Harris Merger on June 29, 2019, and the common stock of L3Harris Technologies, Inc. after the L3Harris Merger) with the comparable cumulative total returns of the Standard & Poor’s 500 Composite Stock Index (“S&P 500”) and the Standard & Poor’s 500 Aerospace & Defense Index (“S&P 500 Aerospace & Defense”). The figures in the performance graph below assume an initial investment of $100 at the close of business on June 29, 2018 in L3Harris common stock, the S&P 500 and the S&P 500 Aerospace & Defense and the reinvestment of all dividends.
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COMPARISON OF THE FISCAL YEAR ENDED JUNE 28, 2019 (PRIOR TO THE L3HARRIS MERGER), THE FISCAL TRANSITION PERIOD FOR THE TWO QUARTERS ENDED JANUARY 3, 2020, FISCAL 2020, FISCAL 2021, FISCAL 2022 AND FISCAL 2023 CUMULATIVE TOTAL RETURN AMONG L3HARRIS, S&P 500 AND S&P 500 AEROSPACE & DEFENSE
Recent Sales of Unregistered Securities
During fiscal 2023, we did not issue or sell any unregistered securities.
Issuer Purchases of Equity Securities
On January 28, 2021, we announced that our Board approved a $6.0 billion share repurchase authorization under our repurchase program. On October 21, 2022, we announced that our Board approved an additional $3.0 billion share repurchase authorization that was in addition to the remaining unused authorization of 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 purchases, private transactions, transactions structured through investment banking institutions or any combination thereof.
During fiscal 2023, we repurchased 2.5 million shares of our common stock under our share repurchase program for $0.5 billion at an average share price of $204.38, excluding commissions of $0.02 per share. During fiscal 2022, we repurchased 4.7 million shares of our common stock under our share repurchase program for $1.1 billion at an average share price of $231.44, excluding commissions of $0.02 per share. As of December 29, 2023, the remaining unused authorization under our repurchase programs was $3.9 billion.
Employee transactions are represented by a combination of (a) shares of our common stock delivered to us in satisfaction of the tax withholding obligation of holders of performance units, restricted units or restricted shares that vested during the quarter and (b) performance units, restricted units or restricted shares returned to us upon retirement or employment termination of employees. Our equity incentive plans provide that the value of shares delivered to us to pay the exercise price of options or to cover tax withholding obligations shall be the closing price of our common stock on the date the relevant transaction occurs.
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The following table sets forth information with respect to repurchases by us of our common stock during the fiscal quarter ended December 29, 2023.
| Period* | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs**(1)** | Maximum approximate dollar value of shares that may yet be purchased under the plans or programs**(1)** ($ in millions) | |||||||||||||||||||
| Month No. 1 | |||||||||||||||||||||||
| (September 30, 2023 - October 27, 2023) | |||||||||||||||||||||||
| Repurchase program(1) | — | $ | — | — | $3,935 | ||||||||||||||||||
| Employee transactions(2) | 20,761 | $ | 171.09 | — | — | ||||||||||||||||||
| Month No. 2 | |||||||||||||||||||||||
| (October 28, 2023 - November 24, 2023) | |||||||||||||||||||||||
| Repurchase program(1) | — | $ | — | — | $3,935 | ||||||||||||||||||
| Employee transactions(2) | 26,591 | $ | 185.30 | — | — | ||||||||||||||||||
| Month No. 3 | |||||||||||||||||||||||
| (November 25, 2023 - December 29, 2023) | |||||||||||||||||||||||
| Repurchase program(1) | — | $ | — | — | $3,935 | ||||||||||||||||||
| Employee transactions(2) | 9,314 | $ | 200.54 | — | — | ||||||||||||||||||
| Total | 56,666 | — | $3,935 |
*Periods represent our fiscal months.
(1)On October 21, 2022, we announced that our Board approved a $3 billion share repurchase authorization under our share repurchase program that was in addition to the remaining unused authorization of 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 purchases, private transactions, transactions structured through investment banking institutions or any combination thereof. As of December 29, 2023, the remaining unused authorization under our repurchase programs was $3.9 billion (as reflected in the table above).
(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 or restricted units that vested during the quarter and (b) performance units or restricted units returned to us upon retirement or employment termination of employees. Our equity incentive plans provide that the value of shares delivered to us to pay the exercise price of options or to cover tax withholding obligations shall be the closing price of our common stock on the date the relevant transaction occurs.
Item 6. [RESERVED.]
| | | | | | |
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations for fiscal 2023 compared with fiscal 2022. A discussion of fiscal 2022 compared to fiscal 2021 can be found in Part II: Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2022 (our “Fiscal 2022 Form 10-K”). 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 Consolidated Financial Statements and accompanying Notes appearing elsewhere in this Report. 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.”
OVERVIEW
We are the Trusted Disruptor in the 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 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
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applications, as well as commercial applications. As of December 29, 2023, we had approximately 50,000 employees, including approximately 20,000 engineers and scientists. 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.
We structure our operations primarily around the products, systems and services we sell and the markets we serve, and we report the financial results of our continuing operations in the four segments: SAS, IMS, CS and AR. See Note 14: Business Segments in the Notes for further information regarding our business segments, including how we define segment operating income or loss.
U.S. and International Budget Environment
Our largest customers are various departments and agencies of the U.S. Government — the percentage of our revenue that was derived from sales to U.S. Government customers, including foreign military sales funded through the U.S. Government, whether directly or through prime contractors, was 76%, 74% and 75%, in fiscal 2023, 2022 and 2021, respectively.
On December 29, 2022, the President signed the Consolidated Appropriations Act, 2023 (H.R. 2617 ) into law, which provided $858 billion of national defense funding for the 2023 GFY, of which $816 billion was allotted to the DoD. On March 13, 2023, the President’s Budget Request for GFY 2024 (“2024 PBR”) was released. The 2024 PBR 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 2024 PBR, including responsive satellites, ISR aircraft, tactical communications and maritime solutions.
On June 3, 2023, the President signed into law the Fiscal Responsibility Act of 2023 (“FRA”), (P.L., 118-5) which suspended the federal debt limit through January 1, 2025 and established new discretionary funding limits for defense and non-defense accounts. The deal capped GFY 2024 national defense funding at $886 billion, including $842 billion for the DoD specifically, and non-defense funding at $704 billion. The FRA includes a provision that requires if a CR is in effect on January 1, 2024, for any discretionary account, the discretionary spending limits would be revised to reflect GFY23 enacted levels for defense and nondefense, decreased by 1%. If a final GFY2024 appropriations bill is not enacted by April 30, the 1% spending cuts would go into effect.
On September 30, 2023, the President signed a short-term CR, funding the government for 48 days through November 17, 2023. On November 17, 2023, the President signed a second CR into law. The second CR funded some government agencies through January 19, 2024, and other agencies, including the DoD, through February 2, 2024. On January 19, 2024, the President signed a third CR into law extending government funding through March 1 and March 8, respectively. Congress must enact full-year GFY appropriations bills or another CR to fund the government by those respective deadlines. While operating under a CR, government agencies are allocated a portion of GFY 2023 enacted funds, and DoD is prohibited from starting new programs.
The overall defense spending environment, both in the U.S. and internationally, reflects the continued impacts of the conflicts in Ukraine and geopolitical tensions across Asia and the Middle East, and changes to U.S. Government or international spending priorities have and could in the future impact our business.
For a discussion of U.S. Government funding risks and international business risks see “Item 1. Business -Government Contracts,” “Item 1. Business - International Business,” “Item 1A. Risk Factors” and “Item 3. Legal Proceedings” of this Report.
Economic Environment
The macroeconomic environment continues to present challenges, which have impacted and may continue to impact our future results. The ongoing uncertainty related to the impacts of inflation, as well as increased interest rates, which raises the cost of borrowing for the federal government, could in the future impact U.S. Government spending priorities and the demand for our products.
For a discussion of inflation-related risks, see “Item 1A. Risk Factors” of this Report.
Acquisitions and Pending Divestitures
TDL Product Line. On January 3, 2023, we completed the acquisition of TDL for a purchase price of $1,958 million. TDL is reported within our CS segment.
AJRD. On July 28, 2023, we completed the acquisition of AJRD for a total net purchase price of $4,715 million. The operations of AJRD are reported in the newly established AR segment and in our corporate headquarters.
Pending Divestiture of CAS Disposal Group. On November 27, 2023, we announced that we entered into a definitive agreement to sell our CAS disposal group, which is included in our IMS segment.
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See Note 13: Acquisitions, Divestitures and Asset Sales in the Notes for further information.
Operating Environment, Strategic Priorities and Key Performance Measures
The heightened geopolitical tensions worldwide emphasize the need for strengthened deterrence to support the U.S. and its allies. With a national security, technology-focused portfolio, we are uniquely positioned to meet our customers’ evolving needs across all domains and deliver advanced capabilities to support the U.S. and its allies. Many of our offerings are supported in the 2024 GFY DoD budget, including responsive satellites, ISR aircraft, tactical communications, networked maritime systems and classified cyber solutions. In fiscal 2023, we received several key strategic contract awards across each of our domains, and we ended the year with backlog of $32.7 billion, a 47% increase over the prior year. Also in fiscal 2023, we invested $480 million (2% of total revenue) in company-funded R&D focused on technologies that expand our capabilities across our domains.
As noted in the “Acquisitions and Pending Divestitures” section above, during fiscal 2023, we closed on two acquisitions. The TDL acquisition provides us access to the Link 16 network and positions us to make the installed base o
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Item 7A. 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 and procedures governing the use of financial instruments to manage our exposure to such risks. For a discussion of such policies and procedures and the related risks, see “Financial Risk Management” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report, which is incorporated by reference into this Item 7A.
In addition, we are exposed to market return fluctuations on our defined benefit plans. A material adverse decline in the value of these assets and/or the discount rate for PBOs would result in a decrease in the funded status of the defined benefit plans, an increase in net periodic benefit cost and an increase in required funding. To protect against declines in the discount rate (i.e., interest rates), we will continue to monitor the performance of these assets and market conditions as we evaluate the amount of future contributions. For further information, see Note 9: Retirement Benefits in the Notes, which information is incorporated by reference into this Item 7A.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| Page | |||||
| Management’s Report on Internal Control Over Financial Reporting | 45 | ||||
| Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) on the Consolidated Financial Statements | 46 | ||||
| Report of Independent Registered Public Accounting Firm on the Effectiveness of Internal Control Over Financial Reporting | 50 | ||||
| Consolidated Statement of Operations — Fiscal Year Ended December 29, 2023, December 30, 2022 and December 31, 2021 | 52 | ||||
| Consolidated Statement of Comprehensive Income — Fiscal Year Ended December 29, 2023, December 30, 2022 and December 31, 2021 | 53 | ||||
| Consolidated Balance Sheet — December 29, 2023 and December 30, 2022 | 54 | ||||
| Consolidated Statement of Cash Flows — Fiscal Year Ended December 29, 2023, December 30, 2022 and December 31, 2021 | 55 | ||||
| Consolidated Statement of Equity — Fiscal Year Ended December 29, 2023, December 30, 2022 and December 31, 2021 | 56 | ||||
| Notes to Consolidated Financial Statements | 57 | ||||
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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of L3Harris Technologies, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance, based on an appropriate cost-benefit analysis, regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 29, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on management’s assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 29, 2023.
Management excluded from its assessment of effectiveness of the Company’s internal control over financial reporting the internal controls of Tactical Data Links product line (“TDL”) and Aerojet Rocketdyne Holdings, Inc. (“AJRD”), which the Company acquired on January 3, 2023 and July 28, 2023, respectively. The financial statements of TDL and AJRD represent 1% and 5%, respectively, of the Company’s total assets, excluding the preliminary value of goodwill and other intangible assets, as of December 29, 2023, and 2% and 5%, respectively, of the Company’s total revenue for the fiscal year then ended. Management will include the internal controls of TDL and AJRD in its assessment of the effectiveness of the Company’s internal control over financial reporting as of the end of fiscal 2024.
The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued a report on the effectiveness of the Company’s internal control over financial reporting. This report appears on page 50 of this Annual Report on Form 10-K.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of L3Harris Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of L3Harris Technologies, Inc. (the Company) as of December 29, 2023 and December 30, 2022, the related consolidated statements of operations, comprehensive income, cash flows and equity for each of the three years in the period ended December 29, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 29, 2023 and December 30, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 29, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 16, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. 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
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
Item 9A. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures: We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our CEO and 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 December 29, 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 under the supervision and with the participation of our management, including our CEO and our CFO. Based on this work and other evaluation procedures, our management, including our CEO and our CFO, has concluded that as of December 29, 2023, our disclosure controls and procedures were effective.
(b) Changes in Internal Control: We periodically review our internal control over financial reporting (“ICFR”) 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 ICFR 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
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activities. As part of our acquisition of AJRD, we are in the process of incorporating our controls and procedures with respect to AJRD’s operations, and we will include internal controls with respect to AJRD’s operations in our assessment of the effectiveness of our ICFR as of the end of fiscal 2024. Other than changes related to incorporating our controls and procedures with respect to AJRD operations, there have been no changes in our ICFR that occurred during the quarter ended December 29, 2023 that have materially affected, or are reasonably likely to materially affect, our ICFR.
(c) Evaluation of ICFR: Our management is responsible for establishing and maintaining adequate ICFR. Our management, with the participation of our CEO and our CFO, assessed the effectiveness of our ICFR as of December 29, 2023. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Our management excluded from its assessment of effectiveness of ICFR the internal controls of AJRD, which we acquired on July 28, 2023, and whose financial statements represent 5% of our total assets, excluding the preliminary value of goodwill and other intangible assets, as of December 29, 2023, and 5% of our total revenue for our fiscal year then ended. Our management will include the internal controls of AJRD in its assessment of the effectiveness of our ICFR as of the end of fiscal 2024. Based on our management’s assessment and those criteria, our management concluded that our ICFR was effective as of December 29, 2023. “Management’s Report on Internal Control Over Financial Reporting” is included within “Item 8. Financial Statements and Supplementary Data” of this Report. The effectiveness of our ICFR was audited by Ernst & Young LLP, our independent registered public accounting firm, whose unqualified report is included within “Item 8. Financial Statements and Supplementary Data” of this Report.
Item 9B. OTHER INFORMATION.
Securities Trading Plans of Directors and Executive Officers
We require all executive officers and directors to effect purchase and sale transactions in L3Harris securities pursuant to a trading plan (each, a “10b5-1 Plan”) intended to satisfy the requirements of Rule 10b5-1 under the Exchange Act (“Rule 10b5-1”). We limit executive officers to a single 10b5-1 Plan in effect at any time, subject to limited exceptions in accordance with Rule 10b5-1. In addition, our stock ownership guidelines require executive officers to maintain ownership of L3Harris securities (excluding stock options and unearned performance share units) with a value equal to a multiple of their annual salary. Each executive officer identified in the table below is expected to hold securities considerably in excess of L3Harris’ stock ownership guidelines following the sale of the maximum number of shares contemplated.
The following table includes the material terms (other than with respect to the price) of each 10b5-1 Plan adopted or terminated by our executive officers and directors during the quarter ended December 29, 2023:
| Name and title | Date of adoption of 10b5-1 Plan**(1)** | Scheduled expiration date of 10b5-1 Plan**(2)** | Aggregate number of shares of common stock to be purchased or sold**(3)** | |||||||||||||||||||||||
| Christopher E. Kubasik Chair and CEO | December 14, 2023 | April 8, 2024 | Up to 46,528 shares underlying options expiring in 2025 | |||||||||||||||||||||||
| Scott T. Mikuen Senior Vice President, General Counsel and Secretary | December 14, 2023 | March 18, 2024 | Up to 6,392 shares | |||||||||||||||||||||||
| William H. Swanson Director | December 13, 2023 | May 1, 2024 | 2,500 shares | |||||||||||||||||||||||
| Edward J. Zoiss President, SAS | November 8, 2023 | July 26, 2024 | Up to 7,217 shares |
(1) Transactions under each Rule 10b5-1 Plan commence no earlier than 90 days after adoption, or such later date as required by Rule 10b5-1.
(2) Each Rule 10b5-1 Plan may expire on such earlier date as all transactions are completed.
(3) Each Rule 10b5-1 Plan provides for shares to be sold on multiple predetermined dates.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
PART III
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Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information regarding our directors, executive officers and corporate governance is included in our Proxy Statement for our 2024 Annual Meeting of Shareholders scheduled to be held on April 19, 2024 (our “2024 Proxy Statement”), which is expected to be filed within 120 days after the end of our fiscal 2023.
(a) Identification of Directors: The information required by this Item with respect to our directors is incorporated herein by reference to the discussion under the headings Proposal 1: Election of Directors and Nominee Biographies in our 2024 Proxy Statement.
(b) Identification of Executive Officers: Certain information regarding our executive officers is included in Part I of this Report under the heading “Information about our Executive Officers” in accordance with General Instruction G(3) of Form 10-K.
(c) Audit Committee Information; Financial Expert: The information required by this Item with respect to the Audit Committee of our Board and “audit committee financial experts” is incorporated herein by reference to the discussions under the headings Corporate Governance and Board Committees— Audit Committee in our 2024 Proxy Statement.
(d) Delinquent Section 16(a) Reports: Information related to compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to the discussion under the heading Delinquent Section 16(a) Reports in our 2024 Proxy Statement.
(e) Code of Ethics: All of our directors and employees, including our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and other senior accounting and financial officers, are required to abide by our Code of Conduct. Our Code of Conduct is posted on our website at https://www.l3harris.com/resources/other/l3harris-code-conduct and is also available free of charge by written request to our Director of Ethics and Compliance, L3Harris Technologies, Inc., 1025 West NASA Boulevard, Melbourne, Florida 32919. We intend to disclose on the Code of Conduct section of our website at https://www.l3harris.com/resources/other/l3harris-code-conduct any amendment to, or waiver from, our Code of Conduct that is required to be disclosed to shareholders, within four business days following such amendment or waiver. The information required by this Item with respect to codes of ethics is incorporated herein by reference to the discussion under the heading Code of Conduct in our 2024 Proxy Statement.
(f) Policy for Nominees: The information required under Item 407(c)(3) of Regulation S-K is incorporated herein by reference to the discussion under the headings Director Nomination Process and Shareholder Nominations and Proposals in our 2024 Proxy Statement concerning procedures by which shareholders may recommend nominees to our Board, submit nominees for inclusion in our proxy materials pursuant to our “proxy access” provision of our By-Laws or directly propose nominees for consideration pursuant to our By-Laws but not pursuant to the proxy access provision. No material changes to those procedures have occurred since the disclosure regarding those procedures in our Proxy Statement for our 2023 Annual Meeting of Shareholders.
(g) Insider Trading Policies: We have adopted an Insider Trading Policy, which governs the purchase, sale, and/or other dispositions of our securities by directors, officers and employees and other covered persons and is designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to us. A copy of our Insider Trading Policy is filed as Exhibit 19 to this Report.
Additional information concerning requirements and procedures for shareholders directly nominating directors is contained under the heading Shareholder Nominations and Proposals in our 2024 Proxy Statement.
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Item 11. EXECUTIVE COMPENSATION.
The information required by this Item with respect to compensation of our directors and executive officers is incorporated herein by reference to the discussions under the headings Director Compensation and Benefits, Compensation Discussion and Analysis, Compensation Committee Report, Compensation Tables, CEO Pay Ratio and Pay Versus Performance in our 2024 Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table provides information as of December 29, 2023 about our common stock that may be issued, whether upon the exercise of options, warrants and rights or otherwise, under our existing equity compensation plans.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)****(2) | Weighted-average exercise price of outstanding options, warrants and rights (b)****(2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | ||||||||
| Equity compensation plans approved by shareholders(1) | 4,459,103 | $169.53 | 12,244,466 | ||||||||
| Equity compensation plans not approved by shareholders | — | — | — | ||||||||
| Total | 4,459,103 | 169.53 | 12,244,466 |
(1) Consists of awards under the L3Harris SIPs.
(2) Under the L3Harris SIPs, in addition to options, we have granted share-based compensation awards in the form of performance share units, restricted stock units and other similar types of share-based awards. As of December 29, 2023, there were awards outstanding under those plans with respect to 1,208,393 shares, consisting of awards of (i) 728,052 restricted stock units and (ii) 480,341 performance share units, for which all 1,208,393 were payable in shares but for which no shares were yet issued and outstanding. The 4,459,103 shares to be issued upon exercise of outstanding options, warrants and rights as listed in column (a) consisted of shares to be issued in respect of the exercise of 3,250,710 outstanding options and in respect of awards of 1,208,393 performance share units and restricted stock units payable in shares. Because there is no exercise price associated with awards of performance share units or restricted stock units, all of which are granted to employees at no cost, such awards are not included in the weighted-average exercise price calculation in column (b).
See Note 10: Stock Options and Other Share-Based Compensation in the Notes for a general description of our share-based incentive plans.
The other information required by this Item with respect to security ownership of certain of our beneficial owners and management is incorporated herein by reference to the discussions under the headings Principal Shareholders and Shares Owned By Directors, Nominees and Executive Officers in our 2024 Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this Item is incorporated herein by reference to the discussions under the headings Director Independence Standards and Related Person Transactions in our 2024 Proxy Statement.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item is incorporated herein by reference to the discussion under the heading Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm in our 2024 Proxy Statement.
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PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as a part of this Report:
| Page | |||||
| (1) List of Financial Statements Filed as Part of this Report: | |||||
| The following financial statements and reports of L3Harris Technologies, Inc. and its consolidated subsidiaries are included in Item 8 of this Report at the page numbers referenced below: | |||||
| Management’s Report on Internal Control Over Financial Reporting | 45 | ||||
| Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) on the Consolidated Financial Statements | 46 | ||||
| Report of Independent Registered Public Accounting Firm on the Effectiveness of Internal Control Over Financial Reporting | 50 | ||||
| Consolidated Statement of Operations — Fiscal Years Ended December 29, 2023, December 30, 2022 and December 31, 2021 | 52 | ||||
| Consolidated Statement of Comprehensive Income — Fiscal Years Ended December 29, 2023, December 30, 2022 and December 31, 2021 | 53 | ||||
| Consolidated Balance Sheet — December 29, 2023 and December 30, 2022 | 54 | ||||
| Consolidated Statement of Cash Flows — Fiscal Years Ended December 29, 2023, December 30, 2022 and December 31, 2021 | 55 | ||||
| Consolidated Statement of Equity — Fiscal Years Ended December 29, 2023, December 30, 2022 and December 31, 2021 | 56 | ||||
| Notes to Consolidated Financial Statements | 57 | ||||
| (2) Financial Statement Schedules: | |||||
| All schedules are omitted because they are not applicable, the amounts are not significant or the required information is shown in the Consolidated Financial Statements or the Notes thereto. |
(3) Exhibits:
The following exhibits are filed herewith or are incorporated herein by reference to exhibits previously filed with the SEC:
(3)(a) Restated Certificate of Incorporation of L3Harris Technologies, Inc. (1995), as amended, incorporated herein by reference to Exhibit 3(a) to the L3Harris Technologies, Inc.’s Quarterly Report on Form 10-Q filed with the SEC on July 29, 2022. (Commission File Number 1-3863)
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**(4)(c) (i) Indenture, dated as of October 1, 1990, between L3Harris Technologies, Inc. (formerly known as Harris Corporation) and U.S. Bank National Association (as successor to National City Bank), as Trustee, relating to unlimited amounts of debt securities which may be issued from time to time by L3Harris Technologies, Inc. (formerly known as Harris Corporation) when and as authorized by L3Harris Technologies, Inc.’s (formerly known as Harris Corporation) Board of Directors or a Committee of the Board, incorporated herein by reference to Exhibit 4 to L3Harris Technologies, Inc. (formerly known as Harris Corporation) Registration Statement on Form S-3, Registration Statement No. 33-35315, filed with the SEC on June 8, 1990.
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(4)(f) Form of Floating Rate Global Note due March 2023, incorporated herein by reference to Exhibit 4.1 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on March 13, 2020. (Commission File Number 1-3863)
(4)(n) Registration Rights Agreement, dated as of July 2, 2019, by and among L3Harris Technologies, Inc. (f/k/a L3Harris Technologies, Inc. (formerly known as Harris Corporation)), BofA Securities, Inc. and Morgan Stanley & Co. LLC, incorporated herein by reference to Exhibit 4.1 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 3, 2019. (Commission File Number 1-3863)
(4)(r) Form of New L3Harris 3.950% 2024 Regulation S Note, incorporated herein by reference to Exhibit 4.7 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 3, 2019. (Commission File Number 1-3863)
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(4)(w) Form of 5.400% Global Note due 2027, incorporated herein by reference to Exhibit 4.1 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 31, 2023. (Commission File Number 1-3863)
(4)(x) Form of 5.400% Global Note due 2033, incorporated herein by reference to Exhibit 4.2 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 31, 2023. (Commission File Number 1-3863)
(4)(y) Form of 5.600% Global Note due 2053, incorporated herein by reference to Exhibit 4.3 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 31, 2023. (Commission File Number 1-3863)
(4)(z) Pursuant to Regulation S-K, Item 601(b)(4)(iii)(A), L3Harris Technologies, Inc. by this filing agrees, upon request, to furnish to the SEC a copy of other instruments defining the rights of holders of long-term debt of L3Harris Technologies, Inc. or L3 Technologies, Inc.
(4)(aa) Description of L3Harris Technologies, Inc.’s Securities, incorporated herein by reference to Exhibit 4(x) to the L3Harris Technologies, Inc.’s Annual Report on Form 10-K filed for the fiscal year ended December 30, 2022. (Commission File Number 1-3863)
*(10)(b) (i) L3Harris Technologies, Inc. Executive Change in Control Severance Plan, effective as of March 1, 2020, incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on March 4, 2020. (Commission File Number 1-3863)
(ii) Form of Stock Option Award Agreement Terms and Conditions (as of June 29, 2013) for grants under the 2005 Equity Incentive Plan (As Amended and Restated Effective August 27, 2010), incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.'s (formerly known as Harris Corporation) Current Report on Form 8-K filed with the SEC on August 31, 2011. (Commission File Number 1-3863)
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(vii) L3Harris Technologies, Inc. Restricted Unit Award Agreement Terms and Conditions (as of February 23, 2023), incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023. (Commission File Number 1-3863)
(viii) L3Harris Technologies, Inc. Performance Unit Award Agreement Terms and Conditions (as of February 23, 2023), incorporated herein by reference to Exhibit 10.2 to L3Harris Technologies, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023. (Commission File Number 1-3863)
(ix) L3Harris Technologies, Inc. Stock Option Award Agreement Terms and Conditions (as of February 23, 2023), incorporated herein by reference to Exhibit 10.3 to L3Harris Technologies, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023. (Commission File Number 1-3863)
*(10)(g) L3Harris Technologies, Inc. 2015 Equity Incentive Plan (Amended and Restated Effective as of August 28, 2020), incorporated herein by reference to Exhibit 10.2 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on September 1, 2020. (Commission File Number 1-3863)
*10(h) L3Harris Retirement Savings Plan (Amended and Restated Effective January 1, 2024)
(ii) Amendment Number One to the L3Harris Excess Retirement Savings Plan (Amended and Restated Effective January 1, 2020), dated December 14, 2020, incorporated herein by reference to Exhibit 10.4 to L3Harris Technologies, Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, 2021. (Commission File Number 1-3863)
(iii) Amendment Number Two to the L3Harris Excess Retirement Savings Plan (Amended and Restated Effective January 1, 2020), dated December 31, 2022
(iv) Amendment Number Three to the L3Harris Excess Retirement Savings Plan (Amended and Restated Effective January 1, 2020), dated December 8, 2023
*(10)(j) L3Harris Technologies, Inc. 2019 Non-Employee Director Deferred Compensation Plan, incorporated herein by reference to Exhibit 10(j) to L3Harris Technologies, Inc.’s Transition Report on Form 10-KT for the fiscal year ended January 3, 2020. (Commission File Number 1-3863)
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*(10)(m) Letter Agreement with Christopher E. Kubasik, dated as of November 5, 2018, incorporated herein by reference to Exhibit 10.4 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 1, 2019. (Commission File Number 1-3863)
*(10)(n) Summary of Annual Compensation of L3Harris Technologies, Inc., Non-Employee Directors effective as of January 1, 2022, 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, 2021. (Commission File Number 1-3863)
*10(o) Summary of Annual Compensation of L3Harris Technologies, Inc., Non-Employee Directors effective as of January 1, 2024, incorporated herein by reference to Exhibit 10.2 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on July 24, 2023. (Commission File Number 1-3863)
*(10)(p) L3Harris Supplemental Executive Retirement Plan (restated January 1, 2020), incorporated herein by reference to Exhibit 10(z) to L3Harris Technologies, Inc.’s Annual Report on Form 10-K for fiscal year-ended January 1, 2021. (Commission File Number 1-3863)
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*(10)(q) L3Harris Salaried Pension Plan (as amended and restated as of December 31, 2021), incorporated herein by reference to Exhibit 10(x)(ii) to L3Harris Technologies, Inc.’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2021. (Commission File Number 1-3863)
*10(r) Link Supplement Nine Component of L3Harris Salaried Pension Plan (as amended and restated effective December 31, 2021), incorporated herein by reference to Exhibit 10(y)(ii) to L3Harris Technologies, Inc.’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2021. (Commission File Number 1-3863)
*10(s) Conditional Waiver, Separation Agreement and Release of All Claims, dated December 22, 2023, between L3Harris Technologies, Inc. and Michelle L. Turner
*10(t) Offer Letter Agreement dated January 24, 2022, between L3Harris Technologies, Inc. and Michelle L. Turner, incorporated herein by reference to Exhibit 10.2 to L3Harris Technologies, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2022. (Commission File Number 1-3863)
***10(u) Revolving Credit Agreement, dated as of July 29, 2022, 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. (Commission File Number 1-3863)
***10(v) Loan Agreement, dated as of November 22, 2022, 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 November 28, 2022. (Commission File Number 1-3863)
*10(w) Offer Letter, dated August 12, 2022, between L3Harris Technologies, Inc. and Jon Rambeau incorporated herein by reference to Exhibit 10(b)(b) to L3Harris Technologies, Inc.’s Annual Report on Form 10-K for fiscal year-ended December 30, 2022. (Commission File Number 1-3863)
***10(x) 364-Day Credit Agreement, dated March 10, 2023, by and among L3Harris Technologies, Inc. and the other parties thereto, incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on March 16, 2023 (Commission File Number 1-3863)
***10(y) 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)
*10(z) Offer Letter, dated November 30, 2023, between L3Harris Technologies, Inc. and Kenneth L. Bedingfield
*10(a)(a) (i) Offer Letter, dated November 4, 2022, between L3Harris Technologies, Inc. and Samir B. Mehta
(ii) Amendment to Offer Letter, dated December 22, 2022, between L3Harris Technologies, Inc. and Samir B. Mehta
*10(b)(b) Cooperation Agreement, dated December 10, 2023, by and among L3Harris Technologies, Inc., D. E. Shaw Oculus Portfolios, L.L.C and D. E. Shaw Valence Portfolios, L.L.C., incorporated herein by reference to Exhibit 10.1 to L3Harris Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on December 11, 2023 (Commission File Number 1-3863)
(21) Subsidiaries of the Registrant
(23) Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
(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
***(97) Incentive-Based Compensation Recovery Policy
(101) The financial information from L3Harris Technologies, Inc.’s Annual Report on Form 10-K for the period from December 31, 2022 to December 29, 2023 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Consolidated Balance Sheet, (ii) the Consolidated Statement of
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Operations, (iii) the Consolidated Statement of Comprehensive Income, (iv) the Consolidated Statement of Changes in Stockholders Equity, (v) the Consolidated Statement of Cash Flows and (vi) the Notes to the 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.
** Paper filing.
*** Schedules and appendices 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 and appendices upon request by the SEC.
Item 16. FORM 10-K SUMMARY.
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: February 16, 2024 | By: | /s/ Christopher E. Kubasik | ||||||||||||
| Christopher E. Kubasik | ||||||||||||||
| Chair and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||||||||||||||||||
| /s/ CHRISTOPHER E. KUBASIK | Chair and Chief Executive Officer (Principal Executive Officer) | February 16, 2024 | ||||||||||||||||||
| Christopher E. Kubasik | ||||||||||||||||||||
| /s/ KENNETH L. BEDINGFIELD | Senior Vice President and Chief Financial Officer (Principal Financial Officer) | February 16, 2024 | ||||||||||||||||||
| Kenneth L. Bedingfield | ||||||||||||||||||||
| /s/ CORLISS J. MONTESI | Vice President, Principal Accounting Officer (Principal Accounting Officer) | February 16, 2024 | ||||||||||||||||||
| Corliss J. Montesi | ||||||||||||||||||||
| /s/ SALLIE B. BAILEY | Director | February 16, 2024 | ||||||||||||||||||
| Sallie B. Bailey | ||||||||||||||||||||
| /s/ PETER W. CHIARELLI | Director | February 16, 2024 | ||||||||||||||||||
| Peter W. Chiarelli | ||||||||||||||||||||
| /s/ THOMAS A. DATTILO | Director | February 16, 2024 | ||||||||||||||||||
| Thomas A. Dattilo | ||||||||||||||||||||
| /s/ ROGER B. FRADIN | Director | February 16, 2024 | ||||||||||||||||||
| Roger B. Fradin | ||||||||||||||||||||
| /s/ JOANNA L. GERAGHTY | Director | February 16, 2024 | ||||||||||||||||||
| Joanna L. Geraghty | ||||||||||||||||||||
| /s/ KIRK S. HACHIGIAN | Director | February 16, 2024 | ||||||||||||||||||
| Kirk S. Hachigian | ||||||||||||||||||||
| /s/ HARRY B. HARRIS, JR. | Director | February 16, 2024 | ||||||||||||||||||
| Harry B. Harris, Jr. | ||||||||||||||||||||
| /s/ LEWIS HAY III | Director | February 16, 2024 | ||||||||||||||||||
| Lewis Hay III | ||||||||||||||||||||
| /s/ RITA S. LANE | Director | February 16, 2024 | ||||||||||||||||||
| Rita S. Lane | ||||||||||||||||||||
| /s/ ROBERT B. MILLARD | Director | February 16, 2024 | ||||||||||||||||||
| Robert B. Millard | ||||||||||||||||||||
| /s/ EDWARD A. RICE, JR. | Director | February 16, 2024 | ||||||||||||||||||
| Edward A. Rice, Jr. | ||||||||||||||||||||
| /s/ WILLIAM H. SWANSON | Director | February 16, 2024 | ||||||||||||||||||
| William H. Swanson | ||||||||||||||||||||
| /s/ CHRISTINA L. ZAMARRO | Director | February 16, 2024 | ||||||||||||||||||
| Christina L. Zamarro | ||||||||||||||||||||
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