Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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

January 3, 2025 and December 29, 2023, the related consolidated statements of operations, comprehensive

income, cash flows and equity for each of the three years in the period ended January 3, 2025, 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 January 3, 2025 and

December 29, 2023, and the results of its operations and its cash flows for each of the three years in the period

ended January 3, 2025, 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 January 3, 2025, 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 14, 2025 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 and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the financial statements are free of material

misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of

material misstatement of the financial statements, whether due to error or fraud, and performing procedures that

respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and

disclosures in the financial statements. Our audits also included evaluating the accounting principles used and

significant estimates made by management, as well as evaluating the overall presentation of the financial

statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial

statements that were communicated or required to be communicated to the audit committee and that: (1) relate to

accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion

on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which

they relate.

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	Cost estimation for revenue recognition on development and production contracts
Description of the Matter	As described in the consolidated financial statements, the Company recognized revenue for certain of its development and production contracts over time, typically using a percentage of completion cost-to-cost method, which required estimates of costs at completion for each contract. At the outset of each contract, the Company gauges its complexity and perceived risks and establishes an estimated total cost at completion with these expectations. After establishing the estimated total cost at completion, the Company reviews the progress and performance on its ongoing contracts at least quarterly and updates the estimated total cost at completion. Such estimates are subject to change during the performance of the contract and significant changes in estimates could have a material effect on the Company’s results of operations. Auditing the cost estimation for revenue recognition on development and production contracts where revenue is recognized over time using the percentage of completion cost- to-cost method involved subjective auditor judgment because the Company’s development of the estimated total cost at completion requires estimates of the cost of the work to be completed based on the Company’s underlying assumptions around achieving the technical, schedule and cost aspects of its contracts. In determining the estimates of the cost of the work to be completed, the Company considered the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance. Estimates of total cost at completion are also affected by management’s assessment of the current status of the contract and expectation for performance on the contract, as well as historical experience.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s accounting for cost estimation for development and production contracts. For example, we tested certain controls over management’s review of the estimate at completion analyses and the significant assumptions underlying the estimated total costs at completion. We also tested certain of management’s controls to validate that the data used in the estimate at completion analyses was complete and accurate. To test the cost estimation for development and production contracts, our audit procedures included, among others, obtaining an understanding of the contract, meeting with program management to confirm our understanding of the risks associated with the arrangement and the current contract performance, review of customer correspondence and contractual milestones and comparing cost estimates to historical cost experience with similar contracts, when applicable. Additionally, we obtained an understanding of the Company’s past performance of estimating total costs at completion by reviewing changes in the cost estimates from previous periods and reviewing the overall accuracy of management’s cost to completion estimations through lookback analyses.

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	Valuation of Goodwill
Description of the Matter	At January 3, 2025, the Company’s goodwill was $20.3 billion. As more fully described in the consolidated financial statements, the Company tests goodwill for impairment annually (or under certain circumstances, more frequently) at the reporting unit level using either a qualitative or quantitative assessment. Under the quantitative assessment to test for goodwill impairment, the Company compares the fair value of a reporting unit to its carrying amount, including goodwill. The Company estimates the fair value of its reporting units using a combination of a discounted cash flows analysis and market-based valuation methodologies. Auditing the Company’s quantitative goodwill impairment tests involved subjective auditor judgment due to the significant estimation required in management’s determination of the fair value of the reporting units. The significant estimation is primarily due to the sensitivity of the respective fair values to underlying assumptions, particularly at the Aerojet Rocketdyne (AR) reporting unit, including changes in the weighted average cost of capital and projected EBITDA margins. These assumptions relate to the expected future operating performance of the Company’s AR reporting unit, are forward-looking, and are sensitive to and affected by economic, industry and company-specific qualitative factors.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of relevant internal controls over the Company’s goodwill impairment review process, including controls over management’s review of the significant assumptions used in the valuation models. We also tested management’s controls to validate that the data used in the valuation models was complete and accurate. To test the estimated fair value of the Company’s AR reporting unit, we performed audit procedures that included, among others, assessing the valuation methodologies used by the Company, involving our valuation specialists to assist in testing the significant assumptions discussed above, and testing the completeness and accuracy of the underlying data the Company used in its valuation analyses. For example, we compared the significant assumptions used by management to current industry, market and economic trends, the historical results of the AR reporting unit and other relevant factors. We also assessed the historical accuracy of management’s valuation estimates and performed sensitivity analyses of significant assumptions used in the impairment tests to evaluate the change in the fair value of the AR reporting unit resulting from changes in the significant assumptions. In addition, we reviewed the reconciliation of the fair value of the reporting units based on the annual impairment test to the market capitalization of the Company.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since at least 1932, but we are unable to determine the specific year.

Orlando, Florida

February 14, 2025

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CONSOLIDATED STATEMENT OF OPERATIONS

	Fiscal Year Ended
(In millions, except per share amounts)	January 3, 2025		December 29, 2023		December 30, 2022
Revenue
Products	$15,134		$13,694		$12,097
Services	6,191		5,725		4,965
Total revenue	21,325		19,419		17,062
Cost of revenue
Products	(11,019)		(9,711)		(8,355)
Services	(4,782)		(4,595)		(3,780)
Total cost of revenue	(15,801)		(14,306)		(12,135)
General and administrative expenses	(3,568)		(3,313)		(2,998)
Impairment of goodwill and other assets	(38)		(374)		(802)
Operating income	1,918		1,426		1,127
Non-service FAS pension income and other, net	354		338		425
Interest expense, net	(675)		(543)		(279)
Income before income taxes	1,597		1,221		1,273
Income taxes	(85)		(23)		(212)
Net income	1,512		1,198		1,061
Noncontrolling interests, net of income taxes	(10)		29		1
Net income attributable to L3Harris Technologies, Inc.	$1,502		$1,227		$1,062
Net income per common share attributable to L3Harris Technologies, Inc. common shareholders
Basic	$7.91		$6.47		$5.54
Diluted	$7.87		$6.44		$5.49

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Fiscal Year Ended
(In millions)	January 3, 2025		December 29, 2023		December 30, 2022
Net income	$1,512		$1,198		$1,061
Other comprehensive income (loss):
Foreign currency translation, net of income taxes	(60)		36		(119)
Hedging derivatives, net of income taxes	(12)		10		(8)
Pension and other postretirement benefits, net of income taxes	323		71		(26)
Other comprehensive income (loss) recognized during the period	251		117		(153)
Reclassification adjustments for (gains) losses included in net income	(26)		(27)		11
Other comprehensive income (loss), net of income taxes	225		90		(142)
Total comprehensive income	1,737		1,288		919
Comprehensive (income) loss attributable to noncontrolling interest	(10)		29		1
Total comprehensive income attributable to L3Harris Technologies, Inc.	$1,727		$1,317		$920

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED BALANCE SHEET

(In millions, except shares)	January 3, 2025		December 29, 2023
Assets
Current assets
Cash and cash equivalents	$615		$560
Receivables, net	1,072		1,230
Contract assets	3,230		3,196
Inventories, net	1,330		1,472
Income taxes receivable	379		61
Other current assets	461		430
Assets of business held for sale	1,131		1,106
Total current assets	8,218		8,055
Non-current assets
Property, plant and equipment, net	2,806		2,862
Goodwill	20,325		19,979
Intangible assets, net	7,639		8,540
Deferred income taxes	120		91
Other non-current assets	2,893		2,160
Total assets	$42,001		$41,687
Liabilities and equity
Current liabilities
Short-term debt	$515		$1,602
Current portion of long-term debt, net	640		363
Accounts payable	2,005		2,106
Contract liabilities	2,142		1,900
Compensation and benefits	419		544
Other current liabilities	1,648		1,129
Income taxes payable	29		88
Liabilities of business held for sale	235		272
Total current liabilities	7,633		8,004
Non-current liabilities
Long-term debt, net	11,081		11,160
Deferred income taxes	942		815
Other long-term liabilities	2,766		2,879
Total liabilities	22,422		22,858
Equity
Shareholders’ Equity:
Preferred stock, without par value; 1,000,000 shares authorized; none issued	—		—
Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 189,794,911 and 189,808,581 shares at January 3, 2025 and December 29, 2023, respectively	190		190
Paid-in capital	15,558		15,553
Retained earnings	3,739		3,220
Accumulated other comprehensive income (loss)	27		(198)
Total shareholders’ equity	19,514		18,765
Noncontrolling interests	65		64
Total equity	19,579		18,829
Total liabilities and equity	$42,001		$41,687

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS

	Fiscal Year Ended
(In millions)	January 3, 2025		December 29, 2023		December 30, 2022
Operating Activities
Net income	$1,512		$1,198		$1,061
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,289		1,166		938
Share-based compensation	97		89		109
Net periodic benefit income	(286)		(275)		(395)
Share-based matching contributions under defined contribution plans	264		231		216
Impairment of goodwill and other assets	38		374		802
Deferred income taxes	174		(423)		(596)
(Increase) decrease in:
Receivables, net	128		124		(210)
Contract assets	(194)		62		23
Inventories, net	96		(182)		(310)
Other current assets	(29)		(55)		13
Increase (decrease) in:
Accounts payable	(90)		87		180
Contract liabilities	126		195		121
Compensation and benefits	(128)		38		(45)
Other current liabilities	155		(88)		(181)
Income taxes	(383)		(333)		499
Other operating activities	(210)		(112)		(67)
Net cash provided by operating activities	2,559		2,096		2,158
Investing Activities
Net cash paid for acquired businesses	—		(6,688)		—
Capital expenditures	(408)		(449)		(252)
Proceeds from sale of property, plant and equipment, net	1		56		14
Proceeds from sales of businesses	273		71		23
Other investing activities	(129)		(11)		(35)
Net cash used in investing activities	(263)		(7,021)		(250)
Financing Activities
Proceeds from issuances of long-term debt, net	2,827		7,568		4
Repayments of long-term debt	(2,620)		(3,170)		(14)
Change in commercial paper, maturities under 90 days, net	(567)		623		—
Proceeds from commercial paper, maturities over 90 days	688		1,181		—
Repayments of commercial paper, maturities over 90 days	(1,205)		(205)		—
Proceeds from exercises of employee stock options	133		24		57
Repurchases of common stock	(554)		(518)		(1,083)
Dividends paid	(886)		(868)		(864)
Other financing activities	(40)		(41)		(51)
Net cash (used in) provided by financing activities	(2,224)		4,594		(1,951)
Effect of exchange rate changes on cash and cash equivalents	(17)		11		(18)
Net increase (decrease) in cash and cash equivalents	55		(320)		(61)
Cash and cash equivalents, beginning of period	560		880		941
Cash and cash equivalents, end of period	$615		$560		$880

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF EQUITY

	Fiscal Year Ended
(In millions, except per share amounts)	January 3, 2025		December 29, 2023		December 30, 2022
Common Stock
Beginning balance	$190		$191		$194
Shares issued under stock incentive plans	2		1		1
Shares issued under defined contribution plans	1		1		1
Repurchases and retirement of common stock	(3)		(3)		(5)
Ending balance	190		190		191
Paid-in Capital
Beginning balance	15,553		15,677		16,248
Shares issued under stock incentive plans	131		23		56
Shares issued under defined contribution plans	263		230		215
Share-based compensation expense	97		89		109
Tax withholding payments on share-based awards	(30)		(30)		(45)
Repurchases and retirement of common stock	(455)		(433)		(907)
Other	(1)		(3)		1
Ending balance	15,558		15,553		15,677
Retained Earnings
Beginning balance	3,220		2,943		2,917
Net income attributable to L3Harris Technologies, Inc.	1,502		1,227		1,062
Repurchases and retirement of common stock	(96)		(82)		(171)
Cash dividends	(886)		(868)		(864)
Other	(1)		—		(1)
Ending balance	3,739		3,220		2,943
Accumulated Other Comprehensive Income (Loss)
Beginning balance	(198)		(288)		(146)
Other comprehensive income (loss), net of income taxes	225		90		(142)
Ending balance	27		(198)		(288)
Noncontrolling Interests
Beginning balance	64		101		106
Net income (loss) attributable to noncontrolling interests	10		(29)		(1)
Other	(9)		(8)		(4)
Ending balance	65		64		101
Total Equity	$19,579		$18,829		$18,624
Cash dividends per share	$4.64		$4.56		$4.48

See accompanying Notes to Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SIGNIFICANT ACCOUNTING POLICIES

Organization — L3Harris Technologies, Inc., together with its subsidiaries, is 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 in the interest of global security. We support government

customers in more than 100 countries, with our largest customers being various departments and agencies of the

U.S. Government, their prime contractors and international allies. Our products and services have defense and civil

government applications, as well as commercial applications. As of January 3, 2025 we had approximately 47,000

employees.

Principles of Consolidation — Our Consolidated Financial Statements include the accounts of L3Harris

Technologies, Inc. and its consolidated subsidiaries. As used in these Notes to the Consolidated Financial

Statements, the terms “L3Harris,” “Company,” “we,” “our” and “us” refer to L3Harris Technologies, Inc. and its

consolidated subsidiaries. Intercompany transactions and accounts have been eliminated.

Fiscal Year — Our fiscal year ends on the Friday nearest December 31. Fiscal 2024 included 53 weeks. Fiscal

2023 and fiscal 2022 each included 52 weeks.

Use of Estimates — The preparation of financial statements in accordance with GAAP requires us to make

estimates and assumptions that affect the amounts reported in the accompanying Consolidated Financial

Statements and these Notes and related disclosures. These estimates and assumptions are based on experience

and other information available prior to issuance of the accompanying Consolidated Financial Statements and these

Notes. Materially different results can occur as circumstances change and additional information becomes known.

Reclassifications — The classification of certain prior year amounts have been adjusted in our Consolidated

Financial Statements and these Notes to conform to current year classifications.

C****ash and Cash Equivalents — Cash and cash equivalents include cash at banks and temporary cash

investments with a maturity of three or fewer months when purchased. These investments include accrued interest

and are carried at the lower of cost or market.

F****air Value Measurements — Fair value is defined as the price that would be received to sell an asset or paid to

transfer a liability in the principal market (or most advantageous market, in the absence of a principal market) for the

asset or liability in an orderly transaction between market participants at the measurement date. Entities are

required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair

value, and to utilize a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three

levels of inputs used to measure fair value are as follows:

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

• Level 2 — Observable inputs other than quoted prices included within Level 1, including quoted prices for

similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in

markets that are not active; and inputs other than quoted prices that are observable or are derived

principally from, or corroborated by, observable market data by correlation or other means.

• Level 3 — Unobservable inputs that are supported by little or no market activity, are significant to the fair

value of the assets or liabilities and reflect our own assumptions about the assumptions market participants

would use in pricing the asset or liability developed using the best information available in the

circumstances.

In certain instances, fair value is estimated using quoted market prices obtained from external pricing services.

In obtaining such data from the pricing service, we have evaluated the methodologies used to develop the estimate

of fair value in order to assess whether such valuations are representative of fair value, including net asset value

(“NAV”). Additionally, in certain circumstances, the NAV reported by an asset manager may be adjusted when

sufficient evidence indicates NAV is not representative of fair value.

Financial instruments. The carrying amounts of certain of our financial instruments reflected in our Consolidated

Balance Sheet, including cash and cash equivalents, accounts receivable, non-current receivables, notes receivable,

accounts payable and short-term debt, approximate their fair values. Fair values for long-term fixed-rate debt are

primarily based on quoted market prices for those or similar instruments. See Note 8: Debt and Credit Arrangements

in these Notes for additional information regarding fair values for our long-term fixed-rate debt. A discussion of fair

values for our derivative financial instruments is included under the caption “Financial Instruments and Risk

Management” in this Note.

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A****ccounts Receivable — We record receivables derived from contracts with customers at net realizable value

and they generally do not bear interest. This value includes an allowance for estimated uncollectible accounts to

reflect any losses anticipated on the accounts receivable balances which is charged to the provision for doubtful

accounts. We calculate this allowance at inception based on expected loss over the life of the receivable. We

consider historical write-offs by customer, level of past due accounts and economic status of the customer. A

receivable is considered delinquent if it is unpaid after the term of the related invoice has expired. Write-offs are

recorded at the time a customer receivable is deemed uncollectible. At January 3, 2025 and December 29, 2023,

our allowances for collection losses were $21 million and $15 million, respectively.

Contract Assets and Liabilities — The timing of revenue recognition, customer billings and cash collections

results in accounts receivable, contract assets and contract liabilities at the end of each reporting period. Contract

assets mainly represent unbilled amounts typically resulting from revenue recognized exceeding amounts billed to

customers for contracts utilizing the POC cost-to-cost revenue recognition method. Contract assets become

receivables as we bill customers as work progresses in accordance with agreed-upon contractual terms, either at

periodic intervals, upon achievement of contractual milestones or upon deliveries and, in certain arrangements, the

customer may withhold payment of a portion of the contract price until contract completion. Contract liabilities

include advance payments and billings in excess of revenue recognized, including deferred revenue. Contract assets

and liabilities are reported on a contract-by-contract basis at the end of each reporting period.

Contract assets related to amounts withheld by customers until contract completion are not considered a

significant financing component of our contracts because the intent is to protect the customers from our failure to

satisfactorily complete our performance obligations. Payments received from customers in advance of revenue

recognition are not considered a significant financing component of our contracts because they are utilized to pay for

contract costs within a one-year period or are requested by us to ensure the customers meet their payment

obligations.

I****nventories — Inventories are valued at the lower of cost (determined by average and first-in, first-out methods)

or net realizable value. We regularly review inventory quantities on hand and record a provision for excess and

obsolete inventory primarily based on our estimated forecast of product demand, anticipated end of product life and

production requirements.

P****roperty, Plant and Equipment — Property, plant and equipment, including software capitalized for internal

use, is recorded at cost and depreciated on a reasonable and systematic basis, typically the straight-line method,

over the estimated useful life of the asset. Estimated useful lives generally range as follows: buildings, including

leasehold improvements, between two and 45 years; machinery and equipment between two and 10 years; and

software capitalized for internal-use between two and 10 years. We review property, plant and equipment for

impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be

recoverable.

Goodwill — We follow the acquisition method of accounting to record the assets and liabilities of acquired

businesses at their estimated fair value at the date of acquisition. We initially record goodwill for the amount the

consideration transferred exceeds the acquisition-date fair value of net identifiable assets acquired.

We test goodwill for impairment at a level within the Company referred to as the reporting unit, which is our

business segment level or one level below the business segment. Goodwill is tested for impairment annually as of

the first business day of our fourth fiscal quarter, or under certain circumstances more frequently, such as when

events or circumstances indicate there may be impairment. Such events or circumstances may include a significant

deterioration in overall economic conditions, changes in the business climate of our industry, a decline in our market

capitalization, operating performance indicators, competition, reorganizations of our business or the disposal of all

or a portion of a reporting unit.

To test goodwill for impairment, we may perform both qualitative and quantitative assessments. If we elect to

perform a qualitative assessment for a certain reporting unit, we evaluate events and circumstances impacting the

reporting unit to determine the probability that goodwill is impaired. If we perform a quantitative assessment for a

certain reporting unit, we calculate the fair value of that reporting unit and compare the fair value to the reporting

unit’s net book value. We estimate fair values of our reporting units based on projected cash flows, and sales and/or

earnings multiples applied to the latest twelve months’ sales and earnings of our reporting units. Projected cash

flows are based on our best estimate of future revenues, operating costs and balance sheet metrics reflecting our

view of the financial and market conditions of the underlying business; and the resulting cash flows are discounted

using an appropriate discount rate that reflects the risk in the forecasted cash flows. Revenue and earnings

multiples are based on current multiples of revenues and earnings for similar businesses, and based on revenue and

earnings multiples paid for recent acquisitions of similar businesses made in the marketplace. We then assess

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whether any implied control premium, based on a comparison of fair value based purely on our stock price and

outstanding shares with fair value determined by using all of the above-described models, is reasonable.

If we determine it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount,

we measure any impairment loss by comparing the fair value of each reporting unit to its carrying amount, including

goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired, and an

impairment loss is recognized in an amount equal to that excess.

Intangible Assets — Our finite-lived intangible assets are amortized to expense over their applicable useful

lives, either according to the underlying economic benefit as reflected by future net cash inflows or on a straight-line

basis depending on the nature of the asset, generally ranging between three to 20 years. We review finite-lived

intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of the

asset may not be recoverable. We evaluate the recoverability of such assets based on the expectations of

undiscounted cash flows from such assets. If the sum of the expected future undiscounted cash flows is less than

the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying

amount.

Our most significant finite-lived intangible asset is customer relationships that are established through written

customer contracts (i.e., revenue arrangements). The fair value for customer relationships is determined, as of the

date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax

earnings and cash flows arising from the follow-on revenues expected from the customer relationships over the

estimated lives, including the probability of expected future contract renewals and revenues, less a contributory

assets charge, all of which is discounted to present value.

Indefinite-lived intangible assets are tested annually for impairment, or under certain circumstances, more

frequently, such as when events or circumstances indicate there may be an impairment. This testing compares the

fair value of the asset to its carrying amount, and, when appropriate, the carrying amount of these assets is reduced

to its fair value.

Leases — We recognize right-of-use (“ROU”) assets and lease liabilities in our Consolidated Balance Sheet for

operating and finance leases under which we are the lessee. As a practical expedient, leases with a term of twelve

months or less (including reasonably certain extension periods) and leases with expected lease payments of less

than $250 thousand are expensed as incurred in the “Cost of revenue” and “General and administrative expenses”

line items in our Consolidated Statement of Operations.

ROU assets and lease liabilities are recognized based on the present value of future lease payments, which are

primarily base rent. We have some lease payments that are based on an index and changes to the index are treated

as variable lease payments and recognized in the “Cost of revenue” and “General and administrative expenses” line

items in our Consolidated Statement of Operations in the period in which the obligation for those payments is

incurred. Our lease payments also include non-lease components such as real estate taxes and common-area

maintenance costs. As a practical expedient, we account for lease and non-lease components as a single

component. For certain leases, the non-lease components are variable and are therefore excluded from lease

payments to determine the ROU asset. The present value of future lease payments is determined using our

incremental borrowing rate at lease commencement over the expected lease term. We use our incremental

borrowing rate because our leases do not provide an implicit lease rate. The expected lease term represents the

number of years we expect to lease the property, including options to extend or terminate the lease when it is

reasonably certain that we will exercise the option.

Operating lease cost and finance lease amortization are recognized on a straight-line basis over the expected

lease term in the “Cost of revenue” and “General and administrative expenses” line items in our Consolidated

Statement of Operations. Interest on finance lease liabilities is recognized in the “Interest expense, net” line item in

our Consolidated Statement of Operations.

I****ncome Taxes — We follow the asset and liability method of accounting for income taxes. We record deferred

tax assets and liabilities for differences between the tax basis of assets and liabilities and amounts reported in our

Consolidated Balance Sheet, as well as operating loss and tax credit carryforwards. We follow specific and detailed

guidelines in each tax jurisdiction regarding the recoverability of any tax assets recorded on the balance sheet and

provide necessary valuation allowances as required. We regularly review our deferred tax assets for recoverability

based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing

temporary differences and tax planning strategies.

We have elected to account for tax on Global Intangible Low-Taxed Income as a current-period expense when

incurred.

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F****oreign Currency Translation — Assets and liabilities of international subsidiaries that use local currency as the

functional currency, are translated at current rates of exchange and income and expense items are translated at the

weighted average exchange rate for the year. The resulting translation adjustments are recorded as a component of

the “Accumulated other comprehensive income (loss)” line item in our Consolidated Balance Sheet.

Share-Based Compensation — We measure compensation cost for all share-based awards (including employee

stock options) at fair value and recognize cost over the vesting period, with forfeitures recognized as they occur. It is

our practice to issue shares when options are exercised.

Share Repurchases — Repurchased common shares are permanently retired. As we repurchase our common

shares, we reduce common stock for the par value and allocate any excess purchase price over par value to paid-in

capital and retained earnings. During fiscal 2024, we repurchased 2.5 million shares of our common stock for $554

million under our repurchase program. At January 3, 2025, we had remaining unused authorization under our

repurchase program of $3,381 million.

Revenue Recognition — We account for a contract when it has approval and commitment from all parties, the

rights and payment terms of the parties can be identified, the contract has commercial substance and the

collectability of the consideration, or transaction price, is probable. Our contracts are often subsequently modified to

include changes in specifications, requirements or price that may create new or change existing enforceable rights

and obligations. We do not account for contract modifications (including unexercised options) or follow-on contracts

until they meet the requirements noted above to account for a contract.

We categorize revenue and costs for performance obligations to provide tangible goods as “product” and

revenue and costs for performance obligations to provide services for which the principal result is not to produce

anything tangible as “service.” In instances where a single performance obligation requires us to deliver products

and perform services, we derive the product and service categories presented in our financial statements based

upon the predominant nature of each performance. In these cases, we classify the revenue and costs from the entire

performance obligation based on the nature of the overall promise made to the customer.

At the inception of each contract, we evaluate the promised products and services to determine whether the

contract should be accounted for as having one or more performance obligations. A performance obligation is a

promise to transfer a distinct product or service to a customer and represents the unit of accounting for revenue

recognition. A substantial majority of our revenue is derived from long-term development and production contracts

involving the design, development, manufacture or modification of defense products and related services according

to the customers’ specifications. Due to the highly interdependent and interrelated nature of the underlying

products and services and the significant service of integration that we provide, which often results in the delivery of

multiple units, we account for these contracts as one performance obligation. For contracts that include both

development/production and follow-on support services (for example, operations and maintenance), we generally

consider the follow-on services distinct in the context of the contract and account for them as separate performance

obligations. Additionally, we recognize revenue from contracts to provide multiple distinct products to a customer

for which the products can readily be sold to other customers based on their commercial nature and, accordingly,

these products are accounted for as separate performance obligations.

Shipping and handling costs incurred after control of a product has transferred to the customer (for example, in

free on board shipping arrangements) are treated as fulfillment costs and, therefore, are not accounted for as

separate performance obligations. Also, we record taxes collected from customers and remitted to governmental

authorities on a net basis such that they are excluded from revenue.

As noted above, our contracts are often subsequently modified to include changes in specifications,

requirements or price. Depending on the nature of the modification, we consider whether to account for the

modification as an adjustment to the existing contract or as a separate contract. Often, the deliverables in our

contract modifications are not distinct from the existing contract due to the significant integration and interrelated

tasks provided in the context of the contract. Therefore, such modifications are accounted for as if they are part of

the existing contract, and we may be required to recognize a cumulative catch-up adjustment to revenue at the date

of the contract modification.

We determine the transaction price for each contract based on our best estimate of the consideration we expect

to receive, which includes assumptions regarding variable consideration such as award and incentive fees. These

variable amounts are generally awarded upon achievement of certain negotiated performance metrics, program

milestones or cost targets and can be based upon customer discretion. We include such estimated amounts in the

transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not

_____________________________________________________________________

occur when the uncertainty associated with the variable consideration is resolved. We estimate variable

consideration primarily using the most likely amount method.

For contracts with multiple performance obligations, we allocate the transaction price to each performance

obligation based on the relative standalone selling price of the product or service underlying each performance

obligation. The standalone selling price represents the amount for which we would sell the product or service to a

customer on a standalone basis (i.e., not sold as a bundle with any other products or services). Our contracts with

the U.S. Government, including foreign military sales contracts, are subject to the FAR and the prices of our contract

deliverables are typically based on our estimated or actual costs plus margin. As a result, the standalone selling

prices of the products and services in these contracts are typically equal to the selling prices stated in the contract,

thereby eliminating the need to allocate (or reallocate) the transaction price to the multiple performance obligations.

In our non-U.S. Government contracts, we also generally use the expected cost plus margin approach to determine

standalone selling price. In addition, we determine standalone selling price for certain contracts that are commercial

in nature based on observable selling prices.

We recognize revenue for each performance obligation when (or as) the performance obligation is satisfied by

transferring control of the promised products or services underlying the performance obligation to the customer.

The transfer of control can occur over-time or at a point in time. A significant portion of our business is derived from

development and production contracts. Revenue and profit related to development and production contracts are

generally recognized over-time, typically using the POC cost-to-cost method of revenue recognition, whereby we

measure our progress towards completion of the performance obligation based on the ratio of costs incurred to date

to estimated costs at completion under the contract. Because costs incurred represent work performed, we believe

this method best depicts the transfer of control of the asset to the customer. Under the POC cost-to-cost method of

revenue recognition, a single estimated profit margin is used to recognize profit for each performance obligation

over its period of performance. To a lesser extent, we also recognize revenue from contracts to provide multiple

distinct products to a customer that are commercial in nature and can readily be sold to other customers. These

performance obligations do not meet the criteria listed below to recognize revenue over-time; therefore, we

recognize revenue at a point in time, generally when the products are received and accepted by the customer.

Point-in-Time Revenue Recognition. Our performance obligations are satisfied at a point in time unless they

meet at least one of the following criteria, in which case they are satisfied over-time:

• The customer simultaneously receives and consumes the benefits provided by our performance as we

perform;

• Our performance creates or enhances an asset (for example, work in process) that the customer controls as

the asset is created or enhanced; or

• Our performance does not create an asset with an alternative use to us and we have an enforceable right to

payment for performance completed to date.

Over-Time Revenue Recognition. For U.S. Government development and production contracts, there is generally

a continuous transfer of control of the asset to the customer as it is being produced based on FAR clauses in the

contract that provide the customer with lien rights to work in process and allow the customer to unilaterally

terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any

work in process. This also typically applies to our contracts with prime contractors for U.S. Government

development and production contracts, when the above-described FAR clauses are flowed down to us by the prime

contractors.

Our non-U.S. Government development and production contracts, including international direct commercial

contracts and U.S. contracts with state and local agencies, utilities, commercial and transportation organizations,

often do not include the FAR clauses described above. However, over-time revenue recognition is typically

supported either through our performance creating or enhancing an asset that the customer controls as it is created

or enhanced or based on other contractual provisions or relevant laws that provide us with an enforceable right to

payment for our work performed to date plus a reasonable profit if our customer were permitted to and did

terminate the contract for reasons other than our failure to perform as promised.

For performance obligations to provide services that are satisfied over-time, we recognize revenue either on a

straight-line basis, the POC cost-to-cost method or based on the right-to-invoice method (i.e., based on our right to

bill the customer), depending on which method best depicts transfer of control to the customer.

Contract Estimates. Under the POC cost-to-cost method of revenue recognition, a single estimated profit margin

is used to recognize profit for each performance obligation over its period of performance. Recognition of profit on a

contract requires estimates of the total cost at completion and transaction price and the measurement of progress

_____________________________________________________________________

towards completion. Due to the long-term nature of many of our contracts, developing the estimated total cost at

completion and total transaction price often requires judgment. Factors that must be considered in estimating the

cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor

performance and the risk and impact of delayed performance. Factors that must be considered in estimating the

total transaction price include contractual cost or performance incentives (such as incentive fees, award fees and

penalties) and other forms of variable consideration, as well as our historical experience and our expectation for

performance on the contract.

At the outset of each contract, we gauge its complexity and perceived risks and establish an estimated total cost

at completion in line with these expectations. We follow a standard EAC process in which we review the progress

and performance on our ongoing contracts. If we successfully retire risks associated with the technical, schedule

and cost aspects of a contract, we may lower our estimated total cost at completion commensurate with the

retirement of these risks. Conversely, there are many reasons estimated contract costs can increase, including: (i)

supply chain disruptions, inflation and labor issues; (ii) design or other development challenges; and (iii) program

execution challenges (including from technical or quality issues and other performance concerns). Additionally, as

the contract progresses, our estimates of total transaction price may increase or decrease if, for example, we

receive incentive or award fees that are higher or lower than expected.

When changes in estimated total costs at completion or in estimated total transaction price are determined, the

related impact on operating income is recognized on a cumulative basis. EAC adjustments represent the cumulative

effect of the changes from current and prior periods; revenue and operating margins in future periods are recognized

as if the revised estimates had been used since contract inception. Any anticipated losses on these contracts are

fully recognized in the period in which the losses become evident.

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

	Fiscal Year Ended
(In millions, except per share amounts)	January 3, 2025		December 29, 2023		December 30, 2022
Net EAC adjustments, before income taxes	$39		$(85)		$36
Net EAC adjustments, net of income taxes	29		(63)		27
Net EAC adjustments, net of income taxes, per diluted share	0.15		(0.33)		0.14

Revenue recognized from performance obligations satisfied (or partially satisfied) in prior periods was $210

million, $118 million and $110 million in fiscal 2024, 2023 and 2022, respectively.

Bill-and-Hold Arrangements. For certain contracts, the finished product may temporarily be stored at our

location under a bill-and-hold arrangement. Revenue is recognized on bill-and-hold arrangements at the point in

time when the customer obtains control of the product and all of the following criteria have been met: the

arrangement is substantive (for example, the customer has requested the arrangement); the product is identified

separately as belonging to the customer; the product is ready for physical transfer to the customer; and we do not

have the ability to use the product or direct it to another customer. In determining when the customer obtains

control of the product, we consider certain indicators, including whether we have a present right to payment from

the customer, whether title and/or significant risks and rewards of ownership have transferred to the customer and

whether customer acceptance has been received (in the case of arrangements with customer acceptance

provisions).

Backlog. Backlog, which is the equivalent of our remaining performance obligations, represents the future

revenue we expect to recognize as we perform on our current contracts. Backlog comprises both funded backlog

(i.e., firm orders for which funding is authorized or appropriated) and unfunded backlog (i.e., orders for which funds

have not been appropriated and/or incrementally funded). Backlog excludes unexercised contract options and

potential orders under ordering-type contracts, such as IDIQ contracts.

At January 3, 2025, our ending backlog was $34.2 billion, of which $23.3 billion was funded backlog. We expect

to recognize approximately 45% of the revenue associated with this backlog by the end of fiscal 2025 and

approximately 75% by the end of fiscal 2026, with the remainder to be recognized thereafter. At December 29,

2023, our ending backlog was $32.7 billion, of which $22.0 billion was funded backlog.

Retirement Benefits — We sponsor various pension and other postretirement defined benefit plans. The funded

or unfunded position of each defined benefit plan is recorded in our Consolidated Balance Sheet. Funded status is

derived by subtracting the respective year-end values of the PBO from the fair value of plan assets. Actuarial gains

and losses and prior service credits and costs are recorded, net of income taxes, in the “Accumulated other

comprehensive income (loss)” line item in our Consolidated Balance Sheet until they are amortized as a component

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of net periodic benefit income in the “Non-service FAS pension income and other, net” line item in our Consolidated

Statement of Operations.

The determination of the PBO and the recognition of net periodic benefit income related to defined benefit plans

depend on various assumptions, including discount rates, expected return on plan assets, the rate of future

compensation increases, mortality, termination and health care cost trend rates. We develop each assumption using

relevant Company experience in conjunction with market-related data. Actuarial assumptions are reviewed annually

with third-party consultants and adjusted as appropriate. For the recognition of net periodic benefit income, we use

a market-related value of plan assets to calculate the expected return on plan assets. The market-related value of

plan assets is based on yearly average asset values at the measurement date over the last five years, with

investment gains or losses to be phased in over five years. Net actuarial gains and losses are amortized to the net

periodic benefit income using the corridor approach, where the net gains and losses in excess of 10% of the greater

of the PBO or the market-related value of plan assets are amortized for each plan over the estimated future life

expectancy or, if applicable, the average remaining service period of the plan’s active participants. The fair value of

plan assets is determined based on market prices or estimated fair value at the measurement date. The

measurement date for valuing defined benefit plan assets and obligations is the end of the month closest to our

fiscal year end.

E****nvironmental Expenditures — We generally capitalize environmental expenditures that increase the life or

efficiency of property or that reduce or prevent environmental contamination. We accrue environmental expenses

resulting from existing conditions that relate to past or current operations. Our accruals for environmental expenses

are recorded on a site-by-site basis when it is probable a liability has been incurred and the amount of the liability

can be reasonably estimated, based on current law and existing technologies available to us. Our accruals for

environmental expenses represent the best estimates related to the investigation and remediation of environmental

media such as water, soil, soil vapor, air and structures, as well as related legal fees and regulatory agency oversight

fees, and are reviewed periodically, at least annually at the year-end balance sheet date, and updated for progress

of investigation and remediation efforts and changes in facts and legal circumstances. If the timing and amount of

future cash payments for environmental liabilities are fixed or reliably determinable, we generally discount such

cash flows in estimating our accrual.

The relevant factors we considered in estimating our potential liabilities under applicable environmental

statutes and regulations included some or all of the following as to each site: incomplete information regarding

particular sites and other potentially responsible parties; uncertainty regarding the extent of investigation or

remediation; our share, if any, of liability for such conditions; the selection of alternative remedial approaches;

changes in environmental standards and regulatory requirements; probable insurance proceeds; cost-sharing

agreements with other parties; and potential indemnification from successor and predecessor owners of these sites.

Derivative Financial Instruments and Hedging Activities — We recognize all derivatives in our Consolidated

Balance Sheet at fair value. These financial instruments are marked-to-market using forward prices and fair value

quotes and are categorized in Level 2 of the fair value hierarchy. Derivatives that are not hedges are adjusted to fair

value through income. If the derivative qualifies and is designated as a hedge, it must be documented as such at the

inception of the hedge. Depending on the nature of the hedge, changes in the fair value of the derivative are either

offset against the change in fair value of assets, liabilities or firm commitments through earnings or recognized in

other comprehensive income (loss) until the hedged item is recognized in earnings. Gains and losses in accumulated

other comprehensive income (loss) are reclassified to earnings when the related hedged item is recognized in

earnings. The cash flow impact of our derivatives is included in the same category in our Consolidated Statement of

Cash Flows as the cash flows of the related hedged items. We do not hold or issue derivatives for speculative trading

purposes.

EPS — EPS is calculated as net income per common share attributable to L3Harris Technologies, Inc. common

shareholders divided by our weighted average number of basic or diluted shares outstanding. Potential dilutive

common shares primarily consist of employee stock options and restricted and performance unit awards.

Business Segments — We evaluate each of our business segments based on its operating income or loss.

Intersegment revenues are generally transferred at cost to the buying segment, and the sourcing segment

recognizes a profit that is eliminated. The elimination of intersegment revenues is included in the “other” line item in

Note 14: Business Segments in these Notes. Corporate expenses are primarily allocated to our business segments

using an allocation methodology prescribed by U.S. Government regulations for government contractors. The

“Unallocated corporate department expense” line item in Note 14: Business Segments in these Notes represents the

portion of corporate expenses that are not included in management’s evaluation of segment operating performance

or elimination of intersegment profits.

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FAS/CAS Operating Adjustment. We calculate and allocate a portion of our defined benefit plan costs to our U.S.

Government contracts in accordance with CAS. However, our Consolidated Financial Statements require we

calculate our defined benefit plan costs (net periodic benefit income) in accordance with FAS requirements. The

difference between CAS pension cost and the service cost component of net periodic benefit income (“FAS pension

service cost”) is reflected in the “FAS/CAS operating adjustment,” which is included as a component of Unallocated

corporate department expense line item in Note 14: Business Segments in these Notes.

	Fiscal Year Ended
(In millions)	January 3, 2025		December 29, 2023		December 30, 2022
FAS pension service cost	$(36)		$(35)		$(46)
Less: CAS pension cost	(64)		(145)		(141)
FAS/CAS operating adjustment	28		110		95

The non-service cost component of net periodic benefit income is included in the “Non-service FAS pension

income and other, net” line item in our Consolidated Statement of Operations. See Note 9: Retirement Benefits in

these Notes for additional information regarding our defined benefit plans and composition of net periodic benefit

income.

R&D — Company-funded R&D costs are expensed as incurred and are included in the “General and

administrative expenses” line item in our Consolidated Statement of Operations. These costs were $515 million,

$480 million and $603 million in fiscal 2024, 2023, and 2022, respectively.

Customer-funded R&D costs are incurred pursuant to contractual arrangements, principally U.S. Government-

sponsored contracts requiring us to provide a product or service meeting certain defined performance or other

specifications (such as designs), and such contractual arrangements are accounted for principally by the POC cost-

to-cost revenue recognition method. Customer-funded R&D is included in the “Revenue” and “Cost of revenue” line

items in our Consolidated Statement of Operations.

Recent Accounting Pronouncements — In November 2023, the Financial Accounting Standards Board

(“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to

Reportable Segment Disclosures (“ASU 2023-07”) which requires additional segment disclosures on an annual and

interim basis, including significant segment expenses that are regularly provided to the chief operating decision

maker. The standard does not change how operating segments and reportable segments are determined. ASU

2023-07 is effective for annual reporting periods beginning after December 15, 2023 and interim reporting periods

beginning after December 15, 2024 and is required to be applied retrospectively to all periods presented in the

consolidated financial statements. We adopted this standard in fiscal 2024 and applied the provisions to our

business segment disclosure. See Note 14: Business Segments in these Notes for further information. The adoption

of 2023-07 did not have any impact on our operating results, financial position, or cash flows.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax

Disclosures (“ASU 2023-09”) which requires disaggregated income tax disclosures on an annual basis, including

information on our effective income tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for

annual reporting periods beginning after December 15, 2024, and may be applied prospectively or retrospectively.

We are evaluating the impact of ASU 2023-09 and expect the standard will only impact our income taxes

disclosures with no material impact on our operating results, financial position, or cash flows.

In March 2024, the SEC issued SEC Release Nos. 33-11275 and 34-99678, The Enhancement and

Standardization of Climate-Related Disclosures for Investors, which requires climate-related disclosures in annual

reports and registration statements. In April 2024, the SEC released an order staying this final rule pending judicial

review of all the petitions challenging the rule. If enacted, the rule would require disclosure of material climate-

related risks, our governance and risk management of climate-related risks and any material climate-related targets

or goals, greenhouse gas emissions as well as disclosure of the financial statement effects, such as costs and losses

resulting from severe weather events and other natural conditions. We are evaluating the impact of the rule and

related litigation on our disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—

Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU

2024-03”) which requires disclosure, in the notes to financial statements, of specified information about certain

costs and expenses included in each expense caption on the face of the income statement at interim and annual

reporting periods. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and

interim reporting periods beginning after December 15, 2027, and should be applied either prospectively to financial

_____________________________________________________________________

statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior

periods presented in the financial statements. We are evaluating the impact of ASU 2024-03 and expect the

standard will only impact our disclosures with no material impact on our operating results, financial position, or cash

flows.

NOTE 2: EARNINGS PER SHARE

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

	Fiscal Year Ended
(In millions, except per share amounts)	January 3, 2025		December 29, 2023		December 30, 2022
Basic weighted-average common shares outstanding	189.8		189.6		191.8
Impact of dilutive share-based awards	0.9		1.0		1.7
Diluted weighted-average common shares outstanding	190.7		190.6		193.5

Diluted EPS excludes the antidilutive impact of 3.3 million, 3.7 million and 0.3 million weighted average share-

based awards outstanding in fiscal 2024, 2023 and 2022, respectively.

NOTE 3: CONTRACT ASSETS AND CONTRACT LIABILITIES

Contract assets and contract liabilities are summarized below:

(In millions)	January 3, 2025		December 29, 2023
Contract assets	$3,230		$3,196
Contract liabilities, current	(2,142)		(1,900)
Contract liabilities, non-current(1)	(91)		(94)
Net contract assets	$997		$1,202

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

Balance Sheet.

Contract assets and liabilities as of January 3, 2025 and December 29, 2023 were impacted primarily by the

timing of contractual billing milestones. In fiscal 2024, 2023 and 2022, we recognized $1,433 million, $1,247

million and $1,057 million, respectively, of revenue related to contract liabilities that were outstanding at the end of

the respective prior fiscal year.

NOTE 4: INVENTORIES, NET

Inventories, net are summarized below:

(In millions)	January 3, 2025		December 29, 2023
Finished products	$211		$217
Work in process	332		427
Materials and supplies	787		828
Inventories, net	$1,330		$1,472

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NOTE 5: PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net, are summarized below:

(In millions)	January 3, 2025		December 29, 2023
Land	$182		$184
Software capitalized for internal use	795		716
Buildings	1,633		1,605
Machinery and equipment	3,032		2,816
	5,642		5,321
Less: accumulated depreciation and amortization	(2,836)		(2,459)
Property, plant and equipment, net	$2,806		$2,862

Depreciation and amortization expense related to property, plant and equipment was $429 million, $389 million

and $342 million in fiscal 2024, 2023 and 2022, respectively.

There were no impairments of property, plant and equipment in fiscal 2024, 2023 or 2022.

NOTE 6: GOODWILL AND INTANGIBLE ASSETS

Goodwill

Changes in the carrying amount of goodwill, by business segment, were as follows:

(In millions)	SAS		IMS		CS		AR		Total
Balance at December 30, 2022	$5,778		$7,709		$3,796		**		$17,283
Reallocation of goodwill in business realignment	327		(327)		—		—		—
Goodwill increase from acquisitions(1)	—		—		1,143		2,365		3,508
Goodwill decrease from divestitures	(9)		—		—		—		(9)
Assets of business held for sale	—		(534)		—		—		(534)
Impairment of goodwill	—		(296)		—		—		(296)
Currency translation adjustments	14		12		1		—		27
Balance at December 29, 2023	6,110		6,564		4,940		2,365		19,979
Goodwill from AJRD acquisition	—		—		—		537		537
Goodwill decrease from divestitures(2)	(79)		—		—		(50)		(129)
Impairment of goodwill	(14)		—		—		—		(14)
Currency translation adjustments	(18)		(28)		(2)		—		(48)
Balance at January 3, 2025	$5,999		$6,536		$4,938		$2,852		$20,325

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**Our AR segment, which is also the AR reporting unit, was established in connection with the AJRD acquisition and consists of assets,

liabilities and operations assumed. As such, there is no comparable prior year information. See Note 13: Acquisitions and Divestitures in

these Notes for further information.

(1)CS: Goodwill recognized in connection with the TDL acquisition is included in our Broadband reporting unit within our CS segment. AR:

Goodwill recognized in connection with the AJRD acquisition is included within the AR Reporting unit, which is also our AR segment.

(2)SAS: Goodwill (net of impairment) derecognized in connection with the Antenna disposal group divestiture. See discussion under “Goodwill

Impairments" below. AR: Goodwill derecognized in connection with the AOT disposal group divestiture. See Note 13: Acquisitions and

Divestitures in these Notes for further information.

At January 3, 2025 and December 29, 2023, accumulated goodwill impairment losses totaled $80 million,

$1,126 million and $355 million in our SAS, IMS, and CS segments, respectively. There are no accumulated

impairment losses in our AR segment.

Reallocation of Goodwill in Business Realignments. To better align our businesses, we adjusted our reporting

within our business segments and goodwill reporting units as follows:

Fiscal 2024. We realigned our Electro Optical and Maritime sectors in our IMS segment, which are also reporting

units, splitting Electro Optical into two sectors, Global Optical Systems and Defense Electronics, and moving one

Electro Optical business to the Maritime sector. Global Optical Systems and Defense Electronics represent one

reporting unit. Immediately before and after the realignment, we performed a quantitative impairment assessment

under our former and new reporting unit structure. These assessments indicated no impairment existed either

before or after the realignment.

_____________________________________________________________________

Fiscal 2023. We transferred our Agile Development Group (“ADG”) business (a reporting unit) from our IMS

segment to our SAS segment (also a reporting unit). In connection with the realignment, we reduced our reporting

units from nine to eight as the ADG reporting unit and all $327 million of associated goodwill was absorbed by our

existing SAS reporting unit given the economic similarities of the two reporting units. Immediately before the

realignment, we performed a qualitative impairment assessment over our SAS reporting unit and a quantitative

impairment assessment over our ADG reporting unit. Immediately after the realignment, we performed a

quantitative impairment assessment over the SAS reporting unit. These assessments indicated no impairment

existed either before or after the realignment.

Goodwill Impairments. We assess goodwill for impairment annually or under certain circumstances more

frequently, such as when events or circumstances indicate there may be impairment.

Fiscal 2024. As described in more detail in Note 13: Acquisitions and Divestitures in these Notes, during the

quarter ended June 28, 2024, we completed the divestiture of Antenna disposal group. As the Antenna disposal

group represents the disposal of a portion of the SAS reporting unit, which is also the SAS segment, we assigned $93

million of goodwill to the Antenna disposal group on a relative fair value basis. In connection with the preparation of

our financial statements for the quarter and two quarters ended June 28, 2024, we performed a quantitative

impairment assessment on goodwill assigned to the Antenna disposal group and a qualitative impairment

assessment on the goodwill assigned to the retained businesses of the reporting unit. As a result of these tests, we

determined that the fair value of the Antenna disposal group was below its carrying value and accordingly recorded a

non-cash charge for impairment of $14 million included in the “Impairment of goodwill and other assets” line item

in our Consolidated Statement of Operations.

F**iscal 2023. As described in more detail in Note 13: Acquisitions and Divestitures in these Notes, during the

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

includes both the CTS and Commercial Aviation reporting units. As of November 27, 2023, the date of the

agreement, the fair value less costs to sell the CAS disposal group was $834 million, inclusive of considerations

related to noncontrolling interest and accumulated other comprehensive income.

In connection with the preparation of our financial statements for fiscal 2023, we evaluated the facts and

circumstances which impacted the agreed upon selling price of the CAS disposal group and identified interim

indicators of impairment within both reporting units subsequent to our annual impairment testing date of October 2,

2023. Specifically, supply chain-related operational challenges which negatively impact cash flows over the short-

term forecast period were assessed in combination with our long-term portfolio shaping strategy to dispose of non-

core businesses. As a result, we performed quantitative impairment tests for both reporting units as of

November 27, 2023, utilizing an income approach aligned to market prices for the two reporting units, as specified

in the definitive agreement. As a result of these tests, we determined that the fair value of the CTS reporting unit was

above carrying value, while the fair value of the Commercial Avionics reporting unit was below its carrying value, and

concluded goodwill related to the Commercial Aviation reporting unit was impaired. Therefore we recorded a non-

cash charge for impairment of $296 million associated with the Commercial Aviation reporting unit in the

“Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations.

The carrying amounts of the CAS disposal group assets (including $534 million of goodwill) and liabilities were

classified as held for sale in our Consolidated Balance Sheet at December 29, 2023.

Fiscal 2022. During fiscal 2022, we determined that goodwill related to our Broadband, ADG and Electro Optical

reporting units was impaired and we recorded non-cash impairment charges of $355 million, $313 million and $134

million, respectively, in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of

Operations. See Note 9: Goodwill in our Fiscal 2022 Form 10-K for further information on our fiscal 2022 goodwill

impairments.

_____________________________________________________________________

Intangible Assets

Intangible assets, net, are summarized below:

	January 3, 2025						December 29, 2023
(In millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$8,817		$(3,470)		$5,347		$8,892		$(2,733)		$6,159
Developed technologies	849		(482)		367		856		(413)		443
Trade names	185		(64)		121		185		(50)		135
Other, including contract backlog	3		(2)		1		4		(4)		—
Total finite-lived intangible assets	9,854		(4,018)		5,836		9,937		(3,200)		6,737
Trade name — indefinite-lived	1,803		—		1,803		1,803		—		1,803
Total intangible assets, net	$11,657		$(4,018)		$7,639		$11,740		$(3,200)		$8,540

Amortization expense for intangible assets was $853 million, $779 million and $605 million in fiscal 2024, 2023

and 2022, respectively.

Future estimated amortization expense for intangible assets is as follows:

	(In millions)
2025	$768
2026	671
2027	562
2028	489
2029	433
Thereafter	2,913
Total	$5,836

In-process R&D Impairment. During fiscal 2023, we closed a facility, which triggered an evaluation of the in-

process R&D related to the operations of the closed facility for impairment. As a result, we recorded a $21 million

non-cash charge for the impairment of in-process R&D intangible assets which is included in the “Impairment of

goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2023.

NOTE 7: INCOME TAXES

Income Tax Provision

Our provisions for current and deferred income taxes are as follows:

	Fiscal Year Ended
(In millions)	January 3, 2025		December 29, 2023		December 30, 2022
Current:
United States	$(166)		$328		$633
International	72		50		82
State and local	5		66		98
Total current income taxes	(89)		444		813
Deferred:
United States	244		(380)		(523)
International	(34)		10		(61)
State and local	(36)		(51)		(17)
Total deferred income taxes	174		(421)		(601)
Total income taxes	$85		$23		$212

_____________________________________________________________________

A reconciliation of the U.S. statutory income tax rate to our effective income tax rate is as follows:

	Fiscal Year Ended
(In millions)	January 3, 2025		December 29, 2023		December 30, 2022
U.S. statutory income tax rate	21.0%		21.0%		21.0%
State taxes	2.1		1.4		2.2
International income	0.4		—		—
Non-deductible goodwill impairment	—		3.6		14.2
R&D tax credit	(10.4)		(12.5)		(13.0)
FDII deduction	(2.1)		(4.4)		(5.1)
Changes in valuation allowance	(2.3)		0.2		0.1
Impact of divestitures and reorganizations	1.2		(8.5)		(1.3)
Share-based compensation(1)	(0.6)		0.2		(0.2)
Settlement of tax audits	(3.4)		(1.1)		(0.7)
Other items	(0.6)		2.0		(0.5)
Effective income tax rate	5.3%		1.9%		16.7%

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(1)Includes non-deductible share-based compensation and excess tax benefits from share-based compensation.

As of January 3, 2025, we estimate our outside basis difference in foreign subsidiaries that are considered

indefinitely reinvested to be approximately $1.5 billion. The outside basis difference is comprised predominantly of

purchase accounting adjustments and to a lesser extent, undistributed earnings and other equity adjustments. In

the event of a disposition of the foreign subsidiaries or a distribution, we may be subject to incremental U.S. income

taxes, subject to an adjustment for foreign tax credits, and withholding taxes or income taxes payable to the foreign

jurisdictions. As of January 3, 2025, the determination of the amount of unrecognized deferred tax liability related to

the outside basis difference is not practicable.

Purchase of Tax Credits

Section 6418 of the Internal Revenue Code permits, in certain circumstances, the sale of federal income tax

credits generated from renewable and alternative energy sources. During the year ended January 3, 2025, we

entered into a binding agreement for the purchase of tax credits totaling $200 million for the 2024 tax year for a net

purchase price of $191 million, allowing us to reduce our 2024 federal income taxes payable by the $200 million.

We have recorded a liability to the seller for the amount owed in the “Other current liabilities” line of the

Consolidated Balance Sheet. We have recorded an income tax benefit of $9 million for the difference between the

amount paid or to be paid to the seller and the reduction to our taxes payable in the “Income taxes” line of the

Consolidated Statement of Operations.

_____________________________________________________________________

Deferred Income Tax Assets (Liabilities)

The components of deferred income tax assets (liabilities) were as follows:

(In millions)	January 3, 2025		December 29, 2023
Deferred tax assets, net:
Accruals	$396		$334
Tax loss and credit carryforwards(1)	249		211
Operating lease obligation	212		243
Capitalized research and experimental expenditures	1,694		1,125
Other	461		380
Valuation allowance(2)	(238)		(240)
Deferred tax assets, net	2,774		2,053
Deferred tax liabilities:
Property, plant and equipment	(216)		(252)
Acquired intangibles	(1,974)		(2,143)
Operating lease ROU asset	(188)		(219)
Deferred revenue on long-term contracts(3)	(913)		—
Other	(305)		(163)
Deferred tax liabilities	(3,596)		(2,777)
Net deferred tax liabilities	$(822)		$(724)

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(1)At January 3, 2025, primarily includes operating loss and credit carryforwards of $81 million and $165 million, respectively, which have

expiration dates ranging from less than one year to no expiration date. A significant portion of the carryforwards are either indefinite or begin

expiring in 2035.

(2)Valuation allowance established to offset certain domestic and foreign deferred tax assets due to the uncertainty regarding our ability to

realize these assets in the future. The net change in our valuation allowance in fiscal 2024 and 2023 was a decrease of $2 million and

$3 million, respectively.

(3)Based on recent IRS guidance, we made a method change to defer taxable income for long-term contracts accounted for under the POC

cost-to-cost method that include deferred R&D expenses, resulting in a $913 million reduction in our current income taxes (current payable)

and corresponding increase to our deferred income taxes (deferred tax liability).

Net deferred tax assets (liabilities) were classified as follows in our Consolidated Balance Sheet:

(In millions)	January 3, 2025		December 29, 2023
Deferred income tax assets	$120		$91
Deferred income tax liabilities	(942)		(815)
Net deferred tax liabilities	$(822)		$(724)

Income before income taxes of our international subsidiaries was $191 million, $205 million and $95 million in

fiscal 2024, 2023 and 2022, respectively.

We paid $102 million, $715 million and $309 million in income taxes, net of refunds received, in fiscal 2024,

2023 and 2022, respectively.

_____________________________________________________________________

Tax Uncertainties

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

	Fiscal Year Ended
(In millions)	January 3, 2025		December 29, 2023		December 30, 2022
Balance at beginning of fiscal year	$652		$613		$587
Additions based on tax positions taken during current period	120		99		124
Additions based on tax positions taken during prior period	23		8		4
Additions from tax positions related to acquired entities	92		86		—
Decreases based on tax positions taken during prior period	(113)		(133)		(76)
Decreases from lapse in statutes of limitations	(9)		(11)		(6)
Decreases from settlements	(7)		(10)		(20)
Balance at end of fiscal year(1)	$758		$652		$613

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(1)Includes unrecognized tax benefits that would favorably impact our future tax rates in the event that the tax benefits are eventually

recognized of $666 million and $509 million at January 3, 2025 and December 29, 2023, respectively.

We recognize accrued interest and penalties related to unrecognized tax benefits in our income tax provision. In

fiscal 2024, 2023 and 2022, we recognized $29 million, $20 million and $12 million, respectively. At January 3,

2025 and December 29, 2023, accrued interest and penalties related to unrecognized tax benefits was $109 million

and $80 million, respectively, which is included in the “Other long-term liabilities” line item in our Consolidated

Balance Sheet.

We file numerous separate and consolidated income tax returns reporting our financial results and, where

appropriate, those of our subsidiaries and affiliates, in the U.S. federal jurisdiction and various state, local and

foreign jurisdictions. Pursuant to the Compliance Assurance Process, the Internal Revenue Service (“IRS”) is

examining our federal tax returns for fiscal 2021, 2022, and 2023. Legacy L3’s federal tax returns for calendar years

2017 and 2018 are currently under IRS examination and refund claims related to calendar years 2012, 2013, 2015

and 2016 have been filed with the IRS. In addition, legacy AJRD refund claims related to calendar year 2019 and

2020 have been filed with the IRS.

We are currently under examination or contesting proposed adjustments by various state and international tax

authorities for fiscal years ranging from 2013 through 2022. It is reasonably possible that there could be a

significant change to our unrecognized tax benefit balance during the course of the next twelve months as these

examinations continue, other tax examinations commence or various statutes of limitations expire. An estimate of

the range of possible changes is not practicable for the remaining unrecognized tax benefits because of the

significant number of jurisdictions in which we do business and the number of open tax periods under various stages

of examination.

_____________________________________________________________________

NOTE 8: DEBT AND CREDIT ARRANGEMENTS

Long-Term Debt

Long-term debt, net, is summarized below:

(In millions)	January 3, 2025		December 29, 2023
Variable-rate debt:
Term Loan 2025	$—		$2,250
Fixed-rate debt:(1)
3.95% 2024 Notes	—		350
3.832% notes, due April 2025(2)(3)	600		600
7.00% debentures, due January 2026(4)	100		100
3.85% notes, due December 2026(2)	550		550
5.40% notes, due January 2027 (“5.40% 2027 Notes”)(2)(3)(5)	1,250		1,250
6.35% debentures, due February 2028(2)	26		26
4.40% notes, due June 2028(2)(3)	1,850		1,850
5.05% notes, due June 2029 (“5.05% 2029 Notes”)(2)(3)	750		—
2.90% notes, due December 2029(2)	400		400
1.80% notes, due January 2031(2)(3)	650		650
5.25% notes, due June 2031 (“5.25% 2031 Notes”)(2)(3)	750		—
5.40% notes, due July 2033 (“5.40% 2033 Notes”)(2)(3)(5)	1,500		1,500
5.35% notes, due June 2034 (“5.35% 2034 Notes”)(2)(3)	750		—
4.854% notes, due April 2035(2)(3)	400		400
6.15% notes, due December 2040(2)(3)	300		300
5.054% notes, due April 2045(2)(3)	500		500
5.60% notes, due July 2053 (“5.60% 2053 Notes”)(2)(3)(5)	500		500
5.50% notes, due August 2054 (“5.50% 2054 Notes”)(2)(3)	600		—
Total variable and fixed-rate debt	11,476		11,226
Financing lease obligations and other debt	288		300
Long-term debt, including the current portion of long-term debt	11,764		11,526
Plus: unamortized bond premium	38		51
Less: unamortized discounts and issuance costs	(81)		(54)
Long-term debt, including the current portion of long-term debt, net	11,721		11,523
Less: current portion of long-term debt, net	(640)		(363)
Total long-term debt, net	$11,081		$11,160

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(1)All fixed-rate notes and debentures rank equally in right of payment.

(2)We may redeem these notes, in whole or in part, at our option, at a pre-determined redemption price pursuant to their terms prior to the

applicable maturity date.

(3)Upon change of control combined with a below-investment-grade rating event, we may be required to make an offer to repurchase these

notes at a pre-determined price pursuant to their terms.

(4)The debentures are not redeemable prior to maturity.

(5)Collectively, the “AJRD Notes.”

The maturities of long-term debt, including the current portion of long-term debt and excluding finance lease

obligations, for the five years following the end of fiscal 2024 and, in total thereafter, are: $610 million in fiscal

2025; $659 million in fiscal 2026; $1,254 million in fiscal 2027; $1,880 million in fiscal 2028; $1,154 million in

fiscal 2029; and $5,973 million thereafter.

*Long-*Term Debt Issuances. On March 13, 2024, we closed the issuance and sale of March Issued 2024 Notes.

The March Issued 2024 Notes were used to repay Term Loan 2025, including related fees and expenses, which had

an outstanding balance of $2.25 billion at December 29, 2023. Interest on the March Issued 2024 Notes is payable

semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2024.

_____________________________________________________________________

On August 2, 2024, we closed the issuance and sale of $600 million aggregate principal amount of the 5.50%

2054 Notes, and used the net proceeds to repay borrowings under our CP Program. Interest on the 5.50% 2054

Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15,

We incurred debt issuance costs of $20 million and $7 million for the March Issued 2024 Notes and 5.50%

2054 Notes, respectively, which are being amortized over the life of each respective note. Such amortization is

included as a component of the “Interest expense, net” line item in our Consolidated Statement of Operations.

Long-Term Debt Repayments.

Fiscal 2024. On March 14, 2024, we repaid the entire outstanding $2.25 billion drawn on Term Loan 2025,

which at time of repayment had a variable interest rate of 6.7%, with proceeds from the issuance of the March

Issued 2024 Notes, which bear fixed interest rates between 5.05% and 5.35%. Additionally, during the quarter

ended June 28, 2024, we repaid the $350 million aggregate principal amount of our 3.95% 2024 Notes.

Fiscal 2023. On March 14, 2023, we repaid the entire outstanding $250 million aggregate principal amount of

our Floating Rate Notes due March 2023 through a $250 million draw on Term Loan 2025. On June 15, 2023, we

repaid the entire outstanding $800 million aggregate principal amount of our 3.85% 2023 Notes through cash on

hand and the issuance of commercial paper during fiscal 2023.

Commercial Paper Program

On January 26, 2024, we lowered the maximum amount available under our CP Program to $3.0 billion from

$3.9 billion in accordance with the terms of the CP Program. At January 3, 2025, our CP Program was supported by

amounts available under the 2022 Credit Agreement and the 2024 Credit Agreement.

The commercial paper notes are sold at par less a discount representing an interest factor or, if interest bearing,

at par, and the maturities vary but may not exceed 397 days from the date of issue. The commercial paper notes will

rank at least pari passu with all other unsecured and unsubordinated indebtedness.

At January 3, 2025 and December 29, 2023, we had $515 million and $1,599 million in outstanding notes under

our CP Program, respectively, which is included as a component of the “Short-term debt” line item in our

Consolidated Balance Sheet. The outstanding notes under our CP Program had a weighted-average interest rate of

4.70% and 5.95% at January 3, 2025 and December 29, 2023, respectively.

Fair Value of Debt

The following table presents the carrying amounts and estimated fair values of our long-term debt:

	January 3, 2025				December 29, 2023
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term Loan 2025(1)	$—		$—		$2,250		$2,250
All other long-term debt, net (including current portion)(2)	11,721		11,467		9,273		9,199
Long-term debt, including the current portion of long-term debt, net	$11,721		$11,467		$11,523		$11,449

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

(2)The fair value was estimated using a market approach based on quoted market prices for our debt traded in the secondary market. If long-

term debt were measured at fair value in our consolidated balance sheet, it would be categorized as Level 2 within the fair value hierarchy.

The fair value of our short-term debt approximates the carrying value due to its short-term nature. If measured

at fair value, the commercial paper would be classified as level 2 and other short-term debt would be classified as

level 3 within the fair value hierarchy.

Credit Agreements

On January 26, 2024, we established a new $1.5 billion, 364-day senior unsecured revolving credit facility by

entering into a 364-day credit agreement maturing no later than January 24, 2025 with a syndicate of lenders. The

2024 Credit Agreement, which matured on January 24, 2025, replaced the 2023 Credit Agreement.

At our election, borrowings under the 2024 Credit Agreement, which were designated in U.S. Dollars, bore

interest at the sum of the term secured overnight financing rate or the Base Rate (as defined in the 2024 Credit

Agreement), plus an applicable margin that varied based on the ratings of our senior unsecured long-term debt

securities (“Senior Debt Ratings”). In addition to interest payable on the principal amount of indebtedness

_____________________________________________________________________

outstanding, we were required to pay a quarterly unused commitment fee that varied based on our Senior Debt

Ratings.

The 2024 Credit Agreement contained representations, warranties, covenants and events of default that are

substantially similar to the 2022 Credit Agreement which established a $2.0 billion, five-year senior unsecured

revolving credit facility.

At January 3, 2025, we had no outstanding borrowings under our credit facility, had available borrowing capacity

of $2,985 million, net of outstanding notes under our CP Program, and were in compliance with all covenants under

the 2024 Credit Agreement and the 2022 Credit Agreement.

At December 29, 2023, we had no outstanding borrowings under our credit facility, had available borrowing

capacity of $2,801 million, net of outstanding notes under our CP Program, and were in compliance with all

covenants under the 2023 Credit Agreement and the 2022 Credit Agreement.

Interest Paid

Total interest paid was $654 million, $489 million and $296 million in fiscal 2024, 2023 and 2022, respectively.

NOTE 9: RETIREMENT BENEFITS

Defined Contribution Plans

We sponsor numerous defined contribution savings plans, which allow our eligible employees to contribute a

portion of their pre-tax and/or after-tax income in accordance with specified guidelines. The plans include several

match contribution formulas which require us to match a percentage of the employee contributions up to certain

limits, generally totaling 6.0% of employee eligible pay. Matching contributions, net of forfeitures, charged to

expense were $276 million, $267 million and $226 million in fiscal 2024, 2023 and 2022, respectively.

Deferred Compensation Plans

We also sponsor certain non-qualified deferred compensation plans. The following table provides the fair value

of our deferred compensation plan investments and liabilities by category and by fair value hierarchy level:

	January 3, 2025				December 29, 2023
(In millions)	Total		Level 1		Total		Level 1
Assets
Deferred compensation plan assets:(1)
Equity and fixed income securities	$219		$219		$106		$106
Investments measured at NAV:
Corporate-owned life insurance	41				37
Total fair value of deferred compensation plan assets	$260				$143
Liabilities
Deferred compensation plan liabilities:(2)
Equity securities and mutual funds	$10		$10		$18		$18
Investments measured at NAV:
Common/collective trusts and guaranteed investment contracts	357				274
Total fair value of deferred compensation plan liabilities	$367				$292

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(1)Represents diversified assets held in rabbi trusts primarily associated with our non-qualified deferred compensation plans, which are

measured at fair value and included in the “Other current assets” and “Other non-current assets” line items in our Consolidated Balance

Sheet. In fiscal 2024, we contributed $100 million to our rabbi trust assets.

(2)Primarily represents obligations to pay benefits under certain non-qualified deferred compensation plans, which we include in the

“Compensation and benefits” and “Other long-term liabilities” line items in our Consolidated Balance Sheet. Under these plans, participants

designate investment options (including stock and fixed-income funds), which serve as the basis for measurement of the notional value of

their accounts.

_____________________________________________________________________

Defined Benefit Plans

We sponsor various defined benefit pension plans for eligible employees in the U.S., Canada and United

Kingdom. Our largest plans are generally closed to new entrants. Benefits for most participants under the terms of

these plans are based on the employee’s years of service and compensation. We fund these plans as required by

statutory regulations and through voluntary contributions. Some of our employees also participate in other

postretirement defined benefit plans (“Other Benefits”) such as health care and life insurance plans. Our largest

defined benefit plan is the Consolidated Pension Plan, with 85% and 86% of total plan assets and PBO, respectively,

as of January 3, 2025.

During fiscal 2024, we reduced our defined benefit pension plan benefit obligations by approximately $333

million by purchasing group annuity policies and transferring approximately $333 million of pension plan assets to

an insurance company. There was no gain or loss as a result of this transaction.

Funded Status. The following table summarizes the funded status of our defined benefit plans:

	January 3, 2025						December 29, 2023
(In millions)	Pension		Other Benefits		Total		Pension		Other Benefits		Total
Change in benefit obligation
PBO at beginning of fiscal year	$8,563		$231		$8,794		$7,494		$228		$7,722
Service cost	34		2		36		33		2		35
Interest cost	394		10		404		386		11		397
Actuarial (gain) loss	(374)		(4)		(378)		280		(1)		279
Benefits paid(1)	(967)		(22)		(989)		(568)		(23)		(591)
Expenses paid	(19)		—		(19)		(34)		—		(34)
Currency translation adjustment	(24)		(1)		(25)		10		—		10
Acquisitions(2)	—		—		—		960		14		974
Other	(12)		(1)		(13)		2		—		2
PBO at end of fiscal year	$7,595		$215		$7,810		$8,563		$231		$8,794
Change in plan assets
Plan assets at beginning of fiscal year	$8,595		$265		$8,860		$7,411		$242		$7,653
Actual return on plan assets	700		22		722		1,004		37		1,041
Employer contributions	45		9		54		20		9		29
Benefits paid(1)	(967)		(22)		(989)		(568)		(23)		(591)
Expenses paid	(19)		—		(19)		(34)		—		(34)
Currency translation adjustment	(31)		—		(31)		12		—		12
Acquisitions(2)	—		—		—		749		—		749
Other	2		—		2		1		—		1
Plan assets at end of fiscal year	$8,325		$274		$8,599		$8,595		$265		$8,860
Funded status at end of fiscal year	$730		$59		$789		$32		$34		$66

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(1)Fiscal 2024 includes approximately $333 million associated with the purchase of group annuity policies and transfer of plan assets to an

insurance company. The transaction is reflected in this caption as settlement accounting had not been met.

(2)PBO assumed and plan assets acquired in the AJRD acquisition. Net defined benefit plan liability is included in our “Other long-term

liabilities” and “Compensation and benefits” line items in “Acquisition of AJRD” section of Note 13: Acquisitions and Divestitures*.*

Actuarial gains in the PBO as of January 3, 2025 were primarily the result of higher discount rates. Actuarial

losses in the PBO as of December 29, 2023 were primarily the result of lower discount rates.

_____________________________________________________________________

The following table summarizes amounts recognized in our Consolidated Balance Sheet:

	January 3, 2025						December 29, 2023
(In millions)	Pension		Other Benefits		Total		Pension		Other Benefits		Total
Assets of business held for sale	$8		$—		$8		$4		$—		$4
Other non-current assets	873		113		986		193		96		289
Compensation and benefits	(12)		(6)		(18)		(12)		(7)		(19)
Other long-term liabilities	(139)		(48)		(187)		(153)		(55)		(208)

The following table summarizes pre-tax amounts recognized in the “Accumulated other comprehensive income

(loss)” line item in our Consolidated Balance Sheet:

	January 3, 2025						December 29, 2023
(In millions)	Pension		Other Benefits		Total		Pension		Other Benefits		Total
Actuarial (gain) loss	$(245)		$(86)		$(331)		$162		$(98)		$64
Net prior service (credit) cost	(144)		2		(142)		(157)		4		(153)
Total recognized in accumulated other comprehensive income (loss), pre-tax	$(389)		$(84)		$(473)		$5		$(94)		$(89)

The following table provides information for our defined benefit plans with PBO in excess of plan assets:

	January 3, 2025				December 29, 2023
(In millions)	Pension		Other Benefits		Pension		Other Benefits
PBO	154		55		226		62
Fair value of plan assets	3		—		60		—

Accumulated Benefit Obligation (“ABO”): The ABO for all defined benefit pension plans was $7,585 million and

$8,563 million at January 3, 2025 and December 29, 2023, respectively. The following table provides information

for our defined benefit plans with ABO in excess of plan assets:

	January 3, 2025				December 29, 2023
(In millions)	Pension		Other Benefits		Pension		Other Benefits
ABO	$153		N/A		$225		N/A
Fair value of plan assets	3		N/A		60		N/A

_____________________________________________________________________

Net Periodic Benefit Income. We record the service cost component of net periodic benefit income in the “Cost

of revenue” and “General and administrative expenses” line items and the non-service cost components in the

“Non-service FAS pension income and other, net” line item in our Consolidated Statement of Operations.

The following table provides the components of net periodic benefit income and other amounts recognized in

other comprehensive income:

	Fiscal Year Ended
	January 3, 2025				December 29, 2023				December 30, 2022
(In millions)	Pension		Other Benefits		Pension		Other Benefits	T o t a l	Pension		Other Benefits
Net periodic benefit income
Operating
Service cost	$34		$2		$33		$2		$44		$2
Non-operating
Interest cost	394		10		386		11		220		7
Expected return on plan assets	(660)		(20)		(633)		(20)		(624)		(20)
Amortization of net actuarial (gain) loss	(4)		(17)		(9)		(20)		9		(7)
Amortization of prior service (credit) cost	(26)		1		(26)		1		(27)		1
Non-service cost periodic benefit income	(296)		(26)		(282)		(28)		(422)		(19)
Net periodic benefit income	$(262)		$(24)		$(249)		$(26)		$(378)		$(17)
Other changes in plan assets and benefit obligations recognized in other comprehensive income
Net actuarial (gain) loss	$(414)		$(7)		$(90)		$(18)		$42		$(34)
Prior service (credit) cost	(14)		—		—		—		8		—
Amortization of net actuarial gain (loss)	4		17		9		20		(9)		7
Amortization of prior service credit (cost)	26		(1)		26		(1)		27		(1)
Currency translation adjustment	4		—		—		—		1		—
Total change recognized in other comprehensive income	(394)		9		(55)		1		69		(28)
Total impact from net periodic benefit income and changes in other comprehensive income	$(656)		$(15)		$(304)		$(25)		$(309)		$(45)

Assumptions. The following table presents the weighted-average assumptions used to determine the benefit

obligation:

	January 3, 2025				December 29, 2023
	Pension**(1)**		Other Benefits		Pension		Other Benefits
Discount rate	5.46%		5.38%		4.91%		4.87%
Rate of future compensation increase	3.01%		N/A		3.01%		N/A
Cash balance interest crediting rate	4.50%		N/A		4.50%		N/A

---

(1)Key assumptions for our Consolidated Pension Plan include a discount rate of 5.49%, cash balance interest crediting rate of 4.50% and a

4.25% interest crediting rate for the frozen pension equity benefit.

_____________________________________________________________________

The following table presents the weighted-average assumptions used to determine net periodic benefit income:

	Fiscal Year Ended
	January 3, 2025				December 29, 2023				December 30, 2022
	Pension**(1)**		Other Benefits		Pension		Other Benefits		Pension		Other Benefits
Discount rate to determine service cost	4.92%		5.00%		5.18%		5.26%		2.69%		2.91%
Discount rate to determine interest cost	4.80%		4.78%		5.08%		5.06%		2.27%		2.06%
Expected return on plan assets	7.45%		7.50%		7.46%		7.50%		7.44%		7.50%
Rate of future compensation increase	3.01%		N/A		3.01%		N/A		3.01%		N/A
Cash balance interest crediting rate	4.50%		N/A		4.00%		N/A		3.50%		N/A

---

(1)Key assumptions for our Consolidated Pension Plan include expected return on plan assets of 7.50%, which is being maintained at 7.50% for

fiscal 2025.

The expected long-term rate of return on plan assets reflects the expected returns for each major asset class in

which the plans invest, the weight of each asset class in the strategic allocation, the correlations among asset

classes and their expected volatilities. Our expected rate of return on plan assets is estimated by evaluating both

historical returns and estimates of future returns. Specifically, the determination of the expected long-term rate of

return takes into consideration: (1) the plan’s actual historical annual return on assets over the past 15-, 20- and 25-

year time periods, (2) historical broad market returns over long-term timeframes weighted by the plan’s strategic

allocation and (3) independent estimates of future long-term asset class returns, weighted by the plan’s strategic

allocation. Based on this approach, the long-term expected annual rate of return on assets is estimated at 7.50% for

fiscal 2025 for the U.S. defined benefit pension plans. The weighted average long-term expected annual rate of

return on assets for all defined benefit pension plans is estimated to be 7.45% for fiscal 2025.

The assumed composite rate of future increases in the per capita healthcare costs (the healthcare trend rate) is

8.23% for fiscal 2025, decreasing ratably to 4.53% by fiscal 2035.

Investment Policy. The investment strategy for managing defined benefit plan assets is to seek an optimal rate

of return relative to an appropriate level of risk. We manage substantially all defined benefit plan assets on a

commingled basis in a master investment trust. In making these asset allocation decisions, we take into account

recent and expected returns and volatility of returns for each asset class, the expected correlation of returns among

the different investments, as well as anticipated funding and cash flows. To enhance returns and mitigate risk, we

diversify our investments by strategy, asset class, geography and sector and engage a large number of managers to

gain broad exposure to the markets.

The following table provides the current strategic target asset allocation ranges by asset category:

	Target Asset Allocation
Equity investments	30%	—	45%
Fixed income investments	30%	—	50%
Alternative investments	10%	—	30%
Cash and cash equivalents	0%	—	10%

_____________________________________________________________________

Fair Value of Plan Assets. The following is a description of the valuation techniques and inputs used to measure

fair value for major categories of investments as reflected in the table that follows such description:

• Domestic and international equities, which include common and preferred shares, domestic listed and

foreign listed equity securities, open-ended and closed-ended mutual funds, real estate investment trusts

and exchange traded funds, are generally valued at the closing price reported on the major market

exchanges on which the individual securities are traded at the measurement date. Because these assets are

traded predominantly on liquid, widely traded public exchanges, equity securities are categorized as Level 1

assets.

• Private equity funds are typically limited partnership investment structures. Private equity funds are valued

using a market approach based on NAV calculated by the funds and are not publicly available. Private equity

funds generally have liquidity restrictions that extend for ten or more years. At January 3, 2025 and

December 29, 2023, our defined benefit plans had future unfunded commitments totaling $539 million and

$550 million, respectively, related to private equity fund investments.

• Real asset funds are typically limited partnership investment structures. Real asset funds are valued using a

market approach based on NAV calculated by the funds and are not publicly available. Real asset funds

generally permit redemption on a quarterly basis with 90 or fewer days-notice. At each of January 3, 2025

and December 29, 2023, our defined benefit plans had no future unfunded commitments related to real

asset fund investments.

• Hedge funds, which include equity long/short, event-driven, fixed-income arbitrage and global macro

strategies, are typically limited partnership investment structures. Limited partnership interests in hedge

funds are valued using a market approach based on NAV calculated by the funds and are not publicly

available. Hedge funds generally permit redemption on a quarterly or more frequent basis with 90 or fewer

days’ notice. At each of January 3, 2025 and December 29, 2023, our defined benefit plans had no future

unfunded commitments related to hedge fund investments.

• Fixed income investments, which include U.S. Government securities, investment and non-investment-

grade corporate bonds and securitized bonds, are generally valued using pricing models that use verifiable,

observable market data such as interest rates, benchmark yield curves and credit spreads, bids provided by

brokers or dealers or quoted prices of securities with similar characteristics. Fixed income investments are

generally categorized as Level 2 assets. Fixed income funds valued at the closing price reported on the

major market exchanges on which the individual fund is traded are categorized as Level 1 assets.

• Cash and cash equivalents are primarily comprised of short-term money market funds valued at cost, which

approximates fair value, or valued at quoted market prices of identical instruments. Cash and cash

equivalents currency are categorized as Level 1 assets; cash equivalents, such as money market funds or

short-term commingled funds, are categorized as Level 2 assets.

• Certain investments that are valued using the NAV per share (or its equivalent) as a practical expedient are

not categorized in the fair value hierarchy and are included in the table to permit reconciliation of the fair

value hierarchy to the aggregate defined benefit plan assets.

_____________________________________________________________________

The following tables provide the fair value of plan assets held by our defined benefit plans by asset category

and by fair value hierarchy level:

	January 3, 2025
(In millions)	Total		Level 1		Level 2		Level 3
Asset category
Equities:
Domestic equities	$1,048		$1,048		$—		$—
International equities	968		968		—		—
Real estate investment trusts	186		186		—		—
Fixed income:
Corporate bonds	1,685		—		1,642		43
Government securities	698		—		698		—
Securitized assets	79		—		79		—
Fixed income funds	132		4		128		—
Cash and cash equivalents	498		14		484		—
Other	53		—		—		53
Total	5,347		$2,220		$3,031		$96
Investments measured at NAV:
Equity funds	1,389
Fixed income funds	106
Hedge funds	219
Private equity funds	1,127
Real asset funds	323
Other	2
Total investments measured at NAV	3,166
Receivables, net	86
Total fair value of plan assets	$8,599

	December 29, 2023
(In millions)	Total		Level 1		Level 2		Level 3
Asset category
Equities:
Domestic equities	$1,294		$1,294		$—		$—
International equities	1,138		1,138		—		—
Real estate investment trusts	214		214		—		—
Fixed income:
Corporate bonds	1,457		—		1,331		126
Government securities	485		—		485		—
Securitized assets	164		—		164		—
Fixed income funds	137		4		133		—
Cash and cash equivalents	545		18		527		—
Other	61		—		—		61
Total	5,495		$2,668		$2,640		$187
Investments measured at NAV:
Equity funds	1,529
Fixed income funds	3
Hedge funds	396
Private equity funds	1,019
Real asset funds	379
Other	2
Total investments measured at NAV	3,328
Receivables, net	37
Total fair value of plan assets	$8,860

_____________________________________________________________________

Contributions. Funding requirements under IRS rules are a major consideration in making contributions to our

defined benefit plans. With respect to U.S. qualified pension plans, we intend to contribute annually not less than the

required minimum funding thresholds.

The Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006 and

further amended by the Worker, Retiree, and Employer Recovery Act of 2008, the Moving Ahead for Progress in the

21st Century Act (“MAP-21”) and applicable Internal Revenue Code regulations mandate minimum funding

thresholds. The Highway and Transportation Funding Act of 2014, the Bipartisan Budget Act of 2015, the American

Rescue Plan Act of 2021 and the Infrastructure Investment and Jobs Act further extended the interest rate

stabilization provision of MAP-21. In fiscal 2024, we made approximately $30 million of contributions to our U.S.

qualified defined benefit pension plans. As a result of prior voluntary contributions, we made no material

contributions to our U.S. qualified defined benefit pension plans in fiscal 2023 or 2022. We expect to make

contributions of approximately $23 million to these plans during fiscal 2025, and may consider voluntary

contributions thereafter.

Estimated Future Benefit Payments. The following table provides the projected timing of payments for benefits

earned to date and benefits expected to be earned for future service by current active employees under our defined

benefit plans:

(In millions)	Pension		Other Benefits(1)		Total
Fiscal Years:
2025	$627		$22		$649
2026	613		21		634
2027	612		21		633
2028	608		20		628
2029	603		19		622
2030 — 2034	2,867		83		2,950

---

(1)Projected payments for Other Benefits reflect net payments from the Company, which include subsidies that reduce the gross payments by

less than 1%.

Multi-employer Benefit Plans

Certain of our businesses participate in multi-employer defined benefit pension plans. We make cash

contributions to these plans under the terms of collective-bargaining agreements that cover union employees based

on a fixed rate per hour of service worked by the covered employees. The risks of participating in these multi-

employer plans are different from single-employer plans in the following aspects: (1) assets contributed to the

multi-employer plan by one employer may be used to provide benefits to employees of other participating

employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be

borne by the remaining participating employers and (3) if we choose to stop participating in some of our multi-

employer plans, we may be required to pay those plans an amount based on the underfunded status of the plan,

referred to as a withdrawal liability. Cash contributed and expenses recorded for our multi-employer plans were not

material in fiscal 2024, 2023 or 2022.

NOTE 10: SHARE-BASED COMPENSATION

At January 3, 2025, we had stock options and other share-based compensation outstanding under our 2024

Equity Incentive Plan, which was approved by our shareholders on April 19, 2024, as well as under employee equity

incentive plans assumed by L3Harris (collectively, the “L3Harris SIPs”). As part of our long-term incentive

compensation program, we have made awards to employees in the form of RSUs, PSUs and non-qualified stock

options under the L3Harris SIPs. We have also awarded RSUs in the form of deferred units to our non-employee

directors. We believe that share-based awards more closely align the interests of participants with those of

shareholders.

_____________________________________________________________________

The following table summarizes the share-based compensation expense recognized in the Consolidated

Statement of Operations:

	Fiscal Year Ended
(In millions)	January 3, 2025		December 29, 2023		December 30, 2022
Share-based compensation expense	$97		$89		$109
Amounts recognized in our Consolidated Statement of Operations include:
Cost of revenue	$14		$16		$19
General and administrative expenses	83		73		90
Share-based compensation expense, before income taxes	97		89		109
Income taxes on share-based compensation expense	(20)		(19)		(27)
Share-based compensation expense, net of income taxes	$77		$70		$82

Share**-Based** Compensation Awards

As of January 3, 2025, a total of 21.2 million shares of common stock remained available under our L3Harris

SIPs for future issuance (excluding shares to be issued in respect of outstanding stock options, with each full-value

award (e.g., RSUs and PSUs) counting as 4.6 shares against the total remaining for future issuance). During fiscal

2024, we issued an aggregate of 1.3 million shares of common stock under the terms of our L3Harris SIPs, which is

net of shares withheld for tax purposes.

RSUs*.* RSUs granted under our L3Harris SIPs are not transferable until vested and the restrictions generally

lapse upon the achievement of continued employment (or board membership) over a specified time period.

The grant-date fair value of these awards was based on the closing price of our common stock on the grant date

and is amortized to compensation expense over the vesting period. At January 3, 2025, there were 582,326 RSUs

outstanding which were payable in shares.

The following table summarizes the activity of RSUs during fiscal 2024:

(In thousands, except per unit amounts)	Units		Weighted-Average Grant-Date Price Per Unit
RSUs outstanding at December 29, 2023	728		$208.78
Granted	158		$211.95
Vested	(227)		$204.42
Forfeited	(77)		$210.18
RSUs outstanding at January 3, 2025	582		$210.28

As of January 3, 2025, there was $57 million of total unrecognized compensation expense related to these

awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.41

years. The weighted-average grant-date price per unit was $211.95, $199.33 and $225.58 for awards granted in

fiscal 2024, 2023 and 2022, respectively. The total fair value of the awards that vested in fiscal 2024, 2023 and

2022 was $46 million, $44 million and $69 million, respectively.

PSUs. At January 3, 2025, all outstanding PSUs granted under our L3Harris SIPs are subject to performance

criteria, such as meeting predetermined operating income or earnings per share, return on invested capital targets

and market conditions, such as total shareholder return, for a three-year performance period. These awards also

generally vest after a three-year performance period. The final determination of the number of shares to be issued in

respect of an award is made by our Board or a committee thereof.

The grant-date fair value of awards with market conditions was determined based on a multifactor Monte Carlo

valuation model that simulates our stock price and TSR relative to other companies in the S&P 500, less a discount

to reflect the delay in payments of cash dividend-equivalents that are made only upon vesting. The fair value of

these awards is amortized to compensation expense over the performance period if achievement of the

performance measures is considered probable.

_____________________________________________________________________

The following table summarizes the activity of PSUs during fiscal 2024:

(In thousands, except per unit amounts)	Units		Weighted-Average Grant-Date Price Per Unit
PSUs outstanding at December 29, 2023	480		$222.73
Granted	172		$230.09
Adjustment for achievement of performance measures	8		$195.07
Vested	(190)		$194.99
Forfeited	(45)		$233.38
PSUs outstanding at January 3, 2025	425		$236.42

As of January 3, 2025, there was $35 million of total unrecognized compensation expense related to these

awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.52

years. The weighted-average grant-date price per unit was $230.09, $223.09 and $258.83 for awards granted in

fiscal 2024, 2023 and 2022, respectively. The total fair value of the awards that vested in fiscal 2024, 2023 and

2022 was $37 million, $42 million and $41 million, respectively.

Stock Options. Exercise prices for stock options, including performance stock options, that have been granted

under the L3Harris SIPs are equal to or greater than the fair market value of our common stock on the grant date,

using the closing stock price of our common stock. Stock options may be exercised for a period of ten years after the

date of grant, and stock options, other than performance stock options, generally become exercisable in

installments, which are typically 33.3% one year from the grant date, 33.3% two years from the grant date and

33.3% three years from the grant date. In certain instances, vesting and exercisability are also subject to

performance criteria.

The grant-date fair value of each stock option award was determined using the Black-Scholes-Merton option-

pricing model which used assumptions noted in the following table:

	Fiscal Year Ended
	January 3, 2025		December 29, 2023		December 30, 2022
Expected dividends	2.18%		2.17%		2.00%
Expected volatility	25.29%		28.60%		29.09%
Risk-free interest rates	3.80% - 4.64%		3.48% - 4.27%		1.63% - 4.27%
Expected term (years)	5.06		5.04		5.02

Expected volatility over the expected term of the stock options is based on implied volatility from traded stock

options on our common stock and the historical volatility of our stock price. The expected term of the stock options

is based on historical observations of our common stock, considering average years to exercise for all stock options

exercised and average years to cancellation for all stock options canceled, as well as average years remaining for

vested outstanding stock options, which is calculated based on the weighted-average of these three inputs. The

risk-free interest rate for periods within the contractual life of the stock option is based on the U.S. Treasury yield

curve in effect at the time of grant.

_____________________________________________________________________

The following table summarizes the stock option activity during fiscal 2024:

	Shares (In thousands)		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value (In millions)
Stock options outstanding at December 29, 2023	3,251		$169.53
Granted	415		$213.85
Exercised	(1,026)		$129.18
Forfeited or expired	(103)		$218.61
Stock options outstanding at January 3, 2025	2,537		$191.09		5.70		$55
Stock options exercisable at January 3, 2025	1,902		$183.03		4.72		$55

The weighted-average grant-date fair value per share was $50.99, $54.63 and $53.66 for stock options granted

in fiscal 2024, 2023 and 2022, respectively. The total intrinsic value of stock options at the time of exercise was

$100 million, $23 million and $56 million for stock options exercised in fiscal 2024, 2023 and 2022, respectively.

The following table summarizes the unvested stock option activity during fiscal 2024:

(In thousands, except per share amounts)	Shares		Weighted-Average Grant-Date Fair Value Per Share
Unvested stock options at December 29, 2023	582		$52.72
Granted	415		$50.99
Vested/forfeited, net	(362)		$50.59
Unvested stock options at January 3, 2025	635		$52.54

As of January 3, 2025, there was $20 million of total unrecognized compensation expense related to unvested

stock options granted under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average

period of 1.80 years. The total fair value of stock options that vested in fiscal 2024, 2023 and 2022 was $14 million,

$14 million and $42 million, respectively.

NOTE 11: LEASES

Our operating and finance leases primarily consist of real estate leases for office space, warehouses,

manufacturing, R&D facilities, telecommunication tower space and land and equipment leases.

Lease Costs. Components of lease costs included in our Consolidated Statement of Operations are as follows:

	Fiscal Year Ended
(In millions)	January 3, 2025		December 29, 2023		December 30, 2022
Operating lease cost	$164		$163		$151
Short-term and equipment lease cost	31		23		21
Variable lease cost	26		26		25
Other, net(1)	18		11		6
Total lease cost	$239		$223		$203

---

(1) Consists of finance lease amortization and interest costs as well as sublease income.

See “Leases” section in Note 1: Significant Accounting Policies in these Notes for the line items in our

Consolidated Statement of Operations where our lease costs are presented.

_____________________________________________________________________

Balance Sheet Information. ROU assets and lease liabilities included in our Consolidated Balance Sheet are as

follows:

(In millions)	January 3, 2025		December 29, 2023
Operating Leases
Other non-current assets	$659		$743
Assets of business held for sale	25		20
Total operating lease assets	$684		$763
Other current liabilities	$143		$120
Other long-term liabilities	601		705
Liabilities of business held for sale	56		61
Total operating lease liabilities	$800	$800	$886
Finance Leases
Property, plant and equipment	$234		$243
Accumulated amortization	(36)		(25)
Property, plant and equipment, net	198		218
Assets of business held for sale	4		—
Total finance lease assets	$202		$218
Current portion of long-term debt, net	$31		$8
Long-term debt, net	203		243
Liabilities of business held for sale	4		—
Total finance lease liabilities	$238		$251

Supplemental Lease Information: Other supplemental lease information is as follows:

	Fiscal Year Ended
(In millions, except lease term and discount rate)	January 3, 2025		December 29, 2023
Cash paid for amounts included in the measurement of lease liabilities
Net cash provided by operating activities - operating lease payments	$182		$159
Assets obtained in exchange for new lease obligations
ROU assets obtained with operating leases	$96		$144
Property, plant and equipment obtained with finance leases	4		68
Weighted average remaining lease term (in years)
Operating leases	7.59		8.30
Finance leases	16.41		17.69
Weighted average discount rate
Operating leases	3.72%		3.86%
Finance leases	4.43%		4.32%

_____________________________________________________________________

Maturities of non-cancelable operating and finance lease liabilities at January 3, 2025 were as follows:

(In millions)	Operating Leases		Finance Leases
2025	$159		$40
2026	134		18
2027	116		17
2028	110		19
2029	89		18
Thereafter	314		208
Total future lease payments required(1)	922		320
Less: imputed interest	122		82
Total	$800		$238

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(1)On January 3, 2025, we had additional future payments on leases of $228 million that had not yet commenced. These leases will commence

between 2025 and 2026, and have lease terms of three to 15 years.

These commitments do not contain any material rent escalations, rent holidays, contingent rent, rent

concessions, leasehold improvement incentives or unusual provisions or conditions. We do not consider any

individual lease material to our operations.

_____________________________________________________________________

NOTE 12: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (“AOCI”)

The components of AOCI are summarized below:

(In millions)	Foreign currency translation		Hedging derivatives		Pension and other postretirement benefits**(1)**		Total AOCI
Balance at December 29, 2023	$(201)		$(65)		$68		$(198)
Other comprehensive (loss) income, before reclassifications to earnings and income taxes	(60)		(12)		431		359
Income taxes	—		—		(108)		(108)
Other comprehensive (loss) income before reclassifications to earnings, net of income taxes	(60)		(12)		323		251
(Gains) losses reclassified to earnings, before income taxes(2)	(4)		11		(46)		(39)
Income taxes	—		—		13		13
(Gains) losses reclassified to earnings, net of income taxes	(4)		11		(33)		(26)
Other comprehensive (loss) income, net of income taxes	(64)		(1)		290		225
Balance at January 3, 2025	$(265)		$(66)		$358		$27
Balance at December 30, 2022	$(237)		$(79)		$28		$(288)
Other comprehensive income, before reclassifications to earnings and income taxes	36		14		95		145
Income taxes	—		(4)		(24)		(28)
Other comprehensive income before reclassifications to earnings, net of income taxes	36		10		71		117
Losses (gains) reclassified to earnings, before income taxes(2)	—		5		(41)		(36)
Income taxes	—		(1)		10		9
Losses (gains) reclassified to earnings, net of income taxes	—		4		(31)		(27)
Other comprehensive income, net of income taxes	36		14		40		90
Balance at December 29, 2023	$(201)		$(65)		$68		$(198)
Balance at December 31, 2021	$(118)		$(89)		$61		$(146)
Other comprehensive loss, before reclassifications to earnings and income taxes	(124)		(10)		(33)		(167)
Income taxes	5		2		7		14
Other comprehensive loss before reclassifications to earnings, net of income taxes	(119)		(8)		(26)		(153)
Losses (gains) reclassified to earnings, before income taxes(2)	—		22		(9)		13
Income taxes	—		(4)		2		(2)
Losses (gains) reclassified to earnings, net of income taxes	—		18		(7)		11
Other comprehensive (loss) income, net of income taxes	(119)		10		(33)		(142)
Balance at December 30, 2022	$(237)		$(79)		$28		$(288)

---

(1)See Note 9: Retirement Benefits in these Notes for further information.

(2)Losses (gains) reclassified to earnings are included in the “Revenue,” “Cost of revenue,” “Interest expense, net” and “Non-service FAS

pension income and other, net” line items in our Consolidated Statement of Operations.

_____________________________________________________________________

NOTE 13: ACQUISITIONS AND DIVESTITURES

Acquisition of Viasat’s TDL

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

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

enable the DoD integrated architecture goal in JADC2.

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

acquisition.

Net assets and results of operations of TDL are reflected in our financial results commencing on January 3,

2023, the acquisition date, and are reported within our CS segment, with the exception of acquired intangible

assets, which are recorded in our corporate headquarters.

We accounted for the acquisition of TDL using the acquisition method of accounting, which required us to

measure identifiable assets acquired and liabilities assumed in the acquiree at their fair values as of the acquisition

date, with the excess of the consideration transferred over those fair values recorded as goodwill.

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

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

---

(1)Prior to the acquisition, we had a preexisting relationship with Viasat’s TDL business in the normal course of business. As of the acquisition

date, our CS segment had a receivable from Viasat’s TDL business with a fair value of $1 million that was settled in connection with the

acquisition.

_____________________________________________________________________

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

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

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

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

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

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

recognized during the measurement period:

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

---

(1)Fair value adjustments during the fiscal year ended December 29, 2023 primarily related to refined assumptions in the valuation of customer

relationship intangible assets.

(2)Assets acquired include $11 million of Contract assets that were reclassified from Inventories, net to Contract assets to conform TDL’s

accounting policies with those of L3Harris, as required under ASC 805. As such, reclassified amounts will not be recognized as revenue in

future periods.

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

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

follows:

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

The fair value of intangible assets is estimated using the relief from royalty method for the acquired developed

technology and the multi-period excess earnings method for the acquired customer relationships. Both of these

level 3 fair value methods are income-based valuation approaches, which require judgment to estimate appropriate

discount rates, royalty rates related to the developed technology intangible assets, revenue growth attributable to

the intangible assets and remaining useful lives. The fair value of inventory was estimated using the replacement

cost approach and comparative sales method, which require estimates of replacement cost for raw materials and

_____________________________________________________________________

estimates of expected sales price less costs to complete and dispose of the inventory, plus a profit margin for efforts

incurred for the work in progress and finished goods.

Goodwill. The $1,143 million of goodwill recognized is attributable to the assembled workforce, in addition to

synergies expected to be realized through integration with existing CS segment businesses and growth opportunities

in the space domain. The acquired goodwill is tax deductible. See Note 6: Goodwill and Intangible Assets in these

Notes for further information.

Financial Results. The following table includes revenue and income before income taxes of TDL included in our

Consolidated Statement of Operations for the acquisition date through December 29, 2023 and the comparable

periods of calendar year 2022. The comparable period results do not include any integration synergies or accounting

conformity adjustments and are not necessarily indicative of our results of operations that actually would have been

obtained had the acquisition of TDL been completed for the period presented, or which may be realized in the future.

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

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

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

2023, respectively, which were included in the General and administrative expenses line item in our Consolidated

Statement of Operations.

Acquisition of AJRD

On July 28, 2023, we acquired AJRD, a technology-based engineering and manufacturing company that

develops and produces missile solutions with technologies for strategic defense, missile defense, and hypersonic

and tactical systems, as well as space propulsion and power systems for national security space and exploration

missions. The acquisition provides us access to a new market. We acquired 100% percent of AJRD for a total net

purchase price of $4,715 million. The acquisition was financed through the issuance and sale of the AJRD Notes and

a draw down under the 2023 Credit Agreement.

Net assets and results of operations of AJRD are reflected in our financial results commencing on July 28, 2023,

the acquisition date, and are reported in our AR segment, which is also the AR reporting unit, except for certain

assets and liabilities recorded at corporate headquarters.

We accounted for the acquisition of AJRD using the acquisition method of accounting, which required us to

measure identifiable assets acquired and liabilities assumed in the acquiree at their fair values as of the acquisition

date, with the excess of the consideration transferred over those fair values recorded as goodwill.

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

(In millions)	July 28, 2023
Cash consideration paid for AJRD outstanding common stock & equity awards	$4,748
AJRD debt settled by L3Harris	257
Cash consideration paid	5,005
Less cash acquired	(290)
Fair value of consideration transferred	$4,715

_____________________________________________________________________

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

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

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

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

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

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

during the measurement period:

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

---

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

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

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

of the uncertain tax position previously recorded by AJRD.

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

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

are as follows:

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

The fair value of intangible assets is estimated using the relief from royalty method for the acquired trade names

and the multi-period excess earnings method for the acquired customer relationships. Both of these level 3 fair

value methods are income-based valuation approaches, which require judgment to estimate appropriate discount

_____________________________________________________________________

rates, royalty rates related to the trade names intangible assets, revenue growth attributable to the intangible assets

and remaining useful lives.

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

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

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

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

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

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

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

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

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

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

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

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

forward loss provision in fiscal 2024 and 2023, respectively.

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

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

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

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

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

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

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

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

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

ratio of the overall AJRD revenue by contract type. We measured the fair value of these components as the amount

by which the terms of the contract with the customer deviates from the terms that a market participant could have

achieved at the acquisition date. The off-market components of these contracts will be recognized as an increase to

revenue as we incur costs to satisfy the associated performance obligations. We recognized $58 million and $14

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

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

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

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

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

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

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

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

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

and 2023, respectively.

Pending Divestiture of CAS Disposal Group

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

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

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

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

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

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

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

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

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

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

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

CAS agreement.

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

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

_____________________________________________________________________

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

2024, 2023 and 2022, respectively.

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

Consolidated Balance Sheet were as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

items, in our Consolidated Statement of Operations.

Completed Divestitures

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

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

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

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

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

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

million, respectively.

_____________________________________________________________________

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

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

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

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

through the date of divestiture.

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

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

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

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

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

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

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

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

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

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

Divestiture and Asset Sale. During fiscal 2022, we completed one business divestiture and one asset sale from

our IMS segment for combined net cash proceeds of $23 million and recognized a pre-tax gain of $8 million

associated with the asset sale included in the “General and administrative expenses” line item in our Consolidated

Statement of Operations.

Fair Value of Businesses

For purposes of allocating goodwill to the disposal groups that represent a portion of a reporting unit, we

determine the fair value of each disposal group based on the respective negotiated selling price, and the fair value of

the retained businesses of the respective reporting unit based on a combination of market-based and income based

valuation techniques, utilizing quoted market prices, comparable publicly reported transactions and projected

discounted cash flows. These fair value determinations are categorized as Level 3 in the fair value hierarchy due to

their use of internal projections and unobservable measurement inputs. See Note 1: Significant Accounting Policies

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

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

divestitures.

NOTE 14: BUSINESS SEGMENTS

We structure our operations primarily around the products, systems and services we sell and the markets we

serve and report our financial results in the following four reportable segments:

SAS: including satellite space payloads, sensors and full-mission solutions; classified intelligence and cyber;

airborne combat systems; and mission networks for air traffic management operations; and

IMS: including multi-mission ISR systems; passive sensing and targeting; electronic attack platforms; autonomy;

power and communications; networks; sensors; and the CAS disposal group, which includes aviation products and

pilot training operations; and

CS: including tactical communications with global communications solutions; broadband communications;

integrated vision solutions; and public safety radios, system applications and equipment; and

AR: including missile solutions with propulsion technologies for strategic defense, missile defense, and

hypersonic and tactical systems; and space propulsion and power systems for national security space and

exploration missions.

Chief Operating Decision Maker (“CODM”)

Our CODM is Christopher E. Kubasik, Chair and CEO. Each of our business segments are regularly reviewed by

the CODM through periodic financial reporting packages to assess the segments performance, allocate resources

and regularly communicate with segment management, who are part of the CODM’s executive staff.

_____________________________________________________________________

Business Segment Financial Information

The following tables present revenue, expenses and operating income by segment:

	Fiscal Year Ended January 3, 2025
(In millions)	SAS	IMS	CS	AR	Other**(1)**	Total
Revenue	$6,869	$6,842	$5,459	$2,347	$(192)	$21,325
Cost of Revenue	(5,430)	(5,237)	(3,490)	(1,802)	158	(15,801)
Other Segment Costs(2)	(627)	(767)	(645)	(251)	34	(2,256)
Unallocated corporate department expense						(1,350)
Operating income	$812	$838	$1,324	$294	$—	$1,918
Non-service FAS pension income and other, net						354
Interest expense, net						(675)
Income before income taxes						$1,597

	Fiscal Year Ended December 29, 2023
(In millions)	SAS	IMS	CS	AR	Other**(1)**	Total
Revenue	$6,856	$6,630	$5,070	$1,052	$(189)	$19,419
Cost of Revenue	(5,380)	(5,086)	(3,217)	(817)	194	(14,306)
Other Segment Costs(2)	(720)	(1,085)	(624)	(113)	(5)	(2,547)
Unallocated corporate department expense						(1,140)
Operating income	$756	$459	$1,229	$122	$—	$1,426
Non-service FAS pension income and other, net						338
Interest expense, net						(543)
Income before income taxes						$1,221

	Fiscal Year Ended December 30, 2022
(In millions)	SAS	IMS	CS	AR	Other**(1)**	Total
Revenue	$6,384	$6,626	$4,217	**	$(165)	$17,062
Cost of revenue	(4,810)	(4,893)	(2,598)	**	166	(12,135)
Other Segment Costs(2)	(909)	(1,239)	(952)	**	(1)	(3,101)
Unallocated corporate department expense						(699)
Operating income	$665	$494	$667	**	$—	$1,127
Non-service FAS pension income and other, net						425
Interest expense, net						(279)
Income before income taxes						$1,273

---

** Our AR segment was established in the quarter ended September 29, 2023 in connection with the AJRD acquisition. As such, there is no fiscal

2022 information.

(1) Includes corporate headquarters and intersegment eliminations

(2) Other segment costs include Impairment of goodwill and other assets, company-funded R&D costs, selling and marketing costs, and other

G&A expenses, which includes a portion of capital expenditure and depreciation and amortization costs that are disaggregated by segment

under the “Disaggregation of Revenue” heading below in this Note.

_____________________________________________________________________

Unallocated Corporate Expense. Total unallocated corporate expense includes corporate items such as a

portion of management and administration, legal, environmental, compensation, retiree benefits, other corporate

expenses and eliminations and the FAS/CAS operating adjustment. Total unallocated corporate expense also

includes the portion of corporate costs not included in management’s evaluation of segment operating performance,

such as amortization of acquisition-related intangibles; additional cost of revenue related to the fair value step-up in

inventory sold; merger, acquisition, and divestiture-related expenses; asset group and business divestiture-related

(losses) gains, net and related impairment of goodwill; impairment of other assets; LHX NeXt implementation costs;

and other items.

LHX NeXt Initiative. LHX NeXt is our initiative to transform multiple functions, systems and processes to increase

agility and competitiveness. The LHX NeXt effort is expected to continue for the next two years with one-time costs

for workforce optimization, incremental IT expenses for implementation of new systems, third party consulting and

other costs.

Disaggregation of Revenue

We disaggregate revenue for all four business segments by customer relationship, contract type and

geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of

revenue and cash flows are affected by economic factors.

	Fiscal Year Ended
	January 3, 2025
(In millions)	SAS		IMS		CS		AR
Revenue By Customer Relationship
Prime contractor	$4,307		$4,341		$3,801		$602
Subcontractor(1)	2,511		2,429		1,589		1,745
Intersegment	51		72		69		—
Total segment	$6,869		$6,842		$5,459		$2,347
Revenue By Contract Type
Fixed-price(2)	$4,293		$5,378		$4,566		$1,389
Cost-reimbursable	2,525		1,392		824		958
Intersegment	51		72		69		—
Total segment	$6,869		$6,842		$5,459		$2,347
Revenue By Geographical Region
United States	$5,971		$4,926		$3,741		$2,299
International	847		1,844		1,649		48
Intersegment	51		72		69		—
Total segment	$6,869		$6,842		$5,459		$2,347

---

(1)Our subcontractor revenues includes products and services to contractors whose customers are the end user.

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

_____________________________________________________________________

	Fiscal Year Ended
	December 29, 2023
(In millions)	SAS		IMS		CS		AR
Revenue By Customer Relationship
Prime contractor	$4,252		$4,196		$3,420		$250
Subcontractor(1)	2,555		2,347		1,597		802
Intersegment	49		87		53		—
Total segment	$6,856		$6,630		$5,070		$1,052
Revenue By Contract Type
Fixed-price(2)	$4,257		$5,020		$4,289		$632
Cost-reimbursable	2,550		1,523		728		420
Intersegment	49		87		53		—
Total segment	$6,856		$6,630		$5,070		$1,052
Revenue By Geographical Region
United States	$5,933		$4,816		$3,482		$1,015
International	874		1,727		1,535		37
Intersegment	49		87		53		—
Total segment	$6,856		$6,630		$5,070		$1,052

---

(1)Our subcontractor revenues includes products and services to contractors whose customers are the end user.

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

	Fiscal Year Ended
	December 30, 2022
(In millions)	SAS		IMS		CS		AR
Revenue By Customer Relationship
Prime contractor	$4,005		$4,301		$2,829		**
Subcontractor(1)	2,330		2,254		1,343		**
Intersegment	49		71		45		**
Total segment	$6,384		$6,626		$4,217		$—
Revenue By Contract Type
Fixed-price(2)	$3,811		$5,060		$3,552		**
Cost-reimbursable	2,524		1,495		620		**
Intersegment	49		71		45		**
Total segment	$6,384		$6,626		$4,217		$—
Revenue By Geographical Region
United States	$5,623		$4,796		$2,735		**
International	712		1,759		1,437		**
Intersegment	49		71		45		**
Total segment	$6,384		$6,626		$4,217		$—

---

**Our AR segment was established in the quarter ended September 29, 2023 in connection with the AJRD acquisition. As such, there is no

fiscal 2022 information.

(1)Our subcontractor revenues includes products and services to contractors whose customers are the end user.

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

_____________________________________________________________________

	Fiscal Year Ended
(In millions)	January 3, 2025		December 29, 2023		December 30, 2022
Geographical Information for Operations
Revenue from U.S. operations	$19,614		$17,537		$15,373
Revenue from international operations	1,711		1,882		1,689

Our products are produced principally in the U.S. with international revenue derived primarily from exports. No

revenue earned from any individual foreign country exceeded 5% of our total revenue in fiscal 2024, 2023 and

Revenue from U.S. Government customers, including foreign military sales funded through the U.S. Government,

whether directly or through prime contractors, by all segments as a percentage of total revenue were 76%, 76% and

74% in fiscal 2024, 2023 and 2022, respectively. Revenue from services in fiscal 2024 was 30%, 37%, 16% and

33% of total revenue in our SAS, IMS, CS and AR segments, respectively.

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 $4,388

million (21% of our revenue), $4,173 million (21% of our revenue) and $3,908 million (23% of our revenue) in fiscal

2024, 2023 and 2022, respectively. Export revenue and revenue from international operations in fiscal 2024 was

principally from the EMEA and APAC regions and Canada.

Other selected financial information by business segment and geographical area is summarized below:

	Fiscal Year Ended
(In millions)	January 3, 2025		December 29, 2023		December 30, 2022
Capital Expenditures
SAS	$140		$151		$133
IMS	118		149		45
CS	50		39		36
AR	49		31		**
Corporate	51		79		38
Total capital expenditures	$408		$449		$252
Depreciation and Amortization
SAS	$130		$115		$112
IMS	65		73		76
CS	56		54		47
AR	48		29		**
Corporate	990		895		703
Total depreciation and amortization	$1,289		$1,166		$938
Geographical Information for Operations
Long-lived assets of U.S. operations	$2,639		$2,678		$1,896
Long-lived assets of international operations	167		184		208

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**Our AR segment was established in the quarter ended September 29, 2023 in connection with the AJRD acquisition. As such, there is no

fiscal 2022 information.

In addition to depreciation and amortization expense related to property, plant and equipment, “Depreciation

and Amortization” in the table above also includes $860 million, $777 million and $596 million of amortization

related to intangible assets, debt premium, debt discount, debt issuance costs and other items in fiscal 2024, 2023

and 2022, respectively.

_____________________________________________________________________

Assets by Business Segment

Total assets by business segment are as follows:

(In millions)	January 3, 2025		December 29, 2023
Total Assets
SAS	$8,705		$9,085
IMS	10,749		10,631
CS	7,060		7,084
AR	4,466		4,208
Corporate(1)	11,021		10,679
Total Assets	$42,001		$41,687

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(1)Identifiable intangible assets acquired in connection with business combinations were recorded as corporate assets because they benefit

the entire Company. Intangible asset balances recorded as corporate assets were $7,639 million and $8,540 million at January 3, 2025 and

December 29, 2023, respectively. Corporate assets also consisted of cash, income taxes receivable, deferred income taxes, deferred

compensation plan assets, buildings and equipment, real estate held for development and leasing, investments, as well as any assets of

businesses held for sale.

NOTE 15: LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES

From time to time, as a normal incident of the nature and kind of businesses in which we are or were engaged,

various claims or charges are asserted and litigation or arbitration is commenced by or against us arising from or

related to matters, including but not limited to: product liability; personal injury; patents, trademarks, trade secrets

or other intellectual property; labor and employment disputes; commercial or contractual disputes; strategic

acquisitions or divestitures; the prior sale or use of former products allegedly containing asbestos or other restricted

materials; breach of warranty; or environmental matters. Claimed amounts against us may be substantial, but may

not bear any reasonable relationship to the merits of the claim or the extent of any real risk of court or arbitral

awards. We record accruals for losses related to those matters against us that we consider to be probable and that

can be reasonably estimated. Gain contingencies, if any, are recognized when they are realized and legal costs

generally are expensed when incurred. At January 3, 2025, our accrual for the potential resolution of lawsuits,

claims or proceedings that we consider probable of being decided unfavorably to us was not material. We cannot at

this time estimate the reasonably possible loss or range of loss in excess of our accrual due to the inherent

uncertainties and speculative nature of contested proceedings. Although it is not feasible to predict the outcome of

these matters with certainty, based on available information, in the opinion of management, settlements, arbitration

awards and final judgments, if any, that are considered probable of being rendered against us in litigation or

arbitration in existence at January 3, 2025 were reserved against or would not have a material adverse effect on our

financial condition, results of operations, cash flows or equity.

Tax Audits

Our tax filings are subject to audit by taxing authorities in jurisdictions where we conduct or conducted business.

These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or

ultimately through legal proceedings. We believe we have adequately accrued for any ultimate amounts that are

likely to result from these audits; however, final assessments, if any, could be different from the amounts recorded

in our Consolidated Financial Statements. Additional information regarding audits and examinations by taxing

authorities of our tax filings is set forth in Note 7: Income Taxes in these Notes.

U.S. Government Business

We are engaged in supplying products and services to various departments and agencies of the

U.S. Government. We are therefore dependent on Congressional appropriations and administrative allotment of

funds and may be affected by changes in U.S. Government policies. U.S. Government development and production

contracts typically involve long lead times for design and development, are subject to significant changes in contract

scheduling and may be unilaterally modified or canceled by the U.S. Government. Often these contracts call for

successful design and production of complex and technologically advanced products or systems. We may

participate in supplying products and services to the U.S. Government as either a prime contractor or as a

subcontractor to a prime contractor. Disputes may arise between the prime contractor and the U.S. Government or

between the prime contractor and its subcontractors and may result in litigation or arbitration between the

contracting parties.

_____________________________________________________________________

Generally, U.S. Government contracts are subject to procurement laws and regulations, including the FAR, which

outline uniform policies and procedures for acquiring products and services by the U.S. Government, and specific

agency acquisition regulations that implement or supplement the FAR, such as the Defense Federal Acquisition

Regulation Supplement. As a U.S. Government contractor, our contract costs are audited and reviewed on a

continuing basis by the Defense Contract Audit Agency (“DCAA”). The DCAA also reviews the adequacy of, and a

U.S. Government contractor’s compliance with, the contractor’s business systems and policies, including the

contractor’s property, estimating, compensation and management information systems. In addition to these routine

audits, from time to time, we may, either individually or in conjunction with other U.S. Government contractors, be

the subject of audits and investigations by other agencies of the U.S. Government. These audits and investigations

are conducted to determine if our performance and administration of our U.S. Government contracts are compliant

with applicable contractual requirements and procurement and other applicable federal laws and regulations,

including ITAR and FCPA. These investigations may be conducted with or without our knowledge or cooperation. We

are unable to predict the outcome of such investigations or to estimate the amounts of resulting claims or other

actions that could be instituted against us or our officers or employees. Under present U.S. Government

procurement laws and regulations, if indicted or adjudged in violation of procurement or other federal laws, a

contractor, such as us, or one or more of our operating divisions or subdivisions, could be subject to fines, penalties,

repayments, or compensatory or treble damages. U.S. Government regulations also provide that certain findings

against a contractor may lead to suspension or debarment from eligibility for awards of new U.S. Government

contracts for a period of time to be determined by the U.S. Government. Suspension or debarment would have a

material adverse effect on us because of our reliance on U.S. Government contracts. In addition, our export

privileges could be suspended or revoked, which also would have a material adverse effect on us. For further

discussion of risks relating to U.S. Government contracts, see “Item 1A. Risk Factors” of this Report.

International

As an international company, we are, from time to time, the subject of investigations relating to our international

operations, including under U.S. export control laws (such as ITAR), the FCPA and other similar U.S. and

international laws.

Commercial Commitments

In the normal course of business, we have entered into commercial commitments primarily relating to the

guarantee of future performance on certain contracts to provide products and services to customers or to obtain

insurance policies with our insurance carriers.

At January 3, 2025, we had the following commercial commitments outstanding:

(In millions)	Commercial Commitment Total		Commitments expiring within 1 Year
Surety bonds used for performance	$506		$386
Standby letters of credit used for:
Advance payments	312		211
Performance	327		198
Financial	62		61
Warranty	1		1
Total standby letters of credit	702		471
Total commitments	$1,208		$857

The surety bonds and standby letters of credit used for performance are primarily related to our Public Safety

business sector. As is customary in bidding for and completing network infrastructure projects for public safety

systems, contractors are required to procure surety bonds and/or standby letters of credit for bids, performance,

warranty and other purposes (collectively, “Performance Bonds”). Such Performance Bonds normally have

maturities of up to three years and are standard in the industry as a way to provide customers a mechanism to seek

redress if a contractor does not satisfy performance requirements under a contract.

Typically, a customer is permitted to draw on a Performance Bond if we do not fulfill all terms of a project

contract. In such an event, we would be obligated to reimburse the financial institution that issued the Performance

Bond for the amounts paid.

_____________________________________________________________________

Environmental Matters

We are subject to numerous U.S. federal, state, local and international environmental laws and regulatory

requirements and are involved from time to time in investigations or litigation of various potential environmental

issues. We or companies we have acquired are responsible, or alleged to be responsible, for environmental

investigation and/or remediation of multiple sites, including sites owned by us and third party sites. These sites are

in various stages of investigation and/or remediation, and in some cases our liability is considered de minimis.

Notices from the U.S. Environmental Protection Agency or equivalent state or international environmental agencies

allege that several sites formerly or currently owned and/or operated by us or companies we have acquired, and

other properties or water supplies that may be or have been impacted from those operations, contain disposed or

recycled materials or wastes and require environmental investigation and/or remediation. These sites include

instances of being identified as a potentially responsible party (“PRP”) under the Comprehensive Environmental

Response, Compensation and Liability Act (commonly known as the “Superfund Act”), the Resource Conservation

Recovery Act and/or equivalent state and international laws, and in some instances, our liability and proportionate

share of costs that may be shared among other PRPs have not been determined largely due to uncertainties as to

the nature and extent of site conditions and our involvement.

As of January 3, 2025, we were named, and continue to be named, as a potentially responsible party at 111

sites where future liabilities could exist. These sites included 13 sites owned by us, 71 sites associated with our

former and current locations or operations and 27 hazardous waste treatment, storage or disposal facility sites not

owned by us that contain hazardous substances allegedly attributable to us from past operations.

Based on an assessment of relevant factors, we estimated that our liability under applicable environmental

statutes and regulations for identified sites was $637 million and $613 million, respectively, as of January 3, 2025

and December 29, 2023. The current portion of our estimated environmental liability is included in the “Other

current liabilities” line item and the non-current portion is included in the “Other long-term liabilities” line item in

our Consolidated Balance Sheet. Some of these environmental costs are eligible for future recovery in the pricing of

our products and services to the U.S. Government. We consider the recovery probable based on U.S. Government

contracting regulations. As of January 3, 2025 and December 29, 2023, we had an asset for the recoverable portion

of these reserves of $462 million and $432 million, respectively. The current and non-current portion of the

recoverable costs are included as a component of the “Other current assets” and “Other non-current assets” line

items, respectively, in our Consolidated Balance Sheet.