filings.toolsItem 1. FINANCIAL STATEMENTS.
86K characters. Original on sec.gov · Markdown
Item 1. FINANCIAL STATEMENTS.
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
| First Quarter | |||||||||||||||||||||||
| (In millions, except per share amounts) | 2025 | 2024 | |||||||||||||||||||||
| Revenue | $ | 5,132 | $ | 5,211 | |||||||||||||||||||
| Cost of revenue | (3,782) | (3,863) | |||||||||||||||||||||
| General and administrative expenses | (825) | (970) | |||||||||||||||||||||
| Operating income | 525 | 378 | |||||||||||||||||||||
| Non-service FAS pension income and other, net(1) | 84 | 88 | |||||||||||||||||||||
| Interest expense, net | (150) | (176) | |||||||||||||||||||||
| Income before income taxes | 459 | 290 | |||||||||||||||||||||
| Income taxes | (73) | (5) | |||||||||||||||||||||
| Net income | 386 | 285 | |||||||||||||||||||||
| Noncontrolling interests, net of income taxes | — | (2) | |||||||||||||||||||||
| Net income attributable to L3Harris Technologies, Inc. | $ | 386 | $ | 283 | |||||||||||||||||||
| Net income per common share attributable to L3Harris Technologies, Inc. common shareholders | |||||||||||||||||||||||
| Basic | $ | 2.05 | $ | 1.49 | |||||||||||||||||||
| Diluted | $ | 2.04 | $ | 1.48 | |||||||||||||||||||
| Basic weighted-average common shares outstanding | 188.5 | 189.8 | |||||||||||||||||||||
| Diluted weighted-average common shares outstanding | 189.1 | 190.8 |
(1)“FAS” is defined as Financial Accounting Standards.
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
_____________________________________________________________________
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
| First Quarter | |||||||||||||||||||||||
| (In millions) | 2025 | 2024 | |||||||||||||||||||||
| Net income | $ | 386 | $ | 285 | |||||||||||||||||||
| Other comprehensive loss, net of income taxes: | |||||||||||||||||||||||
| Foreign currency translation and other, net | 19 | (29) | |||||||||||||||||||||
| Pension and other postretirement benefits | (43) | — | |||||||||||||||||||||
| Other comprehensive loss recognized during the period | (24) | (29) | |||||||||||||||||||||
| Reclassification adjustments for gains included in net income | (17) | (7) | |||||||||||||||||||||
| Other comprehensive loss | (41) | (36) | |||||||||||||||||||||
| Total comprehensive income | 345 | 249 | |||||||||||||||||||||
| Comprehensive income attributable to noncontrolling interest | — | (2) | |||||||||||||||||||||
| Total comprehensive income attributable to L3Harris Technologies, Inc. | $ | 345 | $ | 247 |
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
_____________________________________________________________________
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
| (In millions, except shares) | March 28, 2025 | January 3, 2025 | |||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 517 | $ | 615 | |||||||
| Receivables, net of allowances for collection losses of $23 and $21, respectively | 1,501 | 1,072 | |||||||||
| Contract assets | 3,643 | 3,230 | |||||||||
| Inventories, net | 1,252 | 1,330 | |||||||||
| Income taxes receivable | 205 | 379 | |||||||||
| Other current assets | 478 | 461 | |||||||||
| Assets of business held for sale | — | 1,131 | |||||||||
| Total current assets | 7,596 | 8,218 | |||||||||
| Non-current assets | |||||||||||
| Property, plant and equipment, net | 2,755 | 2,806 | |||||||||
| Goodwill | 20,337 | 20,325 | |||||||||
| Intangible assets, net | 7,448 | 7,639 | |||||||||
| Deferred income taxes | 128 | 120 | |||||||||
| Other non-current assets | 2,984 | 2,893 | |||||||||
| Total assets | $ | 41,248 | $ | 42,001 | |||||||
| Liabilities and equity | |||||||||||
| Current liabilities | |||||||||||
| Short-term debt | $ | 535 | $ | 515 | |||||||
| Current portion of long-term debt, net | 740 | 640 | |||||||||
| Accounts payable | 2,047 | 2,005 | |||||||||
| Contract liabilities | 2,124 | 2,142 | |||||||||
| Compensation and benefits | 314 | 419 | |||||||||
| Other current liabilities | 1,689 | 1,677 | |||||||||
| Liabilities of business held for sale | — | 235 | |||||||||
| Total current liabilities | 7,449 | 7,633 | |||||||||
| Non-current liabilities | |||||||||||
| Long-term debt, net | 10,977 | 11,081 | |||||||||
| Deferred income taxes | 842 | 942 | |||||||||
| Other long-term liabilities | 2,850 | 2,766 | |||||||||
| Total liabilities | 22,118 | 22,422 | |||||||||
| Equity | |||||||||||
| Shareholders’ Equity: | |||||||||||
| Common stock, $1.00 par value; 500,000,000 shares authorized; issued and outstanding 187,593,750 and 189,794,911 shares at March 28, 2025 and January 3, 2025, respectively | 188 | 190 | |||||||||
| Paid-in capital | 15,170 | 15,558 | |||||||||
| Retained earnings | 3,787 | 3,739 | |||||||||
| Accumulated other comprehensive (loss) income | (14) | 27 | |||||||||
| Total shareholders’ equity | 19,131 | 19,514 | |||||||||
| Noncontrolling interests | (1) | 65 | |||||||||
| Total equity | 19,130 | 19,579 | |||||||||
| Total liabilities and equity | $ | 41,248 | $ | 42,001 |
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
_____________________________________________________________________
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| First Quarter | |||||||||||
| (In millions) | 2025 | 2024 | |||||||||
| Operating Activities | |||||||||||
| Net income | $ | 386 | $ | 285 | |||||||
| Adjustments to reconcile net income to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | 301 | 320 | |||||||||
| Share-based compensation | 19 | 26 | |||||||||
| Net periodic benefit income | (84) | (72) | |||||||||
| Share-based matching contributions under defined contribution plans | 68 | 70 | |||||||||
| Deferred income taxes | (89) | (111) | |||||||||
| (Increase) decrease in: | |||||||||||
| Receivables, net | (447) | 7 | |||||||||
| Contract assets | (420) | (340) | |||||||||
| Inventories, net | 92 | (21) | |||||||||
| Other current assets | (19) | 10 | |||||||||
| Increase (decrease) in: | |||||||||||
| Accounts payable | 52 | 9 | |||||||||
| Contract liabilities | (16) | (152) | |||||||||
| Compensation and benefits | (105) | (170) | |||||||||
| Other current liabilities | 11 | (18) | |||||||||
| Income taxes | 273 | 103 | |||||||||
| Other operating activities | (64) | (50) | |||||||||
| Net cash used in operating activities | (42) | (104) | |||||||||
| Investing Activities | |||||||||||
| Capital expenditures | (59) | (115) | |||||||||
| Proceeds from sales of businesses, net of cash divested | 831 | — | |||||||||
| Other investing activities | (28) | (1) | |||||||||
| Net cash provided by (used in) investing activities | 744 | (116) | |||||||||
| Financing Activities | |||||||||||
| Proceeds from issuances of long-term debt, net | — | 2,237 | |||||||||
| Repayments of long-term debt | (5) | (2,250) | |||||||||
| Change in commercial paper, maturities under 90 days, net | 20 | 326 | |||||||||
| Proceeds from commercial paper, maturities over 90 days | — | 480 | |||||||||
| Repayments of commercial paper, maturities over 90 days | — | (205) | |||||||||
| Repurchases of common stock | (569) | (233) | |||||||||
| Dividends paid | (228) | (224) | |||||||||
| Other financing activities | (23) | 13 | |||||||||
| Net cash (used in) provided by financing activities | (805) | 144 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 5 | (7) | |||||||||
| Net decrease in cash and cash equivalents | (98) | (83) | |||||||||
| Cash and cash equivalents, beginning of period | 615 | 560 | |||||||||
| Cash and cash equivalents, end of period | $ | 517 | $ | 477 |
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
_____________________________________________________________________
L3HARRIS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
| First Quarter | |||||||||||||||||||||||
| (In millions, except per share amounts) | 2025 | 2024 | |||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||
| Beginning balance | $ | 190 | $ | 190 | |||||||||||||||||||
| Repurchases and retirement of common stock | (2) | (1) | |||||||||||||||||||||
| Ending balance | 188 | 189 | |||||||||||||||||||||
| Paid-in Capital | |||||||||||||||||||||||
| Beginning balance | 15,558 | 15,553 | |||||||||||||||||||||
| Shares issued under stock incentive plans | 3 | 35 | |||||||||||||||||||||
| Shares issued under defined contribution plans | 68 | 70 | |||||||||||||||||||||
| Share-based compensation expense | 19 | 26 | |||||||||||||||||||||
| Tax withholding payments on share-based awards | (16) | (20) | |||||||||||||||||||||
| Repurchases and retirement of common stock | (457) | (192) | |||||||||||||||||||||
| Other | (5) | — | |||||||||||||||||||||
| Ending balance | 15,170 | 15,472 | |||||||||||||||||||||
| Retained Earnings | |||||||||||||||||||||||
| Beginning balance | 3,739 | 3,220 | |||||||||||||||||||||
| Net income attributable to L3Harris Technologies, Inc. | 386 | 283 | |||||||||||||||||||||
| Repurchases and retirement of common stock | (110) | (40) | |||||||||||||||||||||
| Cash dividends | (228) | (224) | |||||||||||||||||||||
| Ending balance | 3,787 | 3,239 | |||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||
| Beginning balance | 27 | (198) | |||||||||||||||||||||
| Other comprehensive loss, net of income taxes | (41) | (36) | |||||||||||||||||||||
| Ending balance | (14) | (234) | |||||||||||||||||||||
| Noncontrolling Interests | |||||||||||||||||||||||
| Beginning balance | 65 | 64 | |||||||||||||||||||||
| Net income attributable to noncontrolling interests | — | 2 | |||||||||||||||||||||
| Noncontrolling interest derecognized with divestiture | (63) | — | |||||||||||||||||||||
| Other | (3) | (2) | |||||||||||||||||||||
| Ending balance | (1) | 64 | |||||||||||||||||||||
| Total Equity | $ | 19,130 | $ | 18,730 | |||||||||||||||||||
| Cash dividends per share | $ | 1.20 | $ | 1.16 |
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A: BASIS OF PRESENTATION
Principles of Consolidation
The accompanying Condensed Consolidated Financial Statements include the accounts of L3Harris Technologies, Inc. and its consolidated subsidiaries. As used in these notes to Condensed Consolidated Financial Statements (these “Notes”), the terms “L3Harris,” “Company,” “we,” “our” and “us” refer to L3Harris Technologies, Inc. and its consolidated subsidiaries. Intercompany transactions and accounts have been eliminated.
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all information and footnotes necessary for a complete presentation of financial condition, results of operations, cash flows and equity in conformity with GAAP for annual financial statements and are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period.
In the opinion of management, these interim financial statements reflect all adjustments (including normal recurring adjustments) considered necessary for a fair presentation of our financial condition, results of operations, cash flows and equity for the periods presented therein. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 3, 2025 (our “Fiscal 2024 Form 10-K”).
Our fiscal year is based on a 52- or 53-week period ending on the Friday nearest December 31. The fiscal quarters ended March 28, 2025 (“first quarter 2025”) and March 29, 2024 (“first quarter 2024”) include 12 and 13 weeks, respectively.
Description of 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:
Communication Systems (“CS”): Tactical communications with global communications solutions; broadband communications; integrated vision solutions; and public safety radios, system applications and equipment; and
Integrated Mission Systems ("IMS"): Multi-mission intelligence, surveillance and reconnaissance (“ISR”) systems; passive sensing and targeting; electronic attack platforms; autonomy; power and communications; networks; sensors; and Commercial Aviation Solutions (“CAS disposal group”), which includes aviation products and pilot training operations and was divested on March 28, 2025, see Note N: Divestiture; and
Space & Airborne Systems (“SAS”): Satellites and space payloads, sensors and full-mission solutions; classified intelligence and cyber; airborne combat systems; and mission networks for air traffic management operations; and
Aerojet Rocketdyne (“AR”): Missile solutions with propulsion technologies for strategic defense, missile defense, hypersonic and tactical systems and fuzing; and space propulsion and power systems for national security space and exploration missions.
Business realignment. Effective in first quarter 2025, to better align our businesses, we transferred our fuzing and ordnance (“FOS”) business from our IMS segment to our AR segment and adjusted our reporting accordingly.
The historical results, discussion and presentation of our business segments as set forth in the accompanying Condensed Consolidated Financial Statements and these Notes reflect the impact of these changes for all periods presented in order to present segment information on a comparable basis. There is no impact on our previously reported consolidated statements of operations, balance sheets, statements of cash flows or statements of equity resulting from these changes.
See Note E: Goodwill and Intangible Assets and Note O: Business Segment Information in these Notes for further information.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying Condensed Consolidated Financial Statements and these Notes and related disclosures. These estimates and assumptions are based on experience and other information available prior to issuance of the accompanying Condensed Consolidated Financial Statements and these Notes. Materially different results can occur as circumstances change and additional information becomes known.
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Reclassifications
The classifications of certain prior year amounts have been adjusted in our Condensed Consolidated Financial Statements and these Notes to conform to current year classifications.
Recently Issued Accounting Pronouncements
See Note 1: Significant Accounting Policies in our Fiscal 2024 Form 10-K for information on recently issued accounting pronouncements.
NOTE B: EARNINGS PER SHARE (“EPS”)
EPS is calculated as net income attributable to L3Harris common shareholders divided by our weighted-average number of basic or diluted common shares outstanding. Potential dilutive common shares primarily consist of employee stock options, restricted stock units (“RSUs”) and performance share units (“PSUs”).
The weighted-average number of shares outstanding used to compute basic and diluted EPS are as follows:
| First Quarter | |||||||||||||||||||||||
| (In millions) | 2025 | 2024 | |||||||||||||||||||||
| Basic weighted-average common shares outstanding | 188.5 | 189.8 | |||||||||||||||||||||
| Impact of dilutive share-based awards | 0.6 | 1.0 | |||||||||||||||||||||
| Diluted weighted-average common shares outstanding | 189.1 | 190.8 |
Diluted EPS excludes the antidilutive impact of 1.0 million and 0.8 million weighted-average share-based awards outstanding in first quarter 2025 and 2024, respectively.
NOTE C: CONTRACT ASSETS AND CONTRACT LIABILITIES
Contract assets mainly represent unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers for contracts utilizing the percentage of completion (“POC”) cost-to-cost revenue recognition method. 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 defer 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 and contract liabilities are summarized below:
| (In millions) | March 28, 2025 | January 3, 2025 | |||||||||
| Contract assets | $ | 3,643 | $ | 3,230 | |||||||
| Contract liabilities, current | (2,124) | (2,142) | |||||||||
| Contract liabilities, non-current(1) | (105) | (91) | |||||||||
| Net contract assets | $ | 1,414 | $ | 997 |
(1)Included as a component of the “Other long-term liabilities” line item in our Condensed Consolidated Balance Sheet.
In first quarter 2025 and 2024, we recognized $698 million and $695 million, respectively, of revenue related to contract liabilities that were outstanding at the end of the respective prior fiscal year.
NOTE D: INVENTORIES, NET
Inventories, net are summarized below:
| (In millions) | March 28, 2025 | January 3, 2025 | |||||||||
| Finished products | $ | 198 | $ | 211 | |||||||
| Work in process | 349 | 332 | |||||||||
| Materials and supplies | 705 | 787 | |||||||||
| Inventories, net | $ | 1,252 | $ | 1,330 |
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE E: GOODWILL AND INTANGIBLE ASSETS
Goodwill
Changes in the carrying amount of goodwill, by business segment, were as follows:
| (In millions) | CS | IMS(1) | SAS | AR(1) | Total | ||||||||||||||||||||||||
| Balance as of January 3, 2025 | $ | 4,938 | $ | 6,422 | $ | 5,999 | $ | 2,966 | $ | 20,325 | |||||||||||||||||||
| Currency translation adjustments | 3 | 9 | — | 12 | |||||||||||||||||||||||||
| Balance as of March 28, 2025 | $ | 4,938 | $ | 6,425 | $ | 6,008 | $ | 2,966 | $ | 20,337 |
(1)Balances reflect impact of FOS business realignment, as discussed under the “Reallocation of Goodwill in Business Realignment” heading below in this Note.
As of both March 28, 2025 and January 3, 2025, accumulated goodwill impairment losses were $355 million, $80 million and $172 million in our CS, SAS and AR segments, respectively. As of March 28, 2025 and January 3, 2025, accumulated goodwill impairment losses were $954 million and $195 million, respectively, in our IMS segment. In connection with the CAS disposal group divestiture, IMS derecognized $759 million of accumulated goodwill impairment losses. See Note N: Divestiture in these Notes for further information.
Reallocation of Goodwill in Business Realignment. Effective in first quarter 2025, to better align our businesses, we transferred our FOS business from our IMS segment (within the Targeting & Sensor Systems (“TSS”) and Defense Electronics (“DE”) reporting unit) to our AR segment (also a reporting unit) and adjusted our reporting accordingly. In connection with the realignment, goodwill of $114 million, net of accumulated impairment losses of $172 million, was allocated to FOS on a relative fair value basis. Given the economic similarities of FOS and the businesses of our AR reporting unit, all FOS goodwill was absorbed into the existing AR reporting unit. Immediately before and after the realignment, we performed qualitative impairment assessments under our former and new reporting unit structure. These assessments indicated no impairment existed either before or after the realignment.
Intangible Assets
Intangible assets, net are summarized below:
| March 28, 2025 | January 3, 2025 | ||||||||||||||||||||||||||||||||||
| (In millions) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||
| Customer relationships | $ | 8,822 | $ | (3,646) | $ | 5,176 | $ | 8,817 | $ | (3,470) | $ | 5,347 | |||||||||||||||||||||||
| Developed technologies | 850 | (499) | 351 | 849 | (482) | 367 | |||||||||||||||||||||||||||||
| Trade names | 185 | (67) | 118 | 185 | (64) | 121 | |||||||||||||||||||||||||||||
| Other, including contract backlog | 3 | (3) | — | 3 | (2) | 1 | |||||||||||||||||||||||||||||
| Total finite-lived intangible assets | 9,860 | (4,215) | 5,645 | 9,854 | (4,018) | 5,836 | |||||||||||||||||||||||||||||
| Trade name — indefinite-lived | 1,803 | — | 1,803 | 1,803 | — | 1,803 | |||||||||||||||||||||||||||||
| Total intangible assets, net | $ | 11,663 | $ | (4,215) | $ | 7,448 | $ | 11,657 | $ | (4,018) | $ | 7,639 |
Amortization expense for intangible assets was $194 million and $217 million for first quarter 2025 and 2024, respectively.
The following table presents future estimated amortization expense for intangible assets:
| (In millions) | |||||
| Next 12 months | $ | 760 | |||
| Months 13-24 | 626 | ||||
| Months 25-36 | 556 | ||||
| Months 37-48 | 463 | ||||
| Months 49-60 | 429 | ||||
| Thereafter | 2,811 | ||||
| Total | $ | 5,645 |
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE F: INCOME TAXES
Our effective tax rate (“ETR”) was 15.9% and 1.7% for first quarter 2025 and 2024, respectively. First quarter 2025 ETR was unfavorably impacted by the CAS disposal group divestiture, while first quarter 2024 ETR benefited from resolution of specific audit uncertainties and the favorable impact of excess tax benefits from equity-based compensation. The ETR for both periods benefited from favorable impacts of research and development (“R&D”) credits and tax deductions for foreign derived intangible income (“FDII”).
NOTE G: DEBT AND CREDIT ARRANGEMENTS
Long-Term Debt
Long-term debt, net is summarized below:
| (In millions) | March 28, 2025 | January 3, 2025 | |||||||||
| Total fixed-rate debt(1) | $ | 11,476 | $ | 11,476 | |||||||
| Financing lease obligations and other debt | 283 | 288 | |||||||||
| Long-term debt, including the current portion of long-term debt | 11,759 | 11,764 | |||||||||
| Plus: unamortized bond premium | 35 | 38 | |||||||||
| Less: unamortized discounts and issuance costs | (77) | (81) | |||||||||
| Long-term debt, including the current portion of long-term debt, net | 11,717 | 11,721 | |||||||||
| Less: current portion of long-term debt, net(2) | (740) | (640) | |||||||||
| Total long-term debt, net | $ | 10,977 | $ | 11,081 |
(1)See Note 8: Debt and Credit Arrangements in our Fiscal 2024 Form 10-K for information on fixed-rate debt.
(2)As of March 28, 2025, includes the $600 million 3.832% notes, due April 27, 2025 (“3.832% 2025 Notes”) and the $100 million 7.00% debentures, due January 15, 2026. As of January 3, 2025, includes the 3.832% 2025 Notes.
Fair Value. As of March 28, 2025 and January 3, 2025, the estimated fair value of long-term debt, including the current portion of long-term debt, net was $11,590 million and $11,467 million, respectively. These values were estimated using a market approach based on quoted market prices for our debt in the secondary market and would be classified as Level 2 in the fair value hierarchy. See Note K: Fair Value Measurements in these Notes for further information on fair value.
Commercial Paper Program
Under our commercial paper program (“CP Program”), we may issue unsecured commercial paper notes up to a maximum aggregate amount of $3.0 billion. The CP Program is supported by amounts available under our credit agreements, discussed below.
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 rank at least pari passu with all other unsecured and unsubordinated indebtedness.
As of March 28, 2025 and January 3, 2025, we had $535 million and $515 million in outstanding notes under our CP Program, respectively, which is included in the “Short-term debt” line item in our Condensed Consolidated Balance Sheet. The outstanding notes under our CP Program had a weighted-average interest rate of 4.64% and 4.70% as of March 28, 2025 and January 3, 2025, respectively.
Credit Agreements
Five-Year Credit Facility. On February 18, 2025, we established a new $2.5 billion, five-year senior unsecured revolving credit facility (the “2025 Five-Year Credit Facility”) by entering into a Revolving Credit Agreement (“2025 Five-Year Credit Agreement”) maturing on February 18, 2030 with a syndicate of lenders. The 2025 Five-Year Credit Facility replaces the prior $2.0 billion, five-year senior unsecured revolving credit facility established under the Revolving Credit Agreement, dated July 29, 2022 (“2022 Credit Agreement”), and provides for revolving loans, swingline loans and letters of credit, with a sub-limit of $200 million for swingline loans and a sub-limit of $350 million for letters of credit, with the option to request an increase of the maximum amount of commitments up to $3.5 billion.
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At our election, borrowings in U.S. Dollars under the 2025 Five-Year Credit Agreement will bear interest at the sum of the secured overnight funding rate (“SOFR”) or the Base Rate (as defined in the 2025 Five-Year Credit Agreement), plus an applicable margin that varies 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 are required to pay a quarterly unused commitment fee and letter of credit fees based on our Senior Debt Ratings.
364-Day Credit Facility. On February 18, 2025, we established a new $500 million 364-day senior unsecured revolving credit facility (“2025 364-Day Credit Facility”) by entering into a 364-day Credit Agreement (“2025 364-Day Credit Agreement”) maturing no later than February 17, 2026 with a syndicate of lenders. The 2025 364-Day Credit Agreement replaces the prior $1.5 billion 364-day credit agreement (“2024 Credit Agreement”), which matured on January 24, 2025.
At our election, borrowings in U.S. Dollars under the 2025 364-Day Credit Agreement, will bear interest at the sum of the applicable SOFR or the Base Rate (as defined in the 2025 364-Day Credit Agreement), plus an applicable margin that varies based on our Senior Debt Ratings. In addition to interest payable on the principal amount of indebtedness outstanding, we are required to pay a quarterly unused commitment fee that varies based on our Senior Debt Ratings.
Both the 2025 Five-Year Credit Agreement and the 2025 364-Day Credit Agreement contain customary representations, warranties, covenants and events of default for investment grade borrowers and financings of this type.
As of March 28, 2025, we had no outstanding borrowings under either the 2025 Five-Year Credit Agreement or the 2025 364-Day Credit Agreement, had available borrowing capacity of $2,465 million, net of outstanding borrowings under our CP Program and were in compliance with all covenants under both aforementioned credit agreements.
NOTE H: RETIREMENT BENEFITS
The components of net periodic benefit income for our defined benefit pension plans and other postretirement benefit plans (“other benefits”) (collectively, “defined benefit plans”) were as follows:
| First Quarter | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| (In millions) | Pension | Other Benefits | Pension | Other Benefits | |||||||||||||||||||
| Net periodic benefit income | |||||||||||||||||||||||
| Operating | |||||||||||||||||||||||
| Service cost(1) | $ | 6 | $ | — | $ | 8 | $ | — | |||||||||||||||
| Non-operating | |||||||||||||||||||||||
| Interest cost | 88 | 3 | 99 | 3 | |||||||||||||||||||
| Expected return on plan assets | (151) | (5) | (165) | (5) | |||||||||||||||||||
| Amortization of net actuarial gains | (1) | (3) | (1) | (4) | |||||||||||||||||||
| Amortization of prior service credits | (7) | — | (7) | — | |||||||||||||||||||
| Effect of settlements(2) | (14) | — | — | — | |||||||||||||||||||
| Non-service cost net periodic benefit income(3) | (85) | (5) | (74) | (6) | |||||||||||||||||||
| Net periodic benefit income | $ | (79) | $ | (5) | $ | (66) | $ | (6) |
(1)Included in the “Cost of revenue” and “General and administrative expenses” line items in our Condensed Consolidated Statement of Operations.
(2)See discussion under “Pension Group Annuity Purchase” below in this Note.
(3)Included in the “Non-service FAS pension income and other, net” line item in our Condensed Consolidated Statement of Operations.
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Pension Group Annuity Purchase
On March 14, 2025, we executed nonparticipating single premium group annuity contracts to transfer $1.2 billion of our Consolidated Pension Plan (“CPP”) benefit obligation, covering approximately 22,000 U.S. retirees and beneficiaries, to an insurance provider. The contracts were funded with $1.2 billion of existing CPP plan assets and did not require any additional cash contributions. This transaction had no impact on the amount, timing or form of the monthly retirement benefit payments to the affected retirees and beneficiaries. As a result of the transaction, we recognized a pre-tax settlement gain of $14 million in first quarter 2025, which is included in the “Non-service FAS pension income and other, net” line item in our Condensed Consolidated Statement of Operations.
In connection with the annuity purchases, we performed a remeasurement of the CPP plan benefit obligation and plan assets as of February 28, 2025, the end of the month closest to the annuity purchase date. As a result, we recorded a net actuarial loss of $54 million, reflecting a loss of $148 million associated with the decrease in discount rate from 5.49% at January 3, 2025 to 5.22% at February 28, 2025, partially offset by a gain of $94 million from actual return on plan assets more favorable than expected. The net actuarial loss, net of income taxes, is included in the “Accumulated other comprehensive (loss) income” line item in our Condensed Consolidated Balance Sheet as of March 28, 2025.
NOTE I: SHARE-BASED COMPENSATION
As of March 28, 2025, we had stock options and other share-based compensation awards outstanding under our 2024 Equity Incentive Plan and predecessor plans (collectively, the “L3Harris SIPs”).
Awards granted to participants under the L3Harris SIPs and the weighted-average grant-date fair value per share or unit were as follows:
| First Quarter | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| (In thousands, except per share/unit amounts) | Shares or Units | Weighted-Average Grant-Date Fair Value Per Share or Unit | Shares or Units | Weighted-Average Grant-Date Fair Value Per Share or Unit | |||||||||||||||||||
| Stock option shares granted(1) | 388 | $ | 49.20 | 405 | $ | 50.97 | |||||||||||||||||
| RSUs granted(2) | 118 | $ | 206.88 | 120 | $ | 213.15 | |||||||||||||||||
| PSUs granted(3) | 185 | $ | 217.67 | 172 | $ | 230.09 |
(1)Other than certain stock options granted in connection with new hires, our stock options generally ratably vest in equal amounts over a three-year period.
(2)Other than certain RSUs granted in connection with new hires, our RSUs generally cliff vest after three years.
(3)Our PSUs are subject to performance criteria and generally vest after the three-year performance period.
The aggregate number of shares of our common stock issued under the L3Harris SIPs, net of shares withheld for tax purposes, was 0.2 million and 0.5 million for first quarter 2025 and 2024, respectively.
Share-based compensation expense was $19 million and $26 million for first quarter 2025 and 2024, respectively.
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE J: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of accumulated other comprehensive income (loss), net of income taxes, are summarized below:
| (In millions) | Foreign currency translation and other, net**(1)** | Pension and other postretirement benefits**(2)** | Total accumulated other comprehensive income (loss) | ||||||||||||||
| Balance at January 3, 2025 | $ | (331) | $ | 358 | $ | 27 | |||||||||||
| Other comprehensive income (loss) before reclassifications to earnings | 19 | (43) | (24) | ||||||||||||||
| Losses (gains) reclassified to earnings(3) | 11 | (28) | (17) | ||||||||||||||
| Other comprehensive income (loss) | 30 | (71) | (41) | ||||||||||||||
| Balance at March 28, 2025 | $ | (301) | $ | 287 | $ | (14) | |||||||||||
| Balance at December 29, 2023 | $ | (266) | $ | 68 | $ | (198) | |||||||||||
| Other comprehensive loss before reclassifications to earnings | (29) | — | (29) | ||||||||||||||
| Losses (gains) reclassified to earnings(3) | 2 | (9) | (7) | ||||||||||||||
| Other comprehensive loss | (27) | (9) | (36) | ||||||||||||||
| Balance at March 29, 2024 | $ | (293) | $ | 59 | $ | (234) |
(1)Other, net consists of hedging derivatives.
(2)See Note H: Retirement Benefits in these Notes for further information.
(3)Included in the “Revenue,” “Cost of revenue,” “General and administrative expenses,” “Interest expense, net” and “Non-service FAS pension income and other, net” line items in our Condensed Consolidated Statement of Operations.
NOTE K: FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received from the sale of 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 external pricing services, we have evaluated the methodologies used to develop the estimate of fair value in order to assess whether such valuations are representative of fair value, including net asset value (“NAV”). Additionally, in certain circumstances, the NAV reported by an asset manager may be adjusted when sufficient evidence indicates NAV is not representative of fair value.
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes our deferred compensation plan assets and liabilities measured at fair value on a recurring basis in our Condensed Consolidated Balance Sheet:
| March 28, 2025 | January 3, 2025 | ||||||||||||||||||||||
| (In millions) | Total | Level 1 | Total | Level 1 | |||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Deferred compensation plan assets:(1) | |||||||||||||||||||||||
| Equity and fixed income securities | $ | 211 | $ | 211 | $ | 219 | $ | 219 | |||||||||||||||
| Investments measured at NAV: | |||||||||||||||||||||||
| Corporate-owned life insurance | 40 | 41 | |||||||||||||||||||||
| Total fair value of deferred compensation plan assets | $ | 251 | $ | 260 | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Deferred compensation plan liabilities:(2) | |||||||||||||||||||||||
| Equity securities | $ | 9 | $ | 9 | $ | 10 | $ | 10 | |||||||||||||||
| Investments measured at NAV: | |||||||||||||||||||||||
| Common/collective trusts and guaranteed investment contracts | 332 | 357 | |||||||||||||||||||||
| Total fair value of deferred compensation plan liabilities | $ | 341 | $ | 367 |
(1)Represents diversified assets held in rabbi trusts primarily associated with certain non-qualified deferred compensation plans, which we include in the “Other current assets” and “Other non-current assets” line items in our Condensed Consolidated Balance Sheet.
(2)Primarily represents obligations to pay benefits under certain non-qualified deferred compensation plans, which we include in the “Compensation and benefits” and “Other long-term liabilities” line items in our Condensed Consolidated Balance Sheet. Under the 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.
NOTE L: CHANGES IN ESTIMATES
Many of our contracts utilize 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. At the outset of each contract, we gauge its complexity and perceived risks and establish an estimated total cost at completion in line with those expectations. Due to the long-term nature of many of these contracts, developing the estimated total cost at completion and total transaction price often requires judgment. After establishing the estimated total cost at completion, we follow a standard estimate at completion (“EAC”) process in which we review the progress and performance on our ongoing contracts. As the contracts progress, we may successfully retire risks or complexities and may add additional risks, and we adjust our estimated total cost at completion accordingly. For additional discussion of our revenue recognition policies and our EAC process, see “Critical Accounting Estimates” in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Fiscal 2024 Form 10-K.
Net EAC adjustments had the following impact to earnings:
| First Quarter | |||||||||||||||||||||||
| (In millions, except per share amounts) | 2025 | 2024 | |||||||||||||||||||||
| Net EAC adjustments, before income taxes | $ | (21) | $ | 19 | |||||||||||||||||||
| Net EAC adjustments, net of income taxes | (16) | 15 | |||||||||||||||||||||
| Net EAC adjustments, net of income taxes, per diluted share | (0.08) | 0.08 |
Revenue recognized from performance obligations satisfied (or partially satisfied) in prior periods was $37 million and $53 million for first quarter 2025 and 2024, respectively.
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE M: BACKLOG
Backlog, which is the equivalent of our remaining performance obligations, represents the future revenue we expect to recognize as we perform on our current contracts. Backlog comprises both funded backlog (i.e., firm orders for which funding is authorized and appropriated) and unfunded backlog (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 indefinite-delivery, indefinite-quantity contracts.
As of March 28, 2025, our ending backlog was $33.2 billion. We expect to recognize approximately 50% of the revenue associated with this backlog over the next twelve months and an additional 25% over the following twelve months, with the remainder to be recognized thereafter.
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE N: DIVESTITURE
CAS Disposal Group Divestiture
On March 28, 2025, we completed the sale of our CAS disposal group, for cash proceeds, net of cash divested, of $831 million. The CAS disposal group, which provided integrated aircraft avionics, pilot training and data analytics services for the commercial aviation industry, was reported in our IMS segment through the date of sale. Income before income taxes attributable to L3Harris was $21 million and $26 million for first quarter 2025 and 2024, respectively.
The carrying amounts of assets and liabilities included in the CAS disposal group divestiture were as follows:
| (In millions) | March 28, 2025 | ||||||||||||||||
| Receivables, net | $ | 117 | |||||||||||||||
| Contract assets | 47 | ||||||||||||||||
| Inventories, net | 139 | ||||||||||||||||
| Other current assets | 22 | ||||||||||||||||
| Property, plant and equipment, net | 46 | ||||||||||||||||
| Goodwill(1) | 535 | ||||||||||||||||
| Intangible assets, net | 263 | ||||||||||||||||
| Other non-current assets | 60 | ||||||||||||||||
| Total assets | $ | 1,229 | |||||||||||||||
| Current portion of long-term debt | $ | 1 | |||||||||||||||
| Accounts payable | 95 | ||||||||||||||||
| Contract liabilities | 49 | ||||||||||||||||
| Compensation and benefits | 6 | ||||||||||||||||
| Other current liabilities | 40 | ||||||||||||||||
| Long-term debt, net | 2 | ||||||||||||||||
| Other long-term liabilities | 59 | ||||||||||||||||
| Total liabilities | $ | 252 | |||||||||||||||
| Net assets divested | $ | 977 | |||||||||||||||
(1)Includes $759 million of accumulated goodwill impairment losses reported in our IMS segment through the date of sale. See Note E: Goodwill and Intangible Assets in these Notes for further information.
In connection with the divestiture, we derecognized non-controlling interest and accumulated other comprehensive income of $63 million and $6 million, respectively, and recognized a pre-tax loss, inclusive of amounts attributable to noncontrolling interest, of $17 million in first quarter 2025. The pre-tax loss is incremental to the previously recorded CAS disposal group losses recognized in fiscal 2024 and 2023. The final cumulative loss on sale remains subject to certain purchase price adjustments, including final working capital settlement, as set forth in the agreement, and will be finalized in fiscal 2025. The pre-tax loss is included in the “General and administrative expenses” line items in our Condensed Consolidated Statement of Operations.
For additional information on the CAS disposal group, including the cumulative pre-tax losses recognized and carrying amounts of assets and liabilities classified as held for sale as of January 3, 2025, see Note 13: Acquisitions and Divestitures in our Fiscal 2024 Form 10-K.
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE O: BUSINESS SEGMENT INFORMATION
We structure our operations primarily around the products, systems and services we sell and the markets we serve and report our financial results in four reportable segments: CS, IMS, SAS and AR.
Business Realignment. Effective in first quarter 2025, to better align our businesses, we transferred our FOS business from our IMS segment to our AR segment and adjusted our reporting accordingly. See Note A: Basis of Presentation and Note E: Goodwill and Intangible Assets in these Notes for further information.
Business Segment Financial Information
Segment revenue, segment operating income and a reconciliation of segment operating income to total income before income taxes were as follows:
| First Quarter | ||||||||||||||||||||||||||
| (Dollars in millions) | 2025 | 2024 | ||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||
| CS | $ | 1,352 | $ | 1,294 | ||||||||||||||||||||||
| IMS | 1,592 | 1,627 | ||||||||||||||||||||||||
| SAS | 1,611 | 1,751 | ||||||||||||||||||||||||
| AR | 629 | 584 | ||||||||||||||||||||||||
| Other (1) | (52) | (45) | ||||||||||||||||||||||||
| Total revenue | 5,132 | 5,211 | ||||||||||||||||||||||||
| Cost of revenue | ||||||||||||||||||||||||||
| CS | $ | (856) | $ | (837) | ||||||||||||||||||||||
| IMS | (1,204) | (1,248) | ||||||||||||||||||||||||
| SAS | (1,281) | (1,366) | ||||||||||||||||||||||||
| AR | (489) | (443) | ||||||||||||||||||||||||
| Other (1) | 48 | 31 | ||||||||||||||||||||||||
| Total cost of revenue | (3,782) | (3,863) | ||||||||||||||||||||||||
| Other segment costs (2) | ||||||||||||||||||||||||||
| CS | $ | (151) | $ | (147) | ||||||||||||||||||||||
| IMS | (185) | (194) | ||||||||||||||||||||||||
| SAS | (154) | (169) | ||||||||||||||||||||||||
| AR | (64) | (64) | ||||||||||||||||||||||||
| Other (1) | 4 | 14 | ||||||||||||||||||||||||
| Total other segment costs (2) | (550) | (560) | ||||||||||||||||||||||||
| Operating income | ||||||||||||||||||||||||||
| CS | $ | 345 | $ | 310 | ||||||||||||||||||||||
| IMS | 203 | 185 | ||||||||||||||||||||||||
| SAS | 176 | 216 | ||||||||||||||||||||||||
| AR | 76 | 77 | ||||||||||||||||||||||||
| Unallocated corporate expenses | (275) | (410) | ||||||||||||||||||||||||
| Total operating income | 525 | 378 | ||||||||||||||||||||||||
| Non-service FAS pension income and other, net | 84 | 88 | ||||||||||||||||||||||||
| Interest expense, net | (150) | (176) | ||||||||||||||||||||||||
| Income before income taxes | $ | 459 | $ | 290 |
(1) Includes corporate headquarters and intersegment eliminations.
(2) Other segment costs consist of company-funded R&D costs, selling and marketing costs and other General and Administrative (“G&A”) expenses, which include a portion of depreciation and amortization expenses that are disclosed by segment under the “Disaggregation of Revenue” heading below in this Note.
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Unallocated Corporate Expenses. Total unallocated corporate expenses include corporate items such as a portion of management and administration, legal, environmental, compensation, retiree benefits, other corporate expenses and eliminations and the FAS/Cost Accounting Standards (“CAS”) operating adjustment. Total unallocated corporate expenses also include 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; business divestiture-losses and any 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 through 2026 with non-recurring costs for workforce optimization, incremental information technology (“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.
| First Quarter | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | CS | IMS | SAS | AR | CS | IMS | SAS | AR | ||||||||||||||||||||||||||||||||||||||||||
| Revenue By Customer Relationship | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Prime contractor | $ | 995 | $ | 1,049 | $ | 1,008 | $ | 139 | $ | 913 | $ | 1,056 | $ | 1,108 | $ | 163 | ||||||||||||||||||||||||||||||||||
| Subcontractor(1) | 345 | 530 | 586 | 480 | 367 | 560 | 628 | 416 | ||||||||||||||||||||||||||||||||||||||||||
| Intersegment | 12 | 13 | 17 | 10 | 14 | 11 | 15 | 5 | ||||||||||||||||||||||||||||||||||||||||||
| Total segment | $ | 1,352 | $ | 1,592 | $ | 1,611 | $ | 629 | $ | 1,294 | $ | 1,627 | $ | 1,751 | $ | 584 | ||||||||||||||||||||||||||||||||||
| Revenue By Contract Type | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed-price(2) | $ | 1,161 | $ | 1,255 | $ | 994 | $ | 392 | $ | 1,065 | $ | 1,245 | $ | 1,108 | $ | 335 | ||||||||||||||||||||||||||||||||||
| Cost-reimbursable | 179 | 324 | 600 | 227 | 215 | 371 | 628 | 244 | ||||||||||||||||||||||||||||||||||||||||||
| Intersegment | 12 | 13 | 17 | 10 | 14 | 11 | 15 | 5 | ||||||||||||||||||||||||||||||||||||||||||
| Total segment | $ | 1,352 | $ | 1,592 | $ | 1,611 | $ | 629 | $ | 1,294 | $ | 1,627 | $ | 1,751 | $ | 584 | ||||||||||||||||||||||||||||||||||
| Revenue By Geographical Region | ||||||||||||||||||||||||||||||||||||||||||||||||||
| United States | $ | 844 | $ | 1,147 | $ | 1,376 | $ | 609 | $ | 925 | $ | 1,166 | $ | 1,507 | $ | 564 | ||||||||||||||||||||||||||||||||||
| International | 496 | 432 | 218 | 10 | 355 | 450 | 229 | 15 | ||||||||||||||||||||||||||||||||||||||||||
| Intersegment | 12 | 13 | 17 | 10 | 14 | 11 | 15 | 5 | ||||||||||||||||||||||||||||||||||||||||||
| Total segment | $ | 1,352 | $ | 1,592 | $ | 1,611 | $ | 629 | $ | 1,294 | $ | 1,627 | $ | 1,751 | $ | 584 |
(1) Includes products and services to contractors whose customers are the end user.
(2) Includes revenue derived from time-and-materials contracts.
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Other selected financial information by business segment is summarized below:
| First Quarter | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital Expenditures | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CS | $ | 7 | $ | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| IMS | 20 | 40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SAS | 19 | 53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AR | 11 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate | 2 | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total capital expenditures | $ | 59 | $ | 115 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CS | $ | 13 | $ | 14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| IMS | 15 | 16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SAS | 33 | 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AR | 12 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate | 228 | 251 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total depreciation and amortization | $ | 301 | $ | 320 |
Assets by Business Segment
Total assets by business segment were as follows:
| (In millions) | March 28, 2025 | January 3, 2025 | |||||||||
| CS | $ | 7,124 | $ | 7,060 | |||||||
| IMS | 9,615 | 10,389 | |||||||||
| SAS | 9,145 | 8,705 | |||||||||
| AR | 4,773 | 4,826 | |||||||||
| Corporate(1) | 10,591 | 11,021 | |||||||||
| Total Assets | $ | 41,248 | $ | 42,001 |
(1)Includes intangible assets acquired in connection with business combinations that benefit the entire Company of $7,448 million and $7,639 million as of March 28, 2025 and January 3, 2025, respectively. Corporate assets also include cash, income taxes receivable, deferred income taxes, deferred compensation plan assets, buildings and equipment and real estate held for development and leasing.
_____________________________________________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE P: LEGAL PROCEEDINGS AND CONTINGENCIES
In the ordinary course of business, we are routinely defendants in, parties to or otherwise subject to many pending and threatened legal actions, claims, disputes, arbitration and other legal proceedings incident to our business, 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 arbitration 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. As of March 28, 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 as of March 28, 2025 were reserved against or would not have a material adverse effect on our financial condition, results of operations, cash flows or equity.
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 (“EPA”) or equivalent state or international environmental agencies allege that several sites formerly or currently owned and/or operated by us or companies we have acquired, and other properties or water supplies that may be or have been impacted from those operations, contain disposed or recycled materials or wastes and require environmental investigation and/or remediation. These sites include instances of us or companies we acquired 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.
Based on an assessment of relevant factors, we estimated that our liability under applicable environmental statutes and regulations for identified sites was $637 million as of both March 28, 2025 and January 3, 2025. The current and non-current portion of our estimated environmental liability is included in the “Other current liabilities” and “Other long-term liabilities” line items, respectively, in our Condensed Consolidated Balance Sheet.
Some of these environmental costs are recoverable from the U.S. Government. We consider the recovery probable based on U.S. Government contracting regulations and, accordingly, record an asset for the recoverable portion of these reserves which was $463 million and $462 million, as of March 28, 2025 and January 3, 2025, respectively. The current and non-current portion of the recoverable costs are included in the “Other current assets” and “Other non-current assets” line items, respectively, in our Condensed Consolidated Balance Sheet.
_____________________________________________________________________
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of L3Harris Technologies, Inc.
Results of Review of Interim Financial Statements
We have reviewed the accompanying condensed consolidated balance sheet of L3Harris Technologies, Inc. and subsidiaries (the Company) as of March 28, 2025, the related condensed consolidated statements of operations, comprehensive income, cash flows and equity for the quarters ended March 28, 2025 and March 29, 2024, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of January 3, 2025, the related consolidated statements of operations, comprehensive income, cash flows and equity for the year then ended, and the related notes (not presented herein); and in our report dated February 14, 2025, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 3, 2025, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ Ernst & Young LLP
Orlando, Florida
April 24, 2025
_____________________________________________________________________
Previous: Cover and table of contents · Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.