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

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

The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations. This MD&A is provided as a supplement to, should be read in conjunction with, and is qualified in its entirety by reference to, our Condensed Consolidated Financial Statements and accompanying Notes in this Report (the “Notes”). In addition, reference should be made to our audited Consolidated Financial Statements and accompanying Notes to our Consolidated Financial Statements and Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Fiscal 2024 Form 10-K. The discussions in this MD&A contain forward-looking statements.

OVERVIEW

We are the Trusted Disruptor in the defense industry. With customers’ mission-critical needs always in mind, we deliver end-to-end technology solutions connecting the space, air, land, sea and cyber domains in the interest of national 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.

U.S. and International Budget Environment

The percentage of our revenue that was derived from sales to U.S. Government customers, including foreign military sales funded through the U.S. Government, whether directly or through prime contractors, was 74% for first quarter 2025.

The U.S. Government fiscal year (“GFY”) 2024 appropriations funding bills provided approximately $844 billion in funding for the U.S. Department of Defense (“DoD”). On April 24, 2024, the President signed into law a supplemental GFY 2024 appropriations package that included $67 billion in funding for key DoD programs, bringing the DoD funding for GFY 2024 to $911 billion.

On March 15, 2025, the President signed into law a full-year Continuing Resolution (“CR”) for GFY 2025. The CR funds the government through September 30, 2025 and provides $893 billion for defense funding, including $851 billion for the DoD. This is in line with the 1% increase permitted by the Fiscal Responsibility Act of 2023 caps for GFY 2025. Notably, the CR provides funding at the account level, not the program level, allowing federal agencies more discretion with how they can prioritize funding for programs. The CR also provides authority for the DoD to initiate new-start programs, but only if the program was funded in either the House or Senate GFY 2025 appropriations bill.

The overall defense spending environment, both in the U.S. and internationally, reflects the continued impacts of global conflicts and geopolitical tensions, and changes to U.S. Government or international spending priorities have and could in the future impact our business. The GFY 2026 President’s budget is expected in the coming weeks and will clarify the funding proposed to be allocated to the administration’s defense priorities.

See our U.S. Government funding risks and the discussion of our international business risks within Part I. Item 1A. Risk Factors in our Fiscal 2024 Form 10-K.

Economic Environment

The macroeconomic environment continues to evolve, which has impacted our business and may continue to impact our future results. The ongoing uncertainty related to the impacts of inflation, as well as the interest rate environment and ongoing federal deficits, which raises the cost of borrowing for the federal government, could in the future impact U.S. Government spending priorities for our products and services. For a discussion of inflation-related risks, see Part I. Item 1A. Risk Factors in our Fiscal 2024 Form 10-K.

We continue to monitor and evaluate the potential impact of current and proposed changes in trade policies and in particular, tariffs. In response to enacted tariffs, we are seeking exemptions, evaluating alternative sources of materials and subcontracted components, as well as engaging in supplier negotiations to help manage cost impacts and are considering price adjustments and other strategies to support profitability. Based on current conditions, we do not expect a material impact on our 2025 results, but will continue to monitor developments and assess potential implications as trade policies evolve.

For a discussion of trade policy and macroeconomic related risks, see Part II. Item 1A. Risk Factors in this Report and Part I. Item 1A. Risk Factors in our Fiscal 2024 Form 10-K.

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Key Developments

Business Realignment. Effective in first quarter 2025, to better align our businesses, we transferred our FOS business (representing $63 million and $42 million of revenue for first quarter 2025 and 2024, respectively) 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 the Notes for further information.

The historical results, discussion and presentation of our business segments as set forth in this MD&A 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 results of operations, financial condition, cash flows and equity.

Divestiture. On March 28, 2025, we completed the sale of our CAS disposal group, which was reported in our IMS segment through the date of divestiture. See Note N: Divestiture in the Notes for further information.

RESULTS OF OPERATIONS

The first quarter of fiscal 2025 included 12 weeks, whereas the first quarter of fiscal 2024 included 13 weeks. As a result, outcomes for specific periods, or year-over-year comparisons of results of operations and segment performance, may not necessarily predict future operating results. The following discussion should be considered in this context.

Consolidated Results of Operations

First Quarter
(Dollars in millions, except per share amounts)20252024
Revenue
Products$3,566$3,599
Services1,5661,612
Total revenue5,1325,211
Cost of revenue
Products(2,596)(2,594)
Services(1,186)(1,269)
Total cost of revenue(3,782)(3,863)
Gross margin1,3501,348
General and administrative expenses(825)(970)
Operating Income525378
Non-service FAS pension income and other, net8488
Interest expense, net(150)(176)
Income before income taxes459290
Income taxes(73)(5)
Effective Tax Rate15.9%1.7%
Net income386285
Noncontrolling interests, net of income taxes—(2)
Net income attributable to L3Harris Technologies, Inc.$386$283
Diluted EPS$2.04$1.48

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Revenue. The following table presents revenue from products and services by segment, net of intersegment:

First Quarter
(In millions)20252024
CS$1,146$1,007
IMS949988
SAS1,0211,210
AR450394
Total products revenue$3,566$3,599
CS$194$273
IMS630628
SAS573526
AR169185
Total services revenue$1,566$1,612

Products revenue. Products revenue decreased $33 million for first quarter 2025 compared with first quarter 2024 due to lower products revenues of $189 million and $39 million in our SAS and IMS segments, respectively, offset by higher products revenues of $139 million and $56 million in our CS and AR segments, respectively.

Services revenue. Services revenue decreased $46 million for first quarter 2025 compared with first quarter 2024 primarily due to lower services revenue of $79 million in our CS segment, partially offset by higher services revenue of $47 million in our SAS segment.

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

Cost of Revenue. The following table presents cost of revenue from products and services by segment, net of intersegment:

First Quarter
(In millions)20252024
CS$(690)$(602)
IMS(712)(756)
SAS(826)(928)
AR(345)(294)
Corporate(23)(14)
Total cost of products revenue$(2,596)$(2,594)
CS$(154)$(221)
IMS(479)(481)
SAS(438)(423)
AR(134)(144)
Corporate19—
Total cost of services revenue$(1,186)$(1,269)

Cost of products revenue. Cost of products revenue increased $2 million for first quarter 2025 compared with first quarter 2024 primarily due to higher cost of products revenues of $88 million and $51 million in our CS and AR segments, respectively, offset by lower cost of products revenues of $102 million and $44 million in our SAS and IMS segments, respectively.

Cost of services revenue. Cost of services revenue decreased $83 million for first quarter 2025 compared with first quarter 2024 primarily due to lower cost of services revenues of $67 million in our CS segment.

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Gross Margin. Gross margin and gross margin as a percentage of revenue remained flat for first quarter 2025 compared to first quarter 2024 primarily impacted by favorable mix from higher margin revenue, primarily in our CS segment, offset by a $40 million unfavorable change in net EAC adjustments, impacted by program execution on certain classified development programs in SAS. For discussion of operating income by segment see “Business Segment Results of Operations” below in this MD&A for further information.

G&A Expenses. The following table presents the components of G&A expenses:

First Quarter
(In millions)20252024
Amortization of acquisition-related intangibles$(177)$(197)
LHX NeXt implementation costs(1)(35)(127)
Merger, acquisition, and divestiture-related expenses(17)(40)
Business divestiture-related loss(2)(17)—
Company-funded R&D costs(112)(114)
Selling and marketing(105)(113)
Other G&A expenses(3)(362)(379)
G&A expenses$(825)$(970)

(1)Includes costs associated with transforming multiple functions, systems and processes to increase agility and competitiveness, including third-party consulting, workforce optimization and incremental IT expenses for implementation of new systems. See Note O: Business Segment Information in the Notes and the “Operating Environment, Strategic Priorities and Key Performance Measures” section in the MD&A in our Fiscal 2024 Form 10-K for more detail on our LHX NeXt initiative and implementation costs.

(2)Loss recognized in connection with CAS disposal group divestiture. See Note N: Divestiture for further information.

(3)Other segment G&A expenses include payroll and benefits, outside services, facilities, insurance and other expenses, as well as unallocated corporate expenses, such as a portion of management and administration, legal, environmental, compensation, retiree benefits and other corporate G&A expenses and eliminations.

G&A expenses decreased $145 million for first quarter 2025 compared with first quarter 2024 primarily due to lower LHX NeXt implementation costs, including $49 million of lower employee severance and $43 million associated with lower third-party consulting and lower incremental IT expenses for implementation of new systems.

Non-service FAS Pension Income and Other, net. The following table presents the components of Non-service FAS pension income and other, net:

First Quarter
(In millions)20252024
Non-service FAS pension income(1)$90$80
Other, net(2)(6)8
Non-service FAS pension income and other, net$84$88

(1)Includes the non-service cost components of net periodic benefit income under our defined benefit plans. First quarter 2025 includes a pre-tax settlement gain of $14 million recognized in connection with the CPP group annuity purchase. See Note H: Retirement Benefits in the Notes for further information.

(2)Primarily includes changes in the market value of our rabbi trust assets, gains and losses on our equity investments in nonconsolidated affiliates and royalty income.

Interest Expense, net. Our net interest expense decreased for first quarter 2025 compared with first quarter 2024 primarily due to lower average outstanding notes under our CP Program during first quarter 2025.

Income Taxes. During interim periods, we estimate our global forecasted full-year ETR and apply that rate to year-to-date ordinary income in order to compute the year-to-date income tax provision. Although most items will be considered part of the forecasted full-year ETR, there are a number of items that are instead required to be recorded in the interim period in which they occur; such as certain changes in uncertain tax positions, the accrual of interest and penalties, changes in tax laws or rates, and other items as prescribed by GAAP. As a result, there may be quarterly fluctuations in our ETR and the results for the interim periods are not necessarily indicative of the results to be expected for the full year or future periods.

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Our 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 R&D credits and tax deductions for FDII.

Diluted EPS. Diluted EPS increased 38% for first quarter 2025 compared with first quarter 2024 primarily due to higher net income from the combined effects of reasons noted in the sections above, including a decrease in G&A expenses, partially offset by an increase in income taxes.

Business Segment Results of Operations

CS Segment

First Quarter
(Dollars in millions)20252024% Inc/(Dec)
Revenue$1,352$1,2944%
Operating income34531011%
Operating income as a percentage of revenue (“operating margin”)25.5%24.0%

CS segment revenue increased for first quarter 2025 compared with first quarter 2024 primarily due to higher revenue of $84 million in Tactical Communications from higher international volume on resilient communication equipment and sale of satellite communications terminal inventory, partially offset by lower DoD deliveries. As of March 28, 2025, CS segment ending backlog was $7.2 billion.

CS segment operating income increased for first quarter 2025 compared with first quarter 2024 primarily due to favorable higher margin international mix in Tactical Communications and LHX NeXt driven cost savings.

IMS Segment

First Quarter
(Dollars in millions)20252024% Inc/(Dec)
Revenue$1,592$1,627(2)%
Operating income20318510%
Operating margin12.8%11.4%

IMS segment revenue decreased for first quarter 2025 compared with first quarter 2024 primarily due to lower revenues of $40 million in ISR from lower aircraft missionization volume and planned mission support program ramp down and $18 million in Maritime from lower portfolio volume, partially offset by higher revenue of $31 million in Targeting and Sensor Systems from higher commercially priced revenue for airborne electro-optical sensors. As of March 28, 2025, IMS segment ending backlog was $9.3 billion.

IMS segment operating income increased for first quarter 2025 compared with first quarter 2024 primarily due to improved program performance, favorable mix impact from higher airborne electro-optical sensors volume and LHX NeXt driven cost savings.

SAS Segment

First Quarter
(Dollars in millions)20252024% Inc/(Dec)
Revenue$1,611$1,751(8)%
Operating income176216(19)%
Operating margin10.9%12.3%

SAS segment revenue decreased for first quarter 2025 compared with first quarter 2024 primarily due to lower revenue of $124 million in Space Systems from lower volume associated with program timing and the impact of negative EAC adjustments from challenges on certain classified development programs. Revenue also decreased $107 million in Airborne Combat Systems, including lower revenue of $44 million from the May 2024 divestiture of the Antenna disposal group, with the remaining decrease primarily associated with lower volume, including F-35 related volume as TR-3 transitions from development to a more gradual production ramp. Such decreases were partially offset by higher revenue of $56 million in Mission Networks, our FAA mission-critical safety of flight business, from higher volume. As of March 28, 2025, SAS segment ending backlog was $9.1 billion.

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SAS segment operating income decreased for first quarter 2025 compared with first quarter 2024 primarily due to $44 million unfavorable EAC adjustments from program execution challenges on certain classified development programs in Space Systems, partially offset by LHX NeXt driven cost savings.

AR Segment

First Quarter
(Dollars in millions)20252024% Inc/(Dec)
Revenue$629$5848%
Operating income7677(1)%
Operating margin12.1%13.2%

AR segment revenue increased for first quarter 2025 compared with first quarter 2024 primarily due to higher revenues of $62 million in Missile Solutions from increased production volume on key missile and munitions programs and new program ramp, partially offset by lower revenue of $10 million in Space Propulsion and Power Systems from production timing on space programs. As of March 28, 2025, AR segment ending backlog was $7.7 billion.

AR segment operating income modestly decreased for first quarter 2025 compared with first quarter 2024 primarily due to lower net favorable EAC adjustments, partially offset by higher volume and LHX NeXt driven cost savings.

Unallocated Corporate Expenses

First Quarter
(In millions)20252024
Unallocated corporate department expenses(1)$(209)$(250)
Merger, acquisition, and divestiture-related expenses(17)(40)
Business divestiture-related loss(2)(17)—
LHX NeXt implementation costs(3)(35)(127)
FAS/CAS operating adjustment(4)37
Total unallocated corporate expenses$(275)$(410)

(1)Primarily includes amortization expense of $194 million and $217 million in first quarter 2025 and 2024, respectively, associated with intangible assets acquired in connection with business combinations that benefit the entire Company. Additionally, includes corporate items such as a portion of management and administration, legal, environmental, compensation, retiree benefits, other corporate expenses and eliminations.

(2)Loss recognized in connection with CAS disposal group divestiture. See Note N: Divestiture for further information.

(3)Includes costs associated with transforming multiple functions, systems and processes to increase agility and competitiveness, including third-party consulting, workforce optimization and incremental IT expenses for implementation of new systems. For further information on our LHX NeXt initiative and implementation costs see Note O: Business Segment Information in the Notes and the “G&A Expenses” discussion above in this MD&A.

(4)Represents the difference between U.S. Government CAS pension cost and the service cost component of net periodic benefit income under our defined benefit plans.

LIQUIDITY AND CAPITAL RESOURCES

Capital Resources

As of March 28, 2025, we had cash and cash equivalents of $517 million, of which $286 million was held by our foreign subsidiaries, a significant portion of which we believe can be repatriated to the U.S. with minimal tax cost.

CP Program. As of March 28, 2025, we had $535 million in outstanding notes under our CP Program. Our CP Program serves as a source of short-term financing under which we may issue unsecured commercial paper notes up to a maximum aggregate amount of $3.0 billion, supported by amounts available under our credit facilities, discussed below. From time to time, we use borrowings under the CP Program for general corporate purposes, including funding acquisitions, repaying debt, paying dividends, and repurchasing our common stock. See the “Financing Activities” discussion below in this MD&A for further information about our CP Program.

Credit Facilities. As of March 28, 2025, we had no outstanding borrowings under our credit facilities, had available borrowing capacity of $2,465 million, net of outstanding notes under our CP Program, and were in compliance with all covenants.

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2025 Five-Year Credit Facility. On February 18, 2025, we established a new $2.5 billion, five-year senior unsecured revolving credit facility by entering into the 2025 Five-Year Credit Agreement. The 2025 Five-Year Credit Agreement replaces the prior $2.0 billion 2022 Credit Agreement.

2025 364-Day Credit Facility. On February 18, 2025, we established a new $500 million 364-day senior unsecured revolving credit facility by entering into the 2025 364-Day Credit Agreement. The 2025 364-Day Credit Agreement replaces the prior $1.5 billion 364-day 2024 Credit Agreement, which matured on January 24, 2025.

See Note G: Debt and Credit Arrangements in the Notes for further information regarding our credit facilities.

Cash Flows

The following table provides a summary of our cash flow information:

First Quarter
(In millions)20252024
Cash and cash equivalents, beginning of period$615$560
Operating Activities:
Net income386285
Non-cash adjustments215233
Changes in working capital(739)(497)
Other, net96(125)
Net cash used in operating activities(42)(104)
Net cash provided by (used in) investing activities744(116)
Net cash (used in) provided by financing activities(805)144
Effect of exchange rate changes on cash and cash equivalents5(7)
Net decrease in cash and cash equivalents(98)(83)
Cash and cash equivalents, end of period$517$477

Operating Activities. Cash used in operating activities in first quarter 2025 decreased $62 million compared with first quarter 2024, primarily due to an increase in net income and cash provided by tax planning strategies, partially offset by $242 million more cash used to fund working capital, primarily driven by timing of billing and collection activity. The net cash used in operating activities in first quarter is consistent with our historical pattern, whereby operating cash flows are typically lowest in the first quarter due to timing of our business cycles and expenditure activities.

Investing Activities. The $860 million change in net cash provided by investing activities in first quarter 2025 compared with net cash used in investing activities in first quarter 2024 was primarily due to the March 28, 2025 sale of our CAS disposal group for cash proceeds, net of cash divested, of $831 million. For further information on the CAS disposal group sale see Note N: Divestiture in the Notes.

Financing Activities. The $949 million change in net cash used in financing activities in first quarter 2025 compared with net cash provided by financing activities in first quarter 2024, was primarily due to an increase in cash used to repurchase common stock of $336 million and a decrease in net proceeds from issuances of commercial paper of $581 million. Our primary financing activities in first quarter 2025 and 2024 are further discussed below.

Common stock repurchases. During first quarter 2025, we used $569 million to repurchase 2.7 million shares of our common stock under our share repurchase program. As of March 28, 2025, we had $2.8 billion of remaining unused authorization under our repurchase program. During first quarter 2024, we used $233 million to repurchase 1.1 million shares of our common stock under our share repurchase program. See “Liquidity and Capital Resources” in our Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Fiscal 2024 Form 10-K and Part II. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of this Report for further information regarding common stock repurchases.

CP program. During first quarter 2025, our CP Program had a maximum outstanding balance of $1.8 billion and a daily average outstanding balance of $1.3 billion. During first quarter 2024, our CP Program had a maximum outstanding balance was $2.7 billion and daily average outstanding balance of $2.3 billion. We expect balances under the CP Program to remain elevated as compared to historical norms through fiscal 2025.

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Long-term debt. During first quarter 2025, we had no significant long-term debt financing activities. During first quarter 2024, we closed the issuance and sale of $2.25 billion aggregate principal amount of long-term fixed-rate debt consisting of 5.05% notes, due June 2029, 5.25% notes, due June 2031 and 5.35% notes, due June 2034 and used the proceeds to repay the entire outstanding $2.25 billion, variable rate-term loan facility utilized to finance the fiscal 2023 acquisition of Tactical Data Links.

As of March 28, 2025, we had $11,717 million of outstanding long-term debt, net, including the current portion of long-term debt, net of $740 million. On April 27, 2025, we have a scheduled repayment of $600 million aggregate principal amount of our 3.832% 2025 Notes which we plan to fund using proceeds from the $600 million 5.50% notes, due August 2054 issued in fiscal 2024.

Dividends. On February 28, 2025, we announced that our Board of Directors (“Board”) increased the quarterly per share cash dividend rate on our common stock to $1.20 from $1.16, the 24th consecutive annual dividend increase. During first quarter 2025 and 2024, we paid $228 million and $224 million in dividends, respectively. See Part II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in our Fiscal 2024 Form 10-K for further information regarding our dividends.

Cash Requirements

Except for the level of indebtedness under our CP Program and the establishment of the new 2025 Five-Year Credit Agreement and the new 2025 364-Day Credit Facility, there were no material changes to our cash requirements or commercial commitments as disclosed in our Fiscal 2024 Form 10-K. Further information about our credit facilities and CP Program can be found in “Capital Resources” in this MD&A and Note G: Debt and Credit Arrangements in the Notes.

Defined Benefit Plan Contributions. As of March 28, 2025, we had net defined benefit plan assets of $795 million, the majority of which pertain to our U.S. qualified defined benefit pension plans. We intend to contribute annually no less than the required minimum funding thresholds to these pension plans and do not expect to make material contributions in fiscal 2025. Future required contributions will depend primarily on the actual return on plan assets and the discount rate used to measure the benefit obligation at the end of each year.

Pension Group Annuity Purchase. On March 14, 2025, we executed nonparticipating single premium group annuity contracts to transfer $1.2 billion of our CPP pension obligation 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. We expect to continue evaluating opportunities to strategically manage our pension obligations, including the potential for additional pension de-risking transactions in the future, subject to market conditions and plan funding levels. These actions align with our long-term strategy to reduce exposure to pension volatility while maintaining financial flexibility.

See Note 9: Retirement Benefits in our Fiscal 2024 Form 10-K and Note H: Retirement Benefits in the Notes for further information regarding our defined benefit plans.

Liquidity Assessment

Given our current cash position, outlook for funds generated from operations, credit ratings, available credit facilities, cash needs and debt structure, we have not experienced to date, and do not expect to experience, any material issues with liquidity for the next 12 months and in the longer term, although we can give no assurances concerning our future liquidity, particularly in light of our overall level of debt, U.S. Government budget uncertainties and the state of global commerce and general political and global financial uncertainty. See Part I. Item 1A. Risk Factors in our Fiscal 2024 Form 10-K.

Based on our current business plan and revenue prospects, we believe that our existing cash, funds generated from operations, availability under our senior unsecured credit facilities and our CP Program and access to the public and private debt and equity markets will be sufficient to provide for our anticipated working capital requirements, capital expenditures, dividend payments, repurchases under our share repurchase program and repayments of our debt securities at maturity for the next 12 months and the reasonably foreseeable future thereafter. Our capital expenditures for fiscal 2025 are expected to be approximately 2% of revenue. See “ Cash Requirements” in this MD&A and “Capital Resources”, “Cash Requirements” and “Commercial Commitments” in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Fiscal 2024 Form 10-K, for further information regarding our cash requirements.

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CRITICAL ACCOUNTING ESTIMATES

There have been no material changes to the critical accounting estimates disclosed in “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, except for, as set forth below.

Goodwill

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

Fiscal 2025 Impairment Tests. Effective in first quarter 2025, to better align our businesses, we transferred our FOS business from our IMS segment (within the TSS and 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.

See Note E: Goodwill and Intangible Assets in these Notes for further information.

Impact of Recently Issued Accounting Pronouncements

There have been no new accounting pronouncements which became effective during first quarter 2025 that have had a material impact on our Condensed Consolidated Financial Statements.

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