L3HARRIS TECHNOLOGIES INC DE
For the period ended Jan 3, 2025. Filed Feb 14, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 14, 2025
LHX$259.89+0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-29; filed 2024-02-20.
0000202058-24-000029
ITEM 7. anagement’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-01-03; filed 2025-02-14.
0000202058-25-000023
ITEM 7. anagement’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 222 previous paragraphs and 579 current paragraphs.
17 unchanged; 90 reworded; 235 added; 115 removed; 0 previous and 237 current paragraphs rearranged.
Tables are not compared: 16 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (235)
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financial condition and results of operations forfiscal 2024 compared with fiscal 2023. A discussion offiscal 2023
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information, see Part I. Item 1. Business - Cautionary Statement Regarding Forward-Looking Statements of this
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Report.
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we had approximately 47,000 employees, including approximately 18,000 engineers and scientists.
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and 74%, infiscal 2024,2023 and 2022, respectively.
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On March 9, 2024, the President signed the first tranche of GFY 2024 appropriations funding bills into law,
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which funded six government agencies, including the National Aeronautics and Space Administration, the National
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Oceanic and Atmospheric Administration, and the Federal Aviation Administration, through the remainder of GFY
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2024 which ended on September 30, 2024. A second funding bill, signed into law on March 23, 2024, funded all
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remaining agencies, including the DoD, through the remainder of GFY 2024. The bill provided approximately
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$844 billion in funding for DoD. This was in line with our expectations for 3% growth for defense over GFY 2023
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levels and in line with the first year of the Fiscal Responsibility Act of 2023 (“FRA”) caps.
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$850 billion, a 1% topline increase consistent with the FRA caps.
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On April 24, 2024, the President signed into law a supplemental GFY 2024 appropriations package that included
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$67 billion in funding for key DoD programs, bringing the DoD funding for GFY 2024 to$911 billion.
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Congress has not yet reached a final agreement on GFY 2025 funding. A short-term CR was enacted on
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December 21, 2024 that will fund the U.S. Government until March 14, 2025. While operating under a CR,
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programs. If Congress does not enact all 12 GFY 2025 appropriations bills by April 30, 2025, a 1% automatic
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sequestration cut will go into effect as mandated by the FRA.
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Further complicating the budget outlook is the need to raise the debt ceiling in 2025. Congressional inaction
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may lead to a default and potentially create economic instability.
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As a proven alternative to traditional primes and new entrants, our flexible business model allows us to operate
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as either a prime, merchant supplier, or subcontractor, offering both commercial pricing and traditional government
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acquisition approaches. Our products are used across many customer platforms and this platform-agnostic
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approach gives us a unique advantage in rapidly adapting to the changing threat environment while effectively
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partnering with new entrants and non-traditional contractors. Customer demand for our solutions remains robust,
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and we ended fiscal 2024 with backlog of$34.2 billion, a 5% increase over the prior year. Also infiscal 2024, we
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capabilities across our domains.
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Infiscal 2024, we made considerable progress with our LHX NeXt initiative, our targeted three-year program
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•Building upon our solid foundation and operational rigor to execute for our customers;
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•Focusing on profitable growth while securing strategic positions as a primeor subcontractor; and
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•Leveraging innovation as a competitive advantage to develop rapid solutions.
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(2)“EPS” is defined as Earnings Per Share.
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attributable to divested businesses.
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Products revenue. The following table presents products revenue by segment, net of intersegment:
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Products revenue forfiscal 2024 increased $1,440 million, due tothe inclusion of a full year ofproducts revenue
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from AR, rather than a partial year of revenue in fiscal 2023(“the AR Partial Year”)following the July 28, 2023
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acquisition of Aerojet Rocketdyne Holdings, Inc.(“AJRD”), as well asincreased products revenues of$441 million
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and$264 million at CS and IMS, respectively, partially offset by decreased products revenue of$91 million at SAS.
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Services revenue. The following table presents services revenue by segment, net of intersegment:
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Removed paragraphs (115)
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On June 3, 2023, the President signed into law the Fiscal Responsibility Act of 2023 (“FRA”), (P.L., 118-5) which suspended the federal debt limit through January 1, 2025 and established new discretionary funding limits for defense and non-defense accounts. The deal capped GFY 2024 national defense funding at $886 billion, including $842 billion for the DoD specifically, and non-defense funding at $704 billion. The FRA includes a provision that requires if a CR is in effect on January 1, 2024, for any discretionary account, the discretionary spending limits would be revised to reflect GFY23 enacted levels for defense and nondefense, decreased by 1%. If a final GFY2024 appropriations bill is not enacted by April 30, the 1% spending cuts would go into effect.
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Acquisitions and Pending Divestitures
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TDL Product Line. On January 3, 2023, we completed the acquisition of TDL for a purchase price of $1,958 million. TDL is reported within our CS segment.
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AJRD. On July 28, 2023, we completed the acquisition of AJRD for a total net purchase price of $4,715 million. The operations of AJRD are reported in the newly established AR segment and in our corporate headquarters.
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Pending Divestiture of CAS Disposal Group. On November 27, 2023, we announced that we entered into a definitive agreement to sell our CAS disposal group, which is included in our IMS segment.
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See Note 13: Acquisitions, Divestitures and Asset Sales in the Notes for further information.
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As noted in the “Acquisitions and Pending Divestitures” section above, during fiscal 2023, we closed on two acquisitions. The TDL acquisition provides us access to the Link 16 network and positions us to make the installed base of terminals more resilient and relevant, consistent with joint all-domain command and control (“JADC2”) modernization efforts. The AJRD acquisition provides access to new markets in missiles and missile defense as well as space exploration.
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•Relentlessly focusing on program execution and continuous improvement;
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•Strengthening the risk management culture that has developed over the highly volatile past three years;
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•Seamlessly integrating TDL and AJRD; and
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•Attracting, developing and retaining the skilled workforce key to our role as a Trusted Disruptor.
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Revenue
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Gross margin
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Segment Product and Service Analysis
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The following tables present revenue and cost of revenue from products and services by segment.
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** AR is a new reportable segment established in the quarter ended September 29, 2023 which consists of the operations assumed in the AJRD acquisition. As such, there is no comparable prior year information.
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Products revenue. Products revenue increased $1,598 million, from the inclusion of $752 million of products revenue from AR, as well as increases of $687 million at CS, primarily from the inclusion of TDL, and of $305 million at SAS, respectively. Such increases were partially offset by a decrease of $146 million at IMS.
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Cost of product revenue. Cost of product revenue increased $1,356 million, primarily from the inclusion of $558 million of cost of product revenue from AR and an increase of $366 million at CS, in line with the increase in product revenue and primarily from the inclusion of TDL. The increase was also attributable to an increase in cost of product revenue of $380 million at SAS, primarily from an increase in products revenue in Space Systems and $47 million at IMS.
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Services revenue. Services revenue increased $759 million, from the inclusion of $300 million of services revenue from AR, as well as increases of $167 million at SAS, $158 million at CS, primarily from the inclusion of TDL, and $134 million at IMS.
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Cost of services revenue. Cost of services revenue increased $815 million, primarily from the inclusion of $259 million of cost of services revenue from AR and an increase of $245 million, higher costs of services revenue at CS primarily from the inclusion of TDL, and $190 million and $130 million higher costs of services revenue at SAS and IMS respectively, primarily due to a larger volume of lower margin service sales.
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General and administrative expenses
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Major components of General and administrative expenses (“G&A”) were as follows:
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(2)Other G&A expenses primarily includes unallocated corporate expenses and segment G&A expense.
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In fiscal 2023, G&A expenses increased due to the inclusion of costs from our LHX NeXt initiative, as discussed in more detail under the “Operating Environment, Strategic Priorities and Key Performance Measures” section above in this MD&A, as well as increases in amortization of acquisition-related intangibles and an increase in Other G&A expenses as described below. Such increases were partially offset by a decrease in R&D costs and decreases from charges for severance and other termination costs and charges related to an additional pre-merger legal contingency that occurred in fiscal 2022.
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Asset group and business divestiture-related (losses) gains, net
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During fiscal 2023, pre-tax losses, net, consist of a $77 million loss associated with the pending divestiture of the CAS disposal group within the IMS segment, partially offset by a $26 million pre-tax gain recognized on divestiture of our Visual Information Solutions (“VIS”) business from our SAS segment.
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During fiscal 2022, we completed one business divestiture and one asset sale from our IMS segment and recognized a pre-tax gain of $8 million associated with the asset sale. See Note 13: Acquisitions, Divestitures and Asset Salesin the Notes for further information.
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Impairment of goodwill and other assets consisted of the following non-cash charges:
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Interest expense, net
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Net income per common share attributable to L3Harris Technologies, Inc. common shareholders
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The increase in income from continuing operations per diluted common share attributable to L3Harris common shareholders in fiscal 2023 compared with fiscal 2022 was primarily due to higher net income and fewer diluted weighted average common shares outstanding, primarily reflecting the repurchases of our common stock under our share repurchase program during fiscal 2023. See the “Common Stock Repurchases” discussion below in this MD&A for further information.
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Discussion of Business Segment Results of Operations
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Effective for fiscal 2023, we adjusted our reporting to better align our businesses and transferred our ADG business from our IMS segment to our SAS segment. Additionally, upon completion of the AJRD acquisition on July 28, 2023, we established a new reportable segment, AR.
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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 statements of operations, balance sheets, statements of cash flows or statements of equity resulting from these changes.
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SAS Segment
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The increase in SAS revenue in fiscal 2023 compared with fiscal 2022 was primarily due to higher revenue of $445 million from program growth in Space Systems, Mission Networks and Intel and Cyber.
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The increases in SAS operating income and operating margin in fiscal 2023 compared with fiscal 2022 were primarily due to higher volume, $66 million of lower R&D expenses, $53 million of lower non-cash charges for impairment of goodwill and other assets, lower overhead costs and favorable mix in Space Systems due to a non-recurring license sale during fiscal 2023. Such increases were partially offset by $40 million change in EAC adjustments from program execution during fiscal 2023.
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IMS Segment
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The decrease in IMS operating income and operating margin in fiscal 2023 compared with fiscal 2022 were primarily due to a net change in EAC adjustments of $103 million, principally in ISR and in Maritime from net unfavorable EAC adjustments in fiscal 2023 due to program execution, and the sale of $33 million of end-of-life inventory in Commercial Aviation Systems during fiscal 2022. Such decreases were partially offset by $64 million of lower R&D expenses and $59 million of lower non-cash charges for impairment of goodwill and other assets in fiscal 2023.
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Reworded paragraphs (90)
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The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations for fiscal 2023 compared with fiscal 2022. A discussion of fiscal 2022 compared to fiscal 2021 can be found in Part II: Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2022 (our “Fiscal 2022 Form 10-K”). This MD&A is provided as a supplement to, should be read in conjunction with and is qualified in its entirety by reference to, our Consolidated Financial Statements and accompanying Notes appearing elsewhere in this Report. Except for the historical information contained herein, the discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below in this MD&A under “Forward-Looking Statements and Factors that May Affect Future Results.”
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The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our
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We are the Trusted Disruptor in the defense industry. With customers’ mission-critical needs in mind, we deliver end-to-end technology solutions connecting the space, air, land, sea and cyber domains. We support government customers in more than 100 countries, with our largest customers being various departments and agencies of the U.S. Government and their prime contractors. Our products and services have defense and civil government applications, as well as commercial applications. As of December 29, 2023, we had approximately 50,000 employees, including approximately 20,000 engineers and scientists. We generally sell directly to our customers, and we utilize agents and intermediaries to sell and market some products and services, especially in international markets.
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We are the Trusted Disruptor in the defense industry. With customers’ mission-critical needs in mind, we deliver
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We structure our operations primarily around the products, systems and services we sell and the markets we serve, and we report the financial results of our continuing operations in the four segments: SAS, IMS, CS and AR. See Note 14: Business Segments in the Notes for further information regarding our business segments, including how we define segment operating income or loss.
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serve, and we report our financial results in four business segments: SAS, IMS, CS and AR. See Note 14: Business
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Our largest customers are various departments and agencies of the U.S. Government — the percentage of our revenue that was derived from sales to U.S. Government customers, including foreign military sales funded through the U.S. Government, whether directly or through prime contractors, was 76%, 74% and 75%, in fiscal 2023, 2022 and 2021, respectively.
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The percentage ofour revenue that was derived from sales to U.S. Government customers, including foreign
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On December 29, 2022, the President signed the Consolidated Appropriations Act, 2023 (H.R. 2617 ) into law, which provided $858 billion of national defense funding for the 2023 GFY, of which $816 billion was allotted to the DoD. On March 13, 2023, the President’s Budget Request for GFY 2024 (“2024 PBR”) was released. The 2024 PBR includes $842 billion for the DoD, a proposed increase of approximately 3% over the enacted GFY 2023 DoD budget. Many of our offerings funded in the enacted GFY 2023 DoD budget are also supported by the 2024 PBR, including responsive satellites, ISR aircraft, tactical communications and maritime solutions.
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On March 11, 2024, the President’s Budget Request for GFY 2025 was released. The DoD requested
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On September 30, 2023, the President signed a short-term CR, funding the government for 48 days through November 17, 2023. On November 17, 2023, the President signed a second CR into law. The second CR funded some government agencies through January 19, 2024, and other agencies, including the DoD, through February 2, 2024. On January 19, 2024, the President signed a third CR into law extending government funding through March 1 and March 8, respectively. Congress must enact full-year GFY appropriations bills or another CR to fund the government by those respective deadlines. While operating under a CR, government agencies are allocated a portion of GFY 2023 enacted funds, and DoD is prohibited from starting new programs.
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government agencies are allocated a portion of GFY 2024 enacted funds, and DoD is prohibited from starting new
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The overall defense spending environment, both in the U.S. and internationally, reflects the continued impacts of the conflicts in Ukraine and geopolitical tensions across Asia and the Middle East, and changes to U.S. Government or international spending priorities have and could in the future impact our business.
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The overall defense spending environment, both in the U.S. and internationally, reflects the continued impacts of
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For a discussion of U.S. Government funding risks and international business risks see “Item 1. Business -Government Contracts,” “Item 1. Business - International Business,” “Item 1A. Risk Factors” and “Item 3. Legal Proceedings” of this Report.
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For a discussion of U.S. Government funding risks and international business risks see “Item 1. Business -
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The macroeconomic environment continues to present challenges, which have impacted and may continue to impact our future results. The ongoing uncertainty related to the impacts of inflation, as well as increased interest rates, which raises the cost of borrowing for the federal government, could in the future impact U.S. Government spending priorities and the demand for our products.
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The macroeconomic environment continues to present challenges, which have impacted our business and may
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For a discussion of inflation-related risks, see “Item 1A. Risk Factors” of this Report.
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“Item 1A. Risk Factors” of this Report.
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The heightened geopolitical tensions worldwide emphasize the need for strengthened deterrence to support the U.S. and its allies. With a national security, technology-focused portfolio, we are uniquely positioned to meet our customers’ evolving needs across all domains and deliver advanced capabilities to support the U.S. and its allies. Many of our offerings are supported in the 2024 GFY DoD budget, including responsive satellites, ISR aircraft, tactical communications, networked maritime systems and classified cyber solutions. In fiscal 2023, we received several key strategic contract awards across each of our domains, and we ended the year with backlog of $32.7 billion, a 47% increase over the prior year. Also in fiscal 2023, we invested $480 million (2% of total revenue) in company-funded R&D focused on technologies that expand our capabilities across our domains.
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invested$515 million (2% of total revenue) in company-funded R&D focused on technologies that expand our
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This year, we embarked on the next phase of the L3Harris evolution, known as LHX NeXt, a targeted three-year program designed to enhance organizational agility and performance by leveraging our scale and relationships across segments, driving operational efficiency and competitiveness for the enterprise. With this program we are investing in enterprise tools and optimized, revamped processes to unlock further opportunities for margin expansion and create additional value for our shareholders.
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designed to enhance organizational agility and performance by leveraging our scale and relationships across
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Our strategic priorities continue to be performance, growth and innovation, with “Performance First” continuing to be our primary focus. We plan to continue to invest, consistent with growth opportunities, and sustain our culture of innovation, while delivering on our commitments to investors, our customers and on every contract we are awarded. We intend to accomplish this by:
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Our strategic priorities continue to be performance, growth and innovation. We plan to continue to invest,
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We use the following key financial performance measures to manage our business, which are discussed in detail below in the “Operations Review” and “Liquidity and Capital Resources” sections of this MD&A:
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We use the following key financial performance measures to manage our business, which are discussed in detail
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We also measure the success of our business using certain measures that are not defined by U.S. Generally Accepted Accounting Principles (“GAAP”), such as adjusted segment operating income (defined as operating income excluding certain corporate items and certain significant and/or nonrecurring items), earnings before interest and taxes, non-GAAP earnings per share, free cash flow (defined as net cash provided by operating activities less additions of property, plant and equipment net of proceeds from the sale of property, plant and equipment) and return on invested capital (defined as after-tax operating income from continuing operations divided by the five-point average of invested capital at the beginning and end of the period, where invested capital equals equity plus debt, less cash and cash equivalents), which may be calculated differently by other companies. We use these measures, along with our key financial performance measures above, to assess the success of our business and our ability to create shareholder value. We believe these measures are balanced among long-term and short-term performance, growth and innovation. We also use some of these and other performance metrics for executive compensation purposes.
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We use these measures, along with other performance measures that are not defined by U.S. Generally
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As described in more detail in Note 13: Acquisitions, Divestitures and Asset Sales and elsewhere in the Notes, during fiscal 2023 and 2022, we completed certain asset group sales and business divestitures. There was no significant revenue attributable to divested businesses.
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Revenue. As described in more detail in Note 13: Acquisitions and Divestitures and elsewhere in the Notes,
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Revenue for fiscal 2023 increased 14% compared with fiscal 2022 from the inclusion of $1,052 million of revenue from the July 28, 2023 acquisition of AJRD, which is reported in our AR segment, and higher revenue in CS of $853 million (including $365 million of revenue from the acquisition of TDL) and SAS of $472 million. See the “Discussion of Business Segment Results of Operations” discussion below in this MD&A for further information.
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See the “Business Segment Results of Operations” discussion below in this MD&A for further information.
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Gross margin for fiscal 2023 increased compared to fiscal 2022, largely due to the increases in revenue noted above, partially offset by an unfavorable net change in EAC adjustments which decreased gross margin by $121 million and a higher mix of lower margin revenue, primarily in our CS segment. Gross margin as a percentage of revenue decreased compared to fiscal 2022 from EAC adjustments and a higher mix of lower margin revenue, primarily in our CS segment. For discussion of operating income by segment see the “Discussion of Business Segment Results of Operations” below in this MD&A for further information.
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gross margin by$124 million, partially offset by a higher mix of lower margin revenue, primarily in our CS segment.
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(1)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.
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(1)Costs associated with transforming multiple functions, systems and processes to increase agility and competitiveness, including third-party
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For fiscal 2023, the increase in other G&A expenses of $190 million is attributable to increases of $39 million at our CS segment, partially from the inclusion of TDL and $16 million at our IMS segment, as well as the inclusion ofapproximately $75 million of other G&A expenses in our new AR segment, partially offset by a decrease in other G&A expenses in our SAS segment of $8 million. The remaining amount is attributable to an increase in corporate other G&A expenses and eliminations.
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and other corporate G&A expenses and eliminations.
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LHX NeXt implementation costs. LHX NeXt is our initiative to transform multiple functions, systems and processes to increase agility and competitiveness. Costs related to the LHX NeXt effort are expected to continue through 2025, and are expected to include workforce optimization costs, incremental IT expenses for implementation of new systems, third-party consulting expenses and other related costs.
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third-party consulting expenses, incremental IT expenses for implementation of new systems and other costs. G&A
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Impairment of goodwill and other assets
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Impairment of Goodwill and Other Assets. In fiscal 2024, we recognized a$14 million non-cash charge for
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Non-service FAS pension income and other, net
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FAS pension income and other, net:
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See Note 9: Retirement Benefits in the Notes for more information on the composition of non-service cost components of FAS pension and other postretirement benefits (“OPEB”) income and expense.
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information on the composition of non-service FAS pension income.
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Included in this caption is non-service FAS pension income and other non-operating income and expenses. Non-service FAS pension income of $310 million in fiscal 2023 decreased $131 million compared with fiscal 2022 primarily due to the $170 million increase in interest cost due to a higher discount rate in fiscal 2023, partially offset by a $31 million increase in amortization of net actuarial gains. Other non-operating income, net of $28 million in fiscal 2023 increased $44 million from non-operating expense, net of $16 million in fiscal 2022 primarily from changes in the market value of our rabbi trust assets, gains and losses on our equity investments in nonconsolidated affiliates and royalty income.
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(2)Other, net primarily includes changes in the market value of our rabbi trust assets, gains and losses on our equity investments in
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Our net interest expense increased in fiscal 2023 compared with fiscal 2022 primarily due to interest expense of $207 million on the $5.5 billion of long-term debt issued in fiscal 2023 and $69 million increase in interest expenseon outstanding notes under our commercial paper program (“CP Program”) during fiscal 2023, both of which were primarily due to the acquisitions of TDL and AJRD. See Note 8: Debt and Credit Arrangements in the Notes for further information.
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term fixed-rate debt in March 2024 and higher average outstanding notes under our commercial paper program (“CP
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Net cash provided by operating activities: The $62 million decrease in net cash provided by operating activities in fiscal 2023 compared with fiscal 2022 was primarily due to increases in payments of income taxes of $406 million and interest of $193 million on the $2.25 billion, three-year senior unsecured term loan facility (“Term Loan 2025”), the $3.25 billion aggregate principal amount of new long-term fixed-rate debt consisting of the 5.4% 2027 Notes, the 5.4% 2033 Notes and the 5.6% 2053 Notes (collectively, the “AJRD Notes”)and our CP Program, partially offset by less cash used to fund net working capital (i.e., receivables, contract assets, inventories, accounts payable and contract liabilities).
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unsecured term loan facility (“Term Loan 2025”) in March 2024. See the “Liquidity and Capital Resources”
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Our effective tax rate (income taxes as a percentage of income from continuing operations before income taxes) was 1.9% in fiscal 2023 compared with 16.7% in fiscal 2022. The decrease was primarily attributable to favorable impacts of divestitures and internal restructuring and the reduction of unfavorable non-deductible goodwill impairments experienced in fiscal 2022. See Note 7: Income Taxes in the Notes for further information.
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of favorable impacts of divestitures and internal restructuring infiscal 2023, partially offset by favorable
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Our SAS segment includes space payloads, sensors and full-mission solutions; classified intelligence and cyber; avionics; electronic warfare; and mission networks for air traffic management operations. See “Item 1: Business” of this Report for a description of the sectors in SAS.
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SAS. Our SAS segment includes space payloads, sensors and full-mission solutions; classified intelligence and
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Our IMS segment includes ISR; passive sensing and targeting; electronic attack; autonomy; power and communications; networks; sensors; aviation products; and pilot training operations. See “Item 1: Business” of this Report for a description of the sectors in IMS.
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IMS. Our IMS segment includes ISR; passive sensing and targeting; electronic attack; autonomy; power and
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The flat IMS revenue in fiscal 2023 compared with fiscal 2022 was primarily due tolower revenue of $179 million in ISR largely from lower aircraft missionization volume, offset byhigher revenues of $69 million in Electro Optical from higher volume in space and sensors,$63 millionin Maritime largely from volume in classified programs, power and energy solutions and international and $61 million in Commercial Aviation Solutions from volume.
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aircraft missionization volume,$49 million in Commercial Aviation Solutions from higher volume,$31 million in
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Our CS segment includes tactical communications with global communications solutions; broadband communications; integrated vision solutions; and public safety radios, system applications and equipment. See “Item 1: Business” of this Report for a description of the sectors in CS.
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CS. Our CS segment includes tactical communications with global communications solutions; broadband
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Long-Term Variable-Rate Debt. During fiscal 2023, we drew $2.25 billion in long-term debt on Term Loan 2025. The proceeds were utilized to fund the cash consideration paid and a portion of the associated transaction and integration costs related to the TDL acquisition and repay the entire outstanding $250 million aggregate principal amount of our Floating 2023 Notes. See Note 8: Debt and Credit Arrangementsin the Notes for further information on our long-term fixed-rate debt.
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Communications related to the TDL acquisition.
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Our AR segment includes 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. See “Item 1: Business” of this Report for a description of the sectors in AR. AR is a new reportable segment established in the quarter ended September 29, 2023 and as such, there is no comparable prior year information.
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AR. Our AR segment includes missile solutions with propulsion technologies for strategic defense, missile
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Total unallocated corporate expense includes the portion of corporate costs not included in management’s evaluation of segment operating performance. Unallocated corporate expenses increased $441 million in fiscal 2023 compared with fiscal 2022, primarily from an increase of $174 million of amortization of acquisition-related intangibles related to the inclusion of TDL and AJRD, the inclusion of $115 million of LHX NeXt related implementation costs (see discussion under “LHX NeXt implementation costs” below), higher asset group and business divestiture-related losses of $59 million and a $42 million expense during fiscal 2023 compared with $29 million of income during fiscal 2022 related to our deferred compensation plans.
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Unallocated Corporate Expenses. Unallocated corporate expenses include the portion of corporate costs not
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We prioritize cash flow generation through our commitment to operational excellence, efficient balance sheet management and continuous cost reduction efforts. We consistently assess various capital deployment options, considering both our long-term outlook and the evolving market conditions, recognizing the importance of adaptability as market dynamics change over time.
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We prioritize cash flow generation through our commitment to operational excellence, efficient balance sheet
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Our primary capital deployment priorities involve a focus on funding the business, debt repayment to be achieved through the prioritization of capital allocation, potentially accelerated with proceeds from non-core asset divestitures, and returning cash to our shareholders through dividends and share repurchases.
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Our primary capital deployment priorities involve a focus on funding the business, including investing intraining,
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As of December 29, 2023, we had cash and cash equivalents of $560 million, of which $343 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. Additionally, we have two credit facilities and a commercial paper program. See the “Capital Structure and Resources” discussion below in this MD&A for further information about our credit facilities and CP Program.
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As of January 3, 2025, we had cash and cash equivalents of$615 million, of which$300 million was held by our
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On July 28, 2023, we borrowed $2.1 billion under the 2023 Credit Agreement and used the proceeds together with proceeds from the AJRD Notes to fund the acquisition of AJRD and to pay related fees and expenses. All borrowings under the 2023 Credit Agreement were repaid with proceeds of commercial paper issued during fiscal 2023. At December 29, 2023, we had no outstanding borrowings under the 2023 Credit Agreement, had available borrowing capacity of $800 million, net of outstanding CP Program borrowings, and were in compliance with all covenants under the 2023 Credit Agreement.
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borrowing capacity of$2,985 million, net of outstanding borrowings under our CP Program, and were in compliance
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On January 26, 2024, we replaced the 2023 Credit Agreement with a new $1.5 billion, 364-day senior unsecured revolving credit facility maturing no later than January 24, 2025.
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2024 Credit Facility. On January 26, 2024, we established a new$1.5 billion,364-day senior unsecured
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compared tofiscal 2022 can be found in Part II. Item 7. Management's Discussion and Analysis of Financial
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Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended
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December 29, 2023 (our “Fiscal 2023 Form 10-K”). This MD&A is provided as a supplement to, should be read in
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conjunction with and is qualified in its entirety by reference to, our Consolidated Financial Statements and
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accompanying Notes appearing elsewhere in this Report. Except for the historical information contained herein, the
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discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results
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could differ materially from those discussed herein. Factors that could cause or contribute to such differences
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include, but are not limited to, those discussed in Part I. Item 1A. Risk Factors of this Report. For additional
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end-to-end technology solutions connecting the space, air, land, sea and cyber domains in the interest of global
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security. We support government customers in more than 100 countries, with our largest customers being various
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departments and agencies of the U.S. Government, their prime contractors and international allies. Our products and
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services have defense and civil government applications, as well as commercial applications. As of January 3, 2025,
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Segments in the Notes for further information regarding our business segments.
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military sales funded through the U.S. Government, whether directly or through prime contractors, was 76%,76%
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global conflicts and geopolitical tensions, and changes to U.S. Government or international spending priorities have
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and could in the future impact our business.
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International Business,” “Item 1A. Risk Factors” and “Item 3. Legal Proceedings” of this Report.
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continue to impact our future results. The ongoing uncertainty relates to the impacts of inflation, interest rates and
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ongoing federal deficits, which could raise the cost of borrowing for the federal government impacting U.S.
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Government spending priorities and the demand for our products. For a discussion of inflation-related risks, see
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segments, driving operational efficiency and competitiveness for the enterprise. With this program we are investing
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in enterprise tools and optimized, revamped processes to unlock further opportunities for margin expansion and
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create additional value for our shareholders.
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consistent with profitable growth opportunities, and sustain our culture of innovation, while delivering on our
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commitments to investors, our customers and on every contract we are awarded. We intend to accomplish this by:
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below in the “Operations Review” and “Liquidity and Capital Resources” sections of this MD&A:
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Accepted Accounting Principles (“GAAP”), to assess the success of our business and our ability to create
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shareholder value. We believe these measures are balanced among long-term and short-term performance, growth
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and innovation. We also use some of these and other performance metrics for executive compensation purposes.
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during fiscal 2024 and 2023, we completed certain business divestitures. There was no significant revenue
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Gross margin as a percentage of revenue remained flat compared tofiscal 2023. For discussion of operating income
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by segment see “Business Segment Results of Operations” below in this MD&A for further information.
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consulting, workforce optimization and incremental ITexpenses for implementation of new systems.
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discussion below in this MD&A and Note 8: Debt and Credit Arrangements in the Notes for further information.
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See Note 7: Income Taxes in the Notes for further information.
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cyber; airborne combat systems, and mission networks for air traffic management operations. See “Item 1. Business”
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of this Report for a description of the sectors in SAS.
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communications; networks; sensors; aviation products; and pilot training operations. See “Item 1. Business” of this
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Report for a description of the sectors in IMS.
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communications; integrated vision solutions; and public safety radios, system applications and equipment. See
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