L3HARRIS TECHNOLOGIES, INC. /DE/

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any one of which could cause our actual results to vary materially from recent results or our anticipated future

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Our business, financial condition, results of operations, cash flows and equity are subject to, and could be materially adversely affected by, various risks and uncertainties, including, without limitation, those set forth below, any one of which could cause our actual results to vary materially from recent results or our anticipated future results.

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We depend on winning business in competitive markets from U.S. Government customers for a significant

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We depend on winning profitable business in competitive markets from U.S. Government customers for a significant portion of our revenue. We are highly dependent on revenue from U.S. Government customers, primarily defense-related programs with the DoW and other government agencies.

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The market for sales to U.S. Government customers is highly competitive and the U.S. Government may choose

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The market for sales to U.S. Government customers is highly competitive and the U.S. Government may choose to use other contractors as part of competitive bidding processes or otherwise. The U.S. Government has increasingly relied on certain types of contracts that are subject to multiple competitive bidding processes, including multi-vendor indefinite-delivery, indefinite-quantity (“IDIQ”), government-wide acquisition contracts, General

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Services Administration Schedules and other multi-award contracts, which has resulted in greater competition and

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Services Administration Schedules and other multi-award contracts, which has resulted in greater competition and increased pricing pressure. The DoW’s current procurement reform initiative, including the increased use of other transaction authority (“OTA”) agreements, could reduce barriers to entry and result in even greater competition and increased pricing pressure. OTAs are not subject to many traditional procurement laws, including the Federal Acquisition Regulation (“FAR”), and in some instances, an OTA award may require that a significant part of the work be carried out by a non-traditional defense contractor or that a portion of the prototype project's costs be covered by non-governmental sources. Some of our competitors, including non-traditional new entrants to defense-related programs, have greater financial resources than we do and may have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas. We may not be able to continue to win competitively awarded contracts or to obtain task orders under multi-award contracts, especially with increased competition. We may choose not to bid in certain competitive bidding processes, which would result in the potential loss of opportunities, or we may choose to partner with competitors, which could expose our business to additional factors beyond our control. Additionally, bid protests from unsuccessful bidders can result in significant expense or delay, contract modification or contract rescission as a result of our competitors protesting or challenging contracts awarded to us.

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A reduction in U.S. Government funding or a change in U.S. Government spending priorities could have an

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A reduction in U.S. Government funding or a change in U.S. Government spending priorities could have an adverse impact on our business, financial condition, results of operations, cash flows and equity. Our U.S. Government programs must compete with programs managed by other government contractors and with other policy imperatives for consideration for limited resources and for uncertain levels of funding during the budget and appropriations process. Although multi-year contracts may be authorized and appropriated in connection with major procurements, Congress generally appropriates funds on a U.S. Government fiscal year (“GFY”) basis. Procurement funds are typically disbursed over the course of one to three years. Consequently, programs often initially receive only partial funding, and additional funds are obligated only as Congress authorizes further appropriations.

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We cannot predict the extent to which total funding and/or funding for individual programs will be changed as

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We cannot predict the extent to which total funding and/or funding for individual programs will be changed as part of the annual appropriations process ultimately approved by Congress and the President or in separate supplemental appropriations or continuing resolutions, as applicable. Budget and appropriations decisions made by the U.S. Government are outside of our control and may have long-term consequences for our business. U.S. Government spending priorities and levels remain uncertain and difficult to predict. This uncertainty could be exacerbated by procurement reform initiatives that could result in more frequent changes to program funding, scope, or priorities, increasing the risk of contract modifications, terminations, or delays, and making it more difficult to forecast revenue and resource needs. A change in U.S. Government spending priorities or an increase in non-procurement spending at the expense of our programs, or a reduction in total U.S. Government spending on an absolute or inflation-adjusted basis, could have material adverse consequences on our current or future business.

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operations, financial condition and cash flow. Any inability of the U.S. Government to complete its budget process

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Any inability of the U.S. Government to complete its budget process for any GFY and resulting operation on funding levels equivalent to its prior fiscal year pursuant to a Continuing Resolution (“CR”) or shut down, also could have material adverse consequences on our current or future business. For more information see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - U.S. and International Budget Environment” of this Report.

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Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-type and

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Our results of operations and cash flows are substantially affected by our contract mix. Fixed-price contracts, particularly for development programs, could subject us to losses from cost overruns or inflation. In fiscal 2025, 75% of our revenue was derived from fixed-price contracts that allow us to benefit from cost savings, but subject us to the risk of potential cost overruns, including due to greater than anticipated or a sustained period of increased inflation or unexpected delays because we assume all of the cost burden. If our initial estimates are incorrect, we can lose money (or make more or less money than estimated) on these contracts. Fixed-price U.S. Government contracts can expose us to potentially large losses because the U.S. Government can hold us responsible for completing a project or, in limited circumstances, paying the entire cost of its replacement by another provider.

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Contracts for development programs include complex design and technical requirements and are generally

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Contracts for development programs include complex design and technical requirements and are generally contracted on a cost-type basis, however, some existing development programs are contracted on a fixed-price basis or include cost-type contracting for the development phase with fixed-price production options. Because many of these contracts involve new technologies and applications and can last for years, unforeseen events, such as technological difficulties, increases in the price of materials, a significant increase in or a sustained period of increased inflation, problems with our suppliers, labor market conditions and cost overruns, can result in less favorable economics or even losses over time (which, especially in the case of sharp and significant sustained inflation, could happen quickly and have long lasting impacts). Furthermore, if we do not meet contract deadlines or specifications, we may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages or suffer losses if the customer exercises its right to terminate. Some of our contracts have provisions relating to cost controls and audit rights, and if we fail to meet the terms specified in those contracts, we may not realize their full benefits. Cost overruns would adversely impact our results of operations, which are dependent on our ability to maximize our earnings from our contracts, and the potential risk would be greater if our contracts shifted toward a greater percentage of fixed-price contracts, particularly firm fixed-price contracts, as opposed to cost-type and time-and-material contracts.

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To the extent feasible, we have consistently followed the practice of contractually adjusting our prices to reflect

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To the extent feasible, we have consistently followed the practice of contractually adjusting our prices to reflect the impact of inflation on salaries and fringe benefits for employees and the cost of purchased materials and services and in some cases seeking the inclusion of adjustment clauses to incorporate certain cost adjustments in fixed-price contracts for unexpected inflation. However, we may not be successful in accurately accounting for all increased costs, and our fixed-price contracts could subject us to losses in the event of cost overruns or a significant increase in or a sustained period of increased inflation if we are unable to account for and receive cost adjustments in our fixed-price contracts.

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Any or all of the foregoing could have a negative impact on our business, financial condition, results of

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Any or all of the foregoing could have a negative impact on our business, financial condition, results of operations, cash flows and equity.

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The application or impact of regulations, unilateral government action, termination or negative audit findings

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The application or impact of negative audit findings, contract termination, unilateral government action, or regulation on our government contracts could have an adverse impact on our business, financial condition, results of operations, cash flows and equity. U.S. Government contracts are generally subject to U.S. Government oversight audits, which could result in adjustments to our contract costs. Any costs found to be improperly allocated to a specific contract will not be reimbursed, and such costs already reimbursed must be refunded. We have recorded contract revenue based on costs we expect to realize upon final audit. However, we do not know the outcome of any future audits and adjustments, and we may be required to materially reduce our revenue or profits upon completion and final negotiation of audits. Negative audit findings could also result in termination of a contract, forfeiture of profits, suspension of payments, fines or suspension or debarment from U.S. Government contracting or subcontracting for a period of time.

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In addition, U.S. Government contracts generally contain provisions permitting termination, in whole or in part,

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In addition, U.S. Government contracts generally contain provisions permitting termination, in whole or in part, without prior notice at the U.S. Government’s convenience upon payment only for work done and commitments made at the time of termination. For some contracts, we are a subcontractor and the U.S. Government could terminate the prime contractor for convenience without regard for our performance as a subcontractor. We may be unable to secure new contracts to offset revenue or contractual backlog lost as a result of any termination of our U.S. Government contracts.

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From time to time, we may begin performance of a U.S. Government contract under an undefinitized contract

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From time to time, we may begin performance of a U.S. Government contract under an undefinitized contract action with a not-to-exceed price before the terms, specifications or price are agreed to between the parties. In these arrangements, the U.S. Government has the ability to unilaterally definitize the contract if a mutual agreement regarding terms, specifications and price cannot be reached. These uncertainties or loss of negotiating leverage associated with long delays could have a material adverse impact on our business, financial condition, results of operations, cash flows and equity.

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performance and compliance costs. These costs might increase in the future, thereby reducing our margins, which

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Our business with government customers is also subject to a variety of procurement regulations and a variety of socioeconomic, environmental and other requirements that increase our operational and compliance costs, including governmental action through Executive Orders. These costs might increase in the future, particularly for certain international markets and customers, thereby reducing our margins.

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Failure to comply with applicable regulations and requirements could lead to fines, penalties, repayments or

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Failure to comply with applicable regulations and requirements could lead to fines, penalties, repayments or compensatory or treble damages, or suspension or debarment from U.S. Government contracting or subcontracting for a period of time. The termination of a U.S. Government contract or relationship in particular as a result of any of these acts would have an adverse impact on our operations and could have an adverse effect on our standing and eligibility for future U.S. Government contracts.

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payment under our U.S. Government contracts, the loss of one or more large contracts could have an adverse impact

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Because a significant portion of our revenue is dependent on our performance and payment under our government contracts, the loss of one or more large contracts could have a significant adverse impact on our business, financial condition, results of operations, cash flows and equity.

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We participate in markets that are often subject to uncertain economic conditions, which makes it difficult to

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We participate in markets that are often subject to uncertain economic conditions, which makes it difficult to estimate growth in our markets and, as a result, future income and expenditures. We participate in U.S. and international markets that are subject to uncertain economic conditions which could experience increasing price sensitivity due to economic conditions or seek solutions which could adversely affect demand for our products, systems, services or technologies. As a result of that uncertainty, it is difficult to develop accurate estimates of the level of growth in the markets we serve. Because those estimates underpin all components of our budgeting and forecasting, our estimates or guidance for future revenue, income and expenditures may be inaccurate, and we may make significant investments and expenditures but never realize the anticipated benefits.

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We cannot predict the consequences of future geo-political events, but they may adversely affect the markets in

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We cannot predict the consequences of future geo-political events, but they may adversely affect the markets in which we operate, our ability to insure against risks, our operations or our profitability. Ongoing instability and current conflicts in global markets, including in Ukraine and Eastern Europe, the Middle East and Asia, and the potential for other conflicts and future terrorist activities and geo-political events throughout the world have created and may continue to create economic and political uncertainties and impacts that could have a material adverse effect on our business, operations and profitability. Geo-political events and changes in foreign policy could cause isolationism or increased implementation of local solutions by international customers, which could adversely affect demand for our products, systems, services or technologies. Uncertainty in financial and insurance markets may significantly increase the political, economic and social instability in the geographic areas in which we operate which could further impact demand.

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Unfavorable credit conditions in financial markets outside of the U.S. could adversely affect the ability of our

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Unfavorable credit conditions in financial markets outside of the U.S. or changes in U.S. aid or financial support could adversely affect the ability of our international customers and suppliers to obtain financing and could result in a decrease in or cancellation of orders for our products and services or impact the ability of our customers to make payments. These matters also may cause us to experience increased costs, such as for insurance coverage and performance bonds (or for them to be unavailable altogether), as well as difficulty with financing our operating, investing or financing (or refinancing) activities.

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We are subject to government investigations, which could have a material adverse effect on our business,

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We are subject to government investigations, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and equity. U.S. Government contractors are subject to extensive legal and regulatory requirements, including the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”), and U.S. Foreign Corrupt Practices Act (“FCPA”). From time to time agencies of the U.S. Government investigate whether we have been and are operating in accordance with these and/or applicable contractual requirements. Under U.S. Government regulations, an indictment of L3Harris by a federal grand jury, or an administrative finding against us as to our present responsibility to be a U.S. Government contractor or subcontractor, could result in us being suspended for a period of time from eligibility for awards of new government contracts or task orders or in a loss of export privileges, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and equity. A conviction, or an administrative finding against us that satisfies the requisite level of seriousness, could result in civil and/or criminal penalties, including fines, seizure of our products and debarment from contracting with the U.S. Government for a specific term, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and equity.

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We derive a significant portion of our revenue from international operations and are subject to the risks of doing

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We derive a significant portion of our revenue from international operations and are subject to the risks of doing business internationally. We are dependent on sales to customers outside the U.S. We expect that international revenue will continue to account for a significant portion of our total revenue. Also, a portion of our international revenue is from, and a portion of our business activity is being conducted with or in, less-developed countries and sometimes countries with unstable governments, or in areas of military conflict or at military installations. Other risks of doing business internationally include:

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•Laws, regulations and policies of foreign governments relating to investments and operations;

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•Laws, regulations and policies of foreign governments relating to investments and operations, including laws restricting our ability to transact in certain countries and/or markets;

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•Changes in regulatory requirements, including business or operating license requirements, currency

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•Changes in regulatory requirements, including business or operating license requirements, currency exchange controls or embargoes;

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•Contractual obligations to non-U.S. customers that may include specific in-country purchases, investments,

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•Contractual obligations to non-U.S. customers that may include specific in-country purchases, investments, manufacturing agreements or financial or other support obligations, known as offset obligations, that may extend for years, require teaming with local companies and result in significant penalties if not satisfied;

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•Difficulties of managing a geographically dispersed organization and culturally diverse workforces, including

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•Difficulties of managing a geographically dispersed organization and culturally diverse workforces, including compliance with local laws and practices;

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•Fluctuations of currency, currency revaluations, difficulties with repatriating cash generated or held abroad

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•Fluctuations of currency, currency revaluations, difficulties with repatriating cash generated or held abroad in a tax-efficient manner and changes in tax laws;

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•Uncertainties as to local laws and enforcement of contract and intellectual property rights and occasional

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•Uncertainties as to local laws and enforcement of contract and intellectual property rights and occasional requirements for onerous contract terms;

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•Changes in government, economic and political policies, political or civil unrest, acts of terrorism, threats of

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•Changes in government, economic and political policies, political or civil unrest, acts of terrorism, threats of international boycotts, U.S. anti-boycott legislation or sanctions against U.S. defense companies; and

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•Increased risk of an incident resulting in damage or destruction to our facilities or products or resulting in

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•Increased risk of an incident resulting in damage or destruction to our facilities or products or resulting in injury or loss of life to our employees, subcontractors or other third parties.

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We depend on our subcontractors andsuppliers, and failures in or disruptions to our supply chain could cause

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We depend on our subcontractors and suppliers, and failures in or disruptions to our supply chain could cause our products and or services to be produced or delivered in an untimely or unsatisfactory manner. Our ability to manufacture and deliver products and services to our customers requires our U.S. and non-U.S. subcontractors and suppliers to provide a variety of materials, components, subsystems and services. In some instances, we depend upon a single supplier for certain components, which adds risk because that supplier may at times be unable to meet our needs and because we may have limited negotiating leverage with sole-source suppliers. Identifying and qualifying dual and second-source suppliers can be difficult, time-consuming and may result in increased costs. Any inability to timely develop cost-effective alternative sources of supply could materially impact our ability to manufacture and deliver products and services to our customers.

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In addition, we are required to procure certain materials and components, including certain microelectronic

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In addition, we are required to procure certain materials and components, including microelectronic components, from U.S. Government-approved supply sources. Heightened regulatory requirements that may apply to these sources can further limit the subcontractors and suppliers we may utilize. Legislation, regulatory changes or other governmental actions, including product certification or stewardship requirements, sourcing restrictions, tariffs, export controls, embargoes, product authenticity, cybersecurity regulation, and environmental standards may all impact our subcontractors and suppliers.

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our direct control, which may impact their ability to deliver the materials, components, subsystems and services we

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From time to time, our subcontractors and suppliers experience financial and operational difficulties outside of our direct control, which may impact their ability to deliver the materials, components, subsystems and services we need.

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In recent years, global supply chains, including ours, have experienced significant disruption from material

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In recent years, global supply chains, including ours, have experienced significant disruption from material availability and supplier performance, as well as extended lead times, pricing volatility, inflationary pressures and labor issues. We and our subcontractors and suppliers have also experienced difficulties in the timely procurement of necessary materials and components, including microelectronics. Current geopolitical conditions, including sanctions and other trade restrictive activities and strained inter-country relations, have contributed to issues procuring necessary materials and components. For example, some materials and components in our supply chain have previously been sourced from areas now under sanctions or other trade restrictions, such as specialty metals from Russia and certain equipment from China, or are currently sourced from areas which are at risk of sanctions or other trade restrictive actions, not just by the United States but by other nations or groups, such as the European Union.

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While we continuously work to implement supply chain resiliency initiatives, we cannot guarantee the success of

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While we continuously work to implement supply chain resiliency initiatives, we cannot guarantee the success of any of these efforts. Material supply disruptions may still occur in the future. Any supply chain disruption could result in delayed deliveries, increased costs, loss of customers, contractual penalties or damages, claims or litigation, regulatory investigations or actions, loss of future business opportunities, or reputational harm, any of which could materially and adversely affect our business, operational results, financial condition and cash flow.

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business and our business, financial condition, results of operations, cash flows and equity.

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Changes in trade policies, including tariffs, could cause adverse impacts to our business. Beginning in first quarter 2025, we observed a significant shift in U.S. trade policy, with increased tariffs and the imposition of new tariffs that could impact our supply chain and our business. While certain of such tariffs have been paused, ultimately trade policy decisions are outside of our control and may have consequences for our business. Changes in trade policies, such as new tariffs or increases in tariffs, or reactionary measures including retaliatory tariffs, legal challenges, or currency manipulation, could adversely impact us.

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We must attract and retain key employees, and any failure to do so could harm us. Our future success depends

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We must attract and retain key employees, and any failure to do so could harm us. Our future success depends to a significant degree upon the continued contributions of our management and our ability to attract and retain highly-qualified management and technical personnel, including engineers and employees who have, or can obtain, U.S. Government security clearances, particularly clearances of top secret and above. To the extent that the demand for qualified personnel exceeds supply in certain areas, we could experience higher labor, recruiting or training costs in order to attract and retain such employees. Failure to attract and retain such personnel would damage our future prospects and could adversely affect our ability to succeed in our human capital goals and priorities, as well as negatively impact our business and operating results.

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We could be negatively impacted by a security breach of our Information Technology (“IT”)networks and

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We could be negatively impacted by a security breach of our Information Technology (“IT”) networks and related systems. We face the risk of a security breach, whether through cyber-attack on our IT infrastructure, insider threat, or threats to the physical security of our facilities and employees or other significant disruption of our IT networks and related systems or those of our suppliers or subcontractors. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, is persistent. The volume, intensity and sophistication of threats from around the world remains elevated. These risks may increase as AI capabilities improve.

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As a government contractor with access to national security or other sensitive government information, we face

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As a government contractor with access to national security or other sensitive government information, we face a heightened risk of a security breach or disruption from threats to gain unauthorized access to our and our customers’ proprietary information on our IT networks and related systems, our classified networks, and to the IT networks and related systems that we operate, maintain and secure for certain of our customers. We have implemented various measures to manage the risk of a security breach or disruption. See “Item 1C. Cybersecurity" in this Report for further discussion of our risk management and strategy related to cybersecurity threats.

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Our efforts and measures have not been entirely effective in the case of every cyber security incident, but no

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Our efforts and measures have not been entirely effective in the case of every cyber security incident, but no incident has had a material negative impact on us to date. Even the most well-protected information, networks, systems and facilities remain potentially vulnerable because attempted security breaches, particularly cyber-attacks and cyber intrusions, or disruptions will occur in the future, and because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. In some cases, the resources of foreign governments may be behind such attacks due to the nature of our business and the industries in which we operate. Accordingly, we may be unable to anticipate these techniques or to implement adequate security controls or other preventative measures and future cyber security incidents may have a material negative impact on us. A security breach or other significant disruption involving these types of information and IT networks and related systems could: