Part I. Financial Information This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. Financial Statements (Unaudited)](index=4&type=section&id=ITEM%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for L3Harris Technologies, Inc., including the statements of operations, comprehensive income, balance sheet, cash flows, and equity for the second quarter and year-to-date periods of 2025 and 2024, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items [Condensed Consolidated Statement of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Operations) This statement provides a summary of the company's revenues, expenses, and net income for the reported periods | (In millions, except per share amounts) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :------------------------------------ | :------------------ | :------------------ | :---------------- | :---------------- | | Revenue | $5,426 | $5,299 | $10,558 | $10,510 | | Operating income | $571 | $476 | $1,096 | $854 | | Net income attributable to L3Harris | $458 | $366 | $844 | $649 | | Basic EPS | $2.45 | $1.93 | $4.50 | $3.42 | | Diluted EPS | $2.44 | $1.92 | $4.48 | $3.40 | - Revenue **increased by** **2.4%** in Q2 2025 (**$5,426M** vs **$5,299M**) and **0.5%** YTD 2025 (**$10,558M** vs **$10,510M**) compared to the prior year[15](index=15&type=chunk) - Operating income saw a **significant increase** of **19.9%** in Q2 2025 (**$571M** vs **$476M**) and **28.3%** YTD 2025 (**$1,096M** vs **$854M**)[15](index=15&type=chunk) - Diluted EPS **grew by** **27.1%** in Q2 2025 (**$2.44** vs **$1.92**) and **31.8%** YTD 2025 (**$4.48** vs **$3.40**)[15](index=15&type=chunk) [Condensed Consolidated Statement of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) This statement details the company's net income and other comprehensive income components, leading to total comprehensive income | (In millions) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :------------ | :------------------ | :------------------ | :---------------- | :---------------- | | Net income | $458 | $367 | $844 | $652 | | Other comprehensive income (loss) | $45 | $0 | $4 | $(36) | | Total comprehensive income attributable to L3Harris | $503 | $366 | $848 | $613 | - **Total comprehensive income attributable to L3Harris increased by** **37.4%** in Q2 2025 (**$503M** vs **$366M**) and **38.3%** YTD 2025 (**$848M** vs **$613M**)[18](index=18&type=chunk) - **Other comprehensive income (loss) significantly improved** from a loss of **$36M** YTD 2024 to an income of **$4M** YTD 2025, **primarily due to** foreign currency translation and other, net[18](index=18&type=chunk) [Condensed Consolidated Balance Sheet](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) This statement presents the company's financial position, including assets, liabilities, and equity, at specific points in time | (In millions, except shares) | June 27, 2025 | January 3, 2025 | | :--------------------------- | :------------ | :-------------- | | Total assets | $41,240 | $42,001 | | Total liabilities | $21,962 | $22,422 | | Total equity | $19,278 | $19,579 | | Cash and cash equivalents | $482 | $615 | | Receivables, net | $1,437 | $1,072 | | Contract assets | $3,857 | $3,230 | | Assets of business held for sale | $0 | $1,131 | | Short-term debt | $985 | $515 | | Current portion of long-term debt, net | $141 | $640 | | Long-term debt, net | $10,976 | $11,081 | - **Total assets decreased by** **$761 million** from January 3, 2025, to June 27, 2025, largely due to the divestiture of assets held for sale[21](index=21&type=chunk) - **Cash and cash equivalents decreased by** **$133 million**, while receivables and contract assets **increased by** **$365 million** and **$627 million**, respectively[21](index=21&type=chunk) - Short-term debt **increased by** **$470 million**, and the current portion of long-term debt **decreased by** **$499 million**, reflecting debt management activities[21](index=21&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) This statement outlines the cash inflows and outflows from operating, investing, and financing activities for the reported periods | (In millions) | Year to Date 2025 | Year to Date 2024 | | :------------ | :---------------- | :---------------- | | Operating Activities | $598 | $650 | | Investing Activities | $666 | $(58) | | Financing Activities | $(1,415) | $(600) | | Net decrease in cash and cash equivalents | $(133) | $(13) | | Cash and cash equivalents, end of period | $482 | $547 | - **Net cash from operating activities decreased by** **$52 million** YTD 2025 compared to YTD 2024, **mainly due to** **higher working capital usage** and **legal settlement costs**[23](index=23&type=chunk)[175](index=175&type=chunk) - **Net cash from investing activities significantly improved by** **$724 million**, shifting from a net outflow of **$58 million** YTD 2024 to a net inflow of **$666 million** YTD 2025, **driven by proceeds from business sales**[23](index=23&type=chunk)[176](index=176&type=chunk) - **Net cash used in financing activities increased by** **$815 million** YTD 2025, **mainly due to** **higher common stock repurchases** and **increased long-term debt repayments**[23](index=23&type=chunk)[177](index=177&type=chunk) [Condensed Consolidated Statement of Equity](index=10&type=section&id=Condensed%20Consolidated%20Statement%20of%20Equity) This statement details changes in the company's equity, including retained earnings, other comprehensive income, and share transactions | (In millions, except per share amounts) | Year to Date 2025 | Year to Date 2024 | | :------------------------------------ | :---------------- | :---------------- | | Total Equity (Ending balance) | $19,278 | $18,904 |\n| Retained Earnings (Ending balance) | $3,970 | $3,368 |\n| Cash dividends per share | $2.40 | $2.32 | - **Total equity increased by** **$374 million** YTD 2025 compared to YTD 2024, reaching **$19,278 million**[25](index=25&type=chunk) - Retained earnings **increased by** **$602 million** YTD 2025, reflecting net income generation partially offset by cash dividends and stock repurchases[25](index=25&type=chunk) - Cash dividends per share **increased to** **$2.40** YTD 2025 from **$2.32** YTD 2024, marking the **24th consecutive annual dividend increase**[25](index=25&type=chunk)[184](index=184&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [NOTE A: BASIS OF PRESENTATION](index=11&type=section&id=NOTE%20A%3A%20BASIS%20OF%20PRESENTATION) This note describes the accounting principles, fiscal periods, and segment reporting structure used in preparing the financial statements - The financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules, and reflect all necessary adjustments for fair presentation[28](index=28&type=chunk)[29](index=29&type=chunk) - The company's fiscal year is 52- or 53-week period ending on the Friday nearest December 31. Second quarter 2025 and 2024 both included 13 weeks, while year-to-date 2025 included 25 weeks and 2024 included 26 weeks[30](index=30&type=chunk) - L3Harris operates in four reportable segments: Communication Systems (CS), Integrated Mission Systems (IMS), Space & Airborne Systems (SAS), and Aerojet Rocketdyne (AR)[31](index=31&type=chunk) - Effective Q1 2025, the Fuzing and Ordnance (FOS) business was realigned from IMS to AR, with historical results adjusted for comparability[32](index=32&type=chunk)[33](index=33&type=chunk) [NOTE B: EARNINGS PER SHARE ("EPS")](index=12&type=section&id=NOTE%20B%3A%20EARNINGS%20PER%20SHARE%20(%22EPS%22)) This note details the calculation of basic and diluted earnings per share, including weighted-average shares outstanding | (In millions) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :------------ | :------------------ | :------------------ | :---------------- | :---------------- | | Basic weighted-average common shares outstanding | 187.0 | 189.7 | 187.7 | 189.8 | | Diluted weighted-average common shares outstanding | 187.8 | 190.6 | 188.5 | 190.8 | - Diluted EPS calculation excludes **1.0 million** and **2.0 million** weighted-average share-based awards for second quarter and year-to-date 2025, respectively, due to their antidilutive impact[38](index=38&type=chunk) [NOTE C: CONTRACT ASSETS AND CONTRACT LIABILITIES](index=12&type=section&id=NOTE%20C%3A%20CONTRACT%20ASSETS%20AND%20CONTRACT%20LIABILITIES) This note provides information on unbilled revenue (contract assets) and deferred revenue (contract liabilities) from customer contracts - Contract assets represent unbilled amounts where revenue recognized exceeds amounts billed, **primarily from** percentage of completion contracts[39](index=39&type=chunk) | (In millions) | June 27, 2025 | January 3, 2025 | | :------------ | :------------ | :-------------- | | Contract assets | $3,857 | $3,230 | | Contract liabilities, current | $(2,317) | $(2,142) | | Contract liabilities, non-current | $(103) | $(91) | | Net contract assets | $1,437 | $997 | - **Net contract assets increased by** **$440 million** from January 3, 2025, to June 27, 2025[40](index=40&type=chunk) - Revenue recognized from contract liabilities outstanding at the prior fiscal year-end was **$517 million** for Q2 2025 and **$1,215 million** YTD 2025, an increase from **$353 million** and **$1,048 million** in the respective 2024 periods[41](index=41&type=chunk) [NOTE D: INVENTORIES, NET](index=13&type=section&id=NOTE%20D%3A%20INVENTORIES%2C%20NET) This note presents the breakdown of inventories, including finished products, work in process, and materials and supplies | (In millions) | June 27, 2025 | January 3, 2025 | | :------------ | :------------ | :-------------- |\n| Finished products | $258 | $211 |\n| Work in process | $323 | $332 |\n| Materials and supplies | $677 | $787 |\n| Inventories, net | $1,258 | $1,330 | - Net inventories **decreased by** **$72 million** from January 3, 2025, to June 27, 2025, **primarily due to** a reduction in materials and supplies[43](index=43&type=chunk) [NOTE E: GOODWILL AND INTANGIBLE ASSETS](index=13&type=section&id=NOTE%20E%3A%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details the company's goodwill and intangible assets, including changes due to currency translation and amortization | (In millions) | CS | IMS | SAS | AR | Total | | :------------ | :---- | :---- | :---- | :---- | :------ | | Balance as of January 3, 2025 | $4,938 | $6,422 | $5,999 | $2,966 | $20,325 | | Currency translation adjustments | $1 | $20 | $26 | $0 | $47 | | Balance as of June 27, 2025 | $4,939 | $6,442 | $6,025 | $2,966 | $20,372 | - **Total goodwill increased by** **$47 million** due to currency translation adjustments, reaching **$20,372 million** as of June 27, 2025[44](index=44&type=chunk) - IMS accumulated goodwill impairment losses **decreased by** **$759 million** in Q1 2025 due to the **CAS disposal group divestiture**[45](index=45&type=chunk) | (In millions) | June 27, 2025 Net Carrying Amount | January 3, 2025 Net Carrying Amount | | :------------ | :-------------------------------- | :---------------------------------- | | Customer relationships | $5,009 | $5,347 | | Developed technologies | $335 | $367 | | Trade names and other | $114 | $122 | | Indefinite-lived Trade name | $1,803 | $1,803 | | Intangible assets, net | $7,261 | $7,639 | - Net intangible assets **decreased by** **$378 million** from January 3, 2025, to June 27, 2025, **primarily in** customer relationships[46](index=46&type=chunk) - Amortization expense for intangible assets was **$193 million** for Q2 2025 and **$387 million** YTD 2025, down from **$215 million** and **$432 million** in the respective 2024 periods[46](index=46&type=chunk) [NOTE F: INCOME TAXES](index=14&type=section&id=NOTE%20F%3A%20INCOME%20TAXES) This note explains the company's income tax expense and effective tax rates, highlighting key factors influencing tax provisions | (In millions) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :------------ | :------------------ | :------------------ | :---------------- | :---------------- |\n| Income tax expense | $(66) | $(23) | $(139) | $(28) |\n| Effective tax rate (\"ETR\") | 12.6% | 5.9% | 14.1% | 4.1% | - **The ETR increased significantly** in Q2 2025 to **12.6%** from **5.9%** in Q2 2024, and YTD 2025 to **14.1%** from **4.1%** in YTD 2024[49](index=49&type=chunk) - Q2 2025 ETR **benefited from** **audit uncertainty resolution**, **R&D credits**, and **FDII deductions**, but was partially offset by a **state legislative change** requiring a **valuation allowance** on R&D credit carryforwards and the **CAS disposal group divestiture**[50](index=50&type=chunk) - YTD 2025 ETR was **unfavorably impacted by** the **CAS disposal group divestiture** and the **state legislative change**, while YTD 2024 ETR **benefited from** **excess tax benefits** from **equity-based compensation**[51](index=51&type=chunk) [NOTE G: DEBT AND CREDIT ARRANGEMENTS](index=14&type=section&id=NOTE%20G%3A%20DEBT%20AND%20CREDIT%20ARRANGEMENTS) This note provides details on the company's long-term debt, short-term debt, and available credit facilities | (In millions) | June 27, 2025 | January 3, 2025 | | :------------ | :------------ | :-------------- |\n| Long-term debt, net | $10,976 | $11,081 |\n| Short-term debt (CP Program) | $985 | $515 | - Long-term debt, net **decreased by** **$105 million** to **$10,976 million** as of June 27, 2025[52](index=52&type=chunk) - The company repaid **$600 million** of **3.832%** notes due April 27, 2025, using proceeds from **5.50%** notes issued in fiscal 2024[53](index=53&type=chunk) - **Outstanding notes under the Commercial Paper Program increased to** **$985 million** as of June 27, 2025, from **$515 million** as of January 3, 2025, with a weighted-average interest rate of **4.68%**[57](index=57&type=chunk)[58](index=58&type=chunk) - L3Harris established a **new $2.5 billion five-year revolving credit facility** and a **new $500 million 364-day revolving credit facility** in February 2025, replacing prior agreements[59](index=59&type=chunk)[61](index=61&type=chunk) - As of June 27, 2025, there were **no outstanding borrowings** under the new credit facilities, with **$2,015 million available borrowing capacity**[64](index=64&type=chunk) [NOTE H: RETIREMENT BENEFITS](index=16&type=section&id=NOTE%20H%3A%20RETIREMENT%20BENEFITS) This note outlines the financial impact of the company's defined benefit pension plans and other postretirement benefits | (In millions) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :------------ | :------------------ | :------------------ | :---------------- | :---------------- |\n| Net periodic benefit income | $(66) | $(71) | $(150) | $(143) |\n| Non-service cost net periodic benefit income | $(73) | $(81) | $(163) | $(161) | - Net periodic benefit income for defined benefit plans was **$(66) million** for Q2 2025 and **$(150) million** YTD 2025[65](index=65&type=chunk) - In Q1 2025, L3Harris **transferred** **$1.2 billion** of its Consolidated Pension Plan benefit obligation to an insurance provider through **nonparticipating single premium group annuity contracts**[66](index=66&type=chunk) [NOTE I: SHARE-BASED COMPENSATION](index=17&type=section&id=NOTE%20I%3A%20SHARE-BASED%20COMPENSATION) This note describes the company's share-based compensation plans, including stock options, RSUs, and PSUs granted | (In thousands, except per share/unit amounts) | Year to Date 2025 Shares or Units | Year to Date 2025 Weighted-Average Grant-Date Fair Value | Year to Date 2024 Shares or Units | Year to Date 2024 Weighted-Average Grant-Date Fair Value | | :-------------------------------------------- | :-------------------------------- | :------------------------------------------------------- | :-------------------------------- | :------------------------------------------------------- |\n| Stock option shares granted | 388 | $49.20 | 415 | $50.99 |\n| RSUs granted | 229 | $210.15 | 142 | $212.80 |\n| PSUs granted | 185 | $217.67 | 172 | $230.09 | - Share-based compensation expense was **$29 million** for Q2 2025 and **$48 million** YTD 2025, compared to **$27 million** and **$53 million** in the respective 2024 periods[70](index=70&type=chunk) - The **aggregate number of common stock shares issued** under L3Harris SIPs, **net of tax withholdings**, was **0.4 million** YTD 2025, down from **0.8 million** YTD 2024[70](index=70&type=chunk) [NOTE J: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=17&type=section&id=NOTE%20J%3A%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) This note details the components of accumulated other comprehensive income, including foreign currency translation and pension adjustments | (In millions) | Balance at January 3, 2025 | Other comprehensive income (loss) YTD 2025 | Balance at June 27, 2025 | | :------------ | :------------------------- | :----------------------------------------- | :----------------------- |\n| Foreign currency translation and other, net | $(331) | $82 | $(249) |\n| Pension and other postretirement benefits | $358 | $(78) | $280 |\n| Total accumulated other comprehensive income (loss) | $27 | $4 | $31 | - **Total accumulated other comprehensive income increased** from **$27 million** at January 3, 2025, to **$31 million** at June 27, 2025[71](index=71&type=chunk) - **Foreign currency translation and other, net, showed an improvement** from a loss of **$(331) million** to **$(249) million**, while **pension and other postretirement benefits decreased** from **$358 million** to **$280 million**[71](index=71&type=chunk) [NOTE K: FAIR VALUE MEASUREMENTS](index=18&type=section&id=NOTE%20K%3A%20FAIR%20VALUE%20MEASUREMENTS) This note explains the company's fair value measurements for financial instruments, categorized by a three-level hierarchy - **Fair value is measured using a three-level hierarchy**: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than **Level 1**), and **Level 3** (unobservable inputs)[73](index=73&type=chunk)[78](index=78&type=chunk) | (In millions) | June 27, 2025 Total | June 27, 2025 Level 1 | January 3, 2025 Total | January 3, 2025 Level 1 | | :------------ | :------------------ | :-------------------- | :-------------------- | :-------------------- |\n| Deferred compensation plan assets | $273 | $238 | $260 | $219 |\n| Deferred compensation plan liabilities | $378 | $11 | $367 | $10 | - **Deferred compensation plan assets increased to** **$273 million** as of June 27, 2025, with **$238 million** classified as **Level 1**[75](index=75&type=chunk) - **Deferred compensation plan liabilities increased to** **$378 million**, with **$11 million** classified as **Level 1**[75](index=75&type=chunk) [NOTE L: CHANGES IN ESTIMATES](index=19&type=section&id=NOTE%20L%3A%20CHANGES%20IN%20ESTIMATES) This note discusses the impact of changes in estimates, particularly for long-term contracts using the percentage of completion method - **Many contracts use the percentage of completion (POC) cost-to-cost method**, **requiring judgment in estimating total cost at completion and transaction price** due to long-term nature and potential risks[80](index=80&type=chunk) | (In millions, except per share amounts) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :------------------------------------ | :------------------ | :------------------ | :---------------- | :---------------- |\n| Operating income (net EAC adjustments) | $(20) | $0 | $(41) | $19 |\n| Net income (net EAC adjustments) | $(15) | $0 | $(31) | $15 |\n| Diluted EPS (net EAC adjustments) | $(0.08) | $0 | $(0.16) | $0.08 | - **Net EAC adjustments unfavorably impacted operating income by** **$20 million** in Q2 2025 and **$41 million** YTD 2025, compared to no impact in Q2 2024 and a favorable impact of **$19 million** YTD 2024[81](index=81&type=chunk) - **Revenue recognized from performance obligations satisfied in prior periods** was **$37 million** for Q2 2025 and **$74 million** YTD 2025[82](index=82&type=chunk) [NOTE M: BACKLOG](index=19&type=section&id=NOTE%20M%3A%20BACKLOG) This note provides information on the company's backlog, representing remaining performance obligations from customer contracts - **Backlog, representing remaining performance obligations, was** **$35.4 billion** as of June 27, 2025[84](index=84&type=chunk) - **Approximately** **45%** of the backlog is **expected to be recognized** as revenue **over the next twelve months**, and **70% over the next twenty-four months**[84](index=84&type=chunk) [NOTE N: DIVESTITURES](index=20&type=section&id=NOTE%20N%3A%20DIVESTITURES) This note details the company's divestiture activities, including the sale of the Commercial Aviation Solutions disposal group - On March 28, 2025, L3Harris **completed the sale of its Commercial Aviation Solutions (CAS) disposal group for** **$831 million** in cash proceeds, net of cash divested[85](index=85&type=chunk) - The **CAS disposal group divestiture** resulted in a **pre-tax loss of** **$17 million** in YTD 2025, **incremental to previously recorded losses**[87](index=87&type=chunk) | (In millions) | March 28, 2025 | | :------------ | :------------- |\n| Total assets divested | $1,229 |\n| Total liabilities divested | $252 |\n| Net assets divested | $977 | - The **divestiture included** **$535 million** in **goodwill**, with **$759 million** of **accumulated goodwill impairment losses reported** in the IMS segment[86](index=86&type=chunk) - The **Antenna disposal group from the SAS segment was divested** on May 31, 2024[89](index=89&type=chunk) [NOTE O: BUSINESS SEGMENT INFORMATION](index=21&type=section&id=NOTE%20O%3A%20BUSINESS%20SEGMENT%20INFORMATION) This note presents financial results and other key data for the company's four reportable business segments - **L3Harris reports financial results in four segments**: Communication Systems (CS), Integrated Mission Systems (IMS), Space & Airborne Systems (SAS), and Aerojet Rocketdyne (AR)[92](index=92&type=chunk) | (In millions) | Second Quarter 2025 Revenue | Second Quarter 2024 Revenue | Year to Date 2025 Revenue | Year to Date 2024 Revenue | | :------------ | :-------------------------- | :-------------------------- | :------------------------ | :------------------------ |\n| CS | $1,376 | $1,346 | $2,728 | $2,640 |\n| IMS | $1,622 | $1,671 | $3,214 | $3,298 |\n| SAS | $1,787 | $1,707 | $3,398 | $3,458 |\n| AR | $698 | $633 | $1,327 | $1,217 |\n| Total revenue | $5,426 | $5,299 | $10,558 | $10,510 | | (In millions) | Second Quarter 2025 Operating Income | Second Quarter 2024 Operating Income | Year to Date 2025 Operating Income | Year to Date 2024 Operating Income | | :------------ | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- |\n| CS | $336 | $329 | $681 | $639 |\n| IMS | $214 | $200 | $417 | $385 |\n| SAS | $220 | $215 | $396 | $431 |\n| AR | $93 | $81 | $169 | $158 |\n| Total operating income | $571 | $476 | $1,096 | $854 | - **Unallocated corporate expenses include amortization of intangibles**, **M&A expenses**, **divestiture losses**, **impairment**, **LHX NeXt implementation costs**, and **other corporate overhead**[96](index=96&type=chunk) - **LHX NeXt initiative, aimed at transforming functions and systems**, is **expected to continue into 2026** with **non-recurring costs for workforce optimization, IT expenses, and consulting**[97](index=97&type=chunk) | (In millions) | June 27, 2025 Total Assets | January 3, 2025 Total Assets | | :------------ | :------------------------- | :--------------------------- |\n| CS | $7,106 | $7,060 |\n| IMS | $9,667 | $10,389 |\n| SAS | $9,317 | $8,705 |\n| AR | $4,823 | $4,826 |\n| Corporate | $10,327 | $11,021 |\n| Total assets | $41,240 | $42,001 | - **Revenue disaggregation by customer relationship, contract type, and geographical region is provided** for all segments[101](index=101&type=chunk) [NOTE P: LEGAL PROCEEDINGS AND CONTINGENCIES](index=25&type=section&id=NOTE%20P%3A%20LEGAL%20PROCEEDINGS%20AND%20CONTINGENCIES) This note outlines the company's involvement in legal actions, claims, and environmental liabilities - L3Harris is **routinely involved in legal actions and claims**, **accruing for probable and estimable losses**. As of June 27, 2025, the **accrual for potential unfavorable resolutions was not material**[104](index=104&type=chunk) - The **estimated environmental liability was** **$648 million** as of June 27, 2025, with **$472 million considered probable of recovery from the U.S. Government**[106](index=106&type=chunk)[107](index=107&type=chunk) [NOTE Q: SUBSEQUENT EVENTS](index=25&type=section&id=NOTE%20Q%3A%20SUBSEQUENT%20EVENTS) This note discloses significant events occurring after the balance sheet date, such as new tax legislation - On July 4, 2025, **new U.S. federal income tax legislation was enacted**, including **permanent reinstatement of immediate expensing for domestic R&D** and **full expensing for qualified machinery**[108](index=108&type=chunk) - L3Harris **expects favorable cash tax benefits of** **$150 million** and an **increase to its ETR between** **200** and **300 basis points for fiscal 2025**, with **effects to be recognized starting Q3 2025**[108](index=108&type=chunk) [Report of Independent Registered Public Accounting Firm](index=26&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) This report provides the independent auditor's opinion on the fairness of the condensed consolidated interim financial statements - Ernst & Young LLP **reviewed the condensed consolidated interim financial statements** and **found no material modifications needed** for conformity with U.S. GAAP[111](index=111&type=chunk) - The firm previously issued an **unqualified audit opinion** on the Company's consolidated financial statements as of January 3, 2025[112](index=112&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on L3Harris's financial condition and operational results, highlighting key performance drivers, economic influences, and strategic initiatives. It covers consolidated and segment-specific financial performance, liquidity, capital resources, and critical accounting estimates [OVERVIEW](index=27&type=section&id=OVERVIEW) This section provides a general business context, including the company's market position, customer base, and government funding environment - L3Harris is a **defense industry technology solutions provider**, serving government customers in over 100 countries, with **76%** of YTD 2025 **revenue from U.S. Government customers**[117](index=117&type=chunk) - The **U.S. government was funded through** September 30, 2025, with **$893 billion for defense**, including **$851 billion for DoD**, under a **full-year Continuing Resolution**[119](index=119&type=chunk) - A **preliminary GFY 2026 budget proposes a flat national defense topline of** **$893 billion**, with an **additional** **$119 billion** **from reconciliation funding**, **totaling** **$1 trillion**[120](index=120&type=chunk) - The recently signed **reconciliation package includes** **$155 billion for national defense**, **$165 billion for DHS**, **$12.5 billion for FAA**, and **$10 billion for NASA**, with **DoD expected to access** **$113 billion** **in GFY 2026**[121](index=121&type=chunk) [U.S. Federal Tax Reform](index=28&type=section&id=U.S.%20Federal%20Tax%20Reform) This section discusses the impact of recent U.S. federal income tax legislation on the company's financial outlook - Congress' reconciliation package, enacted July 4, 2025, **permanently reinstates immediate expensing for domestic R&D** and **full expensing for qualified machinery and equipment**[124](index=124&type=chunk) - L3Harris **anticipates favorable cash tax benefits of** **$150 million** and an **increase to its ETR between** **200** and **300 basis points for fiscal 2025**, to be recognized in Q3 2025[125](index=125&type=chunk) [Economic Environment](index=28&type=section&id=Economic%20Environment) This section analyzes the broader economic factors, such as inflation and interest rates, affecting the company's operations and government spending - **Ongoing inflation**, **interest rate environment**, and **federal deficits** could impact U.S. Government spending priorities[126](index=126&type=chunk) - The company is monitoring trade policies and tariffs, seeking exemptions, evaluating alternative suppliers, and considering price adjustments to manage cost impacts, with **no material impact expected** on 2025 results[127](index=127&type=chunk) [RESULTS OF OPERATIONS](index=29&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's consolidated and segment-specific financial performance for the reported periods [Consolidated Results of Operations](index=29&type=section&id=Consolidated%20Results%20of%20Operations) This section analyzes the overall financial performance of the company, including revenue, operating income, and diluted EPS | (Dollars in millions, except per share amounts) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :-------------------------------------------- | :------------------ | :------------------ | :---------------- | :---------------- |\n| Total revenue | $5,426 | $5,299 | $10,558 | $10,510 |\n| Gross margin | $1,335 | $1,360 | $2,685 | $2,708 |\n| General and administrative expenses | $(764) | $(884) | $(1,589) | $(1,854) |\n| Operating Income | $571 | $476 | $1,096 | $854 |\n| Net income attributable to L3Harris | $458 | $366 | $844 | $649 |\n| Diluted EPS | $2.44 | $1.92 | $4.48 | $3.40 | - **Consolidated revenue increased by** **2%** in Q2 2025 and **0.5%** YTD 2025[130](index=130&type=chunk) - **Operating income increased by** **20%** in Q2 2025 and **28%** YTD 2025[130](index=130&type=chunk) - **Diluted EPS increased by** **27%** in Q2 2025 and **32%** YTD 2025[130](index=130&type=chunk)[149](index=149&type=chunk) [Revenue](index=29&type=section&id=Revenue) This section details the company's revenue performance, disaggregated by product and service categories across segments | (In millions) | Second Quarter 2025 Products | Second Quarter 2024 Products | Year to Date 2025 Products | Year to Date 2024 Products | | :------------ | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- |\n| CS | $1,167 | $1,062 | $2,313 | $2,069 |\n| IMS | $938 | $1,009 | $1,887 | $1,997 |\n| SAS | $1,101 | $1,189 | $2,122 | $2,399 |\n| AR | $502 | $424 | $952 | $818 |\n| Products revenue | $3,708 | $3,684 | $7,274 | $7,283 | | (In millions) | Second Quarter 2025 Services | Second Quarter 2024 Services | Year to Date 2025 Services | Year to Date 2024 Services | | :------------ | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- |\n| CS | $192 | $262 | $386 | $535 |\n| IMS | $662 | $649 | $1,292 | $1,277 |\n| SAS | $673 | $505 | $1,246 | $1,031 |\n| AR | $191 | $199 | $360 | $384 |\n| Services revenue | $1,718 | $1,615 | $3,284 | $3,227 | - **Products revenue increased** **1%** in Q2 2025, **driven by CS and AR segments**, but was **flat YTD 2025 due to offsets from SAS and IMS**[131](index=131&type=chunk)[132](index=132&type=chunk) - **Services revenue increased** **6%** in Q2 2025 and **2%** YTD 2025, **primarily due to higher SAS segment revenue**[132](index=132&type=chunk)[133](index=133&type=chunk) [Cost of Revenue](index=30&type=section&id=Cost%20of%20Revenue) This section analyzes the costs directly associated with generating revenue from products and services across segments | (In millions) | Second Quarter 2025 Products | Second Quarter 2024 Products | Year to Date 2025 Products | Year to Date 2024 Products | | :------------ | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- |\n| CS | $(705) | $(612) | $(1,395) | $(1,214) |\n| IMS | $(746) | $(800) | $(1,458) | $(1,556) |\n| SAS | $(854) | $(909) | $(1,680) | $(1,837) |\n| AR | $(399) | $(325) | $(744) | $(619) |\n| Cost of products revenue | $(2,716) | $(2,660) | $(5,312) | $(5,254) | | (In millions) | Second Quarter 2025 Services | Second Quarter 2024 Services | Year to Date 2025 Services | Year to Date 2024 Services | | :------------ | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- |\n| CS | $(148) | $(242) | $(302) | $(463) |\n| IMS | $(528) | $(479) | $(1,007) | $(960) |\n| SAS | $(539) | $(407) | $(977) | $(830) |\n| AR | $(145) | $(153) | $(279) | $(297) |\n| Cost of services revenue | $(1,375) | $(1,279) | $(2,561) | $(2,548) | - **Cost of products revenue increased** **2%** in Q2 2025 and **1%** YTD 2025, **primarily driven by CS and AR segments**[134](index=134&type=chunk)[136](index=136&type=chunk) - **Cost of services revenue increased** **8%** in Q2 2025, **mainly due to SAS and IMS**, and **1%** YTD 2025, **primarily due to SAS and IMS**, **partially offset by CS and AR**[135](index=135&type=chunk)[137](index=137&type=chunk) [Gross Margin](index=30&type=section&id=Gross%20Margin) This section discusses the factors influencing the company's gross profit margin, including divestitures and contract adjustments - **Gross margin decreased by** **$25 million** in Q2 2025, **primarily due to a** **$62 million** **decrease from the CAS disposal group divestiture** and **$20 million** **unfavorable net EAC adjustments**, **partially offset by favorable mix**[138](index=138&type=chunk) - **Gross margin decreased by** **$23 million** YTD 2025, **mainly due to a** **$67 million** **decrease from the CAS disposal group divestiture** and **$60 million** **unfavorable net EAC adjustments**, **partially offset by favorable higher margin revenue mix**[139](index=139&type=chunk) [G&A Expenses](index=31&type=section&id=G%26A%20Expenses) This section analyzes general and administrative expenses, including amortization, R&D, and strategic initiative costs | (In millions) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :------------ | :------------------ | :------------------ | :---------------- | :---------------- |\n| G&A expenses | $(764) | $(884) | $(1,589) | $(1,854) |\n| Amortization of intangibles | $(177) | $(194) | $(354) | $(391) |\n| Company-funded R&D costs | $(132) | $(124) | $(244) | $(238) |\n| LHX NeXt implementation costs | $(39) | $(48) | $(74) | $(175) |\n| Business divestiture-related losses | $0 | $(24) | $(17) | $(24) | - **G&A expenses decreased by** **$120 million** (**14%**) in Q2 2025, **primarily due to a** **$75 million** **gain from asset monetization in IMS** and a **$24 million** **decrease in business divestiture-related losses**[142](index=142&type=chunk) - **G&A expenses decreased by** **$265 million** (**14%**) YTD 2025, **driven by** **$101 million** **lower LHX NeXt implementation costs**, the **$75 million** **IMS asset monetization gain**, and **lower amortization and M&A expenses**[143](index=143&type=chunk) [Non-service FAS Pension Income and Other, net](index=31&type=section&id=Non-service%20FAS%20Pension%20Income%20and%20Other%2C%20net) This section explains the impact of non-service pension income and other related items on the company's financial results - **Non-service FAS pension income and other, net, increased by** **$19 million** in Q2 2025 and **$15 million** YTD 2025, **reflecting changes in non-service cost components of net periodic benefit income and market value of rabbi trust assets**[144](index=144&type=chunk) [Interest Expense, net](index=31&type=section&id=Interest%20Expense%2C%20net) This section details the company's net interest expense, reflecting borrowing costs and debt management activities - **Interest expense, net, decreased by** **$20 million** in Q2 2025 and **$46 million** YTD 2025, **primarily due to lower average outstanding notes under the Commercial Paper Program**[145](index=145&type=chunk) [Income Taxes](index=31&type=section&id=Income%20Taxes) This section analyzes the company's income tax expense and effective tax rate, highlighting key drivers and adjustments - **The effective tax rate (ETR) was** **12.6%** for Q2 2025 (vs **5.9%** in Q2 2024) and **14.1%** for YTD 2025 (vs **4.1%** in YTD 2024)[147](index=147&type=chunk)[148](index=148&type=chunk) - Q2 2025 ETR **benefited from** **audit uncertainty resolution**, **R&D credits**, and **FDII deductions**, but was partially offset by a **state legislative change** and the **CAS disposal group divestiture**[147](index=147&type=chunk) - YTD 2025 ETR was **unfavorably impacted by** the **CAS disposal group divestiture** and a **state legislative change**, while YTD 2024 ETR **benefited from** **excess tax benefits** from **equity-based compensation**[148](index=148&type=chunk) [Diluted EPS](index=32&type=section&id=Diluted%20EPS) This section discusses the company's diluted earnings per share performance and the factors contributing to its changes - **Diluted EPS increased by** **27%** in Q2 2025 and **32%** YTD 2025, **driven by higher net income**[149](index=149&type=chunk) [Business Segment Results of Operations](index=32&type=section&id=Business%20Segment%20Results%20of%20Operations) This section provides a detailed analysis of the financial performance for each of the company's four reportable business segments [CS Segment](index=32&type=section&id=CS%20Segment) This section analyzes the revenue, operating income, and backlog for the Communication Systems segment - **CS segment ending backlog was** **$7.0 billion** as of June 27, 2025[150](index=150&type=chunk) | (Dollars in millions) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :-------------------- | :------------------ | :------------------ | :---------------- | :---------------- |\n| Revenue | $1,376 | $1,346 | $2,728 | $2,640 |\n| Operating income | $336 | $329 | $681 | $639 |\n| Operating margin | 24.4% | 24.4% | 25.0% | 24.2% | - **CS revenue increased** **2%** in Q2 2025 and **3%** YTD 2025, **primarily due to higher international demand for tactical communications**[151](index=151&type=chunk)[152](index=152&type=chunk) - **CS operating income increased** **2%** in Q2 2025 and **7%** YTD 2025, **driven by LHX NeXt cost savings and favorable mix**, **partially offset by the absence of a** **$15 million** **legal settlement in Q2 2024**[152](index=152&type=chunk)[153](index=153&type=chunk) [IMS Segment](index=32&type=section&id=IMS%20Segment) This section analyzes the revenue, operating income, and backlog for the Integrated Mission Systems segment - **IMS segment ending backlog was** **$9.9 billion** as of June 27, 2025[154](index=154&type=chunk) | (Dollars in millions) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :-------------------- | :------------------ | :------------------ | :---------------- | :---------------- |\n| Revenue | $1,622 | $1,671 | $3,214 | $3,298 |\n| Operating income | $214 | $200 | $417 | $385 |\n| Operating margin | 13.2% | 12.0% | 13.0% | 11.7% | - **IMS revenue decreased** **3%** in Q2 2025 and YTD 2025, **primarily due to the CAS disposal group divestiture**. Excluding this, revenue increased due to classified program ramp in ISR[155](index=155&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - **IMS operating income increased** **7%** in Q2 2025 and **8%** YTD 2025, **driven by a** **$75 million** **gain from asset monetization**, **improved program performance, and LHX NeXt cost savings**, **partially offset by an unfavorable EAC adjustment and the CAS divestiture impact**[156](index=156&type=chunk)[159](index=159&type=chunk) [SAS Segment](index=33&type=section&id=SAS%20Segment) This section analyzes the revenue, operating income, and backlog for the Space & Airborne Systems segment - **SAS segment ending backlog was** **$10.6 billion** as of June 27, 2025[160](index=160&type=chunk) | (Dollars in millions) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :-------------------- | :------------------ | :------------------ | :---------------- | :---------------- |\n| Revenue | $1,787 | $1,707 | $3,398 | $3,458 |\n| Operating income | $220 | $215 | $396 | $431 |\n| Operating margin | 12.3% | 12.6% | 11.7% | 12.5% | - **SAS revenue increased** **5%** in Q2 2025 **due to higher FAA volume in Mission Networks and improved performance in Airborne Combat Systems**, **partially offset by program timing and the Antenna disposal group divestiture**[161](index=161&type=chunk) - **SAS revenue decreased** **2%** YTD 2025, **primarily due to lower Space Systems volume and negative EAC adjustments on classified development programs, and the Antenna disposal group divestiture**, **partially offset by higher FAA volume in Mission Networks**[163](index=163&type=chunk) - **SAS operating income increased** **2%** in Q2 2025, **driven by a** **$19 million** **asset monetization gain**, **improved program performance, and LHX NeXt cost savings**. YTD 2025 **operating income decreased** **8%** **due to unfavorable EAC adjustments and mix**[162](index=162&type=chunk)[164](index=164&type=chunk) [AR Segment](index=33&type=section&id=AR%20Segment) This section analyzes the revenue, operating income, and backlog for the Aerojet Rocketdyne segment - **AR segment ending backlog was** **$7.9 billion** as of June 27, 2025[165](index=165&type=chunk) | (Dollars in millions) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :-------------------- | :------------------ | :------------------ | :---------------- | :---------------- |\n| Revenue | $698 | $633 | $1,327 | $1,217 |\n| Operating income | $93 | $81 | $169 | $158 |\n| Operating margin | 13.3% | 12.8% | 12.7% | 13.0% | - **AR revenue increased** **10%** in Q2 2025 and **9%** YTD 2025, **primarily due to increased production volume and new program ramp in Missile Solutions**[166](index=166&type=chunk)[167](index=167&type=chunk) - **AR operating income increased** **15%** in Q2 2025 and **7%** YTD 2025, **driven by higher volume, improved performance from LHX NeXt cost savings, and a favorable contract resolution**[167](index=167&type=chunk)[168](index=168&type=chunk) [Unallocated Corporate Expenses](index=34&type=section&id=Unallocated%20Corporate%20Expenses) This section details corporate-level expenses not allocated to business segments, including amortization and strategic initiative costs | (In millions) | Second Quarter 2025 | Second Quarter 2024 | Year to Date 2025 | Year to Date 2024 | | :------------ | :------------------ | :------------------ | :---------------- | :---------------- |\n| Unallocated corporate expenses | $(292) | $(349) | $(567) | $(759) |\n| Amortization of intangibles | $(193) | $(215) | $(387) | $(432) |\n| LHX NeXt implementation costs | $(39) | $(48) | $(74) | $(175) |\n| Merger, acquisition, and divestiture-related expenses | $(13) | $(21) | $(30) | $(61) |\n| Business divestiture-related losses | $0 | $(24) | $(17) | $(24) | - **Unallocated corporate expenses decreased by** **$57 million** in Q2 2025 and **$192 million** YTD 2025, **primarily due to lower amortization of intangibles, LHX NeXt implementation costs, and M&A/divestiture-related expenses**[169](index=169&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=34&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's ability to generate and manage cash, including capital resources and cash flow activities [Capital Resources](index=34&type=section&id=Capital%20Resources) This section outlines the company's available cash, credit facilities, and short-term financing options - As of June 27, 2025, **L3Harris had** **$482 million** **in cash and cash equivalents**, with **$327 million held by foreign subsidiaries, largely repatriable with minimal tax cost**[170](index=170&type=chunk) - **Outstanding notes under the Commercial Paper Program were** **$985 million**, **serving as a short-term financing source up to** **$3.0 billion**, **supported by credit facilities**[171](index=171&type=chunk) - The company had **no outstanding borrowings under its new** **$2.5 billion** **five-year and** **$500 million** **364-day credit facilities**, with **$2,015 million available borrowing capacity** as of June 27, 2025[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) [Cash Flows](index=35&type=section&id=Cash%20Flows) This section analyzes the company's cash flows from operating, investing, and financing activities | (In millions) | Year to Date 2025 | Year to Date 2024 | | :------------ | :---------------- | :---------------- |\n| Operating Activities | $598 | $650 |\n| Investing Activities | $666 | $(58) |\n| Financing Activities | $(1,415) | $(600) |\n| Net decrease in cash and cash equivalents | $(133) | $(13) | - **Net cash from operating activities decreased by** **$52 million** YTD 2025, **mainly due to higher working capital usage and legal settlement costs**[175](index=175&type=chunk) - **Net cash from investing activities significantly improved by** **$724 million**, **shifting to a net inflow of** **$666 million** YTD 2025, **driven by proceeds from business sales (CAS disposal group divestiture)**[176](index=176&type=chunk) - **Net cash used in financing activities increased by** **$815 million** YTD 2025, **primarily due to** **$500 million** **more cash used for common stock repurchases and** **$245 million** **increase in net long-term debt repayments**[177](index=177&type=chunk) - **L3Harris repurchased** **3.9 million** shares for **$822 million** YTD 2025, with **$2.6 billion** **remaining authorization**[178](index=178&type=chunk) - The company repaid **$600 million** of **long-term debt repayments** in YTD 2025 and had **$11.1 billion** outstanding **long-term debt, net**, as of June 27, 2025[180](index=180&type=chunk)[182](index=182&type=chunk) - The Board **increased the quarterly cash dividend rate to** **$1.20** per share, **marking the 24th consecutive annual increase**[184](index=184&type=chunk) [Cash Requirements](index=36&type=section&id=Cash%20Requirements) This section details the company's anticipated cash needs for operations, capital expenditures, and debt obligations - **No material changes to cash requirements or commercial commitments**, **except for CP Program levels and new credit facilities**[185](index=185&type=chunk) - **L3Harris does not expect to make material contributions to defined benefit pension plans in fiscal 2025** and **plans to continue evaluating pension de-risking opportunities**[186](index=186&type=chunk)[187](index=187&type=chunk) - The company expects sufficient liquidity for the next 12 months and foreseeable future, with **capital expenditures for fiscal 2025 projected at approximately** **2%** **of revenue**[189](index=189&type=chunk)[190](index=190&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=36&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section highlights accounting estimates that require significant judgment and could materially impact financial results - **No material changes to critical accounting estimates were disclosed**, **except for goodwill impairment tests**[191](index=191&type=chunk) - Interim goodwill impairment tests for fiscal 2025 indicated **no impairment**[193](index=193&type=chunk) [Impact of Recently Issued Accounting Pronouncements](index=37&type=section&id=Impact%20of%20Recently%20Issued%20Accounting%20Pronouncements) This section discusses the effect of new accounting standards on the company's financial statements - **No new accounting pronouncements effective YTD 2025 had a material impact** on the condensed consolidated financial statements[194](index=194&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there were no material changes to the company's exposure to market risk during year-to-date 2025, apart from the repayment of long-term debt - **No material changes to market risk exposure during YTD 2025**, **other than long-term debt repayment**[195](index=195&type=chunk) [ITEM 4. Controls and Procedures](index=37&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of L3Harris's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the second quarter of 2025 - **Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level** as of June 27, 2025[196](index=196&type=chunk) - **No material changes in internal control over financial reporting occurred during Q2 2025**[197](index=197&type=chunk) Part II. Other Information This section provides additional disclosures on legal proceedings, risk factors, equity sales, and other relevant corporate information [ITEM 1. Legal Proceedings](index=38&type=section&id=ITEM%201.%20Legal%20Proceedings) This section refers to the detailed discussion of legal proceedings and contingencies in Note P of the financial statements, indicating no new material developments since the prior fiscal year's 10-K filing - **No material developments in legal proceedings beyond what is discussed in Note P and the Fiscal 2024 Form 10-K**[200](index=200&type=chunk) [ITEM 1A. Risk Factors](index=38&type=section&id=ITEM%201A.%20Risk%20Factors) This section directs investors to review risk factors detailed in the Fiscal 2024 Form 10-K and the first quarter 2025 Form 10-Q, noting no material changes beyond those previously disclosed - **No material changes to risk factors beyond those disclosed in the Fiscal 2024 Form 10-K and the Q1 2025 Form 10-Q**[201](index=201&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases during the second quarter of 2025 under its authorized repurchase programs and confirms no unregistered equity securities were issued or sold | Period (Fiscal Month) | Total shares purchased | Average price paid per share | | :-------------------- | :--------------------- | :--------------------------- |\n| March 29, 2025 - April 25, 2025 | 928,362 | $211.03 |\n| April 26, 2025 - May 23, 2025 | 211,340 | $218.46 |\n| May 24, 2025 - June 27, 2025 | 44,623 | $246.90 |\n| Total | 1,184,325 | | - As of June 27, 2025, **$2.559 billion** **remained under the share repurchase authorization**[202](index=202&type=chunk) - **No unregistered equity securities were issued or sold during Q2 2025**[205](index=205&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=39&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - **No defaults upon senior securities**[206](index=206&type=chunk) [ITEM 4. Mine Safety Disclosures](index=39&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - **Mine safety disclosures are not applicable**[207](index=207&type=chunk) [ITEM 5. Other Information](index=40&type=section&id=ITEM%205.%20Other%20Information) This section provides information on securities trading plans (10b5-1 Plans) adopted or terminated by executive officers and directors during the second quarter of 2025 - **Executive officers and directors are required to use 10b5-1 Plans for L3Harris securities transactions**[208](index=208&type=chunk) | Name and title | Date of adoption of 10b5-1 Plan | Scheduled expiration date of 10b5-1 Plan | Aggregate number of shares of common stock to be purchased or sold | | :------------------ | :------------------------------ | :--------------------------------------- | :--------------------------------------------------------------- |\n| Christopher E. Kubasik, Chair and CEO | April 28, 2025 | September 9, 2025 | Up to 147,411 shares underlying options expiring in 2027 |\n| Christopher E. Kubasik, Chair and CEO | June 13, 2025 | December 11, 2025 | Up to 97,171 shares underlying options expiring in 2028 | [ITEM 6. Exhibits](index=41&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the report, including amendments to retirement savings plans, certifications, and XBRL formatted financial information - **Exhibits include amendments to the L3Harris Technologies, Inc. Retirement Savings Plan, certifications (CEO, CFO, Section 1350), and Inline XBRL formatted financial information**[211](index=211&type=chunk) Signatures This section contains the signature of the duly authorized officer, Kenneth L. Bedingfield, Senior Vice President, Chief Financial Officer, and President, Aerojet Rocketdyne, confirming the filing of the report - The report was signed by Kenneth L. Bedingfield, Senior Vice President, Chief Financial Officer and President, Aerojet Rocketdyne, on July 24, 2025[213](index=213&type=chunk)

Financial Data and Key Metrics Changes - The company reported a record $8.3 billion in orders for the quarter, resulting in a book-to-bill ratio of 1.5 [16][80] - Revenue for the quarter was $5.4 billion, reflecting strong organic growth of 6% [16][17] - Non-GAAP EPS was $2.78, up 16% year-over-year, while pension-adjusted EPS was $2.42, up 22% year-over-year [17] - Free cash flow was $574 million, driven by increased operating income and improved working capital performance [17] Business Line Data and Key Metrics Changes - Communication Systems (CS) revenue was $1.4 billion, up 2%, with an operating margin of 24.4% [18] - Integrated Mission Systems (IMS) revenue was $1.6 billion, up 6% organically, with an operating margin of 13.2%, up 120 basis points [18][19] - Space and Airborne Systems (SAS) revenue was $1.8 billion, up 7% organically, with an operating margin of 12.3%, down 30 basis points [20] - Aerojet Rocketdyne (AR) achieved 12% organic growth with a book-to-bill ratio of 2.0, marking the highest revenue quarter on record for AR [20] Market Data and Key Metrics Changes - NATO members are increasing defense spending to 5% of GDP, translating into meaningful orders for the company [13] - The U.S. administration's fiscal year 2026 budget request includes approximately $1 trillion in national defense funding, with a focus on areas where the company is well-positioned [10] Company Strategy and Development Direction - The company aims to take out $1 billion in costs over three years and is currently tracking 40% ahead of that target [8] - The LHX NEXT program focuses on enterprise transformation, deploying an operating system, and embedding AI tools across the business [29] - The company is investing in manufacturing capacity and workforce to meet urgent demand for solid rocket motors and missile solutions [12][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2026 financial framework of $23 billion in revenue and 16% segment operating margin [32][36] - The company anticipates strong demand for missile solutions and space propulsion, with growth expected to continue for decades [24][100] - Management highlighted the importance of delivering on schedule to secure new opportunities, particularly in defense contracts [7][10] Other Important Information - The company is preparing to deploy a constellation of 40 to 45 hypersonic threat detection satellites [11] - The integration of Aerojet Rocketdyne has been completed, doubling production rates and reducing costs [8] Q&A Session Summary Question: Can you explain the comment about monetizing legacy end-of-life assets? - Management clarified that monetizing legacy assets is part of the LHX NEXT strategy, focusing on areas of strategic growth [41][42] Question: What impact do you think increased defense spending in Europe will have? - Management noted solid growth internationally, particularly in telecommunications and software-defined radios, with a focus on interoperability and resilience [51] Question: Can you rank the segments by expected growth and margin improvement for 2026? - Management indicated that Aerojet Rocketdyne is expected to be the fastest grower, followed by SAS, CS, and IMS, with all segments showing solid growth opportunities [58][59] Question: How quickly can you get the HPTSS constellation contract under contract? - Management expressed hope to secure the contract by the end of the year, contributing to revenue in 2025 and significantly in 2026 [65] Question: Are you signing contracts that are riskier due to the desire to move faster? - Management assured that they are not taking on riskier contracts, focusing on reasonable agreements that align with their strategy [86][89]

Financial Data and Key Metrics Changes - The company reported a record $8.3 billion in orders for the quarter, resulting in a book-to-bill ratio of 1.5, indicating strong demand and execution [13][14] - Revenue for the quarter was $5.4 billion, reflecting a 6% organic growth year-over-year, marking the highest organic growth in six quarters [14][15] - Non-GAAP EPS was $2.78, up 16% year-over-year, while pension-adjusted EPS was $2.42, up 22% year-over-year [14][15] - Free cash flow was $574 million, driven by increased operating income and improved working capital performance [14] Business Line Data and Key Metrics Changes - Communication Systems (CS) revenue was $1.4 billion, up 2%, with an operating margin of 24.4% [15] - Integrated Mission Systems (IMS) revenue was $1.6 billion, up 6% organically, with an operating margin of 13.2%, up 120 basis points [15][16] - Space and Airborne Systems (SAS) revenue was $1.8 billion, up 7% organically, with an operating margin of 12.3%, down 30 basis points [16] - Aerojet Rocketdyne achieved 12% organic growth with a book-to-bill ratio of 2.0, driven by increased production volume across key missile programs [17] Market Data and Key Metrics Changes - NATO members are increasing defense spending to 5% of GDP, translating into meaningful orders for the company and supporting sustained international growth [10][11] - The U.S. administration's fiscal year 2026 budget request includes approximately $1 trillion in national defense funding, with significant allocations for areas where the company is well-positioned [7][8] Company Strategy and Development Direction - The company is focused on aligning its portfolio with national security priorities, emphasizing resilient communications, space superiority, and missile modernization [31][32] - The LHX NEXT program aims to drive enterprise transformation and operational improvements, with expectations for sustained revenue growth and cash generation [25][26] - The company is investing in manufacturing capacity and expanding its workforce to meet increasing demand for solid rocket motors and missile solutions [21][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2026 financial framework of $23 billion in revenue and a 16% segment operating margin, driven by alignment with long-term defense priorities [29][30] - The company anticipates continued strong demand across all segments, with a focus on delivering timely solutions to address current and future threats [24][32] Other Important Information - The company is on track to achieve $1 billion in cost savings over three years, currently tracking 40% ahead of target [6] - The integration of Aerojet Rocketdyne has been completed, resulting in doubled production rates and reduced costs [6][17] Q&A Session Summary Question: Can you explain the comment about monetizing legacy end-of-life assets? - Management clarified that monetizing legacy assets is part of the LHX NEXT strategy, focusing on aligning investments with growth areas [36][39] Question: What impact do you see from increased defense spending in Europe? - Management noted solid international growth opportunities, particularly in telecommunications and software-defined radios, as European countries seek interoperability and resilience [48][49] Question: How do you expect bookings to trend through the rest of the year? - Management expressed optimism for a solid second half, with expectations for a growing backlog and potential for outsized growth driven by large awards [71][73] Question: Can you provide a breakdown of the $8.3 billion in bookings by segment? - Management indicated strong book-to-bill ratios across all segments, with Aerojet Rocketdyne showing nearly a 2.0 book-to-bill ratio [76][79] Question: Are you signing contracts that are riskier due to the desire to move fast? - Management assured that they are not taking on riskier contracts, emphasizing that many awards are follow-on contracts with reasonable terms [84][86]

Financial Performance Highlights - Orders reached $8 billion, resulting in a record backlog and a book-to-bill ratio of 1.5x, the highest since the merger[4,6] - Organic growth increased by 6%, driving progress towards the 2026 Financial Framework, with AR Missile Solutions up 15% organically[4] - Adjusted Segment Operating Margin was 15.9%, marking the seventh consecutive quarter of margin expansion[4,8] - Non-GAAP EPS grew by 16%, or 22% on a pension-adjusted basis[4,45] - Adjusted Free Cash Flow was $574 million[8] Guidance and Outlook - Revenue guidance for 2025 is approximately $21.75 billion (previously $21.4 billion - $21.7 billion)[5,40] - Adjusted Free Cash Flow for 2025 is projected to be around $2.65 billion (previously $2.4 billion - $2.5 billion)[5,40] - Non-GAAP Diluted EPS guidance for 2025 is $10.40 - $10.60 (previously $10.30 - $10.50)[40,42] Segment Performance - Communication Systems (CS) revenue increased by 2% to $1.376 billion, with an adjusted operating margin of 24.4%[19,20,21] - Integrated Mission Systems (IMS) revenue decreased by 3% but increased 6% organically, with an adjusted operating margin of 13.2%[25,28] - Space & Airborne Systems (SAS) revenue increased by 5% but increased 7% organically, with an adjusted operating margin of 12.3%[32,33] - Aerojet Rocketdyne (AR) revenue increased by 10% but increased 12% organically, with an adjusted operating margin of 13.3%[37,38]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [Second Quarter 2025 Performance Overview](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Overview) L3Harris Technologies reported strong Q2 2025 results, marking an inflection point with significant EPS growth and the strongest revenue growth in six quarters Second Quarter 2025 Key Financials | Metric | Q2 2025 | Q2 2024 | Change | Non-GAAP Q2 2025 | Non-GAAP Q2 2024 | Non-GAAP Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Diluted EPS | $2.44 | $1.92 | +27% | $2.78 | $2.40 | +16% | | Revenue | $5.4B | $5.3B | +2% | - | - | - | - Orders reached **$8.3 billion**, resulting in a book-to-bill ratio of **1.5x**, indicating strong demand and future revenue potential[5](index=5&type=chunk) - Adjusted segment operating margin expanded for the seventh consecutive quarter, increasing by **30 basis points to 15.9%** in Q2 2025[5](index=5&type=chunk)[6](index=6&type=chunk)[11](index=11&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) The CEO highlighted impressive Q2 results driven by record orders and margin expansion, aligning with a generational defense investment cycle - The company achieved a record book-to-bill of **1.5x** and solid organic growth, marking a clear inflection point towards the 2026 Financial Framework[4](index=4&type=chunk) - Defense is entering a generational investment cycle with rapidly growing U.S. and allied budgets, aligning with L3Harris's portfolio in key growth areas[4](index=4&type=chunk) - The 'Trusted Disruptor' strategy drives differentiated, mission-critical solutions, creating value for shareholders and meeting evolving customer needs[4](index=4&type=chunk) [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) Strong Q2 2025 orders, revenue growth, and margin expansion led to an upward revision of 2025 guidance and 2026 outlook - Orders: **$8.3 billion**; book-to-bill of **1.5x**[5](index=5&type=chunk) - Revenue: **$5.4 billion**, up 2% (**6% organically**)[5](index=5&type=chunk) - Operating margin: **10.5%**; Adjusted segment operating margin: **15.9%**[5](index=5&type=chunk) - Diluted EPS: **$2.44**; Non-GAAP diluted EPS: **$2.78**, up 16%[5](index=5&type=chunk) - 2025 guidance and 2026 outlook increased due to strong performance and improved expectations[5](index=5&type=chunk) [Consolidated Financial Results](index=3&type=section&id=Consolidated%20Financial%20Results) [Summary Financial Performance](index=3&type=section&id=Summary%20Financial%20Performance) The company reported revenue growth and improved EPS, though cash flow declined due to working capital timing and legal settlements Summary Financial Results (Q2 2025 vs Q2 2024) | Metric | Q2 2025 ($M) | Q2 2024 ($M) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 5,426 | 5,299 | 2% | | Operating income | 571 | 476 | - | | Adjusted segment operating income | 863 | 825 | 5% | | Operating margin | 10.5% | 9.0% | +150 bps | | Adjusted segment operating margin | 15.9% | 15.6% | +30 bps | | Diluted EPS | $2.44 | $1.92 | - | | Non-GAAP diluted EPS | $2.78 | $2.40 | 16% | | Cash from operations | 640 | 754 | (15%) | | Adjusted free cash flow | 574 | 714 | (20%) | Summary Financial Results (YTD 2025 vs YTD 2024) | Metric | YTD 2025 ($M) | YTD 2024 ($M) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 10,558 | 10,510 | —% | | Operating income | 1,096 | 854 | - | | Adjusted segment operating income | 1,663 | 1,613 | 3% | | Operating margin | 10.4% | 8.1% | - | | Adjusted segment operating margin | 15.8% | 15.3% | +50 bps | | Diluted EPS | $4.48 | $3.40 | - | | Non-GAAP diluted EPS | $5.18 | $4.64 | 12% | | Cash from operations | 598 | 650 | (8%) | | Adjusted free cash flow | 502 | 558 | (10%) | [Revenue Analysis](index=5&type=section&id=Revenue%20Analysis) Second quarter revenue increased 2% (6% organically), driven by higher volumes and increased international demand across all segments - Q2 2025 revenue increased **2% to $5.4 billion**, with organic revenue growth of **6%**[5](index=5&type=chunk)[9](index=9&type=chunk) - Growth was primarily attributed to higher volumes, new program ramps, and increased international demand across all segments[9](index=9&type=chunk) [Operating Margin Analysis](index=5&type=section&id=Operating%20Margin%20Analysis) GAAP operating margin increased by 150 bps, while adjusted segment operating margin expanded by 30 bps from cost savings and asset monetization - GAAP Operating Margin increased **150 bps to 10.5%** in Q2 2025[10](index=10&type=chunk) - The GAAP margin improvement was primarily driven by lower unallocated corporate expenses and the absence of prior year business divestiture-related losses[10](index=10&type=chunk) - Adjusted Segment Operating Margin expanded **30 bps to 15.9%** in Q2 2025, mainly due to monetization of legacy assets and LHX NeXt driven cost savings[11](index=11&type=chunk) [Earnings Per Share (EPS) Analysis](index=5&type=section&id=Earnings%20Per%20Share%20(EPS)%20Analysis) Both GAAP and non-GAAP diluted EPS increased significantly, benefiting from higher operating income and lower interest expense - GAAP Diluted EPS increased **27% to $2.44** in Q2 2025[12](index=12&type=chunk) - Non-GAAP Diluted EPS increased **16% to $2.78**, and Pension Adjusted Non-GAAP Diluted EPS increased **22% to $2.42**[13](index=13&type=chunk) - EPS growth was driven by higher operating income and lower interest expense, partially offset by a higher effective tax rate[12](index=12&type=chunk)[13](index=13&type=chunk) [Cash Flow Analysis](index=5&type=section&id=Cash%20Flow%20Analysis) Cash from operations and adjusted free cash flow decreased in Q2 2025 due to working capital timing and a legal settlement - Cash From Operations decreased **15% to $640 million** in Q2 2025[14](index=14&type=chunk) - Adjusted Free Cash Flow decreased **20% to $574 million** in Q2 2025[14](index=14&type=chunk) - The decrease in cash flow was driven by working capital timing and a legal settlement, partially offset by operating income growth and lower capital expenditures[14](index=14&type=chunk) [Condensed Consolidated Statements](index=10&type=section&id=Condensed%20Consolidated%20Statements) The condensed consolidated financial statements provide a detailed view of the company's financial position, performance, and cash flows [Statement of Operations](index=10&type=section&id=Statement%20of%20Operations) The statement of operations shows Q2 2025 revenue of $5,426 million and net income attributable to L3Harris of $458 million Condensed Consolidated Statement of Operations (Unaudited) | Metric ($ millions, except per share amounts) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $5,426 | $5,299 | $10,558 | $10,510 | | Operating income | $571 | $476 | $1,096 | $854 | | Income before income taxes | $524 | $390 | $983 | $680 | | Net income attributable to L3Harris | $458 | $366 | $844 | $649 | | Diluted EPS | $2.44 | $1.92 | $4.48 | $3.40 | [Statement of Cash Flow](index=11&type=section&id=Statement%20of%20Cash%20Flow) The statement of cash flow indicates net cash from operating activities of $640 million for Q2 2025, a decrease from the prior year Consolidated Statement of Cash Flow (Unaudited) | Metric ($ millions) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $640 | $754 | $598 | $650 | | Net cash (used in) provided by investing activities | $(78) | $58 | $666 | $(58) | | Net cash (used in) provided by financing activities | $(610) | $(744) | $(1,415) | $(600) | | Net decrease in cash and cash equivalents | $(35) | $70 | $(133) | $(13) | | Cash and cash equivalents, end of period | $482 | $547 | $482 | $547 | [Balance Sheet](index=12&type=section&id=Balance%20Sheet) The balance sheet shows total assets of $41,240 million and total equity of $19,278 million as of June 27, 2025 Condensed Consolidated Balance Sheet (Unaudited) | Metric ($ millions) | June 27, 2025 | January 3, 2025 | | :--- | :--- | :--- | | Total current assets | $7,608 | $8,218 | | Total assets | $41,240 | $42,001 | | Total current liabilities | $7,322 | $7,633 | | Total liabilities | $21,962 | $22,422 | | Total equity | $19,278 | $19,579 | [Segment Performance](index=6&type=section&id=Segment%20Performance) [Communication Systems](index=6&type=section&id=Communication%20Systems) The Communication Systems segment reported a 2% revenue increase driven by international demand, with flat operating margin Communication Systems Segment Results | Metric ($ millions) | Q2 2025 | Q2 2024 | Change | YTD 2025 | YTD 2024 | Change | 2025 Guidance | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,376 | $1,346 | 2% | $2,728 | $2,640 | 3% | $5,600 - $5,700 | | Operating margin | 24.4% | 24.4% | — bps | 25.0% | 24.2% | 80 bps | ~25% | - Revenue growth was primarily driven by increased international demand for resilient communication equipment and related waveforms[16](index=16&type=chunk) - Operating margin was flat due to higher volume and LHX NeXt driven cost savings, offset by the absence of favorable legal settlements from 2024[17](index=17&type=chunk) [Integrated Mission Systems](index=6&type=section&id=Integrated%20Mission%20Systems) Integrated Mission Systems organic revenue increased 6% from ISR program ramps, and operating margin significantly increased by 120 bps Integrated Mission Systems Segment Results | Metric ($ millions) | Q2 2025 | Q2 2024 | Change | YTD 2025 | YTD 2024 | Change | 2025 Guidance | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,622 | $1,671 | (3)% | $3,214 | $3,298 | (3)% | ~$6,400 (Prior: ~$6,300) | | Operating margin | 13.2% | 12.0% | 120 bps | 13.0% | 11.7% | 130 bps | ~12% (Prior: high 11%) | - Excluding the CAS business divestiture, organic revenue increased **6%**, primarily due to ISR classified program ramp[18](index=18&type=chunk) - Operating margin increased **120 bps to 13.2%**, driven by monetization of legacy assets, partially offset by an unfavorable EAC adjustment[19](index=19&type=chunk) [Space & Airborne Systems](index=7&type=section&id=Space%20%26%20Airborne%20Systems) Space and Airborne Systems organic revenue increased 7% due to higher FAA volume, while operating margin slightly decreased Space and Airborne Systems Segment Results | Metric ($ millions) | Q2 2025 | Q2 2024 | Change | YTD 2025 | YTD 2024 | Change | 2025 Guidance | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,787 | $1,707 | 5% | $3,398 | $3,458 | (2)% | ~$7,100 (Prior: $6,900 - $7,100) | | Operating margin | 12.3% | 12.6% | (30) bps | 11.7% | 12.5% | (80) bps | low 12% | - Excluding the antenna business divestiture, organic revenue increased **7%**, driven by increased FAA volume and improved program performance[20](index=20&type=chunk) - Operating margin decreased **30 bps to 12.3%** primarily from unfavorable mix, partially offset by asset monetization and cost savings[21](index=21&type=chunk) [Aerojet Rocketdyne](index=7&type=section&id=Aerojet%20Rocketdyne) Aerojet Rocketdyne's organic revenue increased 12% due to higher production, and operating margin improved by 50 bps Aerojet Rocketdyne Segment Results | Metric ($ millions) | Q2 2025 | Q2 2024 | Change | YTD 2025 | YTD 2024 | Change | 2025 Guidance | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $698 | $633 | 10% | $1,327 | $1,217 | 9% | ~$2,800 | | Operating margin | 13.3% | 12.8% | 50 bps | 12.7% | 13.0% | (30) bps | mid 12% | - Excluding the AOT business divestiture, organic revenue increased **12%** from increased production volume across key missile and munitions programs[22](index=22&type=chunk) - Operating margin increased **50 bps to 13.3%**, primarily due to improved performance driven by LHX NeXt cost savings and a favorable contract resolution[23](index=23&type=chunk) [Guidance and Outlook](index=8&type=section&id=Guidance%20and%20Outlook) [2025 Non-GAAP EPS Guidance Bridge](index=8&type=section&id=2025%20Non-GAAP%20EPS%20Guidance%20Bridge) Full-year 2025 non-GAAP diluted EPS guidance was increased to $10.40 - $10.60, reflecting strong performance and an improved outlook 2025 Non-GAAP Diluted EPS Guidance Bridge | Item | Amount | | :--- | :--- | | Non-GAAP diluted EPS (Prior) | $10.30 - $10.50 | | H1 2025 performance and guidance update | ~$0.40 | | Non-GAAP EPS (Before tax reform impact) | $10.70 - $10.90 | | Impact of tax reform | ~($0.30) | | Non-GAAP diluted EPS (New) | $10.40 - $10.60 | - The updated guidance reflects a net increase of **$0.10** to the full-year non-GAAP diluted EPS, offsetting a tax rate headwind[25](index=25&type=chunk) [Supplemental Information](index=8&type=section&id=Supplemental%20Information) Supplemental information for 2025 includes updated estimates for pension income and the effective tax rate on non-GAAP income 2025 Supplemental Information | Other Information | Current | Prior | | :--- | :--- | :--- | | FAS/CAS operating adjustment | ~$15 million | ~$15 million | | Non-service FAS pension income | ~$285 million | ~$270 million | | Net interest expense | ~$600 million | ~$600 million | | Effective tax rate on non-GAAP income | 13.5% - 14.5% | 11.0% - 12.0% | | Weighted-average diluted shares | ~188 | 188 - 189 | | Capital expenditures | ~2% revenue | ~2% revenue | - The effective tax rate on non-GAAP income is projected to be **13.5% - 14.5%**, an increase from the prior guidance of 11.0% - 12.0%[27](index=27&type=chunk) - Non-service FAS pension income is now estimated at **~$285 million**, up from ~$270 million previously[27](index=27&type=chunk) [Non-GAAP Financial Measures & Disclosures](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Disclosures) [Forward-Looking Statements](index=9&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements subject to various risks and uncertainties, and the company disclaims any obligation to update them - Forward-looking statements are made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[29](index=29&type=chunk) - Important risks include competitive markets, U.S. Government spending priorities, inflation, supply chain disruptions, and changes in effective tax rate[29](index=29&type=chunk) - The company disclaims any intention or obligation to update or revise any forward-looking statements, other than as imposed by law[29](index=29&type=chunk) [Non-GAAP Financial Measures Explanation](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) Management uses non-GAAP financial measures to provide a clearer understanding of ongoing operating performance and business trends - Non-GAAP Financial Measures (NGFMs) are used to provide investors with information on period-over-period operating results[30](index=30&type=chunk) - Management utilizes NGFMs for forecasting, long-term planning, and compensation purposes[30](index=30&type=chunk) - Reconciliation of forward-looking NGFMs to GAAP is not available without unreasonable effort due to forecasting difficulties[30](index=30&type=chunk) [Reconciliation of Non-GAAP Measures](index=13&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) This section provides detailed reconciliations of various non-GAAP financial measures to their most directly comparable GAAP measures [Organic Revenue Reconciliation](index=13&type=section&id=Organic%20Revenue%20Reconciliation) The organic revenue reconciliation adjusts GAAP revenue by excluding amounts attributable to divested businesses Organic Revenue Reconciliation (Q2 2025 vs Q2 2024) | Segment | GAAP 2025 ($M) | Adjustments ($M) | Organic 2025 ($M) | GAAP 2024 ($M) | Adjustments ($M) | Organic 2024 ($M) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | CS | $1,376 | — | $1,376 | $1,346 | — | $1,346 | | IMS | $1,622 | — | $1,622 | $1,671 | $(138) | $1,533 | | SAS | $1,787 | — | $1,787 | $1,707 | $(32) | $1,675 | | AR | $698 | — | $698 | $633 | $(12) | $621 | | Corporate eliminations | $(57) | — | $(57) | $(58) | — | $(58) | | **Total Revenue** | **$5,426** | **—** | **$5,426** | **$5,299** | **$(182)** | **$5,117** | [Adjusted Segment Operating Income Reconciliation](index=14&type=section&id=Adjusted%20Segment%20Operating%20Income%20Reconciliation) This reconciliation adjusts GAAP operating income to derive adjusted segment operating income, reflecting core operational performance Reconciliation of Operating Income to Adjusted Segment Operating Income (Q2 2025 vs Q2 2024) | Metric ($ millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Operating income | $571 | $476 | | Amortization of acquisition-related intangibles | 193 | 215 | | Unallocated corporate department expense, net | 50 | 33 | | FAS/CAS operating adjustment | (3) | (6) | | Merger, acquisition, and divestiture-related expenses | 13 | 21 | | Business divestiture-related losses and impairment of goodwill | — | 38 | | LHX NeXt implementation costs | 39 | 48 | | **Adjusted segment operating income** | **$863** | **$825** | [Effective Tax Rate on Non-GAAP Income Reconciliation](index=15&type=section&id=Effective%20Tax%20Rate%20on%20Non-GAAP%20Income%20Reconciliation) This reconciliation adjusts the GAAP effective tax rate to present the effective tax rate on non-GAAP income Reconciliation of Effective Tax Rate to Effective Tax Rate on Non-GAAP Income (Q2 2025 vs Q2 2024) | Metric ($ millions) | Q2 2025 Earnings Before Tax | Q2 2025 Tax Expense (Benefit) | Q2 2025 Effective Tax Rate | Q2 2024 Earnings Before Tax | Q2 2024 Tax Expense (Benefit) | Q2 2024 Effective Tax Rate | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Income before income taxes | $524 | $66 | 12.6% | $390 | $23 | 5.9% | | Merger, acquisition, and divestiture-related expenses | 13 | 3 | | 21 | 7 | | | Business divestiture-related losses and impairment of goodwill | — | (18) | | 38 | (2) | | | LHX NeXt implementation costs | 39 | 4 | | 48 | 11 | | | **Non-GAAP income before income taxes** | **$576** | **$55** | **9.5%** | **$497** | **$39** | **7.8%** | [Diluted EPS to Non-GAAP Diluted EPS Reconciliation](index=16&type=section&id=Diluted%20EPS%20to%20Non-GAAP%20Diluted%20EPS%20Reconciliation) This reconciliation adjusts GAAP diluted EPS for significant and/or non-recurring items to arrive at non-GAAP diluted EPS Reconciliation of Diluted EPS to Non-GAAP Diluted EPS and Pension Adjusted Non-GAAP Diluted EPS (Q2 2025 vs Q2 2024) | Metric ($ millions, except per share data) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Diluted EPS | $2.44 | $1.92 | | Merger, acquisition, and divestiture-related expenses | 0.07 | 0.11 | | Business divestiture-related losses and impairment of goodwill | — | 0.20 | | LHX NeXt implementation costs | 0.21 | 0.25 | | Income taxes on above adjustments and other, net | 0.06 | (0.08) | | **Non-GAAP diluted EPS** | **$2.78** | **$2.40** | | Less: per share impact of: | | | | FAS/CAS operating adjustment | (0.01) | (0.03) | | Non-service FAS pension income | (0.35) | (0.39) | | **Pension adjusted non-GAAP diluted EPS** | **$2.42** | **$1.98** | [Net Cash Provided by Operating Activities to Adjusted Free Cash Flow Reconciliation](index=17&type=section&id=Net%20Cash%20Provided%20by%20Operating%20Activities%20to%20Adjusted%20Free%20Cash%20Flow%20Reconciliation) This reconciliation adjusts net cash provided by operating activities to calculate adjusted free cash flow Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow (Q2 2025 vs Q2 2024) | Metric ($ millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $640 | $754 | | Capital expenditures | (88) | (97) | | Proceeds from disposal of property, plant and equipment, net | 9 | — | | Free cash flow | 561 | 657 | | Cash used for merger, acquisition and severance | 13 | 57 | | **Adjusted free cash flow** | **$574** | **$714** | [Key Terms and Non-GAAP Definitions](index=18&type=section&id=Key%20Terms%20and%20Non-GAAP%20Definitions) This section provides definitions for key terms and non-GAAP financial measures used throughout the earnings release Key Terms and Non-GAAP Definitions | Description | Definition | | :--- | :--- | | Merger, acquisition, and divestiture-related expenses | Transaction and integration expenses associated with the AJRD acquisition; external costs related to pursuing acquisition and divestiture portfolio optimization; non-transaction costs related to divestitures; and salaries of employees in roles dedicated to planned divestiture and acquisition activity | | Business divestiture-related losses and impairment of goodwill | In 2024, includes loss on sale and impairment of goodwill recognized in connection with the sale of our antenna and related businesses and a loss associated with the then pending divestiture of our Commercial Aviation Solutions business. In 2025, includes loss recognized in connection with the sale of our Commercial Aviation Solutions business | | LHX NeXt implementation costs | Costs related to the LHX NeXt initiative are expected to continue into 2026 and are expected to include workforce optimization costs and incremental IT expenses for implementation of new systems, third party consulting expenses and other related costs, including costs related to personnel dedicated to this project | | Organic revenue* | Excludes the impact of completed divestitures and is reconciled in Table 4 | | Orders | Total value of funded and unfunded contract awards received from the U.S. Government and other customers, including incremental funding and adjustments to previous awards, excluding unexercised contract options and potential orders under ordering-type contracts, such as indefinite delivery, indefinite quantity (IDIQ) contracts | | Non-GAAP income before income taxes* | Represents income before income taxes adjusted for items reconciled in Table 6 | | Effective tax rate on non-GAAP income* | Represents the effective tax rate (tax expense as a percentage of income before income taxes) adjusted for the tax effect of items reconciled in Table 6 | | Adjusted segment operating income and margin* | On a consolidated basis represents operating income and margin, excluding unallocated corporate department items and items reconciled in Table 5 | | Non-GAAP diluted EPS* | Represents EPS (earnings per share attributable to common shareholders) adjusted for items reconciled in Table 7 | | Pension adjusted non-GAAP diluted EPS* | Represents Non-GAAP diluted EPS, described above, adjusted for the after tax per share impact of the FAS/CAS operating adjustment and Non-service FAS pension income reconciled in Table 7 | | Adjusted free cash flow* | Net cash provided by operating activities less capital expenditures, plus proceeds from disposal of property, plant and equipment and cash used for merger, acquisition and severance reconciled in Table 8 | | Cash used for merger, acquisition, and severance* | Cash related to merger, acquisition and divestiture-related expenses (described above) and severance costs included in LHX NeXt implementation costs | [Investor and Media Contacts](index=9&type=section&id=Investor%20and%20Media%20Contacts) Contact information for investor and media relations is provided for inquiries regarding L3Harris Technologies - Investor Relations Contact: Daniel Gittsovich, 321-724-3170, investorrelations@l3harris.com[31](index=31&type=chunk) - Media Relations Contact: Sara Banda, 321-306-8927, media@l3harris.com[31](index=31&type=chunk)

Core Insights - L3Harris Technologies, Inc. (LHX) is expected to report second-quarter 2025 results on July 24, 2025, before market open, with a trailing four-quarter average earnings surprise of 2.27% [1] - The Integrated Mission Systems (IMS) segment is anticipated to show weak performance due to lower aircraft missionization volume and planned mission support program ramp down [1] - Overall, LHX is projected to report modest top-line growth, although a significant decline in its IMS unit may weigh on its overall performance [7] Revenue Estimates - The Zacks Consensus Estimate for IMS' second-quarter revenues is currently pegged at $1,581.9 million, indicating a decline of 8.5% from the year-ago quarter's figure [2] - The Communication Systems unit's revenues are estimated at $1,387.3 million, implying growth of 3.1% from the prior-year quarter's figure due to strong international demand for resilient communication equipment [3] - The Missile Solutions unit within Aerojet Rocketdyne is expected to report revenues of $662.4 million, reflecting a growth of 14% from the prior-year quarter [4] - The Space and Airborne Systems (SAS) unit's revenues are estimated at $1,737.3 million, indicating growth of 1.8% from the year-ago quarter's number [6] Overall Performance Expectations - LHX's overall second-quarter sales are projected at $5.30 billion, indicating a growth of 0.1% from the prior-year quarter [9] - Earnings are projected to decline by 23.5% year-over-year, despite a slight increase in total sales [8][10] - Poor operating margin performance in the IMS, SAS, and Aerojet Rocketdyne segments, along with unfavorable non-cash non-service FAS pension income, may adversely impact LHX's second-quarter bottom line [9] Earnings Prediction - The model predicts an earnings beat for L3Harris Technologies, supported by a positive Earnings ESP of +0.46% and a Zacks Rank of 3 [11][12]

Core Insights - L3Harris Technologies plans to build over 20 new manufacturing facilities in Calhoun County, Arkansas, to produce large solid rocket motors, creating 50 new jobs over two years [1][3][4] - The investment is part of a broader strategy to strengthen the domestic solid rocket motor industrial base, essential for national missile and strategic defense [2][4] - L3Harris is investing nearly $500 million across its production sites, with $193 million allocated specifically for Arkansas [3][4] Company Overview - L3Harris' Camden site is recognized as the "Center of Excellence for Solid Rocket Motor production," employing approximately 1,300 people and producing over 100,000 solid rocket motors annually [5][6] - The new facilities are expected to provide a six-fold increase in manufacturing capacity, enhancing the company's ability to meet current demand [4][6] Economic Impact - The investment is anticipated to bolster Arkansas' economy, creating new job opportunities and reinforcing the state's position in the aerospace and defense sector [3][4][7] - Arkansas has been highlighted for its favorable business environment, including a low cost of living and strong economic growth, making it an attractive location for major companies like L3Harris [3][4]

Core Insights - The drone technology sector is experiencing significant growth, with advancements making drones essential across various industries [1] Company Summaries Jabil Inc. (JBL) - Jabil holds a Zacks Rank 1 and has seen substantial benefits from strong momentum in capital equipment, AI-powered data center infrastructure, cloud, and digital commerce [5] - The company emphasizes product diversification, aiming for no single product or family to exceed 5% of operating income or cash flows in any fiscal year [5] - Jabil's expected revenue and earnings growth rates for the next year are 5.8% and 17.8%, respectively, with a recent 8.4% improvement in the Zacks Consensus Estimate for next-year earnings [7] HEICO Corp. (HEI) - HEICO also holds a Zacks Rank 1, benefiting from increased orders for aftermarket replacement parts and repair services due to rising air travel [8] - The company anticipates strong order flows for its defense products, supported by a projected 13% increase in the U.S. defense budget to $1.01 trillion for fiscal 2026 [9] - HEICO's expected revenue and earnings growth rates for the current year are 13.2% and 23.7%, respectively, with a slight 0.2% improvement in the Zacks Consensus Estimate for current-year earnings [10] L3Harris Technologies Inc. (LHX) - L3Harris has a Zacks Rank 2 and benefits from solid U.S. budget funding, which is expected to enhance its revenues [11] - The company is experiencing strong demand for its defensive solutions from various regions, including Asia-Pacific and Latin America, and is involved in the U.S. administration's Golden Dome initiative [11] - L3Harris's expected revenue and earnings growth rates for the current year are 1% and -20%, respectively, with a 0.1% improvement in the Zacks Consensus Estimate for current-year earnings [12]

Industry Overview - 3D Printing, or additive manufacturing, is a transformative technology that creates physical objects from digital designs by layering materials with high precision, significantly impacting manufacturing processes since the 1980s [2] - The technology offers advantages over traditional manufacturing, including cost efficiency, customization, precision, and sustainability [2][4] Market Growth - The global 3D Printing market is projected to grow from $24.61 billion in 2024 to $29.29 billion in 2025, and is expected to reach $134.6 billion by 2034, with a CAGR of 18.52% [7] - The healthcare 3D Printing market is anticipated to grow from $1.66 billion in 2024 to $1.96 billion in 2025, potentially exceeding $8.71 billion by 2034, reflecting a CAGR of 18% [6] Regional Insights - North America currently leads the 3D Printing market with over 35% share, followed closely by Asia Pacific at 30% [8] - The U.S. 3D printing market is expected to grow at a CAGR of 19.18% from 2025 to 2034 [8] Key Players - Leading companies in the 3D Printing space include Xometry, Proto Labs Inc., and Stratasys, which are embracing the technology for rapid prototyping and on-demand production [3] - Carpenter Technology, ATI Inc., GE Aerospace, and L3Harris Technologies are highlighted as promising stocks in the 3D Printing sector, each with unique capabilities and market positions [9][11][14][17][20] Sector Applications - 3D Printing is gaining traction in various sectors, including healthcare, aerospace, automotive, and consumer goods, enabling the production of lightweight components, personalized medical tools, and complex designs [5][4] - In aerospace, 3D Printing is used for manufacturing durable aircraft components, while in automotive, it aids in producing prototypes and customized parts [5] Technological Advancements - The technology allows for the use of lighter and stronger materials, minimizes waste, and enables faster production cycles, which traditional methods cannot achieve [4] - Companies like GE Aerospace have integrated 3D Printing into their production processes, resulting in significant improvements in fuel efficiency for jet engines [18][19]

Business Segments Overview - Integrated Mission Systems (IMS) generated $6.9 billion in revenue in 2024, with 60% from fixed price contracts and 75% from domestic sources[26,31] - Communication Systems (CS) had $6.8 billion in revenue in 2024, with 70% from fixed price contracts and 70% from domestic sources[31,35] - Aerojet Rocketdyne (AR) revenue in 2024 was primarily (98%) from space propulsion and power systems, almost entirely (98%) domestic, and primarily (98%) as a prime contractor[39] Growth Drivers - Integrated Mission Systems (IMS) is driven by modernization of ISR missionization, strengthening capabilities, and supporting sustained growth in intelligence operations[32] - Communication Systems (CS) growth is fueled by increased international demand for software-defined radios, night-vision goggles, and munitions[36] - Aerojet Rocketdyne (AR) aims to leverage DPA funds to scale up capacity and modernize manufacturing facilities[40] Financial Position - The company has $5.2 billion in cash[55] - The company has $3.5 billion in net debt[56]