2020 Annual Report - L3Harris

SUSTAINABILITYPROGRAML3Harris is committed to creating a more sustainable future for our society. The company will issue its firstSustainability Report in 2021, which will provide information about the company’s strategy and metrics onenvironmental, social and governance initiatives.ENVIRONMENTALL3Harris has invested in energy efficiency and carbon-reduction projects while enhancing management ofenergy and water usage, greenhouse gas (GHG) emissions and solid waste generation. The company signeda virtual renewable energy power purchase agreement – 110,000 metric tons of avoided GHG emissionsannually through L3Harris’ agreement, equivalent to removing 24,000 cars from the road every year.30%OUR CURRENT ENVIRONMENTALSUSTAINABILITY PROGRAM2026 GOALS INCLUDE:GHG EMISSIONSREDUCTION*GHG and water use reductioncompared to 2019 baseline.20%75%WATER USEREDUCTIONSOLID WASTEDIVERSIONSOCIALL3Harris invests heavily in our employees’ safety, training and career success – and took key steps early tokeep employees safe throughout the COVID-19 pandemic. In addition, we support communities where wework and live, focusing our philanthropy and employee volunteerism in STEM, mission-aligned and communityinitiatives. Our L3Harris Investing For Tomorrow (LIFT) employee volunteerism program empoweredemployees to support approximately 530 virtual and other community service projects in 2020. In the wakeof social unrest, L3Harris promoted dialogue around the topic of Diversity and Inclusion (D&I), particularlythrough our D&I council and our Employee Resource Groups (ERGs), while also committing to new diversity goals.L3HARRIS EMPLOYEE RESOURCE GROUPSAPEXPRIDEECPSERVE(Asian Professionals for Excellence)(Early Career Professionals)HOLA(Hispanic/Latino Organizationfor Leadership & Advancement)INTRAPRENEURS(Technology & Innovation Resource Group)LEADREPRESENTATION(LGBTQ Resource Group)(Supporting Emergency Respondersand Veterans Engagement)WE3(Women Who Strive for Empowering,Enhancing, & Encouraging Other Women)WILA(Willing & Able)50%WOMENGLOBALLY33%PERSONS OF COLORIN THE U.S.(L3Harris Employees of African Descent)GOVERNANCEL3Harris is committed to responsible and effective corporate governance to ensure sustainable, long-termshareholder value, and to be accountable and responsive to all stakeholders. The Board is elected annuallyby shareholders and is comprised of independent directors except for two employee directors – the CEO andCOO. The ESG Steering Committee is led by our CEO and consists of key executives and an executive sponsorfor each of the three main pillars: Environmental, Social and Governance.COMPANY ERESPECT Accountable Flawless Execution Safe & Sustainable Ethical Customer-Focused Community-Minded Honest Innovative InclusiveL3HARRIS TECHNOLOGIES 2020 ANNUAL REPORT

NON-GAAP AND PRO FORMA FINANCIAL MEASURESTo supplement results presented in accordance with U.S. generally accepted accounting principles (“GAAP”), results in this Annual Report include nonGAAP financial measures (“NGFMs”) within the meaning of Regulation G promulgated by the Securities and Exchange Commission (“SEC”), including organicrevenue; adjusted earnings before interest and taxes (“EBIT”); adjusted EBIT margin; non-GAAP earnings per diluted share from continuing operations(“EPS”); adjusted free cash flow; and [adjusted] earnings before interest, taxes, depreciation and amortization; in each case, adjusted for certain costs,charges, expenses, losses or other amounts as set forth in the reconciliations of NGFMs included below. A “NGFM” is generally defined as a numericalmeasure of a company’s historical or future performance that excludes or includes amounts, or is subject to adjustments, so as to be different from the mostdirectly comparable measure calculated and presented in accordance with GAAP). L3Harris management believes that these NGFMs, when consideredtogether with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separateand apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. L3Harris managementalso believes that these NGFMs enhance the ability of investors to analyze L3Harris business trends and to understand L3Harris performance. In addition,L3Harris may utilize NGFMs as guides in forecasting, budgeting and long-term planning processes and to measure operating performance for somemanagement compensation purposes. NGFMs should be considered in addition to, and not as a substitute for, or superior to, financial measures presentedin accordance with GAAP.Results in this Annual Report also include pro forma financial measures for full-year 2019, which combine the applicable actual GAAP results for the thirdand fourth quarters of 2019 (which occurred following the L3Harris merger) with the corresponding results for the first two quarters of 2019 (preceding theL3Harris merger) in the pro forma condensed combined income statement information (prepared in a manner consistent with Article 11 of Regulation S-X)included in L3Harris’ Current Report on Form 8-K filed with the SEC on May 4, 2020. Adjusted pro forma financial measures are included among the NGFMsdescribed in the preceding paragraph and refer to the applicable prior-year pro forma financial measure as adjusted for certain costs, charges, expenses,losses or other amounts as set forth in the reconciliations of NGFMs included below.A reconciliation of these NGFMs with the most directly comparable financial measures calculated in accordance with GAAP follows:NON-GAAP INCOME FROM CONTINUING OPERATIONS PER DILUTED COMMON SHAREDOLLARS IN MILLIONSIncome from continuing operations per diluted common share attributable to L3Harris Technologies, Inc. common shareholdersREVENUEAdjustments:DOLLARS IN MILLIONSPre-merger integration costs, including change in control chargesRevenue from product sales and servicesL3Harris Merger-related transaction costsAdjustment ( c )L3Harris Merger integration costsOrganic revenueRestructuring charges and other itemsYOY % increaseCharges related to consolidation of facilities, including right-of-use asset impairmentOrganic YOY % increaseGain on pension plan curtailmentEBITMARGINof acquisition-related intangiblesAmortizationDOLLARSIN MILLIONSAdditional costof sales related to the fair value step-up in inventory soldNetincomedivestiture-related(A)Business(gains) lossesAdjustments:Other divestiture-related expensesDiscontinuedoperations,net assetsof incometaxesto divestitures and COVID-19 impactsImpairmentof goodwilland otherrelatedexpense plant and equipmentGainNeton interestsale of property,GainIncomeon saletaxesof asset groupPre-mergerintegrationcosts,toincludingchange in control chargesNon-cashcumulativeadjustmentlease tedand other costsrelated to costsdebt refinancingL3Harris MergerintegrationNoncontrollinginterestsportion ofcostsadjustmentscharges and other itemsTotalRestructuringpre-tax adjustmentsChargesto consolidationIncometaxesrelatedon aboveadjustments of facilities, including right-of-use asset impairmenton pensionplan onof come fromoperationsper diluted common shareAdditional cost of sales related to the fair value step-up in inventory soldYOY % decreaseBusiness(gains) lossesNon-GAAPYOY %divestiture-relatedincreaseOther divestiture-related expensesADJUSTED FREE CASH FLOWImpairment of goodwill and other assets related to divestitures and COVID-19 impactsDOLLARS IN MILLIONSGain on sale of property, plant and equipmentNet cash provided by operating activitiesGain on sale of asset groupAdditions of property, plant and equipmentNon-cash cumulative adjustment to lease expenseProceeds from sale of property, plant and equipment, net(Gains) losses and other costs related to debt refinancingFree cash flowTotal adjustmentsCash used for L3Harris Merger transaction costs, including change in control paymentsAdjusted EBIT (B)Cash used for L3Harris Merger integration costsRevenue from product sales and services (C)Voluntary contribution to pension plansNet income margin (A) / (C)Adjusted free cash flowAdjusted EBIT margin percentage (A) / (B)YOY % increaseNet income margin YOY decreaseAdjusted free cash flow YOY % increaseAdjusted EBIT margin YOY increaseFULL YEARJanuary 3, 2020 ( a )January 1, 2021 7.25 5.19FULL YEARJanuary 3, 2020 ( a )January 1, 20210.45 18,097 18,1940.37(420)0.450.60 17,677 18,1940.520.131%0.223%(0.10)2.683.29January 3, 2020January 1,20210.64 ( a )0.14 1,650 1,086(1.02)0.240.0623.56 2- 253(0.10)254(0.05)189- 2340.04 100(0.01) 0.02 83(0.01) - 102(0.19)1304.22 1177.71 29(1.21) 48(1.30) 3.01 (23)6.41 10.26 601 11.60 709142-28% 31(229)13% 5113767January 3, 2020January 1, 2021(22) 1,655 278 3,039 3,280127173 18,097 18,1943029.1%6.0% 2,095 2,68616.8%18.0%69%(310 bps)28%120 bps( a ) Information for the four quarters ended January 3, 2020 is presented on a pro forma basis. "Pro forma" refers to the applicable result for full-year 2019, which combines the actualGAAP results for the third and fourth quarters of 2019 (which occurred following the L3Harris merger) with the corresponding results for the first two quarters of 2019 (preceding theL3Harris merger) in the pro forma condensed combined income statement information (prepared in a manner consistent with Article 11 of Regulation S-X) included in L3Harris'Current Report on Form 8-K filed on May 4, 2020.( b ) The four quarters ended January 3, 2020 adjusted to exclude backlog related to divested businesses.( c ) The four quarters ended January 3, 2020 adjusted to exclude revenue attributable to each divested business for the remaining portion of calendar 2019 that is equivalent to thebalance of fiscal 2020 following the date the business was divested.PAGE 5

NET DEBT TO NON-GAAP EBITDA RATIODOLLARS IN MILLIONSShort-term debtCurrent portion of long-term debt, netLong-term debt, netTotal debtLess cash and cash equivalentsNet debtIncome from continuing operations before income taxes ( a )Net interest expense ( a )Depreciation and amortization ( a )EBITDA ( a )Net Debt to EBITDA ratio ( a )Adjustments ( a ) :Pre-merger integration costs, including change in control chargesL3Harris Merger-related transaction costsL3Harris Merger integration costsRestructuring charges and other itemsCharges related to consolidation of facilities, including right-of-use asset impairmentGain on pension plan curtailmentAdditional cost of sales related to the fair value step-up in inventory soldBusiness divestiture-related (gains) lossesOther divestiture-related expensesImpairment of goodwill and other assets related to divestitures and COVID-19 impactsGain on sale of property, plant and equipmentGain on sale of asset groupNon-cash cumulative adjustment to lease expense(Gains) losses and other costs related to debt refinancingTotal adjustmentsNon-GAAP EBITDA ( a )Net Debt to Non-GAAP EBITDA ratio ( a ) January 3, 20203 2576,6946,9548246,130 1,841 ,383 1.8January 1, 29315113767(22)(2)(2)9953,6031.6TOTAL BACKLOGDOLLARS IN MILLIONSTotal backlogAdjustment ( b )Organic total backlogAS OFJanuary 3, 2020January 1, 2021 20,551 21,670(405) 20,146 21,670REVENUEDOLLARS IN MILLIONSRevenue from product sales and servicesAdjustment ( c )Organic revenueYOY % increaseOrganic YOY % increaseFULL YEARJanuary 3, 2020 ( a )January 1, 2021 18,097 18,194(420) 17,677 18,1941%3%EBIT MARGINDOLLARS IN MILLIONSNet income (A)Adjustments:Discontinued operations, net of income taxesNet interest expenseIncome taxesPre-merger integration costs, including change in control chargesL3Harris Merger-related transaction costsL3Harris Merger integration costsRestructuring charges and other itemsCharges related to consolidation of facilities, including right-of-use asset impairmentGain on pension plan curtailmentAmortization of acquisition-related intangiblesAdditional cost of sales related to the fair value step-up in inventory soldBusiness divestiture-related (gains) lossesOther divestiture-related expensesImpairment of goodwill and other assets related to divestitures and COVID-19 impactsGain on sale of property, plant and equipmentGain on sale of asset groupNon-cash cumulative adjustment to lease expense(Gains) losses and other costs related to debt refinancingTotal adjustmentsAdjusted EBIT (B)Revenue from product sales and services (C)Net income margin (A) / (C)Adjusted EBIT margin percentage (A) / (B)Net income margin YOY decreaseAdjusted EBIT margin YOY increaseJanuary 3, 2020 ( a )January 1, 2021 1,650 1,086 39 18,097 28018,1946.0%18.0%(310 bps)120 bps( a ) Information for the four quarters ended January 3, 2020 is presented on a pro forma basis. "Pro forma" refers to the applicable result for full-year 2019, which combines the actualGAAP results for the third and fourth quarters of 2019 (which occurred following the L3Harris merger) with the corresponding results for the first two quarters of 2019 (preceding the

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended January 1, 2021OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission File Number 1-3863L3HARRIS TECHNOLOGIES, INC.(Exact name of registrant as specified in its charter)Delaware34-0276860(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)1025 West NASA BoulevardMelbourne, Florida32919(Address of principal executive offices)(Zip Code)Registrant’s telephone number, including area code: (321) 727-9100Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, par value 1.00 per shareLHXNew York Stock ExchangeSecurities Registered Pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No þIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days. Yes þ No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant toRule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes þ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reportingcompany or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and“emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filerNon-accelerated filerAccelerated filer Smaller reporting company Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forcomplying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness ofits internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered publicaccounting firm that prepared or issued its audit report. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No þThe aggregate market value of the voting common equity held by non-affiliates of the registrant at July 3, 2020 was 36,993,861,277(based on the quoted closing sale price per share of the stock on the New York Stock Exchange). For purposes of this calculation, the registranthas assumed that its directors and executive officers as of July 3, 2020 are affiliates.The number of shares outstanding of the registrant’s common stock as of February 26, 2021 was 205,565,782.þ Documents Incorporated by Reference:Portions of the registrant’s definitive Proxy Statement for the 2021 Annual Meeting of Shareholders scheduled to be held on April 23,2021, which will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year endedJanuary 1, 2021, are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent described therein.

L3HARRIS TECHNOLOGIES, INC.ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 1, 2021TABLE OF CONTENTSPage No.Part I:ITEM 1.ITEM 1A.ITEM 1B.ITEM 2.ITEM 3.ITEM 4.Business.Risk Factors.Unresolved Staff Comments.Properties.Legal Proceedings.Mine Safety Disclosures.Information about our Executive Officers.1112425252728Part II:ITEM 5.ITEM 6.ITEM 7.ITEM 7A.ITEM 8.ITEM 9.ITEM 9A.ITEM 9B.Market for Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities.[Reserved].Management’s Discussion and Analysis of Financial Condition and Results of Operations.Quantitative and Qualitative Disclosures About Market Risk.Financial Statements and Supplementary Data.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.Controls and Procedures.Other Information.3032336970132132133Part III:ITEM 10.ITEM 11.ITEM 12.133134ITEM 13.ITEM 14.Directors, Executive Officers and Corporate Governance.Executive Compensation.S

an eight-day improvement in 2020, which helped generate 2.7 billion in adjusted free cash flow. This enabled us to return 3 billion to shareholders through 725 million in dividends and 2.3 billion in share repurchases. We continued to position the business for long-term focusing our managemen