L3Harris Technologies, Inc. is an agile global aerospace and defense technology innovator, which engages in the provision of defense and commercial technologies across air, land, sea, space and cyber domains. It operates through the following segments: Integrated Mission Systems; Space and Airborne Systems; Communication Systems; and Aviation Systems. The Integrated Mission Systems segment include intelligence, surveillance, and reconnaissance; advanced electro optical and infrared; and maritime power and navigation. The Space and Airborne Systems segment comprises space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; avionics; and electronic warfare. The Communication Systems segment consists tactical communications; broadband communications; L3's night vision; and public safety. The Aviation Systems segment compose defense aviation products; security, detection and other commercial aviation products; air traffic management; and commercial and military pilot training. The company was founded in 2019 and is headquartered in Melbourne, FL.
We depend on U.S. Government customers for a significant portion of our revenue, and the loss of these relationships, a reduction in U.S. Government funding or a change in U.S. Government spending priorities could have an adverse impact on our business, financial condition, results of operations and cash flows.
We depend significantly on U.S. Government contracts, which often are only partially funded, subject to immediate termination, and heavily regulated and audited. The termination or failure to fund, or negative audit findings for, one or more of these contracts could have an adverse impact on our business, financial condition, results of operations and cash flows.
The U.S. Government’s budget deficit and the national debt, as well as any inability of the U.S. Government to complete its budget process for any government fiscal year and consequently having to shut down or operate on funding levels equivalent to its prior fiscal year pursuant to a “continuing resolution,” could have an adverse impact on our business, financial condition, results of operations and cash flows.
Our ability to successfully manage ongoing business and organizational changes could impact our business results.
Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts. In particular, our fixed-price contracts could subject us to losses in the event of cost overruns or a significant increase in inflation.
We use estimates in accounting for many of our programs, and changes in our estimates could adversely affect our future financial results.
We derive a significant portion of our revenue from international operations and are subject to the risks of doing business internationally, including fluctuations in currency exchange rates.
The level of returns on defined benefit plan assets, changes in interest rates and other factors could affect our financial condition, results of operations and cash flows in future periods.
We may not be successful in obtaining the necessary export licenses to conduct certain operations abroad, and Congress may prevent proposed sales to certain foreign governments.
Disputes with our subcontractors or the inability of our subcontractors to perform, or our key suppliers to timely deliver our components, parts or services, could cause our products, systems or services to be produced or delivered in an untimely or unsatisfactory manner.
Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents or business partners.
Our future success will depend on our ability to develop new products, systems, services and technologies that achieve market acceptance in our current and future markets.
We participate in markets that are often subject to uncertain economic conditions, which makes it difficult to estimate growth in our markets and, as a result, future income and expenditures.
We cannot predict the consequences of future geo-political events, but they may adversely affect the markets in which we operate, our ability to insure against risks, our operations or our profitability.
Strategic transactions, including mergers, acquisitions and divestitures, involve significant risks and uncertainties that could adversely affect our business, financial condition, results of operations and cash flows.
The outcome of litigation or arbitration in which we are involved from time to time is unpredictable, and an adverse decision in any such matter could have a material adverse effect on our financial condition, results of operations and cash flows.
Third parties have claimed in the past and may claim in the future that we are infringing directly or indirectly upon their intellectual property rights, and third parties may infringe upon our intellectual property rights.
We face certain significant risk exposures and potential liabilities that may not be covered adequately by insurance or indemnity.
Changes in our effective tax rate may have an adverse effect on our results of operations.
Our level of indebtedness and our ability to make payments on or service our indebtedness and our unfunded defined benefit plans liability may adversely affect our financial and operating activities or our ability to incur additional debt.
A downgrade in our credit ratings could materially adversely affect our business.
Unforeseen environmental issues could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We have significant operations in locations that could be materially and adversely impacted in the event of a natural disaster or other significant disruption.
Changes in future business or other market conditions could cause business investments and/or recorded goodwill or other long-term assets to become impaired, resulting in substantial losses and write-downs that would adversely affect our results of operations.
We must attract and retain key employees, and any failure to do so could seriously harm us.
Some of our workforce is represented by labor unions, so our business could be harmed in the event of a prolonged work stoppage.
We may fail to realize all of the anticipated benefits of the L3Harris Merger or those benefits may take longer to realize than expected. We may also encounter significant difficulties in integrating the businesses.
Certain business uncertainties arising from the L3Harris Merger could adversely affect our businesses and operations.
We have incurred and will incur direct and indirect costs as a result of the L3Harris Merger.
As noted in the introductory paragraph before “Item 1: Business” and described in more detail in Note 1: Significant Accounting Policies under “Principles of Consolidation” and Note 26: Subsequent Events in the Notes, the L3Harris Merger closed on June 29, 2019, after Harris’ fiscal 2019 ended (on June 28, 2019), and consequently, all or significant portions of the disclosure in the business description, results of operations, financial position, financial reports and Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Report principally relate to Harris.
Through fiscal 2019, our fiscal years ended on the Friday nearest June 30. Commencing June 29, 2019, our fiscal year will end on the Friday nearest December 31, and the period commencing on June 29, 2019 will be a fiscal transition period ending on January 3, 2020. Our segment reporting for the Fiscal Transition Period will be adjusted to reflect our new organizational structure announced July 1, 2019, consisting of the following four business segments:
These changes to our segment reporting are effective as of the beginning of the Fiscal Transition Period and therefore do not affect the historical results, discussion or presentation of our business segments as set forth in this Report. We will report our financial results consistent with this new segment reporting structure beginning with the fiscal quarter ending on September 27, 2019.