AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 4/6 · 18/10/2026
Moat50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Complex integration, life-cycle management and long-term contracts support incumbent continuity. The advantage is inferred from actual business relationships; exclusivity, replacement costs and superiority over named competitors are unquantified.
durability · 2/4 · Long-term contracts and growing backlog support persistence within awarded work, while repeated bidding and possible procurement changes limit confidence beyond current programs.
customer dependency · 2/4 · Life-cycle responsibilities and increased volumes on established aircraft, space and missile programs indicate meaningful customer reliance. This is indirect evidence; it does not establish sole-source dependence or inability to switch.
erosion resilience · 2/4 · Backlog growth and expanding program volumes show current resilience despite competitive procurement. Existing pricing pressure and well-resourced competitors prevent a stronger durability judgment; procurement reform remains a potential risk.
Pricing power44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · The issuer explicitly reports increased pricing pressure from multiple competitive bidding processes. Recent revenue growth is attributed principally to volume and program ramps, without evidence of realized price premiums. The grade reflects disclosed weak pricing conditions, not an assumed price decline.
retention · 3/4 · Contractual backlog grew 13% to $38.7 billion, and subsequent production and development volumes expanded across established programs. This is strong indirect evidence of continuing demand, although it combines existing-program activity with new awards and supplies no renewal rate.
margin resilience · 2/4 · Revenue and operating income increased in the first half of 2026. However, gross-margin improvement included favorable contract-estimate adjustments, and individual programs incurred unfavorable adjustments. Results support mixed resilience without proving pricing power.
contractual freedom · 1/4 · Cost-type contracts restrict recovery to allowable costs and specified or discretionary fees. Firm fixed-price contracts lock in prices while exposing the company to overruns, and repeated bidding increases pricing pressure. These terms constrain unilateral repricing.
Predictability—
Missing exact annual revenue, free cash flow or FCF margin; operating cash flow and capex must both be reported for all five years.
Financial strength33
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 55.08
- netDebtEbitGrade
- 4.77
- interestCoverageGrade
- 37.66
- currentRatioGrade
- 35.13
- Debt / FCF (x)
- 4.14
- Net debt / operating income (x)
- 4.76
- Current ratio (x)
- 1.19
- cashInterestPaid
- 604.00
- cashInterestCoverage
- 5.14
Capital allocation—
Missing required inputs: sbcRevenue. Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 6.05
- 3-year average dilution (%)
- -0.77
- cashConversionGrade
- 100.00
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Fiscal 2025 operating cash generation of $3.1 billion, subsequent shareholder distributions and declining common-share balances demonstrate tangible capital activity. Debt remained approximately $11 billion with higher current maturities. Missing investment-return and complete cash-flow detail limit assessment of allocation quality.
incentive alignment · 3/4 · Existing compensation uses overlapping three-year performance periods, equity vesting, payout caps and clawbacks; fiscal 2025 results and resulting incentive payouts are disclosed. Ownership guidelines add alignment, although some executives were only on track to comply and exact holdings are absent.
execution · 3/4 · Reported fiscal 2025 cash flow, earnings and cost savings exceeded disclosed incentive targets; subsequent revenue and operating income increased, and transformation implementation was completed. This is strong operating evidence, qualified by adjusted measures, favorable estimate revisions and individual program overruns. Delivery execution is assessed indirectly rather than from a verified on-time delivery series.
governance · 2/4 · Annual majority-vote elections and regular independent-director executive sessions provide concrete accountability mechanisms. The existing 25% special-meeting threshold and one-year holding requirement constrain shareholder access. These disclosures support a mixed assessment without establishing exceptional oversight effectiveness.
Evidence
IMS specializes in system design, development, integration, production, modernization and sustainment for national security and international customers in the following business sectors: ISR: Airborne passive sensing and targeting, mission systems development, integration and life-cycle management for strategic reconnaissance and air superiority platforms, national command and control, tactical surveillance, electronic attack, agile strike, mobility, and classified platforms.
Business — IMS integration and life-cycle management · Filed 12/02/2026
We provide top-tier capabilities in the design, development, integration, production and sustainment of weapons systems for national security, civil government and international customers in the following business sectors: Space Systems: ISR; position, navigation and timing; weather and climate monitoring; missile defense and ground-based space surveillance networks.
Business — design, production and sustainment capabilities · Filed 12/02/2026
Revenue Recognition A significant portion of our business is derived from long-term development and production contracts.
Critical accounting estimates — long-term development and production contracts · Filed 12/02/2026
Customer demand for our solutions remains robust, and we ended fiscal 2025 with contractual backlog of $38.7 billion, a 13% increase over the prior year.
MD&A — fiscal 2025 contractual backlog and growth · Filed 12/02/2026
Year to Date Comparison. Space and Mission Systems revenue increased primarily due to higher revenues of $501 million in ISR associated with a milestone related to material procurement in support of classified contracts and higher volumes on missionized aircraft programs, $141 million in Space Systems from higher volumes on Space Development Agency (“SDA”) Tracking Tranche 3 and classified space programs, $99 million in Mission Networks from higher FAA volume, $56 million in Maritime from higher volume on international programs associated with program timing and $51 million in Airborne Solutions from higher F-35 volumes.
MD&A — year-to-date Space and Mission Systems program volumes · Filed 30/07/2026
Missile Solutions revenue increased primarily due to higher revenue of $210 million in Propulsion Systems as growth from increased production and development volumes on key missile and munitions programs was partially offset by lower growth in our space propulsion business.
MD&A — Missile Solutions production and development volumes · Filed 30/07/2026
We compete domestically and internationally against large defense companies; principally BAE Systems, Boeing, General Dynamics, Lockheed Martin, Northrop Grumman, RTX, Thales and non-traditional defense contractors, such as Anduril, Ursa Major and Silvus Technologies.
Business — named competitors · Filed 12/02/2026
The U.S. Government has increasingly relied on certain types of contracts that are subject to multiple competitive bidding processes, including multi-vendor indefinite-delivery, indefinite-quantity (“IDIQ”), government-wide acquisition contracts, General _____________________________________________________________________ 5 Services Administration Schedules and other multi-award contracts, which has resulted in greater competition and increased pricing pressure.
Risk factors — multiple bidding processes and increased pricing pressure · Filed 12/02/2026
The DoW’s current procurement reform initiative, including the increased use of other transaction authority (“OTA”) agreements, could reduce barriers to entry and result in even greater competition and increased pricing pressure.
Risk factors — potential entry-barrier reduction from procurement reform · Filed 12/02/2026
Some of our competitors, including non-traditional new entrants to defense-related programs, have greater financial resources than we do and may have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas.
Risk factors — competing financial and specialized capabilities · Filed 12/02/2026
Cost-type contracts. Our U.S. Government cost-type contracts provide for the reimbursement of allowable costs plus payment of a fee and fall into three basic types: (i) cost-plus fixed-fee contracts, which provide for payment of a fixed fee irrespective of the final cost of performance; (ii) cost-plus incentive-fee contracts, which provide for payment of a fee that may increase or decrease, within specified limits, based on actual results compared with contractual targets relating to factors such as cost, performance and delivery schedule; and (iii) cost-plus award-fee contracts, which provide for payment of an award fee determined at the customer’s discretion based on our performance against pre-established performance criteria.
Contract types — allowable-cost reimbursement and fee restrictions · Filed 12/02/2026
Under our U.S. Government firm fixed-price contracts, we agree to perform a specific scope of work or sell a specific product for a fixed price and, as a result, benefit from cost savings or carry the burden of cost overruns.
Contract types — firm fixed prices and cost-overrun exposure · Filed 12/02/2026
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) Second Quarter Year to Date (In millions, except per share amounts) 2026 2025 2026 2025 Revenue $ 5,881 $ 5,426 $ 11,625 $ 10,558 Cost of revenue (4,379) (4,091) (8,721) (7,873) General and administrative expenses (848) (764) (1,598) (1,589) Operating income 654 571 1,306 1,096 Non-service FAS pension income and other, net(1) 185 105 258 189 Interest expense, net (129) (152) (265) (302) Income before income taxes 710 524 1,299 983 Income tax expense (110) (66) (187) (139) Net income $ 600 $ 458 $ 1,112 $ 844 Subsidiary preferred stock deemed dividend (14) — (14) — Net income available to common shareholders $ 586 $ 458 $ 1,098 $ 844 Earnings per share available to common shareholders Basic $ 3.15 $ 2.45 $ 5.89 $ 4.50 Diluted $ 3.13 $ 2.44 $ 5.85 $ 4.48 _______________ (1)“FAS” is defined as Financial Accounting Standards.
Condensed consolidated statement of operations — 2026 comparative results · Filed 30/07/2026
Year to Date Comparison. Gross margin increased $219 million, primarily due to higher volumes across all segments and a $82 million favorable change in net EAC adjustments, partially offset by the absence of the CAS disposal group as a result of the March 2025 divestiture.
MD&A — year-to-date gross-margin drivers and favorable estimate adjustments · Filed 30/07/2026
Operating income was also impacted by a gain of $39 million recognized in connection with the sale of assets from a product line sale in first quarter 2026, partially offset by a $31 million unfavorable EAC adjustment on a legacy domestic naval sensor program in first quarter 2026.
MD&A — product-line sale gain and unfavorable program adjustment · Filed 30/07/2026
2025 FINANCIAL RESULTS COMPANY DATA ANNUAL REVENUE BY SEGMENT** $27.5B ORDERS $38.7B BACKLOG $10.7B SPACE & MISSION SYSTEMS $21.9B L3HARRIS ANNUAL REVENUE 9.7%/15.8% GAAP MARGIN/ADJUSTED SEGMENT OPERATING MARGIN* $7.6B COMMUNICATIONS & SPECTRUM DOMINANCE $8.53/$10.73 GAAP EPS/NON-GAAP EPS* $3.1/$2.8B CASH FROM OPERATIONS/ ADJUSTED FREE CASH FLOW* $3.8B MISSILE SOLUTIONS OUR VALUES INTEGRITY EXCELLENCE RESPECT Accountable Ethical Honest Flawless Execution Customer-Focused Innovative Safe Sustainable Community-Minded * See Appendix A for reconciliations of U.S.
Proxy summary — fiscal 2025 revenue, orders and operating cash flow · Filed 01/04/2026
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF EQUITY (Unaudited) Second Quarter Year to Date (In millions, except per share amounts) 2026 2025 2026 2025 Common Stock Beginning balance $ 187 $ 188 $ 187 $ 190 Share-based compensation — 1 1 1 Repurchases and retirement of common stock (1) (2) (2) (4) Ending balance 186 187 186 187 Paid-in Capital Beginning balance 14,974 15,170 15,117 15,558 Share-based compensation and other, net 84 121 172 190 Repurchases and retirement of common stock (176) (201) (407) (658) Ending balance 14,882 15,090 14,882 15,090 Retained Earnings Beginning balance 4,421 3,787 4,212 3,739 Net income and other 600 458 1,111 844 Subsidiary preferred stock deemed dividend (14) — (14) — Repurchases and retirement of common stock (52) (50) (116) (160) Cash dividends (232) (225) (470) (453) Ending balance 4,723 3,970 4,723 3,970 Accumulated Other Comprehensive Income (Loss) Beginning balance 98 (14) 119 27 Other comprehensive (loss) income, net of tax (7) 45 (28) 4 Ending balance 91 31 91 31 Noncontrolling Interests Beginning balance — (1) — 65 Derecognized with divestiture — — — (63) Other — 1 — (2) Ending balance — — — — Total Equity $ 19,882 $ 19,278 $ 19,882 $ 19,278 Cash dividends per share $ 1.25 $ 1.20 $ 2.50 $ 2.40 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
Statement of equity — repurchases, compensation and dividends · Filed 30/07/2026
_____________________________________________________________________ 14 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE I: DEBT AND CREDIT ARRANGEMENTS Long-Term Debt Long-term debt is summarized below: (In millions) July 3, 2026 January 2, 2026 Fixed-rate debt(1) $ 10,776 $ 10,876 Finance lease obligations and other 267 283 Unamortized discounts and issuance costs, net of bond premium (44) (43) Total long-term debt 10,999 11,116 Less: Current portion of long-term debt(2) 1,815 673 Long-term debt, net $ 9,184 $ 10,443 _______________ (1)See Note 8: Debt and Credit Arrangements in our Fiscal 2025 Form 10-K for information on our fixed-rate debt.
Note I — debt balances and current maturities · Filed 30/07/2026
Threshold Target Maximum Result Financial Performance (50% (100% (200% Relative to Resulting Weighted Measure Weighting Payout)(1) Payout)(1) Payout)(1) Result(2) Target(2) Payout % Payout% L3HARRIS (100% for Kubasik and Bedingfield; 50% for other named executive officers) Adjusted Free Cash Flow 50 % $ 2,066 $ 2,582 $ 2,970 $ 2,814 109 % 160 % Adjusted EBIT 20 % $ 2,397 $ 2,820 $ 3,243 $ 2,950 105 % 131 % Revenue 10 % $ 19,491 $ 21,657 $ 23,822 $ 21,865 101 % 110 % > 153% Adjusted Segment Operating Margin 10 % 14.7% 15.5% 16.0% 15.8% 102 % 160 % LHX NeXt Cost Savings 10 % $ 900 $ 1,200 $ 1,500 $ 1,500 125 % 200 % SPACE & AIRBORNE SYSTEMS SEGMENT (50% for Zoiss) Adjusted Free Cash Flow 50 % $ 676 $ 845 $ 972 $ 868 103 % 118 % Adjusted EBIT 20 % $ 761 $ 895 $ 1,029 $ 852 95 % 84 % Revenue 10 % $ 6,390 $ 7,100 $ 7,810 $ 6,946 98 % 89 % > 112% Segment Operating Margin 10 % 12.0% 12.6% 13.1% 12.3% 98 % 76 % LHX NeXt Cost Savings 10 % $ 900 $ 1,200 $ 1,500 $ 1,500 125 % 200 % COMMUNICATION SYSTEMS SEGMENT (50% for Mehta) Adjusted Free Cash Flow 50 % $ 1,120 $ 1,400 $ 1,610 $ 1,432 102 % 115 % Adjusted EBIT 20 % $ 1,211 $ 1,425 $ 1,639 $ 1,432 101 % 103 % Revenue 10 % $ 5,130 $ 5,700 $ 6,270 $ 5,673 100 % 98 % > 122% Segment Operating Margin 10 % 23.8% 25.0% 25.5% 25.2% 101 % 140 % LHX NeXt Cost Savings 10 % $ 900 $ 1,200 $ 1,500 $ 1,500 125 % 200 % INTEGRATED MISSION SYSTEMS SEGMENT (50% for Rambeau) Adjusted Free Cash Flow 50 % $ 510 $ 638 $ 734 $ 719 113 % 185 % Adjusted EBIT 20 % $ 620 $ 730 $ 839 $ 812 111 % 175 % Revenue 10 % $ 5,680 $ 6,311 $ 6,942 $ 6,630 105 % 151 % > 183% Segment Operating Margin 10 % 11.0% 11.6% 12.1% 12.2% 105 % 200 % LHX NeXt Cost Savings 10 % $ 900 $ 1,200 $ 1,500 $ 1,500 125 % 200 % * All segment payouts are based on our 2025 segment structure, prior to our segment reorganization, effective January 3, 2026.
Compensation discussion — fiscal 2025 performance targets, results and payouts · Filed 01/04/2026
These factors included: > An emphasis on long-term compensation that utilizes a balanced portfolio of compensation elements, such as cash and equity, and delivers rewards based on sustained performance over time; > The Compensation Committee’s power to set short- and long-term performance objectives for incentive plans that appropriately correlate with shareholder value and use multiple financial measures to measure performance; > Performance share unit awards that generally are tied to financial performance measures spanning overlapping three-year performance periods, creating a focus on driving sustained performance over multiple performance periods, which mitigates the potential for executives to take excessive risks to drive one-time, short-term performance spikes in any one performance period; > The use of equity awards with vesting periods to foster retention and align executives’ interests with those of shareholders; > Caps on potential payouts under both short- and long-term incentive plans to eliminate the potential for windfalls; > A Clawback Policy that requires recovery of any excess incentive-based compensation from executive officers following a restatement of financial information that affects the financial measures used to determine such incentive-based compensation; > Share ownership guidelines; and > A broad array of competitive benefit programs that offer employees and executives an opportunity to build meaningful retirement assets and benefit protections throughout their careers.
Compensation practices — performance periods, vesting, payout caps and recovery · Filed 01/04/2026
As of March 13, 2026, our CEO and all other named executive officers have met or were on track to meet the applicable stock ownership guidelines within the applicable timeframe.
Ownership guidelines — compliance status as of March 13, 2026 · Filed 01/04/2026
Key Governance Practices All directors elected annually with a majority voting standard in uncontested elections.
Governance practices — annual elections and majority voting · Filed 01/04/2026
> holds executive sessions of independent directors at every regularly scheduled Board and committee meeting to discuss strategic matters and significant developments without management present.
Governance practices — independent-director executive sessions · Filed 01/04/2026
This characterization is inaccurate and misleading because: > Our special meeting right is meaningful and aligned with market best practices; > The 25% threshold can be achieved by a reasonable number of our largest shareholders acting together; > The one-year holding requirement is a standard protective measure, not a discriminatory barrier; and > The requirement ensures that those calling special meetings have demonstrated a long-term commitment to the Company.
Shareholder proposal response — existing special-meeting threshold and holding requirement · Filed 01/04/2026
The implementation phase of LHX NeXt was completed in fiscal 2025.
MD&A — completion of LHX NeXt implementation · Filed 30/07/2026
Revenue increased $1,067 million, or 10% reflecting higher revenues across all segments, primarily from higher volumes, driven by new program ramps, including a milestone related to material procurement in support of classified contracts, and increased international deliveries.
MD&A — revenue growth attributed principally to volumes and program ramps · Filed 30/07/2026
