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STOCK OPTIONS AND OTHER SHARE-BASED COMPENSATION | 12 Months Ended
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Dec. 29, 2023
Share-Based Payment Arrangement [Abstract] |
STOCK OPTIONS AND OTHER SHARE-BASED COMPENSATION | NOTE 10: STOCK OPTIONS AND OTHER SHARE-BASED COMPENSATION At December 29, 2023, we had options or other share-based compensation outstanding under two Harris shareholder-approved employee stock incentive plans (“SIPs”), the Harris Corporation 2005 Equity Incentive Plan (As Amended and Restated Effective August 27, 2010) and the L3Harris Technologies, Inc. 2015 Equity Incentive Plan (As Amended and Restated Effective August 28, 2020) (the “2015 EIP”), as well as under employee stock incentive plans of L3 assumed by L3Harris (collectively, “L3Harris SIPs”). As part of our long-term incentive compensation program, we have made awards to employees in the form of performance share units, restricted stock units, nonqualified options under the L3Harris SIPs. We have also awarded restricted stock units in the form of deferred units to our non-employee directors. We believe that share-based awards more closely align the interests of participants with those of shareholders. Summary of Share-Based Compensation Expense The following table summarizes the amounts and classification of share-based compensation expense:
| Fiscal Year Ended
(In millions) | December 29, 2023 |  | December 30, 2022 |  | December 31, 2021
Total expense | $ | 89 |  |  | $ | 109 |  |  | $ | 129 |
Included in: |  |  |  |  |
Cost of product sales and services | $ | 16 |  |  | $ | 19 |  |  | $ | 14 |
General and administrative expenses | 73 |  |  | 90 |  |  | 115 |
Income from continuing operations | 89 |  |  | 109 |  |  | 129 |
Tax effect on share-based compensation expense | (19) |  |  | (27) |  |  | (33) |
Total share-based compensation expense after-tax | $ | 70 |  |  | $ | 82 |  |  | $ | 96 |
As of December 29, 2023, a total of 12.2 million shares of common stock remained available under our 2015 EIP for future issuance (excluding shares to be issued in respect of outstanding options and other share-based awards, and with each full-value award (e.g., restricted stock unit awards and performance share unit awards) counting as 4.6 shares against the total remaining for future issuance). During fiscal 2023, we issued an aggregate of 0.5 million shares of common stock under the terms of our L3Harris SIPs, which is net of shares withheld for tax purposes. Stock Options The following information relates to stock options, including performance stock options, that have been granted under shareholder-approved L3Harris SIPs. Option exercise prices are equal to or greater than the fair market value of our common stock on the date the options are granted, using the closing stock price of our common stock. Options may be exercised for a period of ten years after the date of grant, and options, other than performance stock options, generally become exercisable in installments, which are typically 33.3% one year from the grant date, 33.3% two years from the grant date and 33.3% three years from the grant date. In certain instances, vesting and exercisability are also subject to performance criteria. The fair value as of the grant date of each option award was determined using the Black-Scholes-Merton option-pricing model which uses assumptions noted in the following table. Expected volatility over the expected term of the options is based on implied volatility from traded options on our common stock and the historical volatility of our stock price. The expected term of the options is based on historical observations of our common stock, considering average years to exercise for all options exercised and average years to cancellation for all options canceled, as well as average years remaining for vested outstanding options, which is calculated based on the weighted-average of these three inputs. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. A summary of the assumptions used in determining the fair value of the stock option grants under our L3Harris SIPs is as follows:
| Fiscal Year Ended
| December 29, 2023 |  | December 30, 2022 |  | December 31, 2021
Expected dividends | 2.17% |  | 2.00% |  | 1.99%
Expected volatility | 28.60% |  | 29.09% |  | 31.71%
Risk-free interest rates | 3.48% - 4.27% |  | 1.63% - 4.27% |  | 0.75%
Expected term (years) | 5.04 |  | 5.02 |  | 5.05
A summary of stock option activity under our L3Harris SIPs as of December 29, 2023 and changes during fiscal 2023 is as follows:
| Shares |  | Weighted Average Exercise Price Per Share |  | Weighted Average Remaining Contractual Term (In years) |  | Aggregate Intrinsic Value (In millions)
Stock options outstanding at December 30, 2022 | 3,306,129 |  |  | $ | 162.56 |  |  |  |  |
Granted | 366,670 |  |  | $ | 209.88 |  |  |  |  |
Exercised | (230,702) |  |  | $ | 100.03 |  |  |  |  |
Forfeited or expired | (191,387) |  |  | $ | 210.31 |  |  |  |  |
Stock options outstanding at December 29, 2023 | 3,250,710 |  |  | $ | 169.53 |  |  | 5.42 |  | $ | 140 |
Stock options exercisable at December 29, 2023 | 2,669,082 |  |  | $ | 160.11 |  |  | 4.74 |  | $ | 138 |
The weighted-average grant-date fair value per share was $54.63, $53.66 and $42.16 for options granted in fiscal 2023, 2022 and 2021, respectively. The total intrinsic value of options at the time of exercise was $23 million, $56 million and $173 million for options exercised in fiscal 2023, 2022 and 2021, respectively. A summary of the status of our nonvested stock options at December 29, 2023 and changes during fiscal 2023 is as follows:
| Shares |  | Weighted-Average Grant-Date Fair Value Per Share
Nonvested stock options at December 30, 2022 | 685,718 |  |  | $ | 46.76 |
Granted | 366,670 |  |  | $ | 54.63 |
Vested/forfeited, net | (470,760) |  |  | $ | 43.21 |
Nonvested stock options at December 29, 2023 | 581,628 |  |  | $ | 52.72 |
As of December 29, 2023, there was $19 million of total unrecognized compensation expense related to nonvested stock options granted under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.90 years. The total fair value of stock options that vested in fiscal 2023, 2022 and 2021 was $14 million, $42 million and $6 million, respectively. Restricted Stock Unit Awards The following information relates to awards of restricted stock units that have been granted to employees and non-employee directors under our L3Harris SIPs. These awards are not transferable until vested and the restrictions generally lapse upon the achievement of continued employment (or board membership) over a specified time period. The fair value as of the grant date of these awards was based on the closing price of our common stock on the grant date and is amortized to compensation expense over the vesting period. At December 29, 2023, there were 728,052 restricted stock units outstanding which were payable in shares. A summary of the status of these awards at December 29, 2023 and changes during fiscal 2023 is as follows:
| Units |  | Weighted-Average Grant Price Per Unit
Restricted stock units outstanding at December 30, 2022 | 673,495 |  |  | $ | 211.16 |
Granted | 354,657 |  |  | $ | 199.33 |
Vested | (223,855) |  |  | $ | 198.24 |
Forfeited | (76,245) |  |  | $ | 205.77 |
Restricted stock units outstanding at December 29, 2023 | 728,052 |  |  | $ | 208.78 |
As of December 29, 2023, there was $86 million of total unrecognized compensation expense related to these awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.75 years. The weighted-average grant date price per share or per unit was $199.33, $225.58 and $202.10 for awards granted in fiscal 2023, 2022 and 2021, respectively. The total fair value of these awards was $44 million, $69 million and $19 million for awards that vested in fiscal 2023, 2022 and 2021, respectively. Performance Share Unit Awards The following information relates to awards of performance share units that have been granted to employees under our L3Harris SIPs. At December 29, 2023, all of these awards are subject to performance criteria, such as meeting predetermined operating income or earnings per share, return on invested capital targets and market conditions, such as total shareholder return, for a 3-year performance period. These awards also generally vest after a 3-year performance period. The final determination of the number of shares to be issued in respect of an award is made by our Board or a committee thereof. The fair value as of the grant date of awards with market conditions was determined based on a multifactor Monte Carlo valuation model that simulates our stock price and TSR relative to other companies in the S&P 500, less a discount to reflect the delay in payments of cash dividend-equivalents that are made only upon vesting. The fair value of these awards is amortized to compensation expense over the performance period if achievement of the performance measures is considered probable. A summary of the status of these awards at December 29, 2023 and changes during fiscal 2023 is as follows:
| Units |  | Weighted-Average Grant Price Per Unit(1)
Performance share units outstanding at December 30, 2022 | 524,343 |  |  | $ | 224.94 |
Granted | 180,118 |  |  | $ | 223.09 |
Adjustment(1) | 14,771 |  |  | $ | 228.29 |
Vested | (182,808) |  |  | $ | 228.29 |
Forfeited | (56,083) |  |  | $ | 236.80 |
Performance share units outstanding at December 29, 2023 | 480,341 |  |  | $ | 222.73 |
______________ (1) Adjustment for achievement of performance measures. As of December 29, 2023, there was $35 million of total unrecognized compensation expense related to these awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.56 years. The weighted-average grant date price per unit was $223.09, $258.83 and $201.32 for awards granted in fiscal 2023, 2022 and 2021, respectively. The total fair value of the awards that vested in fiscal 2023 and 2022 was $42 million and $41 million, respectively. There were no awards that vested in fiscal 2021.

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