Item 9A. Controls and Procedures
ITEM 9A . CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934 , our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of December 31, 2022 and determined these disclosure controls and procedures are effective to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022. This assessment was based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 framework). Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2022.
Due to the inherent limitations, internal control systems can provide only reasonable assurance with respect to financial statement preparation and presentation, and may not prevent or detect financial statement misstatements. Also, projections of any evaluation of internal control effectiveness to future periods are subject to the risk that existing controls may become inadequate because of changing conditions, or that the degree of compliance with existing policies and procedures may deteriorate.
Management has excluded from the scope of its assessment of the effectiveness of internal control over financial reporting as of December 31, 2022, the operations and related assets acquired in the RADA merger (the “Acquired Company”), which were acquired on November 28, 2022. The Acquired Company’s total assets and total sales represented approximately 8% and 0.5% of the Company's respective consolidated total assets and total sales as of and for the year ended December 31, 2022.
Changes in Internal Control over Financial Reporting
As the result of the RADA transaction, the Company added Business Combination and Stock Compensations controls into the overall internal controls framework in Q4. Other than these additions, there were no changes in our internal control over financial reporting identified in connection with the
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evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C . DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 regarding our directors and corporate governance matters is incorporated by reference herein to the Proxy Statement sections entitled "Directors and Corporate
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Governance." The information required by Item 10 regarding our executive officers appears as a supplementary item following Item 4 under Part I of this Report. The information required by Item 10 regarding compliance with section 16(a) of the Securities Exchange Act of 1934, as amended, is incorporated by reference herein to the Proxy Statement section entitled "Delinquent Section 16(a) Reports”.
We have adopted a Code of Business Conduct and Ethics that applies to our executive officers, including our Principal Executive Officer, our Principal Financial Officer and our Principal Accounting Officer, which can be found on our website at http://www.investors.leonardodrs.com. We will post any amendment to or waiver from the provisions of the Code of Business Conduct and Ethics that applies to the executive officers above on the same website and will provide it to stockholders free of charge upon written request by contacting Leonardo DRS, Inc., at 2345 Crystal Drive, Suite 1000, Arlington, Virginia 22202.
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ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference herein to the Proxy Statement sections entitled “Directors and Corporate Governance - Director Compensation,” “Compensation Discussion and Analysis,” “Executive Compensation,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report.” Notwithstanding anything indicating the contrary set forth in this Report, the “Compensation Committee Report” section of the Proxy Statement shall be deemed to be “furnished” not “filed” for purposes of the Securities Exchange Act of 1934, as amended.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 is incorporated by reference herein to the Proxy Statement sections entitled “Stock Ownership of Management Table,” “Compensation Discussion and Analysis,” “Executive Compensation” and “Persons Owning More than 5% of Leonardo DRS Common Stock.”
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by Item 13 is incorporated by reference herein to the Proxy Statement sections entitled “Related Person Transaction Reporting Compliance” and “Director Independence.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is incorporated by reference herein to the Proxy Statement section entitled “Fees Paid to Auditor.”
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ITEM 15. Exhibits and Financial Statement Schedules
1.Consolidated Financial Statements
Consolidated Statement of Earnings
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statement of Cash Flows
Consolidated Statements of Shareholders Equity
Notes to Consolidated Financial Statements (1 to 21)
2. Index to Exhibits - Leonardo DRS
Exhibits listed below, which have been filed with the Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1933, and which were filed as noted below, are hereby incorporated by reference and made a part of this report with the effect as if filed herewith.
Exhibits.
Exhibit
Number Exhibit Description
2.1 Stock Purchase Agreement, dated as of March 21, 2022, by and among SES Government Solutions, Inc., SES S.A., DRS Defense Solutions, LLC and DRS Global Enterprise Solutions, Inc. and Leonardo DRS, Inc.
2.2 Agreement and Plan of Merger, dated as of June 21, 2022, by among RADA Electronic Industries LTD., Leonardo DRS, Inc. and Blackstart LTD
2.2(a) Certain Waivers to and Amendments of the Agreement and Plan of Merger, dated June 21, 2022, by and among RADA Electronic Industries LTD., Leonardo DRS, Inc. and Blackstart LTD, effective August 25, 2022
3.3 Amended and Restated Certificate of Incorporation of Leonardo DRS, Inc., as in effect
3.4 Amended and Restated Bylaws of Leonardo DRS, Inc., as in effect
10.1 Tax Allocation Agreement, dated as of November 16, 2020, by and among Leonardo US Holding, Inc., Leonardo DRS, Inc. and the other signatories thereto
10.2 Trademark License Agreement , dated as of January 1, 2021, by and between Leonardo DRS, Inc. and Leonardo – Societ à per azioni
10.3 Commitment Letter re Leonardo DRS, Inc. Commitment to Mitigate Foreign Ownership, Control or Influence, dated as of February 26, 2021, by and among Leonardo DRS, Inc., Leonardo US Holding, Inc., Leonardo – Società per azioni and the U.S. Department of Defense
10.4 First Amendment to Tax Allocation Agreement, dated November 16, 2020, by and among Leonardo US Holding, Inc., Leonardo DRS, Inc. and Leonardo Aircraft, Inc., effective July 28, 2022
10.5 Second Amendment to Tax Allocation Agreement, dated November 16, 2020, by and among Leonardo US Holding, Inc., Leonardo DRS, Inc. and Leonardo Aircraft, Inc., effective July 29, 2022
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10.6 Form of Amended and Restated Proxy Agreement by and among Leonardo DRS, Inc., the individual Proxy Holders signatories thereto, Leonardo US Holding, Inc., Leonardo – Società per azioni and the U.S. Department of Defense
10.7 Registration Rights Agreement, dated as of November 28, 2022, by and among Leonardo DRS, Inc., Leonardo S.P.A. and Leonardo US Holdings, Inc.
10.8 Cooperation Agreement, dated as of November 28, 2022, by and among Leonardo DRS, Inc., Leonardo S.P.A. and Leonardo US Holdings, Inc.
10.9 Credit Agreement dated as of November 29, 2022, by and among Leonardo DRS, Inc. referred to therein, each of the lenders identified therein and Bank of America, N.A., as administrative agent
10.10† Employment Agreement , dated as of November 22, 2022, by and between Leonardo DRS, Inc. and William J. Lynn III
10.11† Leonardo DRS Incentive Compensation Plan
10.12† Leonardo DRS Long-Term Incentive Plan
10.13† Leonardo DRS, Inc. Executive Severance Plan
10.14† Leonardo DRS, Inc. 2022 Omnibus Equity Compensation Plan
10.15† Form of Restricted Stock Unit Award Agreement
10.16† Form of Director Indemnification Agreement
10.17† Form of Performance Restricted Stock Unit Agreement
21.1 Subsidiaries
23.1 Consent of Independent Registered Public Accounting Firm
23.2 Consent of Independent Registered Public Accounting Firm
31.1 Certification by principal executive officer pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification by principal financial officer pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification by principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification by principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document - the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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† Identifies each management contract or compensatory plan or arrangement.
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(a) Financial Statement Schedules: Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized as of March 28, 2023.
LEONARDO DRS, INC.
By: /s/ William J. Lynn III
Name: William J. Lynn III
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 28, 2023 by the following persons on behalf of the registrant in the capacities indicated.
Signature Title
/s/ William J. Lynn III Director, Chief Executive Officer
(Principal Executive Officer)
William J. Lynn III
/s/ Michael D. Dippold Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Michael D. Dippold
/s/ Pamela J. Morrow Senior Vice President and Controller
(Principal Accounting Officer)
Pamela J. Morrow
/s/ Louis R. Brothers Director
Louis R. Brothers
/s/ David W. Carey Director
David W. Carey
/s/ General George W. Casey, Jr. (Ret.) Director
General George W. Casey, Jr. (Ret.)
/s/ Kenneth J. Krieg Director
Kenneth J. Krieg
/s/ Eric C. Salzman Director
Eric C. Salzman
/s/ Frances F. Townsend Director
Frances F. Townsend
/s/ Gail Baker Director
Gail Baker
/s/ Mary E. Gallagher Director
Mary E. Gallagher
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SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
No such annual report or proxy material has been sent to security holders.
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