01—Abstract
Summary
Summary of the 10-K filed August 27, 2018. Cited figures are marked; the original filing is the authoritative source.
L3Harris Technologies, Inc. (LHX), formerly Harris Corporation, filed its 10-K for the fiscal year ending June 28, 2018, showcasing robust financial performance and strategic positioning within defense and government sectors.
The company reported strong revenue growth and improved profitability, driven by its three core segments: Communication Systems, Electronic Systems, and Space and Intelligence Systems. Significant contract wins and a substantial backlog indicate continued demand for its technology-driven solutions. The company also highlighted its commitment to shareholder returns through dividends and share repurchases, alongside strategic investments in innovation and operational efficiency.
Overall, L3Harris demonstrated resilience and growth, underscored by its focus on mission-critical, high-margin businesses. The company's strong customer relationships, particularly with the U.S. Government, and its diversified portfolio of advanced technology products and services position it favorably for future expansion. Investors can find confidence in the company's strategic execution, financial discipline, and ongoing efforts to enhance shareholder value.
02—Key points
Key Highlights
- Revenue growth of 5% to $6.2 billion in fiscal 2018, driven by increased demand in Communication Systems and Electronic Systems segments.
- Income from continuing operations increased by 13% to $721 million, with a corresponding increase in diluted EPS to $5.94.
- Strong backlog of $5.2 billion at fiscal year-end 2018, indicating robust future revenue potential.
- Continued commitment to shareholder returns with a 17% increase in quarterly cash dividend rate and active share repurchase program.
- Operational excellence program (HBX) and investments in R&D are driving efficiency and innovation across all segments.
- Significant portion of revenue (75%) derived from U.S. Government customers, highlighting strategic importance and market penetration.
- Successful integration of Exelis acquisition and strategic divestitures of non-core assets have streamlined operations and focused on high-margin businesses.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, L3HARRIS Technologies, Inc. kept $0.11.
- Revenue$6.18B100.0%
- Cost of revenue−$2.10B34.1%
- Gross profit$4.08B65.9%
- Operating costs−$2.96B47.8%
- Operating income$1.12B18.1%
- Interest, other & tax−$422.0M6.8%
- Net income$700.0M11.3%
Where FY2018 revenue went
$6.18B- Other operating costs: $2.37B, 38% of revenue
- Cost of revenue: $2.10B, 34% of revenue
- Net income: $700.0M, 11% of revenue
- SG&A: $583.0M, 9.4% of revenue
- Interest, other & tax: $422.0M, 6.8% of revenue
Kept 11% as net incomeNet income $700.0M · 11%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed August 27, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $6.18B$5.90B | +4.8% |
| Cost of Revenue | $2.10B$3.85B | −45.4% |
| Gross Profit | $4.08B$2.04B | +99.6% |
| SG&A Expenses | $583.00M— | — |
| Operating Expenses | $1.18B$1.15B | +2.8% |
| Operating Income | $1.12B$1.07B | +4.6% |
| Interest Expense | $170.00M$172.00M | −1.2% |
| Net Income | $700.00M$543.00M | +28.9% |
| EPS (Basic) | $3.71$4.42 | −16.1% |
| EPS (Diluted) | $3.64$4.36 | −16.5% |
| Shares Outstanding (Basic) | 117.80M122.60M | −3.9% |
| Shares Outstanding (Diluted) | 120.30M124.30M | −3.2% |
05—Questions
Frequently Asked Questions
What are L3Harris's primary business segments, and what are their contributions to revenue?
L3Harris operates through three primary business segments: Communication Systems, Electronic Systems, and Space and Intelligence Systems. In fiscal 2018, these segments contributed approximately 31%, 38%, and 31% of total revenue, respectively.
How dependent is L3Harris on U.S. Government contracts?
L3Harris is significantly dependent on U.S. Government contracts. In fiscal 2018, approximately 75% of its revenue was derived from sales to U.S. Government customers, including foreign military sales funded through the U.S. Government, whether directly or through prime contractors.
What is L3Harris's approach to shareholder returns?
L3Harris demonstrates a strong commitment to shareholder returns. This includes a consistent history of increasing its quarterly cash dividend and actively repurchasing its own stock. In fiscal 2018, the company returned $272 million through dividends and $272 million through share repurchases.
What are the key risks facing L3Harris, as highlighted in the filing?
Key risks include significant dependence on U.S. Government contracts, potential disruptions to government funding, cybersecurity threats, competition, and risks associated with international operations and fluctuating currency exchange rates. The company also faces risks related to large contract terminations or failures to fund, and potential liabilities from its product and service offerings.
06—Continue