01—Abstract
Summary
Summary of the 10-Q filed October 28, 2009. Cited figures are marked; the original filing is the authoritative source.
L3Harris Technologies (LHX) reported its first quarter fiscal year 2010 results, showing a slight revenue increase of 2.6% to $1,203.0 milliona, up from $1,172.6 million in the prior year quarter.
However, income from continuing operations saw a notable decrease of 12.5% to $104.5 millionb, or $0.79 per diluted share, down from $119.4 million, or $0.89 per diluted share, in the first quarter of fiscal 2009. This decline in profitability was primarily driven by lower operating income in the RF Communications and Broadcast Communications segments, although the Government Communications Systems segment showed strong growth.
The company benefited from strategic acquisitions, including Wireless Systems in the RF Communications segment and Crucial Security and SolaCom ATC in the Government Communications Systems segment, which contributed to revenue growth but also impacted operating margins and increased engineering, selling, and administrative (ESA) expenses. Despite the dip in net income, the company demonstrated robust operational cash flow, generating $134.5 millionc, a significant improvement from $37.5 million in the prior year, indicating solid cash generation capabilities and effective working capital management.
02—Key points
Key Highlights
- Revenue increased 2.6% to $1,203.0 million, driven by growth in Government Communications Systems and RF Communications segments, partially offset by a decline in Broadcast Communications.
- Income from continuing operations decreased by 12.5% to $104.5 million ($0.79 per diluted share) from $119.4 million ($0.89 per diluted share) in the prior year quarter.
- Government Communications Systems segment revenue grew 9.6% and operating income increased 29.3%, boosted by strong legacy programs and recent acquisitions.
- RF Communications segment revenue increased 2.0%, but operating income decreased 19.8% due to acquisition-related charges and higher ESA expenses.
- Broadcast Communications segment revenue declined significantly by 25.0% due to weakened demand and delayed capital spending from customers.
- Net cash provided by operating activities surged to $134.5 million from $37.5 million in the prior year quarter, reflecting improved working capital management.
- The company repurchased $50 million of common stock during the quarter, maintaining its commitment to shareholder returns through dividends and buybacks.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2010, L3HARRIS Technologies, Inc. kept $0.09.
- Revenue$1.20B100.0%
- Cost of revenue−$812.1M67.5%
- Gross profit$390.9M32.5%
- Operating costs−$286.4M23.8%
- Operating income$104.5M8.7%
- Interest, other & tax$-00.0%
- Net income$104.5M8.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2010filed October 28, 2009Financial Statements
Q3 FY2010 against Q3 FY2009
| Line item | Q3 FY2010Q3 FY2009 | Change |
|---|---|---|
| Revenue | $1.20B$1.17B | +2.6% |
| Cost of Revenue | $812.10M$791.90M | +2.6% |
| Gross Profit | $390.90M$380.70M | +2.7% |
| Operating Expenses | $212.10M$189.60M | +11.9% |
| Operating Income | $104.50M$119.40M | −12.5% |
| Interest Expense | $18.20M$12.40M | +46.8% |
| Net Income | $104.50M$118.70M | −12.0% |
| EPS (Basic) | $0.79$0.89 | −11.2% |
| EPS (Diluted) | $0.79$0.88 | −10.2% |
| Shares Outstanding (Basic) | 130.80M134.00M | −2.4% |
| Shares Outstanding (Diluted) | 131.40M134.70M | −2.4% |
05—Questions
Frequently Asked Questions
What were the primary drivers of the decrease in net income despite revenue growth?
The decrease in net income was primarily driven by lower operating income in the RF Communications and Broadcast Communications segments. The RF Communications segment's operating income was impacted by acquisition-related charges and a higher proportion of expenses from the acquired Wireless Systems. The Broadcast Communications segment experienced a significant revenue drop due to weak customer demand and delayed capital spending, which negatively affected its profitability.
How did the recent acquisitions impact the company's financial performance?
The acquisitions, particularly Wireless Systems in RF Communications and Crucial Security/SolaCom ATC in Government Communications Systems, contributed to revenue growth in their respective segments. However, these acquisitions also brought acquisition-related charges and increased engineering, selling, and administrative (ESA) expenses, especially in the RF Communications segment, where the acquired business had a higher ESA expense ratio. These factors partially offset the positive revenue contributions.
What is the outlook for the different business segments based on this report?
The Government Communications Systems segment shows strong momentum with significant revenue and operating income growth, driven by existing programs and new contract wins. The RF Communications segment is seeing robust order activity, especially for tactical radios, despite near-term margin pressures from acquisitions. The Broadcast Communications segment faces headwinds from the global recession and delayed customer spending, leading to a sharp decline in revenue and profitability, though new program wins were noted.
How is the company managing its liquidity and capital resources?
L3Harris Technologies maintains a strong liquidity position, with $231.1 million in cash and cash equivalents at the end of the quarter and an undrawn revolving credit facility of $725 million. Net cash provided by operating activities significantly increased, demonstrating strong operational cash generation. The company continued its share repurchase program and maintained its dividend, indicating confidence in its financial stability and ability to fund operations, capital expenditures, and shareholder returns.
06—Continue