10-QPeriod: Q3 FY2010

L3HARRIS TECHNOLOGIES, INC. /DE/ Quarterly Report for Q3 Ended Oct 2, 2009

Filed October 28, 2009For Securities:LHX

Summary

L3Harris Technologies (LHX) reported its first quarter fiscal year 2010 results, showing a slight revenue increase of 2.6% to $1,203.0 million, 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 million, 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 million, a significant improvement from $37.5 million in the prior year, indicating solid cash generation capabilities and effective working capital management.

Financial Highlights

51 data points
Beta

Revenue

$1.20B

32.5% Gross Margin

Net Income

$104.50M

8.7% Net Margin

EPS (Diluted)

$0.79

Total Assets

$4.39B

Cash & Equivalents

$231.10M

Free Cash Flow

$115.90M

Financial Statements
Beta
Revenue$1.20B
Cost of Revenue$812.10M
Gross Profit$390.90M
Operating Expenses$212.10M
Operating Income$104.50M
Interest Expense$18.20M
Net Income$104.50M
EPS (Basic)$0.79
EPS (Diluted)$0.79
Shares Outstanding (Basic)130.80M
Shares Outstanding (Diluted)131.40M

Key Highlights

  • 1Revenue 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.
  • 2Income 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.
  • 3Government Communications Systems segment revenue grew 9.6% and operating income increased 29.3%, boosted by strong legacy programs and recent acquisitions.
  • 4RF Communications segment revenue increased 2.0%, but operating income decreased 19.8% due to acquisition-related charges and higher ESA expenses.
  • 5Broadcast Communications segment revenue declined significantly by 25.0% due to weakened demand and delayed capital spending from customers.
  • 6Net cash provided by operating activities surged to $134.5 million from $37.5 million in the prior year quarter, reflecting improved working capital management.
  • 7The company repurchased $50 million of common stock during the quarter, maintaining its commitment to shareholder returns through dividends and buybacks.

Frequently Asked Questions

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.

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.

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.

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.