01—Abstract
Summary
Summary of the 10-Q filed October 27, 2011. Cited figures are marked; the original filing is the authoritative source.
L3Harris Technologies, Inc. (LHX) reported a decrease in net income for the quarter ended September 30, 2011, to $121.6 milliona, or $1.01 per diluted share, compared to $163.9 million, or $1.27 per diluted share, in the same period last year.
This decline was primarily attributed to lower operating income in the RF Communications segment, which had benefited significantly from expedited shipments of tactical radios in the prior year, and increased integration costs and new initiative losses within the Integrated Network Solutions segment. Despite the dip in profitability, consolidated revenue saw a modest increase of 3.9% to $1,460.3 millionb, driven by the Integrated Network Solutions segment's growth, largely from recent acquisitions. The company's liquidity position remained strong, with $305.4 million in cash and cash equivalents.
However, operating cash flow decreased substantially to $78.7 millionc from $294.9 million year-over-year, impacted by lower net income and changes in working capital. Significant financing activities included substantial share repurchases totaling $406.2 million, alongside dividend payments and net proceeds from borrowings. The company highlighted its ongoing commitment to shareholder returns through dividends and an active share repurchase program.
02—Key points
Key Highlights
- Revenue increased by 3.9% year-over-year to $1,460.3 million, driven by the Integrated Network Solutions segment, boosted by recent acquisitions.
- Net income decreased by 25.8% to $121.6 million, and diluted EPS fell to $1.01 from $1.27 year-over-year.
- RF Communications segment revenue and operating income declined significantly (12.3% and 32.6% respectively), primarily due to the absence of prior-year expedited shipments for MRAP vehicles.
- Integrated Network Solutions segment revenue grew by 25.5%, but operating income saw a sharp decrease of 65.4% due to acquisition integration costs and losses from new ventures.
- Government Communications Systems segment showed strong performance with revenue up 4.6% and operating income increasing by 41.5%.
- Net cash provided by operating activities significantly decreased by 73.3% to $78.7 million compared to the prior year.
- The company actively repurchased $406.2 million of its common stock during the quarter under its new $1 billion repurchase program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2012, L3HARRIS Technologies, Inc. kept $0.09.
- Revenue$1.34B100.0%
- Cost of revenue−$893.9M66.9%
- Gross profit$442.2M33.1%
- Operating costs−$311.1M23.3%
- Operating income$131.1M9.8%
- Interest, other & tax−$9.5M0.7%
- Net income$121.6M9.1%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2012filed October 27, 2011Financial Statements
Q3 FY2012 against Q3 FY2011
| Line item | Q3 FY2012Q3 FY2011 | Change |
|---|---|---|
| Revenue | $1.34B$1.41B | −4.9% |
| Cost of Revenue | $893.90M$881.10M | +1.5% |
| Gross Profit | $442.20M$524.30M | −15.7% |
| Operating Expenses | $223.40M$255.20M | −12.5% |
| Operating Income | $131.10M— | — |
| Interest Expense | $28.10M$17.80M | +57.9% |
| Net Income | $121.60M$163.90M | −25.8% |
| EPS (Basic) | $1.01$1.28 | −21.1% |
| EPS (Diluted) | $1.01$1.27 | −20.5% |
| Shares Outstanding (Basic) | 118.80M126.80M | −6.3% |
| Shares Outstanding (Diluted) | 119.40M127.70M | −6.5% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the decrease in net income compared to the prior year?
The primary driver for the decrease in net income was the significant drop in operating income from the RF Communications segment. This segment benefited substantially in the prior year's comparable quarter from expedited shipments of tactical radios for MRAP vehicles, a favorable factor not present in the current quarter. Additionally, increased integration costs related to recent acquisitions and losses from new cyber and healthcare initiatives in the Integrated Network Solutions segment contributed to the decline.
How has the company's cash flow from operations changed, and what is impacting it?
Net cash provided by operating activities decreased significantly by 73.3% to $78.7 million in the current quarter compared to $294.9 million in the prior year. This reduction is primarily due to lower net income and unfavorable changes in working capital. The prior year's strong operating cash flow was also bolstered by the expedited shipments mentioned earlier.
What is the company's current debt situation and its ability to manage short-term obligations?
The company has two senior unsecured revolving credit facilities totaling $1 billion ($250 million and $750 million). At the end of the quarter, there were no borrowings outstanding under the $250 million facility, and $560.0 million of short-term debt (primarily commercial paper) was outstanding, supported by the $750 million facility. The company states its financial position remains strong, with sufficient cash, access to credit facilities, and outlook for operational cash generation to meet its anticipated working capital requirements, capital expenditures, and share repurchase program for the next 12 months.
Can you explain the significant share repurchase activity?
L3Harris repurchased $406.2 million of its common stock during the quarter. This activity is part of its new $1 billion share repurchase program approved in July 2011, which replaced a prior program. The company views these repurchases as a way to return value to shareholders and indicated that the repurchases are expected to exceed the dilutive effect of shares issued under its incentive plans.
06—Continue