01—Abstract
Summary
Summary of the 10-Q filed May 2, 2012. Cited figures are marked; the original filing is the authoritative source.
L3Harris Technologies, Inc. (LHX) reported a significant loss from continuing operations for the three quarters ended March 30, 2012, primarily driven by a substantial non-cash impairment charge of $424.0 milliona related to goodwill and other long-lived assets within its Integrated Network Solutions segment, specifically impacting the Broadcast Communications business.
This impairment, coupled with a planned exit from its cyber integrated solutions (CIS) operation, led to a net loss attributable to shareholders of $98.5 millionb for the nine-month period, a stark contrast to the $454.5 million net income in the prior year. Despite the significant impairment, the company's revenue showed modest growth of 2.7% year-over-year for the nine-month period, reaching $4.37 billion, driven by increases in the Integrated Network Solutions and Government Communications Systems segments, partially offset by a decline in RF Communications. The company also highlighted its ongoing share repurchase program and dividend payments, demonstrating a continued focus on returning capital to shareholders, although the substantial impairment charge is a major overhang for investors to consider.
02—Key points
Key Highlights
- Reported a net loss of $98.5 million for the first nine months of fiscal year 2012, a significant decrease from a net income of $454.5 million in the prior year's comparable period.
- Incurred a substantial non-cash impairment charge of $424.0 million ($406.5 million after-tax) related to goodwill and other long-lived assets in the Broadcast Communications business within the Integrated Network Solutions segment.
- Revenue for the first nine months of fiscal year 2012 increased by 2.7% to $4.37 billion, compared to $4.26 billion in the prior year's period.
- Announced a plan to divest its cyber integrated solutions (CIS) operation, which is now reported as discontinued operations.
- Repurchased $442.0 million of common stock in the first nine months of fiscal year 2012, demonstrating a commitment to returning capital to shareholders.
- The Government Communications Systems segment saw revenue growth of 4.7% and operating income growth of 16.1% for the nine-month period.
- The company's cash and cash equivalents decreased by $67.9 million to $299.0 million at the end of the third quarter of fiscal 2012.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2013, L3HARRIS Technologies, Inc. lost $0.26.
- Revenue$1.37B100.0%
- Cost of revenue−$879.8M64.3%
- Gross profit$489.0M35.7%
- Operating costs−$67.0M4.9%
- Operating income$422.0M30.8%
- Interest, other & tax−$775.2M56.6%
- Net income−$353.2M25.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2013filed May 2, 2012Financial Statements
Q1 FY2013 against Q1 FY2012
| Line item | Q1 FY2013Q1 FY2012 | Change |
|---|---|---|
| Revenue | $1.37B$1.41B | −3.1% |
| Cost of Revenue | $879.80M$896.60M | −1.9% |
| Gross Profit | $489.00M$516.20M | −5.3% |
| Operating Expenses | $242.00M$281.00M | −13.9% |
| Operating Income | $422.00M$461.70M | −8.6% |
| Interest Expense | $28.70M$27.10M | +5.9% |
| Net Income | -$353.20M$139.50M | −353.2% |
| EPS (Basic) | $-3.15$1.10 | −386.4% |
| EPS (Diluted) | $-3.13$1.09 | −387.2% |
| Shares Outstanding (Basic) | 112.30M125.00M | −10.2% |
| Shares Outstanding (Diluted) | 112.90M126.00M | −10.4% |
05—Questions
Frequently Asked Questions
What is the primary reason for the significant drop in net income for the first nine months of fiscal year 2012 compared to the prior year?
The primary reason for the significant drop in net income is a substantial non-cash impairment charge of $424.0 million related to goodwill and other long-lived assets within the Broadcast Communications business of the Integrated Network Solutions segment. This charge, combined with the impact of discontinued operations and other factors, resulted in a net loss for the period.
What is the company's strategy regarding the Broadcast Communications business and the cyber integrated solutions (CIS) operation?
The company has decided to divest its Broadcast Communications business, as it no longer aligns with their long-term strategy, and has already recorded a significant impairment charge for its assets. Additionally, the company is exiting its cyber integrated solutions (CIS) operation, which provided remote cloud hosting, and these operations are now reported as discontinued.
How is the company managing its capital and returning value to shareholders despite the net loss?
Despite the net loss, L3Harris continued its share repurchase program, spending $442.0 million in the first nine months of fiscal year 2012. The company also continued to pay cash dividends, demonstrating a commitment to returning capital to shareholders. The company ended the quarter with $299.0 million in cash and cash equivalents and has available credit facilities.
What is the outlook for revenue growth, considering the recent impairment and divestitures?
For the first nine months of fiscal year 2012, revenue increased by 2.7% year-over-year, driven by growth in the Integrated Network Solutions and Government Communications Systems segments. While the divestiture of CIS and the impairment of Broadcast Communications will impact future reporting, the company's other segments, such as RF Communications and Government Communications Systems, showed resilience and some growth.
06—Continue