10-QPeriod: Q1 FY2013

L3HARRIS TECHNOLOGIES, INC. /DE/ Quarterly Report for Q1 Ended Mar 30, 2012

Filed May 2, 2012For Securities:LHX

Summary

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 million 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 million 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.

Financial Highlights

52 data points
Beta

Revenue

$1.37B

35.7% Gross Margin

Net Income

-$353.20M

-25.8% Net Margin

EPS (Diluted)

$-3.13

Total Assets

$5.65B

Cash & Equivalents

$299.00M

Free Cash Flow

$325.80M

Financial Statements
Beta
Revenue$1.37B
Cost of Revenue$879.80M
Gross Profit$489.00M
Operating Expenses$242.00M
Operating Income$422.00M
Interest Expense$28.70M
Net Income-$353.20M
EPS (Basic)$-3.15
EPS (Diluted)$-3.13
Shares Outstanding (Basic)112.30M
Shares Outstanding (Diluted)112.90M

Key Highlights

  • 1Reported 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.
  • 2Incurred 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.
  • 3Revenue 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.
  • 4Announced a plan to divest its cyber integrated solutions (CIS) operation, which is now reported as discontinued operations.
  • 5Repurchased $442.0 million of common stock in the first nine months of fiscal year 2012, demonstrating a commitment to returning capital to shareholders.
  • 6The Government Communications Systems segment saw revenue growth of 4.7% and operating income growth of 16.1% for the nine-month period.
  • 7The 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.

Frequently Asked Questions

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.

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.

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.

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.