10-QPeriod: Q3 FY2014

L3HARRIS TECHNOLOGIES, INC. /DE/ Quarterly Report for Q3 Ended Sep 27, 2013

Filed October 30, 2013For Securities:LHX

Summary

L3Harris Technologies, Inc. (LHX) reported its first quarter fiscal year 2014 results, showing a slight year-over-year decrease in total revenue to $1.19 billion, down from $1.26 billion in the prior year's comparable quarter. This revenue decline was observed across all three business segments: RF Communications, Integrated Network Solutions, and Government Communications Systems. Despite the revenue dip, income from continuing operations remained stable at approximately $127.5 million. However, income from continuing operations per diluted share saw a modest increase to $1.18 from $1.14, driven by a reduction in outstanding shares due to ongoing share repurchase programs. The company also highlighted strong operating cash flow generation, which increased significantly by 43.2% to $172.6 million, bolstered by effective working capital management. This robust cash flow, combined with a solid balance sheet and an undrawn credit facility, indicates a strong liquidity position. The company continued its commitment to shareholder returns by increasing its quarterly dividend and actively engaging in share repurchases, underscoring a focus on returning value to investors.

Financial Highlights

51 data points
Beta

Revenue

$1.19B

35.0% Gross Margin

Net Income

$125.80M

10.6% Net Margin

EPS (Diluted)

$1.16

Total Assets

$4.78B

Cash & Equivalents

$337.20M

Free Cash Flow

$139.20M

Financial Statements
Beta
Revenue$1.19B
Cost of Revenue$774.50M
Gross Profit$417.40M
Operating Expenses$207.80M
Operating Income$127.50M
Interest Expense$23.70M
Net Income$125.80M
EPS (Basic)$1.17
EPS (Diluted)$1.16
Shares Outstanding (Basic)106.40M
Shares Outstanding (Diluted)107.30M

Key Highlights

  • 1Total revenue for the quarter decreased by 5.5% to $1.19 billion compared to the prior year's first quarter.
  • 2Income from continuing operations remained relatively flat at $127.5 million, a slight decrease of 0.8% year-over-year.
  • 3Diluted earnings per share (EPS) from continuing operations increased by 3.5% to $1.18, primarily due to a reduction in the number of outstanding shares.
  • 4Net cash provided by operating activities saw a substantial increase of 43.2% to $172.6 million, demonstrating improved cash generation.
  • 5All three operating segments (RF Communications, Integrated Network Solutions, Government Communications Systems) experienced revenue declines.
  • 6The company repurchased $106.7 million of its common stock during the quarter and increased its quarterly dividend by 13.5% to $0.42 per share.
  • 7Discontinued operations resulted in a net loss of $1.7 million, primarily related to adjustments for the sale of Broadcast Communications.

Frequently Asked Questions

The increase in diluted EPS from $1.14 to $1.18 was primarily driven by a significant reduction in the weighted average number of diluted shares outstanding. This reduction is a result of the company's active share repurchase programs, which effectively reduced the share count and thereby increased EPS, even with slightly lower net income.

The substantial increase in net cash provided by operating activities was attributed to strong working capital management. This likely involved efficient collection of receivables, optimal inventory levels, and effective management of payables, leading to a healthier cash conversion cycle for the business.

L3Harris maintained a strong liquidity position with $337.2 million in cash and cash equivalents at quarter-end. The company has an undrawn $1 billion revolving credit facility, no significant long-term debt maturities in the near term, and expects its operating cash flows and existing credit facilities to be sufficient for its anticipated needs, including working capital, capital expenditures, and dividends for the next 12 months and beyond.

The decrease in revenue across all segments was influenced by factors such as lower revenue from U.S. Government customers, including reduced activity on programs like GOES-R and from DoD customers, as well as general weakness in certain commercial markets. U.S. Government budget uncertainties and sequestration were also cited as contributing factors, particularly impacting the Integrated Network Solutions segment.