10-QPeriod: Q1 FY2015

L3HARRIS TECHNOLOGIES, INC. /DE/ Quarterly Report for Q1 Ended Mar 28, 2014

Filed April 30, 2014For Securities:LHX

Summary

L3Harris Technologies, Inc. (LHX) reported solid financial results for the third quarter of fiscal year 2014, with total revenue increasing by 5.3% to $1,267.5 million compared to the prior year period. This top-line growth was driven primarily by the Government Communications Systems and RF Communications segments. Income from continuing operations saw a notable increase of 9.8% to $137.3 million, leading to a 13.4% rise in diluted earnings per share to $1.27, reflecting improved operational efficiency and a favorable business segment mix. The company demonstrated strong operational execution, evidenced by a 1.3% increase in gross margin for the first three quarters of the fiscal year, and maintained disciplined control over engineering, selling, and administrative expenses. Net cash provided by operating activities remained robust, although it saw a slight decrease year-over-year due to timing of shipments and collections. Despite some segment-specific revenue pressures, particularly in Integrated Network Solutions, the overall financial health appears strong with a healthy balance sheet and ample liquidity.

Financial Highlights

51 data points
Beta

Revenue

$1.27B

33.6% Gross Margin

Net Income

$141.40M

11.2% Net Margin

EPS (Diluted)

$1.31

Total Assets

$4.96B

Cash & Equivalents

$349.60M

Free Cash Flow

$314.30M

Financial Statements
Beta
Revenue$1.27B
Cost of Revenue$841.00M
Gross Profit$426.50M
Operating Expenses$203.20M
Operating Income$402.00M
Interest Expense$23.20M
Net Income$141.40M
EPS (Basic)$1.32
EPS (Diluted)$1.31
Shares Outstanding (Basic)106.20M
Shares Outstanding (Diluted)107.40M

Key Highlights

  • 1Total revenue increased by 5.3% to $1,267.5 million for the third quarter of fiscal year 2014 compared to the prior year.
  • 2Income from continuing operations grew by 9.8% to $137.3 million for the quarter.
  • 3Diluted earnings per share (EPS) from continuing operations increased by 13.4% to $1.27.
  • 4The RF Communications segment showed strong revenue growth of 9.5%, and the Government Communications Systems segment increased revenue by 10.7%.
  • 5Gross margin percentage improved slightly year-over-year, indicating effective cost management and pricing.
  • 6Net cash provided by operating activities was $454.0 million for the first three quarters of fiscal year 2014.
  • 7The company repurchased approximately $214.4 million of its common stock in the first three quarters of fiscal year 2014, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

Revenue growth was primarily driven by increases in the Government Communications Systems segment, notably from programs like Aireon hosted payload, Federal Aviation Administration's NextGen Data Communications Integrated Services (DataComm), and the U.S. Army Modernization of Enterprise Terminals (MET) program. The RF Communications segment also contributed with higher international revenue in Tactical Communications.

Engineering, selling, and administrative (ESA) expenses remained largely stable year-over-year, resulting in a lower ESA as a percentage of revenue due to higher revenue. Gross margin percentage saw a slight increase, reflecting improved operational efficiency and a favorable segment mix. These factors, combined with disciplined expense management, contributed to the significant increase in income from continuing operations and diluted EPS.

The company maintained a strong financial position with $349.6 million in cash and cash equivalents at the end of the quarter. They have significant undrawn credit facilities and no material long-term debt maturing in the near future. Management expressed confidence that existing cash, operational cash flow, and credit facilities are sufficient to meet working capital requirements, capital expenditures, and dividend payments for the foreseeable future, despite ongoing uncertainties in government budgets and the global economy.

The company reported positive results from discontinued operations in the third quarter of fiscal year 2014, primarily due to tax benefits related to Broadcast Communications and a gain on the sale of remaining assets from Cyber Integrated Solutions (CIS). While these are now in the past, the net impact on overall net income for the period was positive.