01—Abstract
Summary
Summary of the 10-Q filed November 6, 2015. Cited figures are marked; the original filing is the authoritative source.
L3Harris Technologies, Inc. (formerly Harris Corporation) reported a significant increase in revenue for the quarter ended October 2, 2015, reaching $1.811 billiona, a 56.8% jump from $1.155 billion in the prior year's comparable quarter.
This substantial growth was primarily driven by the acquisition of Exelis Inc. in the fourth quarter of fiscal year 2015, which integrated Exelis's operations into Harris's financial results. Net income also saw a healthy increase of 18.4% to $148 millionb, though diluted earnings per share remained flat at $1.18, reflecting the increased share count post-acquisition. Despite the overall revenue growth and improved net income, investors should note the decrease in net cash provided by operating activities, which fell by 20% to $64 million.
This was attributed to factors such as increased inventory, pension contributions, and reduced accounts payable, partially offset by lower accounts receivable. The company also reported increased net interest expense due to higher debt levels incurred to finance the Exelis acquisition. The company highlighted strong performance across its four reporting segments, all of which saw significant revenue increases, largely due to the Exelis integration.
02—Key points
Key Highlights
- Revenue increased by 56.8% to $1.811 billion for the quarter ended October 2, 2015, largely due to the acquisition of Exelis Inc.
- Net income grew by 18.4% to $148 million compared to the prior year's quarter.
- Diluted earnings per share remained stable at $1.18, indicating the impact of increased share count from the Exelis acquisition.
- Net cash provided by operating activities decreased by 20% to $64 million, impacted by changes in working capital and pension contributions.
- All four business segments (Communication Systems, Space and Intelligence Systems, Electronic Systems, and Critical Networks) showed substantial revenue growth, primarily driven by the Exelis integration.
- Net interest expense increased significantly due to debt financing for the Exelis acquisition.
- The company repurchased no shares under its repurchase program in the current quarter, compared to $100 million in the prior year quarter.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2016filed November 6, 2015Financial Statements
Q3 FY2016 against Q3 FY2015
| Line item | Q3 FY2016Q3 FY2015 | Change |
|---|---|---|
| Revenue | $1.81B$1.16B | +56.8% |
| Cost of Revenue | $1.22B$762.00M | +60.1% |
| Gross Profit | $591.00M$393.00M | +50.4% |
| Operating Expenses | $329.00M$195.00M | +68.7% |
| Interest Expense | $48.00M$23.00M | +108.7% |
| Net Income | $148.00M$125.00M | +18.4% |
| EPS (Basic) | $1.20$1.19 | +0.8% |
| EPS (Diluted) | $1.18$1.18 | 0.0% |
| Shares Outstanding (Basic) | 123.50M104.60M | +18.1% |
| Shares Outstanding (Diluted) | 124.70M105.80M | +17.9% |
05—Questions
Frequently Asked Questions
What was the primary driver for the significant revenue increase in this quarter?
The primary driver for the significant revenue increase was the acquisition of Exelis Inc. in the fourth quarter of fiscal year 2015. This acquisition integrated Exelis's operations and revenue streams into L3Harris Technologies' (formerly Harris Corporation) financial reporting.
Why did net income increase but diluted earnings per share remain flat?
Net income increased due to the operational efficiencies and revenue growth from the Exelis acquisition. However, diluted earnings per share remained flat because the company issued approximately 19 million new shares as part of the Exelis acquisition, which increased the total number of outstanding shares, offsetting the net income gain on a per-share basis.
What factors contributed to the decrease in net cash provided by operating activities?
The decrease in net cash provided by operating activities was primarily due to an increase in inventory levels, higher pension contributions, and a reduction in accounts payable and accrued expenses. These factors were partially offset by a decrease in accounts receivable.
How did the Exelis acquisition impact the company's debt and interest expense?
The Exelis acquisition led to a significant increase in the company's overall debt levels. This was due to the issuance of new debt securities and borrowing under a term loan agreement to finance the acquisition. Consequently, net interest expense rose substantially.
06—Continue