01—Abstract
Summary
Summary of the 10-Q filed February 3, 2016. Cited figures are marked; the original filing is the authoritative source.
L3Harris Technologies, Inc. (LHX) reported a significant shift in its financial performance for the second quarter ended January 1, 2016, compared to the prior year.
The company incurred a substantial net loss of $152 milliona, or $1.23 per diluted share, a stark contrast to the net income of $139 million, or $1.32 per diluted share, reported in the same period last year. This downturn was largely driven by a significant non-cash impairment charge of $367 million related to goodwill and other assets in its Critical Networks segment, attributed to a downturn in the energy market impacting customer operations. Despite the substantial loss in the current quarter, the company experienced robust revenue growth of 52.8% year-over-year, reaching $1.843 billion.
This growth was primarily fueled by the inclusion of Exelis operations, acquired in the fourth quarter of fiscal 2015. However, the integration of Exelis and ongoing market pressures presented challenges, as reflected in increased engineering, selling, and administrative expenses and a lower gross margin percentage. Net cash provided by operating activities saw a healthy increase, indicating operational cash generation strength despite the reported loss.
02—Key points
Key Highlights
- Reported a net loss of $152 million ($1.23 per diluted share) for the quarter, a significant decline from a net income of $139 million ($1.32 per diluted share) in the prior year's quarter.
- Recorded a substantial $367 million non-cash impairment charge for goodwill and other assets in the Critical Networks segment, impacting profitability.
- Revenue increased by 52.8% to $1.843 billion, primarily due to the acquisition of Exelis.
- Engineering, selling, and administrative expenses increased by 27.1% to $239 million, partly due to Exelis integration costs and amortization of intangible assets.
- Net cash provided by operating activities increased significantly by 74.3% to $387 million for the first two quarters of fiscal 2016 compared to the prior year.
- The company continues to return capital to shareholders, paying cash dividends of $0.50 per share in the current quarter, up from $0.47 per share in the prior year's quarter.
03—Questions
Frequently Asked Questions
What caused the significant net loss in the current quarter?
The primary driver of the net loss of $152 million in the second quarter of fiscal 2016 was a substantial non-cash impairment charge of $367 million related to goodwill and other assets within the Critical Networks segment. This impairment was necessitated by a downturn in the energy market impacting customer operations.
How did the acquisition of Exelis impact the financial results?
The acquisition of Exelis in the fourth quarter of fiscal 2015 significantly boosted revenue, contributing to a 52.8% year-over-year increase to $1.843 billion in the current quarter. However, it also led to increased engineering, selling, and administrative expenses, including amortization of acquired intangible assets and integration costs.
What is the outlook for cash flow from operations?
The company demonstrated strong operational cash generation, with net cash provided by operating activities increasing by 74.3% to $387 million for the first two quarters of fiscal 2016 compared to the same period last year. This indicates a healthy ability to generate cash from its core operations despite the reported net loss.
What is the company doing to return value to shareholders?
L3Harris Technologies continued its commitment to shareholder returns by increasing its quarterly cash dividend to $0.50 per share, up from $0.47 per share in the prior year's quarter. The company also has an ongoing share repurchase program authorization, though no shares were repurchased under this program in the current quarter.
04—Continue