01—Abstract
Summary
Summary of the 10-Q filed May 3, 2017. Cited figures are marked; the original filing is the authoritative source.
L3Harris Technologies (LHX) reported its financial results for the fiscal third quarter ending March 31, 2017.
The company experienced a slight decrease in revenue compared to the prior year, primarily driven by lower sales in its Communication Systems and Electronic Systems segments. Despite the revenue dip, income from continuing operations and earnings per diluted share saw modest increases, indicating improved profitability and operational efficiency. A significant strategic shift is underway with the completed divestiture of the Harris CapRock Communications commercial business and the pending sale of its government IT services business, both reported as discontinued operations.
These divestitures are part of a strategy to sharpen focus on core franchises where technology is a key differentiator. The company also continued its share repurchase program and maintained its quarterly cash dividend, signaling confidence in its financial health and commitment to returning value to shareholders.
02—Key points
Key Highlights
- Revenue for the third quarter decreased by 4% year-over-year to $1.49 billion.
- Income from continuing operations increased by 3% to $164 million, with diluted EPS rising 4% to $1.31.
- The company divested its Harris CapRock Communications business and entered into an agreement to sell its government IT services business, classifying both as discontinued operations.
- Strategic restructuring led to the elimination of the Critical Networks segment, with its remaining operations integrated into the Electronic Systems segment.
- Net cash provided by operating activities for the first three quarters was $489 million, a slight decrease from the prior year's $507 million.
- The company repurchased approximately 3.03 million shares of common stock during the third fiscal quarter for $361 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2018, L3HARRIS Technologies, Inc. kept $0.11.
- Revenue$1.49B100.0%
- Cost of revenue−$958.0M64.3%
- Gross profit$531.0M35.7%
- Operating costs−$256.0M17.2%
- Operating income$275.0M18.5%
- Interest, other & tax−$112.0M7.5%
- Net income$163.0M10.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2018filed May 3, 2017Financial Statements
Q1 FY2018 against Q1 FY2017
| Line item | Q1 FY2018Q1 FY2017 | Change |
|---|---|---|
| Revenue | $1.49B$1.55B | −3.9% |
| Cost of Revenue | $958.00M$1.01B | −5.1% |
| Gross Profit | $531.00M$541.00M | −1.8% |
| Operating Expenses | $256.00M$273.00M | −6.2% |
| Operating Income | $275.00M— | — |
| Interest Expense | $42.00M$46.00M | −8.7% |
| Net Income | $163.00M$168.00M | −3.0% |
| EPS (Basic) | $0.70$1.35 | −48.1% |
| EPS (Diluted) | $0.69$1.34 | −48.5% |
| Shares Outstanding (Basic) | 122.60M124.00M | −1.1% |
| Shares Outstanding (Diluted) | 124.50M125.10M | −0.5% |
05—Questions
Frequently Asked Questions
What were the main drivers of the revenue decline in the quarter?
The revenue decline was primarily attributed to lower sales in the Communication Systems segment (legacy Exelis tactical radios and night vision) and the Electronic Systems segment (impact of the Aerostructures divestiture). Additionally, lower revenue from environmental programs in the Space and Intelligence Systems segment contributed.
How is the company addressing its strategic focus?
L3Harris is actively divesting non-core businesses, specifically mentioning the completed sale of its CapRock business and the agreement to sell its government IT services business. These actions are intended to sharpen the company's focus on core technology-driven franchises.
What is the company's approach to capital allocation for shareholders?
The company continues to return capital to shareholders through share repurchases, having bought back approximately 3.03 million shares in the third quarter. It also maintained its quarterly cash dividend, having increased it in the prior year.
What significant impairments or charges were recorded?
The company recorded a non-cash impairment charge of $238 million in discontinued operations, with $228 million related to goodwill impairment associated with the impending sale of the IT Services business.
06—Continue