01—Abstract
Summary
Summary of the 10-Q filed October 29, 2021. Cited figures are marked; the original filing is the authoritative source.
L3Harris Technologies reported solid financial performance for the third quarter and the first three quarters of fiscal year 2021, demonstrating resilience and strategic execution.
Revenue for the quarter ended October 1, 2021, was $4.23 billiona, a slight decrease of 5% year-over-year, primarily impacted by business divestitures and supply chain constraints. However, for the first three quarters, revenue stood at $13.46 billion, a marginal 1% decrease, showcasing stability. Net income attributable to L3Harris common shareholders grew by 13% to $481 million in the quarter and a substantial 47% to $1.36 billion for the year-to-date period, with diluted EPS rising to $2.39 and $6.64, respectively.
The company continued its strategic portfolio transformation, completing several business divestitures while also benefiting from organic growth in key segments like Space and Airborne Systems. The company's operational excellence initiatives and integration benefits are contributing to improved profitability, as evidenced by an increase in gross margin percentage.
L3Harris also demonstrated a strong commitment to returning capital to shareholders, with significant share repurchases and an increased quarterly dividend. The company maintains a healthy liquidity position, supported by operating cash flows and an available revolving credit facility, positioning it well for future operations and strategic initiatives.
02—Key points
Key Highlights
- Total revenue for the three quarters ended October 1, 2021, was $13.46 billion, a slight decrease of 1% compared to the prior year, indicating stable top-line performance despite divestitures.
- Net income attributable to L3Harris common shareholders increased significantly by 47% to $1.36 billion for the first three quarters of 2021, compared to $928 million in the prior year.
- Diluted Earnings Per Share (EPS) saw a substantial increase of 56% to $6.64 for the first three quarters of 2021, up from $4.27 in the comparable period of 2020.
- The company executed a notable $1.598 billion in net proceeds from business divestitures during the three quarters ended October 1, 2021, reflecting ongoing portfolio optimization.
- Despite a $150 million net decrease in cash and cash equivalents for the first three quarters of 2021, the company ended the period with $1.126 billion in cash and maintained a $2 billion revolving credit facility, indicating strong liquidity.
- L3Harris repurchased approximately $2.88 billion of its common stock during the first three quarters of 2021, demonstrating a commitment to shareholder returns.
- The gross margin percentage improved to 30% for the first three quarters of 2021 from 29% in the prior year, driven by operational excellence and integration benefits.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2022, L3HARRIS Technologies, Inc. kept $0.11.
- Revenue$4.23B100.0%
- Cost of revenue−$2.92B69.1%
- Gross profit$1.31B30.9%
- Operating costs$55.0M1.3%
- Operating income$1.36B32.2%
- Interest, other & tax−$882.0M20.9%
- Net income$481.0M11.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2022filed October 29, 2021Financial Statements
Q3 FY2022 against Q3 FY2021
| Line item | Q3 FY2022Q3 FY2021 | Change |
|---|---|---|
| Revenue | $4.23B$4.46B | −5.2% |
| Cost of Revenue | $2.92B$3.15B | −7.3% |
| Gross Profit | $1.31B$1.31B | −0.2% |
| SG&A Expenses | $793.00M$817.00M | −2.9% |
| Operating Income | $1.36B$928.00M | +46.9% |
| Net Income | $481.00M$430.00M | +11.9% |
| EPS (Basic) | $2.41$2.00 | +20.5% |
| EPS (Diluted) | $2.39$1.98 | +20.7% |
| Shares Outstanding (Basic) | 199.50M213.40M | −6.5% |
| Shares Outstanding (Diluted) | 201.60M215.10M | −6.3% |
05—Questions
Frequently Asked Questions
What was the primary driver behind the revenue decrease in the third quarter of 2021 compared to the prior year?
The decrease in revenue for the quarter ended October 1, 2021, compared to the quarter ended October 2, 2020, was primarily driven by the impact of completed business divestitures, which reduced revenue by $181 million. Additionally, lower revenue was attributed to supply chain-related constraints within the Communication Systems segment and reduced aircraft sales volume in the Integrated Mission Systems segment. These decreases were partially offset by organic growth in the Space and Airborne Systems and Aviation Systems segments.
How did the company's profitability change in the first three quarters of 2021 compared to the same period in 2020?
Profitability showed significant improvement. Income from continuing operations for the first three quarters of 2021 increased by 50% to $1.359 billion, compared to $904 million in the prior year. Correspondingly, income from continuing operations attributable to L3Harris common shareholders grew by 47% to $1.363 billion. Diluted Earnings Per Share (EPS) rose substantially by 56% to $6.64 in the first three quarters of 2021 from $4.27 in the comparable period of 2020.
What is the status of the company's share repurchase program?
L3Harris continued its aggressive share repurchase program, using $2.88 billion to repurchase shares of its common stock during the first three quarters of 2021. As of October 1, 2021, there was a remaining authorization of approximately $3.3 billion under its share repurchase program, which does not have an expiration date. These repurchases reflect the company's strategy to return capital to shareholders.
How is the company managing its liquidity and financial resources?
The company ended the third quarter of 2021 with $1.126 billion in cash and cash equivalents and maintained a $2 billion revolving credit facility. Net cash provided by operating activities was $1.865 billion for the first three quarters of 2021. Management believes that existing cash, funds generated from operations, the credit facility, and access to debt and equity markets will be sufficient to meet its anticipated working capital needs, capital expenditures, dividend payments, share repurchases, and debt repayments for the foreseeable future.
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