10-QPeriod: Q2 FY2023

L3HARRIS TECHNOLOGIES, INC. /DE/ Quarterly Report for Q2 Ended Jul 1, 2022

Filed July 29, 2022For Securities:LHX

Summary

L3Harris Technologies, Inc. reported its financial results for the quarter and first two quarters of fiscal year 2022 ending July 1, 2022. For the second quarter, revenue decreased by 11% year-over-year to $4.135 billion, while net income attributable to L3Harris common shareholders increased by 14% to $471 million. Diluted Earnings Per Share (EPS) saw a significant increase of 20% to $2.42. The decrease in revenue was primarily attributed to lower revenue from completed business divestitures, supply chain disruptions, and program transitions. Despite revenue challenges, the company demonstrated strong profit generation and improved EPS, supported by effective cost management and a lower effective tax rate of 10.5% for the quarter. For the first half of the year, total revenue also declined by 11% to $8.238 billion, but net income attributable to L3Harris common shareholders grew by 7% to $946 million, with diluted EPS up 14% to $4.86. The company's balance sheet remains solid with substantial goodwill and intangible assets, although total assets and equity saw a slight decrease compared to the end of 2021. Cash flow from operations was $788 million for the first half, a decrease from the prior year, impacted by working capital changes. The company continues to prioritize shareholder returns through significant share repurchases and dividends, with $729 million in share repurchases and $435 million in dividends paid during the first half of 2022.

Financial Highlights

53 data points
Beta

Revenue

$4.13B

29.7% Gross Margin

Net Income

$471.00M

11.4% Net Margin

EPS (Diluted)

$2.42

Total Assets

$34.14B

Cash & Equivalents

$420.00M

Free Cash Flow

$687.00M

Financial Statements
Beta
Revenue$4.13B
Cost of Revenue$2.91B
Gross Profit$1.23B
SG&A Expenses$744.00M
Operating Income$946.00M
Net Income$471.00M
EPS (Basic)$2.45
EPS (Diluted)$2.42
Shares Outstanding (Basic)192.10M
Shares Outstanding (Diluted)194.00M

Key Highlights

  • 1Revenue for the second quarter of 2022 decreased by 11% to $4.135 billion compared to the same period in 2021, mainly due to business divestitures and supply chain issues.
  • 2Net income attributable to L3Harris common shareholders increased by 14% to $471 million for the second quarter of 2022.
  • 3Diluted Earnings Per Share (EPS) rose by 20% to $2.42 in the second quarter of 2022.
  • 4For the first half of 2022, revenue decreased by 11% to $8.238 billion, while net income attributable to common shareholders increased by 7% to $946 million.
  • 5The effective tax rate for the second quarter of 2022 was 10.5%, a significant decrease from 29.0% in the prior year, benefiting from R&D credits and other factors.
  • 6Cash provided by operating activities for the first half of 2022 was $788 million, a decrease from $1.381 billion in the prior year, primarily due to working capital changes.
  • 7The company returned significant capital to shareholders, repurchasing $729 million of stock and paying $435 million in dividends in the first half of 2022.

Frequently Asked Questions

The revenue decline of 11% in the second quarter of 2022 was primarily driven by the impact of completed business divestitures, ongoing supply chain disruptions affecting production and delivery, and transitions in airborne programs. There was also a slightly lower revenue due to one less working day in the quarter compared to the prior year.

The company effectively managed its expenses, with Engineering, Selling, and Administrative (ESA) expenses decreasing by 16% in the quarter. This reduction was due to lower costs from divested businesses, reduced R&D expenses, and favorable impacts from changes in the market value of its deferred compensation plan liabilities.

L3Harris maintains a strong liquidity position with $420 million in cash and cash equivalents as of July 1, 2022, and an undrawn $2 billion revolving credit facility. The company anticipates that its existing cash, cash generated from operations, and credit facilities will be sufficient to meet its working capital needs, capital expenditures, dividend payments, share repurchases, and debt repayments for the next twelve months and beyond. Capital expenditures for fiscal 2022 are expected to be around $300 million.

The company is not required to make any contributions to its U.S. qualified defined benefit pension plans in fiscal year 2022 and for several years thereafter, due to prior voluntary contributions and positive plan performance. The net unfunded defined benefit plan obligation was $436 million as of July 1, 2022. Future contributions will depend on investment returns and discount rates.