01—Abstract
Summary
Summary of the 10-Q filed July 29, 2022. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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 billionb, 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 millionc 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.
02—Key points
Key Highlights
- Revenue 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.
- Net income attributable to L3Harris common shareholders increased by 14% to $471 million for the second quarter of 2022.
- Diluted Earnings Per Share (EPS) rose by 20% to $2.42 in the second quarter of 2022.
- For 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.
- The 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.
- Cash 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.
- The company returned significant capital to shareholders, repurchasing $729 million of stock and paying $435 million in dividends in the first half of 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2023, L3HARRIS Technologies, Inc. kept $0.11.
- Revenue$4.13B100.0%
- Cost of revenue−$2.91B70.3%
- Gross profit$1.23B29.7%
- Operating costs−$282.0M6.8%
- Operating income$946.0M22.9%
- Interest, other & tax−$475.0M11.5%
- Net income$471.0M11.4%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2023filed July 29, 2022Financial Statements
Q2 FY2023 against Q2 FY2022
| Line item | Q2 FY2023Q2 FY2022 | Change |
|---|---|---|
| Revenue | $4.13B$4.67B | −11.4% |
| Cost of Revenue | $2.91B$3.25B | −10.6% |
| Gross Profit | $1.23B$1.42B | −13.3% |
| SG&A Expenses | $744.00M$891.00M | −16.5% |
| Operating Income | $946.00M$882.00M | +7.3% |
| Net Income | $471.00M$413.00M | +14.0% |
| EPS (Basic) | $2.45$2.03 | +20.7% |
| EPS (Diluted) | $2.42$2.01 | +20.4% |
| Shares Outstanding (Basic) | 192.10M203.60M | −5.6% |
| Shares Outstanding (Diluted) | 194.00M205.60M | −5.6% |
05—Questions
Frequently Asked Questions
What were the main drivers behind the revenue decline in the second quarter of 2022?
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.
How did the company manage its expenses despite lower revenues?
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.
What is the outlook for the company's liquidity and financial resources?
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.
How has the company addressed its pension obligations?
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.
06—Continue