L3Harris Reports Fourth Quarter Financial Reports
Tuesday, February 01, 2022 | Comments

L3Harris Technologies reported fourth quarter and 2021 fiscal results.

“The L3Harris team delivered solid EPS growth, consistent with expectations, despite supply chain headwinds and budget uncertainty,” said Vice Chair and CEO Christopher E. Kubasik. "In 2022, we look forward to taking the next step as the industry's trusted disruptor to deliver innovative and affordable solutions, and with a focus on creating value over the long term."

Revenue decreased 7% versus the prior year, primarily due to divestitures within aviation systems and supply chain-related constraints within communication systems, and decreased 1% on an organic basis. At the segment level, organic revenue was driven by integrated mission systems and space and airborne systems, which were up 6% and 2%, respectively, and offset by a decline in communication systems and aviation systems, which were down 11% and 5%, respectively. Funded book-to-bill was 0.90 for the quarter.

Net income margin expanded 720 bps and adjusted earnings before interest and taxes (EBIT) margin expanded 70 bps to 19.2% versus the prior year. Generally accepted accounting principles (GAAP) earnings per share (EPS) increased 167% to $2.46, driven primarily by prior-year charges for the impairment of intangibles, goodwill and other assets related to the commercial aerospace business and other COVID-related impacts. Non-GAAP EPS increased 5% to $3.30 versus the prior year driven by e3 performance, integration benefits, expense management, and a lower share count, more than offsetting supply chain and divestiture-related impacts.

Revenue decreased 2% versus the prior year, primarily due to divestitures within aviation systems and supply chain-related constraints within communication systems and increased 2% on an organic basis. At the segment level, organic revenue was driven by integrated mission systems and space and airborne systems, up 5% and 3%, respectively, partially offset by a decline in communication systems and aviation systems, down 3% and 2%, respectively. Funded book-to-bill was 1.02 for the year.

Net income margin expanded 430 bps and adjusted EBIT margin expanded 110 bps to 19.1% versus the prior year. GAAP EPS increased 75% to $9.09 driven primarily by prior-year charges for the impairment of goodwill and other assets and other COVID-related impacts. Non-GAAP EPS increased 12% to $12.95 versus the prior year driven by e3 performance, integration benefits, and a lower share count, more than offsetting supply chain and divestiture-related impacts as well as higher R&D investments.

Revenue decreased 11% due to anticipated product delivery delays from supply chain-related constraints mainly within tactical communications, lower volume on legacy platforms in broadband communications, contract roll-offs in global communications solutions, and delivery timing within integrated vision solutions. This decline was partially offset by higher sales in public safety. Operating income decreased 15% to $253 million, and operating margin contracted 100 bps to 24.9% versus the prior year as e3 performance and integration benefits were more than offset by supply chain impacts and higher R&D investments. Segment funded book-to-bill was 0.97.

For the full year in communications, revenue decreased 4% versus the prior year and 3% on an organic basis due to product delivery delays from supply chain-related constraints mainly within tactical communications and lower volume on legacy unmanned platforms in broadband communications, along with a modest decline in public safety. This decline was partially offset by U.S. Department of Defense (DoD) modernization growth within global communications solutions, with flat revenue in integrated vision solutions. Operating income increased 1% to $1.092 billion, and operating margin expanded 110 bps to 25.5% versus the prior year from e3 performance and integration benefits, net of supply chain impacts and higher R&D investments. Segment funded book-to-bill was 1.10.

In the fourth quarter of fiscal 2021, L3Harris generated $822 million in operating cash flow and $758 million in adjusted free cash flow, and returned $999 million to shareholders through $800 million in share repurchases and $199 million in dividends. For the full year, the company generated $2.7 billion in operating cash flow and $2.75 billion in adjusted free cash flow and returned $4.5 billion to shareholders through $3.7 billion in share repurchases and $817 million in dividends.

L3Harris also completed the divestitures of the ESSCO and Narda-MITEQ businesses, with total gross proceeds in the quarter of $130 million, contributing to gross proceeds from post-merger portfolio shaping of approximately $2.8 billion.

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