L3Harris(LHX) - 2021 Q2 - Quarterly Report

Merger and Divestiture Activities - L3Harris Technologies reported total merger-related expenses of $20 million for the quarter ended July 2, 2021, and$60 million for the same quarter in 2020, with total expenses of $41 million and$106 million for the two quarters ended July 2, 2021, and July 3, 2020, respectively [23]. - The company completed the divestiture of the military training business for $1,050 million, netting$1,057 million after selling costs and adjustments [38]. - L3Harris entered into a definitive agreement to sell its Electron Devices business for $185 million, expected to close in the second half of fiscal 2021 [30]. - The divestiture of the Combat Propulsion Systems business was completed for$398 million, resulting in net proceeds of $347 million after selling costs [36]. - L3Harris divested the EOTech business for$42 million, netting $40 million after selling costs and adjustments [39]. - The total business divestiture-related gains for the quarter ended July 2, 2021 amounted to$180 million, compared to a loss of $49 million for the same quarter in the previous year [44]. - The total goodwill impairment charge recognized in connection with the CPS business divestiture was$62 million, included in the "Impairment of goodwill and other assets" line item [37]. - The company derecognized $486 million of intangible assets associated with completed divestitures during the two quarters ended July 2, 2021 [73]. - Goodwill decreased by$538 million due to divestitures during the two quarters ended July 2, 2021 [62]. Financial Performance - For the quarter ended July 2, 2021, income from continuing operations was $413 million, compared to$283 million for the same quarter in 2020, representing a 46% increase [82]. - The diluted income from continuing operations per share for the quarter ended July 2, 2021, was $2.01, up from$1.30 for the same quarter in 2020, reflecting a 55% increase [82]. - The company reported total income from continuing operations before income taxes of $582 million for the quarter ended July 2, 2021, up from$336 million for the same quarter in 2020 [107]. - Non-operating income for the quarter ended July 2, 2021, totaled $86 million, compared to$105 million for the same quarter in 2020, a decrease of 18% [83]. - The net periodic benefit income for the pension plans was $(93) million for the quarter ended July 2, 2021, compared to$(77) million for the same quarter in 2020 [82]. - The company recognized a pre-tax settlement gain of $3 million from a pension obligation de-risking initiative during the quarter ended July 2, 2021 [78]. Revenue and Backlog - Total revenue for the quarter ended July 2, 2021, was$4.668 billion, an increase from $4.445 billion in the same quarter of 2020 [107]. - The company's ending backlog was$20.2 billion as of July 2, 2021, with an expectation to recognize approximately 66% of this revenue by the end of 2022 [103]. - Revenue from prime contractor relationships across all segments totaled $3,056 million for the two quarters ended July 2, 2021, up from$2,883 million for the same period in 2020, an increase of 6.0% [113][115][117][120]. - The U.S. Government remains the primary customer, with total revenue from U.S. contracts amounting to $3,034 million for the two quarters ended July 2, 2021, compared to$3,025 million for the same period in 2020 [113][115][117][120]. Asset and Liability Management - As of July 2, 2021, net receivables were $1,197 million, a decrease from$1,344 million on January 1, 2021 [52]. - Contract assets increased to $2,648 million as of July 2, 2021, compared to$2,437 million on January 1, 2021 [56]. - Total inventories decreased to $872 million as of July 2, 2021, down from$973 million on January 1, 2021 [58]. - Property, plant, and equipment, net totaled $2,026 million as of July 2, 2021, compared to$2,102 million on January 1, 2021 [59]. - Long-term debt (including current portion) was $7,072 million as of July 2, 2021, compared to$6,953 million as of January 1, 2021, reflecting an increase of 1.7% [90]. - The liability for standard product warranties decreased from $133 million at January 1, 2021, to$123 million at July 2, 2021 [75]. Impairments and Amortization - The company recorded additional pre-tax losses of $18 million and$26 million for non-cash remeasurement losses related to the VSE disposal group during the quarter and two quarters ended July 2, 2021 [34]. - An $82 million non-cash impairment charge for long-lived assets was recorded for the quarter and two quarters ended July 2, 2021 [61]. - The amortization of identifiable intangible assets from the L3Harris Merger was$131 million for the quarter ended July 2, 2021, compared to $183 million for the same quarter in 2020 [108]. - Amortization expense for identifiable intangible assets was$156 million for the quarter ended July 2, 2021 [74]. - Future estimated amortization expense for identifiable intangible assets is projected to total $5,134 million over the next five years [74]. Risks and Challenges - The company faces risks associated with foreign currency exchange rates and changes in interest rates, employing established policies to manage these risks [223]. - The company must attract and retain key employees, as failure to do so could seriously harm its operations [223]. - The company has significant operations in locations that could be adversely impacted by natural disasters or significant disruptions [223]. - Changes in estimates used in accounting could adversely affect future financial results [223]. - The company may not realize all anticipated benefits from the L3Harris Merger, and integration difficulties may arise [223].