L3Harris(US:LHX)2022-10-30 16:00Business Divestitures and Acquisitions - L3Harris completed one business divestiture and one asset sale during the three quarters ended September 30, 2022, generating combined net cash proceeds of $23 million and recognizing a pre-tax gain of $8 million[30]. - The company announced a definitive agreement to acquire Viasat, Inc.'s tactical data links product line for approximately $1.96 billion, expected to close in the first half of 2023[108][109]. Financial Performance - For the quarter ended September 30, 2022, total revenue was $4.246 billion, a slight increase from $4.229 billion in the same quarter of the previous year[97]. - The company reported a loss from continuing operations before income taxes of $321 million for the quarter ended September 30, 2022, compared to an income of $586 million for the same quarter last year[97]. - Total revenue for the quarter ended September 30, 2022, was $1,710 million, an increase from $1,502 million in the same quarter of the previous year, representing a growth of 13.9%[102]. - Revenue from prime contractors was $1,138 million for the quarter, up from $963 million year-over-year, indicating a growth of 18.2%[102]. - Fixed-price contract revenue for the quarter was $1,270 million, compared to $914 million in the prior year, reflecting a significant increase of 39.0%[102]. - Revenue from the United States for the quarter was $1,295 million, slightly down from $1,332 million in the previous year, a decrease of 2.8%[102]. - International revenue for the quarter was $401 million, significantly up from $164 million year-over-year, marking a growth of 144.0%[102]. Segment Performance - Integrated Mission Systems segment reported a revenue of $1.710 billion for the quarter ended September 30, 2022, compared to $1.649 billion for the same period last year[97]. - Space & Airborne Systems segment generated $1.502 billion in revenue for the quarter ended September 30, 2022, slightly up from $1.494 billion year-over-year[97]. - Communication Systems segment revenue was $1.068 billion for the quarter ended September 30, 2022, compared to $1.030 billion in the same quarter of the previous year[97]. Impairment Charges - L3Harris recognized a non-cash impairment charge of $62 million related to the CPS business during the quarter ended April 2, 2021, which is included in the "Impairment of goodwill and other assets" line item[35]. - The company recorded a non-cash impairment charge of $489 million for goodwill during the quarter ended September 30, 2022, with $355 million related to Broadband and $134 million related to Electro Optical[54]. Business Segment Restructuring - The company streamlined its business segments from four to three effective January 1, 2022, eliminating the former Aviation Systems segment[22]. - The company streamlined its business segments from four to three effective January 1, 2022, integrating operations from the former Aviation Systems segment into the remaining segments[91]. Cash Flow and Financing - A new $2 billion, 5-year senior unsecured revolving credit facility was established on July 29, 2022, replacing the previous facility, with no borrowings outstanding as of September 30, 2022[61]. - The company was in compliance with all covenants under the new credit agreement, maintaining a consolidated total indebtedness to total capital ratio of 0.65 to 1.00 or less[63]. Assets and Liabilities - Total assets as of September 30, 2022, were $33,381 million, a decrease from $34,709 million as of December 31, 2021[103]. - The balance of accumulated other comprehensive income (loss) at September 30, 2022, was $(366) million, reflecting a net comprehensive loss of $(220) million for the period[41]. - The carrying amount of long-term debt (including current portion) was $7,030 million as of September 30, 2022, compared to $7,059 million as of December 31, 2021[77]. - Accounts receivable increased to $1,175 million as of September 30, 2022, up from $1,088 million at December 31, 2021, with net receivables at $1,138 million compared to $1,045 million[43]. - Contract assets rose to $3,135 million as of September 30, 2022, from $3,021 million at December 31, 2021, while contract liabilities decreased to $1,158 million from $1,297 million[45]. - Total inventories increased to $1,339 million as of September 30, 2022, compared to $982 million at December 31, 2021, with finished products at $191 million, work in process at $464 million, and raw materials at $684 million[47]. - Property, plant, and equipment, net totaled $2,092 million as of September 30, 2022, slightly down from $2,101 million at December 31, 2021, with accumulated depreciation at $2,150 million[48]. - Goodwill decreased to $17,260 million as of September 30, 2022, from $18,189 million at December 31, 2021, after recording an impairment charge of $802 million[50]. - The liability for standard product warranties decreased to $95 million as of September 30, 2022, from $117 million at December 31, 2021, after accruals of $31 million and settlements of $45 million during the period[60]. Pension and Employee Benefits - For the three quarters ended September 30, 2022, the compensation cost related to share-based awards was $92 million, compared to $100 million for the same period in 2021[37]. - The company’s pension and OPEB costs are now reported under U.S. Government Cost Accounting Standards, aligning with industry peers[23]. - The service cost for pension plans was $10 million for the quarter ended September 30, 2022, down from $16 million for the same quarter in 2021, representing a decrease of 37.5%[65]. - The interest cost for pension plans increased to $55 million for the quarter ended September 30, 2022, compared to $47 million for the quarter ended October 1, 2021, an increase of 17.02%[65]. - The net periodic benefit income was $(96) million for the quarter ended September 30, 2022, compared to $(85) million for the quarter ended October 1, 2021, reflecting a decrease of approximately 12.94%[65]. - The company did not make any material contributions to its U.S. qualified defined benefit pension plans during the quarter or three quarters ended September 30, 2022[67]. - The total fair value of deferred compensation plan assets was $91 million as of September 30, 2022, down from $112 million as of December 31, 2021[75]. Taxation - The effective tax rate for the quarter ended September 30, 2022, was 6.2%, significantly lower than the 18.3% for the quarter ended October 1, 2021[71]. - The effective tax rate for the three quarters ended September 30, 2022, was 13.0%, compared to 19.8% for the three quarters ended October 1, 2021[72]. Legal Proceedings - The company recorded an additional $31 million charge related to a pre-merger legal contingency during the quarter ended September 30, 2022[105]. - The company is involved in various legal proceedings, but management believes that any potential liabilities will not have a material adverse effect on its financial condition[106].