L3Harris Reports Fourth Quarter and 2020 Results; Initiates 2021 Guidance

Fourth Quarter 2020 Results

Revenue of $4.7 billion, down 3.6% versus prior year; flat on an organic1 basis; funded book-to-bill of 0.93

Net income margin of 3.9%; adjusted earnings before interest and taxes (EBIT)2 margin of 18.5%

GAAP earnings per share from continuing operations (EPS) of $0.92, down 48%

Non-GAAP EPS2 of $3.14, up 10%

Operating cash flow of $698 million; adjusted free cash flow (FCF)2 of $642 million

Full Year 2020 Results

Revenue of $18.2 billion, up 42% versus prior year, 0.5% versus prior-year pro forma3, and 2.9% on an organic basis; funded book-to-bill of 1.04

Net income margin of 6.0%; adjusted EBIT margin of 18.0%

GAAP EPS of $5.19, down 34%; non-GAAP EPS of $11.60, up 13%

Operating cash flow of $2,790 million; adjusted FCF of $2,686 million

Initiated 2021 guidance consistent with medium-term growth framework

Raised quarterly dividend by 20% and established new $6 billion share repurchase authorization

MELBOURNE, Fla. - L3Harris Technologies, Inc. (NYSE:LHX) reported fourth quarter 2020 revenue of $4.7 billion, down 3.6% versus prior year, and flat on an organic1 basis. GAAP net income was $184 million, down 54% versus prior year. Adjusted EBIT2 was $864 million, up 3.5% versus prior year, and adjusted EBIT margin expanded 120 basis points (bps) to 18.5%. GAAP EPS was $0.92, down 48%, and non-GAAP EPS2 was $3.14, up 10% versus prior year.

Thanks to the hard work of our employees we continued to deliver the benefits of the merger and ended the year with solid performance, exceeding our initial 2020 guidance for margins, EPS and free cash flow as we overcame headwinds due to the global pandemic, said William M. Brown, Chairman and Chief Executive Officer. We're clearly making progress in building a high-performance, technology-focused operating company and positioning L3Harris as a full end-to-end mission solutions prime. In 2021, well build on our momentum as we remain focused on meeting employee, customer and shareholder commitments.

Summary Financial Results

Fourth Quarter 2020 Results:

Fourth Quarter

($ millions, except per share data)

2020

2019

Change

(GAAP to GAAP comparison)

Revenue

$

4,660

$

4,832

(3.6%)

Net income

$

184

$

399

(54%)

Net income margin

3.9

%

8.3

%

(440) bps

EPS

$

0.92

$

1.77

(48%)

(Non-GAAP to non-GAAP comparison)2

Revenue

$

4,660

$

4,832

(3.6%)

Adjusted EBIT

$

864

$

835

3.5%

Adjusted EBIT margin

18.5

%

17.3

%

120 bps

EPS

$

3.14

$

2.85

10%

(Organic revenue comparison)1

Organic revenue

$

4,660

$

4,672

-%

Fourth quarter revenue decreased 3.6% versus prior year primarily due to divestitures and COVID-related impacts, mainly for commercial-related sales. Organic revenue was flat for the quarter as 3.7% growth in core U.S. and international businesses, excluding commercial aviation and Public Safety, was offset by the anticipated COVID-related decline. At the segment level, revenue growth was driven by Space and Airborne Systems and Communication Systems, offset by a decline in Aviation Systems primarily due to COVID-related impacts. Funded book-to-bill was 0.93 for the quarter.

Fourth quarter GAAP EPS decreased 48% versus prior year primarily due to charges for the impairment of intangibles, goodwill and other assets related to the commercial aviation business and other COVID-related impacts. These charges and other impacts were partially offset by operational excellence, integration benefits, cost management, a decrease in integration costs and a lower share count. Non-GAAP EPS increased 10% versus prior year driven by operational excellence, integration benefits, cost management and a lower share count, partially offset by COVID and divestiture-related impacts. Net income margin contracted 440 bps and adjusted EBIT margin expanded 120 bps to 18.5% versus prior year.

Full Year 2020 Results:

Full Year

($ millions, except per share data)

2020

2019

Change

(GAAP to GAAP comparison)

Revenue

$

18,194

$

12,856

42%

Net income

$

1,086

$

1,345

(19%)

Net income margin

6.0

%

10.5

%

(450) bps

EPS

$

5.19

$

7.90

(34%)

(GAAP to pro forma comparison)3

Revenue

$

18,194

$

18,097

0.5%

Net income

$

1,086

$

1,650

(34%)

Net income margin

6.0

%

9.1

%

(310) bps

EPS

$

5.19

$

7.25

(28%)

(Non-GAAP to adjusted pro forma comparison) 2,3

Revenue

$

18,194

$

18,097

0.5%

Adjusted EBIT

$

3,280

$

3,039

7.9%

Adjusted EBIT margin

18.0

%

16.8

%

120 bps

EPS

$

11.60

$

10.26

13%

(Organic revenue comparison)1

Organic revenue

$

18,194

$

17,677

2.9%

Full-year revenue increased 42% versus prior year primarily due to the post-merger inclusion of L3 operations in results, partially offset by divestitures and COVID-related impacts, mainly for commercial-related sales. Full-year revenue increased 0.5% versus prior-year pro forma and 2.9% on an organic basis as 5.6% growth in core U.S. and international businesses, excluding commercial aviation and Public Safety, more than offset the COVID-related decline. At the segment level, revenue growth was driven by Space and Airborne Systems, Integrated Mission Systems and Communication Systems, partially offset by a decline in Aviation Systems primarily due to COVID-related impacts. Funded book-to-bill was 1.04 for the year.

Full-year GAAP EPS decreased 34% versus prior year primarily due to charges for impairment of goodwill and other assets and other COVID-related impacts, higher amortization of acquisition-related intangibles, divestitures and a higher share count. This decline was partially offset by the inclusion of L3 operations in results for the full year in 2020 compared with only the second half in 2019, operational excellence, integration benefits, cost management and a decrease in integration costs. Full-year non-GAAP EPS inc

LINK:	https://www.l3harris.com/newsroom/press-release/2021/01/l3harris-repor...
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