L3Harris Reports Strong Third Quarter 2020 Results and Raises Outlook

3Q20 revenue

$4.5 billion, up 0.7% versus prior year

Up 4.4% on an organic1 basis; funded book-to-bill of 1.02

3Q20 margin and earnings

Net income margin of 9.6%; adjusted earnings before interest and taxes (EBIT)2 margin of 17.9%

GAAP earnings per share from continuing operations (EPS) of $1.99, up 4.7%

Non-GAAP EPS2 of $2.84, up 10%

3Q20 cash flow

Operating cash flow of $757 million; adjusted free cash flow (FCF)2 of $726 million

Narrowed revenue and increased EBIT margin, EPS and adjusted FCF2 guidance for 2020

MELBOURNE, Fla. - L3Harris Technologies, Inc. (NYSE:LHX) reported third quarter 2020 revenue of $4.5 billion, up 0.7% versus prior year, and up 4.4% on an organic1 basis. GAAP net income was $430 million, down 1.1% versus prior year. Adjusted EBIT2 was $798 million, up 4.2% versus prior year, and margin expanded 60 basis points (bps) to 17.9%. GAAP EPS was $1.99, up 4.7%, and non-GAAP EPS2 was $2.84, up 10% versus prior year.

The L3Harris team delivered a strong quarter that demonstrated integration progress, portfolio resiliency and the perseverance of our employees, said William M. Brown, Chairman and Chief Executive Officer. Our on-going execution puts us in a position to deliver on an improved outlook for the year, which well build on over the medium term.

Summary Financial Results

Third Quarter

($ millions, except per share data)

2020

2019

Change

(GAAP to GAAP comparison)

Revenue

$

4,463

$

4,431

0.7%

Net income

$

430

$

435

(1.1%)

Net income margin

9.6

%

9.8

%

(20)bps

EPS

$

1.99

$

1.90

4.7%

(Non-GAAP to non-GAAP comparison)2

Revenue

$

4,463

$

4,431

0.7%

Adjusted EBIT

$

798

$

766

4.2%

Adjusted EBIT margin

17.9

%

17.3

%

60bps

EPS

$

2.84

$

2.58

10%

Year-To-Date

($ millions, except per share data)

2020

2019

Change

(GAAP to GAAP comparison)

Revenue

$

13,534

$

8,024

69%

Net income

$

902

$

946

(4.7%)

Net income margin

6.7

%

11.8

%

(510)bps

EPS

$

4.27

$

6.13

(30%)

(GAAP to pro forma comparison)3

Revenue

$

13,534

$

13,265

2.0%

Net income

$

902

$

1,251

(28%)

Net income margin

6.7

%

9.4

%

(270)bps

EPS

$

4.27

$

5.48

(22%)

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

Revenue

$

13,534

$

13,265

2.0%

Adjusted EBIT

$

2,416

$

2,204

9.6%

Adjusted EBIT margin

17.9

%

16.6

%

130bps

EPS

$

8.47

$

7.41

14%

Revenue for the quarter increased 0.7% versus prior-year GAAP as 3.3% growth in core U.S. and international businesses was offset by the divestiture of the airport security and automation business and COVID-19-related impacts, mainly for commercial-related sales. Organic revenue increased 4.4% for the quarter as 7.4% growth in core U.S. and international businesses, excluding commercial aviation and Public Safety, more than offset the anticipated decline from the pandemic. At the segment level, revenue growth was driven by Integrated Mission Systems, Space and Airborne Systems and Communication Systems, partially offset by a decline in Aviation Systems due to COVID-19-related impacts.

GAAP EPS for the quarter increased 4.7% versus prior year driven by operational excellence, integration benefits, a decrease in integration costs and lower share count, partially offset by impacts from the pandemic, higher investments and amortization of merger-related intangibles, as well as the absence of a prior-year benefit from the gain on the sale of the Harris Night Vision business. Third quarter non-GAAP EPS increased 10% versus prior year driven by the favorable factors noted above, partially offset by the impacts of the pandemic and higher investments. Net income margin contracted 20 bps and adjusted EBIT margin expanded 60 bps to 17.9% versus prior year.

Segment Results

Integrated Mission Systems

Third Quarter

($ millions)

2020

2019

Change

(GAAP to GAAP comparison)

Revenue

$

1,372

$

1,292

6.2%

Operating income

$

213

$

176

21%

Operating margin

15.5

%

13.6

%

190bps

Year-To-Date

($ millions)

2020

2019

Change

(GAAP to GAAP comparison)

Revenue

$

4,073

$

1,317

n/m

Operating income

$

638

$

182

n/m

Operating margin

15.7

%

13.8

%

190bps

(GAAP to pro forma comparison)

Revenue

$

4,073

$

3,894

4.6%

Operating income

$

638

$

503

27%

Operating margin

15.7

%

12.9

%

280bps

n/m: Not meaningful

Third quarter revenue increased 6.2% from strong growth in Maritime from a ramp in manned and classified platforms, and in ISR driven by aircraft missionization demand, partially offset by a moderate decline in Electro Optical due to program timing. Third quarter operating income increased 21% to $213 million, and operating margin expanded 190 bps to 15.5% versus prior year, driven by operational excellence and integration benefits, partially offset by higher investments.

Segment funded book-to-bill was 1.08 for the quarter and 1.22 year-to-date.

Orders strength in ISR continued with several international awards totaling $123 million, including an award to provide ISR capabilities on three King Air 350ER aircraft for the Canadian Department of National Defence (DND) and an order to deliver a missionized Gulfstream G550 aircraft to the Royal Australian Air Force (RAAF).

In Electro Optical, sensor demand remained strong with a $37 million sole-source IDIQ award for thermal sight systems and equipment in support of the U.S. Marine Corps Assault Amphibious Vehicle. The company also reinforced its international position with a $54 million order for WESCAM airborne turrets from a European customer.

In Maritime, the companys investment in unmanned capabilities led to a $35 million award from the U.S. Navy as the prime system integrator for the Medium Unmanned Surface Vehicle (MUSV) program, which with options could reach $281 million. The company was als

LINK:	https://www.l3harris.com/newsroom/press-release/2020/10/l3harris-repor...
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