MELBOURNE, Fla.--(BUSINESS WIRE)--L3Harris Technologies (NYSE: LHX) reported fourth quarter 2024 diluted EPS of $2.37 on fourth quarter 2024 revenue of $5.5 billion. Fourth quarter 2024 non-GAAP diluted EPS was $3.47. Fourth quarter results reflect growth in the business and continued operational efficiencies driving margin improvement. Reconciliations of non-GAAP results are detailed in tables beginning on page 13.
"2024 was a year of significant accomplishments as we delivered on our financial commitments, underscoring our agility and position as the defense industry's Trusted Disruptor, and achieved a record backlog of $34 billion. These results reflect our alignment with customer priorities, driving strong demand across all domains. Through our LHX NeXt initiative, we exceeded our cost-savings target for 2024, achieving $800 million, and are raising our overall cost-savings goal to $1.2 billion by the end of 2025, a year ahead of schedule," said Christopher E. Kubasik, Chair and CEO.
Kubasik added, "As we move into 2025, our momentum remains strong, driven by strong bookings, a robust pipeline, expanding international opportunities, and continued transformation and operational improvements. We are on track to achieve our 2026 financial framework and remain committed to returning excess cash to shareholders. We are confident in our ability to sustain profitable growth and drive long-term value for our stakeholders. We are the agile defense player that is able to rapidly adapt to changing industry dynamics to deliver mission-critical capabilities for our customers."
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*Organic revenue, adjusted segment operating margin, non-GAAP diluted EPS and adjusted free cash flow are non-GAAP financial measures defined on page 19.
SUMMARY FINANCIAL RESULTS*
Fourth Quarter | Full Year | ||||||||||||||||||||
($ millions, except per share data) | 2024 | 2023 | Change | 2024 | 2023 | Change | |||||||||||||||
Revenue (see Table 4 for organic revenue) | |||||||||||||||||||||
Space & Airborne Systems | $ | 1,728 | $ | 1,800 | $ | 6,869 | $ | 6,856 | |||||||||||||
Integrated Mission Systems | 1,773 | 1,627 | 6,842 | 6,630 | |||||||||||||||||
Communication Systems | 1,437 | 1,363 | 5,459 | 5,070 | |||||||||||||||||
Aerojet Rocketdyne | 628 | 597 | 2,347 | 1,052 | |||||||||||||||||
Corporate eliminations | (43 | ) | (47 | ) | (192 | ) | (189 | ) | |||||||||||||
Revenue | $ | 5,523 | $ | 5,340 | 3% | $ | 21,325 | $ | 19,419 | 10% | |||||||||||
Operating income | |||||||||||||||||||||
Space & Airborne Systems | $ | 186 | $ | 191 | $ | 812 | $ | 756 | |||||||||||||
Integrated Mission Systems | 238 | (75 | ) | 838 | 459 | ||||||||||||||||
Communication Systems | 326 | 356 | 1,324 | 1,229 | |||||||||||||||||
Aerojet Rocketdyne | 72 | 66 | 294 | 122 | |||||||||||||||||
Corporate unallocated items | (253 | ) | (384 | ) | (1,350 | ) | (1,140 | ) | |||||||||||||
Operating income | $ | 569 | $ | 154 | $ | 1,918 | $ | 1,426 | |||||||||||||
Adjusted segment operating income (see Table 5) | $ | 846 | $ | 807 | 5% | $ | 3,292 | $ | 2,874 | 15% | |||||||||||
Margin | |||||||||||||||||||||
Operating margin | 10.3 | % | 2.9 | % | 9.0 | % | 7.3 | % | |||||||||||||
Adjusted segment operating margin | 15.3 | % | 15.1 | % | 20 bps | 15.4 | % | 14.8 | % | 60 bps | |||||||||||
Tax rate | |||||||||||||||||||||
Effective tax rate (GAAP) | 6.4 | % | (65.8 | %) | 5.3 | % | 1.9 | % | |||||||||||||
Effective tax rate (non-GAAP) | 12.1 | % | 12.6 | % | 12.7 | % | 13.0 | % | |||||||||||||
EPS | |||||||||||||||||||||
Diluted EPS | $ | 2.37 | $ | 0.83 | $ | 7.87 | $ | 6.44 | |||||||||||||
Non-GAAP diluted EPS | $ | 3.47 | $ | 3.35 | 4% | $ | 13.10 | $ | 12.36 | 6% | |||||||||||
Pension adjusted non-GAAP diluted EPS | $ | 3.06 | $ | 2.82 | 9% | $ | 11.50 | $ | 10.44 | 10% | |||||||||||
Cash flow | |||||||||||||||||||||
Cash from operations | $ | 1,129 | $ | 789 | 43% | $ | 2,559 | $ | 2,096 | 22% | |||||||||||
Adjusted free cash flow | $ | 1,033 | $ | 756 | 37% | $ | 2,319 | $ | 2,029 | 14% | |||||||||||
* Adjusted segment operating income and margin, effective tax rate on non-GAAP income, non-GAAP diluted EPS, pension adjusted non-GAAP diluted EPS, organic revenue and adjusted free cash flow are non-GAAP financial measures defined on page 19. | |||||||||||||||||||||
Revenue: Fourth quarter revenue increased 3%, supported by solid growth in Integrated Mission Systems (IMS) and Communication Systems (CS) of 9% and 5%, respectively. The increases were driven by demand for resilient communication products and night vision devices, higher aircraft missionization volume, increased volume for advanced electronics for space and munitions programs and higher volume in our Commercial Aviation Solutions (CAS) business.
2024 revenue increased 10% due to the inclusion of a full year of results for our Aerojet Rocketdyne (AR) segment and 4% organically due to continued strong demand for our resilient communication products, higher volume for advanced electronics and higher volume in our CAS business.
Operating Margin:
GAAP Operating Margin: Fourth quarter increased 740 bps to 10.3% and 2024 increased 170 bps to 9.0%.
Adjusted Segment Operating Margin: Fourth quarter expanded 20 bps to 15.3% and 2024 expanded 60 bps to 15.4%.
Fourth quarter operating margin increase was primarily driven by improved program performance at IMS, the absence of a prior year goodwill impairment associated with CAS and the monetization of certain legacy end of life assets, aligned with our transformation and value creation priorities. Such increases were partially offset by mix at CS, challenges on classified development programs at SAS and an impairment of other assets related to the Tactical Data Links acquisition. Adjusted segment operating margin excludes the impact of a prior year goodwill impairment associated with CAS and an impairment of other assets related to the Tactical Data Links acquisition in 2024.
2024 operating margin increased driven by the absence of a prior year goodwill impairment associated with CAS. Adjusted segment operating margin increased, with all four segments contributing to margin improvement; IMS in particular increased 100 bps versus prior year.
Diluted EPS:
GAAP Diluted EPS: Fourth quarter increased 186% to $2.37 and 2024 increased 22% to $7.87.
Non-GAAP Diluted EPS: Fourth quarter non-GAAP diluted EPS increased 4% to $3.47 and 2024 non-GAAP diluted EPS increased 6% to $13.10.
Pension Adjusted Non-GAAP Diluted EPS: Fourth quarter pension adjusted non-GAAP diluted EPS increased 9% to $3.06 and 2024 pension adjusted non-GAAP diluted EPS increased 10% to $11.50.
Fourth quarter and 2024 diluted EPS increase was driven by higher operating income, partially offset by a lower Financial Accounting Standards/U.S. Government Cost Accounting Standards (FAS/CAS) operating adjustment and higher income taxes. Non-GAAP diluted EPS increased due to higher adjusted segment operating income, partially offset by a lower FAS/CAS operating adjustment. Over the same period, pension adjusted non-GAAP diluted EPS increased due to higher adjusted segment operating income.
Cash Flow:
Cash from Operations: Fourth quarter increased 43% to $1.1 billion and 2024 increased 22% to $2.6 billion.
Adjusted Free Cash Flow: Fourth quarter increased 37% to $1.0 billion and 2024 increased 14% to $2.3 billion.
Fourth quarter cash from operations increased due to tax planning strategies, less cash used to fund working capital and less cash used for merger, acquisition and severance payments. Adjusted free cash flow excludes the impact of cash used for merger, acquisition and severance payments.
2024 cash from operations increased due to tax planning strategies and a decrease in transaction costs related to the AJRD acquisition, partially offset by more cash used to fund working capital. Adjusted free cash flow excludes the impact of cash used for merger, acquisition and severance payments.
SEGMENT RESULTS*
SAS
Fourth Quarter | Full Year | ||||||||||||||||
($ millions) | 2024 | 2023 | Change | 2024 | 2023 | Change | |||||||||||
Revenue | $ | 1,728 | $ | 1,800 | (4)% | $ | 6,869 | $ | 6,856 | -% | |||||||
Operating margin | 10.8% | 10.6% | 20 bps | 11.8% | 11.0% | 80 bps | |||||||||||
Adjusted segment operating margin | 10.8% | 10.6% | 20 bps | 11.8% | 11.4% | 40 bps | |||||||||||
Revenue: Fourth quarter revenue decreased 4%, reflecting the divestiture of our antenna business in the second quarter. Excluding the divestiture impact, organic revenue decreased 1%, primarily due to lower F-35 related volume as TR-3 transitions from development to a more gradual production ramp in our Airborne Combat Systems business, partially offset by increased volume in our FAA safety of flight networks business and growth of classified programs in Intel & Cyber.
2024 revenue was flat, reflecting the divestiture of the antenna business. Excluding the divestiture impact, organic revenue increased 2% primarily due to program growth in Intel & Cyber and higher volume in our FAA safety of flight networks business, partially offset by lower F-35 related volume.
Operating Margin:
GAAP Operating Margin: Fourth quarter increased 20 bps to 10.8% and 2024 increased 80 bps to 11.8%.
Adjusted Segment Operating Margin: Fourth quarter increased 20 bps to 10.8% and 2024 increased 40 bps to 11.8%.
Fourth quarter operating margin and adjusted segment operating margin increased primarily due to LHX NeXt cost savings, growth in our FAA safety of flight networks business and the monetization of certain legacy end of life assets, aligned with our transformation and value creation priorities; increase was partially offset by challenges on classified fixed price development programs in Space Systems that are in later stages of completion.
2024 operating margin increased 80 bps, primarily due to LHX NeXt cost savings, growth in our FAA safety of flight networks business, the monetization of certain end of life assets, aligned with our transformation and value creation priorities, and the impact of a non-cash charge for impairment of other assets which occurred during FY23. Such increases were partially offset by challenges on classified fixed price development programs in Space Systems. 2023 adjusted segment operating margin excludes the impact of the non-cash charge.
*Organic revenue and adjusted segment operating margin are non-GAAP financial measures defined on page 19.
IMS
Fourth Quarter | Full Year | ||||||||||||||||
($ millions) | 2024 | 2023 | Change | 2024 | 2023 | Change | |||||||||||
Revenue | $ | 1,773 | $ | 1,627 | 9% | $ | 6,842 | $ | 6,630 | 3% | |||||||
Operating margin | 13.4% | (4.6%) | 1,800 bps | 12.2% | 6.9% | 530 bps | |||||||||||
Adjusted segment operating margin | 13.4% | 11.9% | 150 bps | 12.2% | 11.2% | 100 bps | |||||||||||
Revenue: Fourth quarter revenue increased 9.0% primarily due to higher aircraft missionization volume, higher volume in our CAS business, the divestiture of which is pending closure, and increased advanced electronics demand for space and munitions programs.
2024 increased due to higher revenue for advanced electronics, higher aircraft missionization volume, higher volume in CAS and Maritime, and higher commercial revenue for airborne electro-optical sensors.
Operating Margin:
GAAP Operating Margin: Fourth quarter operating margin increased to 13.4% and 2024 increased 530 bps 12.2%.
Adjusted Segment Operating Margin: Fourth quarter adjusted segment operating margin increased 150 bps to 13.4% and 2024 increased 100 bps to 12.2%.
Fourth quarter operating margin increased primarily due to improved program performance across the segment, including LHX NeXt cost savings, absence of a prior year goodwill impairment associated with CAS, and the monetization of certain end of life assets, aligned with our transformation and value creation priorities. Adjusted segment operating margin increase excludes the prior year goodwill impairment.
2024 operating margin increased primarily due to improved program performance across the segment, including LHX NeXt cost savings, and the absence of a prior year goodwill impairment associated with CAS that is not included in adjusted segment operating margin.
CS
Fourth Quarter | Full Year | ||||||||||||||||
($ millions) | 2024 | 2023 | Change | 2024 | 2023 | Change | |||||||||||
Revenue | $ | 1,437 | $ | 1,363 | 5% | $ | 5,459 | $ | 5,070 | 8% | |||||||
Operating margin | 22.7% | 26.1% | (340) bps | 24.3% | 24.2% | 10 bps | |||||||||||
Adjusted segment operating margin | 24.4% | 26.1% | (170) bps | 24.7% | 24.2% | 50 bps | |||||||||||
Revenue: Fourth quarter and 2024 revenue increased 5% and 8%, respectively, primarily driven by robust demand for our resilient communication equipment, related waveforms, and night vision devices. Growth for software defined tactical radios was especially strong across international markets, in particular from NATO countries, reflecting demand for our superior capabilities for critical battlefield communication equipment and waveforms.
Operating Margin:
GAAP Operating Margin: Fourth quarter decreased 340 bps to 22.7% and 2024 increased 10 bps to 24.3%.
Adjusted Segment Operating Margin: Fourth quarter decreased 170 bps to 24.4% and 2024 increased 50 bps to 24.7%.
Fourth quarter operating margin decreased due to higher mix of domestic radios related to competitive IDIQ contracts and a non-cash impairment of other assets related to the Tactical Data Links acquisition, partially offset by LHX NeXt cost savings. Adjusted segment operating margin decrease excludes the impact of the non-cash impairment of other assets.
2024 operating margin increased due to LHX NeXt cost savings, partially offset by a higher mix of domestic radios related to competitive IDIQ contracts and the non-cash impairment of other assets. Adjusted segment operating margin increase excludes the impact of the non-cash impairment of other assets.
AR
Fourth Quarter | Full Year | ||||||||||||||||
($ millions) | 2024 | 2023 | Change | 2024 | 2023 | Change | |||||||||||
Revenue | $ | 628 | $ | 597 | 5% | $ | 2,347 | $ | 1,052 | 123% | |||||||
Operating margin | 11.5% | 11.1% | 40 bps | 12.5% | 11.6% | 90 bps | |||||||||||
Revenue: Fourth quarter revenue increased 5%, primarily from increased production volume across key missile programs, partially offset by a reduction in space propulsion revenue due to program related delays and lower volume of in-space propulsion work.
2024 results are attributed to program execution across both sectors, Missile Solutions and Space Propulsion and Power Systems, relative to the 5 months of AR results in 2023.
Operating Margin: Fourth quarter and 2024 operating margin increased, primarily from the benefit of increased production volumes and strong program execution.
2025 GUIDANCE
Beginning in 1Q25 and reflected in our 2025 guidance, we are revising our Non-GAAP diluted EPS metric to exclude an adjustment for amortization of acquisition-related intangible assets that are in full year results for both years. We believe this better aligns to industry standard presentation of Non-GAAP diluted EPS and provides our investors with a more appropriate metric that better reflects our performance. In this press release, 4Q24 and 2024 "Non-GAAP diluted EPS" and "Pension adjusted non-GAAP diluted EPS" include an adjustment for amortization of acquisition-related intangible assets, and "Non-GAAP diluted EPS (New)" does not include an adjustment for amortization of acquisition-related intangible assets.
Guidance assumes a Continuing Resolution through March of 2025 and no other funding delays or impacts. The administration has issued several Executive Orders that are still being assessed but are not expected to have a significant impact on our 2025 results. However, as US Government contracting officers assess the impact of Executive Orders on new contracts, we could see an effect on our Q1 2025 bookings and revenue.
Revenue | Adjusted Segment
| |||||
Space & Airborne Systems | $6.9B - $7.1B | low 12% | ||||
Integrated Mission Systems | $7.0B - $7.2B | low 12% | ||||
Communication Systems | $5.6B - $5.7B | high 24% | ||||
Aerojet Rocketdyne | ~$2.5B | mid 12% | ||||
Total Company | $21.8B - $22.2B | mid - high 15% | ||||
2025 | 2024 | |||||
Earning per share | Guidance1 | Actuals | ||||
Non-GAAP diluted EPS (Prior) | $13.70 - $14.00 | $13.10 | ||||
Intangible amortization, net of income taxes | ~(3.15) | (3.40) | ||||
Non-GAAP diluted EPS (New) | $10.55 - $10.85 | $9.70 | ||||
Growth | 10%* | 5% | ||||
Adjusted free cash flow | $2.4B - $2.5B | $2.3B | ||||
1A reconciliation of adjusted segment operating income and margin, effective tax rate on non-GAAP income, non-GAAP diluted EPS (prior and new) and adjusted free cash flow on a forward-looking basis to GAAP is not available without unreasonable effort due to the unavailability of items for exclusion from the GAAP measure. We are unable to address the probable significance of this information, the variability of which may have a significant impact on future GAAP results. See Non-GAAP Financial Measures on page 9 for more information. *Based on mid-point | ||||||
SUPPLEMENTAL INFORMATION
2025 | 2024 | |||||
Other Information | Current | Actuals | ||||
FAS/CAS operating adjustment | ~$15 million | $28 million | ||||
Non-service FAS pension income1 | ~$260 million | $322 million | ||||
Net interest expense | ~$630 million | $675 million | ||||
Effective tax rate on GAAP income | 5.3% | |||||
Effective tax rate on non-GAAP income (New)2 | 11.0% - 12.0% | |||||
Average diluted shares | ~190 | 190.7 | ||||
Capital expenditures | ~2% sales | 2% sales | ||||
1Includes the reduction in non-service FAS pension income resulting from the anticipated transfer of ~$1.2 billion of pension assets and liabilities to a third party in Q1 2025. 2Effective tax rate on non-GAAP income is a non-GAAP financial measure defined on page 19. A reconciliation of effective tax rate on non-GAAP income guidance is not available. See Non-GAAP Financial Measures on page 10 for more information. Excludes the adjustment for amortization of acquisition-related intangible assets. | ||||||
Forward-Looking Statements
This earnings release contains forward-looking statements within the meaning of federal securities laws made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Examples include, but are not limited to: share repurchases; potential divestitures and their timing; 2024 guidance; 2026 financial framework; anticipated LHX NeXt initiative costs and savings targets; 2026 margins; supplemental information for 2024; projection of other financial items; and assumptions underlying any of the foregoing. Investors should not place undue reliance on forward-looking statements, which reflect management's current expectations, estimates, projections, assumptions and information currently available to management, and are not guarantees of future performance or actual results. Important risks that could cause our results to differ materially from those expressed in or implied by these forward-looking statements or from our historical results include, but are not limited to, risks arising from: competitive markets; U.S. Government spending priorities; changes in contract mix; inflation; unilateral contract action by the U.S. Government; uncertain economic conditions; future geo-political events; supply chain disruptions; impacts of LHX NeXt; indebtedness; defined benefit plan liabilities and returns; interest rates and other market factors; changes in effective tax rate or additional tax exposures; pending and contemplated divestitures. These and other important risks that could impact forward-looking statements are described more fully in the "Risk Factors" in our Form 10-K for fiscal 2023 filed with the SEC. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section, and we have no duty to and disclaim any intention or obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events or developments or otherwise.
Non-GAAP Financial Measures
Management believes the adjustments to non-GAAP Financial Measures ("NGFMs") in the tables beginning on page 13 are useful to investors because the excluded costs do not reflect our ongoing operating performance. Such adjustments, considered together with the unadjusted GAAP financial measures, provide information that management believes is useful to investors to understand period-over-period operating results separate from items that management believes may disproportionately impact operating results in any particular period; however there is no guarantee that items excluded from NGFMs will not reoccur in future periods. Management also believes that NGFMs enhance the ability of investors to analyze business trends, understand performance and evaluate our initiatives to drive improved financial performance. Management utilizes NGFMs to guide forecasting and long-term planning and for compensation purposes. NGFMs should be considered in addition to, and not as a substitute for, financial measures presented in accordance with GAAP. A reconciliation of forward-looking NGFMs to GAAP is not available without unreasonable effort because of inherent difficulty in forecasting and quantifying comparable GAAP measures and applicable adjustments and other amounts necessary for a reconciliation because of potentially high variability, complexity and low visibility of applicable adjustments and other unusual amounts that could disproportionately impact future GAAP results, such as the impact of defined benefit plan performance, LHX NeXt, potential divestitures and their timing, and the extent of tax deductibility.
Conference Call and Webcast
L3Harris Technologies will host an earnings call on January 30, 2025, at 10:30 a.m. Eastern Time (ET). Participants are encouraged to listen via webcast, which will be broadcast live at L3Harris.com/investors. The dial-in numbers for the teleconference are (U.S.) 800-549-8228 and (International) 289-819-1520, and participants will be directed to an operator. A recording of the call will be available on the L3Harris website, beginning at approximately 12 p.m. ET on January 30, 2025.
Table 1 - Condensed Consolidated Statement of Operations (Unaudited) | |||||||||||||||
Fourth Quarter | Full Year | ||||||||||||||
(In millions, except per share amounts) | 2024 | 2023 | 2024 | 2023 | |||||||||||
Revenue | $ | 5,523 | $ | 5,340 | $ | 21,325 | $ | 19,419 | |||||||
Cost of revenue | (4,126 | ) | (3,935 | ) | (15,801 | ) | (14,306 | ) | |||||||
General and administrative expenses | (804 | ) | (955 | ) | (3,568 | ) | (3,313 | ) | |||||||
Impairment of goodwill and other assets | (24 | ) | (296 | ) | (38 | ) | (374 | ) | |||||||
Operating income | 569 | 154 | 1,918 | 1,426 | |||||||||||
Non-service FAS pension income and other, net | 79 | 93 | 354 | 338 | |||||||||||
Interest expense, net | (161 | ) | (171 | ) | (675 | ) | (543 | ) | |||||||
Income before income taxes | 487 | 76 | 1,597 | 1,221 | |||||||||||
Income taxes | (31 | ) | 50 | (85 | ) | (23 | ) | ||||||||
Net income | 456 | 126 | 1,512 | 1,198 | |||||||||||
Noncontrolling interests, net of income taxes | (3 | ) | 32 | (10 | ) | 29 | |||||||||
Net income attributable to L3Harris Technologies, Inc. | $ | 453 | $ | 158 | $ | 1,502 | $ | 1,227 | |||||||
Net income per common share attributable to L3Harris Technologies, Inc. common shareholders | |||||||||||||||
Basic | $ | 2.38 | $ | 0.83 | $ | 7.91 | $ | 6.47 | |||||||
Diluted | $ | 2.37 | $ | 0.83 | $ | 7.87 | $ | 6.44 | |||||||
Basic weighted-average common shares outstanding | 189.7 | 189.6 | 189.8 | 189.6 | |||||||||||
Diluted weighted-average common shares outstanding | 190.6 | 190.6 | 190.7 | 190.6 | |||||||||||
Table 2 - Consolidated Statement of Cash Flow (Unaudited) | ||||||||
Full Year | ||||||||
(In millions) | 2024 | 2023 | ||||||
Operating Activities | ||||||||
Net income | $ | 1,512 | $ | 1,198 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 1,289 | 1,166 | ||||||
Share-based compensation | 97 | 89 | ||||||
Net periodic benefit income | (286 | ) | (275 | ) | ||||
Share-based matching contributions under defined contribution plans | 264 | 231 | ||||||
Impairment of goodwill and other assets | 38 | 374 | ||||||
Deferred income taxes | 174 | (423 | ) | |||||
(Increase) decrease in: | ||||||||
Receivables, net | 128 | 124 | ||||||
Contract assets | (194 | ) | 62 | |||||
Inventories, net | 96 | (182 | ) | |||||
Other current assets | (29 | ) | (55 | ) | ||||
Increase (decrease) in: | ||||||||
Accounts payable | (90 | ) | 87 | |||||
Contract liabilities | 126 | 195 | ||||||
Compensation and benefits | (128 | ) | 38 | |||||
Other current liabilities | 155 | (88 | ) | |||||
Income taxes | (383 | ) | (333 | ) | ||||
Other operating activities | (210 | ) | (112 | ) | ||||
Net cash provided by operating activities | 2,559 | 2,096 | ||||||
Investing Activities | ||||||||
Net cash paid for acquired businesses | - | (6,688 | ) | |||||
Capital expenditures | (408 | ) | (449 | ) | ||||
Proceeds from sale of property, plant and equipment, net | 1 | 56 | ||||||
Proceeds from sales of businesses | 273 | 71 | ||||||
Other investing activities | (129 | ) | (11 | ) | ||||
Net cash used in investing activities | (263 | ) | (7,021 | ) | ||||
Financing Activities | ||||||||
Proceeds from issuances of long-term debt, net | 2,827 | 7,568 | ||||||
Repayments of long-term debt | (2,620 | ) | (3,170 | ) | ||||
Change in commercial paper, maturities under 90 days, net | (567 | ) | 623 | |||||
Proceeds from commercial paper, maturities over 90 days | 688 | 1,181 | ||||||
Repayments of commercial paper, maturities over 90 days | (1,205 | ) | (205 | ) | ||||
Proceeds from exercises of employee stock options | 133 | 24 | ||||||
Repurchases of common stock | (554 | ) | (518 | ) | ||||
Dividends paid | (886 | ) | (868 | ) | ||||
Other financing activities | (40 | ) | (41 | ) | ||||
Net cash (used in) provided by financing activities | (2,224 | ) | 4,594 | |||||
Effect of exchange rate changes on cash and cash equivalents | (17 | ) | 11 | |||||
Net increase (decrease) in cash and cash equivalents | 55 | (320 | ) | |||||
Cash and cash equivalents, beginning of period | 560 | 880 | ||||||
Cash and cash equivalents, end of period | $ | 615 | $ | 560 | ||||
Table 3 - Condensed Consolidated Balance Sheet (Unaudited) | |||||
(In millions) | January 3, 2025 | December 29, 2023 | |||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | $ | 615 | $ | 560 | |
Receivables, net | 1,072 | 1,230 | |||
Contract assets | 3,230 | 3,196 | |||
Inventories, net | 1,330 | 1,472 | |||
Income taxes receivable | 379 | 61 | |||
Other current assets | 461 | 430 | |||
Assets of business held for sale | 1,131 | 1,106 | |||
Total current assets | 8,218 | 8,055 | |||
Non-current assets | |||||
Property, plant and equipment, net | 2,806 | 2,862 | |||
Goodwill | 20,325 | 19,979 | |||
Intangible assets, net | 7,639 | 8,540 | |||
Deferred income taxes | 120 | 91 | |||
Other non-current assets | 2,893 | 2,160 | |||
Total assets | $ | 42,001 | $ | 41,687 | |
Liabilities and equity | |||||
Current liabilities | |||||
Short-term debt | $ | 515 | $ | 1,602 | |
Current portion of long-term debt, net | 640 | 363 | |||
Accounts payable | 2,005 | 2,106 | |||
Contract liabilities | 2,142 | 1,900 | |||
Compensation and benefits | 419 | 544 | |||
Income taxes payable | 29 | 88 | |||
Other current liabilities | 1,648 | 1,129 | |||
Liabilities of business held for sale | 235 | 272 | |||
Total current liabilities | 7,633 | 8,004 | |||
Non-current liabilities | |||||
Long-term debt, net | 11,081 | 11,160 | |||
Deferred income taxes | 942 | 815 | |||
Other long-term liabilities | 2,766 | 2,879 | |||
Total liabilities | 22,422 | 22,858 | |||
Total equity | 19,579 | 18,829 | |||
Total liabilities and equity | $ | 42,001 | $ | 41,687 | |
Reconciliation of Non-GAAP Financial Measures
Table 4 - Organic Revenue Reconciliation (Unaudited) | |||||||||||||||||||||||
Fourth Quarter | |||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||
(In millions) | GAAP | Adjustments | Organic | GAAP | Adjustments1 | Organic | |||||||||||||||||
SAS | $ | 1,728 | $ | - | $ | 1,728 | $ | 1,800 | $ | (54 | ) | $ | 1,746 | ||||||||||
IMS | 1,773 | - | 1,773 | 1,627 | - | 1,627 | |||||||||||||||||
CS | 1,437 | - | 1,437 | 1,363 | - | 1,363 | |||||||||||||||||
AR | 628 | - | 628 | 597 | - | 597 | |||||||||||||||||
Corporate eliminations | (43 | ) | - | (43 | ) | (47 | ) | - | (47 | ) | |||||||||||||
Revenue | $ | 5,523 | $ | - | $ | 5,523 | $ | 5,340 | $ | (54 | ) | $ | 5,286 | ||||||||||
Full Year | |||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||
(In millions) | GAAP | Adjustments2 | Organic | GAAP | Adjustments1 | Organic | |||||||||||||||||
SAS | $ | 6,869 | $ | - | $ | 6,869 | $ | 6,856 | $ | (124 | ) | $ | 6,732 | ||||||||||
IMS | 6,842 | - | 6,842 | 6,630 | - | 6,630 | |||||||||||||||||
CS | 5,459 | - | 5,459 | 5,070 | - | 5,070 | |||||||||||||||||
AR | 2,347 | (1,282 | ) | 1,065 | 1,052 | - | 1,052 | ||||||||||||||||
Corporate eliminations | (192 | ) | - | (192 | ) | (189 | ) | - | (189 | ) | |||||||||||||
Revenue | $ | 21,325 | $ | (1,282 | ) | $ | 20,043 | $ | 19,419 | $ | (124 | ) | $ | 19,295 | |||||||||
1Adjustment to exclude amounts attributable to divested businesses. | |||||||||||||||||||||||
2Adjustment to exclude amounts attributable to AR through the date of acquisition. | |||||||||||||||||||||||
Table 5 - Reconciliation of Operating Income to Adjusted Segment Operating Income (Unaudited) | ||||||||||||||
Fourth Quarter | Full Year | |||||||||||||
(In millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||
Operating income | $ | 569 | $ | 154 | $ | 1,918 | $ | 1,426 | ||||||
Unallocated corporate items1 | 9 | (3 | ) | 95 | (48 | ) | ||||||||
Significant and/or non-recurring items: | ||||||||||||||
Amortization of acquisition-related intangibles and additional cost of revenue related to the fair value step-up in inventory sold2 | 211 | 233 | 853 | 809 | ||||||||||
Merger, acquisition, and divestiture-related expenses2 | 16 | 30 | 102 | 174 | ||||||||||
Business divestiture-related (gains) losses, net and impairment of goodwill and other assets2 | (10 | ) | 373 | 57 | 425 | |||||||||
LHX NeXt implementation costs2 | 51 | 47 | 267 | 115 | ||||||||||
Gain on sale of property, plant and equipment2 | - | (27 | ) | - | (27 | ) | ||||||||
Total significant and/or non-recurring items | 268 | 656 | 1,279 | 1,496 | ||||||||||
Unallocated items | 277 | 653 | 1,374 | 1,448 | ||||||||||
Adjusted segment operating income | $ | 846 | $ | 807 | $ | 3,292 | $ | 2,874 | ||||||
1Includes unallocated corporate department expense of $17M and $123M for the fourth quarter and year to date 2024, respectively, and $35M and $62M for the fourth quarter 2023 and year to date 2023, respectively. Additionally, includes the FAS/CAS operating adjustment of $8M and $28M for the fourth quarter and year to date 2024, respectively, and $38M and $110M for the fourth quarter and year to date 2023, respectively. The FAS/CAS operating adjustment represents the difference between the service cost component of Financial Accounting Standards net periodic benefit income and total U.S. Government Cost Accounting Standards pension cost. |
2Refer to Key Terms and Non-GAAP Definitions on page 19. |
Table 6 - Reconciliation of Operating Income to Adjusted Segment Operating Income by Segment (Unaudited) | ||||||||||||||||||||||||
Fourth Quarter | ||||||||||||||||||||||||
2024 | 2023 | |||||||||||||||||||||||
(In millions) | SAS | IMS | CS | AR | SAS | IMS | CS | AR | ||||||||||||||||
Operating income | 186 | 238 | 326 | 72 | 191 | (75 | ) | 356 | 66 | |||||||||||||||
Segment impairment of goodwill and other assets1 | - | - | 24 | - | - | 296 | - | - | ||||||||||||||||
Gain on sale of property, plant and equipment1 | - | - | - | - | - | (27 | ) | - | - | |||||||||||||||
Adjusted segment operating income | $ | 186 | $ | 238 | $ | 350 | $ | 72 | $ | 191 | $ | 194 | $ | 356 | $ | 66 | ||||||||
Full Year | ||||||||||||||||||||||||
2024 | 2023 | |||||||||||||||||||||||
(In millions) | SAS | IMS | CS | AR | SAS | IMS | CS | AR | ||||||||||||||||
Operating income | 812 | 838 | 1,324 | 294 | 756 | 459 | 1,229 | 122 | ||||||||||||||||
Segment impairment of goodwill and other assets1 | - | - | 24 | - | 27 | 308 | - | - | ||||||||||||||||
Gain on sale of property, plant and equipment1 | - | - | - | - | - | (27 | ) | - | - | |||||||||||||||
Adjusted segment operating income | $ | 812 | $ | 838 | $ | 1,348 | $ | 294 | $ | 783 | $ | 740 | $ | 1,229 | $ | 122 | ||||||||
1Refer to Key Terms and Non-GAAP Definitions on page 19. | ||||||||||||||||||||||||
Table 7 - Reconciliation of Effective Tax Rate to Effective Tax Rate on Non-GAAP Income (unaudited) | ||||||||||||||||||||
Fourth Quarter | ||||||||||||||||||||
2024 | 2023 | |||||||||||||||||||
(In millions) | Earnings
| Tax
| Effective
| Earnings
| Tax
| Effective
| ||||||||||||||
Income before income taxes | $ | 487 | $ | 31 | 6.4 | % | $ | 76 | $ | (50 | ) | (65.8 | )% | |||||||
Amortization of acquisition-related intangibles and additional cost of revenue related to the fair value step-up in inventory sold1 | 211 | 40 | 233 | 53 |
| |||||||||||||||
Merger, acquisition, and divestiture-related expenses1 | 16 | 3 | 30 | 7 | ||||||||||||||||
Business divestiture-related (gains) losses, net and impairment of goodwill and other assets1 | (10 | ) | 4 | 346 | 72 | |||||||||||||||
LHX NeXt implementation costs1 | 51 | 13 | 47 | 10 | ||||||||||||||||
Non-GAAP income before income taxes | $ | 755 | $ | 91 | 12.1 | % | $ | 732 | $ | 92 | 12.6 | % | ||||||||
Full Year | ||||||||||||||||||||
2024 | 2023 | |||||||||||||||||||
(In millions) | Earnings
| Tax
| Effective
| Earnings
| Tax
| Effective
| ||||||||||||||
Income before income taxes | $ | 1,597 | $ | 85 | 5.3 | % | $ | 1,221 | $ | 23 | 1.9 | % | ||||||||
Amortization of acquisition-related intangibles and additional cost of revenue related to the fair value step-up in inventory sold1 | 853 | 205 | 809 | 191 | ||||||||||||||||
Merger, acquisition, and divestiture-related expenses1 | 102 | 22 | 174 | 31 | ||||||||||||||||
Business divestiture-related (gains) losses, net and impairment of goodwill and other assets1 | 57 | (13 | ) | 398 | 83 | |||||||||||||||
LHX NeXt implementation costs1 | 267 | 67 | 115 | 26 | ||||||||||||||||
Non-GAAP income before income taxes | $ | 2,876 | $ | 366 | 12.7 | % | $ | 2,717 | $ | 354 | 13.0 | % | ||||||||
1Refer to Key Terms and Non-GAAP Definitions on page 19. | ||||||||||||||||||||
Table 8 - Reconciliation of Diluted EPS to Non-GAAP Diluted EPS and Pension Adjusted Non-GAAP Diluted EPS (unaudited) | |||||||||||||||
Fourth Quarter | Full Year | ||||||||||||||
(In millions, except per share data) | 2024 | 2023 | 2024 | 2023 | |||||||||||
Diluted weighted-average common shares outstanding | 190.6 | 190.6 | 190.7 | 190.6 | |||||||||||
Diluted EPS | $ | 2.37 | $ | 0.83 | $ | 7.87 | $ | 6.44 | |||||||
Significant and/or non-recurring items included in diluted EPS above: | |||||||||||||||
Amortization of acquisition-related intangibles and additional cost of revenue related to the fair value step-up in inventory sold1 | 1.11 | 1.22 | 4.47 | 4.25 | |||||||||||
Merger, acquisition, and divestiture-related expenses1 | 0.08 | 0.16 | 0.53 | 0.91 | |||||||||||
Business divestiture-related (gains) losses, net and impairment of goodwill and other assets1 | (0.05 | ) | 1.95 | 0.30 | 2.23 | ||||||||||
LHX NeXt implementation costs1 | 0.27 | 0.25 | 1.40 | 0.60 | |||||||||||
Gain on sale of property, plant and equipment1 | - | (0.14 | ) | - | (0.14 | ) | |||||||||
Income taxes on above adjustments | (0.31 | ) | (0.75 | ) | (1.47 | ) | (1.74 | ) | |||||||
Noncontrolling interests portion of adjustment | - | (0.17 | ) | - | (0.19 | ) | |||||||||
Non-GAAP diluted EPS | $ | 3.47 | $ | 3.35 | $ | 13.10 | $ | 12.36 | |||||||
Less: per share impact of: | |||||||||||||||
FAS/CAS operating adjustment2 | (0.04 | ) | (0.17 | ) | (0.13 | ) | (0.50 | ) | |||||||
Non-service FAS pension income2 | (0.37 | ) | (0.36 | ) | (1.47 | ) | (1.42 | ) | |||||||
Pension adjusted non-GAAP diluted EPS | $ | 3.06 | $ | 2.82 | $ | 11.50 | $ | 10.44 | |||||||
1Refer to Key Terms and Non-GAAP Definitions on page 19. 2Net of tax effect. | |||||||||||||||
Table 9 - Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow (unaudited) | |||||||||||||||
Fourth Quarter | Full Year | ||||||||||||||
(In millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||
Net cash provided by operating activities | $ | 1,129 | $ | 789 | $ | 2,559 | $ | 2,096 | |||||||
Capital expenditures | (118 | ) | (137 | ) | (408 | ) | (449 | ) | |||||||
Proceeds from sale of property, plant and equipment, net | 1 | 56 | 1 | 56 | |||||||||||
Free cash flow | 1,012 | 708 | 2,152 | 1,703 | |||||||||||
Cash used for merger, acquisition and severance1,2 | 21 | 48 | 167 | 326 | |||||||||||
Adjusted free cash flow | $ | 1,033 | $ | 756 | $ | 2,319 | $ | 2,029 | |||||||
1Refer to Key Terms and Non-GAAP Definitions on page 19. 22023 amounts reclassified to include cash paid for severance. | |||||||||||||||
Key Terms and Non-GAAP Definitions | ||
Description | Definition | |
Amortization of acquisition-related intangibles and additional cost of revenue related to the fair value step-up in inventory sold | Amortization of identifiable intangible assets acquired in connection with business combinations. Additional cost of revenue related to the fair value step-up in inventory is the difference between the balance sheet value of inventory from the acquiree and the acquisition date fair value. | |
Merger, acquisition, and divestiture-related expenses | Transaction and integration expenses associated with Tactical Data Links and AR acquisitions; external costs related to pursuing acquisition and divestiture portfolio optimization; non-transaction costs related to divestitures; and salaries of employees in roles dedicated to planned divestiture and acquisition activity. | |
Business divestiture-related (gains) losses, net and impairment of goodwill and other assets | Inclusive of segment impairment of goodwill and other assets noted below. 2023, includes a gain on sale of our Visual Information Solutions business, impairment of contract assets and other assets related to the restructuring of a customer contract and impairment of in-process research and development associated with a facility closure. In 2024, includes valuation allowance increase related to the pending sale of our CAS business (QTD and YTD) and impairment of goodwill and loss on sale recognized in connection with the sale of our antenna and related businesses (YTD). | |
Segment impairment of goodwill and other assets | In 2023, charges for goodwill impairment recorded at our IMS segment related to the pending divestiture of our CAS business and charges at our IMS and SAS segment related to restructuring of a customer contract impacting both segments and facility closures in IMS. In 2024, charges for an impairment of other assets recorded at our CS segment related to the Tactical Data Links acquisition. | |
Gain on sale of property, plant and equipment | In 2023, related to the sale of a building in our IMS segment. | |
LHX NeXt implementation costs | Costs related to the LHX NeXt initiative are expected to continue through 2025 and are expected to include workforce optimization costs and incremental IT expenses for implementation of new systems, third-party consulting expenses and other related costs, including costs related to personnel dedicated to this project. | |
LHX NeXt cost savings | Represents annual gross run rate savings driven by the LHX NeXt transformation initiative. It is an operational measure that includes savings from initiatives related to labor and function optimization, direct and indirect procurement, and infrastructure expected to recur on an ongoing basis. | |
Orders | Total value of funded and unfunded contract awards received from the U.S. Government and other customers, including incremental funding and adjustments to previous awards, excluding unexercised contract options and potential orders under ordering-type contracts, such as indefinite delivery, indefinite quantity (IDIQ) contracts. | |
Organic revenue* | Excludes the impact of completed divestitures and first year revenue associated with acquisitions and is reconciled in Table 4. | |
Adjusted segment operating income and margin* | On a consolidated basis represents operating income and margin, excluding the FAS/CAS operating adjustment, corporate unallocated items and items reconciled in Table 5. Segment operating income and margin for each segment represents each such segment's operating income and margin (GAAP measures), excluding impairment of goodwill and other assets and gain on sale of property, plant and equipment, as reconciled in table 6. | |
Non-GAAP diluted EPS*1 | Represents EPS (net income per diluted common share attributable to L3Harris Technologies, Inc. common shareholders) adjusted for items reconciled in Table 8. | |
Pension adjusted non-GAAP diluted EPS*1 | Represents Non-GAAP diluted EPS, described above, adjusted for the after tax per share impact of the FAS/CAS operating adjustment and Non-service FAS pension income reconciled in Table 8. | |
Adjusted Free Cash Flow* | Net cash provided by operating activities less capital expenditures, plus proceeds from sale of property, plant and equipment, cash used for merger, acquisition, and severance reconciled in Table 9. | |
Cash used for merger, acquisition, and severance* | Cash related to merger and acquisition expenses (described above) and severance costs included in LHX NeXt implementation costs. | |
Non-GAAP income before income taxes* | Represents income before income taxes adjusted for items reconciled in Table 7. | |
Effective tax rate on non-GAAP income* | Represents the effective tax rate (tax expense as a percentage of income before income taxes) adjusted for the tax effect of items reconciled in Table 7. | |
_____ *Refer to Non-GAAP Financial Measures on page 7 for more information. 1 Beginning in 1Q25 and reflected in our 2025 guidance, we are revising our Non-GAAP diluted EPS metric to exclude an adjustment for amortization of acquisition-related intangible assets. We believe this better aligns to industry standard presentation of Non-GAAP diluted EPS and provides our investors with a more appropriate metric that better reflects our performance. In this press release, "Non-GAAP diluted EPS" and "Pension adjusted non-GAAP diluted EPS" include an adjustment for amortization of acquisition-related intangible assets, and "Non-GAAP diluted EPS (New)" and "Pension adjusted non-GAAP diluted EPS (New)" does not include an adjustment for amortization of acquisition-related intangible assets. | ||
Contacts
Investor Relations Contact:
Daniel Gittsovich, 321-724-3170
investorrelations@l3harris.com
Media Relations Contact:
Sara Banda, 321-306-8927
media@l3harris.com
