Guidance
As a result of strong year-to-date performance, L3Harris updated its guidance to the following:
Second half calendar year 2019 guidance:
- Revenue of approximately $9.2 billion, up ~10% from combined second half calendar 2018 (tightened from previous range of $9.2 - $9.3 billion, up 9.5% - 10.5%)
- GAAP EPS of approximately $3.81 and non-GAAP EPS7 of approximately $5.35 (increased from previous range of $2.31 - $2.41 GAAP and $4.95 - $5.05 non-GAAP)
- Operating cash flow of approximately $834 million; adjusted free cash flow8 of approximately $1.35 billion (tightened from previous guidance of $1.07 - $1.12 billion operating cash flow and $1.30 - $1.35 billion adjusted free cash flow)
Full calendar year 2019 guidance:
- Revenue of approximately $18.1 billion, up ~10% from combined full year calendar 2018 (tightened from previous range of $18.0 - $18.1 billion, up 9.5% - 10.5%)
- GAAP EPS of approximately $8.03 and non-GAAP EPS7 of approximately $10.00 (increased from previous range of $6.35 - $6.45 GAAP and $9.60 - $9.70 non-GAAP)
- Operating cash flow of approximately $1.95 billion; adjusted free cash flow8 of approximately $2.35 billion (tightened from previous guidance of $2.24 - $2.29 billion operating cash flow and $2.30 - $2.35 billion adjusted free cash flow)
Conference Call and Webcast
L3Harris will host a conference call today, October 30, at 8:30 a.m. Eastern Time (ET) to discuss its calendar 2019 third quarter financial results. The dial-in numbers for the teleconference are (U.S.) (877) 407-6184 and (International) (201) 389-0877, and participants will be directed to an operator. Please allow at least 10 minutes before the scheduled start time to connect to the teleconference. Participants are encouraged to listen via live webcast and view management’s supporting slide presentation at https://www.l3harris.com/investors. A recording of the call will be available on the L3Harris website beginning at approximately 12 p.m. ET on October 30.
About L3Harris Technologies
L3Harris Technologies is an agile global aerospace and defense technology innovator, delivering end-to-end solutions that meet customers’ mission-critical needs. The company provides advanced defense and commercial technologies across air, land, sea, space and cyber domains. L3Harris has approximately $17 billion in annual revenue and 50,000 employees, with customers in 130 countries. L3Harris.com.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission (“SEC”), including earnings per diluted share from continuing operations for the third quarter and first three quarters of calendar 2019 and expected earnings per diluted share from continuing operations for the second half and full calendar 2019, in each case excluding L3Harris deal and integration costs, deal-related amortization expense and gain on sale of Harris’ Night Vision business; earnings per diluted share from continuing operations for the third quarter and first three quarters of calendar 2018, in each case excluding the impact of non-cash adjustments related to tax reform and charges related to a decision to transition and exit a commercial line of business and other items, and in the case of the first three quarters of calendar 2018, also excluding a one-time non-cash charge from an adjustment for deferred compensation; adjusted earnings before interest and taxes (“EBIT”) and adjusted EBIT margin for the third quarter and first three quarters of calendar 2019, in each case excluding net interest expense, income taxes, discontinued operations net of income taxes and L3Harris deal and integration costs; adjusted EBIT and adjusted EBIT margin for the third quarter and first three quarters of calendar 2018, in each case excluding, as applicable, net interest expense, income taxes, discontinued operations net of income taxes, charges related to a decision to transition and exit a commercial line of business and other items and a one-time non-cash charge from an adjustment for deferred compensation; free cash flow for the third quarter and first three quarters of calendar 2019 and third quarter and first three quarters of calendar 2018, in each case excluding cash flow for capital expenditures; adjusted free cash flow for the third quarter and first three quarters of calendar 2019 and expected adjusted free cash flow for the second half and full calendar 2019, in each case excluding cash flow for capital expenditures and L3Harris deal and integration costs and adjusted for the voluntary contribution to qualified pension plans in the third quarter of calendar 2019; and adjusted free cash flow for the third quarter and first three quarters of calendar 2018, in each case excluding cash flow for capital expenditures and adjusted to add back the voluntary contribution to qualified pension plans in the first quarter of calendar 2018. A “non-GAAP financial measure” is generally defined as a numerical measure of a company’s historical or future performance that excludes or includes amounts, or is subject to adjustments, so as to be different from the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles (“GAAP”). L3Harris management believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. L3Harris management also believes that these non-GAAP financial measures enhance the ability of investors to analyze L3Harris business trends and to understand L3Harris performance. In addition, L3Harris may utilize non-GAAP financial measures as guides in forecasting, budgeting and long-term planning processes and to measure operating performance for some management compensation purposes. Non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures presented in accordance with GAAP.
Basis of Preparation of Unaudited Combined L3 and Harris Historical Financial Information
As supplemental information to aid with year-over-year comparability following the L3Harris merger, L3Harris has included certain unaudited combined L3 and Harris historical financial information, which combines L3 and Harris historical operating results as if the businesses had been operated together during prior periods on the basis of the combined company’s four segment structure effective following the merger, but excluding the operating results of Harris’ Night Vision business and L3's divested businesses, allocating Harris’ corporate department expense to the new segment structure and excluding Harris historical deal amortization (primarily related to Exelis) (the “Supplemental Unaudited Combined Financial Information”). L3Harris current-period adjusted results exclude, and L3Harris intends to continue to exclude in future-period adjusted results, all deal amortization (including L3 historical deal amortization). The Supplemental Unaudited Combined Financial Information has no impact on L3’s or Harris’ previously reported consolidated balance sheets or statements of income, comprehensive income, cash flows or equity.
For avoidance of doubt, the Supplemental Unaudited Combined Financial Information also is not intended to be, and is not, prepared consistent with the unaudited pro forma condensed combined financial information in Exhibit 99.7 to L3Harris’ Current Report on Form 8-K filed July 1, 2019 with the U.S. Securities and Exchange Commission (the “Pro Forma 8-K Filing”), which provides the pro forma financial information required by Item 9.01(b) of Form 8-K, or other pro forma financial information prepared in accordance with Article 11 of Regulation S-X that may be included in L3Harris periodic reports filed with the SEC (collectively with the pro forma information in Exhibit 99.7 to the Pro Forma 8-K Filing, the “Pro Forma Financial Information”). For instance, the Supplemental Unaudited Combined Financial Information does not give effect to the L3Harris merger under the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 805, Business Combinations (“ASC Topic 805”), with Harris treated as the legal and accounting acquirer, and was not prepared to reflect the merger as if it occurred on the first day of any of the fiscal periods presented. The Supplemental Unaudited Combined Financial Information has not been adjusted to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable, or (3) expected to have a continuing impact on the combined results of L3 and Harris. More specifically, other than excluding the operating results of Harris’ Night Vision business and L3's divested businesses, allocating Harris’ corporate department expense to the combined company’s four segment structure and excluding Harris historical deal amortization (primarily related to Exelis), the Supplemental Unaudited Combined Financial Information does not reflect the types of pro forma adjustments in the Pro Forma Financial Information. Consequently, the Supplemental Unaudited Combined Financial Information is intentionally different from, but does not supersede, the Pro Forma Financial Information.
