L3Harris Reports Strong Harris Standalone Fourth Quarter and Fiscal 2019 Results...Initiates L3Harris Calendar Year 2019 Guidance

Combined L3 and Harris revenue increased 7% for the second quarter and 10% for the first half of calendar 2019, with growth across each of the four new segments (Integrated Mission Systems, Space and Airborne Systems, Communication Systems and Aviation Systems). Unadjusted and adjusted EPS6 growth exceeded 20% for the second quarter and the first half. Adjusted EBIT6 margin expanded 140 basis points to 16.3% in the second quarter and 90 basis points to 15.8% in the first half.

Guidance

L3Harris initiated second half and calendar year 2019 guidance.

Second half calendar year 2019 guidance:

  • Revenue in a range of $9.2 - $9.3 billion, up 9.5% - 10.5% from second half calendar 20187
  • GAAP EPS in a range of $2.31 - $2.41 and non-GAAP8 EPS in a range of $4.95 - $5.05
  • Operating cash flow in a range of $1.07 - $1.12 billion; adjusted free cash flow9 in a range of $1.30 - $1.35 billion

Full calendar year 2019 guidance:

  • Revenue in a range of $18.0 - $18.1 billion, up 9.5% - 10.5% from full year calendar 20187
  • GAAP EPS in a range of $6.35 - $6.45 and non-GAAP8 EPS in a range of $9.60 - $9.70
  • Operating cash flow in a range of $2.26 - $2.31 billion; adjusted free cash flow9 in a range of $2.30 - $2.35 billion

Conference Call and Webcast

L3Harris will host a conference call today, July 31, at 8:30 a.m. Eastern Time (ET) to discuss Harris standalone fiscal 2019 fourth quarter and full-year financial results and unaudited combined L3 and Harris historical financial information. 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 July 31.

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 fourth quarter and fiscal 2019 and expected earnings per diluted share from continuing operations for the second half and full calendar year 2019, in each case excluding merger deal and integration costs, and in the case of expected earnings per diluted share from continuing operations for the second half and full calendar year 2019, also excluding amortization of acquisition-related intangibles; earnings per diluted share from continuing operations for the fourth quarter and fiscal 2018, in each case excluding the impact of a non-cash charge related to consolidation of certain Exelis facilities, losses related to debt refinancing and non-cash adjustments related to tax reform, and in the case of fiscal 2018, also excluding 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; earnings before interest and taxes (“EBIT”) and EBIT margin for the fourth quarter and fiscal 2019, in each case excluding net interest expense, income taxes, discontinued operations net of income taxes and merger deal and integration costs; EBIT and EBIT margin for the fourth quarter and fiscal 2018, in each case excluding net interest expense, income taxes, discontinued operations net of income taxes, a non-cash charge related to consolidation of certain Exelis facilities and losses related to debt refinancing, and in the case of fiscal 2018, also excluding 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; operating cash flow for the fourth quarter and fiscal 2019 and expected operating cash flow for the second half and full calendar year 2019, in each case excluding cash flow for capital expenditures and merger deal and integration costs; and operating cash flow for the fourth quarter and fiscal 2018, in each case excluding cash flow for capital expenditures, and in the case of operating cash flow for fiscal 2018, adjusted for the voluntary contribution to qualified pension plans in the third quarter of fiscal 2018. The amounts included in the unaudited combined L3 and Harris historical financial information are non-GAAP financial measures. 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 for investors, L3Harris has provided unaudited combined L3 and Harris historical financial information, which combines L3 and Harris historical operating results as if the businesses had been operated together on the basis of the newly announced four segment structure during prior periods, 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 intends to exclude all deal amortization (including L3 historical deal amortization) for future periods. The new segment structure and the Supplemental Unaudited Combined Financial Information have 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 was not intended to be, and was not, prepared on a basis 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. 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 new 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 set forth in Exhibit 99.7 to the Pro Forma 8-K Filing. Consequently, the Supplemental Unaudited Combined Financial Information is intentionally different from, but does not supersede, the pro forma financial information set forth in Exhibit 99.7 to the Pro Forma 8-K Filing.

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