L3Harris Technologies, Inc. (LHX) Earnings Call Transcript & Summary

Good morning, everyone. I'm Bill Brown. It's my pleasure as Chair and CEO of L3Harris Technologies to welcome you to the company's 2021 Annual Meeting of Shareholders. Our annual meeting is an important event for our Board, management and shareholders. It is being held as a virtual-only meeting again this year due to ongoing COVID-related precautions, with shareholders and guests attending via the web portal and our other directors and the EY representative attending via operator-assisted telephone line. Please note that this meeting is being recorded. However, no participant is permitted to use any audio recording device. I now call the meeting to order. Serving as secretary for the meeting is Scott Mikuen, the company's General Counsel and Secretary. The order of business displayed on the web portal sets forth the agenda for the meeting, which we will conduct in accordance with the guidelines available on the web portal. Joining us by phone today are Chris Kubasik, Vice Chair, President and Chief Operating Officer; as well as the other members of the L3Harris Board: Sallie Bailey; Pete Chiarelli; Tom Corcoran; Tom Dattilo; Roger Fradin; Lew Hay; Lew Kramer; Rita Lane; Bob Millard; and Fig Newton. I would like to thank the members of the Board for their service to our company and its shareholders. Also joining by phone today is Brent Smith representing EY, our independent auditor. He will be available to respond to relevant questions during the question-and-answer session later in the meeting. I have appointed as inspectors of election, Robert Johnson, L3Harris Counsel and Assistant Secretary; and [ Sheryl Needling ] of Broadridge. They have sworn an oath of office and will be tabulating the votes. The secretary and inspectors of election have reported to me that notice of this annual meeting has been properly given to shareholders and a quorum is present. Therefore, the meeting is duly convened. The secretary will now outline the business matters to be addressed.

Thank you, Mr. Chair. There are 3 business items presented for shareholder action, each as described more fully in the company's 2021 proxy statement. The first item is the election of 12 nominees for director for a term expiring at the company's annual meeting to be held in April 2022. The second item is the advisory vote to approve the compensation of the named executive officers as disclosed in the company's 2021 proxy statement. The third and final item is the ratification of the Audit Committee's appointment of EY as the independent registered public accounting firm for the fiscal year ending December 31, 2021. Mr. Chair, the company has received no notice of any further matters to be considered at today's meeting beyond the 3 business items I summarized. Therefore, no such further matters may be properly introduced by shareholders at today's meeting.

The 3 business items are now before the meeting for shareholder action. The polls are open for voting and will stay open until the conclusion of the formal business portion of the meeting. For shareholders, if you have not yet voted or would like to change your vote, you may do so by clicking the voting button on the web portal and following the instructions there. To be clear, if you have already voted, you do not need to take any further action unless you would like to change your prior vote. After the formal business portion of the meeting, we will provide time for germane questions from validated shareholders. [Operator Instructions] Though we may not be able to answer every question, we will attempt to respond to as many as possible in the time allotted.

Mr. Chair, with respect to the 3 business items, the Board recommends a vote for each of its 12 nominees for director; for approval of the named executive officer compensation; and for ratification of the Audit Committee's appointment of EY.

This concludes the presentation of the proposals. The polls are about to close. So if you have not yet voted, please do so now, and I'll pause briefly. [Voting]

The polls are now closed, and the inspectors of election will submit the preliminary report.

Based on the inspector's preliminary report, approximately 89.5% of the company's shares, as of the record date, are represented at this meeting, and I now declare the following as to the business items presented for shareholder action. The 12 nominees set forth in the 2021 proxy statement have been duly elected as directors of the company for a term expiring at the 2022 annual meeting by the affirmative vote of a majority of votes cast. The compensation of the company's named executive officers has been approved by a majority of the voting power entitled to vote. The appointment of EY as independent registered public accounting firm for the fiscal year ending December 31, 2021, has been ratified and approved by a majority of the voting power entitled to vote.

This completes the formal business portion of this meeting, and I declare the business meeting adjourned. I now open the floor for shareholder questions via the web portal. We will attempt to answer as many questions as possible in the time allotted, but only questions that are germane to the meeting will be addressed.

Okay. Now the first is a statement and a question from Mr. John Kendall. Before COVID, I had never missed a meeting attending in person, but please send my greetings to everyone. I am in listening online as keeping my record of attendance. Shout out to my friend, Tom Corcoran, from our days in Camden, also to Chris Kubasik and Bill Brown. So glad the company is growing. It was a good move in raising a quarterly dividend payout to $1.02 per share. Management is doing a good job in creating a caring, friendly atmosphere with less pressure, resulting in higher productivity. My question, I believe that our stock is undervalued. Any comments?

Well, thanks, John, for your comments and your question. We certainly wish you are here in person, and I appreciate your dedication to participating in our annual shareholders' meetings. I also appreciate the comment on our caring work atmosphere as that's certainly what we're trying to create here at L3Harris. And you may have noticed very recently, we were named a Fortune 100 Best Company to Work For in 2021 and we're the only A&D company on that list and the second recognition by Fortune this year. So we're very proud about that. Now relative to our stock price, the management team and the Board, our focus on execution of our strategy and delivering long-term value creation for our shareholders. But certainly, given our recent share repurchase activity, it's clear that we also believe there is long-term value potential in the company. So John, again, thank you very much for the question.

Next question. Why are there not more women on the Board of Directors and in executive leadership, including named executive officers in the proxy statement?

Well, thank you for that question. And first of all, as a leadership team and a Board, we're strongly committed to building a more diverse and inclusive environment here at L3Harris. In November, we published our first ever Diversity Inclusion Annual Report, which highlights our goals and progress on diversity. And you may have seen we recently expanded upon that in our sustainability report that we issued just last month. Both of those reports can be found on our website. Today, about 24% of our workforce are women. And in our executive ranks, more than 33% are women, which is an increase of 9 percentage points since the merger closed in the middle of 2019. So some progress there, but certainly more work to do. Now at the Board level, 2 of our 10 independent directors are women, and it's a key focus area for the Nom and Gov Committee of the Board, and the Board as a whole, where we hope to see increasing diversity as retirements and other changes take place in the next few years. So again, thank you very much for that question as well.

Okay. Next question. In January of this year, the Nobel Peace Prize winning treaty on the prohibition of nuclear weapons entered into force as international law in the first 50 ratifying countries. 85 more countries support the treaty and may ratify in the near future. Nuclear weapons are highly profitable but profoundly dangerous and immoral industry. As this product is now illegal under international law and shareholders are facing legislative risk, will you adopt -- adapt by converting nuclear weapons scientists and infrastructure to green technologies and other pressing human needs?

Well, thanks for that question. It really isn't applicable to L3Harris as that's not the work we're in today. So thank you very much for that question.

And no further questions.

Okay. Well, thank you very much for your attendance today and the questions, and have a good day. Thank you so much.