L3Harris Technologies, Inc. (LHX) Cash Flow Statement

Across the ten reported quarters, operating cash flow has been negative in two periods and has exceeded net income by multiples in several others, which suggests the reported earnings base is not a reliable predictor of quarterly cash generation. The conversion pattern appears driven more by working capital swings than by underlying profitability, so the gap between net income and operating cash flow warrants further investigation before treating any single quarter as representative. A sustained OCF/NI ratio above 1.0 across a full cycle would be a more meaningful signal of conversion quality than the current volatile readings.

The magnitude of these swings relative to net income suggests that milestone billing, contract receivables timing, and inventory build on large programs are the primary drivers of quarterly cash results. This pattern appears consistent with long-cycle defense contracting, though the data alone does not identify which specific balance sheet line is responsible. Investors should monitor whether these swings reverse over subsequent quarters, as persistent working capital absorption would indicate a structural rather than timing-based cash drag.

The most recent two quarters show substantially stronger free cash flow than the first half of the period, which may indicate improving program execution and collections. However, the 2026Q3 result is heavily reliant on a $523M working capital inflow, so the underlying run-rate is likely lower than the headline margin implies. Sustainability should be assessed against capex intensity, which has remained modest at roughly 1-3% of revenue.

Because dividends have been paid at a consistent level even in quarters with negative free cash flow, they appear to be funded through balance sheet resources or debt during weaker periods. This suggests the dividend is treated as a committed obligation, which may constrain flexibility for deleveraging after the Aerojet acquisition. Buybacks have been more variable, indicating management is treating repurchases as a discretionary lever.