Harris Corporation Reports Fiscal 2015 Third Quarter Results In Line With Preliminary Third Quarter Estimates

MELBOURNE, Fla. — (BUSINESS WIRE) — May 5, 2015 — Harris Corporation (NYSE: HRS) reported revenue in the third quarter of fiscal 2015 of $1.19 billion compared with $1.27 billion in the prior year. Income from continuing operations was $126 million, or $1.20 per diluted share on a GAAP basis and $139 million, or $1.32 per diluted share on a non-GAAP basis, excluding acquisition-related costs. In the prior year, GAAP income from continuing operations was $137 million, or $1.27 per diluted share. Orders in the third quarter were $1.21 billion compared with $1.11 billion in the prior year. The company generated strong free cash flow (net cash provided by operating activities less capital expenditures) of $150 million in the third quarter compared with $120 million in the prior year. A reconciliation of GAAP to non-GAAP financial measures is provided in the tables.

“We had solid performance in the third quarter and expect good operating results for the full fiscal year,” said William M. Brown, chairman, president and chief executive officer. “Our acquisition of Exelis is progressing with debt financing now in place and at favorable terms. And while we received a second request from the Department of Justice in connection with anti-trust clearance, we continue to expect the transaction to close in June.”

RF Communications

RF Communications segment revenue in the third quarter was $451 million compared with $457 million in the prior year. Tactical Communications revenue was $356 million, increasing 6 percent, and Public Safety revenue was $95 million compared with $122 million in the prior year. Segment operating income was $151 million compared with $144 million in the prior year.

Orders for the segment totaled $393 million, including $286 million in Tactical Communications and $107 million in Public Safety. Book-to-bill for the segment was 0.87 and funded backlog was $453 million in Tactical Communications and $501 million in Public Safety.

Tactical radio orders included $47 million and $22 million from two countries in the Middle East, $26 million and $16 million from two NATO countries, and $27 million from the U.S. Special Operations Command. Public Safety orders included $14 million from the Port Authority of New York and New Jersey and $13 million from the Republic of Trinidad and Tobago.

Following the close of the quarter, Harris received a $74 million order from an international customer for the next phase of a tactical communications modernization program. Harris was also awarded a 10-year (5-year base, 5 option years) $3.9 billion ceiling, multi-award Indefinite Delivery Indefinite Quantity (IDIQ) contract from the U.S. Army for rifleman radios and associated services under the Joint Tactical Radio System (JTRS) Handheld, Manpack and Small-form Fit (HMS) program.

Government Communications Systems

Government Communications Systems segment revenue in the third quarter was $455 million, decreasing 5 percent compared with $477 million in the prior year. Higher revenue from the U.S. Navy’s Commercial Broadband Satellite Program and the Foundation GEOINT Content Management program was more than offset by lower revenue from space customers and NOAA’s GOES-R weather program. Segment operating income was $75 million compared with $77 million in the prior year. Operating margin was 16.4 percent, reflecting continued strong program execution and favorable product mix.

During the quarter, Harris was awarded an 8-year, $238 million single-award IDIQ contract from the FAA for the Common Support Services–Weather program to design and implement a system that provides real-time weather information across the National Airspace System, and a 5-year, $300 million single-award IDIQ contract from a classified customer to integrate various intelligence systems. Harris also was awarded contracts totaling $133 million from other classified customers, including a 3-year, $23 million contract from a new customer for space situational awareness.

Integrated Network Solutions

Integrated Network Solutions segment revenue in the third quarter was $299 million, decreasing 14 percent compared with $348 million in the prior year. The decline in revenue was primarily from the previously reported wind-down of two IT Services programs. Segment operating income was $12 million compared with $21 million in the prior year.

During the quarter, IT Services was awarded a 10-year, $450 million single-award IDIQ from the Defense Information Systems Agency to provide systems engineering and program management services for the Crisis Management System. CapRock orders included a $35 million, 4-year contract extension from a major offshore oil and gas driller and orders totaling $21 million from a leading energy services company.

Earnings Guidance

Harris reiterated its increased fiscal 2015 guidance announced April 21 for non-GAAP income from continuing operations per diluted share from a range of $4.95 to $5.05 to a range of $5.00 to $5.10 and updated revenue guidance from a decline in a range of 1 to 3 percent to a decline of about 4 percent. Fiscal 2015 non-GAAP guidance does not include any impact from the pending acquisition of Exelis. Fiscal 2015 GAAP results would include potential post-closing revenue and income attributable to Exelis, increased share count from the transaction, and acquisition-related costs that are expected to be in a range of $270 million to $290 million.

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