Harris Corporation Reports Fiscal 2015 Fourth Quarter Results

MELBOURNE, Fla. — (BUSINESS WIRE) — August 7, 2015 — Harris Corporation (NYSE: HRS) reported fiscal 2015 fourth quarter results, which included results of Exelis Inc. following the May 29, 2015 acquisition closing date.

Revenue in the fourth quarter of fiscal 2015 was $1.53 billion, compared with $1.33 billion in the prior year. GAAP loss from continuing operations was $56 million, or $0.51 per diluted share. Non-GAAP income from continuing operations in the fourth quarter was $148 million, or $1.32 per diluted share, and excluded acquisition-related costs and charges for restructuring and other items. The net benefit from the Exelis acquisition to Harris non-GAAP income from continuing operations was $0.09 per diluted share. Prior year GAAP income from continuing operations was $138 million, or $1.28 per diluted share. A reconciliation of GAAP to non-GAAP financial measures is provided in the tables.

Orders in the fourth quarter were $1.53 billion compared with $1.09 billion in the prior year. Free cash flow (net cash provided by operating activities less capital expenditures) in the fourth quarter was $413 million compared with $334 million in the prior year.

“Fourth quarter results were solid, and the integration of Harris and Exelis is off to a good start,” said William M. Brown, chairman, president and chief executive officer. “We announced our reorganization into four market-focused segments for fiscal 2016 and we consolidated headquarters, combining the top talent from across both companies. We also announced our intention to close Exelis’ Ft. Wayne tactical radio facility and consolidate operations into our world-class Rochester facility. These initial integration steps mark good progress towards achieving the significant cost savings and improved competitive position this combination affords us.”

For full fiscal year 2015, revenue was $5.08 billion compared with $5.01 billion in the prior year. GAAP income from continuing operations was $334 million, or $3.11 per diluted share. Non-GAAP income from continuing operations was $551 million, or $5.14 per diluted share. In the prior year, GAAP income from continuing operations was $540 million, or $5.00 per diluted share. Fiscal 2015 free cash flow was $713 million.

RF Communications

RF Communications revenue in the fourth quarter was $505 million compared with $493 million in the prior year. Tactical Communications revenue was $366 million, increasing 5 percent, and Public Safety revenue was $139 million, decreasing 4 percent. Segment operating income was $157 million and non-GAAP operating income was $159 million, excluding restructuring charges. Operating income was $141 million in the prior year.

Orders for the segment totaled $530 million, including $402 million in Tactical Communications and $128 million in Public Safety. Book-to-bill for the segment was 1.05 for the fourth quarter and 0.93 for the fiscal year. Funded backlog was $488 million in Tactical Communications and $514 million in Public Safety.

Tactical radio orders included $74 million from an international customer for the next phase of a tactical communications modernization program, $55 million from Australia for technical and logistics support for the Joint Project 2072 Battlespace Communications program, $21 million from a country in Central Asia, $12 million from a country in the Middle East, and $36 million from the U.S. Marine Corps. 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 under the Joint Tactical Radio System (JTRS) Handheld, Manpack and Small-form Fit (HMS) program. Public Safety orders included $37 million from the New York Metropolitan Transportation Authority.

Government Communications Systems

Government Communications Systems revenue in the fourth quarter was $485 million compared with $480 million in the prior year. Higher revenue from the Foundation GEOINT Content Management program, the F-35 program, and Highband Networking Radios for the U.S. Army’s Warfighter Information Network – Tactical (WIN-T) Increment 2 program was partially offset by lower revenue from two classified programs and the U.S. Navy’s Commercial Broadband Satellite program. Segment operating income was $66 million compared with $69 million in the prior year.

Orders included $55 million from exactEarth for commercial hosted payloads, $38 million from the Foundation GEOINT Content Management program, and $45 million for the U.S. Army’s Modernization of Enterprise Terminals (MET) program under a previously awarded IDIQ contract with a ceiling value of $800 million. Harris was also awarded a 2-year, $29 million contract from the U.S. Navy for the Distributed Targeting System on the F/A-18 E/F and EA-18G platform and an 18-month, $24 million follow-on production contract for Small Tactical Terminals to provide situational awareness in mobile-ground and light-aircraft applications. Harris also was awarded contracts totaling $21 million from classified customers.

Integrated Network Solutions

Integrated Network Solutions revenue in the fourth quarter was $289 million, compared with $373 million in the prior year, a decrease of 23 percent primarily from the previously reported wind-down of two IT Services programs and continued market weakness. Segment operating loss was $21 million, and non-GAAP operating income was $16 million and excluded charges for restructuring and other items. Operating income was $33 million in the prior year.

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