Harris Corporation Reports Fiscal 2017 First Quarter Results

  • Fiscal 2017 revenue and EPS guidance reiterated
  • 1Q17 EPS $1.27 GAAP, up 8%; $1.39 non-GAAP, up 6%
  • Strong bookings of $2.05 billion; book-to-bill of 1.17
  • Operating cash flow $43 million, free cash flow $22 million
  • Expect fiscal 17 free cash flow ~$800 million
  • Repurchased $100 million in shares during the quarter
  • Announced definitive agreement to sell the CapRock commercial business for $425 million

MELBOURNE, Fla. — (BUSINESS WIRE) — November 1, 2016 — Harris Corporation (NYSE: HRS) reported revenue in the first quarter of fiscal 2017 of $1.75 billion compared with $1.81 billion in the prior year, down 3 percent on a reported basis and 2 percent on an organic basis, excluding prior-year revenue attributable to the divested Aerostructures business. GAAP net income was $160 million, or $1.27 per diluted share, compared with $148 million, or $1.18 per diluted share, in the prior year. Non-GAAP net income, excluding acquisition-related charges, was $175 million, or $1.39 per diluted share, compared with $163 million, or $1.31 per diluted share, in the prior year. A reconciliation of GAAP to non-GAAP financial measures is provided in the tables.

“First quarter performance provided a solid start to our fiscal year,” said William M. Brown, chairman, president and chief executive officer. “Despite the revenue headwind, earnings were higher in the quarter as we maintained our focus on operational excellence and realized acquisition synergies while investing to meet the needs of our customers. The business reported strong book-to-bill and backlog grew in all four segments including in our tactical radio business.”

“Earlier today we announced a definitive agreement to sell the CapRock commercial business for $425 million in cash as part of our on-going strategic initiative to optimize the business portfolio. Proceeds from the transaction will be used to pay down debt and return cash to shareholders. The transaction is expected to close in the first calendar quarter of 2017.”

Communication Systems

Communication Systems segment revenue in the first quarter was $431 million, down 5 percent compared to the prior year. Tactical Communications revenue was $340 million, down 6 percent primarily due to lower international SINCGARS radio sales. Public Safety revenue was $91 million, down 1 percent. Segment operating income was $119 million compared with $138 million in the prior year, declining primarily as a result of lower volume and mix.

Tactical radio orders in the quarter included $51 million from a country in Eastern Europe, $35 million from a country in Latin America, and $15 million from a country in Southeast Asia. Harris also was awarded several single-award IDIQ contracts, including a 5-year, $93 million contract from U.S. Southern Command with initial orders of $26 million to support counter-narcotic missions primarily in a number of Latin American countries; a 4-month, $33 million bridge contract from the Army and the Defense Logistics Agency; and a 3-year, $13 million competitive contract from the Army to develop a narrowband mode of the Soldier Radio Waveform (SRW), which will be required in all Army modernization radios, including HMS, MNVR, and Small Airborne Networking Radio (SANR).

Harris achieved two notable milestones during the quarter, receiving limited rate production authorization for the MNVR and NSA Certification for Falcon III 117G radios to run the Mobile User Objective System (MUOS) waveform, which provides connectivity to the Department of Defense’s next-generation MUOS satellite system.

Space and Intelligence Systems

Space and Intelligence Systems segment revenue in the first quarter was $453 million, up 4 percent compared to the prior year, driven by higher revenue from intelligence community customers and from the Radiation Budget Instrument program that provides sensors for monitoring climate change and global warming on NASA’s Joint Polar Satellite System (JPSS). Segment operating income was $80 million compared with $68 million in the prior year, reflecting continued strong program performance and higher pension income.

Following the close of the quarter, Harris received a 3½-year, $90 million follow-on contract with an initial order of $39 million to provide navigation payloads for the Air Force’s ninth and tenth GPS III satellites, and was selected for $53 million in follow-on work to provide counter-communication capabilities and situational awareness to support space asset protection, which will bring contracts to-date for this mission to about $200 million.

Electronic Systems

Electronic Systems segment revenue in the first quarter was $361 million, down 3 percent compared to the prior year. Revenue was up 2 percent on an organic basis, excluding $19 million of prior-year revenue attributable to the divested Aerostructures business. On an organic basis, higher revenue from the recent integrated battle management system win in the Middle East and from electronic warfare solutions was partially offset by lower revenue from wireless products sales. Segment operating income was $74 million compared with $69 million in the prior year.

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