Harris Corporation Reports Fiscal 2017 Second Quarter Results

Electronic Systems

Electronic Systems segment revenue in the second quarter was $384 million, up 1 percent compared with the prior year. Revenue was up 6 percent on an organic basis, excluding $18 million of prior-year revenue attributable to the divested Aerostructures business. On an organic basis, higher revenue from electronic warfare solutions and the recent integrated battle management system win in the Middle East was partially offset by lower wireless products sales. Segment operating income was $79 million compared with $63 million GAAP and $69 million non-GAAP, excluding restructuring and other charges, in the prior year, reflecting continued strong program performance and higher pension income.

Harris was awarded a 2-year, $91 million, single-award IDIQ contract from the U.S. Air Force to deliver electronic warfare pods on Moroccan F-16 aircraft; a 3-year, $45 million follow-on contract for carriage and release systems on F-35 aircraft; and a 3-year, $22 million contract from the U.S. Navy to upgrade electronic countermeasure capability on Australian F-18 aircraft under the Integrated Defensive Electronic Countermeasures (IDECM) program.

Critical Networks

Critical Networks segment revenue in the second quarter was $454 million, up 2 percent from the prior year. Higher revenue from FAA NextGen modernization programs and NASA’s Space Communications Network program was partially offset by lower IT services revenue. Segment operating income was $75 million compared with $63 million GAAP and $66 million non-GAAP, excluding restructuring, in the prior year, reflecting the benefit of a contract settlement partially offset by a less favorable mix of program revenue.

Harris was awarded a 14-year (7-year base, 7-year option), $700 million ceiling, single-award IDIQ contract to provide MyFloridaNet-2, a state-wide secure communications network with about 4,000 sites connecting public safety, law enforcement, and other state and local government agencies.

Guidance

In connection with the completed sale of CapRock and pending sale of government IT services, Harris updated its guidance to reflect both CapRock and government IT services reported as discontinued operations and the company’s reorganization into three segments. The air traffic management business will now operate as part of the Electronic Systems segment, and the Critical Networks segment will no longer exist. There were no changes to the Communication Systems or Space and Intelligence Systems segments.

Harris expects fiscal 2017 GAAP income from continuing operations in a range of $5.21 to $5.41 per diluted share and non-GAAP income from continuing operations in a range of $5.40 to $5.60 per diluted share, excluding Exelis acquisition-related integration charges. Fiscal 2017 revenue is expected in a range of $5.76 - $5.88 billion.

Harris will host a conference call today, February 2, at 8:30 a.m. Eastern Time (ET) to discuss its second quarter fiscal 2017 financial results. The dial-in numbers for the teleconference are (877) 303-9481 (U.S.) and (760) 666-3582 (International), using participant code 59654745. Please allow at least 10 minutes before the scheduled start time to connect to the teleconference. Participants are encouraged to listen via live webcast and view management’s supporting slide presentation at https://www.harris.com/investors/financial-reports. A recording of the call will be available on the Harris website beginning at approximately 12 p.m. ET on February 2.

About Harris Corporation

Harris Corporation is a leading technology innovator, solving customers’ toughest mission-critical challenges by providing solutions that connect, inform and protect. Harris supports government and commercial customers in more than 100 countries and has approximately $6 billion in annual revenue. The company is organized into three business segments: Communication Systems, Space and Intelligence Systems and Electronic Systems. Learn more at harris.com.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission (“SEC”), including income from continuing operations and income from continuing operations per diluted share for the second quarter of fiscal 2017 and the second quarter of fiscal 2016, in each case excluding Exelis acquisition-related items and in the case of the second quarter of fiscal 2016 also excluding restructuring and other charges; free cash flow for the second quarter of fiscal 2017, excluding cash flow for net capital expenditures; segment operating income for the Communication Systems, Electronic Systems and Critical Networks segments for the second quarter of fiscal 2016, in each case excluding restructuring and other charges; the percentage change in revenue for the Electronic Systems segment on an organic basis, excluding revenue in the second quarter of fiscal 2016 attributable to the Aerostructures business divested in the fourth quarter of fiscal 2016; and the guidance range for expected income from continuing operations per diluted share for fiscal 2017, excluding Exelis acquisition-related integration charges. A “non-GAAP financial measure” is generally defined as a numerical measure of a company’s historical or future performance that excludes or includes amounts, or is subject to adjustments, so as to be different from the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles (“GAAP”). Harris management believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. Harris management also believes that these non-GAAP financial measures enhance the ability of investors to analyze Harris business trends and to understand Harris performance. In addition, Harris may utilize non-GAAP financial measures as guides in forecasting, budgeting and long-term planning processes and to measure operating performance for some management compensation purposes. Non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures presented in accordance with GAAP.

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