Harris Corporation Reports Fiscal 2016 First Quarter Results

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Harris Corporation reported revenue in the first quarter of fiscal 2016 of $1.81 billion, compared with $1.16 billion in the prior year. GAAP net income was $148 million, or $1.18 per diluted share, and non-GAAP net income was $163 million, or $1.31 per diluted share, excluding acquisition-related costs. Prior-year GAAP net income was $125 million, or $1.18 per diluted share. Higher first quarter results were primarily due to the acquisition of Exelis in the fourth quarter of fiscal 2015. A reconciliation of GAAP to non-GAAP financial measures is provided in the tables.

Orders in the first quarter were $2.24 billion. Free cash flow (net cash provided by operating activities less capital expenditures) was $40 million.

“First quarter results marked a strong start to our fiscal year and reflected the first full quarter of Exelis’ operations,” said William M. Brown, chairman, president and chief executive officer. “The integration is on track, with synergy savings already evident in first quarter results and ramping towards our fiscal year target of $70-75 million. Orders in the quarter were excellent, resulting in a book-to-bill of 1.24 and expanding backlog.”

As previously announced, Harris reorganized at the beginning of fiscal 2016 into four new business segments: Communication Systems, Space and Intelligence Systems, Electronic Systems and Critical Networks. On November 2, 2015, Harris provided selected information which combines Harris and Exelis historic results for comparable periods as if the businesses had been operated together on the basis of the new segment structure for fiscal years 2014 and 2015.

Communication Systems

Communication Systems segment revenue in the first quarter was $454 million and operating income was $138 million.

Tactical radio orders included $38 million and $26 million from a country in Central Asia, $39 million from 2 Baltic countries, $27 million from several countries in the Middle East and Africa, $21 million from a Latin American nation, and $13 million from the U.S. Air National Guard. Harris also was awarded a 6-year, $390 million ceiling, single-award Indefinite Delivery Indefinite Quantity (IDIQ) contract from the U.S. Special Operations Command for a new integrated 2-channel handheld tactical radio and a $100 million increase in the ceiling value of a previously awarded single-source IDIQ contract with the U.S. Defense Logistics Agency to provide tactical radio spare parts to the U.S. Army and federal civilian agencies.

Space and Intelligence Systems

Space and Intelligence Systems segment revenue in the first quarter was $435 million and operating income was $68 million.

Orders included a total of $184 million from classified customers primarily in support of space superiority missions and advanced sensors systems as well as $45 million from the U.S. Naval Research Laboratory for commercial antennas and ground communication system upgrades.

Electronic Systems

Electronic Systems segment revenue in the first quarter was $374 million and operating income was $69 million.

Orders included $111 million from the U.S. Air Force for fixed-wing aircraft electronic warfare self-protection subsystems, $97 million from the U.S. Navy for F/A-18 jammer systems under the Integrated Defensive Electronic Countermeasures (IDECM) program, and $27 million from the U.S. Department of State for EGON counter improvised explosive device (IED) systems. Harris also was awarded a 4-year (1-year base, three 1-year options), $113 million contract with an initial $39 million order from the U.S. Naval Sea Systems Command (NAVSEA) for radar kits; a 5-year, $78 million ceiling, single-award IDIQ contract from a Department of Defense customer for electronic warfare subsystems on rotary aircraft as well as a 3-year, $54 million ceiling, single-award IDIQ contract from the U.S. Naval Research Laboratory for the Advanced Decoy Architecture Payloads (ADAP) program; and a 2-year (1-year base, 1-year option), $49 million production contract for sonobuoy launchers for P-8 Poseidon anti-submarine aircraft.

Critical Networks

Critical Networks segment revenue in the first quarter was $566 million and operating income was $63 million.

Contract awards for IT services included a 5-year, $800 million ceiling, multi-award IDIQ from the U.S. Army for research and development to counteract asymmetrical threats; a 5-year, $500 million ceiling, multi-award IDIQ from a proprietary customer with an initial $25 million order; and a 5-year, $228 million ceiling IDIQ from the U.S. Navy for maritime mine countermeasures support.

Earnings Guidance

Harris reiterated its guidance for fiscal 2016 GAAP net income in a range of $5.25-$5.45 per diluted share and non-GAAP net income, excluding acquisition-related costs, in a range of $5.60-$5.80 per diluted share. GAAP net income guidance could change as a result of any further actions related to the Exelis acquisition. Guidance for fiscal 2016 revenue is unchanged in a range of $7.67-$7.83 billion.

About Harris Corporation

Harris Corporation is a leading technology innovator, solving our customers’ toughest mission-critical challenges by providing solutions that connect, inform and protect. Harris supports customers in over 125 countries. The Company has approximately $8 billion in annual revenue and 22,000 employees and is organized into four business segments: Communication Systems, Space and Intelligence Systems, Electronic Systems, and Critical Networks