Harris Reports Fiscal 2016 Third Quarter Results

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Harris Corporation reported revenue in the third quarter of fiscal 2016 of $1.91 billion, compared with $1.19 billion in the prior year. Income from continuing operations was $170 million, or $1.36 per diluted share, on a GAAP basis and $182 million, or $1.45 per diluted share, on a non-GAAP basis, excluding acquisition-related costs. 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. Third quarter results benefited from 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 third quarter were $2.14 billion. Free cash flow (net cash provided by operating activities less capital expenditures) was $87 million.

“Third quarter earnings were solid, continuing to benefit from the integration of Exelis and the capture of synergy savings,” said William M. Brown, chairman, president and chief executive officer. “Despite lower tactical revenue from the Middle East, total company orders and revenue in the third quarter were sequentially higher and book-to-bill was greater than one, driven by Space and Intelligence Systems, Electronic Systems and Critical Networks.”

“In early April, we completed the sale of our Aerostructures business and used the cash proceeds to pay down debt, bringing total term loan repayments since the acquisition to $683 million. The decision to sell Aerostructures is part of an ongoing strategy to optimize our business portfolio.”

Communication Systems

Communication Systems segment revenue in the third quarter was $485 million and operating income was $154 million.

Tactical radio orders included $29 million from a European nation; $20 million, $17 million and $11 million from several countries in the Middle East and Africa region; $12 million from the Philippines; $12 million from the U.S. Air Force for MRAP vehicles; and $12 million from U.S. Special Operations Command. Harris also was awarded a 10-year (5-year base, one 5-year option) $12.7 billion ceiling, multi-award Indefinite Delivery Indefinite Quantity (IDIQ) contract from the U.S. Army for multi-channel manpack radios.

Following the close of the quarter, Harris was selected as the preferred supplier for an integrated battlespace communications system for Australia’s phase 3 modernization program.

Space and Intelligence Systems

Space and Intelligence Systems segment revenue in the third quarter was $489 million and operating income was $76 million.

Orders included an 18-meter unfurlable antenna reflector for the JCSAT-17 geostationary communications satellite and $329 million from classified customers. Harris also was awarded a 6-year, $316 million follow-on contract with an initial $51 million order from NASA to provide weather payloads for the fourth and fifth satellites for the Joint Polar Satellite System program.

Following the close of the quarter, Harris was awarded $81 million in follow-on contracts with a $26 million order to sustain ground-based systems that support U.S. missile warning, missile defense and space surveillance missions from the U.S. Air Force for the System Engineering and Sustainment Integrator (SENSOR) program.

Electronic Systems

Electronic Systems segment revenue in the third quarter was $393 million and operating income was $75 million.

Orders included $88 million from the U.S. Navy to supply electronic jammers for the F/A-18 Hornet and Super Hornet aircraft; $17 million from the U.S. Air Force to provide sustainment and maintenance for B-1B electronic warfare self-protection subsystems; $41 million under the U.S. Army’s Modernization of Enterprise Terminals (MET) program; and $29 million for Sonobouy Launching Systems for the P8 antisubmarine aircraft. Harris also was awarded $121 million in follow-on contracts for the F-35 program; and a 3-year, $26 million contract with an initial $22 million order to provide maritime communications terminals to the Royal Canadian Navy.

Critical Networks

Critical Networks segment revenue in the third quarter was $551 million and operating income was $59 million.

Harris was awarded two 1-year options, adding $384 million of contract ceiling from NASA to continue supporting the Space Communications Network Services (SCNS) program; a 7-year, $44 million contract from the United Kingdom’s Air Traffic Services to supply a next-generation, VoIP communications system; and a multi-year contract renewal from Transocean to provide managed satellite communications services for its entire fleet.

Earnings Guidance

Harris now expects fiscal 2016 non-GAAP income from continuing operations of about $5.70 per diluted share, excluding a non-cash charge related to CapRock recorded in the second quarter, acquisition-related items, restructuring and other charges. Harris also now expects fiscal 2016 GAAP income from continuing operations of about $2.80 per diluted share. GAAP income from continuing operations guidance could change as a result of any further integration actions related to the Exelis acquisition. Harris now expects fiscal 2016 revenue of about $7.5 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.