Harris Corporation Reports Fiscal 2013 Fourth Quarter Results
MELBOURNE, Florida — Harris Corporation (NYSE:HRS) reported revenue in the fourth quarter of fiscal 2013 of $1.36 billion compared with $1.44 billion in the prior year. GAAP income from continuing operations was $71 million, or $0.65 per diluted share, compared with $137 million, or $1.20 per diluted share, in the prior year. Non-GAAP income from continuing operations was $154 million, or $1.41 per diluted share, compared with $162 million, or $1.42 per diluted share, in the prior year. Non-GAAP amounts for fiscal 2013 exclude charges of $127 million related to restructuring and other actions in the fourth quarter and for fiscal 2012 exclude acquisition-related costs. A reconciliation of GAAP to non-GAAP financial measures is provided in the tables. Orders in the fourth quarter were $1.43 billion compared with $1.48 billion in the prior year.
"Fourth quarter results were solid in a tough government spending environment," said William M. Brown, president and chief executive officer. "Performance benefited from our commitment to operational excellence and ongoing cost-reduction efforts, including restructuring actions announced in April that were executed faster than expected and generated fourth quarter cost savings. As we enter fiscal 2014, we now expect that restructuring and other actions will generate net annualized cost savings of approximately $60 million."
"We were particularly encouraged by the strong new orders momentum in the international tactical radio market. With a tactical book-to-bill of 1.49 and greater than one in both international and U.S. markets, tactical backlog increased substantially in the fourth quarter."
For full fiscal year 2013, revenue was $5.11 billion compared with $5.45 billion in the prior year. GAAP income from continuing operations was $466 million, or $4.16 per diluted share, compared with $559 million, or $4.80 per diluted share, in the prior year. Non-GAAP income from continuing operations was $549 million, or $4.90 per diluted share, compared with $605 million, or $5.20 per diluted share, in the prior year. Free cash flow was strong at $655 million compared with $619 million in the prior year.
Revenue in the fourth quarter for the RF Communications segment was $501 million compared with $584 million in the prior year. Tactical Communications revenue was $336 million, decreasing 18 percent, and Public Safety revenue was $165 million, decreasing 6 percent. For the quarter, segment operating income was $176 million, and non-GAAP operating income was $185 million. Operating income was $196 million in the prior year. Non-GAAP operating margin for the quarter was 36.9 percent and reflected a favorable product mix, lower costs through ongoing cost-reduction and operational excellence initiatives, and a $7 million benefit from the cumulative effect of a change in the timing of cost recognition on tactical radio programs.
Orders for the segment totaled $646 million, including $498 million in Tactical Communications and $148 million in Public Safety. Book-to-bill was 1.29 for the segment. At the end of the fourth quarter, backlog was $743 million in Tactical Communications and $598 million in Public Safety.
International tactical radio orders in the quarter included $79 million from a country in the Middle East for an integrated command, control and communications system utilizing wideband tactical radios and 4G tactical cellular capabilities, $61 million from Poland, $55 million from a country in Africa and $39 million from several customers in Brazil. U.S tactical radio orders included $38 million from the U.S. Air Force, $36 million from the U.S. Special Operations Command, and $20 million from the U.S. Marine Corps.
Public Safety orders in the quarter included $17 million from Los Angeles County, $13 million from the United Arab Emirates, and a $15 million follow-on order from the San Francisco Municipal Transportation Authority, bringing orders to-date to $47 million under an $85 million contract.
Integrated Network Solutions
Revenue in the fourth quarter for the Integrated Network Solutions segment was $402 million, a 6 percent increase compared with $379 million in the prior year, driven by growth across the segment in CapRock Communications, Healthcare Solutions and IT Services. Operating loss for the segment was $18 million compared with operating income of $6 million in the prior year. Non-GAAP operating income was $35 million compared with $34 million in the prior year.
Government Communications Systems
Revenue in the fourth quarter for the Government Communications Systems segment was $481 million, a 3 percent decline compared with $497 million in the prior year, primarily due to the transition of the GOES-R weather program to the integration and test phase. For the quarter, segment operating income was $55 million, and non-GAAP operating income was $66 million. Operating income was $66 million in the prior year. Non-GAAP operating margin in the fourth quarter was solid at 13.6 percent, resulting from strong program performance, and contributed to a record non-GAAP operating margin of 14.5 percent for the year.
Following the close of the quarter, Harris was awarded a 7-year, $150 million contract from the FAA to provide the Data Communication Network Services (DCNS) component of the NextGen Data Communications and Integrated Services (DCIS) program, bringing total contract value on the program to $481 million.
Initial guidance for GAAP income from continuing operations for fiscal 2014 is a range of $4.65 to $4.85 per diluted share. Revenue for fiscal 2014 is expected to be about 1 to 3 percent lower compared with fiscal 2013.
Harris will host a conference call today, July 30, at 8:30 a.m. Eastern Time (ET) to discuss its fourth quarter fiscal 2013 financial results. The dial-in numbers for the teleconference are (877) 299-4454 (U.S.) and (617) 597-5447 (International), using participant code 84790152. 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 www.harris.com/conference-call. A recording of the call will be available on the Harris website beginning at approximately 12 p.m. ET on July 30.
About Harris Corporation
Harris is an international communications and information technology company serving government and commercial markets in more than 125 countries. Headquartered in Melbourne, Florida, the company has approximately $5 billion of annual revenue and about 14,000 employees — including 6,000 engineers and scientists. Harris is dedicated to developing best-in-class assured communications® products, systems, and services. Additional information about Harris Corporation is available at harris.com.
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Non-GAAP Financial Measures
This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the SEC, including income from continuing operations and income from continuing operations per diluted share for the fourth quarter of fiscal 2013 and for fiscal 2013, excluding charges related to restructuring and other actions in the fourth quarter of fiscal 2013; income from continuing operations and income from continuing operations per diluted share for the fourth quarter of fiscal 2012 and for fiscal 2012, excluding charges for acquisition-related costs; free cash flow for fiscal 2013 and fiscal 2012, in each case excluding cash flow for capital expenditures; operating income and operating margin for the RF Communications segment for the fourth quarter of fiscal 2013, operating income for the Integrated Network Solutions segment for the fourth quarter of fiscal 2013, operating income and operating margin for the Government Communications Systems segment for the fourth quarter of fiscal 2013, and operating margin for the Government Communications Systems segment for fiscal 2013, in each case excluding charges related to restructuring and other actions in the fourth quarter of fiscal 2013; and operating income for the Integrated Network Solutions segment for the fourth quarter of fiscal 2012, excluding charges for acquisition-related costs. 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. 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 a guide in its forecasting, budgeting and long-term planning process and to measure operating performance for some management compensation purposes. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.
Attachments: Financial Statements (nine tables).
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Statements in this press release that are not historical facts are forward-looking statements that reflect management's current expectations, assumptions and estimates of future performance and economic conditions. Such statements are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this release include but are not limited to: earnings and revenue guidance for fiscal 2014; expected cost savings from restructuring and other actions in the fourth quarter of fiscal 2013; statements regarding commitment to operational excellence and ongoing cost-reduction efforts; potential contract opportunities and awards; the potential value of contract awards; and statements regarding outlook. The company cautions investors that any forward-looking statements are subject to risks and uncertainties that may cause actual results and future trends to differ materially from those matters expressed in or implied by such forward-looking statements. The company's consolidated results and the forward-looking statements could be affected by many factors, including but not limited to: the actual cost-savings from restructuring and other actions; the loss of the company's relationship with the U.S. Government or a shift in U.S. Government funding; potential changes in U.S. Government or customer priorities and requirements (including potential deferrals of awards, terminations, reductions of expenditures, changes to respond to the priorities of Congress and the Administration, budgetary constraints, debt ceiling implications, sequestration and cost-cutting initiatives); risks inherent with large long-term fixed-price contracts, particularly the ability to contain cost overruns; the potential impact of a security breach, through cyber attack or otherwise, or other significant disruptions of the company's IT networks and systems or those the company operates for customers; financial and government and regulatory risks relating to international sales and operations; the continued effects of the general downturn and weakness in the global economy and U.S. Government's budget deficits, national debt, continuing resolutions and sequestration; the company's ability to continue to develop new products that achieve market acceptance; the consequences of future geo-political events; strategic acquisitions and the risks and uncertainties related thereto, including the company's ability to manage and integrate acquired businesses; performance of the company's subcontractors and suppliers; potential claims that the company is infringing the intellectual property rights of third parties; the successful resolution of patent infringement claims and the ultimate outcome of other contingencies, litigation and legal matters; risks inherent in developing new technologies; changes in the company's effective tax rate; the potential impact of natural disasters or other disruptions on the company's operations; the potential impact of changes in the regulatory framework that applies to, or of satellite bandwidth constraints on, the company's managed satellite and terrestrial communications solutions; the timing and impact of the anticipated disposition of the company's Cyber Integrated Solutions operation and the timing and amount of anticipated gains, losses, impairments and charges related to such disposition; and changes in future business or other market conditions that could cause business investments and/or recorded goodwill or other long-term assets to become impaired. Further information relating to factors that may impact the company's results and forward-looking statements are disclosed in the company's filings with the SEC. The forward-looking statements contained in this release are made as of the date of this release, and the company disclaims any intention or obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
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