MELBOURNE, Fla., July 29, 2014 — Harris Corporation (NYSE:HRS) reported revenue in the fourth quarter of fiscal 2014 of $1.33 billion and GAAP income from continuing operations of $138 million, or $1.28 per diluted share. In the prior year, revenue was $1.36 billion and GAAP income from continuing operations was $71 million, or $0.65 per diluted share. Prior year non-GAAP income from continuing operations, excluding charges related to restructuring and other actions, was $154 million, or $1.41 per diluted share. A reconciliation of GAAP to non-GAAP financial measures is provided in the tables. Free cash flow (net cash provided by operating activities less capital expenditures) in the fourth quarter was $334 million compared with $273 million in the prior year.
"Fourth quarter revenue and earnings were solid, and the company continues to generate substantial free cash flow while still investing for the future," said William M. Brown, chairman, president and chief executive officer. "Higher revenue and operating income in Government Communications Systems as well as efficiencies from operational excellence initiatives across the segments contributed to the solid performance in a tough U.S. Government spending environment."
For full fiscal year 2014, revenue was $5.01 billion compared with $5.11 billion in the prior year. GAAP income from continuing operations was $540 million, or $5.00 per diluted share, compared with $466 million, or $4.16 per diluted share, in the prior year. Non-GAAP income from continuing operations in the prior year was $549 million, or $4.90 per diluted share. Fiscal 2014 free cash flow was $648 million and 120 percent of income from continuing operations.
Revenue in the fourth quarter for the RF Communications segment was $493 million compared with $501 million in the prior year. Tactical Communications revenue was $348 million, increasing 4 percent, and Public Safety revenue was $145 million, decreasing 12 percent. Segment operating income was $141 million. In the prior year, segment operating income was $176 million, and non-GAAP operating income was $185 million.
Orders for the segment totaled $361 million, including $232 million in Tactical Communications and $129 million in Public Safety. Book-to-bill for the segment was 0.73 for the fourth quarter and 0.89 for the fiscal year. Funded backlog was $564 million in Tactical Communications and $570 million in Public Safety.
International tactical radio orders in the quarter included $78 million from a country in Central Asia, $15 million from a government in the Middle East, and $14 million from the Philippines. Harris was also awarded 5-year multi-vendor Indefinite Delivery Indefinite Quantity (IDIQ) contracts from the U.S. Army for Soldier Radio Waveform (SRW) vehicular appliquÃ© systems with a potential total value of $988 million. Public Safety orders included a $25 million follow-on order from the San Francisco Municipal Transportation Authority, bringing orders to-date to $72 million under a $92 million contract, and an $8 million follow-on order from the U.S. Marine Corps, bringing orders to-date to $36 million.
Integrated Network Solutions
Revenue in the fourth quarter for the Integrated Network Solutions segment was $373 million, decreasing 9 percent compared with $412 million in the prior year. Segment operating income was $33 million. In the prior year, segment operating loss was $17 million, and non-GAAP operating income was $36 million.
During the quarter, IT Services was awarded a 5-year contract with a potential value of $29 million for the U.S. State Department's Global IT Modernization Program and awards totaling $26 million under the Department of Veterans Affairs T4 IDIQ contract. CapRock Communications orders included $20 million and $15 million from two international oil and gas drilling companies, and three follow-on orders totaling $29 million from the Defense Information Systems Agency to provide managed satellite bandwidth services.
Government Communications Systems
Revenue in the fourth quarter for the Government Communications Systems segment was $480 million, increasing 2 percent compared with $471 million in the prior year. Major drivers included higher revenue from classified customers, the FAA's NextGen DataComm program, the F-35 program, and the U.S. Navy's Commercial Broadband Satellite program, partially offset by lower revenue from NASA's Space Network Ground Segment Sustainment program and NOAA's GOES-R weather program. Segment operating income was $69 million. In the prior year, segment operating income was $54 million, and non-GAAP operating income was $65 million.
During the quarter, Harris was awarded two 5-year, single-award IDIQ contracts totaling $773 million from the National Geospatial Intelligence Agency (NGA) for the Foundation GEOINT Content Management (FGCM) program to provide imagery products for two of three regions — $365 million for Region A for the U.S. Pacific Command and U.S. Northern Command, and $408 million for Region C for the U.S. Africa Command and U.S. Southern Command. Harris also was awarded two follow-on contracts totaling $78 million for the F-35 program and awards totaling $98 million from classified customers.
Harris was recently awarded two new wins for commercially-hosted satellite payloads, including a $63 million order in the fourth quarter for a payload program, and following the close of the quarter, a 5-year, $495 million multi-vendor IDIQ contract from the U.S. Air Force for the Hosted Payload Solutions (HoPS) program.
Initial guidance for GAAP income from continuing operations for fiscal 2015 is a range of $4.75 to $5.00 per diluted share. Revenue guidance for fiscal 2015 is a range of 1 to 3 percent lower compared with fiscal 2014.
Harris will host a conference call today, July 29, at 8:30 a.m. Eastern Time (ET) to discuss its fourth quarter fiscal 2014 financial results. The dial-in numbers for the teleconference are (877) 303-9481 (U.S.) and (760) 666-3582 (International), using participant code 65762292. 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 29.
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
Attachments: Financial Statements (7 tables).
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