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Harris Management Discusses Q4 2012 Results - Earnings Call Transcript

Stocks in this article: HRS

Before we get started, a few words on forward-looking statements. In the course of this teleconference, management may make forward-looking statements. Forward-looking statements involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements. For more information and a discussion of such assumptions, risks and uncertainties, please see the press release and filings made by Harris with the SEC.

In addition, in our press release and on this teleconference and the related presentation, we will discuss certain financial measures and information that are non-GAAP financial measures. A reconciliation to the comparable GAAP measures is included in tables of the press release and on the Investor Relations section of our website, which is www.harris.com. A replay of this call will also be available on the Investor Relations section of our website.

And with that, Bill, I'll turn it over to you.

William M. Brown

Okay. Well, thank you, Pam. And welcome to our Fourth Quarter Fiscal 2012 Earnings Call. I'll begin today's call by turning to Slides 3 and 4 in the presentation.

Harris fourth quarter results represented a solid finish to fiscal 2012. Revenue was $1.4 billion. Non-GAAP income was $162 million and increased 4% over the prior year even though revenue declined by 6%. Operating income was higher in all 3 segments as a result of our productivity and cost-reduction initiatives. Non-GAAP EPS of $1.42 was up a strong 15% compared to $1.24 in the prior year, reflecting higher operating income and share repurchases. In addition, cash flow was particularly strong in the quarter and resulted in record free cash flow for the year.

Our new wins and orders in the quarter were encouraging as we enter fiscal 2013. Total orders in the quarter were higher than revenue and increased in all 3 segments. Although total revenue declined as expected due to lower revenue in Tactical Communications and IT Services, we are gaining traction in each of our growth initiatives. Public Safety and Professional Communications continued along its strong growth trajectory and was up 12% in the quarter. In CapRock, demand was strong for satellite communications solutions, with revenue up 8% and orders up solidly double-digit over the prior year and also significantly higher than revenue. In Healthcare Solutions, revenue increased 69% off of a relatively small base driven by excellent momentum in government healthcare where funding remains solid. In Tactical Communications, we're managing through a transition in the U.S. DoD market from one previously driven by OPTEMPO to a modernization cycle driven by wideband technology where we're the clear leader and where we continue to win on innovation and affordability. In government communications, continuing strong execution is generating solid operating margins, with sales to the classified community and civil customers like the FAA offsetting weaker DoD customer spending.

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