Harris Corp. F3Q10 (Qtr End 3/31/10) Earnings Call Transcript

Harris Corp. F3Q10 (Qtr End 3/31/10) Earnings Call Transcript
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Harris Corp. (HRS)

F3Q10 (Qtr End 3/31/10) Harris Earnings Call

April 28, 2010 4:30 pm ET

Executives

Pamela Padgett - VP of IR and Corporate Communications

Howard Lance - Chairman, President and CEO

Gary McArthur - SVP and CFO

Analysts

Gautam Khanna - Cowen & Company

Chris Quilty - Raymond James & Associates

Larry Harris - C.L. King

Joe Nadol - JPMorgan

Jim Mcilree - Merriman

Operator

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Previous Statements by HRS
» Harris Corp. F2Q10 (Qtr End 01/01/10) Earnings Call Transcript
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» Harris Corp. F4Q09 (Qtr ended 3/7/09) Earnings Call Transcript

Good afternoon, today's call is being recorded. Beginning today's meeting is Pamela Padgett, Vice-President of Investor Relations and Corporate Communications. Please go ahead.

Pamela Padgett

Thank you. Good afternoon everyone and welcome to our third quarter fiscal 2010 conference call. I am Pamela Padgett, Vice-President of Investor Relations and Corporate Communications. And on the call today with me is Howard Lance, Chairman, President and CEO, Gary McArthur, Senior Vice-President and Chief Financial Officer.

Before we get started the few words on the forward-looking statements. In the course of this teleconference, management may make forward-looking statements. Forward-looking statements involve assumptions, risks and uncertainties; they could cause actual results to differ materially from those statements.

For more information on the discussion of such assumptions, risks and uncertainties, please see the press release and filings made by Harris with the SEC. In addition on our press release and on this teleconference, we will discuss certain financial measures and information that are non-GAAP financial measures. A reconciliation with the comparable GAAP measures have included in the tables of our 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 in the Investor Relations section on our website.

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

Howard Lance

Thank you, Pam. And welcome everyone to our third quarter fiscal 2010 earnings call. We had another excellent quarter of financial results. And perhaps even more importantly we set ourselves up for continued growth in the fiscal fourth quarter and in fiscal 2011. Our gross strategies are clearly working. We are gaining market share in our core markets while also moving the company into important adjacent markets to capitalize on growth opportunities.

Our mission critical assured communications capabilities are in strong demand across a broad range of market applications. Revenue in the third quarter was $1.33 billions, 10% higher than 1.21 billion in the prior year. Non-GAAP income excluding acquisition related cost was $170 million or $1.30 per diluted share. An increase of 27% compared with the prior year $136 million or $1.02 per shear.

Our bottom line continued to be driven by excellent program performance and award fees across the Government Communications segment. And strong gross margins and operational efficiencies in the RF Communications segment. New orders for the company were very strong again this quarter at $1.45 billions offering excellent forward momentum.

They were significantly higher than orders of $1.03 billion in the prior year and higher than third quarter revenue. Third quarter revenue for the RF Communications segment was $551 million compared with $439 million in the prior year. Tactical radio communications business revenue for the quarter was $429 million, about flat with the prior year while the public safety and professional communications business revenue contributed $122 million in the quarter.

Non-GAAP segment income was $208 million in the third quarter. That's excluding charges related to the Tyco Electronics Wireless Systems acquisition. And it is compared to $151 million in the prior year. Segment operating margin was exceptionally strong again this quarter at 38%. We are continuing to benefit from favorable tactical radio product mix and significant operating leverage provided by cost reduction actions.

New orders for the RF segment were $656 million in the quarter. Net included 488 million and tactical radio communications systems and $168 million for public safety and professional communications system. Both businesses had book-to-bill ratios of significantly greater than one.

Tactical radio communications order backlog at the end of the third quarter increased to $1 billion. Given our strong Q3 orders and our good Q4 momentum, we now expect to enter fiscal 2011 above with the tactical radio order backlog above $1 billion. Much higher than our previous expectation of $800 million.

Several factors continue to drive new orders. Customer demand for our next generation Falcon III radio is accelerating. And not just in the U.S. market, adoption in the International market is beginning, as evidenced by the significant order from Australia in the quarter.

Overall, International market demand has strengthened with some very large opportunities getting underway. And we continue to be the primary tactical radio supplier for the MRAP-ATV program by equipping the military's initial 6,644 vehicle purchases. Vehicle that will be used across all of the services.

The importance of the M-ATV program to Harris is two-fold. Naturally, it is a significant revenue opportunity. But it also offers a platform to showcase the advanced capabilities of our next generation Falcon III radios. This grass roots effort fields the new radios across a broad spectrum of users and encourages further adoption. A strategy that continues to be very successful for us.

Demand for the JTRS approved Falcon III family of radios has resulted in year-to-date Falcon III orders through the third quarter now totaling $620 million. Our Falcon III 117G wide band networking radio is enabling war fighters with unprecedented situational awareness. By providing streaming video, simultaneous voice and data feeds, collaborative chat and secure network connectivity.

Reports from the field confirm to us that the 117G is changing the way war fighters are conducting their missions. Falcon III orders during the third quarter included $73 million for the 117G Multiband manpack from the Marine Corp. for use in Afghanistan. $12 million from the Marine Corps. to upgrade existing 152C Multiband handheld systems from 20 to 50 watts to allow communications over a longer distances and rough terrain.

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