Q1 2011 Earnings Call
October 25, 2010 4:30 pm ET
Howard Lance - Executive Chairman, Chief Executive Officer and President
Pamela Padgett - Vice President of Investor Relations
Gary McArthur - Chief Financial Officer and Senior Vice President
Joseph Nadol - JP Morgan Chase & Co
Mark Jordan - Noble Financial Group
Jason Kupferberg - UBS Investment Bank
Chris Quilty - Raymond James & Associates
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Good day, ladies and gentlemen, and welcome to the First Quarter 2011 Harris Earnings Conference Call. My name is Alicia, and I will be your coordinator today. [Operator Instructions] I would now like to turn the call over to Ms. Pamela Padgett, Vice President of Investor Relations. Please proceed.
Hello, everyone. Good afternoon. Welcome to Harris Corp. first quarter fiscal 2011 conference call. I'm Pamela Padgett, and on the call with me today is Howard Lance, Chairman, President and CEO; Gary McArthur, Senior Vice President and Chief Financial Officer. Before we get started a few words about 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, we will discuss certain financial measures and information that are non-GAAP financial measures. A reconciliation to the comparable GAAP measure is 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 the Investor Relations section. And with that, Howard, I'll turn it over to you.
Thanks, Pam, and welcome everyone to our first quarter fiscal 2011 earnings call. Harris first quarter results were very strong with revenue and income significantly higher than the prior year. Excellent financial performance was driven by continuing strong demand, and favorable product mix in our Tactical Radio business. Results in the Public Safety and Professional Communications business were solid.
And following the end of the quarter, Harris was selected to negotiate a potential contract with the government of Alberta, Canada with their new province-wide radio communication system. This represents a significant multi-year program opportunity for us. In our Government Communication Systems segment, new program wins as well as additional program scope and follow-on business for existing programs are building a healthy backlog even as the government spending environment has become more challenging. And sequential improvement was seen in our Broadcast Communication segment, which has been negatively impacted by the global recession.
Consolidated revenue in the first quarter was $1.41 billion, 17% higher than the prior year. On an organic basis, excluding the impact of acquisitions, revenue increased 10%. Non-GAAP income, which excludes acquisition-related costs was $165 million in the first quarter or $1.28 per diluted share. An increase of 56% compared with the prior-year quarter. Non-GAAP EBITDA in the first quarter was $318 million, compared with the prior year of $228 million. Consolidated orders in the first quarter were very strong at $1.30 billion. While somewhat lower than the $1.50 billion in the prior quarter, but it also sequentially followed a very large fourth quarter of $1.70 billion in orders. Our recent wins and strong opportunity pipeline have certainly increased our confidence for another strong performance in fiscal 2011, and we expect good momentum when we enter fiscal 2012.
First quarter revenue for the RF Communication segment was $567 million, that's 34% higher compared to $424 million in the prior year. Operating income was $229 million and operating margin was a very strong 40% due to favorable product mix and operating efficiencies in our business. First quarter orders for the RF segment were $472 million. Tactical Radio Communications revenue was $446 million in the quarter, increased 47% compared with the $303 million in the last-year first quarter. Revenue was driven by deliveries on fiscal 2010 orders for equipping MRAPs and M-ATVs. The remaining $80 million in prior-year MRAP and M-ATV orders is expected to ship in our second quarter.
Tactical Radio Communications orders were $394 million in the quarter, representing a strong book-to-bill of 0.9%. We continue to experience solid demand in the U.S., stronger demand internationally and an uptake in customer adoption of our new Falcon III radio family. We also saw a number of orders for new products. In fact, orders outside of our core tactical radio products represented 26% of orders in the first quarter in total, and 7% of revenue. Additionally, nearly 50% of our orders in the quarter were for less than $5 million, coming from a wide array of U.S. and international customers. We believe further demonstrating the broad-based sustainable global appeal of our product offering.
International wins in the quarter included three orders totalling $69 million from the government of Pakistan. For the next phase of our comprehensive C4I system, which utilizes Harris Falcon II and Falcon III Tactical Radios, our secure personal radios, our multiband networking radios and high-capacity line of sight radio solutions. Also included a $12 million order for Falcon III high-capacity line of sight radios, and Falcon II HF radios from a country in the Middle East and $14 million and $10 million, respectively in orders to deliver the first Falcon III Type-1 Suite B Handheld Tactical Radios supporting Coalition Forces in the Middle East and is in Central Asia.