Harris Reports Fiscal 2018 Fourth-Quarter Results
Tuesday, July 31, 2018 | Comments

Harris reported fiscal 2018 fourth-quarter revenue of $1.7 billion, up 8 percent compared with the prior year. GAAP operating margin expanded 150 basis points to 19.3 percent.

Revenue increased 5 percent for the year, led by growth in communication systems and electronic systems. GAAP and non-GAAP EPS grew double digits for the quarter and the year driven by higher volume, operational excellence, higher pension income, lower share count and tax gains, partially offset for the year by a $36 million unfavorable impact from the Automatic Dependent Surveillance-Broadcast (ADS-B) program transition in the first half of fiscal 2018.

Fourth quarter segment revenue increased 16 percent from growth in all three businesses. Tactical communications revenue grew 21 percent, with Department of Defense (DoD) up 46 percent on strong readiness and modernization demand and international up 10 percent from solid growth in the Middle East and Asia Pacific. Night vision revenue grew double digits on increased U.S. Army demand. Operating income grew 11 percent to $162 million on increased volume and operational efficiencies.

Orders strength for the segment continued in the quarter, marking its eighth straight quarter of year-over-year orders growth. Tactical communications received several significant awards to meet U.S. DoD readiness demand, support U.S Army modernization, extend Harris ground-based radio expertise into adjacent markets and combat evolving international threats.

Public safety received $26 million in contracts from U.S. Customs and Border Protection (CBP) for advanced digital handheld radios, as it continues to diversify its customer base from state and local governments to federal agencies and public utilities.

Full year segment revenue increased 9 percent from 35 percent growth in DoD tactical and double-digit growth in night vision. Operating margins expanded 10 basis points to 30 percent. Orders grew 28 percent, resulting in a book-to-bill of 1.25 and greater than 1.0 in all three businesses. Tactical communications backlog increased more than 80 percent compared with the prior year.

In fiscal 2018, Harris generated $915 million in adjusted free cash flow, excluding a $300 million voluntary pension contribution in the third quarter and returned $544 million to shareholders through dividends and share repurchases.

"We ended the year on a high note with strong fourth quarter results capping a successful 2018," said William M. Brown, chairman, president and CEO. "We achieved our highest revenue growth in the last seven years with all three segments up year over year, high teens EPS (earnings per share) growth, record free cash flow and more than half a billion dollars returned to shareholders. With a well-funded budget, solid backlog growth, strong customer relationships and a culture of operational excellence, we are well positioned to accelerate growth, increase margins and generate free cash flow in excess of $1 billion.”

For fiscal 2019, Harris expects revenue in a range of $6.53 billion to $6.65 billion, up 6 to 8 percent from fiscal 2018 and free cash flow of at least $1 billion.

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