Harris Announces Fiscal Second-Quarter Financial Results
Tuesday, January 29, 2019 | Comments

Harris reported fiscal 2019 second quarter revenue of $1.7 billion, up 9 percent compared with the prior year. Net income increased 72 percent to $225 million, and adjusted earnings before interest and taxes (EBIT) increased 18 percent to $327 million with margin expansion of 150 basis points.

"We delivered the third straight quarter of high single-digit revenue growth and generated record earnings per share (EPS) with strong margin expansion across all three segments," said William M. Brown, chairman, president and CEO. "First half revenue growth of 9 percent, book-to-bill of 1.17 and margin expansion of 90 basis points give us confidence to increase our revenue and EPS guidance for the second time this fiscal year.

"Integration planning for the merger with L3 is progressing well, with the integration team fully staffed and developing detailed plans to deliver $500 million of cost synergies and ensure seamless operations post close. We continue to expect the transaction to close in mid-2019.”

Overall revenue increased 9 percent for the quarter and the first half, with solid growth across all three segments. Communications systems second-quarter revenue increased 10 percent from strong growth in all three businesses. Tactical communications revenue grew 9 percent, with international up 11 percent from growth in Asia Pacific and Europe, and Department of Defense (DoD) up 7 percent on modernization demand. Night Vision and Public Safety and Professional Communications (PSPC) grew double digits as strong orders continued to convert into revenue.

Operating income in the communications system segment increased 12 percent, and margin expanded 50 basis points to 30 percent from volume leverage and operational efficiencies, partially offset by mix. Orders were up 33 percent resulting in a segment book-to-bill of 1.18.

Tactical communications orders grew 27 percent driven by DoD modernization, content growth in the adjacent airborne market and international programs to counter evolving threats. Public safety continued to strengthen its position with state and federal agencies and utilities with a $33 million order from Nevada as part of a $108 million program to upgrade the statewide shared radio system; a $23 million order from the Air National Guard as it continues to adopt Harris converged radios; and $25 million from American Electric Power, the third award in its $106 million multiyear modernization program.

First half segment revenue increased 12 percent from double-digit growth in all three businesses. Operating margin expanded 90 basis points to 29.9 percent. Segment book-to-bill was strong at 1.28. Tactical communications book-to-bill was 1.32 with funded backlog greater than $1.1 billion.

Harris updated its guidance for fiscal 2019, including revenue in a range of $6.66 billion to $6.69 billion, up 8 to 8.5 percent from fiscal 2018. The company expects adjusted free cash flow in a range of $1 billion to $1.025 billion, increased from previous guidance of up to $1 billion.

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