3Q18 revenue up 5% to $1.6 billion; orders up 27%; book-to-bill 1.2
3Q18 EPS from continuing operations up 27% to $1.67 GAAP; up 21% to $1.67 non-GAAP1
YTD18 revenue up 4%; EPS from continuing operations up 11% GAAP and up 17% non-GAAP; book-to-bill 1.2
YTD18 operating cash flow $230 million; excluding $300 million voluntary pension contribution, adjusted operating cash flow and free cash flow up $41 million to $530 million and $451 million, respectively
Narrowed fiscal 2018 revenue and EPS guidance to high end of prior range - revenue up 4%; EPS from continuing operations $5.93 - $5.98 GAAP, $6.45 - $6.50 non-GAAP
Increased fiscal 2018 adjusted free cash flow guidance to $900 - $925 million
Harris Corporation (NYSE:HRS) reported fiscal 2018 third quarter revenue of $1.57 billion, up 5% compared with the prior year. Earnings per diluted share (EPS1) from continuing operations increased to $1.67, compared with $1.31 (GAAP) and $1.38 (non-GAAP1) in the prior year.
We delivered strong revenue, orders and EPS growth in the third quarter, continuing our solid year-to-date performance across the three segments. These results give us confidence to tighten revenue and EPS guidance to the high end of our prior range and increase free cash flow guidance for the year, said William M. Brown, chairman, president and chief executive officer. Looking beyond fiscal 2018, our continued investment in innovation, strong customer positions and a well-funded budget will enable us to accelerate top-line growth while maintaining best-in-class margins.
Summary Financial Results
Third quarter revenue increased 5%, with growth across all three segments led by Electronic Systems and Communication Systems. GAAP and non-GAAP EPS grew double digits from higher volume, strong operational performance, higher pension income, a lower share count and the benefit of tax reform. GAAP EPS also included a change in deferred taxes offset by charges related to transitioning and exiting a commercial business and other items. Orders increased 27%, resulting in a book-to-bill of 1.2.
Year-to-date revenue increased 4%, with growth across all segments. GAAP and non-GAAP EPS grew double digits from higher volume, strong operational performance, higher pension income, a lower share count and tax gains, partially offset by the ADS-B program transition in the first half of the year. GAAP EPS also includes adjustments incurred in the first three quarters of fiscal 2018. Orders increased 25%, resulting in a book-to-bill of 1.2.
Communication Systems
Revenue increased 4% in the third quarter from growth in Tactical Communications and Night Vision. Tactical Communications revenue grew 3% with DoD Tactical up 48% on strong readiness demand from the U.S. Army and U.S. Air Force, partially offset by a 12% decline in International Tactical, reflecting a tough year-over-year comparison. Night Vision revenue grew double digits on increased demand from the U.S. Army. Operating income grew 5% and margins expanded 20 bps on increased volume and operational efficiencies.
Communication Systems order momentum continued in the third quarter, marking the seventh straight quarter of year-over-year orders growth for the segment.
DoD Tactical orders grew 27% from readiness and modernization initiatives on ground and airborne platforms. Key orders included:
Upgrade of vehicular radio systems for the U.S. Air Force Mine Resistant Ambush Protected (MRAP) vehicles
Single-Channel Ground and Airborne Radio Systems (SINCGARS) for the U.S. Army
Highband Networking RadiosTM for the U.S. Armys upper tactical network
International Tactical orders grew 15% with several key wins, including an award from an Asian nation to integrate, modernize and upgrade their command and control network and multiple orders across several countries supporting security forces modernization, counter-terrorism and border control.
Public Safety orders grew 28% on increased demand from state and local agencies for legacy system upgrades, including the Washington State Department of Transportation and the cities of San Antonio and Miami Beach.
Night Vision orders grew 10% on momentum with the U.S. Army, receiving a $30 million award to support increased logistics readiness.
Electronic Systems
Revenue increased 10% in the third quarter from higher volume in Avionics, with growth on F-35 and other international platforms, growth in Electronic Warfare (EW) on F-16 and F/A-18 platforms and in C4ISR from the ramp of U.K. robotics and the UAE battle management system. Operating income declined $3 million as the benefit of higher volume was more than offset by increased research and development investment and program revenue mix.
Order momentum was strong in Electronic Systems with bookings in EW and Avionics of more than $500 million across multiple platforms. EW received a $184 million, 3-year contract for electronic jamming systems for U.S. Navy, Australian and Kuwaiti F/A-18 aircraft and a $28 million contract from the U.S. Special Operations Command to provide electronic warfare capabilities for rotary aircraft. In Avionics, in addition to strong orders for F-35, F/A-18 and P-8 platforms, Harris was awarded a £59 million contract supporting the U.K. Ministry of Defence and a partnering nation for Paveway weapon interface kits that advance tactical air-to-ground warfare capabilities.
Space and Intelligence Systems
Third quarter segment revenue increased 1% as growth from Classified programs, driven by the ramp of small satellites, ground-based processing adjacency and space surveillance programs, was partially offset by expected lower revenue from environmental programs. Operating income increased 8% to $82 million and margins expanded 100 basis points on strong program execution and incremental pension income.
In Classified programs, order momentum remained strong. Th
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3Q18 revenue up 5% to $1.6 billion; orders up 27%; book-to-bill 1.2
