Good day, ladies and gentlemen, and welcome to the First Quarter 2012 Harris Corp. Earnings Conference Call. [Operator Instructions] At this time, I'd like to introduce Ms. Pamela Padgett, Vice President of Investor Relations. Please proceed.

Good afternoon, everyone, and welcome to our call. We're very sorry about the delay. It seems like our conference call company had a little bit of a technical difficulty. So on the call with me today is Howard Lance, Chairman President and CEO; and 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 the 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 and the related presentation, we will discuss certain financial measures and information that are non-GAAP financial measures. A reconciliation to the comparable GAAP measures is included in tables in 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 of our website. And with that, Howard, I'll turn it over to you.

Thank you, Pam. I want to welcome all of you to our First Quarter Fiscal 2012 Earnings Call. Before I turn to the quarter's results, earlier this month, the Harris Board of Directors announced the appointment of William M. Brown as President and CEO to become effective on November 1. Bill joins Harris from United Technologies Corporation, where he most recently served as Senior Vice President of Corporate Strategy and Development. Previously, he served for 5 years as President of UTC's Fire & Security business, which has revenues of $6.5 billion and 45,000 employees. Bill has a proven track record of driving growth, building and motivating teams and delivering financial results. I'm confident that his P&L management experience, his operating and commercial skills and strategic acumen will allow him to be very successful as he comes forward to lead Harris. Moving now to first quarter results in Slides 3 and 4 in our presentation. We began fiscal 2012 with a number of important new wins and strong orders so we're off to a good start. Orders increased 23% compared to the prior year. They exceeded revenue, and that drove a book-to-bill for the total company of greater than 1 during the first quarter. Consolidated revenue was $1.46 billion. That increased 4% over the prior year. If we exclude the impact of acquisitions, then revenue declined about 2%. Expedited tactical radio shipments in the prior year of $235 million created a difficult year-over-year comparison to both revenue and income. And you'll remember these were for the expedited MRAP vehicle program. This was expected, the year-over-year change, and included in our prior guidance. Non-GAAP earnings per share was $1.06 in the first quarter. Also during the first quarter, we repurchased $400 million in outstanding shares, reducing the share count by 8.6% and…

Thank you, Howard. As highlighted on Slide 4 and already mentioned by Howard, we repurchased $400 million in shares, reducing shares outstanding by $10.6 million or 8.6%. As of quarter end, we have $600 million remaining authorization under our share repurchase program. Turning to Slides 8 and 9. We ended the quarter with cash on hand of $305 million. Cash flow generated from operating activities was $79 million in the quarter as compared to $295 million in the prior year. All 3 segments generated positive operating cash flow. Operating cash flow was weaker mainly as a result of lower operating income and collections primarily at RF Communications, wherein in the prior year, expedited shipments and collections on tactical radios for MRAP vehicles benefited income and cash flow, and in the first quarter of this year, the transition to the new factory, delayed shipments and ultimately collections. Our expectations for the corporation are that cash flow from operations will increase steadily over the next 3 quarters as operating income increases, and days sales outstanding declined from 56 days as of the end of the first quarter to the more typical low 50s. Though we are maintaining our guidance for operating cash flow at $825 million to $875 million. As a result of our slower-than-expected start to the year, we will continue to monitor this closely. Depreciation and amortization was $63 million as compared to $47 million in the prior year. Our expectations for depreciation and amortization for fiscal year 2012 are unchanged at $280 million to $290 million. Capital expenditures were $82 million as compared to $41 million in the first quarter of fiscal 2011. Our current guidance for fiscal year 2012 CapEx is unchanged to between $265 million and $285 million. Our effective non-GAAP tax rate in the first quarter was 31%. Our outlook for the full year tax rate remains at 33%, again noting, however, that the tax rate for any given quarter could vary up or down as a result of discrete tax events. And finally during the quarter, we renewed our 364-day revolving credit facility at a level of $250 million, which combined with our primary revolver, provides us with $1 billion of short-term debt capacity. With that, I'll turn it back to Howard.

Thanks, Gary. On Slide 10, we're maintaining our previous financial guidance for fiscal 2012 both in total and for each segment. Consolidated revenue for fiscal 2012 is expected to be 4% to 6% higher than the prior year, with revenue coming in between $6.15 billion and $6.3 billion. Non-GAAP income excluding acquisition-related cost is expected to be in the range from $5.10 to $5.30 per diluted share, a year-over-year increase of 4% to 8%. Adjusted EBITDA for the year is expected to be in the range of $1.28 billion to $1.32 billion, a year-over-year increase of 4% to 8%. For the RF Communications segment fiscal 2012 revenue is expected to be 3% to 6% lower than fiscal 2011. This includes a 10% decline in Tactical Communications revenue, along with double-digit growth in Public Safety and Professional Communications business area. Segment operating margin is still expected to be 33% to 34%. For the Integrated Network Solutions segment, we expect revenue in the range 16% to 18% higher than fiscal 2011, with organic growth in the range of 7% to 9%. Non-GAAP segment operating margin is expected to be between 5.5% and 6.5%. And finally, for the Government Communication Systems segment, we expect revenue for fiscal 2012 to be 2% to 4% higher than fiscal 2011, and segment operating margins of about 13.5%. Let me close my final earnings call as Harris President and CEO by saying it's been a real privilege for me to serve this great company and our shareholders. I continue to believe in the future growth prospects for Harris. The company is well positioned to outperform in our core U.S. government and defense businesses, while benefiting from a growing number of growth platforms, including international tactical communications, public safety, broadcast, satellite communication services, healthcare information systems and cyber-integrated solutions. I believe Bill Brown will do a great job taking over from me in the leadership role, and I want to wish him and the entire Harris team my very best. At this time, I'll ask the operator to open the line, and we'll be pleased to take your questions.

[Operator Instructions] Our first question comes from Noah Poponak with Goldman Sachs.

My first question is, I'm wondering what you think the post-GMR Army wideband radio procurement structure will look like? Do we continue to see these steady smaller contract awards? Or at some point, do we get some larger onetime award that covers a lot of what the Army wants to do over a longer period of time? Any insights you have into how this is likely to play out.

Well, I wish I could be specific, but we really don't know. I'm expecting both. In the short run, I think we will continue to see smaller orders released. But I do think at some point to fully fill out capability set 13 across all the brigade combat teams. 42, I think, is the total number we talked about previously. And at a level of penetration of wideband networking, which would be more than this initial tranche, that they'll probably create some sort of a large IDIQ contract vehicle to accomplish that. But certainly, I don't have any specifics on the timing of that any more than we did last quarter. We're very pleased obviously with this first award. Our performance in the NIE, our performance in the field, the advancements we continue to make in the technology that are further distancing our performance in the radios from the programs of record, ultimately, have made this an easy decision, I think, for the Army and one obviously we're pleased with.

Okay, that's helpful. One other question related to that. We've seen the Army discuss your ANW2 waveform technology as sort of critical to the process. But it looks like they've been saying that they're going to try to bring that in to their own repository, as they put it, and make it available to others who are also competing. Can you talk about whether or not that's true? And if it is, if you would -- if you're selling the technology and would -- and gain a royalty on other contractor wins or just what might happen there?

It's my understanding that your statement about what they want is correct. We have definitely expressed a willingness to provide the ANW2 waveform to the library, but we have not negotiated the terms for providing that waveform at the current time. We're certainly not going to give it away. We're going to make it available as part of returning appropriate value for the investments that we've made. I don't know what form that will take, whether it would be a royalty or onetime payment or some of each. At this point, those negotiations are ongoing, and there's nothing to report of a final nature.

And our next question comes from Mark Jordan with Noble Financial.

The buyback, you stated that you completed what I assume is basically baked into your -- into the estimates and guidance for the year. You have $600 million left. Does that mean that any incremental purchases from here would be additive to expected profitability? And secondly, should we be looking at approximately 115 million shares as your share base for Q2?

On your second question, I'll have to ask Pam to tell me if 115 million is a reasonable number for the share count. I don't recall. Offhand, she'll look that up. As it relates to our strategy, we committed to repurchase 8% to 9% of the shares. We said when we announced the share buyback program that we thought that would be about $500 million. Given the lower level of share price, we were able to get that accomplished with $400 million, which means we have additional money that we could spend to buy back shares, and it would be incremental to our EPS guidance. The question becomes whether or not we do that. That decision has not been made. As Gary said, our cash flow in the first quarter was lower than expected. We're going to monitor this and make that decision at some future date going forward. We're also going to continue to manage our debt-to-total-capital ratio from a ratings standpoint. You'll recall, the ratings agencies reaffirmed our debt ratings when we announced the share buyback and our plans. And at this point, we don't have any plans to do anything that would change that. So that's kind of the color around what we have done. We're certainly continuing to look at it. Pam?

We stand at 113 million. We always have a little bit of dilution but I'm sure we'll probably offset that with the purchases. And then the rest of it will go to earnings.

Does that answer your question, Mark?

Yes, it did.

And our next question comes from Carter Copeland with Barclays Capital.

Let me just reiterate, Howard, our congratulations. It's certainly -- this company has seen a lot of earnings growth over the years under your watch, and we just want to wish you the best in your future endeavors. Hopefully, you could see an equal of rounds of golf played as EPS. That probably would be a success.

A lot of golf.

Well, I'll work on that. Obviously, as a shareholder, I'm also very interested in the company's success going forward. And I'm very sincere when I say, I think the Board made an excellent choice in Bill Brown, and that there will be a very smooth transition here.

Wonderful. Just a couple of quick ones. First, sort of a bigger picture, just question on INS. Obviously, there's a lot of moving pieces here, whether it's in commercial healthcare or whether it's in cyber, where you're losing money and hopefully hope to turn that around here relatively soon. And there's obviously some restructuring on the cost front. It really seems like 2012 is a real rebuilding year. Is this -- is it your view that you'll get through most of those activities and we can see the money-losing businesses moving to profitability in '13 and the restructuring largely being behind you in '13? Or is this going to be a process that drags on further than that based on what you're seeing today?

I would say, yes, that's our current view. Whether that remains the case going forward, I don't know. But right now, we expect to see improvement as the year goes on. And we are not expecting to take that negative 60 to a positive number next quarter, but we are expecting progress in the commercial healthcare business we bought, as well as the cyber business that we have started from scratch. So I think that's a reasonable expectation, that the drag from those gets eliminated in '12, and that they are breakeven or above in '13. The other thing just to remind you of is there's a significant amount of amortization intangibles and depreciation of the assets invested in cyber that are really dragging down and creating a much bigger gap between operating income growth and EBITDA growth year-over-year. On a cash basis, these businesses are doing much better than on a fully amortized and depreciated basis. Having said that, we understand that that's the way we're reporting numbers. That's what you should focus on. I think you got it about right, by '13, these 2 contribute. We continue to see improvement from the Harris CapRock acquisition and their growth and in broadcast and continue to feel very positive about the INS segment as a major driver of revenue growth and margin expansion in '13 and '14 to help us get up to the higher levels of EPS that we're striving for.

And our next question comes from Joe Nadol with JPMorgan. Joseph Nadol - JP Morgan Chase & Co, Research Division: On the RF business, I was wondering if you could break out domestic versus international bookings for the quarter and for the year and what your book-to-bill expectations are for the year. And then just a quick one for Gary. Where are the receivables? Or where did they build in Q1, which part of the business, which products, et cetera?

Well, as it relates to the orders, for the year, we still expect that international orders will be slightly greater than U.S. orders, and that international revenue will be slightly higher than U.S. revenue. I'm not going to comment on any specific book-to-bill forecast. We're off to a very good start. We're over 1:1. And obviously, our goal is to keep that going. Gary, do you want to comment on receivables question?

Yes, Joe, the receivables increased primarily at RF. Their days sales outstanding increased by about 7 days. That was really as a result of the impact of the factory coming online in July, with most of the build and shipments taking place in August and September and then not having time to collect that in the quarter. So we don't see this as a long-term issue. We see this as a timing issue, and we should get back to more normal days sales outstanding at RF and in the company going forward.

We'll collect those dollars, Joe, in the second quarter instead of the first quarter. That's essentially the point. Joseph Nadol - JP Morgan Chase & Co, Research Division: Got it. I mean, they were late billings as opposed to international customers that aren't paying?

Yes.

Yes.

Correct.

Yes, absolutely. Normally, you'd have the full 3 months to be building, and we really didn't build anything, ship anything in July because that's the month that we moved everything and started the factory up. We were up and running by the time we had our call. I think it was August 1, August 2. But we really didn't ship anything in July. So we shipped it all in August and a lot of it in September, and those bills weren't due yet. So this is not a question of quality of receivables at all.

Our next question comes from Michael Lewis with Lazard Capital Markets.

If I could just circle back to the cyber operation, qualitatively, what type of -- are we seeing more clients starting to participate in the operation? And are you getting more traction from the government customer?

I think the answer is yes. Across both government and commercial customers, we're getting a lot of traction. But as we've discussed before, the traction is around pilots and the kind of demonstration programs rather than the scale at which we had hoped we'd be able to get people to convert to cloud computing and hosting services. But we are seeing that the pilot activity continue to pick up, and it's across both government and commercial clients.

And our next question comes from Pete Skibitski with SunTrust.

Yes, I was just wondering if we can get more clarity on the 8 BCT manpack order, the $66 million order. Is it your understanding that, that basically fills out completely the 8 BCTs for now, and then we'll have to sort of wait for that future competition before we see further BCT-related orders or penetration there?

I view it as initial order against the 8 BCTs. It certainly does not fill them out at a level of penetration of wideband networking for either manpack, vehicular or handheld that they ultimately will want.

Okay. So you expect to see more orders before the kind of the follow-on formal competition?

I don't know that we can be specific on the timing, but I expect more orders, absolutely.

Okay. And then on the recent notice on the $20 million order for the 117Gs for MRAPs. It seemed like you guys kind of called attention to that as well in terms of -- I'm not sure if most of the MRAPs had Falcon IIs, and now we're beginning maybe a Falcon III migration into the MRAPs. But do you guys see it that way as sort of a tech refresh opportunity for you?

Yes, the answer is, most of the MRAP vehicles that were deployed out of that $1 billion in orders were using Falcon II technology, because the contract vehicles were not in place to allow them to use Falcon IIIs. It sounds counterintuitive. Why wouldn't you put the new radios in? Because you're going to have to replace them. But we will have a significant opportunity to upgrade all those vehicles as they need wideband capability.

And our next question comes from Chris Quilty with Raymond James. Chris Quilty - Raymond James & Associates, Inc., Research Division: Circling back on the JTRS opportunity. I think one of the other requirements for whatever is going to replace the GMR is that it'd be a 2-channel radio. And at this time, Falcon III platform is a 1-channel radio, though I know you've talked about an appliqué that would take it to 2-channel. Can you talk to us about what your thoughts on whether they actually want or will need a 2-channel radio, and how long it would take you to position your product for that opportunity?

Best of my knowledge, they still want a 2-channel radio. We are clearly working on turning the Falcon III 117G into a 2-channel version to accomplish that. I don't think you should view it as an appliqué, but rather a full radio system that would have 2 channels. So that's the best of my understanding. But I think what's important to keep in mind is that this is a fluid situation in terms of requirements. The good news, Chris, is that we have been able to shape the requirements and actually enhance them because we have features in our radio beyond the program of record. So I don't think that requirement is necessarily cast in stone at this point. But my latest understanding is, it still is a 2-channel request. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. And then sort of a follow-on to that. You have integrated wideband networking waveform into the 152, I believe?

We have integrated our ANW2, and we, as we said last time, we're working on also integrating SRW in. And we expect to have that in, in time for this fall, in the fall NIE evaluation. Chris Quilty - Raymond James & Associates, Inc., Research Division: So SRW, I thought you had that certified on at least 1 platform?

Yes, SRW has been certified by the NSA on the 117G. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. And so the question is, to get the WNW certified, is that something that you would anticipate a long lead time? Or can that be done on relatively short order?

[indiscernible].

Yes, I think the real key to Pam's point is the -- WNW is not ready for primetime, and that was clear in the summer NIE evaluations. So -- how long does it take once it is in the library and ready? I don't know. I wouldn't be too precise. A lot of it has to do with NSA testing and requirements. I'm going to throw out, it's a year probably process, but there's not much we can do until it's really finished. And that to the earlier question, that's why they're very interested in the ANW2 waveform, which performed, I think, up to 30-node network at -- in Fort Bliss and in the testing, which they were very, very pleased at. That's many more nodes than the SRW can do and much wider, larger bandwidth, wider pipes. Chris Quilty - Raymond James & Associates, Inc., Research Division: So the ANW2 is battlefield proven, but does it need to get NSA-certified in order to get into the repository?

Well, it's already NSA-certified in now both of our products, the 117G manpack vehicular, as well as the 152A. So it has to get in to the repository when we choose to give government purpose rights to it. So it's really up to us and the government to negotiate something. We're not opposed to doing it, but we've invested a lot of money from our shareholders to get here. And we certainly expect to return on that investment.

And our next question comes from Larry Harris with CL King. Lawrence M. Harris - CL King & Associates, Inc.: Question about the Public Safety business. The other day, you announced alliance with AT&T on the LTE front. And, of course, Motorola Solutions is working with Verizon. And are you still working with Nokia Siemens in terms of their base stations? And what do you think is the timing for the deployment of LTE within the public safety arena?

Yes, we're still working with Nokia Siemens. I think this process is going to be what I'll describe as long term and not necessarily linear. I think it's going to be lumpy. A lot of it has to do with funding. Everybody wants to have the ability to pass data over an LTE network that is robust and private and secure. It's a lot more efficient than -- and lower cost than what they do today where they're basically using cards in laptops over these public networks, commercial networks. The issue is all about funding. The FCC and Congress are trying to move forward on this national broadband plan. $5 billion continues to be talked about. But it's just not something that is apparent is going to be available in the budget for a couple of years. So I think up until this time, you're going to see trial systems out and essentially proving out the technology. I'm very pleased with our progress. I think LTE, as a technology, is going to be ultimately pervasive in both the public safety, as well as in the DoD market. And ultimately, our advantage, I think, in being in both of these, both tactical radios, as well as public safety radios is we're going to be able to develop integrated networks between tactical and LTE and public safety and LTE, so that from our customers perspective, the network traffic and how it's all being managed, is just going to all happen behind the curtain. They're not going to care, but it's going to seamlessly be able to move traffic over those networks, but still give them the secure, private, control of the networks that they need. So I'm still very bullish on the technology, but it's going to be a long, long road before it's adopted in any scale, in our view.

Next question comes from Michael French with Morgan Joseph.

On the subject here of the transition, Bill Brown has a lot of M&A experience. So it seems it's safe to assume that there won't be any change to the company's acquisitive nature. I'll go ahead and ask the question since you didn't mention M&A in the opening remarks. How important a consideration was that in selecting him for this role? And should we expect any changes with your outlook towards acquisitions in the near or longer term?

I think, Michael, that M&A was only one of a number of preferences in the requirements for the new CEO. It certainly was not at the top of the list, but it's a wonderful skill and experience that Bill has in not just doing acquisitions but in integrating them. And I think that his focus in fiscal '12, as we've said previously, will be on integrating the acquisitions that we have, getting them fully up to speed both from a cost standpoint, as well as driving revenue synergies. In the longer term, we certainly would expect acquisitions will continue to be, as they have been in the past, a part of our growth strategy, filling in holes for vertical markets, product or technologies or geographies. So I think all those are going to be positive, and certainly Bill's experience in those areas will be a great help. But I don't think you should read into this too much. He was in the M&A corporate development job only for a few months at UTC. His primary background is in running businesses and growing businesses organically. But he's got a lot of experience in allowing acquisitions to fit and to fit effectively. So it will be a great added value that he'll bring to the company by having that experience. But I don't think you should read into that it's going to somehow change Harris' strategy or that the Board is going to go out and charge Bill of doing a big deal, like the UTC-Goodrich acquisition. That's just -- that's coincidental. And in fact, it hadn't even been announced when they were talking with Bill. So that was not why they went out and found him.

Very good. And a follow-up is on the NIE, the test for the Falcon III that's coming up in the fall. Can you discuss some of the capabilities you're looking for, how the radio is performing? And if I understand, this is just a technical evaluation. They're not looking at economic considerations such as the cost of the radios. Is that correct?

Yes, that's my understanding, that the NIE doesn't really look at cost. Although I think General Odierno's quote that I read clearly says that he's interested in cost and speed and capability. And I think that's where we win this game. We really are offering all 3 of those, and no one else can do it. In terms of additional features, I think it's more of the same. I think it's very much about the network and the network effectivity. We'll be able to use radios now from Harris at that NIE in the fall that will have both the SRW and the ANW2 waveform. No one else is going to have both of those in the radio. And -- so we just have such a significant lead, but I think it's just -- it's more of the same. The last one was the first NIE. Part of it is just getting, I think, a tempo of doing this a couple of times a year. But I can't really speak to any specific requirements they have added over the last one at this point, Michael. So I'm just not aware of anything significantly different. But I know what we're going to be bringing are the lessons learned and continued enhancements we've made since the last one and the integration of the SRW2 -- SRW waveform into both the 117G and the 152.

Our next question comes from Josephine Millward with The Benchmark Company.

A bunch of your RF orders were actually announced in October. Is there a reason why you're including them in your September quarter?

We're certainly not including October orders in the September orders booked. We're talking about them because we think they're significant. They occurred after the quarter end. So when the orders booked is what determines what quarter it goes into, sometimes -- in fact, in every case, there's usually a gap of at least a few weeks between when we get an order and when the customer approves a press release allowing us to announce it. So those don't always line up when we issue it. It's normally weeks. As Pam said, sometimes it's longer. But we can announce an order in October, but the order may have been booked, received and appropriately booked in September. It would have been included in the first quarter numbers. But we don't include anything in the quarter that doesn't meet our requirements as a bookable order, and that's got a pretty high threshold and E&Y [indiscernible] reviews that.

Okay, that's what I thought. So the $66 million Falcon III order for brigade combat team was received in September, but you didn't press release it until October.

Right.

That's correct.

Okay, great. I was wondering if you can -- now that the government is operating under a CR again, can you comment on whether you're seeing any impact on your order activities so far?

I don't think we've seen anything immediately. We've tried to look at this every which way. We don't believe that the CR would have a meaningful impact on our fiscal '12 operations. We have tried to bake into our outlook what we think may be some impact. Now it's always possible, it could be worse. But I don't feel like, today, there is much downside for Harris Corporation if we stayed on a continued resolution for the rest of fiscal year '12. '13, '14, '15, there's lots of question marks out there regarding budgets and so on. So I'm not going to comment on that because I don't know what's going to happen anymore than you do. Bottom line is, I think our '12 guidance is solid, and the continuing CR shouldn't have much downside impact this fiscal year. I think that, again, our level of diversification in programs, in customers and now across a number of government and commercial vertical markets should allow us to continue to outperform the market. Will we outperform at a level we're all happy with? I think that time remains to be seen whether we do that. But I really like our position, and it's much stronger than it would have been if this had happened several years ago, where we were much more dependent only on a couple of growth initiatives.

We do have a follow-up from Pete Skibitski with SunTrust.

Yes, just a couple of quick follow-ups. I think you guys have a large Veterans Affairs multi-award IDIQ called T4. Is that on protest? Or is that in the clear now?

I'm not aware that we have anything with the VA under protest.

Okay. And then the classified wins in GCS, can you just maybe characterize them? Are those space-related?

No, I can't really talk about the details. Our work in classified generally has kind of 3 categories. It's space systems, it's mission systems and it's information systems. And I think we're seeing a strong progress in all 3 of those areas. So I don't think it's any one particular area. This part of our business has been a little cyclical, and we're very pleased to see it coming back. We have great long-term relationships with customers, and our teams' performance on these very, very difficult technologies has just been superior over time. Thank you very much. And, again, I want to thank all of you for your interest in Harris, and I hope that you will stay tuned. I think this company has a very, very bright future.

Thank you, everyone, for joining us. And, again, I'm sorry for the late start.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.