Good day, ladies and gentlemen, and welcome to the Harris Corporation's Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. I would now like to introduce your host for today's conference, Mr. Anurag Maheshwari, Vice President, Investor Relations.

Thank you, Victoria. Good morning, everyone, and welcome to our fourth quarter fiscal 2017 earnings call. On the call with me today is Bill Brown, Chairman and Chief Executive Officer; and Rahul Ghai, Senior Vice President and Chief Financial Officer. First, a few words on forward-looking statements. Forward-looking statements made today involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements. For more information and related discussion, please see the press release, the presentation and Harris' SEC filings. In addition, discussions today will include non-GAAP financial measures and the reconciliation of the non-GAAP measures discussed today to comparable GAAP measures is included in the quarterly materials on the Investor Relations section of our website, which is www.harris.com, where a replay of this call also will be available. With that, Bill, I will turn it over to you.

Okay. Well, thank you, Anurag, and good morning, everyone. We ended fiscal 2017 on a high note, with fourth quarter earnings per share up 15% on top-line growth of about 1%. For the year, earnings per share was up 8% to $5.53, on organic revenue down about 0.5%. Despite slightly lower revenue, we expanded operating margins 50 basis points to 19.2% and generated record free cash flow of $850 million, 123% of income which is well above our guidance of $800 million. Total company book-to-bill was 1.02, driving increasing backlog and setting us up for return to growth in fiscal 2018. On each of our quarterly calls this year, I've updated you on our progress against strategic priorities. So, let me just quickly recap the key highlights for the year. We successfully divested CapRock and IT services with combined revenue of $1.4 billion. The sale of these two non-core businesses generated more than $1 billion of net proceeds. We completed Exelis integration, achieving $145 million of net annual run rate savings versus our initial estimate of $100 million to $120 million. Integration concluded a full year ahead of our original baseline plan, without any business disruption and while also making operational improvements in several Exelis' business areas including the SENSOR program, GPS III and Night Vision. We generated a record $850 million of free cash, which when combined with divesture proceeds, netted over $1.9 billion of cash inflow. We returned almost half of that cash or about $900 million to shareholders through the largest stock repurchase program in our history and dividends, which increased 6% in fiscal 2017, and 17% annually over the last decade. The remaining half of that cash we used to de-risk the balance sheet in two ways. First, we paid down debt by $575 million, bringing…

Thank you, Bill, and good morning, everyone. As a reminder, discussions today are on a non-GAAP basis and exclude Exelis integration and other costs. Turning now to segment details on slide 6. Communication Systems revenue in the quarter was $449 million, up 3% versus prior year. Operating income for the segment was up 22%, resulting in margin expansion of 500 basis points from higher tactical radio volume, integration savings and the benefits of operational excellence initiatives. Legacy tactical revenue grew 28% in the quarter and was about flat for the year versus previous guidance of down low-single digits and down high-single digits at the beginning of the year. This strong performance in legacy Tactical resulted in full year segment revenue down 6% versus our previous guidance of down 7%. Following the end of the CR, DoD tactical procurement picked up with the Air Force placing a $23 million order for radios for MRAP vehicles, and we ended the full year revenue growth of 3%, better than our previous expectation of flat revenues. In international Tactical, revenue was up 37% in the quarter over a relatively weak compare from last year. As expected, Eastern Europe continues to be an area of strength and we also saw positive signs in the Middle East with an order from Iraq and growth in the Asia Pacific region. Improving conditions in the international tactical market throughout the year resulted in full year revenue being down 1% versus our prior expectation of a mid single-digit decline and a mid-teens decline at the beginning of the year. Regarding the Australia opportunity, in June, we have received a $19 million order to conduct risk reduction and planning activity for Australia's Phase 3 modernization program. And in mid-July, the program was approved by Australia's DoD Investment Committee. Following that,…

Okay, well. Thank you, Rahul. I wanted to close out our prepared remarks with a few comments on our growth outlook beyond fiscal 2018, given what we're hearing from customers about mission and funding priorities and potential budget trajectories. As indicated on slide 12, we expect top line growth to accelerate in almost every one of our businesses beyond 2018. In Communication Systems, we expect to start seeing the benefits of DoD modernizations towards the back half of fiscal 2018, which will continue to ramp in fiscal 2019 and beyond. Our International Tactical business began to stabilize over the past six months and we expect to return to growth in the medium-term as the Middle East comes out of a trough and Australia and UK modernizations get underway. The growth in the tactical business coupled with a modest recovery in Night Vision and Public Safety, will lead to accelerating mid-single digit growth in the segment. In Electronic Systems, we see growth across the board. Our electronic warfare business has a solid and growing pipeline of upgrade opportunities on international F-16, plus upgrade and new builds on U.S. and international F-18s. In avionics, we'll benefit from the volume ramp and new content wins on F-35, plus new platform wins in classified areas, KFX (21:18) and others that are still being competed. In C4I, we have the opportunity to significantly increase scope on the current battlefield management project in the UAE and leverage that success to expand to other Gulf countries. In mission networks, which include our air traffic management business, while we see near-term pressure from the ADS-B transition, it will be offset in the medium-term by International growth. As a result, we expect the strong momentum in Electronic Systems to accelerate to mid-to-high single-digits. In Space and Intel, we continue to see strong and accelerated growth in the classified area, driven by budget increases and expansion in the new adjacencies. We also expect increasing momentum in commercial space from recapitalizations. Growth in classified and commercial along with better compare in environmental and other civil areas, including a win on the recompete of GPS III 11 plus will drive low-to-mid single-digit growth for the segment. Overall, the combination of our strong competitive position and inflecting budgets along with continued excellent operational execution will drive mid single-digit top line growth, higher earnings and a $1 billion in free cash flow. And with that, I'd like to ask the operator to open the line for questions.

Thank you. The first question is from Jason Gursky of Citi. Your line is open.

Good morning, guys.

Good morning, Jason.

I was wondering, Rahul, if you could just provide for us in terms of bridge between net income and cash flows this year, talk a little bit about some of the moving pieces on working capital. I know you guys have been working hard to drive better efficiency there, so just kind of what's baked into guidance for this year? And then, maybe some comments on the longer-term outlook on working capital and maybe how much more we have to go on getting efficient there? Thanks.

So your question, Jason, was on the fiscal 2017 free cash flow or fiscal 2018?

2018, I'm sorry. Yeah, to be clear, 2018. Yeah.

Yeah, absolutely. So the big thing – so there are two ways to look at this, Jason, one going from kind of 2017 to 2018. The big piece is we were targeting about three days improvement in working capital, and we got six. So, it was slightly increased benefit from working capital in fiscal 2017 versus fiscal 2018. And most of that was driven by some collections that we are forecasting in July that came in early in June. So that creates a little bit of headwind for us. Also keep in mind that our revenue is growing up. So, as we continue to improve working capital base, the contribution from working capital in dollars will not be that much. So, as we look from 2017 to 2018, the big drivers will be reduction of integration and restructuring cost that we had this year, about $10-ish million of working capital dollar improvement, while we continue to improve our days, and does get offset by some increase in CapEx. So that's kind of the bridge between 2017 and 2018. And going from net income to that, I mean it's depreciation, and basically offsetting some of the non-cash pension income and some improvement in working capital and the D&A. So, it's pretty standard stuff. So, longer-term, it's the same, the drivers of getting to $1 billion (25:02) have not changed. As we look from where we end fiscal 2018 and going to $1 billion, it will be driving working capital improvements, and continuous improvement in capital efficiency. I think Bill has mentioned before, I think in the last four years, five years that we've done a great job of reducing our CapEx. And as we've taken 2 million square feet of our floor space, out of our consolidated business between Harris and Exelis, that continues to drive a lower CapEx. And then growth in top line will drive earnings growth. So, those are the big pieces of getting to a $1 billion.

I mean, let me just add here, I think I'm very, very pleased with our cash performance in fiscal 2017. As Rahul said, we came down by about six days versus what we expected was three, which is extraordinary performance, and we feel good about it. A little snapback in next year, but not a lot. We do see a little bit more opportunity in working capital performance, 43 days is pretty good, maybe a little bit more over time, but getting beyond where we're at in 2018 is going to hinge a lot on earnings growth, net income growth and that's what we expect to see that bridge from 2018 guidance to $1 billion a couple of years out. So, thank you, Jason.

Yeah, thank you.

Thank you. The next question is from Seth Seifman of JPMorgan. Your line is open.

Thanks very much and good morning. Bill, I wonder if you could talk a little bit more about the Army review that you referenced in your introductory remarks and sort of what's prompted it, what do you guys think the Army is kind of looking for here, what are some of the things they might come back and ask for, what in their view is some of the shortfalls for Communication Systems at this point and to what extent is WIN-T a pacing item for HMS and other things that you're involved with, if it is at all?

Yeah Seth, thanks for that question. Look, OSD CAPE commissioned a study that's been led by this firm called IDA, the Institute for Defense Analyses of the Army communications network and it was something that was required in the 2016 NDAA. And they did a lot of work, they came out and talked to a few different companies, not a lot of time with us, but they scoured the commercial landscape a little bit in the defense base. They came up with the report. It was issued in the spring. The chief then out-briefed that to industry and other players. In that out-brief, he expressed in terms of concerned what he really needs to see is a network to your question, he's looking for, as you would expect, assured communication, assured connectivity, so it has to be secure, it has to be simple and intuitive, able to be operated, implemented, maintained by soldiers in the battlefield, resilient, maneuverable and I think an important element he wanted to make sure it's upgradable, so that he is not hardware constrained. And that's where I think there's a great opportunity for us at Harris because through a commercial model, we invest our own money, we develop the radios on our own nickel, we build headroom into our radio platforms which allows those radios because they are software defined to be upgraded over time to do applications, new waveform, new waveform technologies and that's where we see an opportunity here. What they've decided to do is, is split their analysis into three pieces, sort of the upper tactical tier, the lower tactical tier which is the radios, the manpack, the handheld, and an application. And I think because you'll see two things, one is the budget is growing in 2018, which the Army is supportive of and then importantly the delivery order that came out yesterday, which is encouraging them to move forward on manpack testing early next year, I think there are encouraging signs that the Army sees they can separate the upper and lower tactical tier, they have to connect over time, but they could be separated and we can move forward in the lower tactical tier as they evaluate what they want to do with the upper system, which is effectively WIN-T.

Great. Thanks very much.

Sure.

Thank you. The next question is from Pete Skibitski of Drexel Hamilton. Your line is open.

Good morning guys.

Good morning.

Hey, Bill, I wanted to ask about U.S. foreign military financing, just because it's been in the headlines in the past about the potential for cuts, can you give us a sense of how much of your international radio levels are FMS funded. And then maybe, what you're seeing as the trends in the 2017 budget that was approved and in the 2018 request as well?

Yeah. Look, Pete, it's a good question. About 40% of our International business is funded by the U.S. government. So, 60% national funds, about 40% by the U.S. government. Frankly, we're seeing very good trends in U.S. support for our international partners. The total amount of the funding was around $7 billion or so in the 2016 budget. It grew to about $11 billion in 2017. The marks are around $13 billion in fiscal 2018, when you look at the where the President is at is where the House and Senate happen to be. The buckets are moving around a little bit. A lot of support for counter-ISIL, so it was Iraq and Syrian Train and Equip is now counter-ISIL. Afghanistan, Europe you see the ERI, the European Reassurance Initiative still support for Ukraine, South China Sea, there's a Security Cooperation Fund. So, there's lots of different buckets. But the funding trend is actually quite positive, and it's important for us because, again about 40% of our International Tactical business is funded by the U.S. government.

Okay. That's great, very helpful. Thank you. And my only other one I had was on UK Morpheus, so I just wanted to ask you, because I thought it was a 2021 start, but it seems like you're talking about that more, have they accelerated that program?

No, it's still sitting out there in that 2021 program, but GD was awarded a study program, it's about £330 million, if I remember the number right. Basically, where the UK MoD wants to go is developing a open architecture, non-proprietary system or the system design is owned by the MoD, GD is helping with that. There are some programs that we're starting to win associated with that for the tactical internet backbone radio. But we see this as a big opportunity for us. It will be beyond 2020. We have something like 50,000 or 60,000 Bowman radios there and we do see that to be a good opportunity. And frankly our very strong position across all of the services in the U.S. is going to help us a lot I think in the UK. So, we're very optimistic and it's going to progress probably several years out.

Okay, great. Thank you so much.

You bet, Pete.

Thank you. The next question is from Gautam Khanna of Cowen and Company. Your line is open.

Yes, thanks. Good morning, guys.

Hey, good morning, Gautam.

So, I remember last quarter I think you talked about some expiring funds as of 09/30 and I was wondering if you could update us on that and give us some flavor for what ex-Australia, the RF tactical book-to-bill likely sits in the September quarter?

Well, that's a very specific question, not just the year, but looking at just the next quarter. Look there is some expiring fund, Gautam, and our team up in Rochester is really all over that as you know them well and expect them to be and we expect them to be. And because we could move very, very quickly and a lot of our products are required in some of the markets like Ukraine, where there are some funds that are expiring, we're pushing very hard for that, we're hopeful that we can pull some of that into Q1 here. Beyond that, I won't comment on book-to-bill for the quarter for that tactical business, but I would say for the year, for fiscal 2018, we should all expect that book-to-bill to be reasonably above 1, just given the fact that that very sizeable Australian order shifted into fiscal 2018 and should help us in the full year, driving the book-to-bill over 1 in that business.

Could you quantify what level of funds are in fact expiring by the government fiscal yearend?

I think that's probably findable, I think it's little north of $100 million in that range, which of course, we're going to go for part of that.

Sure. Okay. And then on Australia, so assuming you book it this quarter, how quickly do you start to ship on it and could you remind us again of the profile of it, I remember the radios, we're sort of at the backend and some of the systems integrations at the frontend, if you could just give us some flavor on how much revenue from Australia is booked into the current fiscal year and how much you expect to get in subsequent years?

Yeah. Sure. Look, we are confident it's going to come here in the first quarter. I think, as Rahul pointed out, the Investment Committee approval was very substantial, getting a letter of intent following that was very important. Getting an advanced order, if you will, for some risk reduction activities in Q4, again was very encouraging for us. It only has to go through the National Security Council which is scheduled at the end of August. So, we're feeling pretty good that it's going to come in that range that Rahul mentioned, around $260 million. As we said last time, it's about a three-year program. It's going to roll into 2018. It'll ramp a little bit more in 2019 and 2020. This year, we think it's going to be about $60 million more or less of revenue and then the balance in the out years. And yeah, the radio is a little bit further in the backend, but overall margins I think will be reasonably good for that particular program and won't dilute the overall segment margins given where our guidance happens to be in fiscal 2018.

And the only other thing, Gautam, I would say is that given the order that we got in fourth quarter allowed us to keep the program on track with some of the development, risk reduction, and other work, so that way the slight delay in order did not impact the revenue profile, so that was important.

Okay, that's helpful. And then given the pipeline metrics in prior quarters, I was wondering if you could update us DoD versus International? And then also what your current thinking is for timing of the manpack orders? It's still the spring of next year, and therefore not much in the way of revenue is assumed from the HMS Manpack program in the current fiscal year?

Yeah, Gautam, look on the DoD side, the pipeline is about $1.5 billion. So, it's up a little bit from last time and up pretty substantially from the beginning of the year as we start to see more of the modernization opportunities come into the pipeline. So, it's about a $1.5 billion, the International is around $2.5 billion. The shape is, it is not changing a whole lot, a lot of it is Middle East, but that's not changing a lot. And it's pretty much in line with where we were last quarter around $2.4 billion. So, again very healthy and continued healthy pipeline associated with the tactical business. Now in the manpack, like I said, I'm encouraged about this delivery order that we got yesterday. It ships in the early part of next year. I think the data is sometime early in April. They will do a field base risk reduction effort, and that will be in the April, May, June timeframe. We'll get some guidance in the coming weeks on the RFP time range. I think it's probably still in that March, April, May timeframe. If there's revenue in the manpack, it will be very late in fiscal 2018. It could shift into fiscal 2019. But right now, we still see at least some coming at the back end of the year, certainly some revenue associated with this delivery order.

Got it. Thanks a lot guys.

You bet, Gautam.

Thank you. And the next question is from Noah Poponak of Goldman Sachs. Your line is open. Noah Poponak - Goldman Sachs & Co. LLC: Hey, good morning, everyone.

Hey, Noah. Noah Poponak - Goldman Sachs & Co. LLC: Bill, so what's down in International next year, because you just quantified Australia as a not insignificant chunk of revenue relative to the size of International Tactical comm, and then sounds like no let up in Europe, sounds like you're saying Middle East is recovering and I think that's off a fairly low base. So, what's going against it that keeps that flat in 2018?

Yeah. Look, I think we're coming off of a better year in fiscal 2017 than we thought. I'm very, very pleased with where we've come up. Europe has been the star of the year. We had hit record levels and far above what we thought it would be. CALA was very, very good, and we saw Canada being very strong in fiscal 2017. So, as we go into 2018, yes, we do see good growth in the Middle East, both Saudi because of the (38:10) order that we booked in our Q4 for the SINCGARS product line has been sitting out there for several years; it's finally been booked. We sized that before in this call at around $40 million. That's going to roll into next year. We see Iraq starting to come back a little bit, and we're seeing a lot of strength in the Africa region both in Northern Africa, as well as sub-Saharan. So the whole Middle East, Africa region is going to recover into next year. I think that's a good sign. Now Asia-Pacific is coming up largely because of Australia, but a few other countries are also important contributors in fiscal 2018 in Asia. Central Asia which has been relatively weak, largely Afghanistan, Pakistan will be about flat. But as we look out in the future, the offsetting piece is going to be Europe, and it's going to be in the Central American, Latin American region. Europe, I think will remain strong, but it's not going to be at that record level that we saw in 2017, so we do see that coming back off a little bit in 2018. Noah Poponak - Goldman Sachs & Co. LLC: Okay. So, just some tough comparisons there.

It's going to be tough comparisons in Europe. Same thing as well as in the CALA region, and again like I said, we had a really good year with some quick term funding in Canada, and that's going to come back off a little bit. So those are the three markets that will offset what I think is good trajectory in the other regions. Noah Poponak - Goldman Sachs & Co. LLC: Okay. When you were speaking to the medium-term growth framework by segment, and definitely appreciate you providing that color, because I think the investor base is looking further out here than your average company. When you said accelerating mid-single-digit in Communication Systems, that sounded conservative to me, but then you said upper-single in Electronics, so it sounds like that's really what you see in CS. I guess, could we dig a little further into that, because in my model, if I just assume the old base business grows 5%, International grows 5%, Public Safety grows 5%, just kind of mid single-digit for those items. With how I have the ramp laid out for the new programs, you've mentioned you've swept. And obviously the ramp on those can look – there's a wide range of outcomes for that ramp, but just there's so much new revenue flowing in that it's hard for the total business to not be well through that 5%, which is also at the high end of the range of what you have this year with some headwinds. So what's going against that description I just laid out because that gets easily into the double-digits. What am I missing?

Well, I think you laid out a very good picture on the DoD side, in tactical, I do see that part growing very fast. It's going to come off a fairly low base, and there's very good support of modernization and that could cause that part of the business to grow very quickly. Again, keep in mind, it's coming off, if you look in the back up in the page around $390 million, $400 million of revenue. So it's not a big piece to start, so very significant double-digit growth which we do expect in that business beyond 2018 is – it won't be the biggest driver. You mentioned, Public Safety, mid-single digit 5%, I think it's going to be lighter than that. Night Vision could be a little bit lighter than that. The biggest part of the segment is International... Noah Poponak - Goldman Sachs & Co. LLC: Yeah.

...and a lot of that segment going to grow mid-single digits or high-single digits is going to hinge on whether all of the cylinders are firing across all regions on international. And, right now, we see next year flat to down modestly, but then growing beyond that, again, because of Australia, UK, Middle East, but again depends on whether all the pieces come at the same time, Noah. And let me just comment on the (41:51) because you mentioned that. I'm really pleased with our bid activity, our pipeline activity, the wins we're seeing there, and it's really across the board. So we're feeling very good about that. So mid-to-high single-digits to me is very, very achievable in that segment, and it's coming off a very high margin as well. Noah Poponak - Goldman Sachs & Co. LLC: What's assumed for Army manpack in that statement of accelerating mid-single digits for CS?

Well, it follows what's happening in the funding trajectory. We do see growth in fiscal 2018. It's going to probably come at the backend. It depends on when the RFP happens and when deliveries actually occur, but it's going to follow the budget picture which is growing quite substantially. Noah Poponak - Goldman Sachs & Co. LLC: Okay, okay. Thanks a lot.

You bet, Noah.

Thank you. The next question is from Howard Rubel of Jefferies. Your line is open.

Thank you very much. First, could you address, Bill, a little bit this ADS-B headwind. I mean, it's a substantial number, and what does sustainment mean versus just build out of the network?

Yeah. I'll ask Rahul to just comment on that.

Yeah. So, Howard, ADS-B, I mean I think this contract goes back to 2007, 2008, when Exelis started it. The first phase ended, which was kind of the build out phase, ended in September 2016. So, it ended kind of Q1 of our last fiscal year. Then, we got some extension and one-time award and all that for settlement. So, realistically speaking, it kind of ended Q2 last year. So, we started seeing the ramp down on margins, and it's a fairly – because it was build out, going to more sustainment, there're still very, very healthy margins, but it's not at that level that we've been getting. So that's – we've kind of been talking about it. We spoke about it in the Q3 call as well as we were seeing that come down. So it creates whatever $0.22 of headwinds on EPS for us and to be largely be in the first half and then the margins stabilize and kind of stay at that level for going back next four years.

Okay. All right, final. I mean, can you just put a kind of general size of revenues on this. I thought it was a couple of hundred million dollars, is that right, of what it used to be?

It'll be slightly north of $100 million in fiscal 2018.

And it was just under, at a high, like $160 million, $180 million in that range in the 2016, 2017 fiscal years.

Okay. Just two more questions. One is if – you've had this manpack slip and while you have some positive wins on some of the other radio programs, the Army is not going to stop taking radios in the intermediate term. So, what are you going to end up or what are you going to end up being able to bid for or sell with this push out in the modernization program?

Well look, it's not just Army, we sell radios throughout the services and I wouldn't discount the significant wins that we have with SOCOM taking on a hand-held side, which will start to deliver the back half of the year. And if you look back a couple of quarters ago, we launched a new HF radio, and Harris is positioned in HF globally, it's very, very strong. And we launched our radio with 10x data rate. It's just fantastic and it's picking up a lot of traction. And I think that's going to pick up some traction particularly in SATCOM-denied, SATCOM-issue, SATCOM-concerns and I think that's going to get some traction in the Army next year as well. So we see that. We also see opportunities to sell more 117Gs is into the Army for just improving readiness. So we see a number of different opportunities in the Army, but again I think the manpack is still sitting at the backend of our fiscal 2018 network.

I mean, Bill, maybe what I'm trying to say is that, they are not going to buy nothing for a period of time while this testing continues to go on because the Army is marching in a lot of different places and using systems. So even though this is split to the right, there's ongoing just operational needs which will be filled in with some of your core products. Is that a fair conclusion?

That's very fair. That's exactly what we're seeing. We don't know exactly when that will be or the shape of that but we do believe they're going to continue to buy, and I think it, as I mentioned, some of our 117Gs, it could be the new HF radio. It could be a variety of different things. So you're exactly right, Howard.

Thank you, Bill. And then, finally not to ignore Space for a moment, I think you said a number of new items or a number of new things there, and if you could just elaborate a little bit. First, it would seem as if you won some additional sensors on some new commercial satellites for inventory, if that's correct? And then second, could you elaborate a little bit on what you're doing in terms of building a new satellite? I think you said, and then maybe talk about some of the new architecture applications?

Yeah. Sure. We've talked about that on this call several times where the Intel community is moving towards more disaggregated capabilities which could be hosted payloads on various satellites or it could be small satellites and we're a significant player on both of them, the expertise that we've developed and demonstrated through the hosted payloads which are now flying on Iridium NEXT is proving our presence in some ways on HPL, on hosted payloads. Within a couple of years, we'll have more than 200 payloads flying, which is probably the market-leading position. And we won a couple of important contracts to develop, design small sats for the community. And we're going to fly our own small sat to reduce risk so it demonstrates our ability to have a mission that is our own entire soup to nuts satellite. So we're going in that direction. This I think is very positive for us and it shows our agility, our nimbleness, our willingness to spend R&D dollars to commercialize that technology. On the commercial side, and you referenced that briefly, we actually had a very good year in fiscal 2017 on commercial reflectors. We won about five awards. We were winning sort of two a year in years before that and we've got a great pipeline coming up. So we do see continued growth in the commercial reflector side within Space and Intel as well. So I don't know, if I answered your question, I think that those were the two pieces you're asking about Howard.

No, this is great, Bill. Thank you very much.

Sure. You bet.

Thank you. The next question is from Josh Sullivan of Seaport Global. Your line is open.

Good morning.

Hey, good morning, Josh.

Can you just provide some color on that U.S. Army LMR network upgrade I believe for Public Safety. Does that help change kind of the growth profile for the segment?

Well, I don't think it's going to be a huge driver, it's a big IDIQ, our competitor won the same sort of IDIQ. We both got a $10 million initial award. It is sized on the order of sort of $20 million to $40 million. At least it's been running at about $20 million to $40 million a year. I think the big difference here is that we've not been able to participate in those awards because we weren't on the contract vehicle. It was effectively sole-sourced. So it opens up a market opportunity for us. We have lot of relationships intimacy with our omni-customer and I do think that we have a good ability to compete there, again sizing it. It has been running at $20 million to $40 million in that range. Could it ramp faster than that? It's possible. But that's how I would think about that one, Josh.

Okay. Thanks. And then just on the growth profile for Space and Intel next year. Can you just expand on the program transitions on the civil side, I think with some environmental programs, anyway to scope or timeline that for us?

Yeah. Sure. The classified business is actually going pretty well. It's about two-thirds of that segment and we're tracking at or slightly better than where the classified budgets are going. We had some indications of where they're at beyond 2018 and they see within some of the specific areas. And I think it actually supports our business and our business model pretty well. So we could see it continue in next year and beyond growth in the classified side. The commercial reflector business, which isn't that big sort of in the $50 million, $60 million range, but we see that business growing a little bit. The piece that is down next year and it's down double-digits, is on the environmental side, environmental solutions or weather, and part of it is the transition from GOES-R or GOES-16 program, which we had from Exelis, both the AVI sensor onboard as well as all the ground processing that legacy Harris was doing. So, that was a reasonably good-sized program that will be down double-digits going into fiscal 2018. We also see in the budget outlook some additional pressure on some of the NOAA/NASA program supporting global weather as we see a little bit of pressure there. But beyond 2018, we see that leveling out a little bit and we see that business stabilizing going beyond 2018 and the 2019 and beyond. And we do still see some good international opportunities on the weather side, both with international partners as well as with the defense base, because the Air Force has to upgrade its weather capabilities in places like over CENTCOM, and we think we have an opportunity to help them with that.

Okay, good. Thank you.

You bet.

Thank you. Our final question will come from Robert Stallard of Vertical Research. Your line is open.

Thanks so much. Good morning.

Good morning, Rob.

Rahul, a quick question for you on the cash flow, in fact the free cash flow deployment. I think I've got it right to say you expect to spend another $600 million on debt pay down and $150 million on share repurchase. So, assuming you get to your free cash flow guidance, what will the rest of the cash be allocated on?

There will be dividends. So, we expect to generate between $850 million and $900 million. We typically keep kind of $300 million of cash. We ended the year with $484 million. So, we've got about $200 million extra as we start the year and we will deploy that about $600 million for debt, $150 million for stock buyback and about $270 million-ish for dividends. So, that's the layout.

Okay. And then, Bill, one for you. On the medium-term guidance, is this assuming that operating margins stay roughly stable versus fiscal 2018? And what are your thoughts on what free cash flow conversion would do during this period? Thank you.

Yeah. We expect our operating margin to stay at this very high level. We're sort of running in the 90%, 90.5% range, which is very, very strong, strong in the segment and we feel great about it. We expect operational savings to offset any pressure on inflation like on wages or new program starts and we'll hold that very substantial high-teens margins into the out years, which means very good drop through into operating margin growth – operating profit growth, which as we continue to grow our cash flow, we'll see cash conversion consistently above our net income simply because of our ability to drive cash growth in our high depreciation amortization that's in our net income. So we continue to see over 100% of free cash to net income. And when you look out beyond 2018 and things that just Rahul just talked about, we don't see any incremental debt pay down required beyond 2018, which means we have a lots of opportunities to deploy that free cash either with share buyback or to M&A, which will be an accelerator on earnings per share growth beyond fiscal 2018 and that's how we see that playing itself out.

That's great. Thanks so much.

You bet.

Okay.

Thank you all for joining us and participating in today's conference call. If there are any further questions, please feel free to get in touch with me. Thank you. Have a great day.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.