Good day ladies and gentlemen and welcome to the Harris Corporation First Quarter 2015 Earnings Call. (Operator Instructions). I would now like to introduce your host for today’s conference Pamela Padgett, Vice President of Investor Relations. Ma'am, you may begin.

Thank you. Good morning, everyone, and welcome to our first quarter fiscal 2015 earnings call. I'm Pamela Padgett. And on the call today is Bill Brown, Chairman and CEO; and Mick Lopez, Senior Vice President and Chief Financial Officer. And before we get started, a few words on 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 a 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 the tables of 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. Bill with that I'll turn it over to you.

Okay. Thank you, Pam and good morning everybody. We began our fiscal year posting strong revenue and orders growth in government communications systems and in RF communications’ international tactical radio business. Operating performance was solid as we continued to benefit from lower costs and good execution. Turning to Slides 3 and 4 of the presentation. Earnings-per-share was $1.18, flat with the prior year and favorably impacted by $0.06 from a lower tax rate in the quarter. Operational earnings came in as expected. Revenue was down 3% with continued strong growth in government communications systems and in international tactical radios more than offset by continued weakness in the US tactical radio market and declining IT services revenue, primarily due to the wind-down of two major programs. We remain focused on expanding outside the US, and in the first quarter, international revenue was up 15% to 31% of total revenue, trending favorably compared to 30% of total revenue for all of fiscal ’14. While our focus on operational excellence is reading through the margins and earnings, some of the savings is being reinvested in R&D to drive future growth. Company-funded R&D was up 5% to 5.4% of total revenue with essentially all of the increase in tactical radio. Orders in the quarter were $1.11 billion and book-to-bill was 0.96. Orders were down 7% year-over-year, primarily due to the decline in IT services. Sequentially, orders were up 3% in the quarter. Turning to a few segment highlights, and I'll begin with government communications systems which had an excellent start to the year with revenue, orders and operating income, all up significantly over the prior year. This is the fourth consecutive quarter of positive year-over-year growth for GCS. Customer diversification and leveraging our strong franchises in space, avionics, air traffic management, geospatial imagery and…

Thank you, Bill and good morning to everyone. Moving to segment results on Slide 5. RF communications revenue was $387 million compared to $423 million in the prior year. Segment orders were $374 million, up 7% compared to last year. Book-to-bill was 0.97. Tactical communications revenue was $276 million and declined 9%. While orders were $288 million, up 28% compared to the prior year. We experienced strong revenue and orders growth in international but the US market remained weak. Book-to-bill for tactical was 1.04 and sequentially funded backlog was up modestly from 4Q’s $564 million to $575 million this quarter. The public safety, weakness in the state and local market continued. Revenue was $111 million, down 6% compared to the prior year. Orders were $86 million compared to $123 million in the prior year. Operating income for the RF communication segment was $117 million and operating margin was 30.1%. Let’s turn to government communications system segment on Slide 6. First quarter revenue was $461 million, increasing 12% compared to $412 million in the prior year. Higher revenue from classified customers, commercially hosted payload programs, the F 35 program and the FAA's NexGen data comm program was partially offset by lower revenue from NASA's Space Network Ground Segment Sustainment program. Segment operating income was $74 million and operating margin was 16%, reflecting manufacturing efficiencies in the space area and strong program performance across the segment. During the quarter, Harris was awarded a five-year $495 million ceiling multi-vendor IDIQ contract from the U.S. Air Force for the hosted payload solutions program and awards totaling $83 million from classified customers. Turning to integrated network solution segment on Slide 7. First quarter revenue was $326 million, down 13% compared to the prior year. Revenue growth in commercial CapRock and healthcare was more than offset…

(Operator Instructions) Our first question comes from Gautam Khanna with Cowen and Company.

So hey, I just wanted to ask a couple of questions. One, could you comment maybe on how the tactical RF orders have trended since the September quarter ended? And then if you could just give us some flavour of when – what you expected the bookings – what the cadence of RF tactical bookings will be through the year, because it looks like you do still have some go-get kind of business to hit the numbers this year?

Yeah, I don’t think, Gautam, we can comment on anything that's happened since the close of the quarter at this point. We will release publicly whatever we believe should be issued in a press release as they get awarded to us, we will continue to do that through the second quarter. I would say we felt pretty good about the start to the year in international and we were very pleased with the revenue and order growth coming off a very very strong fiscal ’14. And as I mentioned in my prepared remarks, Gautam, I'm encouraged by the pipeline replenishing itself to you’re seeing 2.5 billion and it’s pretty constant over the last number of quarters, it almost looks like a manufactured number. In fact, there is real opportunities, they’re moving through the pipeline and the fact that we’ve been booking so healthily, including in Q1, I am pretty encouraged by that. And I would say also in terms of the quality of the opportunities as they’re moving through the pipeline feels pretty good. On the domestic side, we knew the first half was going to be a bit challenging. We talked about that in the last quarter. We knew we’d have a slow start. We did see some opportunities that we had hoped to book in Q1, slipped a little bit to the right. The fact is we’re operating under a CR. We expect that will get resolved towards the end of the calendar year and a budget happening sometime early in next calendar year as something that happened this past year. So I think once that happens, I think money will start to flow once there is more certainty on funding lines. So we do expect the back half in the DoD tactical business to be a bit better than the front half. But I think it's what I can comment on in terms of the order trajectory as we see it today, Gautam.

And you are still looking for it to be down, tactical RF, low single digits, is that right – so there is no change –

Yes, there is no change to that. We still see the year down low single digits. We still see the DoD part down the low double digits in the 10% to 12% range, and again we start out Q1 a weaker than that, so it does imply a little bit better performance in the back half. We do see international up low single-digits and again we start out a little stronger than that. So perhaps a strength there might offset a little bit of softness in DoD but overall tactical for the year we still see it being down low single digits.

And can you update us on your buyback plans for the year? I think you said 200 million but you did just over half of that in Q1. What do you expect to do in terms of share buyback?

Nothing has changed at this point. We’re still guiding towards $200 million for the year. We tend not to communicate too much on a quarterly pattern here. Last year we did start off the year as well with a pretty healthy buyback in the first quarter. We ended up doing more in the year. This year we did $100 million in Q1 and still guide to $200 million for the year.

Thank you. Our next question comes from Joe Nadol with JPMorgan. Joe Nadol – JPMorgan: Bill, just on the cash flow, you were a little lighter in the quarter than you haven’t had below 100 million for a while in operating cash flow in a quarter. Just wondering, it looks like some of it was inventories. Wonder if you could comment on maybe where things were a little weaker in the quarter and were you looking for a pick up later in the year?

Well, I think I would say that Mick and I weren’t too particularly happy with our start on free cash flow. As you point out, we typically have done better in the first half of the year. Our first half is always a little weak and Q1 is always a weaker part of the first half. But we were down quite a bit versus last year. We’re not pleased with the results. It wasn’t in any particular segment, it was really across the segments and it wasn’t so much capital. Capital was up a little bit in the quarter as we knew it would be. It was really coming off of working capital. We know we booked a couple of orders a little later in the quarter than we thought, so that didn’t get collected and we built a little bit of inventory and we are going live this quarter on a ERP system in RF in Rochester and we want to make sure we’re protected for that. So there is a bit of inventory there but we’re going to hit a 100% in net income for the year, we’re guiding to it. I am confident on our ability to get there. We know what we need to do and it will correct itself through the year. Joe Nadol – JPMorgan: Is it fair to say that in tactical that – or even in RF more broadly that Q2 should look sort of like Q1 and you expect a material pickup going into Q3 and Q4, or maybe a little help with that – [indiscernible] would be because you are under 400 in the quarter, backlog is pretty consistent with where it was and – it looks like Q1 you’re 800, looking for 1.8 for the year. So any comments there?

Well, we’re not going to guide to Q2. I mean we’re going to stick to the guidance for the year. What I did say earlier, in fact, is consistent with what we said on the last call, was that the second half was going to be bit better than the first half. And I think a lot of this is going to do with -- have to do with some budget certainty which we see happening. We did see the tactical backlog come up sequentially a little bit a couple percent and that’s encouraging for us. We do see typically 60% to 70% of our backlog turned in the year. We do see up to 75% of new orders that we book in the year to convert to revenue within the year. That's spot on to what we did in fiscal ‘14 and we see fiscal ‘15 playing out pretty much the same way. Joe Nadol – JPMorgan: And then just one more, any thoughts – I haven’t turned this one on in a little while but any thoughts on capital deployment outside of returning cash to shareholders, i.e. M&A, any pipeline, just any update in the strategy there?

Well, we wouldn’t talk about anything in particular on M&A but I would say that there's nothing in the marketplace where Harris right now is changing our strategy. We remain committed as the board does to returning capital to owners in an efficient way. We continue to fund internal priority and that's our number one requirement. We've paid a nice dividend, you probably saw we raised it again 12% in the month of August. We’ve got a very strong track record of double-digit increases going back a decade 23% CAGR was pretty pretty healthy. And it has been up by about 19%, 20% the last three years. We’ve been I think pretty good in returning cash in terms of buyback as well, and as my comment to Gautam indicated, we still have 200 for the year, 100 million in Q1. We come out of the gates a little soft on free cash flow but I'm sure we will hit on a percent of net income in the full-year. So nothing has really changed at this point, that's notable to report to our owners.

Our next question comes from Carter Copeland with Barclays. Carter Copeland – Barclays: Just a couple of quick ones. First off, on your comments around PSPC, I know last quarter, Bill, you had said you expected things to tick up a little bit more in the back half of the year but it sounds like incrementally the commentary there -- that market is a bit tougher than you thought coming into the year. And am I hearing that correctly -- hopes of the pickup in the back year of your fiscal year?

Yes, it is incrementally a little bit softer than we had hoped. We thought the market would accelerate towards the back end of calendar ‘14 and at least through our calendar ’13, so our first quarter, we didn't see that happening. As I mentioned last time, there is a combination of both the market being soft and continued to be soft, I think we’re in a bit of the trough between the narrow banding, rebanding rolloff and LTE somewhere off in the horizon and the market is getting a bit more competitive. And we’ve got some internal execution issues that we’re working through. We've put in place a new management team. We’re working hard on our sales force. We’re making a lot of improvements to our product offering. We are working on some of the nagging quality issues we have seen over the last couple of years in our business that the team is really focused on. And we get almost daily reports on how we are improving on the quality side. So it’s really the combination of those two things. And in order to hit – so we start off the year, fiscal year a little bit softer than we had hoped. We’re still guiding to flat for the full-year but that does put a bit of scratch in the back half. Carter Copeland – Barclays: And then with respect to INS, I wondered if you’d just give us a little bit of color. The language in the release makes it sound like the year-over-year decline was basically the IT services pieces you talked about, which would sort of suggest that the domestic declines or government declines in CapRock were offsetting the growth in commercial. Is that the right characterization and can you help us understand some of the color around the declines and the growth there and just some more color on what you are seeing in that marketplace?

I think it's accurate, Carter. I think the challenge we had in INS in Q1 was almost as we had expected and guided to. So the segment as a whole came in as we had thought it would. IT services and the rest of the government part of INS was soft. We did see the rolloff of two significant contracts in the IT services business. One was NMCI that Mick had mentioned, the other is the NETCENTS products business which we decided to not sell under anymore because we didn't think it added any value to our owners. That's about two-thirds of the impact in IT services and the other third was about – it was really around the market softness in IT services. We did continue to see some erosion on the government side of CapRock, you know, that business was down about 24%, 25% last year. It was pretty soft as well in Q1 and that was not quite offset by as we mentioned some growth in the commercial side of CapRock which was very good both in maritime and energy as well as in the commercial side of healthcare. So it didn’t offset the decline from the government side but it did mute them a little bit. Carter Copeland – Barclays: And just lastly with respect to the – I understand this can be a Q1 sort of thing but you're obviously running very good margins in government comm in the quarter with INS perhaps a little bit below kind of full year expectations. Are those suggestive of any trends, does it imply anything about the guidance moving, or is it just Q1 and it’s too early to call?

It's too early to call but yes, we did see GCS a little bit better than what we were guiding to for the year. We knew that was going to end up happening and we knew the margins were going to be strong. We knew we had a couple of space programs that are more product related that are going to wind down after Q1. So we don’t really see that repeating in Q2 but we’re very very pleased with where GCS has been in a market that's really very very challenging, to come out with 12% growth top line and pretty strong orders is very impressive accomplishment of the team. And like I said on the INS side, yeah, it’s a little bit soft, not as we expected the softness in the first quarter but today we don't see any change in the guidance for the full-year for GCS or INS.

Our next question comes from Peter Skibitski with Drexel Hamilton.

Bill, I was wondering – do you have a sense that maybe your Army radio revenue is kind of at a trough this year. I know it should be down but now for a number of years it seems like the comp is just getting easier for you in terms of QD [ph] volumes, particularly in the Army, because you’ve got a number of competition, it seemed like you’re pretty well placed. On the other hand, the Army budgets are really tough. So I am just wondering how you think about things from that perspective?

Well, look, we certainly see the business to be – continue to be challenging in our fiscal ’15, it’s where we’re guiding to be down, another 10% to 12% from being down north of 20% last year. And so we know there’s going to be more pressure in the budgets in fiscal ’15. However they are constituted in and get approved in December January timeframe. But look, we see the budgets bottoming. We may not be at the bottom or certainly near it, we do know that with a modestly better budget environment we do see budgets starting to recover and support for modernization happening in fiscal ’16. So we do see that getting better over the next year or two. It's hard to say that this is exactly the inflection point but I think we’re bumping along the bottom. I think the demand is there, it’s driven by a number of factors. Certainly Army modernization is important. I am glad to see it’s still a priority, the opportunity over the next decade is multimillions of dollars, could be $5 billion. We do know that some of the delays in HMS do create some fill the gaps that we hope we can find a way to plug. I'm very pleased that SOCOM has come out with their STC program, the modernization program that was come out as an RFP in October and the rest to follow, that's a half a billion dollar program, we’re well-positioned there. We do know that there are some reset opportunities that are OEM funded because there is a lot of inventory of radios and they need to be upgraded and reset. There is some urgent needs requirements. There's a lot of conflict in the world, that perhaps there are some urgent needs that are happening. I am finding a lot more attention paid to Mules [ph] and frankly a little more concern around SATCOM access, and SATCOM reliability which is partly why we’re seeing a little more interest in a wideband radio, wideband HF radio. So to me there's a number of things that could cause the business to get better over time. I do see that when the markets do come back, when the funding is there, the investments that we've made and they are significant ones, are going to position us to be successful. So long way of saying, Pete, I think we’re sort of bouncing along the bottom and recoveries can depend upon what happens in the overall budget environment.

I will just have one more follow-up. Hosted payloads, you are on a couple of contracts now, it’s kind of a new area. Just wondering how you think about this area, maybe how big you think it could be because like I said, you have a couple of new contracts but there is a lot of competition also, at least on one of them. So I am just wondering if you see this as kind of a long term trend and if it’s kind of a meaningful opportunity for you, it’s kind of – maybe a more modest one?

Well, I think we’re very very well positioned and it started a couple of years ago when we won the Arianne hosted payload for the [Arianne radium] set of satellites that they’re going to launch I think some time next year. And that put us in the leadership position and we were able to augment that win with a number of other payloads on that platform. And I would say today we are the market leader on hosted payloads and I think we’re well-positioned. We've got a facility set up in Palm Bay under GCS. We’ve got a lot of years of experience in doing this sort of work, and the us winning a piece like many others on this hosted payloads solutions contract is very encouraging to us. We’re looking at six or seven different opportunities that are live, under that particular contract. And I think we’re going to – I think we’re going to be very well positioned over time. I do think that this is a longer-term trend, this has to do a lot with what people call this disaggregation of space where very large multibillion dollar single-purpose satellites will likely over time get disaggregated into smaller pieces, that could be more responsive, launched faster, be more nimble than waiting for a decade to have a very large exquisite multibillion dollar satellite launch. I think the needs of our military and IC community, and the technology progress is such that it’s to me that's the direction that this whole market is going to go. It doesn't mean that there won't be a demand for exquisite technology, I just think that there is a lot of opportunity for finding hosted solutions on ready to be launched commercial platforms.

Our next question comes from Chris Quilty of Raymond James.

Bill, can you give us -- is there any update on the timing of RFPs for the rifleman Manpack are still on track?

Well the latest we’ve heard is the rifleman RFP should be out in the next couple of months by the end of the year and probably the Manpack perhaps early in calendar ’15 like in the January timeframe. I am sort of – that’s good [ph] to call in the ball, on this one, Chris, to be honest with you. That’s the latest we are hearing from the PEO and so I am repeating that to you but it does feel like it is getting lots -- it's right around the corner. There has been a lot of discussion, RFI discussion on both the rifleman and the Manpack going back and forth. And it certainly does feel like we’re getting a lot closer to the RFPs being issued. So that's the perspective as we speak today, Chris.

And I haven't read through all the commentary on the RFIs. But was there anything in the original specs or the RFI discussions that’s troubling in terms of product designer requirements?

No, I wouldn’t say there's anything that we’re finding particularly troubling. I think the RFIs on the Manpack really go back to what happened in NIE 14.2 where the program of record perhaps did meet the expectations of the Army, this followed with this memo from General McMaster who at the time was the commanding general of the Army Maneuver Center of Excellence, like in the June timeframe he was pretty critical of the program. And I think what the Army has done has gone back and reassessed their needs, their requirements and the RFIs that we've responded to are more along the lines of addressing some of the concerns on size, weight, power, range, heat, that General McMaster pointed out and it's asking questions relative to what sort of improvements would you be able to make over what period of time in the Manpack. I think it's you being used to inform the Army as to what might be a special requirement and what might be an objective requirement. I find it all to be honest with you very very encouraging for Harris, because what they're looking at is how will these product be improved over the near-term to do those things that General McMaster wants to see happen -- take weight out of it, make it more nimble, improve the range, reduce the power draw, improve battery life. Those are some of the things that we do every single day going back over a decade and we continue to make improvements on our radio. We think today even our Manpack is very very well positioned. I made a few comments on that in my prepared remarks. I think our radio is well-positioned. We've got great ideas to do some additional things, bring additional value, like this additional slot that the team just put into the Manpack radio of that lot capability should the warfighter need that additional capability for ISR or SATCOM access, that’s pretty interesting and unique, and it’s gotten the services kind of interested and excited about that. So that's the progress that’s happening right now. So I do believe when the RFPs, when they come out over the next couple of months, I think we’re going to be very well-positioned. I am extraordinarily encouraged that we have three orders outside of the Army are ready and we are delivering in this quarter and I think that really to me is a testament to the fact that we’re ready to compete for the Army program.

Speaking of orders outside – if I did the numbers correct, it looks like your international opportunity pipeline went from about 2.4 to 1.5 billion, are those numbers correct? And can you just speak to that?

Now the international pipeline has remained about $2.5 billion for the last several quarters, it’s very very good, very strong. And as I mentioned in some of my remarks, I think the quality of pipeline is good if not coming up a little bit. It hasn't changed in its size over the last couple of quarters despite really really good bookings here, Chris.

And with the FTCM contract, can you just speak to -- I mean with series of contract awards now, how much incremental all of that order activity has been relative to your past work that you’ve done in recent years?

Yeah, no change to what I mentioned on the last call. We have a long history with the NGA as a key geospatial imagery supplier and that broad set of suppliers is narrowing itself down to today – to really being two and we won two of three regions around the world. As I mentioned one of the regions was protested, it was denied. So we have 2 of 3 regions around the world for the NGA. Task orders are starting to be issued against those contracts, and as I mentioned last we expect the value of that business for us, for Harris Corporation, to roughly double in size from where we were. And we were in that $30 million to $50 million range, maybe $50 million, we think that that's going to double over time.

Thank you. Our next question comes from Josh Sullivan with Sterne Agee.

So just with the rebates, managing price in the last month or so, are your CapRock energy customers making any change to their long term CapEx investments?

We haven’t seen that, I think it's too soon to say and I think it’s pretty consistent with the commentary that I am reading across all the other players in the energy segment. At $80 a barrel whatever it is today, 80, 81, something like that, it hasn't hit that level which causes people to rethink capital investments. Should it fall another $10, $15 I mean maybe something is going to change. I think it’s going to end up happening and then impacting some of the big oil and gas players a lot sooner than it will impact us. So we have not seen that. Remember our model here in CapRock, these rigs are existing, they are very long – the new ones are long-term build, you got to get positioned on them very very early on. We tend to own the equipment, we lease it back to the operator of the rig. So should oil prices remain deeply depressed for a multiyear basis would there be an impact on the business? It's possible but it won’t read through to us for some time.

And then can you just talk about the Smart Sky opportunity and if there is any overlap on the LTE capability to public safety?

Yeah it’s a little bit too soon to talk about Smart Sky for us, we do think it's an interesting opportunity for us for developing some good technology based on GCS for air to ground communications. And it builds on the things that we do at public safety but also in LTE capability we have around the company and it is really being led by GCS. A lot of it has to do with our ability to develop and deliver long-range radios. We do it for the military and this is a slightly different adaptation of that. So nothing to really update today. It's still a work-in-process.

Thank you. I am showing no further questions at this time. I would now like to turn the call back to Pamela Padgett for closing remarks.

Okay. Thank you everyone for joining us today.

Thank you. Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day.