Good day, ladies and gentlemen, and welcome to the Harris Corporation's Fourth Quarter 2016 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. As a reminder this call may be recorded. I would now like to introduce your host for today's conference Pamela Padgett, Vice President-Investor Relations. Please go ahead.

Hi. Good morning, everyone. Welcome to our fourth quarter 2016 earnings call. I am Pamela Padgett. On the call today is Bill Brown, Chairman and CEO 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 on a related discussion, please see the press release, the presentation on Harris', SEC filings. In addition, a reconciliation of non-GAAP financial measures discussed today to comparable GAAP measures is included in the quarterly material on the Investor Relations section of our website, which is www.harris.com, where a replay of this call is also available. And with that, Bill, I'll turn it over to you. William M. Brown - Chairman, President & Chief Executive Officer: Okay. Well, thank you, Pam, and good morning, everybody. Overall, fiscal 2016 was a solid year, and I am pleased with our performance. Earnings per share increased 11% to $5.70 and organic revenue down 7%. Operating margins were up 60 basis points to 16.2% and free cash flow was strong at $772 million. Book-to-bill was greater than 1. And we executed well against the key priorities we set out at the beginning of the year. First was, successfully integrated Exelis, a company which added scale, a broader portfolio of technologies, new market opportunities and improved operating resilience and moving faster in achieving greater savings than initially expected. We exited fiscal 2016, year one of integration at a net savings run rate of $120 million the top end of what we originally committed to by year three. And we're tracking well towards achieving $140 million to $150 million net as we exit fiscal 2017. The second priority was to…

Our first question today comes from the line of Pete Skibitski with Drexel Hamilton. Your line is open.

Good morning, guys. William M. Brown - Chairman, President & Chief Executive Officer: Good morning, Pete.

Good morning.

The decline in U.S. radio volume in the fourth quarter and kind of going into fiscal 2017, and just with sort of the expectation for continuing resolution, is that softness kind of across all the services and across special forces or just the Army? And can you maybe characterize if the CR goes into first quarter of next calendar year, how much incremental pressure there might be? William M. Brown - Chairman, President & Chief Executive Officer: Well, it was pretty broad across the services. It was not in special operations, but it was pretty broad across the other services, mainly base type business, resets, sustainment spares, other things that we saw. And it's not really in our view a need-based push out, it's really based on just some cautionary behavior on expectations of a continuing resolution which again we are expecting through the end of this calendar year. I won't speculate today as to what the impact might be if it moves beyond the end of December, but I think it would probably put some pressure on the backend of our year if the CR moves out beyond December.

Okay. I will just ask one more and get back in queue. William M. Brown - Chairman, President & Chief Executive Officer: Sure. Yeah.

It sounds like you've factored the MUOS upgrade pretty substantially in your 2017 guidance. I think, you said previously the money for that is already appropriated. Is that so, and so would there be upside to your guidance from that, and maybe give us a sense of what the Army is kind of thinking on that program specifically right now? William M. Brown - Chairman, President & Chief Executive Officer: Well, it's really across the services and it's not so much Army driven; it's other services. But it's a – we're making very good progress. Most – in fact, all of the certifications are in place. The testing is complete. We have interim NSA certification; right now, getting a formal NSA cert should happen over the next several months. It's really administrative process more than anything, and once we get the formal NSA cert, it should trigger some orders happening. We have about $10 million in backlog right now in MUOS and we do see, as a Rahul pointed out, in next year tens of millions of opportunities in MUOS. We still feel very, very good about that opportunity in fiscal 2017, Pete.

Okay, okay, great. Thank you. William M. Brown - Chairman, President & Chief Executive Officer: You bet.

Thank you. Our next question comes from the line of Howard Rubel with Jefferies. Your line is open.

Thank you very much. I have two questions. First, talk for a minute about Critical Networks, and I mean, there's sort of two things, one is you were able to restructure CapRock so that it's profitable, can you outline how you've – I mean, what some of the accomplishments were and how you think about the sustainability of it? And then, also can you talk about win rates in the service business, Bill? William M. Brown - Chairman, President & Chief Executive Officer: Yeah, sure. Let me start with CapRock. The – we exit the year about what we thought about $60 million in the quarter in CapRock energy. So, it was down quite a bit year-over-year in the fourth quarter probably around 35%, for the year in 2016 down about 25%. With oil sitting down in the low $40s, now we see a bit of incremental pressure, although there's some service companies out there that are expecting some recovery into 2017 and maybe the back end of 2017. We do see another step down next year, we're sizing it about 25%. We took some pretty aggressive restructuring actions really over the last 12 months to 18 months, but you recall pretty significantly as we exited Q2 and those are starting to take hold. We lost money in CapRock energy in Q3, we returned to profitability in Q4. And that's part of the reason why you see the CN segment, Critical Networks segment being a little more profitable in Q4, part of it comes from some turnaround in the CapRock business. So I think, we've sized it for next year. We expect to make money in CapRock energy next year, but we do see another step down in that segment again about 25%. On the services side, we were down…

That's very helpful. And then, your joint press release with JANA sounds to be very constructive. Can you elaborate a little bit on the dialogue and what you're looking for in the independent directors? William M. Brown - Chairman, President & Chief Executive Officer: Well, first off, the – it was constructive. They've become a major shareholder. We welcome input from all of our shareholders. We have very active dialogue with everybody. We reached an agreement to add two new independent directors to the board, and we talked – and you'll read in the 8-K and the agreement that we filed a little bit about that. One will be announced in early September, both will stand for election at our Annual General Meeting in October. But beyond that, I don't think I'll comment on any other conversations with them or any other particular shareholder, Howard.

I understand. Thank you very much. William M. Brown - Chairman, President & Chief Executive Officer: You bet.

Thank you. Our next question comes from the line of Seth Seifman with JPMorgan. Your line is open.

Thanks very much and good morning. Bill, I think around the time of the acquisition you've put out a long-term cash flow target, I think, for fiscal 2019 of $1 billion of free cash flow, and so the forecast for 2017 is $800 million. Is that target still operative and can you talk about the ways that you get there? William M. Brown - Chairman, President & Chief Executive Officer: Sure. In fact, we feel very good first off about where we came out in fiscal 2016, with a lot of puts and takes, above the $750 million guidance, so we came in at $772 million. We feel good about how we delivered that, absorbing pretty substantial pension and cash integration costs, very good improvement in working capital as we had signaled we would have. We continue to tightly manage our capital spending. So next year we guided to about $800 million in free cash flow with a little bit of a step up in capital spending, although we remain very, very tight on that at $175 million. We still see a path to getting to $1 billion by fiscal 2019. That was a three year goal that we set out. And it comes from the same things we described before on this call. Certainly the integration savings roll in this year and sort of hit steady state really going into 2018. We see lower cash integration costs. We see lower cash interest expenses. We see some additional working capital performance improvements. And since we've closed about 50% of our floor space or about 2 million square feet, we do see some additional capital spending efficiencies as we get further out in time. So those are the still – they still remain, Seth, to be the key drivers of hitting $1 billion in 2019.

Great. Thanks. And just as a quick follow-up on MNVR, there was some talk in the press about an OT&E evaluation with – that they found some issues with it. Do you still expect it to go forward with an award this quarter? William M. Brown - Chairman, President & Chief Executive Officer: Yes, we do. We do expect Milestone C occurring later this quarter. And just to go back a little bit, we had a very good user test – limited user test back in October of last year. The Army validated the need for the mid-tier radio at 16.2 back in May, so it was very good. It was – you need the mid-tier to connect the upper and lower tactical tiers, and they've shown that. They also showed, which was the key intention of the test, was that you needed a radio like MNVR to operate in SATCOM denied or degraded environments, and it performed well. Our radio meets all the CPD requirements, and we do expect a Milestone C later in this year. The questions that were raised were really around weight – really SWaP in general, and range. And we met the original – we met the requirements. We do see opportunities to improve that over time.

Great. Thank you. William M. Brown - Chairman, President & Chief Executive Officer: Sure.

Thank you. Our next question comes from the line of Carter Copeland with Barclays. Your line is open. William M. Brown - Chairman, President & Chief Executive Officer: Good morning, Carter.

Carter, check your mute button.

Operator, we will come back around to Carter.

Our next question comes from the line of Noah Poponak with Goldman Sachs. Your line is open. Noah Poponak - Goldman Sachs & Co.: Hi. Good morning, everyone. William M. Brown - Chairman, President & Chief Executive Officer: Hey, good morning, Noah.

Good morning. Noah Poponak - Goldman Sachs & Co.: Bill, I wondered if you'd speak to where you expect domestic and international legacy – in the legacy Harris tactical radio business, where you expect book-to-bill to trend through your upcoming fiscal year? William M. Brown - Chairman, President & Chief Executive Officer: Well, we're not going to give guidance on the book-to-bill. What we've given guidance on today is what we think is going to happen in the revenue environment. And we see the DoD business to be flat to up a little bit slightly going into next year. We ended the year around $70 million more or less in Q4. You see it in the back of the appendix in the DoD tactical business. We see that same cautious behavior continuing into next year, but then on top of that, we see tens of millions of opportunities in two areas as Rahul mentioned, Army modernization opportunities, which would include the MNVR opportunity, as well as on MUOS and that should bring us to flat to up slightly. We do see another step-down next year in the international business. We see that our pipeline still remains pretty healthy in that business, but we do see that business down sort of mid teens going into next year. Not a lot really has changed in many ways since our Q3 release in terms of the overall sets of risks and opportunities that are still out there. We still see some good funding on the horizon. But we see that business down a little bit going into next year. And maybe, Noah, I'll just give you a little bit more color on this, as we look out into 2017, we see about a third of that business is in Europe, which as you…

Thank you. Our next question comes from the line of Gautam Khanna with Cowen and Company. Your line is open.

Yes. Thanks. So I was wondering could you quantify, you mentioned that some of the Q4 slipped that are tactical product in Q1. Could you quantify that for us, then I've a couple other questions. William M. Brown - Chairman, President & Chief Executive Officer: Well, just in terms of just the math that we gave in terms of guidance, we said the tactical business – legacy tactical would be down high single digits. You can see it came down about 14%, just the math would indicate it's sort of $65 million to $70 million slipped out into fiscal 2017.

Okay. And I have a follow-up. Can you talk about the FMS task orders that you were talking about having moved to the right a little bit? Size them for us and could you gauge whether those are incremental year-to-year? It doesn't sound like you've given the guidance of down mid-teens. William M. Brown - Chairman, President & Chief Executive Officer: Yeah. Sure, look, I mean, about the...

What should we expect? William M. Brown - Chairman, President & Chief Executive Officer: Go ahead, I'm sorry.

No, I'm just curious, I mean, I'm trying to square it because it looks like there's some things you're going to catch up, but the guidance is down quite a bit. William M. Brown - Chairman, President & Chief Executive Officer: Yeah, look – the – so again, about $65 million, $70 million moved out. A little more than half of that was international, little less than half of that was on the DoD side. So on the international side, it was several different opportunities about two-thirds of which really came out of the Middle East Africa region. And really got hung up by sort of a late, late approval on the $1.77 billion IDIQ, and then it just took some time to get the task orders through the system. And as we pointed out, we did recognize revenue for those opportunities here in July. And I wouldn't characterize it as anything more than – whether it's incremental or not, we gave our guidance for 2017, we do see the international business to be sort of down mid teens going into next year.

Okay. So just squaring that, mid teens implies $140 million decline. You mentioned the legacy DoD flat to up, so maybe you net down $120 million, $130 million, something like that. Could you help us understand what happens to core legacy RF tactical margins in that scenario? I understand that the integration synergy benefits the overall Comm. Systems, but are tactical RF margins going to be down, and if so how much? William M. Brown - Chairman, President & Chief Executive Officer: Yeah. We've weathered this past year on a tactical business down about 14%. We weathered that downturn and had pretty good margins in 2016 and we expect to have good margins going into 2017 as well. Integration savings are a key component of that, Gautam. In fact, the significant relocation of the Fort Wayne production facility into Rochester was a tactical radio opportunity and those – and that's those savings are going to hit us in 2017 and that does backstop our margins in fiscal 2017 offsetting what would happen to be some pressure from top line coming down.

Okay. And then last one, Bill, could you give us an update on the size of your international and DoD legacy RF pipeline and also relatedly, you may have answered it, I may have missed it, the book-to-bill expectation for tactical RF this year and perhaps any phasing, because it sounds like second half you will have some of those 18 opportunities start to convert to orders. I'm thinking JTRS Manpack Australia and the like but I haven't heard much about the first half and I'm just wondering if you could calibrate an overall tactical RF book-to-bill first half versus second half? Thank you. William M. Brown - Chairman, President & Chief Executive Officer: Thank you, Gautam. Look, I'm not going to give much color around book-to-bill for the year. For the company overall we do see a slightly better back half and front half, simply just by the nature of the expectations of the CR, it's going to be slightly backend loaded, but not much unusual from what we've seen in the prior year's, maybe a tick-up in the back half from what we seen before. So I won't really size or shape the tactical business for fiscal 2017. On the pipeline, the DoD pipeline still remains pretty healthy. It's in the $900 million to $1 billion size. And we do start to see more of the modernization opportunities starting to come into the pipeline. On the international side, the pipeline remains about $2.6 billion. We said last time about $2.9 billion. The big opportunity we had in there that drove it to $2.9 billion was Australia, $600 million. We feel good about the opportunity. It's still out there. As we gotten into detailed negotiations with Australia, they may split that into two pieces, they may do $300 million, $350 million at the back end of our fiscal 2017, the balance may slip out a little bit beyond that. And that was the key driver of bringing down our international pipeline to about $2.6 billion. But it's still sitting at a very robust level, which gives us some confidence of growth in fiscal 2018 as a company overall.

Okay. I'm sorry, so that was my last one. I did want to ask Rahul, if you could just talk about where the unfunded pension and OPEB now ends fiscal 2016, and what if any implications that has on cash contributions longer term. Thank you. Rahul Ghai - Chief Financial Officer & Senior Vice President: Yeah. So our total pension deficit, Gautam, increased by about $100 million to $2.3 billion from $2.2 billion, and this includes both the pension and the OPEB liabilities. So we previously said that our pension liabilities increased about roughly $180-ish million for every 25 basis points reduction in discount rate, and the discount rate changed by 40 basis points. But that was partially offset by the contributions we had made and certain changes in the postretirement benefits. So our total deficit ended at $2.3 billion, up $100 million from where we ended last year. It really has no impact on our contributions because that's a kind of a different formula. Our total contributions will go up a little bit next year because the discount rate at which we calculate with the contributions is coming down, and also, the rate of return on assets need to be factored in. So contributions are up about $10 million, $15 million year-over-year, but that also gets offset by the cash reimbursements that we get from the government.

Thank you, guys. William M. Brown - Chairman, President & Chief Executive Officer: Sure, Gautam.

Thank you. Our next question comes from the line of Carter Copeland with Barclays. Your line is open.

All right. Can you hear me this time, guys? William M. Brown - Chairman, President & Chief Executive Officer: We can hear you, Carter, yes.

Perfect. Malfunctioning mute button there. So just a couple of quick ones, as a lot of these have been asked. On the pension, Rahul, can you size for us where those incremental tailwinds went in the segments, just to kind of get a sense of what impact that had on the margins? And then, Bill, at least from a high level, I understand that it's classified, but this new win and new franchise that could be bigger longer term, can you help us from a high level just to understand the size and scale and maybe the growth prospects of what that is? Thanks. Rahul Ghai - Chief Financial Officer & Senior Vice President: Okay. So let me start, Carter, and Bill can take the second one. So the FAS pension benefit is, as you know, is largely on the Exelis portfolio. So by the nature of that, that went to Space & Intel, ES and Critical Networks because that's where the majority of the FAS benefit is just given where the Exelis business happens to be in our business. And you can see the margins in those segments did get a benefit from those FAS contributions or FAS changes. William M. Brown - Chairman, President & Chief Executive Officer: And on the classified one – go ahead, Carter.

I'm just thinking if we assume 40%, 40%, 20%, kind of split between those segments to kind of get a sense of what the underlying margin movement is, is that a fair split? Rahul Ghai - Chief Financial Officer & Senior Vice President: With the changes, yeah, if you assume 40%, 40%, 20%, I don't think you'll be that far off in terms of those three segments.

Okay, great. Okay, sorry. William M. Brown - Chairman, President & Chief Executive Officer: And on the classified piece, you're right, I mean, we really can't provide a lot more color on that other than what we've talked about. But I'm very pleased and very proud of what the team has done over the course of fiscal 2016, certainly in the back half in our proprietary business, classified business. A lot of this relates to using different capabilities acquired with Exelis, combining with what Harris legacy has, moving from sensors to systems to now providing end-to-end solutions. And that allows us to have a different conversation with customers on where we can plug in as a prime mission provider. And these things evolve over time. The team has done a fantastic job of articulating our newfound capabilities, and the customers recognizing that and providing opportunities back to Harris Corporation. So I really can't say much more than that other than we're performing very, very well in a classified space with good back funding support and with a lot of good, strong prospects into the future.

Great. And one last clarification. I know you highlighted Iraq as an opportunity last quarter and it sounds like in your response to Gautam's question, Iraq is still an opportunity. So I guess, are we to assume that none of that has entered the backlog just yet? William M. Brown - Chairman, President & Chief Executive Officer: Well, I won't talk about what we've certainly booked in the month of July in terms by country, but it is an opportunity in fiscal 2017, what slipped from June moved into 2017. There was you recall back when we announced our Q3 earnings, we recalibrated guidance for tactical and part of it was an opportunity for Iraq that moved into 2017, that is still sitting out here. That is going to happen. There's funding support for that. Iraq remains one of our biggest opportunities, certainly for next year, but also more importantly in terms of a longer term pipeline. There's lots of opportunities in Iraq. It comes both in the Ministry of Defense, Ministry of Interiors, different funding support – funding backstop (46:48) support, but it's really a good opportunity for us going into 2017 in our tactical business.

Great. Thanks, Bill. William M. Brown - Chairman, President & Chief Executive Officer: You bet, Carter.

Operator, we'll take one more question.

Thank you. Our last question for today is a follow-up from the line of Pete Skibitski with Drexel Hamilton. Your line is open.

Yeah. Thanks guys. I guess, Rahul, I was wondering if you can give us a full depreciation amortization forecast for fiscal 2017 and then I mean you guys did a good job of beating your free cash flow guidance in 2016 despite kind of all the headwinds. So I'm just wondering, if you could talk about maybe how much upside opportunity that could be in 2017 if we avoid some of the incremental headwinds that we saw in 2016? Rahul Ghai - Chief Financial Officer & Senior Vice President: Yeah. So we've mentioned our amortization is roughly the same year-over-year on the Exelis deal, beyond that we would not like to comment. In terms of our cash flow, listen, we feel good about the $800 million if you look at the kind of the $770 million that we did this year with the tailwind that Bill mentioned on coming off the integration cost adjusted for tax. We do have some pension income that is non-cash, and then a little bit of CapEx changes and then working capital improvement, that gets us to about $800 million, we feel good about that. And I really don't want to go beyond that at this point. William M. Brown - Chairman, President & Chief Executive Officer: Yeah. I don't think depreciation and amortization in total is changing in 2017 versus 2016, it's about flat, so there's not an incremental contribution in cash going into 2017, Pete, on D&A.

Okay. Great. Thanks very much. William M. Brown - Chairman, President & Chief Executive Officer: You bet.

All right. Thank you, everyone. Appreciate it.

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.