“From a change standpoint, one area that I am particularly interested in is our international presence,” he said. “During the past five years, international revenue has grown from about 10% of total revenue to about 26% today, with the opportunity to grow to beyond 30% in the coming years.”
Moving forward
With a market cap of approximately $6.2 billion, Harris falls into the category of “smaller defense company,” meaning reduced government spending could have a bigger impact on its bottom line — for comparison, Boeing‘s market cap hovers around $81.4 billion, Lockheed Martin‘s is $39.4 billion, and Northrop Grumman‘s is $21.4 billion. Harris is aware of the gap and is making the necessary changes.
As a result, Q4 2013 revenue was down as expected — $1.36 billion, compared with $1.44 billion in the prior year. GAAP income from continuing operations was $71 million, or $0.65 per diluted share, compared with $137 million, or $1.20 per diluted share in the prior year, and non-GAAP income from continuing operations was $154 million, or $1.41 per diluted share, compared with $162 million, or $1.42 per diluted share, in the prior year.
However, Q4 free cash flow was better than expected at $273 million and resulted in a strong $655 million for fiscal 2013 — up 6% versus the prior year and 119% of non-GAAP net income.
Orders came in at $1.43 billion, down from the prior year, but 105% of revenue. Orders further resulted in a funded backlog that’s up 2% sequentially and 4% year over year.
In addition, Brown said: “During fiscal 2013, we recorded record free cash flow, repurchased $400 million of stock and increased our dividend 12% on top of a 32% increase in fiscal 2012. On Aug. 26, entering our fiscal 2014, we announced a further increase of 13.5%, along with a new $1 billion share repurchase authorization.”
A Foolish wrap
Thanks to reduced government spending, Harris’ business environment has changed. But Harris is embracing that change and has a good idea of what it needs to do to stay relevant and thrive in the future. That’s good news for investors, as shares sit at $57.26 — near their 52-week high of $58.56. Thus, while Harris still has a lot of challenges to overcome, it looks pretty good overall.
Check back soon for Part 3 of my exclusive interview with Bill Brown, where we’ll delve further into sequestration, what Harris is doing to combat it, and Harris’ competitive advantage.
The article Harris Makes the Transition to Record-Breaking Free-Cash Flow originally appeared on Fool.com and is written by Katie Spence.
Fool contributor Katie Spence owns shares of Northrop Grumman. The Motley Fool owns shares of Lockheed Martin and Northrop Grumman.
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