“Harris first quarter results were solid in a challenging government spending environment,” said William M. Brown, president and chief executive officer. “We were awarded a number of large contracts in both RF Communications and in Government Communications Systems, and revenue in Government Communications Systems increased 5 percent over the prior year. First quarter operating performance was positive with operating margin flat compared to the prior year, despite lower revenue and higher R&D investment. Harris generates strong free cash flow, and in the first quarter we increased the dividend by 12 percent, the second increase this calendar year.”

RF Communications

Revenue in the first quarter for the RF Communications segment was $445 million compared with $497 million in the prior year. Tactical Communications revenue was $307 million, a decline of 18 percent, and Public Safety and Professional Communications revenue was $138 million, an increase of 12 percent. Operating income for the RF Communications segment was $134 million compared with $154 million in the prior year. Operating margin was 30.2 percent, declining from 31.0 percent in the prior year as a result of a shift in product mix related to the strong revenue growth in Public Safety and Professional Communications.

Orders for the segment totaled $363 million, including $254 million in Tactical Communications and $109 million in Public Safety and Professional Communications. Book-to-bill was .82 for the segment. At the end of the first quarter, backlog was $612 million in Tactical Communications and $623 million in Public Safety and Professional Communications.

During the quarter, Harris was awarded a 5-year, $297 million Indefinite Delivery Indefinite Quantity (IDIQ) follow-on contract from the U.S. Department of the Navy for a broad portfolio of radio solutions to support modernization and standardization on Falcon III^®. Harris also was awarded a $397 million Consolidated Single-Channel Handheld Radio (CSCHR) follow-on IDIQ contract to provide the U.S. Department of Defense with Falcon III handheld radios. This 2-year contract includes two 1-year options that increase the potential value of the contract to $712 million. Significant international orders included $25 million from a government in the Middle East to provide high-frequency radios as part of a multi-year modernization program, $14 million from a European country for Falcon III handheld accessories and $15 million from a country in Latin America for both public safety and tactical radios. Harris also was awarded a $24 million contract from the Regional Municipality of Durham, Ontario to deploy a P25 simulcast radio system that will provide interoperability with adjacent municipalities and utility partners and can be adapted to support Long-Term Evolution (LTE) networks.

Integrated Network Solutions

Revenue in the first quarter for the Integrated Network Solutions segment was $376 million, a decrease of 10 percent compared with $419 million in the prior year. Solid growth in CapRock Communications was more than offset by a decline in IT Services revenue, primarily from the loss of the Patriot program.

Operating income for the segment was $32 million compared with $22 million in the prior year. Non-GAAP operating income in the prior year was $31 million. Improved operating performance in CapRock Communications and Healthcare Solutions was partially offset by lower operating income in IT Services due to the loss of the Patriot program at the end of fiscal 2011.

During the quarter, Integrated Network Solutions was awarded several contracts with the U.S. Department of Veterans Affairs (VA), including a 4-year, $47 million follow-on IT Services contract to expand the VA’s nationwide wireless network infrastructure from the initial 22 medical centers to 66 and two contracts totaling $18 million under the Transformation Twenty-One Total Technology (T4) IDIQ contract to improve electronic data interoperability for claims processing. Healthcare Solutions awards included a contract for $11 million under the U.S. General Services Administration’s Alliant IDIQ contract to provide an electronic health record system for the Department of Homeland Security. IT Services awards included a 4-year, $46 million contract to provide enterprise IT support services to the North American Air Defense Command (NORAD) and the U.S. Northern Command (USNORTHCOM) and a $65 million follow-on contract to operate and support the U.S. Air Force Space Command’s 50^th Space Wing. Orders for CapRock Communications included $44 million for satellite communications solutions under the Future COMSATCOM Services Acquisition (FSCA) contract.

Government Communications Systems

Revenue in the first quarter for the Government Communications Systems segment was $465 million and increased 5 percent compared with $444 million in the prior year. Year-over-year revenue increases from the GOES-R weather program and the Space Network Ground Segment Sustainment (SGSS) program for NASA were partially offset by continued slower spending by Department of Defense customers. Operating income was $67 million compared with $63 million in the prior year. Operating margin was 14.4 percent compared with 14.2 percent in the prior year.

During the quarter, Harris was awarded three contracts that provide essential elements of the Federal Aviation Administration’s (FAA’s) multi-billion dollar NextGen initiative: a 7-year, $331 million Data Communications Integrated Services (DCIS) contract to transform voice-based air traffic control to automated air traffic management; a 15-year, $291 million NextGen National Airspace System (NAS) Voice System (NVS) contract to create a modern VoIP network for communications among air traffic controllers, pilots and ground personnel; and a 5-year, $63 million NAS Enterprise Messaging Service (NEMS) IDIQ contract that provides the Systems Wide Information Management (SWIM) program with enterprise-wide data-sharing for a variety of critical information such as flight planning, traffic flow, surface radar and weather. Harris was also awarded a $51 million follow-on contract for the U.S. Army’s Modernization of Enterprise Terminals (MET) program for advanced satellite terminals that provide the worldwide backbone for high-priority military communications and a $43 million award from a classified customer.

Discontinued Operations

Based on recent indicators of value during the first quarter of fiscal 2013, including market, financial performance and indications of value from interested parties, we recorded additional non-cash impairment charges in discontinued operations for Cyber Integrated Solutions and Broadcast Communications totaling $222 million.