11
| 1 2014 Annual Meeting of Shareholders | 10/24/2014 Annual Meeting of Shareholders William M. Brown Chairman, President & Chief Executive Officer

Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

  • Upload
    others

  • View
    3

  • Download
    0

Embed Size (px)

Citation preview

Page 1: Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

| 12014 Annual Meeting of Shareholders| 10/24/2014

Annual Meeting

of Shareholders

William M. BrownChairman, President &

Chief Executive Officer

Page 2: Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

| 22014 Annual Meeting of Shareholders| 10/24/2014

Statements in this presentation that are not historical facts are forward-looking statements that reflect management's current

expectations, assumptions and estimates of future performance and economic conditions. Such statements are made in reliance on

the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Forward-looking statements in this presentation include but are not limited to: earnings, revenue, operating margin, free cash flow, tax

rate and other guidance for fiscal 2015; potential contract opportunities and awards; the potential value and timing of contract awards;

the value of opportunity pipelines; and statements regarding outlook, including expected revenue, orders, cash flow, share repurchases

and dividends and potential growth and expansion. The company cautions investors that any forward-looking statements are subject to

risks and uncertainties that may cause actual results and future trends to differ materially from those matters expressed in or implied by

such forward-looking statements. The company's consolidated results and the forward-looking statements could be affected by many

factors, including but not limited to: the loss of the company’s relationship with the U.S. Government or a reduction in U.S. Government

funding; potential changes in U.S. Government or customer priorities and requirements (including potential deferrals of awards,

terminations, reductions of expenditures, changes to respond to the priorities of Congress and the Administration, budgetary

constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

attack or otherwise, or other significant disruptions of the company’s IT networks and systems or those the company operates for

customers; risks inherent with large long-term fixed-price contracts, particularly the ability to contain cost overruns; financial and

government and regulatory risks relating to international sales and operations; the continued effects of the general weakness in the

global economy and U.S. Government’s budget deficits, national debt and sequestration; the company’s ability to continue to develop

new products that achieve market acceptance; the consequences of future geo-political events; strategic acquisitions and the risks and

uncertainties related thereto, including the company’s ability to manage and integrate acquired businesses; performance of the

company’s subcontractors and suppliers; potential claims that the company is infringing the intellectual property rights of third parties;

the successful resolution of patent infringement claims and the ultimate outcome of other contingencies, litigation and legal matters;

risks inherent in developing new technologies; changes in the company’s effective tax rate; the potential impact of natural disasters or

other disruptions on the company’s operations; the potential impact of changes in the regulatory framework that applies to, or of satellite

bandwidth constraints on, the company’s managed satellite and terrestrial communications solutions; and changes in future business or

other market conditions that could cause business investments and/or recorded goodwill or other long-term assets to become impaired.

Further information relating to factors that may impact the company's results and forward-looking statements are disclosed in the

company's filings with the SEC. The forward-looking statements contained in this presentation are made as of the date of this

presentation, and the company disclaims any intention or obligation, other than imposed by law, to update or revise any forward-looking

statements, whether as a result of new information, future events, or otherwise.

Forward-looking statements

Page 3: Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

| 32014 Annual Meeting of Shareholders| 10/24/2014

Financial performance

FY14 performance

Revenue down 2%

EPS up 2%

Free cash flow up 3%

($million except EPS)

*Reference non-GAAP reconciliation on the Harris investor relations website.

4,725

5,418 5,451

5,112 5,012

21% 19% 18% 18% 18%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

FY10 FY11 FY12 FY13 FY14

EPS*

Operating

income

margin*

Revenue

$4.57 $4.98 $5.20 $4.90 $5.00

Page 4: Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

| 42014 Annual Meeting of Shareholders| 10/24/2014

Central Asia

$160M

35.2% 34.4%32.8%

31.7% 30.7%

0

500

1000

1500

2000

2500

3000

FY10 FY11 FY12 FY13 FY14

RF Communications

2,1442,289

2,067

1,849

Operating

income

margin*

PSPC

DoD

International

Down

1%

-12%

-20%

+25%

Notable AccomplishmentsRevenue ($million)

*Reference non-GAAP reconciliation on the Harris investor relations website.

1,828

MNVR

$141M

Australia

$111M

USMC

$97M

US Army

$109M

Mobile County

$40M

Page 5: Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

| 52014 Annual Meeting of Shareholders| 10/24/2014

Government Communications Systems

Commercial

Broadband Satellite

Program

F-35 Common

Components and

Data Link

$150M

Notable AccomplishmentsRevenue ($million)

13.3% 12.9%14.2% 14.7% 15.4%

0

500

1000

1500

2000

2500

FY10 FY11 FY12 FY13 FY14

1,7291,786 1,784 1,801

1,718

Operating

income

margin*

Civil

National

Defense

Data CommNetwork Services

(DCNS)

Foundation GEOINT

Content

Management

*Reference non-GAAP reconciliation on the Harris investor relations website.

$133M $120M

Joint

Strike

Fighter

$770M

Up

1%

Page 6: Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

| 62014 Annual Meeting of Shareholders| 10/24/2014

Integrated Network Solutions

Dept of Veterans

Affairs

$89M

Notable AccomplishmentsRevenue ($million)

12.1%9.4% 8.1% 8.4% 8.0%

(100)

400

900

1,400

1,900

FY10 FY11 FY12 FY13 FY14

1,6101,488

1,027

1,576

Operating

income

margin*

Healthcare

IT Services

CapRock

Down

7%

Carnival

102

ships

Dept of State

$29M

*Reference non-GAAP reconciliation on the Harris investor relations website.

1,463

Channel Partners

UK/Canada

Partnerships

Energy

$135M

Page 7: Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

| 72014 Annual Meeting of Shareholders| 10/24/2014

Objective Measure

Improve customer satisfactionBU specific; e.g. on time

delivery; zero out of box failures

Objective Measure

Deliver supply chain productivitySupply chain savings (OI & total)

$, % of spend

Increase labor productivityLabor productivity $, % of labor

cost

Improve cost of poor quality

(warranty, scrap, rework, turnbacks,

escapes)

COPQ improvement $, % of total

cost of sales

Improve overhead leverageCost to serve $, % of revenue,

% improvement

Improve competitive rates % improvement

ROS % (government programs)

GM % (commercial programs)

NRM % (targeted programs)

Objective Measure

Improve net working capital Days improvement

Capex % of revenue

Capex % of depreciation

Improve return on invested capital ROIC

Cu

sto

me

r

Sa

tis

fac

tio

n

Are we exceeding our customers' expectations?

Pro

du

cti

vit

y

Are we improving year over year?

Improve program execution /

performance

As

se

t V

elo

cit

y

How fast are our assets being used to make more money?

Improve capital intensity

Objective Measure

Improve customer satisfactionBU specific; e.g. on time

delivery; zero out of box failures

Objective Measure

Deliver supply chain productivitySupply chain savings (OI & total)

$, % of spend

Increase labor productivityLabor productivity $, % of labor

cost

Improve cost of poor quality

(warranty, scrap, rework, turnbacks,

escapes)

COPQ improvement $, % of total

cost of sales

Improve overhead leverageCost to serve $, % of revenue,

% improvement

Improve competitive rates % improvement

ROS % (government programs)

GM % (commercial programs)

NRM % (targeted programs)

Objective Measure

Improve net working capital Days improvement

Capex % of revenue

Capex % of depreciation

Improve return on invested capital ROIC

Cu

sto

me

r

Sa

tis

fac

tio

n

Are we exceeding our customers' expectations?

Pro

du

cti

vit

y

Are we improving year over year?

Improve program execution /

performance

As

se

t V

elo

cit

y

How fast are our assets being used to make more money?

Improve capital intensity

Objective Measure

Improve customer satisfactionBU specific; e.g. on time

delivery; zero out of box failures

Objective Measure

Deliver supply chain productivitySupply chain savings (OI & total)

$, % of spend

Increase labor productivityLabor productivity $, % of labor

cost

Improve cost of poor quality

(warranty, scrap, rework, turnbacks,

escapes)

COPQ improvement $, % of total

cost of sales

Improve overhead leverageCost to serve $, % of revenue,

% improvement

Improve competitive rates % improvement

ROS % (government programs)

GM % (commercial programs)

NRM % (targeted programs)

Objective Measure

Improve net working capital Days improvement

Capex % of revenue

Capex % of depreciation

Improve return on invested capital ROIC

Cu

sto

me

r

Sa

tis

fac

tio

n

Are we exceeding our customers' expectations?

Pro

du

cti

vit

y

Are we improving year over year?

Improve program execution /

performance

As

se

t V

elo

cit

y

How fast are our assets being used to make more money?

Improve capital intensity

Excellence and Innovation

Lean Six Sigma

CUSTOMER

SATISFACTION

PRODUCTIVITY

ASSET VELOCITY

Tools

Metrics

Training

228

240

219

254

264

4.8%4.4%

4.0%

5.0%5.3%

FY10 FY11 FY12 FY13 FY14

Company-funded R&D Spend

% of

revenue

($million)

Pre-Launch FY14 FY15

Yellow

Belt

Green

Belt

Black

Belt

White

Belt

Forecast

~3x

~2x

Source: Annual SEC filings

Page 8: Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

| 82014 Annual Meeting of Shareholders| 10/24/2014

605

508

619 655 675

(198)

(325)

(234)

(178)(209)

FY10 FY11 FY12 FY13 FY14

Cash generation and deployment

Philosophy

Fully fund internal requirements

Pursue accretive acquisitions

Maintain healthy balance sheet

Return cash to shareholders

101%

80%

102%

119%125%

Free cash flow

to non-GAAP

net income*

Free cash

flow*

CapEx

*Reference non-GAAP reconciliation on the Harris investor relations website.

($million)

Page 9: Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

| 92014 Annual Meeting of Shareholders| 10/24/2014

32 43 58 82 107 115 127 140 165 180 ~200

56 45

251 235

132

208

256

474

415

309

~200

141 142 141

137

133

130

126

115 111

107

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15Guidance

239

Return cash to shareholders

Dividends and

repurchases/

free cash flow * 37% 47% 99% 77% 44% 53% 75% 99% 89% 73% 77%**

($million)

~$3.4 billion

dividends/repurchases

over last ten years

323

383

613

580

490

Dividends

Share repurchases

Average fully diluted

share count (millions)

~400

88 88

310 316

**Based on midpoint of guidance provided July 29, 2014.

*Reference non-GAAP reconciliation on the Harris investor relations website.

Page 10: Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

| 102014 Annual Meeting of Shareholders| 10/24/2014

$0.24 $0.32

$0.44

$0.60

$0.80 $0.88

$1.00

$1.22

$1.48

$1.68

$1.88

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Track record of double-digit dividend

growth

12% increase

approved

August 2014

Page 11: Annual Meeting of Shareholders · constraints, debt ceiling implications, sequestration and cost-cutting initiatives); the potential impact of a security breach, through cyber

| 112014 Annual Meeting of Shareholders| 10/24/2014

Annual Meeting

of Shareholders