LHX - Earnings call transcript Q1 2007 | L3Harris Technologies, Inc.

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Operator

Good morning and welcome to L3 Technologies’ and Harris Corporation’s conference call to discuss their merger of equals. Please note this event is being recorded. I would like to turn the conference over to John Kim, Vice President of Investor Relations at L3. Go ahead, Mr. Kim.

John Kim

morning. good and you Thank I'd like and merger joint Corporation to equals. welcome Technologies conference everyone LX the our call Harris to to of discuss With Relations. and Brown, Anurag are Vice me Ghai, Maheshwari, Investor Rahul CFO; Chairman of President from Harris CEO; Bill are Chairman and LX D'Ambrosio, CEO; Kubasik, Chris from Ralph CFO. And will available take formal questions. your their After be remarks, management to Please refer to and note forward-looking make statements that during will the financial call, measures. management non-GAAP for each a and release detailed presentation yesterday company’s press SEC that the as filings from those factors results to refer of anticipated. Please actual to more materially as description issued cause well may differ Please also that call broadcast is being note the Internet. over this simultaneously

would Bill. to like call the I over to Now, turn

Bill Brown

LX cash call our our expand technology of our performance, you, us global in the significant similar customers X, creates top slide cap $XX good operational support of revenue, in This successful in Well, us John company aligned to and and capabilities billion The calendar accelerated technologies, result for and transformative combination all-stock of growth, new priorities scale, XXXX. and key approximately short an in Harris LX defense have our in driving with Starting flow. morning, strategy. appreciate bring and leading a customers in and history billion robust this and free confidence have exciting employees. expansion will set XX complementary of equals of has defense The countries. company. strong you organizations and more an year a flow excellence cash billion with Yesterday base EBIT defense of create and and LX [indiscernible] company, broaden largest generating approximately a XXX value critical employees, on where and announced culture will represents transaction successful in Technologies, It's engineers the including than be free $X.X a of shareholders, increase decades businesses and billion cultures joining with solutions which leading than the with XX,XXX merger markets LX customer Combining and global $X.X will of of Harris we both customer XX,XXX market $XX differentiated mission merger together focus the will in defense and afternoon, industry from Harris merger of Harris innovation on this thank closely this national portfolio everyone. we margin notice. and day will that for technology a more with gives

be by will year, and other following transaction. integration Harris consist LX X, the I approved Executive and and of Technologies XX%. slide activities and by will reflects both which terms XX% approximately the role. the years, the for Florida to Melbourne, Operating will Chris Harris Harris LX Executive on be and capabilities as will of both related focused LX. Board XX shareholders the In assume the Chairman, two shareholders Chairman close board first from agreement, directors, highly with third own and will I of Chief unanimously Officer a of headquartered Chris transition Officer strength the as combined experienced been own leadership led equal serve companies. remaining Turning has will the approximately and proven company in boards, CEO the both will closing, Chief the the and new that Upon of to Chair representation serve under Vice of will and team and

of forma expected a cost increasing to by cost the of the is $XXX year pro both to The three, companies. at of returned annual will best leadership later million best positions of two from customers, net be synergies senior million, approximately margins companies $XXX date, reflecting basis Additional savings XXX generate pretax in integration the approximately named points.

anticipate year the subject starting share cash reporting significant with post-closing. months dividend including both anticipate shareholders expected first year This consistent basis, a a by to We XX expect customary policy, regulatory three to shareholder generation free mid at financial the robust cash current January next repurchases, an XXXX. is close approval billion on transaction practices through years companies returning over $X within and to calendar with We and calendar and X, up XXXX.

expansion scale will slide and of accelerate air, businesses Now, X, will and way. challenges two well affordable portfolio our solve and LX land, our a excellence margin leverage and innovate strategic critical mission businesses turning maritime, a technology competitive in to that focused customer's across toughest, to will of And through with highly balanced will broader common this greater which the programs, our and HBX engineering ability broader have together capabilities road. the scale domains, space and portfolio provide that us operational with cyber. company down strengthen the create a complementary Both cost optionality LXXX and a our and philosophy two around integrated companies our mix with companies. a Bringing Harris creates demonstrated solutions combination combined multiple shaping

business it will our let short, excellent to shareholder some be In known free basis this I'm can with friendly throughout relationship will working what known turn and years a his disciplined, a combined means allocation and over in strong have cash respect. this result together a of Chris aspects in of and a be capital with through one that financial I years strong this very working And transaction transformational It and whom other I’ve have stakeholders. are balanced great with developed strategy. immediately I've robust deployed that me rapport compelling. for mutual our team and company excited sheet we and closely about merger several bring several balance equals process, one. confident we're and and accretive and year him personal business each for of on the for with and Finally, flow Chris. a combined enjoyed cash it this as that,

Chris Kubasik

Thank is exciting I a combination you, of companies. an both our This is win-win for time and Bill. believe truly this

together few As a worked philosophy. operating to Bill and of become that closely together months, it’s shared with the closely Bill I and with is this this lot I last to a do a new to clear look leaders over company have working hard make work partnership success. brings two forward There

company’s slide price the and be of from customers will establishes and communications land, X. company and in Last be as derived speed more has In develop UAV platforms, to customers the contracts. will prime positions company complex, contested into platforms. on legacy providing domain, directly subsurface end LX non-traditional programs. customers, and innovative secured such and a non-traditional Guardrail affordable electronic in has FXX. well as intelligence every region vision warfare combined UUV sixth be us portfolio expanded with LX’s both new links, propulsion Harris a combined as optics, in that you well Joint, the with capabilities of our avionics legacy naval than data adjacent brings US our the national products industry of greater multi and agile, have LX integrated XX% firm as revenues market satellites. companies turn the leading global majority More meaning company of of becoming the Slide Let’s multiple level nation’s expanding and including platforms, technologies meaning SATCOM, In for X key our thirds combined On data communication strength increasingly government to and can international and FXX more have of positioned In across space capabilities both recently The prime, being XX% and while as and I December, prime positions to a with solutions. Call Together, want of as space signal and to links user This be system solutions communication optical systems surface to in the next including the domain well and with leading more maritime franchise’s shared communication. small complemented will balanced sales from two contract partners. provide end FXX will prime sixth world. enduring missions ISRs, businesses, platforms. our to serving of have Harris’ on portfolio modernization long This cyber intelligence the will and domains. for merger investments, we domain. than Rivet to well its this cyber, leveraged such user related direct both more over diversity revenue our and and defense will solutions. and as customers combined the be our better franchise programs, fixed shows serve many the air, sensors power tactical programs by secured strong the the Compass enable are capabilities with and and premier LX generation the has we

to are passenger global leading airport management, personnel. FAA’s XX,XXX and This workforce bring as X, most to needs, to organizations’ the traffic well our the franchise. and management generation on air critical businesses for traffic R&D, and grow can accelerate security, years over share more in are next LX On and which have training and slide mission organizations. develop transaction growth LX, of market come. where generation next across complex, to innovation. leveraged Harris, Both engineers infrastructure a two will together have both pilot traffic commitment engineering and solve see to focused we companies our by sensitive this a Driven rapidly commercial Technologies customers and aviation rising in you identify and to Lastly, leading focus our can system and both technologies. innovate, best cleared technology practices many supplier companies air needs, be industry that ability avionics. positioned they brings Harris will leading workforce these

focused and and be key systems, including to in leveraging will we many leadership On domain areas communications. based and space, solutions, we spectrum By in unmanned extend communication, see will avenues positions and imperatives, Our protected drive reporting superiority energy ISR franchises and additional innovation our resilience slide growth multi electronic can growth. future and solution. warfare, directed technology investments accelerate X, to our

and and $XX business deepen internationally our relationships we more company, With can countries. billion capabilities do over we customer XXX where together, the invest the scale of in

Additionally, opportunities, and pull avionics including space, prime a we can system electronic of platform sensors. additional leverage to through ISR our warfare, there drive number optic are were and

is ago both program a robust Harris operational expansion. Excellence to a LX the share initiated within Turning five XX, and Business common margin embedded philosophy Harris’ deeply to organization. years mature Program is and slide that over drive

LXXX wide LX’s While corporate year old early momentum. has good

continuous we shared will reliably. program reduce strengthen ultimately and operational so help our efficiently serve vision Our can customers focused us more process and stay on effectively, execution improvement that complexity,

will the take systems implement to We best companies both selecting from the a by and breed best approach to processes throughout enterprise.

to integration. Let turn now discuss me back Bill the to further it

Bill Brown

to giving of successful for analysis, substantial line about So combined of a that Exelis year are now in with a cost been These Roughly, will X.X% higher, not efficiencies, between couple planned. done in combination turning but facility where opportunity largely months eliminating overhead is achieved and half come slide what equally savings this split in this approximately which of integration from gross shared discussing indirect and cost the other we’ve earlier us $XXX the the million synergies confidence half we direct XX, services. duplicate than spend savings and generate revenue. and three, savings and delivered only corporate reducing footprint, initially we segment the rationalizing will with in functional were and reductions cost merger that have

spending profile. strong XX accelerate $XXX invest generation. to drive ability by merger million a that our an efficiencies year growth, these this we're to cash One three cash next the and synergies, grade will the attractive the rating. $X cash We attractive capital reduction and particularly is free forma working balance credit maintaining cost expect to in free XX, pro combination strong of aspect can highlights years capital flow synergies. you of approximately combined flow achieve On billion slide and organic has investment Slide X. committed The to cash sheet see financials over to company

benefits all Turning to slide XX, transaction we this believe stakeholders.

We our to will serve positioned be better customers.

year. most our of leveraging opportunities affordability a are will diversified, our We how part employees a assets Harris will in more the create our that improve our more scale of company. LX and efficient government larger, savings about recognize and per both growth and will valuable greater benefit becoming by and synergy employees customers XXX from million global return defense the as merger our for

shareholder immediately to innovative of an that, customers, the like and lines companies from questions. to benefit to able two highly and And from the Finally, would ask for transaction shareholders upside open this both in our Overall, participate combination. employees. that combines Maria I the our sets will cash our benefit accretive transformational with be merger

Operator

[Operator comes question of Instructions] of first the Our JP Seth from line Morgan. Seifman

Seth Seifman

very much morning Thanks and and congratulations. good

is XX% I'm that growth wanted Just and of is third from way the going of we’re little deal, rate the that synergies what maybe little you the think budgets think given and, talk bit at XX% tax like, the then maybe outlays talking is X.X you maybe this if drop point? to looks line, to capture right are XX% hope XXXX through organic a incremental a one growing so might flow coming if, from the the about about year, kind bit of to be conservative about asking mid-single that about if top the that On we revenue and based to start slides, cash we billion full it wondering growth. if on and so, to digit and that know

Bill Brown

we've start Seth. I company to of individually we at see doing individually. realistic profile think based organic from what combined and what not what it's growth guided look on different we're today, the will the The

company over and synergies plus in the growth capital important organic we’re bit. and is tax after million capital performance, plus of be capital little the expect $XXX working trim billion any quantifying day flow to I in, Of going able you in be a When not today. we think over $X certainly start that the we years, one generation cash we calendar expect in, pointed to of time, look over three math as period, But revenue XX. million. lay to cost combined is XX on don't pop two year opportunities next see at do that when about we We're to days, course, and right. free worth is together, would there you out, lever. ’XX to sit at Working capital that in is your synergies we’re broadly or around spending, an efficiencies, but $XX the Each

years opportunities So, we bring to we see is see – the better achievable. $X capital we and working think performance both do out billion target three

Seth Seifman

the can and follow-up. the And do look at quick that of versus here challenges maybe I was anticipating company when with some them? here how bought planning what to then Difficulty], integrated which more and happened I as maybe at said the doing a and the smaller in Exelis, time it, just what talk you you you're about you're you know, challenges guess are Bill, of that have past interested you [Technical Chris a in you more

Bill Brown

keep going combination to Well, top against next I, And a -- your is priorities, as enormous years. what’s the task together, segments both the be execute market an of the this and Chief any make eye we integration size, from we best three Officer in sure over the business what down, that both on against leading teams executed and keep us right. bigger the mean, growing point our a of an expect and challenge, integrating our customers staying the best capture growing and what also but buying all the President down enormous sure of us. responsibilities of much transaction head head keep making than sharing Chris will and chair Operating both on making be now and will then the customer Seth, their a this, sure fortunately our Exelis, keep we Chris organizations. the I but of It's is will company company,

of investors Chris and be what we do reassured that with So here. top I staying the to exactly think on know I should company,

Chris Kubasik

I you in. this Seth, it, growth this about of talked could and greater The either benefits Bill company and opportunities exciting from just my perspective and time done and are than on does have quarterly I’ll and chime put an companies, really two have merger this strong think and unique create merger results, is part on these I saw to both it's a their upswing own we’re the exciting together.

Operator

next Our the line from Copeland question comes Melius Research. Carter of of

Carter Copeland

synergies. they the things you clarification then is of a I guess, and questions. both, are philosophically, is in org companies of a of Are the synergy and and about these about question but I Hey, reduction just morning, about sort if One, two They're and way for and just gentlemen ways, how estimates you I side? wants whoever somewhat structure, Two number question the in targets just on the think two feel for talked mean -- you segments it, a put And exclusive you to together look and guess, might of terms own least about so operating a on congratulations. outlined good structure, those different together. that their of entrepreneurial all putting have your the cost Ralph. the how LX bit you I envision vision share different. who more answer wondered at

Chris Kubasik

laid is easy the Thanks questions. for to take out numbers the here. Carter. Yeah, synergy relative one the first we’ve and one. two I'll the answer It’s yes, an that

organize, Bill it over initial that. of to I’ve him you of relative and some a spent turn lot to to give thoughts. the So going about we’re I'll how to talking time

Bill Brown

be the the of than a could reduction, see it'll Chris be the at has the in and to range. things Obviously, two couple last months, we've about what be between maybe you year down focused talk on of is I'll and it’s have number we and high I as all that So, excellence, of process performance that LX. operational generation, cash out realign course sort have three, it over next will things and has over the level, at strategy laid Chris the smaller the us. a it that underneath of way the complexity that. that, six this as all done, of our today businesses I time segments simplification, But four, the what of a we think improved flow pieces over

page we're it how I in run to deep culturally, both on same a the organizations. So, on business the frankly, think runs

to We driving have the spirit the we at growth, same broader the enterprise happen leverage maintain in today. entrepreneurial make sure that we to be running that of time, but get

So of just exclude the announce first comment been, is be Harris through we’ll that we or months LX course structure we’re to of million, that I the -- several the dimensions. from opportunities those first over individually. be, on next to have very talk question would $XXX to what we've But savings, clear, as the going careful any the think, savings done your

Operator

line comes Citi. question from next of Our of Jon Raviv the

Jon Raviv

forma pro deployment. the on cash Question

you you’ve be portfolio I room might spend up appreciated? that there Bill you much that? road, cash on more? -- not the think spend also would but mentioned down I you optionality think would on some of something on to mentioned to more that color perspective add why purchases, shaping or $X billion excess Is

Bill Brown

think merger to -- and billion I limited we're really $X I tax up Jon. that's what’s a only nature limiting that, of in free think maintain this to

time, we'll be buyback can of more that, for we to So, a do to in right, we share as there's be next the we're next say about going we'll to ratio, consistent $X will -- to several the what a both generate cash that years, you're deployment. some And going additional payout But the perspective. both think out decide dividend investors, I for do maintain billion. XX% it attractive couple up dividend the XX% as years policy and when shaping, optionality well portfolio figure to to we from is of importantly, experienced which over going last but that have over to only over

Chris Kubasik

first number top focus to two And and the business and existing just commitments grow years, the integration. are for the three – to organically one the number on then goals emphasize, the two execute our on

we cash have cost to new free spent, the think the be about integrate flow So, of $XXX will I million this entity.

friendly we’ve we and couple shareholder we first be lot integration as focus we’ll as the obviously, discussed. in acquisitions those of of expect said, Bill cash wouldn't excess a As of on years, the flow

Operator

Kahyaoglu next the from comes Jefferies. Sheila of question Our line of

Sheila Kahyaoglu

guess most the do so, with generate that defense but drive there commercial the Harris opportunities the that you what Are meant business, operating if margin. platforms? I expansion is have model XX% margin to domains think communications combined And across as applicable?

Bill Brown

well good anticipating going as operating It’s been we see to has companies, At as the plus to guiding years we’ll Sheila. and several margin as because, very expansion, next the margin expansion see journey a we’re operating LX our synergies. were with acceleration question, cost investors growth the we clear combine simply you margin point, it this associated combine when over that the and a those about opportunities companies,

XXX -- margin to the energies points customers. coming that our after given cost expansion, from tax basis another aren't back XXX the to So from of

opportunity that transfer the what coming opportunity we months business. sort well, do more an that. run it So, in ability There’s here. we commercial yeah, lifeblood We'll we The Yeah. talk that want gives really from Sheila. but as do of see of that tactical through as radio the and to could to be model, Chris growth an how explore I organization, over the the

Sheila Kahyaoglu

about think Chris, just the terms gross that one maybe how synergies, in that? standalone for of or LX of of million do then XXX one is And how much you, quick we

Chris Kubasik

Yeah.

about, way cost already and had into the built individually company’s Bill both cost to I our think synergies as I think savings.

that. is XXX So, and above over million the

through going chain be As is supply as of based Bill a it, on this said we go majority and rationalizing to footprint. the

to going identify sit specific targets. down months in ahead, So we're and the the

two it's months of say in but to the us, the come between As probably equally ahead. pretty more distributed now, I of would

Operator

the line America. from Epstein comes of question Ron of of Bank next Our

Ron Epstein

questions mean, who just little came of a So, couple The you. one it you just genesis how through this of question. a deal, you, that’s can walk approached for I about, bit, maybe

Second My how wanted much a of third, sense it’s then how is expect react is, you but do your lot, confirm to to not just to that. overlap heck I this? question is, competitors And there? a

Bill Brown

Turning to a you and that confirm I we're think is between review the in very talk did about when not last today. we were of how one, companies, third little your I'll laying point, we as complementary our overlap. overlap portfolios, We lot which see as we our complementary. two very careful mean what really do out There’s

years On first, other ongoing for an each LX; Harris. LX we had and have the I spaces. same have look, relationship. play knows and We the Chris known know in We several

through combine a more least into to of growth that competing, accelerated of calendar to the exploit our opportunities play While to to us summer we together it opportunities beginning but today. to opportunities since of the to been we market the companies about same more fully I've a [indiscernible]. He capture of ahead and conversation the we speaking we’re do lot partner at year, in and evolved not and where be spaces, want the an happen opportunity around, cost more

to to – Do So say over it the really -- you months. it Chris XX the want X on last developed

Chris Kubasik

time long combination Yeah. sense happen. and just just worked make thought, to that to it hard and I think a to that people made Ron, for this believed I And have Bill add most always

and we're we the ourselves have pride to the think how this impressed is, but fact quick together off able think be and both people agile to timing don't maybe getting not I be a innovative will pull leave. rather and should So, anything were being on we surprise, I

quite like So, to that. unique of competimates. proud Relative industry. We’d competitors, a it’s call we’re ourselves our to

Sometimes, we we compete. team and sometimes,

to expect, would to and weekend heads up. the I supportive. industry and and everybody We seem was reached Congress you out over be the partners of appreciative customers and Bill As

making a significant to So, any and an I in exciting issues transformational success. don't this think expect it's going deal be

Operator

Our next of from Robert line the Stallard question Vertical comes of Research.

Robert Stallard

Couple ones quick from of me.

and really up was First, my to on the I wanted in second on maybe question appear have vision. like wondering, that? follow-up the with areas be then There I'll to what reaction. would overlap one. overlap Ron’s said And some about follow the night customer might customer

Bill Brown

it's it's too the overlap end at what that, piece a fraction together the $XX an day, of say Look, soon to we a even At really. billion. do in there's of small like if

So, it's about We our will a talk businesses complementary that. process. do premature to normal regulatory really go are believe and through

from heard the normal has our mentioned, through they in transaction Chris but over As potential consummating I this will Pentagon normally and the customers don't weekend and any the have go as in just them, conversations do transaction past evaluate have about we’ll this particular with process any expect would overlap. issue and

Robert Stallard

there drives have something you was just more life this. get I would perhaps than you do is continued can that it would And made synergy, out this deal? more be Okay. then synergy, makes driven savings a difficult there -- really is second question, perhaps mean, broad question. appreciated, What independent to your cost really that

Bill Brown

businesses and very – both jump he in exceptionally a performing of were start was then me and last There’s results were well, well. can careful can executing well that are our we were we saying great that maybe in the the latest you year, on trajectory, both quarter in we performing let Chris Well, look, over in. see the

So, there's one well not to our put together. because performing a company not is need,

back I [indiscernible]. I look customers, at this shareholders, We’re employees. creates doing all When create, enterprise stakeholders, the because for our will value sit creates our including more this that our and domain power it this combination

there's comms, forms LX broad ISR. can and across optical in capabilities links, company that expertise us communications SATCOM at the the way form way capabilities, and with and terms of no look You in really Harris’ other ISR match data platforms,

which competitor Chris, across battlefield. the much will electronic is through [indiscernible], walk a the to but company first this very across the Chris? together, all Our strengths unique. time be it positions our network when this warfare, and very stronger warfare company able all strengthen is in in combined importantly, span important really domains spectrum makes domains does

Chris Kubasik

And Yeah. at I I a Bill together, and really from just I has ours perfectly operating the drive defense importantly, Exelis, synergy and experience Bill with and time complementary I spent we we think industry Harris the more the and really at continuous culture, it my common I what think and the aligned position look done is had they've for how at leadership there's had looked I are improvement leaders. were this two perfect with company When and company, have think as integration he and on success individually. But a a I between us. of operate international, it want each to we’re

together, opportunity. stakeholder, thought the And are down both So that and aligned end the We've to we sat think want this end defense with solutions customers national I that each there's rapid strategy. absolutely individually. as great done about

I think we combined. can do more for customers our

MOE, have and cleared again speak great and done employees, the of technical opportunities shareholders them the think are are for world I so benefit engineering think first in especially together I and career sets this development. and both on the going in benefit. shareholders to the the aware MOEs great we've job a to

this I sense made think why to to from the and successful. from culture just we leadership complementary keyword at every looked be that’s again portfolio So, is and single it angle will

Operator

David Our of next question comes from line the of Barclays. Strauss

David Strauss

sort years, case tougher be in there? going and to combined think where see revenue is your fit kind together, on out Maybe that's percentage from revenue standpoint? EW, follow-up of a the versus the you complementary of two the of but Is any on that it together question, portfolios to but then synergy as laid a synergy thoughts quantification sort much any portfolio, -- how opportunity or a how bit fit biggest you Bill, little CX I not do the from you standpoint, much said a of the first

Bill Brown

pull the pilot will Not distant. has in held folks segment as started a more So, this depth teams lot Keep most they There's tie the better commercial lot revenue where very but the the little of LX bit are time, through are I aviation very opportunities think toward be, look of something weeks, the what we're sort our people a but to months. on is I in that mind, a is common that coming on components is we’ll across our on. there's when in closely. pieces portfolio and in last technical couple to There a here, sort complementary. general how in to quantify of overlap. on deeply It’s is base together to that’s be not the of happen to seeing very about little over we're on the a to aviation, training, doing is prepared platforms, been of involved, they going and get but the there leverage perspective that some at Chris in that been fit they have think the this develop we're internationally, over platforms technologies, broaden content with opportunities of

to electronic thing can like of a came and I the ferret position synergies, look really able over what out going to to about lot of -- in on there's and here. lot an happened time. we’re value revenue domain, of additional same So, focus of together create the explore how when at When able deep our things and closed going we we're people we same investment, a but and do think time we I'm to terms lot will we about space do bringing going that think will a Exelis, at in when were sure back what’s warfare, we place opportunities articulate to be to smart over happen are the lot where weren’t avionics, a that through that’s opportunities of we

Chris Kubasik

the look comms, secured David, maybe mean, as kind space agree, I out this, warfare, of pop the we when ISR, would areas. electronic at four I top

the We decades have that enable I some world integration to realize class goes that synergies. in some and unique aircraft back and will companies think some two be skills experience help revenue

test Harris flight that have We capabilities not does have.

unique some will labs the allow multispectral of that we analysis. We Between to and do test us facilities. have two operational have some testing us,

months So, synergies of to and to take those. with identify we're be in I to Bill, it's quite exciting years and advantage be going ahead, these the and agree able able revenue

David Strauss

Thanks.

And to what intangible also synergy follow-up you then combination spend and levels initial thoughts generate synergy those? the million can amortization question, -- of potential the savings, savings, throw saving XXX do that timing of from the perspective? about cost As talk out cash a a on

Bill Brown

Yeah.

On more the XX% the or in to will there. tail so probably it and be going it’s XXX, loaded, I that assume end front first year off of beyond

amortization, quantify will the work maybe the a a to year to be at moment. to assumption billion, of couple think, I so and down our just slide years, is billion, still lot ingoing XXX it has the that's little first really of first the in there's over but start bit of over but terms done that In X the that, X.X intangible

in the indirect we year cost of the lot and facilities, the the the years. – the the in roll first is and the and $XX we’ll $XX which an in but direct years, probably will fairly level cash segment million, in year. spend, facilities of terms savings, time, savings will the corporate of the million do couple $XXX down million be in in year, on of mostly it’s first see spend across of what noticed couple cost one indirect a happen you In first take gross first consolidation cash With range will see some

some costs. So, in we’ll to coming also savings restructuring some the first see year offset the cash of

Operator

Rumohr next Company. of Our von Cowen of line the and comes from question Cai

Gautam Khanna

Gautam. and Cai It’s Yeah.

each a we're We this. ask on have -- going question to

dissynergies consider. you Bill, congratulations. I about any talk to could wondering if First, was possible

market you're where there could and things there that mentioned if little bit a very little you any concentration. are be be You looking might maybe other deeper, that Could more at of that challenging. explore topic

Bill Brown

little dissynergies, to There's to very of businesses. think combined you. terms the I sales and overlap in think market to There's a there’s less to I of honest than going the head million billion, between us. Gautam head, $XX really be going $XXX Look, with of small. compete very, it's negligible be very We often don't

a profit not or on there's margin margin So, on profit loss.

So, in issue takes There's some that be either. and think we savings. nature, that's don’t the on I in really costs see puts benefits that to already of billion an X.X but and going as considered

really dissynergies I in a of So, lot transaction. see don't the

Gautam Khanna

follow-up, leaders direct night enhanced in you both you the guys As are are quick Bill, vision goggles a competitors. and

don't have SATCOM? So while areas you what to links there are in any much there do happen you where to have and think is your going or then overlap, direct competitors say data

Bill Brown

Data And of and think, on a links that look, in I is night competitive there, lot space. play and we both have both completely we some necessarily SATCOM it’s not positions they're complementary. vision, space but competitors, very

and I to Chris’s much think We night Exelis, I substantial Pentagon again, the run more business terms this. scope in it is of the at combined has we that see front overall position run don't had. of DoJ, magnitude through vision FDC a as bought in with going again, of process really concern a but business. and business don't assessing want than terms our the to the But we've significant in came

Operator

from comes question Spingarn the Suisse. next Robert Our Credit line of of

Robert Spingarn

your forth, and and think leading cost opening that there, about you of sort in you so XXX could do we a pacing XXX. the I the to bit a one, work questions of little synergies was hoping on the headquarters two up about ago of a bit deeper little how synergies, three, delve spoke just couple those Bill, about million the, but type

Bill Brown

loaded, bit Yeah. have going be piece corporate move to front the about largely because That’s more a we by wasn’t we XX%. way. something. the quickly Maybe, that’s our going we're That on dog what to just do have The to color. [Technical at to end little segment Difficulty] consolidation,

Robert Spingarn

That was just part enthusiastic. They’re team. very of the

Bill Brown

the that and Chris we straightaway what execute on obviously, one, one. that know day have organizational so work in coming And an model, months, together that we I place, people are, people in have day with the jobs

more of several indirect. Of segment be well side, on direct supply So, pieces in rationalization, it’s that supply loaded. there end to is the that and front footprint corporate going and are chain chain as piece

I piece part $XX There with of know indirect and spend relatively range. probably quickly, suppliers. time, more a $XX take side going that’s think as and cost. take That's about that where some on over work subcontractor time. to and We’ve could price, look a beat the come and it locations company, XX% we've of we simply we should When three well. combined may the it's That be The million approximately XXX take K, at, million the little occupancy over take rationalization square be of piece I generally from. is about sometimes of got that's some was in going saw at we This to all a be space, the equalizing million to happen is it got again, XX it’s will Exelis. to going course that, million to the facility will that’s Exelis, the to bit this back The we’re and out. on to because requalifying time. very, sit of it investment $XXX feet do but time got years. I but going do very With XX%, direct in

numbers, happen two three. will broad and balance and in in So, see one you'll something year like $XXX year the million year

Chris Kubasik

get together we a soon sure integration going as the best. integration to we're and co-chair team allowed team and and as So that best I to the joint of put Rob, make Bill obviously going are

moving I example, think, model, already from we’re excited lot from in is a choose there Ralph to such service functions. and place, a process, heading policy, We a quite which that were shared about. I Clearly, talk to about has towards. system and Harris internally

So, that investment example. laps and and on the they us have time immediately will save as already just an what

I number, a of big So, opportunities, committed think the together. we're but there's lot think exciting I it's and

Robert Spingarn

LX enough just Okay. threshold on I regulatory one there. the imagine perhaps side. a there side exposure, the the at review regulatory to trigger And quick for China aviation Is on

Chris Kubasik

Yeah.

China. it looks it that right one in buy As now, doesn't need to appear we’ll

no outside that with through we’ll to but question. first pass So advisors, would the this be work the

Operator

comes Our of Peter the from question next Baird. line Arment of

Peter Arment

Yeah.

of comment, on quickly, answered I a follow-up the because lot a this morning. regulatory guess, questions Just here you've

see reviews, just Just the of ultimately you you mentioned do maybe the final normal you I regarding how arrived Bill, or timeline process, guess, in to terms when the approvals. the guys expect,

little just further. it pin a to mid-XXXX, said down trying but You

Bill Brown

some that. than going together take of reclass few further much down It's we months it pin the to have to to put a six to hard weeks, maybe It's financials. SX, do Yeah.

how next go SX through on We expectation right have the January and quickly to February we with we’re early with timeframe, putting in get they'll [rates then, and the away can depending year file out. just] shareholders’ the together paperwork in are approved here be meeting get again our the attorneys process. to U.S. outside a their going upon could And if

mid BREXIT, inconsequential, was at the to think for it have, I end of it could will don't happen? XX. it'll I of There a took It in nothing the the it pieces China, go but very, the expect Exelis, to depending that. that time I transaction very narrow to issue. day know. resolved, the we beyond and think a EU that said just be on re-filings We but believe ought some get as it I be we think second calendar on given safe, the with don't it We Will Chris was well we as did be anticipate magnitude UK. be in request. to

the we months. said that's over why period by mid ‘XX. work these But to it, through different all calendar coming have of closing expected We filings

Operator

for from today will question final of Sachs. Goldman the line Poponak of come Noah Our

Noah Poponak

be What are year three you financials discussion? year considering the to in

Bill Brown

in middle be ’XX. will after of it years middle close the to We ’XX, the three of expect so

be the will or calendar the XXXX. early part be ’XX the around it So, by end -- of of could

Noah Poponak

Okay.

be full could we So talking year XXXX?

Bill Brown

Yes.

Noah Poponak

you Okay. flow. in margins entity X And combined are free cash profit of billion kind the what the combined for contemplating of

Rahul Ghai

combined margin think Harris, this Right combined margins XXish I are, – percent. around is the now, is between

it it to think we add about, teensXX% as of kind to mid point, through up I XX%. will go a So

Noah Poponak

net I alone, the genesis being of Okay. hundred synergies that combined I basis couple guess, of the synergies had the question. mean, alone points. a XX.X, Yeah.

think basis then and and back get synergies can how you there as standalone So, staring efficiency the wondering Harris had if operating improvements you I’m back, well? guess, of you close the I on what the, is is, sort but on not company combined to margins to legacy a margin combined the at

Bill Brown

up range Yeah. to the XX%, It’s like get XX.X% XX.X%, to next going back in some probably couple over the to years. time it’s of XX%, take but

Chris Kubasik

obviously. intangibles excluding all That’s Yeah.

So goal. that’s the

Noah Poponak

versions I growth, more one can to more just a is, different just, standalones that both you little view guidance by have of maybe confused for because already then I was related as little the organic digit detail put to that, of upper companies existing a And more closer or discussion a standalone I digit guess Okay. basis particularly synergies all multi-year on bookings are question and mid-single that. a digit on guess strong for just timeframe single Am I organic basis. in on what understanding revenue mid-single missing about growth organic on something am The of been not a longer I you financial you're have than each about one-year top company growth. and revenue talking missing talking

Bill Brown

around quarter XX% to over term can has quite off both a growth, here Chris and which was guiding digits high to organic Harris strong. been good So we talk to their the came we’re single medium guidance about where happened recently and to be. very X% mid

higher we beyond that, range put then, talk how forma, revenue in some prepared additional when pro today, be something incrementally that the companies you're yeah, to incremental and than right, about some be opportunities be together, be that but more the would will we're there's will So not of opportunities. much to there it growth in know terms going

Chris Kubasik

years. the over target our of kind as X% about talked we’ve And Yeah. next few

of we're here. think all I in So, the same kind range

off. tell we’ll right and exciting So, it, XX%, you working as opportunity. We'll away there’s more get this keep you this, abreast on a pretty but XX% into can ways as we is XX%, get

upside and to a we’re there's what think, margins and on the lot deliver committed that's revenues, I costs the the of on.

Bill Brown

much very for us on joining well, So, notice. very such equals. short thank of you transformational this merger about everybody excited We're

now LX get Chris off to very both are quarter, a and work. coming We strong are of to and Harris back going I and

for everybody. joining a much Thank on So very Monday morning. thank us you, you

Chris Kubasik

you. Thank

Operator

Thank conclude gentlemen, this today's you. does conference Ladies call. and

disconnect. now may You

L3Harris (LHX) 15 Oct 182007 Q1 Earnings call transcript