Business News
Harris Corporation Fourth Quarter Revenue Grows 19%; Net Income Increases 39%; Non-GAAP Net Income Increases 30%
2008-08-05 15:02:00
Harris Corporation Fourth Quarter Revenue Grows 19%; Net Income Increases 39%; Non-GAAP Net Income Increases 30%
Strong New Orders Momentum Entering Fiscal Year 2009
MELBOURNE, Fla., Aug. 5 /EMWNews/ -- Harris Corporation
(NYSE: HRS) reported that revenue in its fiscal fourth quarter ended June
27, 2008, increased 19 percent to $1.4 billion, compared to $1.2 billion in
the prior-year quarter. Organic revenue increased 12 percent. Orders in the
fourth quarter were significantly higher than revenue.
GAAP net income in the fourth quarter of fiscal 2008 was $122 million,
or $.90 per diluted share, compared to $88 million, or $.63 per diluted
share, in the prior-year quarter. Non-GAAP net income in the fourth quarter
of fiscal 2008 was $128 million, or $.95 per diluted share, compared to $99
million, or $.71 per diluted share, in the prior-year quarter, an increase
of 34 percent. Non-GAAP net income in fiscal 2008 excludes
acquisition-related costs. A reconciliation of GAAP to non-GAAP financial
measures is provided in Tables 5 through 8 along with the accompanying
notes.
Full-year revenue in fiscal 2008 was $5.3 billion, a 25 percent
increase compared to $4.2 billion in the prior year. Organic revenue
increased 13 percent, and new orders were significantly higher than
revenue. GAAP net income in fiscal 2008 was $444 million, or $3.26 per
diluted share, compared to $480 million, or $3.43 per diluted share, in the
prior year. Non-GAAP net income in fiscal 2008, which excludes
acquisition-related costs, was $462 million, or $3.39 per diluted share, an
18 percent increase compared to non-GAAP net income in fiscal 2007 of $391
million, or $2.80 per diluted share. Non-GAAP net income in fiscal 2007
excludes charges associated with cost-reduction actions, asset impairments,
acquisition costs and the significant gain associated with the Harris
Stratex Networks combination.
"Harris achieved excellent financial results, notwithstanding the
unexpected higher costs and accounting errors in the fourth quarter at
Harris Stratex Networks. We continued to deliver double-digit organic
revenue growth, and orders were significantly higher than revenue," said
Howard L. Lance, chairman, president and chief executive officer. "Revenue
increased in all four operating segments during the fourth quarter, on both
a year-over-year and sequential basis. New orders combined with a robust
pipeline of opportunities in the markets we serve are giving us confidence
that fiscal 2009 will be another year of strong financial performance. To
ensure margin expansion, cost-reduction actions have been initiated to
better align resources to support faster-growing, higher-margin market
opportunities."
Defense Communications and Electronics
The Defense Communications and Electronics segment -- comprised of the
RF Communications Division and Defense Programs -- continued its strong
momentum of revenue and earnings growth. Fourth quarter revenue of $567
million was 22 percent higher than the prior-year quarter and sequentially
was 12 percent higher than the third quarter. Operating income for the
quarter increased 29 percent to $170 million, compared to the prior-year
quarter, and operating margin was 30 percent.
RF Communications. Fourth quarter revenue in the RF Communications
Division was $441 million, increasing 36 percent compared to $326 million
in the prior-year quarter. RF Communications also posted another strong
quarter of sequential revenue growth with revenue increasing 13 percent
compared to the third quarter. Strong market demand and customer preference
in both U.S. and international markets is continuing for Harris Falcon(R)
tactical radios. This continuing success was highlighted by the diverse
group of international customer shipments in the quarter, including
Pakistan, Algeria, Georgia, the Philippines, Saudi Arabia, the Bahamas,
Estonia, Ethiopia, Honduras, Macedonia, Nicaragua, Romania and the United
Kingdom.
Worldwide demand for Harris software-defined tactical radios continues
to be driven by multiple factors, including modernization programs, force
expansion, force restructuring, interoperability requirements, and
requirements for network-centric communications. Customer priorities
continue to evolve across the defense, homeland security, public safety and
peacekeeping landscape. Their communications systems need to be versatile
and adaptable in order to be effective in multiple operating environments
and missions. Demand will continue to increase for network-centric
communications systems that can significantly improve situational awareness
and force effectiveness through communications superiority. Harris Falcon
radios embrace these changing mission priorities and offer superior
multimission performance.
RF Communications orders in the fourth quarter included:
-- $118 million contract from the U.S. Marine Corps for Falcon II(R)
multiband manpack radios as part of a $350 million Indefinite Delivery,
Indefinite Quantity (IDIQ) contract to transition from legacy single-band
radios to multiband, multimission software-defined radios;
-- $43 million order from a Latin American country for Falcon II HF
radios;
-- $42 million order from the U.S. Army for 1,400 Falcon II vehicular
adapter systems -- including power amplifiers, filters, antenna systems,
and other installation components -- for installation of Falcon II manpack
radios in MRAP (Mine Resistant Ambush Protected) vehicles;
-- $18 million order for Falcon II HF radios to modernize and support
communications networks for the Iraq Ministry of Defense;
-- $16 million order for Bowman HF tactical radios from the United
Kingdom; and
-- $15 million contract from the Polish Ministry of National Defense
for Falcon II manpack radios and vehicular installations for the Combat Net
Radio program of the Polish Armed Forces.
Total orders in the RF Communications Division for fiscal 2008 were
approximately $1.7 billion and were significantly higher than full-year
revenue. Backlog in the business at year-end was about $1 billion, 23
percent higher than at the end of fiscal 2007.
In July, the new Falcon III(R) AN/PRC-117G multiband, multimission
manpack radio became the first manpack radio with wideband networking
capability to be certified by the Joint Tactical Radio System (JTRS) Joint
Program Executive Office (JPEO). The radio had previously received Type-1
security certification from the National Security Agency (NSA). The radio
provides secure IP data transmission at on-air rates up to 5 megabits per
second, mobile ad-hoc networking, and automated network establishment and
maintenance. The radio also provides networked voice, data and video
communications and true battlefield situational awareness to military and
peace-keeping forces on the move. The radio has full interoperability with
currently fielded legacy radios such as SINCGARS. Harris already has
received initial orders for the new Falcon III manpack from a number of
Department of Defense (DoD) and other U.S. Government customers.
Following the close of the quarter, RF Communications introduced the
Unity(TM) XG-100 land mobile radio, the newest product in a family of
multiband, software-defined radios that will give federal, state and local
public safety responders the ability to communicate using a single radio
across multiple frequencies with virtually any agency responding to an
emergency. The Unity(TM) XG-100 expands on the capabilities of the
RF-1033M, the first Harris land mobile radio introduced earlier this year,
and extends the covered frequency range to include the 700/800 MHz bands.
Defense Programs. Defense Programs revenue declined 7 percent compared
to the prior-year quarter. The prior-year quarter benefited from higher
levels of production on the F/A-18 and F-22A aircraft programs. In the
fourth quarter, DoD programs with higher revenue included the LMST
(Lightweight Multiband Satellite Terminal) program for the U.S. Marine
Corps, the F-35 Joint Strike Fighter program, and the next-generation U.S.
Air Force Global Positioning System (GPS) control segment. Revenue declined
in the fourth quarter from the JDAM (Joint Direct Attack Munitions) program
as it neared completion.
Significant Defense Programs awards in the fourth quarter included two
separate contracts totaling $162 million to provide multiband SATCOM
terminals for various U.S. Navy ships. Harris also secured several
follow-on contracts for avionics systems for the F-35 Lightning II Joint
Strike Fighter aircraft, as well as anti-scintillation modems and the
In-Flight Interceptor Communications System (IFICS) for the U.S. Missile
Defense Agency (MDA).
Government Communications Systems
The Government Communications Systems segment -- comprised of Civil
Programs, National Intelligence Programs, and IT Services -- reported
fourth quarter revenue of $512 million, an increase of 24 percent compared
to the prior-year quarter. Operating income in the fourth quarter of fiscal
2008 increased 57 percent to $52 million, compared to $33 million in the
prior-year quarter. Operating margin was a strong 10.2 percent.
The strong rebound in operating performance was primarily the result of
the company's progress made over the last several months in implementing
new designs in several commercial satellite reflector programs. Of the 10
commercial reflectors that are in various stages of design, assembly, test
and delivery, four have now been completed and the first has been
successfully deployed in space. A fifth reflector was nearing completion
when it sustained accidental damage. As a result of the company's
maintenance of insurance policies covering accidental damage and related
costs, any financial impact associated with the accident is not expected to
be material.
Organic revenue increased 6 percent in the fourth quarter, compared to
the prior-year quarter, driven by the NETCENTS IT integration and services
program for the U.S. Air Force, the Navy/ Marine Corps Intranet (NMCI)
program, the Field Data Collection Automation (FDCA) program for the U.S.
Census Bureau, the Global Geospatial Intelligence (GGI) program for the
National Geospatial-Intelligence Agency (NGA), and the Network Space
Operations and Maintenance (NSOM) program for the Air Force 50th Space
Wing.
Key Government Communications Systems contract awards in the fourth
quarter included several new classified programs with a combined value of
$113 million, a $58 million contract for a new NASA space suit
communications system, and a $20 million IT services contract for a
next-generation Tactical Video Capture System (TVCS) that will support
training at various U.S. Marine Corps locations across the U.S. and abroad.
Harris also was awarded its second contract in a new market for the
company -- Healthcare IT. Under a $12 million contract for the U.S. Army
Dental Command Information Management & Technology Division, Harris will
provide local operations and support to the U.S. Army Dental Command at Ft.
Sam Houston, Texas, and other Army dental clinics at locations around the
world.
Broadcast Communications
Fourth-quarter revenue in the Broadcast Communications segment was $174
million, a 5 percent increase compared to the prior-year quarter. Orders
were higher than revenue. Sales of transmission equipment increased at
double-digit rates due to strong shipments in the U.S. market for the
over-the-air digital transmission build-out. Video infrastructure equipment
sales, including routers, master control, test and measurement, and
multiviewers, continued to increase at strong double-digit rates driven by
the continuing global conversion by media organizations to digital and HD
(high-definition) operations. Sales of server equipment declined compared
to an unusually strong prior-year quarter. The continuing product
transition to new traffic and billing software platforms in North American
and international markets dampened sales of legacy software products.
GAAP and non-GAAP operating income was $8 million, flat with the
prior-year quarter GAAP operating income. Non-GAAP operating income in the
prior-year quarter was $12 million, excluding expenses related to
cost-reduction actions in the transmission and software areas of the
business. Operating expenses in the quarter increased for R&D and
marketing. Increased investment is being directed at expansion in
higher-growth, higher-margin product areas and growing international
markets such as the Middle East, Asia Pacific, Europe and Latin America.
Sequentially, operating performance improved, compared to the third
quarter of fiscal 2008. Revenue was 10 percent higher, while operating
income was 14 percent higher despite increased marketing expenses related
to annual fourth quarter trade shows. Following the end of the quarter,
cost-reduction actions including additional headcount reductions were
initiated to further improve operating performance.
During the fourth quarter, the Harris ONE(TM) solution, which improves
workflow solutions across the entire broadcast delivery value chain,
continued to gain traction in both domestic and international markets.
Harris received a significant order from Sezmi, a new entertainment
services company that is combining traditional TV content, movies and
Internet video in a single easy-to-use product. Harris is providing Sezmi
with traffic and scheduling systems and a multichannel playout and
nationwide distribution system, including video encoding, video servers,
multiviewers, routers, test and measurement systems and signal processing
equipment. Additionally, Harris will distribute content and provide network
and IT managed services utilizing its network operations center (NOC) in
Melbourne, Florida.
Harris received a significant order in the quarter from Special
Broadcasting Service (SBS), Australia's multicultural and multilingual
public broadcaster, to supply a Harris ONE(TM) solution for the
comprehensive rebuild of SBS' facility in Sydney to HD operations. Other
Harris ONE(TM) solution orders received during the quarter included
Showtime Arabia, a leading Pay TV network in the Middle East, GSEN, the new
radio and TV Gaming Sports Entertainment Network in Las Vegas, The Advance
Broadcast Corporation, the largest cable TV company in Thailand, and
Kalaignar TV India. Other key orders came from CBS Television for HD video
servers, CTV, a leading broadcaster in Canada, for multiple HD conversion
systems, the National Basketball Association for NetVX encoders to backhaul
live HD feeds to 29 arenas, and Cimax International in China and the
Botswana Government Department of Information and Broadcasting, both for
radio transmitters.
Harris Stratex Networks, Inc.
Harris Stratex Networks revenue for the fourth quarter is expected to
be $187 million, a 7 percent increase compared to $174 million in the
prior-year quarter. Revenue is expected to increase 5 percent compared to
sequential third quarter revenue of $178 million. Harris Stratex Networks
(Nasdaq: HSTX) is a 56 percent majority-owned subsidiary of Harris.
Revenue drivers continue to be the transition to IP networks, the
evolution to 4G technologies, and wireless network infrastructure expansion
in emerging regions. The company achieved record booking levels in the
fourth quarter with a 1.6 to 1 book-to-bill ratio, which is expected to
contribute to revenue generation in fiscal 2009. Increased orders came from
Africa, Europe, the Middle East and Russia as well as North America. Demand
for its Eclipse(TM) product line was particularly strong when compared with
prior periods.
Segment GAAP operating loss in the fourth quarter is expected to be $36
million. Non-GAAP operating loss is expected to be $19 million and excludes
integration costs of $17 million associated with the Harris Stratex
Networks combination. The non-GAAP operating loss resulted from unexpected
operating cost increases and accounting errors related to prior periods
totaling $32 million.
Outlook
Harris reconfirmed its earnings guidance for fiscal 2009 in a range of
$4.05 to $4.15 per diluted share. Fiscal 2009 earnings guidance represents
a year-over-year increase of 19 to 22 percent, compared to non-GAAP
earnings in fiscal 2008. Revenue in fiscal 2009 is expected to increase by
about 8-10 percent compared to fiscal 2008. A reconciliation of GAAP to
non-GAAP financial measures is provided in Table 7 along with the
accompanying notes.
Harris will host a conference call today at 5:00 p.m. Eastern Time (ET)
to discuss its fourth quarter fiscal 2008 financial results. The dial-in
number for the teleconference is (719) 325-4756 and the access code is
1862497. Please allow at least 10 minutes prior to the scheduled start time
to connect to the teleconference. Harris encourages you to listen via web
cast, which will be broadcast live at http://www.harris.com/conference-call. A
replay of the teleconference will be available beginning at 9:00 p.m. ET on
August 5 and will run until midnight ET on Tuesday, August 12. To access
the replay, please call (719) 457-0820, access code 1862497. A recording of
the call will also be available on the Harris website beginning at 7:00
p.m. ET on August 5.
About Harris Corporation
Harris is an international communications and information technology
company serving government and commercial markets in more than 150
countries. Headquartered in Melbourne, Florida, the company has annual
revenue of more than $5.3 billion and 16,000 employees -- including nearly
7,000 engineers and scientists. Harris is dedicated to developing
best-in-class assured communications (R) products, systems, and services.
Additional information about Harris Corporation is available at
http://www.harris.com.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures within the
meaning of Regulation G promulgated by the SEC, including net income and
earnings per share for the fourth quarter of fiscal 2008 and for fiscal
2008 excluding the impact of costs associated with our acquisitions and
integration costs associated with the Harris Stratex Networks combination;
and earnings per share guidance for fiscal 2009. Harris management believes
that these non-GAAP financial measures, when considered together with the
GAAP financial measures, provide information that is useful to investors in
understanding period-over-period operating results separate and apart from
items that may, or could, have a disproportionately positive or negative
impact on results in any particular period. Management also believes that
these non-GAAP financial measures enhance the ability of investors to
analyze Harris business trends and to understand Harris performance. In
addition, Harris may utilize non-GAAP financial measures as a guide in its
forecasting, budgeting, and long-term planning process and to measure
operating performance for some management compensation purposes. Any
analysis of non-GAAP financial measures should be used only in conjunction
with results presented in accordance with GAAP.
Attachments: Financial Statements (eight tables).
Forward-Looking Statements
Statements in this press release 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 upon 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 release include
but are not limited to: earnings guidance for fiscal 2009; the potential
value of contract awards; and statements regarding outlook, including
expected revenue growth. 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: our participation
in markets that are often subject to uncertain economic conditions which
makes it difficult to estimate growth in our markets and, as a result,
future income and expenditures; our dependence on the U.S. government for a
significant portion of our revenue, as the loss of this relationship or a
shift in U.S. government funding could have adverse consequences on our
future business; potential changes in U.S. government or customer
priorities due to program reviews or revisions to strategic objectives,
including termination of or potential failure to fund U.S. government
contracts; risks inherent with large long-term fixed-price contracts,
particularly the ability to contain cost overruns; the performance of
critical subcontractors or suppliers; financial and government and
regulatory risks relating to international sales and operations, including
fluctuations in foreign currency exchange rates and the effectiveness of
our currency hedging program; our ability to continue to develop new
products that achieve market acceptance; the consequences of future
geo-political events, which may affect adversely the markets in which we
operate, our ability to insure against risks, our operations or our
profitability; strategic acquisitions and the risks and uncertainties
related thereto, including our ability to manage and integrate acquired
businesses; potential claims that we are 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; customer credit risk; the fair values of our
portfolio of passive investments, which values are subject to significant
price volatility or erosion; risks inherent in developing new technologies;
changes in our effective tax rate that may have an adverse effect on our
results of operations; the impact of the results of Harris Stratex
Networks, which may vary significantly and may be difficult to forecast;
the potential impact of natural disasters on our significant operations in
Florida, California and other locations; general economic conditions in the
markets in which we operate; changes in future business conditions that
could cause business investments and/or recorded goodwill to become
impaired; and our ability to attract and retain key employees. 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. Harris 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.
Table 1
HARRIS CORPORATION
FY '08 Fourth Quarter Summary
condensed Consolidated Statement of Income
(Unaudited)
Quarter Ended Fiscal Year Ended
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
(In millions, except per share amounts)
Revenue from product sales
and services $1,433.2 $1,207.6 $5,311.0 $4,243.0
Cost of product sales
and services (990.0) (827.4) (3,681.7) (2,871.1)
Engineering, selling and
administrative expenses (270.2) (238.4) (953.8) (830.7)
Gain on combination with
Stratex Networks, Inc. --- --- --- 163.4
Non-operating income (loss) 2.7 (0.3) 11.4 (16.2)
Interest income 1.8 4.0 7.3 13.5
Interest expense (12.9) (11.0) (55.7) (41.1)
Income before income taxes and
minority interest 164.6 134.5 638.5 660.8
Income taxes (52.5) (50.8) (201.5) (190.9)
Minority interest in Harris
Stratex Networks, Inc.,
net of tax 9.6 3.9 7.2 10.5
Net income $121.7 $87.6 $444.2 $480.4
Net income per common share
Basic $.91 $.67 $3.32 $3.63
Diluted $.90 $.63 $3.26 $3.43
Cash dividends paid per
common share $.15 $.11 $.60 $.44
Basic weighted average
shares outstanding 133.7 131.4 133.9 132.5
Diluted weighted average
shares outstanding 135.3 139.9 136.5 141.1
Note: Results for the fiscal year ended June 29, 2007 include a $143.1
million after-tax ($1.01 per diluted share) gain on the combination with
Stratex Networks, Inc. offset by $22.9 million after-tax and minority
interest ($.16 per diluted share) of transaction and integration costs
related to the combination.
Table 2
HARRIS CORPORATION
FY '08 Fourth Quarter Summary
Business Segment Information
(Unaudited)
Quarter Ended Fiscal Year Ended
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
(In millions)
Revenue
Defense Communications and
Electronics $566.8 $464.5 $1,975.2 $1,660.8
Government Communications
Systems 511.9 414.3 1,999.8 1,512.6
Broadcast Communications 174.2 166.1 643.1 599.5
Harris Stratex Networks 186.8 174.1 718.4 508.0
Corporate eliminations (6.5) (11.4) (25.5) (37.9)
$1,433.2 $1,207.6 $5,311.0 $4,243.0
Income Before Income Taxes and
Minority Interest
Segment Operating Income (Loss):
Defense Communications and
Electronics $169.7 $131.9 $599.8 $487.1
Government Communications
Systems 52.0 33.2 149.8 140.0
Broadcast Communications 8.1 8.2 33.8 11.9
Harris Stratex Networks (35.9) (10.1) (28.5) 146.9
Headquarters expense (18.8) (19.4) (74.0) (69.6)
Corporate eliminations (2.1) (2.0) (5.4) (11.7)
Non-operating income (loss) 2.7 (0.3) 11.4 (16.2)
Net interest (11.1) (7.0) (48.4) (27.6)
$164.6 $134.5 $638.5 $660.8
Table 3
HARRIS CORPORATION
FY '08 Fourth Quarter Summary
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Fiscal Year Ended
June 27, June 29,
2008 2007
(In millions)
Operating Activities
Net income $444.2 $480.4
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 172.2 135.2
Purchased in-process research
and development write-off 1.4 15.3
Share-based compensation 38.2 28.7
Non-current deferred income tax (4.7) (16.3)
Gain on the sale of securities
available-for-sale (9.8) ---
Gain on the combination with
Stratex Networks, Inc. --- (163.4)
Minority interest in Harris
Stratex Networks, Inc., net of tax (7.2) (10.5)
Increase in:
Accounts and notes receivable (105.7) (91.9)
Inventories (51.3) (46.0)
Increase (decrease) in:
Accounts payable and accrued expenses 65.3 91.0
Advance payments and unearned income 17.9 (1.2)
Income taxes (6.6) 12.5
Other (3.6) 4.8
Net cash provided by operating activities 550.3 438.6
Investing Activities
Cash paid for acquired businesses (19.4) (404.6)
Cash received in the combination with
Stratex Networks, Inc. --- 33.1
Additions of property, plant and equipment (112.9) (88.8)
Additions of capitalized software (33.3) (40.3)
Proceeds from the sale of securities
available-for-sale 13.7 ---
Cash paid for short-term investments
available-for-sale (9.3) (356.0)
Proceeds from the sale of short-term
investments available-for-sale 26.6 473.7
Net cash used in investing activities (134.6) (382.9)
Financing Activities
Proceeds from borrowings 460.5 442.0
Repayment of borrowings (599.4) (39.3)
Payment of treasury lock (8.8) ---
Proceeds from exercise of employee
stock options 40.8 35.7
Repurchases of common stock (225.0) (246.9)
Cash dividends (81.5) (58.2)
Net cash provided by (used in)
financing activities (413.4) 133.3
Effect of exchange rate changes on cash
and cash equivalents (0.6) (2.0)
Net increase in cash and cash equivalents 1.7 187.0
Cash and cash equivalents, beginning of year 368.3 181.3
Cash and cash equivalents, end of year $370.0 $368.3
Supplemental disclosure of noncash investing
and financing activities:
Formation and combination of Harris
Stratex Networks, Inc.:
Contribution of Harris Microwave
Communications Division assets and
liabilities to the former shareholders of
Stratex Networks, Inc. $--- $(117.9)
57% of the fair value of Stratex Networks,
Inc. received by Harris Corporation $--- $281.3
Common stock issued in exchange for 3.5%
convertible debentures, due fiscal 2023 $163.5 $---
Table 4
HARRIS CORPORATION
FY '08 Fourth Quarter Summary
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
June 27, June 29,
2008 2007
(In millions)
Assets
Cash and cash equivalents $370.0 $368.3
Short-term investments 3.1 20.4
Marketable equity securities 19.3 40.5
Receivables 859.0 748.5
Inventories 610.4 556.8
Current deferred income taxes 117.2 94.3
Other current assets 67.7 67.3
Property, plant and equipment 482.2 459.2
Goodwill 1,547.3 1,525.2
Identifiable intangible assets 367.0 417.9
Other non-current assets 115.4 107.6
$4,558.6 $4,406.0
Liabilities and Shareholders' Equity
Short-term debt $8.5 $410.0
Accounts payable 390.8 350.0
Compensation and benefits 181.6 188.1
Other accrued items 239.1 187.5
Advance payments and unearned income 146.4 128.5
Income taxes payable 22.9 64.2
Current portion of long-term debt 5.7 309.8
Non-current deferred income taxes 29.8 61.8
Long-term debt 831.8 408.9
Other long-term liabilities 97.7 66.5
Minority interest in Harris Stratex
Networks, Inc. 330.3 326.9
Shareholders' equity 2,274.0 1,903.8
$4,558.6 $4,406.0
HARRIS CORPORATION
FY '08 Fourth Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE
To supplement our condensed consolidated financial statements presented
in accordance with U.S. generally accepted accounting principles (GAAP), we
provide additional measures of segments' operating income (loss),
non-operating income (loss); cost of product sales and services;
engineering, selling and administrative expenses; income before income
taxes and minority interest; income taxes; minority interest; net income;
and net income per diluted share adjusted to exclude certain costs,
expenses, gains and losses. Harris management believes that these non-GAAP
financial measures, when considered together with the GAAP financial
measures, provide information that is useful to investors in understanding
period-over-period operating results separate and apart from items that
may, or could, have a disproportionately positive or negative impact on
results in any particular period. Harris management also believes that
these non-GAAP financial measures enhance the ability of investors to
analyze Harris business trends and to understand Harris performance. In
addition, Harris may utilize non-GAAP financial measures as a guide in its
forecasting, budgeting, and long-term planning process and to measure
operating performance for some management compensation purposes. Any
analysis of non-GAAP financial measures should be used only in conjunction
with results presented in accordance with GAAP. A reconciliation of these
non-GAAP financial measures with the most directly comparable financial
measures calculated in accordance with GAAP follows:
Table 5
HARRIS CORPORATION
FY '08 Fourth Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Condensed Consolidated Statement of Income
(Unaudited)
Quarter Ended Quarter Ended
June 27, 2008 June 29, 2007
As Adjust- Non- As Adjust- Non-
Reported ment GAAP Reported ment GAAP
(In millions, except per share amounts)
Revenue from
product
sales and
services $1,433.2 $--- $1,433.2 $1,207.6 $--- $1,207.6
Cost of product
sales and
services (A) (990.0) 11.1 (978.9) (827.4) 2.7 (824.7)
Engineering,
selling and
administrative
expenses(B) (270.2) 6.2 (264.0) (238.4) 18.4 (220.0)
Non-operating
income (loss) 2.7 --- 2.7 (0.3) --- (0.3)
Interest income 1.8 --- 1.8 4.0 --- 4.0
Interest
expense (12.9) --- (12.9) (11.0) --- (11.0)
Income before
income taxes
and minority
interest 164.6 17.3 181.9 134.5 21.1 155.6
Income taxes (52.5) (7.4) (59.9) (50.8) (3.7) (54.5)
Minority
interest in
Harris Stratex
Networks, Inc.,
net of tax 9.6 (3.5) 6.1 3.9 (6.3) (2.4)
Net income $121.7 $6.4 $128.1 $87.6 $11.1 $98.7
Net income per
diluted common
share $.90 $.05 $.95 $.63 $.08 $.71
Fiscal Year Ended Fiscal Year Ended
June 27, 2008 June 29, 2007
As Adjust- Non- As Adjust- Non-
Reported ment GAAP Reported ment GAAP
(In millions, except per share amounts)
Revenue from
product sales
and services $5,311.0 $--- $5,311.0 $4,243.0 $--- $4,243.0
Cost of product
sales and
services (A) (3,681.7) 17.3 (3,664.4) (2,871.1) 8.7 (2,862.4)
Engineering,
selling and
administrative
expenses(B) (953.8) 25.1 (928.7) (830.7) 63.7 (767.0)
Gain on
combination
with Stratex
Networks, Inc. (C) --- --- --- 163.4 (163.4) ---
Non-operating
income (loss)(D) 11.4 --- 11.4 (16.2) 19.8 3.6
Interest income 7.3 --- 7.3 13.5 --- 13.5
Interest expense (55.7) --- (55.7) (41.1) --- (41.1)
Income before
income taxes
and minority
interest 638.5 42.4 680.9 660.8 (71.2) 589.6
Income taxes (201.5) (14.0) (215.5) (190.9) (1.8) (192.7)
Minority interest
in Harris
Stratex Networks,
Inc., net of tax 7.2 (10.3) (3.1) 10.5 (16.0) (5.5)
Net income $444.2 $18.1 $462.3 $480.4 $(89.0) $391.4
Net income per
diluted common
share $3.26 $.13 $3.39 $3.43 $(.63) $2.80
Table 6
HARRIS CORPORATION
FY '08 Fourth Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Business Segment Information
(Unaudited)
Quarter Ended Quarter Ended
June 27, 2008 June 29, 2007
As Adjust- Non- As Adjust- Non-
Reported ment GAAP Reported ment GAAP
(In millions)
Revenue
Defense
Communications
and
Electronics $566.8 $--- $566.8 $464.5 $--- $464.5
Government
Communications
Systems 511.9 --- 511.9 414.3 --- 414.3
Broadcast
Communications 174.2 --- 174.2 166.1 --- 166.1
Harris Stratex
Networks 186.8 --- 186.8 174.1 --- 174.1
Corporate
eliminations (6.5) --- (6.5) (11.4) --- (11.4)
$1,433.2 $--- $1,433.2 $1,207.6 $--- $1,207.6
Income Before
Income Taxes and
Minority Interest
Segment Operating
Income (Loss):
Defense
Communications
and
Electronics $169.7 $--- $169.7 $131.9 $--- $131.9
Government
Communications
Systems (E) 52.0 0.4 52.4 33.2 --- 33.2
Broadcast
Communi-
cations (F) 8.1 0.1 8.2 8.2 3.3 11.5
Harris Stratex
Networks (G) (35.9) 16.8 (19.1) (10.1) 17.8 7.7
Headquarters
expense (18.8) --- (18.8) (19.4) --- (19.4)
Corporate
eliminations (2.1) --- (2.1) (2.0) --- (2.0)
Non-operating
income (loss) 2.7 --- 2.7 (0.3) --- (0.3)
Net interest
expense (11.1) --- (11.1) (7.0) --- (7.0)
$164.6 $17.3 $181.9 $134.5 $21.1 $155.6
Fiscal Year Ended Fiscal Year Ended
June 27, 2008 June 29, 2007
As Adjust- Non- As Adjust- Non-
Reported ment GAAP Reported ment GAAP
(In millions)
Revenue
Defense
Communications
and
Electronics $1,975.2 $--- $1,975.2 $1,660.8 $--- $1,660.8
Government
Communications
Systems 1,999.8 --- 1,999.8 1,512.6 --- 1,512.6
Broadcast
Communications 643.1 --- 643.1 599.5 --- 599.5
Harris Stratex
Networks 718.4 --- 718.4 508.0 --- 508.0
Corporate
eliminations (25.5) --- (25.5) (37.9) --- (37.9)
$5,311.0 $--- $5,311.0 $4,243.0 $--- $4,243.0
Income Before Income
Taxes and Minority Interest
Segment Operating Income (Loss):
Defense
Communications
and
Electronics $599.8 $--- $599.8 $487.1 $--- $487.1
Government
Communications
Systems (E) 149.8 1.7 151.5 140.0 --- 140.0
Broadcast
Communi-
cations (F) 33.8 2.0 35.8 11.9 26.4 38.3
Harris Stratex
Networks (G) (28.5) 38.7 10.2 146.9 (117.4) 29.5
Headquarters
expense (74.0) --- (74.0) (69.6) --- (69.6)
Corporate
eliminations (5.4) --- (5.4) (11.7) --- (11.7)
Non-operating
income (loss)(D) 11.4 --- 11.4 (16.2) 19.8 3.6
Net interest
expense (48.4) --- (48.4) (27.6) --- (27.6)
$638.5 $42.4 $680.9 $660.8 $(71.2) $589.6
Table 7
HARRIS CORPORATION
Reconciliation of FY '08 GAAP EPS to Non-GAAP EPS
and
Reconciliation of FY '09 GAAP EPS Guidance to FY '08 GAAP and Non-GAAP EPS
(Unaudited)
Guidance for
Fiscal Year Fiscal Year Percent
2008 2009 Growth
GAAP Earnings Per
Diluted Share $3.26 $4.05 to $4.15 24% to 27%
Charges associated with
the combination with
Stratex Networks, Inc. (H) $0.11
Charges associated with
the acquisition of
Multimax Incorporated (I) $0.01
Charges associated with
the acquisition of Zandar
Technologies plc (J) $0.01
Non-GAAP Earnings Per
Diluted Share $3.39 $4.05 to $4.15 19% to 22%
Table 8
HARRIS CORPORATION
FY '08 Fourth Quarter and Full Fiscal Year
Year-Over-Year Organic Revenue Growth
(Unaudited)
Quarter Ended
June 29, June 27, Percent
2007 2008 Growth
(In millions)
Harris Corporation
GAAP Revenue $ 1,207.6 $ 1,433.2 19%
Impact of acquisitions (K) 73.7
Organic Revenue $ 1,281.3 $ 1,433.2 12%
Government Communications Systems
GAAP Revenue $414.3 $ 511.9 24%
Impact of acquisitions (L) 70.8
Organic Revenue $485.1 $ 511.9 6%
Fiscal Year Ended
June 29, June 27, Percent
2007 2008 Growth
(In millions)
Harris Corporation
GAAP Revenue $ 4,243.0 $ 5,311.0 25%
Impact of acquisitions (M) 453.7
Organic Revenue $ 4,696.7 $ 5,311.0 13%
HARRIS CORPORATION
FY '08 Fourth Quarter Summary
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Notes to tables 5 through 8:
Note A - Adjustments to cost of product sales and services for the
quarter ended June 27, 2008 are due to an inventory write-down related to
an accelerated technology transition to IP-based products associated with
the combination between Stratex Networks, Inc. ("Stratex") and our former
Microwave Communications Division ($11.1 million). Adjustments to cost of
product sales and services for the fiscal year ended June 27, 2008 are due
to the impact of integration-related activities associated with the Stratex
combination including a step up in fixed assets, an inventory write-down
related to an accelerated technology transition to IP-based products and
other integration-related costs ($16.9 million) and a step up in inventory
associated with our acquisition of Zandar Technologies plc ("Zandar") ($0.4
million). Adjustments to cost of product sales and services for the quarter
and the fiscal year ended June 29, 2007 are due to integration-related
activities associated with the Stratex combination including the impact of
a step up in inventory, step up in fixed assets and write-off of deferred
revenue ($2.7 million for the quarter and $8.7 million for the fiscal year
ended June 29, 2007).
Note B - Adjustments to engineering, selling and administrative
expenses for the quarter ended June 27, 2008 are due to the impact of a
step up in fixed assets and integration costs associated with the Stratex
combination ($5.7 million), integration costs associated with our
acquisition of Multimax Incorporated ("Multimax") ($0.4 million) and
integration costs associated with our acquisition of Zandar ($0.1 million).
Adjustments to engineering, selling and administrative expenses for the
fiscal year ended June 27, 2008 are due to the impact of a step up in fixed
assets and integration costs associated with the Stratex combination ($21.8
million), integration costs associated with our acquisition of Multimax
($1.7 million) and integration costs and a write-off of in-process research
and development associated with our acquisition of Zandar ($1.6 million).
Adjustments to engineering, selling and administrative expenses for the
quarter ended June 29, 2007 are due to the impact of amortization of
backlog, a step up in fixed assets and other integration- related costs
associated with the Stratex combination ($15.1 million) and severance and
other expenses associated with cost-reduction actions in our Broadcast
Communications segment ($3.3 million). Adjustments to engineering, selling
and administrative expenses for the fiscal year ended June 29, 2007 are due
to the impact of a write-off of in-process research and development,
amortization of backlog, a step up in fixed assets and integration costs
associated with the Stratex combination ($37.3 million); severance and
other expenses associated with cost-reduction actions in our Broadcast
Communications segment ($7.5 million) and a write-down of capitalized
software in our Broadcast Communications segment ($18.9 million).
Note C - Adjustment for the gain on the Stratex combination ($163.4
million).
Note D - The adjustment to non-operating income (loss) for the fiscal
year ended June 29, 2007 is due to the impairment to our investment in
Terion, Inc. ($19.8 million).
Note E - Adjustments to our Government Communications Systems segment
operating income for the quarter and fiscal year ended June 27, 2008 are
due to integration costs associated with our acquisition of Multimax ($0.4
million and $1.7 million, respectively).
Note F - Adjustments to our Broadcast Communications segment operating
income for the quarter ended June 27, 2008 are due to integration costs
associated with our acquisition of Zandar ($0.1 million). Adjustments to
our Broadcast Communications segment operating income for the fiscal year
ended June 27, 2008 are due to the impact of a step up in inventory,
integration costs and a write-off of in-process research and development
associated with our acquisition of Zandar ($2.0 million). Adjustments to
our Broadcast Communications segment operating income for the quarter ended
June 29, 2007 are due to severance and other expenses associated with
cost-reduction actions ($3.3 million). Adjustments to our Broadcast
Communications segment operating income for the fiscal year ended June 29,
2007 are due to severance and other expenses associated with cost-reduction
actions ($7.5 million) and a write- down of capitalized software ($18.9
million).
Note G - Adjustments to our Harris Stratex Networks segment operating
income for the quarter and fiscal year ended June 27, 2008 are due to the
impact of integration-related activities associated with the Stratex
combination including a step up in fixed assets, an inventory write-down
related to an accelerated technology transition to IP-based products and
other integration-related costs ($16.8 million and $38.7 million,
respectively). Adjustments to our Harris Stratex Networks segment operating
income for the quarter ended June 29, 2007 are due to the impact of
integration-related activities associated with the Stratex combination
including amortization of backlog, a step up in fixed assets, a step up in
inventory and other integration-related costs ($17.8 million). Adjustments
to our Harris Stratex Networks segment operating income for the fiscal year
ended June 29, 2007 are due to the impact of the gain on the Stratex
combination ($163.4 million) offset by the impact of integration-related
activities associated with the Stratex combination including amortization
of backlog, a step up in fixed assets, a step up in inventory and other
integration-related costs ($46.0 million).
Note H - Adjustment for the $.11 per diluted share impact, after
minority interest, of a step up in fixed assets and integration costs
associated with the Stratex combination.
Note I - Adjustment for the $.01 per diluted share impact of
integration and other charges associated with our acquisition of Multimax.
Note J - Adjustment for the $.01 per diluted share impact of
integration and other charges associated with our acquisition of Zandar.
Note K - Adjustments to add revenue of Multimax and Zandar during the
fourth quarter of Harris' fiscal year 2007 and to subtract revenue during
the fourth quarter of Harris' fiscal year 2007 of our radio resale business
exited in the fourth quarter of fiscal 2007.
Note L - Adjustments to add revenue of Multimax during the fourth
quarter of Harris' fiscal year 2007.
Note M - Adjustments to add revenue of Stratex during Harris' fiscal
year 2007 prior to the Stratex combination and revenue of Multimax and
Zandar during Harris' fiscal year 2007 and to subtract revenue during
Harris' fiscal year 2007 of our radio resale business exited in the fourth
quarter of fiscal 2007.
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