Company Provides Initial Fiscal Year 2008 EPS Guidance of $3.20 to
$3.30 MELBOURNE, Fla., May 1 /PRNewswire-FirstCall/ -- Harris
Corporation (NYSE:HRS) reported revenue for the third quarter of
fiscal year 2007 increased 22 percent to $1.072 billion, compared
to $881 million in the prior- year quarter. GAAP net income
increased to $214.9 million or $1.52 per diluted share. Non-GAAP
net income-excluding a significant gain and charges associated with
the Harris Stratex Networks transaction, and charges associated
with cost-reduction actions in the Broadcast Communications
segment-increased to $100.5 million, or $.72 per diluted share, a
24 percent increase when compared to non-GAAP income in the
prior-year quarter. A reconciliation of GAAP to non-GAAP financial
measures is provided on Tables 5 and 6 along with accompanying
notes. "Harris delivered excellent financial results in the third
quarter, led by higher revenue and strong operating performance in
our Government Communications Systems and RF Communications
segments," said Howard L. Lance, chairman, president, and chief
executive officer. "Organic revenue growth was 14 percent in the
quarter, reflecting continued positive momentum for the company.
Our diversified U.S. and international customer base, solid program
execution, and new product introductions position Harris for
continued growth going forward. Significant restructuring
activities during the quarter in our two commercial businesses
overshadowed the progress we are making in repositioning Broadcast
Communications and Harris Stratex Networks as global market
leaders." New Share Repurchase Program The Harris Board of
Directors has approved a new $600 million share repurchase program.
The company expects to purchase $200 million of its shares during
the current quarter, with the remaining $400 million spread over
the following 24 months. "Our new share repurchase program
recognizes our excellent cash flow from operations," Lance said.
"We will repurchase shares in balance with market conditions and
the company's operational requirements, while continuing to invest
in both internal growth initiatives and strategic acquisitions."
Share repurchases will be funded with available cash. Repurchases
under the program may be made through open market purchases,
private transactions, transactions structured through investment
banking institutions, or any combination thereof. The timing,
volume, and nature of share repurchases are subject to market
conditions, applicable securities laws, and other factors, are at
the discretion of the company's management, and may be suspended or
discontinued at any time. The share repurchase program announced
today replaces a previous share repurchase authorization, which had
approximately 2.5 million shares remaining. Government
Communications Systems Third quarter revenue of $500 million in the
Government Communications Systems segment was a year-over-year
increase of 10 percent, and resulted from the award of new programs
for communications and information networks and continued expansion
of work scope on existing programs. Operating income was $63.9
million, and operating margin was 12.8 percent, reflecting a
favorable program mix and a net $4.3 million gain on the sale of
the STAT(R) network security product line. Year-over-year revenue
growth drivers in the third quarter included: -- The 15-year, $2.2
billion Federal Aviation Administration (FAA) Telecommunications
Infrastructure (FTI) program. FTI is a new, state- of-the-art,
telecommunications network that enhances network efficiency,
reliability and security while reducing operational costs. The
program has a potential value of $3.5 billion; -- The 5-year, $600
million Field Data Collection Automation (FDCA) program for the
U.S. Census Bureau, which includes the development of a new
handheld device with integrated GPS and secure communication
capabilities that will be used by 500,000 census takers during the
2010 Census; -- Continuing growth of the 10-year, $1.0 billion
Patriot technical services program for the National Reconnaissance
Office; -- More than $100 million in new programs and follow-on
contracts with National Intelligence customers; and -- The $66
million CDL Hawklink program for the U.S. Navy that transmits
real-time sensor data from LAMPS helicopters to naval vessels. RF
Communications Revenue in the RF Communications segment was $304
million in the third quarter, a 42 percent increase compared to the
year-ago quarter. Operating income was $107.4 million and operating
margin was 35.3 percent. Opportunities in both U.S. and
international markets continued to be very strong, fueled by
on-going global tactical radio modernization. Harris high-
performance, feature-rich Falcon(R) tactical radios continue to
demonstrate communications capabilities and interoperability that
is unmatched in the industry. During the quarter, Harris received
significant new orders from the U.S. Marine Corps, U.S. Army, and
U.S. Air Force and from the governments of Saudi Arabia, Algeria,
and the Republic of Georgia. Harris has now delivered over 15,000
units of its next-generation Falcon III multi-band handheld radio
since its launch in fiscal year 2006. The Falcon III handheld radio
is the first widely fielded tactical radio to receive certification
from the JTRS (Joint Tactical Radio System) Joint Program Executive
Office and the National Security Agency (NSA). Customers for the
Falcon III handheld and vehicular radio systems include the U.S.
Army, U.S. Navy and U.S. Air Force, as well as other government
agencies. The Falcon III has been well received by the market and
is providing combat units in Iraq with true multimode operational
capabilities, including ground-to- ground, ground-to-air and
long-range tactical satellite communications. The Falcon III
multiband man-pack radio, scheduled for release in September 2007,
will be the first NSA-certified radio to provide wideband secure
networking for data-intensive applications, such as video
transmission in mobile battlefield conditions. Also during the
quarter, Harris received Type 1 certification from the NSA for its
new SecNet(R) 54 Secure Wireless Local Area Network product line.
This product enables transmission of sensitive defense
communications over wireless infrastructures in applications such
as tactical operations centers. Broadcast Communications Revenue in
the Broadcast Communications segment was $139 million in the third
quarter, compared to $143 million in the prior-year quarter. Strong
positive trends continued in the Video Infrastructure and Digital
Media product lines, which posted another quarter of strong
double-digit revenue growth. Investments in analog-to-digital and
high-definition systems are enabling content providers and
broadcasters to create, manage and deliver additional channels and
video streams to consumers. HD Radio(R) Transmission systems
revenue also increased as a result of further penetration of the
new Harris FlexStar(R) exciter. Revenue was significantly lower in
the quarter in U.S. digital TV Transmission and Automation software
systems products. The segment's operating loss of $18.1 million in
the quarter included charges of $23.1 million related to
cost-reduction actions in both the Transmission and Software
business areas, including severance and facilities charges and the
write-down of capitalized software associated with discontinuing an
Automation software development effort. Excluding these charges,
non-GAAP operating income was $5.0 million. Income was negatively
impacted by the significant decline in U.S. digital TV Transmission
and Automation systems revenue, and by increased expenses
associated with the investment and deployment of new Software
products including OSi Traffic(TM) and Invenio(R) Digital Asset
Management. Cost-reduction actions are expected to result in annual
savings of approximately $12 million in fiscal year 2008. Broadcast
Communications orders were significantly higher than sales at $167
million, a 12 percent increase over the prior-year quarter. Video
Infrastructure product line orders increased 17 percent compared to
the fiscal 2006 third quarter. Harris provides industry-leading
routers, digital amplifiers, test and measurement and networking
technologies that support large, fast-growing segments of the media
market. Harris is supporting customers as they expand services for
high-definition TV, Internet Protocol TV, video-on-demand, and
interactive TV. Recent acquisitions and a series of innovative new
products have clearly established Harris as the preferred end-
to-end solutions provider for the digital build-out worldwide.
Harris solutions were on display at the recent National Association
of Broadcasters (NAB) trade show and received very positive
customer reviews and numerous awards for innovation. Harris Stratex
Networks, Inc. On January 26, 2007, the Harris Microwave
Communications Division was combined with Stratex Networks, Inc. to
create a new company named Harris Stratex Networks, Inc., with
Harris owning 57 percent of the outstanding shares. Harris third
quarter fiscal 2007 financial results include two months of Harris
Stratex Networks on a fully consolidated basis, with an elimination
of the minority interest. Third quarter revenue for the Harris
Stratex Networks segment was $139 million. Segment operating income
was $141.0 million, and included a $163.4 million gain and $26.5
million of costs associated with the transaction. Non- GAAP
operating income, excluding both the gain and transaction costs,
was $4.1 million in the third quarter. A reconciliation of GAAP to
non-GAAP financial measures is provided on Table 8 along with
accompanying notes. For comparative purposes, Harris Stratex
Networks has provided pro forma, non-GAAP financial information
related to revenue and income for the third quarters of fiscal 2007
and fiscal 2006, as if the former Stratex Networks and the former
Harris Microwave Communications Division had been combined for the
entire third quarter in both years. On this basis, Harris Stratex
Networks revenue was $147 million in the third quarter, 7 percent
higher than the same quarter in the prior year. North America
revenue reflected continued market strength, increasing 34 percent
compared to the prior-year quarter. Growth was driven by mobile
operators substituting microwave capabilities for leased lines and
by requirements for additional capacity to handle high-bandwidth
services. In addition, a large private network upgrade for a state
government was also a major revenue driver in the quarter.
International revenue declined 4 percent in the quarter compared to
the prior year, primarily as a result of lower orders and project
delays in Europe, the Middle East and Africa. The segment's merger
integration activities in these regions disrupted existing sales
channels more than expected. International revenue was higher in
Latin America compared to the prior year, and revenue in the
Network Operations segment of the business also increased. Global
wireless infrastructure investment is expected to continue as
mobile operators expand their networks and deploy new 3G services.
On a pro forma, non-GAAP basis operating income in the third
quarter for Harris Stratex Networks was $5.6 million, which was
flat with the prior-year quarter. A higher mix of services versus
product revenue in both North America and Africa reduced gross
margin and operating results. On-going product cost reductions
progressed as planned during the quarter with product margins
increasing. The majority of integration activities should be
completed during fiscal year 2007. Harris Stratex Networks
(NASDAQ:HSTX) management will host a conference call and webcast
(http://www.harrisstratex.com/) today at 5:30 p.m., Eastern Time,
to discuss financial results for their fiscal year third quarter.
Outlook and Guidance Revised non-GAAP earnings guidance for fiscal
year 2007 is a range of $2.77 to $2.81 per diluted share. The
company also provided initial earnings guidance for fiscal year
2008, beginning June 30, 2007, of $3.20 to $3.30 per diluted share,
representing an increase of approximately 17 percent. "In fiscal
year 2008, we expect to achieve revenue growth in a range of 10 to
15 percent, including the full-year contribution of Harris Stratex
Networks," Lance said. "Our optimism is driven by expectations for
growth in each of our business segments. Our Government
Communications Systems segment should continue expanding its broad
program base with work on future communications and IT platform
upgrades, as well as new international opportunities. Further
growth in the RF Communications segment is expected as both U.S.
and international customers continue to gravitate toward the robust
capabilities of our Falcon tactical radios. "Our commercial
broadcast and microwave segments are expected to contribute
significant growth in fiscal 2008 as they address a growing list of
opportunities, particularly in international markets," Lance said.
"Order growth in the Broadcast business confirms our strategic
investments in video infrastructure and digital media acquisitions,
and the recent merger of our Microwave Communications segment with
Stratex Networks has created a new business with significant mass
and product depth in the global telecom market." Harris will host a
conference call today at 4:30 p.m., Eastern Time, to discuss the
above items. Interested individuals are invited to listen to the
call by using a dial-in number: (719) 457-2633, access code:
8643460. The conference call also will be broadcast live via the
Internet at http://www.harris.com/. A replay of the teleconference
will be available beginning at 8:00 p.m., Eastern Time, and will
run until midnight, Eastern Time, on Tuesday, May 8. To access the
replay, please call (719) 457-0820, access code: 8643460. A
recording of the call will also be available on the Harris website
beginning at 7:00 p.m., Eastern Time, on May 1. 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 about $4 billion and more than 14,000 employees -
including more than 6,000 engineers and scientists. Harris is
dedicated to developing best-in-class assured communications(TM)
products, systems, and services for global markets, including
government communications, RF communications, broadcast
communications, and wireless transmission network solutions.
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 third quarter of fiscal 2007 excluding
the impact of costs associated with the combination of our Harris
Microwave Communications business and Stratex Networks, Inc. and
earnings per share guidance for fiscal 2007 also excluding the
impact of integration activities and the gain associated with the
combination of our Harris Microwave Communications business and
Stratex Networks, Inc., the impairment in our Terion investment and
charges related to cost-reduction actions and write-down of
capitalized software in our Broadcast Communications segment.
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 better
understand the company's 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. Forward-Looking
Statement 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 2007 and 2008; the
potential value of contract awards and potential contract awards;
the expected benefits of cost reduction actions; 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
revenues, and 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; the potential impact of hurricanes on our operations
in Florida and the potential impact of earthquakes on our
operations in California; the impact of the results of Harris
Stratex Networks, which may vary significantly and may be difficult
to forecast; the ability to recruit and retain qualified personnel;
and general economic conditions in the markets in which we operate.
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. Attachments: Financial Statements
(eight tables). HD Radio(R) is a trademark of iBiquity Digital
Corporation. Table 1 HARRIS CORPORATION FY'07 Third Quarter Summary
condensed Consolidated Statement of Income Quarter Ended Three
Quarters Ended March 30, March 31, March 30, March 31, 2007 2006
2007 2006 (In millions, except per share amounts) Revenue from
product sales and services $1,072.4 $ 881.1 $ 3,035.4 $ 2,482.4
Cost of product sales and services (719.1) (588.1) (2,043.7)
(1,730.3) Engineering, selling and administrative expenses (241.5)
(173.9) (592.3) (481.3) Gain on combination with Stratex 163.4 ---
163.4 --- Non-operating income (loss) 2.8 --- (15.9) (0.8) Interest
income 4.6 2.3 9.5 8.5 Interest expense (10.5) (10.1) (30.1) (26.6)
Income before income taxes and minority interest 272.1 111.3 526.3
251.9 Income taxes (63.8) (38.8) (140.1) (99.1) Minority interest
in Harris Stratex Networks, net of tax 6.6 --- 6.6 --- Net income $
214.9 $ 72.5 $ 392.8 $ 152.8 Net income per common share Basic $
1.62 $ .54 $ 2.95 $ 1.15 Diluted $ 1.52 $ .52 $ 2.79 $ 1.10 Cash
dividends paid per common share $ .11 $ .08 $ .33 $ .24 Basic
weighted average shares outstanding 133.0 133.2 133.0 132.8 Diluted
weighted average shares outstanding 141.7 142.0 141.7 141.6 Table 2
HARRIS CORPORATION FY'07 Third Quarter Summary Business Segment
Information Quarter Ended Three Quarters Ended March 30, March 31,
March 30, March 31, 2007 2006 2007 2006 (In millions) Revenue
Government Communications Systems $ 500.3 $ 456.8 $ 1,443.2 $
1,332.8 RF Communications 304.4 214.2 853.6 565.9 Harris Stratex
Networks 139.0 73.7 333.9 238.2 Broadcast Communications 138.6
143.1 433.4 366.2 Corporate eliminations (9.9) (6.7) (28.7) (20.7)
$ 1,072.4 $ 881.1 $ 3,035.4 $ 2,482.4 Income Before Income Taxes
and Minority Interest Segment Operating Income (Loss): Government
Communications Systems $ 63.9 $ 55.0 $ 172.7 $ 162.3 RF
Communications 107.4 75.6 290.8 195.2 Harris Stratex Networks 141.0
1.0 157.0 (25.5) Broadcast Communications (18.1) 13.8 3.7 5.0
Headquarters expense (16.2) (23.8) (50.2) (55.0) Corporate
eliminations (2.8) (2.5) (11.2) (11.2) Non-operating income (loss)
2.8 --- (15.9) (0.8) Net interest (5.9) (7.8) (20.6) (18.1) $ 272.1
$ 111.3 $ 526.3 $ 251.9 Table 3 HARRIS CORPORATION FY'07 Third
Quarter Summary CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Quarters Ended March 30, March 31, 2007 2006 (In millions)
Operating Activities Net income $ 392.8 $ 152.8 Adjustments to
reconcile net income to net cash provided by (used in) operating
activities: Depreciation and amortization 89.1 66.0 Purchased
in-process research and development write-off 15.3 3.6 Non-current
deferred income tax (2.6) (3.5) Gain on combination with Stratex,
net of tax (143.1) --- Minority interest in Harris Stratex
Networks, net of tax (6.6) --- (Increase) decrease in: Accounts and
notes receivable (27.1) (20.5) Inventories (26.2) (83.1) Increase
(decrease) in: Accounts payable and accrued expenses (6.1) 7.4
Advance payments and unearned income 20.6 21.1 Income taxes (14.0)
46.5 Other 31.2 24.7 Net cash provided by operating activities
323.3 215.0 Investing Activities Cash paid for acquired businesses
--- (443.5) Cash received in the combination with Stratex 33.2 ---
Additions of plant and equipment (66.6) (64.4) Additions of
capitalized software (32.2) (27.9) Cash paid for short-term
investments (259.9) (301.7) available-for-sale Proceeds from the
sale of short-term investments available-for-sale 362.1 159.0 Net
cash provided by (used in) investing activities 36.6 (678.5)
Financing Activities Proceeds from borrowings 36.0 331.6 Repayment
of borrowings (31.5) (33.0) Proceeds from exercise of employee
stock options 27.8 28.7 Repurchases of common stock (47.0) (16.2)
Cash dividends (44.2) (32.0) Net cash provided by (used in)
financing activities (58.9) 279.1 Effect of exchange rate changes
on cash and cash equivalents 4.5 (0.4) Net increase (decrease) in
cash and cash equivalents 305.5 (184.8) Cash and cash equivalents,
beginning of year 181.3 377.6 Cash and cash equivalents, end of
period $ 486.8 $ 192.8 Table 4 HARRIS CORPORATION FY'07 Third
Quarter Summary CONDENSED CONSOLIDATED BALANCE SHEET March 30, June
30, 2007 2006 (In millions) Assets Cash and cash equivalents $486.8
$181.3 Short-term investments 35.8 112.6 Receivables 630.3 560.6
Inventories 523.0 468.9 Current deferred income taxes 112.0 105.0
Property, plant and equipment 451.2 393.4 Goodwill 1,207.1 951.1
Identifiable intangible assets 313.7 193.4 Non-current notes
receivable 5.1 4.3 Other assets 175.8 171.7 $3,940.8 $3,142.3
Liabilities and Shareholders' Equity Short-term debt $8.9 $0.2
Accounts payable and accrued expenses 649.0 582.5 Advance payments
and unearned income 162.1 129.9 Income taxes payable 55.6 38.1
Current portion of long-term debt 310.4 1.4 Non-current deferred
income taxes 24.5 28.6 Long-term debt 411.0 699.5 Minority interest
in Harris Stratex Networks 323.9 --- Shareholders' equity 1,995.4
1,662.1 $3,940.8 $3,142.3 HARRIS CORPORATION FY'07 Third 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; gain on the combination with
Stratex; income before income taxes; income taxes; 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'07
Third Quarter Summary RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Condensed Consolidated Statement of Income Quarter Ended Quarter
Ended March 30, 2007 March 31,2006 As Adjustment Non-GAAP As
Adjustment Non-GAAP Reported Reported (In millions, except per
share amounts) Revenue from product sales and services $1,072.4 $ -
$1,072.4 $ 881.1 $ - $ 881.1 Cost of product sales and services (A)
(719.1) 6.0 (713.1) (588.1) 2.5 (585.6) Engineering, selling and
administrative expenses(B) (241.5) 43.6 (197.9) (173.9) 7.2 (166.7)
Gain on combination with Stratex (C) 163.4 (163.4) - - - -
Non-operating income (loss) 2.8 - 2.8 - - - Interest income 4.6 -
4.6 2.3 - 2.3 Interest expense (10.5) - (10.5) (10.1) - (10.1)
Income before income taxes and minority interest 272.1 (113.8)
158.3 111.3 9.7 121.0 Income taxes (63.8) 9.1 (54. 7) (38.8) (1.1)
(39.9) Minority interest in Harris Stratex Networks, net of tax 6.6
(9.7) (3.1) - - - Net income $ 214.9 $ (114.4) $ 100.5 $72.5 $8.6 $
81.1 Net income per diluted common share $ 1.52 $ (.80) $ .72 $ .52
$.06 $ .58 Three Quarters Ended Three Quarters Ended March 30, 2007
March 31,2006 As Adjustment Non-GAAP As Adjustment Non-GAAP
Reported Reported (In millions, except per share amounts) Revenue
from product sales and services $ 3,035.4 $ - $ 3,035.4 $2,482.4 $
- $2,482.4 Cost of product sales and services (A) (2,043.7) 6.0
(2,037.7) (1,730.3) 48.8 (1,681.5) Engineering, selling and
administrative expenses(B) (592.3) 45.3 (547.0) (481.3) 26.1
(455.2) Gain on combination with Stratex (C) 163.4 (163.4) - - - -
Non-operating income (loss)(D) (15.9) 19.8 3.9 (0.8) - (0.8)
Interest income 9.5 - 9.5 8.5 - 8.5 Interest expense (30.1) -
(30.1) (26.6) - (26.6) Income before income taxes and minority
interest 526.3 (92.3) 434.0 251.9 74.9 326.8 Income taxes (140.1)
(1.9) (138.2) (99.1) (8.7) (107.8) Minority interest in Harris
Stratex Networks, net of tax 6.6 (9.7) (3.1) - - - Net income $
392.8 $(100.1) $ 292.7 $ 152.8 $ 66.2 $ 219.0 Net income per
diluted common share $ 2.79 $ (.70) $ 2.09 $ 1.10 $.47 $ 1.57 Table
6 HARRIS CORPORATION FY'07 Third Quarter Summary RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES Business Segment Information Quarter
Ended Quarter Ended March 30, 2007 March 31, 2006 As Non- As Non-
Reported Adjustment GAAP Reported Adjustment GAAP (In millions)
Revenue Government Communications Systems $500.3 $- $500.3 $456.8
$- $456.8 RF Communi- cations 304.4 - 304.4 214.2 - 214.2 Harris
Stratex Networks 139.0 - 139.0 73.7 - 73.7 Broadcast Communications
138.6 - 138.6 143.1 - 143.1 Corporate eliminations (9.9) - (9.9)
(6.7) - (6.7) $1,072.4 $- $1,072.4 $881.1 $- $881.1 Income Before
Income Taxes and Minority Interest Segment Operating Income (Loss):
Government Communications Systems $63.9 $- $63.9 $55.0 $- $55.0 RF
Communi- cations 107.4 - 107.4 75.6 - 75.6 Harris Stratex Networks
(E) 141.0 (136.9) 4.1 1.0 0.3 1.3 Broadcast Communica- tions (F)
(18.1) 23.1 5.0 13.8 4.0 17.8 Headquarters expense (G) (16.2) -
(16.2) (23.8) 5.4 (18.4) Corporate eliminations (2.8) - (2.8) (2.5)
- (2.5) Non-operating income (loss) 2.8 - 2.8 - - - Net interest
(5.9) - (5.9) (7.8) - (7.8) $272.1 $(113.8) $158.3 $111.3 $9.7
$121.0 Three Quarters Ended Three Quarters Ended March 30, 2007
March 31, 2006 As Non- As Non- Reported Adjustment GAAP Reported
Adjustment GAAP (In millions) Revenue Government Communications
Systems $1,443.2 $- $1,443.2 $1,332.8 $- $1,332.8 RF Communi-
cations 853.6 - 853.6 565.9 - 565.9 Harris Stratex Networks 333.9 -
333.9 238.2 - 238.2 Broadcast Communications 433.4 - 433.4 366.2 -
366.2 Corporate eliminations (28.7) - (28.7) (20.7) - (20.7)
$3,035.4 $- $3,035.4 $2,482.4 $- $2,482.4 Income Before Income
Taxes and Minority Interest Segment Operating Income (Loss):
Government Communications Systems $172.7 $- $172.7 $162.3 $- $162.3
RF Communi- cations 290.8 - 290.8 195.2 - 195.2 Harris Stratex
Networks (E) 157.0 (135.2) 21.8 (25.5) 35.8 10.3 Broadcast
Communica- tions (F) 3.7 23.1 26.8 5.0 33.7 38.7 Headquarters
expense (G) (50.2) - (50.2) (55.0) 5.4 (49.6) Corporate
eliminations (11.2) - (11.2) (11.2) - (11.2) Non-operating income
(loss)(D) (15.9) 19.8 3.9 (0.8) - (0.8) Net interest (20.6) -
(20.6) (18.1) - (18.1) $526.3 $(92.3) $434.0 $251.9 $74.9 $326.8
Table 7 HARRIS CORPORATION Reconciliation of FY'07 GAAP EPS
Guidance to Non-GAAP EPS Guidance Earnings Per Diluted Share
Earnings Per Share Guidance for FY'07 $3.39 to $3.43 Impairment in
Terion (D) $0.09 Broadcast Communications segment cost- reduction
actions and software impairment (F) $0.13 Charges associated with
the combination with Stratex (H) $0.17 Gain on the combination with
Stratex (C) $(1.01) Non-GAAP Earnings Per Share Guidance for FY'07
$2.77 to $2.81 Table 8 HARRIS CORPORATION Comparison of Harris
Stratex Networks Segment GAAP and NON-GAAP Revenue and Operating
Income to that Reported by Harris Stratex Networks, Inc. Quarter
Ended Quarter Ended March 30, 2007 March 31, 2006 As Reported by As
Reported by Harris Harris Stratex Stratex Harris Networks Harris
Networks (In millions) Revenue - As Reported $ 139.0 $ 139.0 $ 73.7
$ 73.7 Adjustments: Stratex Networks Revenue: January 2007 Quarter
ended March 31, 2006 7.8 63.9 Revenue - Non-GAAP $ 139.0 $ 146.8 $
73.7 $ 137.6 Operating Income(Loss) - As Reported (I) $ 141.0 $
(22.7) $ 1.0 $ (6.1) Adjustments: Gain on the combination with
Stratex (163.4) Stratex combination transaction costs 23.0 23.0
Stratex combination integration costs 3.5 3.5 FAS 123R expense 1.5
0.4 Other identifiable intangible amortization 2.4 Stratex Networks
operating income (Loss): January 2007 (2.1) Quarter ended March 31,
2006 4.1 Harris corporate allocations 6.9 Costs associated with
product discontinuances 0.3 0.3 Operating Income - Non-GAAP $ 4.1 $
5.6 $ 1.3 $ 5.6 HARRIS CORPORATION FY'07 Third Quarter Summary
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES Notes to
tables 5 through 8: Note A - Adjustments to cost of product sales
and services for the quarter and three quarters ended March 30,
2007 are due to transaction-related costs including a step up in
inventory, step up in fixed assets and write-off of deferred
revenue related to our combination with Stratex ($6.0 million).
Adjustments to cost of product sales and services for the quarter
ended March 31, 2006 are due to costs related to a step up in
inventory associated with our acquisition of Leitch Technology
Corporation ("Leitch") ($2.5 million). Adjustments to cost of
product sales and services for the three quarters ended March 31,
2006 are due to inventory write-downs associated with product
discontinuances in our Harris Stratex Networks segment ($35.0
million), inventory write-downs associated with cost-reduction
actions including the transfer of European manufacturing to the
United States and outsourcing of other manufacturing activity in
our Broadcast Communications segment ($11.3 million) and costs
related to a step up in inventory associated with our acquisition
of Leitch ($2.5 million). Note B - Adjustments to engineering,
selling and administrative expenses for the quarter and three
quarters ended March 30, 2007 are due to transaction costs related
to the combination with Stratex including the write-off of in-
process research and development and the amortization of backlog
($17.0 million); integration costs associated with the Stratex
combination ($3.5 million for the quarter and $5.2 million for the
three quarters ended March 30, 2007); severance and other expenses
associated with cost-reduction actions in our Broadcast
Communications segment ($4.2 million) and the write-down of
capitalized software associated with management's decision to
discontinue an automation software development effort in our
Broadcast Communications segment ($18.9 million). Adjustments to
engineering, selling and administrative expenses for the quarter
ended March 31, 2006 are due to a charge related to a decision
received in our arbitration with Bourdex Telecommunications Limited
("Bourdex") ($5.4 million), integration costs associated with our
acquisition of Leitch ($0.7 million), severance and other expenses
associated with cost-reduction actions in our Broadcast
Communications segment ($0.8 million) and severance costs
associated with product discontinuances in our Harris Stratex
Networks segment ($0.3 million). Adjustments to engineering,
selling and administrative expenses for the three quarters ended
March 31, 2006 are due to the charge related to our arbitration
with Bourdex ($5.4 million), the write-off of in-process research
and development and other expenses associated with our acquisition
of Leitch ($7.2 million), severance costs associated with product
discontinuances in our Harris Stratex Networks segment ($0.8
million) and severance and other expenses associated with
cost-reduction actions in our Broadcast Communications segment
($12.7 million). Note C - Adjustment for the gain on the
combination with Stratex ($163.4 million). Note D - The adjustment
to non-operating income (loss) for the three quarters ended March
30, 2007 is due to the impairment to our investment in Terion, Inc.
("Terion") ($19.8 million). Note E - Adjustments to our Harris
Stratex Networks segment operating income for the quarter and three
quarters ended March 30, 2007 are due to the gain on the
combination with Stratex ($163.4 million) offset by transaction
costs ($23.0 million) and integration costs ($3.5 million for the
quarter and $5.2 million for the three quarters ended March 30,
2007) associated with the transaction. Adjustments to our Harris
Stratex Networks segment operating income for the quarter ended
March 31, 2006 are due to severance costs associated with product
discontinuances in our Harris Stratex Networks segment ($0.3
million). Adjustments to our Harris Stratex Networks segment
operating loss for the three quarters ended March 31, 2006 are due
to inventory write- downs and severance costs associated with
product discontinuances ($35.8 million). Note F - Adjustments to
our Broadcast Communications segment operating income for the
quarter and three quarters ended March 30, 2007 are due to
severance and other expenses associated with cost-reduction actions
($4.2 million) and a write-down of capitalized software associated
with management's decision to discontinue an automation software
development effort ($18.9 million). Adjustments to our Broadcast
Communications segment operating income for the quarter ended March
31, 2006 are due to costs related to a step up in inventory and
integration costs associated with our acquisition of Leitch ($3.2
million) and severance and other expenses associated with cost
reduction actions in our Broadcast Communications segment ($0.8
million). Adjustments to our Broadcast Communications segment
operating income for the three quarters ended March 31, 2006 are
due to inventory write-downs, severance and other expenses
associated with cost-reduction actions ($24.0 million) and charges
associated with our acquisition of Leitch ($9.7 million) including
the write-off of in-process research and development, costs related
to the step up of inventory, integration costs and other items.
Note G - Adjustments to headquarters expense for the quarter and
three quarters ended March 31, 2006 are due to charges related to a
decision received in our arbitration with Bourdex ($5.4 million).
Note H - Adjustment for the estimated $.17 per diluted share
impact, after minority interest, from the charges associated with
the merger transaction with Stratex. These charges include expenses
related to integration and transaction costs including the
write-off of in-process research and development, the impact from
step ups in inventory and fixed assets and a write-down of deferred
revenue as of the closing date of the transaction. Note I - The
difference between the GAAP operating income (loss) recorded during
the quarter ended March 30, 2007 by Harris versus Harris Stratex
Networks is due to the $163.4 million gain recorded by Harris on
the combination with Stratex and $0.3 million of corporate
allocations expense. The difference between the GAAP operating
income (loss) recorded during the quarter ended March 31, 2006 by
Harris versus Harris Stratex Networks is due to $6.9 million of
corporate allocations expense and $0.2 million of other expense.
DATASOURCE: Harris Corporation CONTACT: Investor Relations
inquiries, Pamela Padgett, +1-321-727-9383, , Media inquiries, Jim
Burke +1-321-727-9131, , or for additional information, contact
Harris Corporation at Web site: http://www.harris.com/
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