Harris Corporation Updates EPS Guidance for Fiscal Year 2008
February 28 2008 - 4:00PM
PR Newswire (US)
MELBOURNE, Fla., Feb. 28 /PRNewswire-FirstCall/ -- Harris
Corporation (NYSE:HRS) today announced that it expects non-GAAP
earnings for fiscal year 2008 ending on June 27 to be at the lower
end of its previous guidance range of $3.45 to $3.55 per diluted
share, as a result of additional cost overruns on several
commercial satellite reflector programs. The company expects to
establish additional reserves of about $47 million in its fiscal
third quarter in the Government Communications Systems segment to
cover costs related to redesign, rework and schedule delays. The
low end of the non-GAAP earnings guidance range represents earnings
growth of 23 percent, compared to non-GAAP earnings per share in
fiscal year 2007. Non-GAAP earnings exclude charges related to
acquisitions and the formation of Harris Stratex Networks. The
corresponding fiscal year 2008 GAAP earnings guidance is a range of
$3.35 to 3.45 per diluted share. Revenue for fiscal year 2008 is
now expected to be about $5.3 billion, representing organic growth
of 13 percent above fiscal year 2007. A reconciliation of GAAP to
non-GAAP financial measures is provided in Tables 1 and 2 and the
accompanying notes. The additional reserves will be established for
4 programs encompassing 10 commercial reflectors in various stages
of development, assembly, test and delivery. The first reflector
has been completed and is awaiting customer launch. A second
reflector has been delivered for spacecraft integration. Three
others have completed major manufacturing milestones and are
expected to be delivered for spacecraft integration by the end of
fiscal year 2008. "Redesign and rework costs required to resolve
performance issues and manufacturing complexities have rippled
through the entire commercial reflector enterprise, causing
significant inefficiencies and bottlenecks in the factory," said
Howard L. Lance, chairman, president and chief executive officer.
"We have been overly optimistic about our abilities to close the
schedule and cost gaps. To maintain schedule commitments to our
customers, we will have to sustain the current high level of
headcount for an extended period of time. The additional reserves
reflect our latest estimated cost-at- completion on these programs,
only a portion of which actually has been spent to date. "We are
making progress and believe that we now understand the remaining
challenges. While the costs-at-completion for these reflectors will
be much higher than originally anticipated, the long-term outlook
for our reflector product line is positive," Lance continued.
"Harris reflectors have a competitive advantage in the market in
terms of their performance, weight and stowable size. As a result,
we expect to receive future orders at historical levels of
profitability. "We expect the impact of the additional reserves on
fiscal year 2008 earnings to be partially offset through higher
than previously expected operating results in the Defense
Communications and Electronics segment, a lower effective tax rate
as a result of anticipated favorable tax settlements, and increased
non-operating income from the sale of securities as we begin to
monetize our investment in a Harris technology spin-off. "Harris is
in a solid financial position to absorb the additional costs in the
reflector business, while still generating significant revenue and
earnings growth in fiscal year 2008. We expect to finish the year
with substantial backlog and robust markets that will drive
excellent revenue and earnings growth once again in fiscal year
2009," Lance said. Harris will host a conference call today at 5:00
p.m., Eastern Time, to discuss the content of this press release.
Interested individuals are invited to listen to the call by using a
dial-in number: (719) 325-4824, access code: 5703433. 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 March 6, 2008. To access the replay,
please call (719) 457-0820, access code: 5703433. A recording of
the call will also be available on the Harris website beginning at
7:00 p.m., Eastern Time, on February 28. 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 almost $5 billion and more than 16,000 employees - including
nearly 7,000 engineers and scientists. Harris is dedicated to
developing best-in-class assured communications(TM) 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 earnings per share guidance for fiscal 2008 excluding
costs associated with our acquisitions and with the formation of
Harris Stratex Networks and expected organic revenue growth. 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. 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 2008; 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. For additional information, contact
Harris Corporation at . Table 1 HARRIS CORPORATION Reconciliation
of FY'08 GAAP EPS Guidance to Non-GAAP EPS Guidance (Unaudited)
Earnings Per Diluted Share GAAP Earnings Per Share Guidance for
FY'08 $3.35 to $3.45 Charges associated with the combination with
Stratex Networks, Inc. (A) $0.07 Charges associated with the
acquisition of Multimax Incorporated (B) $0.01 Charges associated
with the acquisition of Zandar Technologies plc (C) $0.02 Non-GAAP
Earnings Per Share Guidance for FY'08 $3.45 to $3.55 Non-GAAP
Earnings Per Share for FY'07 $2.80 Percent Change 23% to 27% Table
2 HARRIS CORPORATION FY'08 Forecasted Organic Growth Calculation
(Unaudited) Fiscal Year 2007 GAAP Revenue $4,243.0 Impact of
acquisitions (D) 443.0 Organic Revenue $4,686.0 Fiscal Year 2008
Forecasted Revenue $5,300.0 Organic Revenue Growth 13% Note A -
Adjustment for the estimated $0.07 per diluted share impact, after
minority interest, is due to the impact of a step up in fixed
assets and integration costs associated with the Stratex Networks,
Inc. ("Stratex") combination. Note B - Adjustment for the estimated
$0.01 per diluted share impact is for the estimated impact from
integration and other charges associated with the acquisition of
Multimax Incorporated ("Multimax"). Note C - Adjustment for the
estimated $0.02 per diluted share impact is for the estimated
impact from integration and other charges associated with the
acquisition of Zandar Technologies plc ("Zandar"). Note D -
Adjustments to add revenue of Stratex, Multimax and Zandar during
Harris' fiscal year 2007 and to subtract fiscal year 2007 revenue
of our radio resale business exited in the fourth quarter of fiscal
2007. DATASOURCE: Harris Corporation CONTACT: Investors, Pamela
Padgett, +1-321-727-9383, , or Media, Jim Burke, +1-321-727-9131, ,
both of Harris Corporation Web site: http://www.harris.com/
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