Company Increases Fiscal Year 2009 Earnings Guidance MELBOURNE,
Fla., April 29 /PRNewswire-FirstCall/ -- Harris Corporation
(NYSE:HRS) reported revenue for its third quarter of fiscal year
2008 of $1.33 billion, an increase of 24 percent compared to $1.07
billion in the prior-year quarter. Organic revenue increased 15
percent, excluding the impact of prior-year acquisitions. Net
income for the third quarter of fiscal year 2008 was $108 million,
or $.78 per diluted share. Net income in the prior-year quarter,
which included a significant gain associated with the Harris
Stratex Networks combination, was $215 million, or $1.52 per
diluted share. Non-GAAP net income, excluding acquisition-related
costs and gains, was $110 million, or $.81 per diluted share, in
the third quarter of fiscal year 2008, compared to $101 million, or
$.72 per diluted share, in the prior-year quarter. Third quarter
fiscal year 2008 earnings were adversely impacted by a previously
announced charge of $47 million for cost overruns on several
commercial satellite reflector programs. Also, as previously
announced, third quarter earnings benefited from a low effective
tax rate. A reconciliation of GAAP to non-GAAP financial measures
is provided in Tables 5 through 8 along with accompanying notes.
"Strong revenue growth continued in the third quarter across all of
our businesses. Even with the impact of the commercial reflector
charge, Harris generated excellent earnings in the quarter," said
Howard L. Lance, chairman, president and chief executive officer.
"Orders were particularly strong and our growing backlog should
provide excellent momentum entering fiscal 2009." Defense
Communications and Electronics Results in the Defense
Communications and Electronics segment continued to be excellent,
with third quarter revenue of $507 million, an increase of 22
percent compared to the prior-year quarter. Orders were
significantly greater than revenue. Operating income of $156
million increased 24 percent, compared to the prior-year quarter,
and operating margin was 31 percent. The Defense Communications and
Electronics segment is comprised of the RF Communications Division
and Defense Programs. Global market demand for Harris Falcon(R)
tactical radios continued to increase at double-digit rates.
Deployment of advanced communications systems remains a top
customer priority in the U.S. as well as globally. Demand is being
driven by modernization programs, force expansion, force
restructuring and modularity, and network-centric operations that
significantly improve situational awareness. International
deliveries were made to a diverse set of customers, including
Pakistan, Albania, Algeria, Bulgaria, Kazakhstan, Saudi Arabia,
Georgia, Singapore, Chad, Jamaica, Romania, Spain, Thailand, and
the United Kingdom. Significant RF Communications orders in the
third quarter included: -- A $118 million order from the U.S. Army
to supply Falcon II(R) high- frequency (HF) vehicular radio systems
for HMMWV's and other vehicles; -- A $97 million contract to
continue upgrading U.S. Marine Corps tactical radio communications
with multiband, multimission JTRS-approved Falcon III(R) handheld
and vehicular radio systems; -- An $80 million order from the
Philippines Ministry of Defence for Falcon radios; -- A $45 million
order to supply the U.S. Air Force with a complete suite of Falcon
tactical radios for its fleet of Mine Resistant Ambush Protected
(MRAP) vehicles; and -- A $25 million contract from the Brunei
Ministry of Defence to supply tactical radios, accessories and
other equipment to the Combat Net Radio replacement program of the
Royal Brunei Armed Forces. Announcements in the third quarter
related to the robust RF Communications new product funnel
included: -- First deliveries of the new Falcon III multiband,
multimission manpack radio, the first wideband networking radio to
utilize the Software Communication Architecture (SCA) and receive
NSA Type 1 certification for the protection of voice and data
traffic up through the TOP SECRET level; -- Deployment of the new
Broadband Ethernet high-capacity line-of-site radio by the 2-25th
Stryker Brigade Combat Team of the U.S. Army's 25th Infantry
Division; -- Introduction of the first multiband land mobile radio
that provides real-time interoperable communications for the
growing federal public safety and homeland security market; -- A
contract from the Defence Forces of Norway to provide several
thousand RF-7800S Secure Personal Radios, a lightweight wideband
radio that delivers secure tactical communications to individual
soldiers; and -- Use of the JTRS-approved Falcon III handheld
radios in U.S. Army Shadow 200 Unmanned Aerial Vehicles to extend
the communications capabilities of soldiers serving in mountainous
and urban environments. Defense Programs revenue increased in the
third quarter of fiscal year 2008, compared to the prior-year
quarter. Higher revenue was achieved in a number of strategic
Department of Defense (DoD) programs including: the LMST
(Lightweight Multiband Satellite Terminal) program for the U.S.
Marine Corps, the WIN-T (Warfighter Information Network-Tactical)
program for the U.S. Army, the IFCS (Improved Fire Control System)
for the U.S. Army Multiple Launch Rocket System, the CDL (Common
Data Link) Hawklink program for the U.S. Navy, and the MIDS
(Multifunctional Information Distribution System) for DoD aircraft.
Harris products and systems are providing advanced battlespace
networking capabilities at virtually every layer of the global
communications grid -- ground, air, sea and space. Harris develops
mobile, ad hoc and self-healing networks for network-centric
warfare, providing defense forces with true situational awareness
and information assurance, along with multi-level security and
leading-edge encryption solutions. Government Communications
Systems Revenue growth also continued in the Government
Communications Systems segment. Third quarter revenue was $491
million, an increase of 27 percent compared to the prior-year
quarter. Orders were higher than revenue. Operating income for the
third quarter was $6 million and was adversely impacted by the $47
million charge for commercial satellite reflector programs.
Operating income in the prior-year quarter was $45 million. The
Government Communications Systems segment is comprised of Civil
Programs, National Intelligence Programs, and IT Services. Organic
revenue increased 6 percent in the third quarter, compared to the
prior-year quarter, driven by the FDCA (Field Data Collection
Automation) program for the U.S. Census Bureau, the Patriot IT
services program for the NRO (National Reconnaissance Office), the
NETCENTS IT integration and services program for the U.S. Air
Force, and a number of classified programs. Major program wins in
the third quarter included the potential $410 million, 6.5-year
Network and Space Operations and Maintenance (NSOM) program. Harris
will provide operations and maintenance support to the 50th Space
Wing Air Force Satellite Control Network at locations around the
world. Harris also received a $22 million, 6-month extension to a
Department of State contract to modernize IT architecture for the
Bureau of Consular Affairs. During the quarter, Harris won new
classified programs valued at approximately $140 million and was
awarded a $20 million, 2-year program to provide satellite
reflector antennas for the Sirius Satellite Radio FM 6 satellite
expected to be launched in the fourth quarter of 2010. In a new
market for Harris -- Healthcare IT -- Harris won a $6 million
contract during the third quarter from the U.S. Department of
Health and Human Services. Harris will develop and integrate an
open-source National Health Information Exchange Gateway solution
that will enable federal healthcare agencies and healthcare
providers to share patient information more quickly and easily,
improving the quality of care and reducing costs. Following the
close of the quarter, Harris was awarded a 10-year contract valued
at more than $40 million to supply depot support and engineering
services for multiple space control systems for the U.S. Space and
Missile Systems Center Space Superiority Systems Wing at Los
Angeles Air Force Base, California. The value of the contract may
increase through future options. Broadcast Communications Third
quarter revenue in the Broadcast Communications segment was $159
million, an increase of 14 percent compared to the prior-year
quarter. Orders were higher than revenue. Operating income was $7
million, compared to non-GAAP operating income of $5 million in the
prior-year quarter. In the prior-year quarter, the segment had an
operating loss, on a GAAP basis, of $18 million, which included the
impact of cost-reduction actions and the discontinuance of a
software development effort. Strong orders and an increase in
backlog in the third quarter are expected to drive higher sales and
operating income in the fourth quarter. A number of new initiatives
are also underway to further reduce operating expenses and improve
gross margins going forward. Revenue growth in the third quarter
was across all business areas in both U.S. and international
markets. Higher revenue is being driven by the continuing global
conversion to both digital and HD (high-definition) operations.
Sales of Transmission Systems grew at double-digit rates, compared
to the prior-year quarter, as a result of strong shipments in the
U.S. market for the over-the-air digital transmission build-out.
Double-digit growth continued in Infrastructure & Digital Media
systems, including routers, graphics equipment and multiviewers.
Third quarter sales of traffic and billing Software Solutions also
improved, particularly in international markets. Increasingly,
large media customers are selecting the Harris ONE(TM) approach for
workflow solutions across the entire broadcast delivery chain,
tying workflow and signal flow together to improve productivity and
responsiveness. Recent international examples include projects with
Chunghwa Telecom in Taiwan; Brazilian broadcaster TV Anhanguera;
the Saudi Arabia Ministry of Culture and Information for Saudi
Television; Kuwait Television; RTV, the national public broadcaster
in Slovenia; and HD suisse, the first HD television channel in
Switzerland. Harris Stratex Networks, Inc. Revenue for the Harris
Stratex Networks segment was $178 million in the third quarter, an
increase of 21 percent compared to the prior-year quarter on a pro
forma, non-GAAP basis (as if the former Harris Microwave
Communications segment and Stratex Networks had been combined since
the beginning of fiscal year 2007). Non-GAAP operating income in
the third quarter was $11 million, excluding integration costs
associated with the Harris Stratex Networks combination, compared
with non-GAAP operating income of $4 million in the prior-year
quarter. Segment operating income on a GAAP basis was $9 million,
compared to $141 million in the prior-year quarter, which included
a significant gain associated with the business combination, net of
transaction- related costs. North American revenue increased a
strong 16 percent to $57 million in the third quarter compared to
the prior-year quarter. Sales continue to be fueled by leased line
substitution, foot-print expansion, grant money that is being made
available to state, local and federal agencies, and right-of-way
users responding to an increased demand for bandwidth expansion and
some re-allocation to 1.7 / 2.7 GHz frequencies. International
revenue increased 27 percent to $117 million in the third quarter.
Growth was led by a 49 percent year-over-year increase in Africa,
reflecting a rebound in capital investment following a series of
mobile operator consolidations. Revenue growth was also strong in
Europe, the Middle East and Russia. During the quarter, Harald J.
Braun was appointed president and chief executive officer of Harris
Stratex Networks, succeeding Guy M. Campbell, who had previously
announced his retirement. An industry veteran, Braun previously
served as president and CEO of Siemens Networks LLC and was most
recently senior executive in Nokia Siemens Networks North America.
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 Harris reconfirmed its non-GAAP
earnings guidance for fiscal year 2008 previously provided on
February 28, 2008 at approximately $3.45 per diluted share. The
company increased its earnings guidance for fiscal year 2009 to a
new range of $4.05 to $4.15 per diluted share, compared to initial
guidance provided on March 5, 2008, of $4.00 to $4.10 per diluted
share. Fiscal 2009 earnings guidance now represents a
year-over-year increase of 17 to 20 percent compared to current
non-GAAP guidance for fiscal year 2008. The corresponding fiscal
year 2008 GAAP earnings guidance is approximately $3.34 per diluted
share. A reconciliation of GAAP to non-GAAP guidance is provided in
Table 7 and the accompanying notes. 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) 325-4796, access code: 5925245. 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 May 6, 2008. To access the replay,
please call (719) 457-0820, access code: 5925245. A recording of
the call will also be available on the Harris website beginning at
7:00 p.m., Eastern Time, on April 29. 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 billion and more than 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 third quarter
of fiscal 2008 excluding the impact of costs associated with our
acquisitions and integration costs associated with the formation of
Harris Stratex Networks; and earnings per share guidance for fiscal
2008 also excluding the impact of integration costs associated with
the formation of Harris Stratex Networks and acquisitions. 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 fiscal 2009; the
potential value of contract awards and potential 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 revenues, 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 Third Quarter
Summary condensed Consolidated Statement of Income (Unaudited)
Quarter Ended Three Quarters Ended March 28, March 30, March 28,
March 30, 2008 2007 2008 2007 (In millions, except per share
amounts) Revenue from product sales and services $1,329.6 $1,072.4
$3,877.8 $3,035.4 Cost of product sales and services (933.9)
(719.1) (2,691.7) (2,043.7) Engineering, selling and administrative
expenses (236.4) (241.5) (683.6) (592.3) Gain on combination with
Stratex Networks, Inc. -- 163.4 -- 163.4 Non-operating income
(loss) 2.8 2.8 8.7 (15.9) Interest income 1.9 4.6 5.5 9.5 Interest
expense (13.9) (10.5) (42.8) (30.1) Income before income taxes and
minority interest 150.1 272.1 473.9 526.3 Income taxes (38.9)
(63.8) (149.0) (140.1) Minority interest in Harris Stratex
Networks, Inc., net of tax (3.2) 6.6 (2.4) 6.6 Net income $108.0
$214.9 $322.5 $392.8 Net income per common share Basic $.80 $1.62
$2.41 $2.95 Diluted $.78 $1.52 $2.35 $2.79 Cash dividends paid per
common share $.15 $.11 $.45 $.33 Basic weighted average shares
outstanding 134.6 133.0 134.0 133.0 Diluted weighted average shares
outstanding 136.2 141.7 136.9 141.7 Note: Results for the quarter
ended March 30, 2007 include a $143.1 million after-tax ($1.01 per
diluted share) gain on the combination with Stratex Networks, Inc.
offset by $13.0 million after-tax and minority interest ($0.09 per
diluted share) of transaction and integration costs related to the
combination. Table 2 HARRIS CORPORATION FY '08 Third Quarter
Summary Business Segment Information (Unaudited) Quarter Ended
Three Quarters Ended March 28, March 30, March 28, March 30, 2008
2007 2008 2007 (In millions) Revenue Defense Communications and
Electronics $506.8 $ 416.4 $1,408.4 $1,196.3 Government
Communications Systems 490.6 387.6 1,487.9 1,098.3 Broadcast
Communications 158.6 138.6 468.9 433.4 Harris Stratex Networks
178.2 139.0 531.6 333.9 Corporate eliminations (4.6) (9.2) (19.0)
(26.5) $1,329.6 $1,072.4 $3,877.8 $3,035.4 Income Before Income
Taxes and Minority Interest Segment Operating Income (Loss):
Defense Communications and Electronics $156.4 $ 126.3 $ 430.1
$355.2 Government Communications Systems 5.7 44.5 97.8 106.8
Broadcast Communications 7.1 (18.1) 25.7 3.7 Harris Stratex
Networks 9.2 141.0 7.4 157.0 Headquarters expense (18.2) (16.2)
(55.2) (50.2) Corporate eliminations (0.9) (2.3) (3.3) (9.7)
Non-operating income (loss) 2.8 2.8 8.7 (15.9) Net interest (12.0)
(5.9) (37.3) (20.6) $150.1 $272.1 $473.9 $526.3 Table 3 HARRIS
CORPORATION FY '08 Third Quarter Summary CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS (Unaudited) Three Quarters Ended March 28,
March 30, 2008 2007 (In millions) Operating Activities Net income $
322.5 $ 392.8 Adjustments to reconcile net income to net cash
provided by (used in) operating activities: Depreciation and
amortization 125.8 89.1 Purchased in-process research and
development write-off 1.4 15.3 Share-based compensation 29.8 19.1
Non-current deferred income tax 2.3 (2.6) Gain on the sale of
securities available-for-sale (4.8) -- Gain on the combination with
Stratex Networks, Inc. -- (163.4) Minority interest in Harris
Stratex Networks, Inc., net of tax 2.4 (6.6) (Increase) decrease
in: Accounts and notes receivable (96.7) (27.1) Inventories (90.3)
(26.2) Increase (decrease) in: Accounts payable and accrued
expenses 67.4 (6.1) Advance payments and unearned income 13.8 20.6
Income taxes (19.2) 6.3 Other (1.2) 12.1 Net cash provided by
operating activities 353.2 323.3 Investing Activities Cash paid for
acquired businesses (12.8) -- Cash received in the combination with
Stratex Networks, Inc. -- 33.2 Additions of property, plant and
equipment (84.2) (66.6) Additions of capitalized software (24.7)
(32.2) Proceeds from the sale of securities available-for-sale 7.1
-- Cash paid for short-term investments available-for-sale (8.4)
(264.9) Proceeds from the sale of short-term investments
available-for-sale 25.4 362.1 Net cash provided by (used in)
investing activities (97.6) 31.6 Financing Activities Proceeds from
borrowings 450.2 36.0 Repayment of borrowings (541.3) (31.5)
Payment of treasury lock (8.8) -- Proceeds from exercise of
employee stock options 27.1 27.8 Repurchases of common stock
(200.0) (47.0) Cash dividends (61.3) (44.2) Net cash used in
financing activities (334.1) (58.9) Effect of exchange rate changes
on cash and cash equivalents 2.1 4.5 Net increase (decrease) in
cash and cash equivalents (76.4) 300.5 Cash and cash equivalents,
beginning of year 368.3 181.3 Cash and cash equivalents, end of
quarter $291.9 $481.8 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 Third Quarter Summary CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited) March 28, June 29, 2008 2007 (In millions) Assets Cash
and cash equivalents $291.9 $368.3 Short-term investments 3.4 20.4
Marketable equity securities 31.1 40.5 Receivables 848.9 748.5
Inventories 649.3 556.8 Current deferred income taxes 119.7 94.3
Other current assets 64.8 67.3 Property, plant and equipment 481.3
459.2 Goodwill 1,539.3 1,525.2 Identifiable intangible assets 380.8
417.9 Other non-current assets 114.8 107.6 $4,525.3 $4,406.0
Liabilities and Shareholders' Equity Short-term debt $53.5 $410.0
Accounts payable 395.9 350.0 Compensation and benefits 174.9 188.1
Other accrued items 241.6 187.5 Advance payments and unearned
income 142.3 128.5 Income taxes payable 15.2 64.2 Current portion
of long-term debt 6.8 309.8 Non-current deferred income taxes 35.6
61.8 Long-term debt 833.5 408.9 Other long-term liabilities 105.8
66.5 Minority interest in Harris Stratex Networks, Inc. 337.8 326.9
Shareholders' equity 2,182.4 1,903.8 $4,525.3 $4,406.0 HARRIS
CORPORATION FY '08 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; 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 Third Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Condensed
Consolidated Statement of Income (Unaudited) Quarter Ended Quarter
Ended March 28, 2008 March 30, 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 $1,329.6 $--
$1,329.6 $1,072.4 $-- $1,072.4 Cost of product sales and services
(A) (933.9) 0.2 (933.7) (719.1) 6.0 (713.1) Engineering, selling
and administrative expenses(B) (236.4) 1.8 (234.6) (241.5) 43.6
(197.9) Gain on combination with Stratex Networks, Inc. (C) -- --
-- 163.4 (163.4) -- Non-operating income 2.8 -- 2.8 2.8 -- 2.8
Interest income 1.9 -- 1.9 4.6 -- 4.6 Interest expense (13.9) --
(13.9) (10.5) -- (10.5) Income before income taxes and minority
interest 150.1 2.0 152.1 272.1 (113.8) 158.3 Income taxes (38.9)
0.3 (38.6) (63.8) 9.1 (54.7) Minority interest in Harris Stratex
Networks, Inc., net of tax (3.2) (0.1) (3.3) 6.6 (9.7) (3.1) Net
income $108.0 $2.2 $110.2 $214.9 $(114.4) $100.5 Net income per
diluted common share (N) $.78 $.03 $.81 $1.52 $(.80) $.72 Three
Quarters Ended Three Quarters Ended March 28, 2008 March 30, 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 $3,877.8 $-- $3,877.8 $3,035.4 $-- $3,035.4 Cost
of product sales and services (A) (2,691.7) 6.2 (2,685.5) (2,043.7)
6.0 (2,037.7) Engineering, selling and administrative expenses(B)
(683.6) 18.9 (664.7) (592.3) 45.3 (547.0) Gain on combination with
Stratex Networks, Inc. (C) -- -- -- 163.4 (163.4) -- Non-operating
income (loss)(D) 8.7 -- 8.7 (15.9) 19.8 3.9 Interest income 5.5 --
5.5 9.5 -- 9.5 Interest expense (42.8) -- (42.8) (30.1) -- (30.1)
Income before income taxes and minority interest 473.9 25.1 499.0
526.3 (92.3) 434.0 Income taxes (149.0) (6.6) (155.6) (140.1) 1.9
(138.2) Minority interest in Harris Stratex Networks, Inc., net of
tax (2.4) (6.8) (9.2) 6.6 (9.7) (3.1) Net income $322.5 $11.7
$334.2 $392.8 $(100.1) $292.7 Net income per diluted common share
(N) $2.35 $.09 $2.44 $2.79 $(.70) $2.09 Table 6 HARRIS CORPORATION
FY '08 Third Quarter Summary RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES Business Segment Information (Unaudited) Quarter Ended
Quarter Ended March 28, 2008 March 30, 2007 As Adjust- Non- As
Adjust- Non- Reported ment GAAP Reported ment GAAP (In millions)
Revenue Defense Communications and Electronics $506.8 $-- $506.8
$416.4 $-- $416.4 Government Communications Systems 490.6 -- 490.6
387.6 -- 387.6 Broadcast Communications 158.6 -- 158.6 138.6 --
138.6 Harris Stratex Networks 178.2 -- 178.2 139.0 -- 139.0
Corporate eliminations (4.6) -- (4.6) (9.2) -- (9.2) $1,329.6 $--
$1,329.6 $1,072.4 $-- $1,072.4 Income Before Income Taxes and
Minority Interest Segment Operating Income (Loss): Defense
Communications and Electronics $156.4 $-- $156.4 $126.3 $-- $126.3
Government Communications Systems (E) 5.7 0.4 6.1 44.5 -- 44.5
Broadcast Communications (F) 7.1 0.1 7.2 (18.1) 23.1 5.0 Harris
Stratex Networks (G) 9.2 1.5 10.7 141.0 (136.9) 4.1 Headquarters
expense (18.2) -- (18.2) (16.2) -- (16.2) Corporate eliminations
(0.9) -- (0.9) (2.3) -- (2.3) Non-operating income 2.8 -- 2.8 2.8
-- 2.8 Net interest expense (12.0) -- (12.0) (5.9) -- (5.9) $150.1
$2.0 $152.1 $272.1 $(113.8) $158.3 Three Quarters Ended Three
Quarters Ended March 28, 2008 March 30, 2007 As Adjust- Non- As
Adjust- Non- Reported ment GAAP Reported ment GAAP (In millions)
Revenue Defense Communications and Electronics $1,408.4 $--
$1,408.4 $1,196.3 $-- $1,196.3 Government Communications Systems
1,487.9 -- 1,487.9 1,098.3 -- 1,098.3 Broadcast Communications
468.9 -- 468.9 433.4 -- 433.4 Harris Stratex Networks 531.6 --
531.6 333.9 -- 333.9 Corporate eliminations (19.0) -- (19.0) (26.5)
-- (26.5) $3,877.8 $-- $3,877.8 $3,035.4 $-- $3,035.4 Income Before
Income Taxes and Minority Interest Segment Operating Income (Loss):
Defense Communications and Electronics $430.1 $-- $430.1 $355.2 $--
$355.2 Government Communications Systems (E) 97.8 1.3 99.1 106.8 --
106.8 Broadcast Commu- nications (F) 25.7 1.9 27.6 3.7 23.1 26.8
Harris Stratex Networks (G) 7.4 21.9 29.3 157.0 (135.2) 21.8
Headquarters expense (55.2) -- (55.2) (50.2) -- (50.2) Corporate
eliminations (3.3) -- (3.3) (9.7) -- (9.7) Non-operating income
(loss)(D) 8.7 -- 8.7 (15.9) 19.8 3.9 Net interest expense (37.3) --
(37.3) (20.6) -- (20.6) $473.9 $25.1 $499.0 $526.3 $(92.3) $434.0
Table 7 HARRIS CORPORATION Reconciliation of FY '08 GAAP EPS
Guidance to Non-GAAP EPS Guidance and Reconciliation of FY '09 GAAP
EPS Guidance to FY '08 GAAP and Non-GAAP EPS Guidance (Unaudited)
Fiscal Year Fiscal Year Percent 2008 2009 Growth GAAP Earnings Per
Share Guidance $3.34 $4.05 to $4.15 21% to 24% Charges associated
with the combination with Stratex Networks, Inc. (H) $0.07 Charges
associated with the acquisition of Multimax Incorporated (I) $0.02
Charges associated with the acquisition of Zandar Technologies plc
(J) $0.02 Non-GAAP Earnings Per Share Guidance $3.45 $4.05 to $4.15
17% to 20% Table 8 HARRIS CORPORATION FY '08 Third Quarter Year
Over Year Organic Revenue Growth (Unaudited) Quarter Ended March
30, March 28, Percent 2007 2008 Growth (In millions) Harris
Corporation GAAP Revenue $1,072.4 $1,329.6 24 % Impact of
acquisitions (K) 82.6 Organic Revenue $1,155.0 $1,329.6 15 %
Government Communications Systems GAAP Revenue $387.6 $490.6 27 %
Impact of acquisitions (L) 73.1 Organic Revenue $460.7 $490.6 6 %
Table 9 HARRIS CORPORATION FY '08 Third Quarter Summary Comparison
of Harris Stratex Networks Segment GAAP and Non-GAAP Revenue and
Operating Income to that Reported by Harris Stratex Networks, Inc.
(Unaudited) Quarter Ended Quarter Ended March 28, 2008 March 30,
2007 As Reported by As Reported by Harris Harris Stratex Stratex
Harris Networks Harris Networks (In millions) Revenue -- As
Reported $178.2 $178.2 $139.0 $139.0 Adjustments: Stratex Networks,
Inc. revenue: January 2007 -- -- -- 7.8 Revenue -- Non-GAAP $178.2
$178.2 $139.0 $146.8 Operating Income(Loss) -- As Reported (M) $9.2
$9.2 $141.0 $(22.7) Adjustments: Gain on combination with Stratex
Networks, Inc. -- -- (163.4) -- Stratex combination transaction
costs -- -- 23.0 23.0 Stratex combination integration costs 1.5 1.5
3.5 3.5 FAS 123R expense -- 2.1 -- 1.5 Other identifiable
intangible amortization -- 3.7 -- 2.4 Stratex Networks, Inc.
operating loss: January 2007 -- -- -- (2.1) Operating Income --
Non-GAAP $10.7 $16.5 $4.1 $5.6 HARRIS CORPORATION FY '08 Third
Quarter Summary RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES (Unaudited) Notes to tables 5 through 9: Note A -
Adjustments to cost of product sales and services for the quarter
ended March 28, 2008 are due to the impact of a step up in fixed
assets associated with the combination between Stratex Networks,
Inc. ("Stratex") and our former Microwave Communications Division
($0.2 million). Adjustments to cost of product sales and services
for the three quarters ended March 28, 2008 are due to the impact
of a step up in fixed assets and integration costs associated with
the Stratex combination ($5.8 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 three quarters ended March 30, 2007
are due to transaction-related costs including a step up in
inventory, a step up in fixed assets and a write-off of deferred
revenue associated with the Stratex combination ($6.0 million).
Note B - Adjustments to engineering, selling and administrative
expenses for the quarter ended March 28, 2008 are due to the impact
of a step up in fixed assets and integration costs associated with
the Stratex combination ($1.3 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 three
quarters ended March 28, 2008 are due to the impact of a step up in
fixed assets and integration costs associated with the Stratex
combination ($16.1 million), integration costs associated with our
acquisition of Multimax ($1.3 million) and integration costs and a
write-off of in-process research and development associated with
our acquisition of Zandar ($1.5 million). Adjustments to
engineering, selling and administrative expenses for the quarter
and three quarters ended March 30, 2007 are due to transaction
costs associated with the Stratex combination, including a
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
a 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). Note C -
Adjustment for the gain on the Stratex combination ($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. ($19.8 million). Note
E - Adjustments to our Government Communications Systems segment
operating income for the quarter and three quarters ended March 28,
2008 are due to integration costs associated with our acquisition
of Multimax ($0.4 million and $1.3 million, respectively). Note F -
Adjustments to our Broadcast Communications segment operating
income for the quarter ended March 28, 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 three quarters ended March 28, 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 ($1.9 million). 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). Note G - Adjustments to our Harris Stratex
Networks segment operating income for the quarter and three
quarters ended March 28, 2008 are due to the impact of a step up in
fixed assets and integration costs associated with the Stratex
combination ($1.5 million and $21.9 million, respectively).
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 Stratex combination ($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 Stratex combination. Note
H - 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
combination. Note I - Adjustment for the estimated $0.02 per
diluted share impact is for the estimated impact from integration
and other charges associated with our acquisition of Multimax. Note
J - Adjustment for the estimated $0.02 per diluted share impact is
for the estimated impact from integration and other charges
associated with our acquisition of Zandar. Note K - Adjustments to
add revenue of Stratex, Multimax, and Zandar during the third
quarter of Harris' fiscal year 2007 and to subtract revenue during
the third 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 third quarter of
Harris' fiscal year 2007. Note M - The difference between the GAAP
operating income (loss) recorded during the quarter ended March 30,
2007 by Harris versus Harris Stratex Networks, Inc. is due to the
$163.4 million gain recorded by Harris on the Stratex combination
and $0.3 million of corporate allocations expense. Note N - For the
quarter and three quarters ended March 28, 2008 the "As Reported"
calculations of net income per diluted common share include the
potential dilutive effect of warrants to purchase the common stock
of Harris Stratex Networks, Inc. The "Non-GAAP" calculations
exclude the effects of this potential dilution. DATASOURCE: Harris
Corporation CONTACT: Investors, Pamela Padgett, +1-321-727-9383, ,
or Media, Jim Burke, +1-321-727-9131, , both of Harris Corporation;
or Harris Corporation, Web site: http://www.harris.com/
http://www.harrisstratex.com/
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