Strong New Orders Momentum Entering Fiscal Year 2009 MELBOURNE,
Fla., Aug. 5 /PRNewswire-FirstCall/ -- 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. DATASOURCE: Harris Corporation CONTACT: Investors,
Pamela Padgett, +1-321-727-9383, , Media, Jim Burke,
+1-321-727-9131, , both of Harris Corporation, Web site:
http://www.harris.com/
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