Harris Corporation Third Quarter
Revenue Increases 24%; Orders Higher Than Revenue in All Four Operating
Segments
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 (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.
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
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.
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.
Source: Harris Corporation
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