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PRESS RELEASES
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.
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 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 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.
SOURCE Harris Corporation
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