MELBOURNE, Florida, August 3, 2010 — Harris Corporation (NYSE:HRS) reported GAAP income from continuing operations for the fourth quarter of fiscal 2010 of $151 million, or $1.16 per diluted share, compared with a loss of $84 million, or $.63 per diluted share, in the prior-year quarter. Non-GAAP income from continuing operations in the fourth quarter of fiscal 2010 was $161 million, or $1.24 per diluted share, compared with $120 million, or $.90 per diluted share, in the prior-year quarter. Non-GAAP income excludes acquisition-related costs in both quarters as well as pre-tax charges of $256 million for a non-cash impairment of goodwill and intangible assets in the Broadcast Communications segment in the prior-year fourth quarter. Revenue for the fourth quarter of fiscal 2010 was $1.46 billion, compared with $1.29 billion for the fourth quarter of fiscal 2009. Orders in the fourth quarter were $1.72 billion, compared with $1.29 billion in the prior-year quarter. A reconciliation of GAAP to non-GAAP financial measures is provided in Tables 5 through 8, along with the accompanying notes.
"Harris achieved another quarter of strong results with orders, revenue and income all significantly higher than in the prior year, driven primarily by continuing strong demand and excellent operating performance in RF Communications," said Howard L. Lance, chairman, president and chief executive officer. Harris fourth quarter orders were significantly higher than revenue, thus adding to an already strong backlog as we enter fiscal 2011. In Tactical Radio Communications, backlog increased to a record $1.24 billion driven by strength in both U.S. and international markets.
"As previously announced, Harris completed the acquisition of CapRock Communications, a global provider of mission-critical managed satellite communications solutions for the government, energy and maritime markets. With this acquisition we further increased the breadth of our assured communications® capabilities, entered new vertical markets, and increased our international presence." The acquisition is expected to be slightly accretive to Harris earnings in fiscal 2011, excluding acquisition-related costs, and a more significant contributor to earnings in fiscal 2012.
Results for Full Fiscal Year
GAAP income from continuing operations in fiscal 2010 was $562 million, or $4.28 per diluted share, compared with the prior year of $312 million, or $2.33 per diluted share. Non-GAAP income from continuing operations in fiscal 2010 was $582 million, or $4.43 per diluted share, compared with the prior year of $516 million, or $3.85 per diluted share. Non-GAAP income excludes acquisition-related costs in both fiscal years as well as pre-tax charges of $256 million for a non-cash impairment of goodwill and intangible assets in the Broadcast Communications segment in the prior year. Revenue in fiscal 2010 was $5.21 billion compared with $5.01 billion in the prior year. The company generated strong cash flow from operations of $803 million in fiscal 2010, which was significantly higher compared with the prior year of $667 million.
Fourth quarter orders for the RF Communications segment totaled $890 million, including $711 million in Tactical Radio Communications and $179 million in Public Safety and Professional Communications. At the end of the fourth quarter, total backlog for the RF Communications segment was $1.76 billion, including $1.24 billion in Tactical Radio Communications and $527 million in Public Safety and Professional Communications.
Revenue for RF Communications in the fourth quarter was $630 million, compared with $468 million in the prior-year quarter. Revenue included $486 million in Tactical Radio Communications and $144 million in Public Safety and Professional Communications. Organic growth for the segment was 22 percent.
Operating income for RF Communications was $220 million in the fourth quarter, compared with $134 million in the prior-year quarter. Non-GAAP operating income, which excludes acquisition-related costs, was $227 million, compared with $144 million in the prior-year quarter. Non-GAAP operating margin was very strong at 36.0 percent due to favorable product mix and operational efficiencies.
New orders for Tactical Radio Communications systems in the fourth quarter were driven by several factors, including continued customer adoption of next-generation Falcon III® radios, equipping the military's MRAP and M-ATVs (Mine Resistant Ambush Protected All-Terrain Vehicles) with Falcon II® and Falcon III radios, and strengthening international demand.
Major Falcon III radio wins in the U.S. market included a $24 million order from the U.S. Air Force for Falcon III AN/PRC-152(C) multiband handheld radios; orders from the U.S. Department of Defense of $20 million and $11 million for Falcon III AN/PRC-117G multiband manpack radio systems and $17 million for Falcon III AN/PRC-152(C) handheld radios; an $11 million order from the U.S. Marine Corps for Falcon III AN/VRC-110 multiband, multimode vehicular tactical radio systems*; and orders of $13 million and $27 million for Falcon III AN/PRC-152(C) multiband handheld radio systems in vehicular adapters to equip the military's MRAP vehicle program.
Other significant U.S. orders in the fourth quarter included a $139 million order to provide additional Falcon II AN/VRC-104 high-frequency (HF) tactical radio systems for the MRAP vehicle program and also a $101 million order for Falcon II AN/PRC-117F multiband vehicular radios to equip the next phase of M-ATV purchases and to retrofit other existing MRAP vehicles.
Growing demand in the international market was a key driver in the quarter of higher than expected orders and backlog for tactical radios. International wins in the quarter also included several Falcon III awards. Harris received orders totaling $99 million from a customer in Asia for the next phase of a comprehensive, multi-level C4I system of Falcon II HF radios and Falcon III radios, including RF-7800S secure personal radios, RF-7800M multiband networking radios, and RF-7800W high-capacity line-of-sight radios; a $30 million order from a customer in the Middle East for Falcon II HF radio systems; an $11 million order from a customer in Central Asia for Falcon II and Falcon III radios to support its role as a Partnership for Peace nation; and orders totaling $26 million from two NATO countries for Falcon III AN/PRC-152(C) handheld radios.
In the Public Safety and Professional Communications business, Harris received a $30 million order to deploy a P25 trunked emergency radio communications system to support up to 25,000 public service and public safety users in Monroe County, New York. Other major orders included $23 million for an OpenSky® communications system from an energy company in the southwest U.S.; $9 million from Franklin County, North Carolina for a P25 radio communications system; and $5 million from the New York State Police for Unity XG-100P multiband radios.
Government Communications Systems
Fourth quarter revenue for the Government Communications Systems segment was $707 million, compared with $704 million in the prior-year quarter. Operating income was $74 million in the fourth quarter, compared with $77 million in the prior-year quarter. Non-GAAP operating income, which excludes acquisition-related costs, was $78 million in the fourth quarter, and was unchanged from the prior-year quarter. Non-GAAP operating margin was a strong 11.0 percent in the fourth quarter.
Revenue increased for the Geostationary Operational Environmental Satellite — Series R Ground Segment (GOES-R GS) weather program for the National Oceanic and Atmospheric Administration (NOAA), the Modernization of Enterprise Terminals (MET) program for the U.S. Army, the Joint Strike Fighter program for the Department of Defense, and the IT services relocation program for the U.S. Southern Command (USSOUTHCOM). As expected, revenue from the Field Data Collection Automation (FDCA) program for the U.S. Census Bureau's 2010 census declined $50 million compared with the prior-year quarter as the program nears completion. Revenue also benefited from recent acquisitions related to new growth initiatives, primarily in Healthcare Solutions.
In the fourth quarter, Harris was awarded a six-year, $97 million contract with the Federal Aviation Administration for the Weather and Radar Maintenance and Sustainment Services II program. The scope includes software maintenance releases, depot support, on-site field support, and engineering services at 22 operational FAA facilities in the U.S. Harris also was awarded in the quarter a 30-month, $25 million contract to modernize and support high-bandwidth network cabling at Air National Guard (ANG) sites nationwide; a $55 million contract for advanced satellite terminals under the U.S. Army's MET program; and a $25 million contract from a national intelligence customer.
Following the close of the quarter, Harris was awarded a 10-year, $130 million contract to supply antennas and control systems for NOAA's Geostationary Operational Environmental Satellite Series-R (GOES-R) program. The antennas will provide communications links for command, telemetry and sensor data, as well as the communications link to direct data users. The new antennas will operate with next-generation GOES-R satellites and will be compatible with existing GOES-N through GOES-P satellites.
Orders in the Broadcast Communications segment were $111 million in the fourth quarter and were weaker compared with the prior-year quarter of $127 million. Revenue in the fourth quarter was $128 million compared with the prior-year quarter of $130 million.
Operating loss in the fourth quarter was $21 million and included $7 million in charges related to cost-reduction actions and $6 million in inventory write-downs associated with weaker demand. Operating results reflected continuing market weakness in the traditional U.S. broadcast market as well as increased investment to address new media and international growth opportunities. Additional cost-reduction actions are planned for fiscal 2011 and are expected to result in additional charges of about $7 million.
Orders in the fourth quarter included $9 million for turnkey, high-power AM radio transmitter systems for the Pakistan Broadcasting Corporation funded through USAID; $4 million for the Korean Broadcasting System for high-powered AM radio transmitters; $3 million for Viditec S.A. in Argentina to begin to deploy the country's first digital terrestrial transmission system; and $3 million for TCN Channel Nine PTY LTD. in Australia to continue to build out the company's playout and news centers.
Due to the acquisition of CapRock Communications, the company increased its guidance for non-GAAP income from continuing operations for fiscal 2011 to a range of $4.60 to $4.70 per diluted share ($4.55 to $4.65 per diluted share on a GAAP basis), representing a year-over-year increase of 4 to 6 percent. This compares with a previous range of $4.55 to $4.65 per diluted share ($4.55 to $4.65 per diluted share on a GAAP basis). Fiscal 2011 non-GAAP earnings guidance excludes acquisition-related costs.
Fiscal 2011 revenue is now expected to be in a range of $5.9 to $6.0 billion, representing a year-over-year increase of 13 to 15 percent compared with the prior year. This compares with a previous range of $5.5 to $5.6 billion.
Harris will host a conference call today, August 3, at 4:30 p.m. Eastern Time (ET) to discuss its fourth quarter fiscal 2010 financial results. The dial-in numbers for the teleconference are (800) 299-0148 (U.S.) and (617) 801-9711 (International), using participant code 93828851. Please allow at least 10 minutes prior to the scheduled start time to connect to the teleconference. Participants are encouraged to listen via webcast, which will be broadcast live at www.harris.com/conference-call. A replay of the teleconference will be available beginning at 7:30 p.m. ET on August 3, and will run until midnight ET on Tuesday, August 10. To access the replay, please call (888) 286-8010 (U.S.) or (617) 801-6888 (International), access code 90846456. A recording of the call also will be available on the Harris website beginning at 7 p.m. ET on August 3.
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 approximately $5 billion of annual revenue and more than 15,000 employees — including nearly 7,000 engineers and scientists. Harris is dedicated to developing best-in-class assured communications® products, systems, and services. Additional information about Harris Corporation is available at www.harris.com.
*Release language has been slightly modified from version issued over PR Newswire.
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Non-GAAP Financial Measures
Attachments: Financial Statements (eight tables).
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