Qtrly report for HRS blows away expectations; excellent cash generation during the Qtr. Very Impressive; Note comments on JTRS revenue....
Harris Corporation Reports 31% Increase in Net Income On 24% Increase in Revenue for First Quarter
MELBOURNE, Fla., Oct 21, 2003 /PRNewswire-FirstCall via COMTEX/ -- Harris
Corporation (NYSE: HRS) today reported that fiscal 2004 first quarter net income
increased 31 percent and revenue increased 24 percent, primarily as a result of
continuing strong performances in its government-related businesses.
Net income in the first quarter was $26.0 million, or $.39 per diluted share,
compared to the prior-year quarter of $19.9 million, or $.30 per diluted share.
Revenue in the first quarter was $559.2 million, versus $450.2 million in the
year-ago quarter. First quarter results included no contribution from
non-operating income, compared to $16.2 million of non- operating income in the
prior-year quarter.
"The performance of our Government Communications Systems and RF Communications
segments continues to drive significantly improved results for the company,"
said Howard L. Lance, chairman, president, and chief executive officer. "These
two government-related businesses are clearly outpacing growth in the industry.
Harris is successfully responding to near-term government priorities, as well as
long-term requirements for the modernization of communications infrastructures.
"We achieved meaningful improvement in our Network Support and Microwave
Communications segments during the quarter," Lance said. "However, results in
our Broadcast Communications segment were disappointing. There is still weakness
in many of our commercial markets and, as a result, visibility is limited.
Cost-reductions implemented in our commercial businesses during fiscal 2003 are
having a positive impact on fiscal 2004 operating results."
Government Communications Systems
First quarter operating income in the company's Government Communications
Systems segment increased 35 percent to $31.9 million, compared to $23.7 million
in the prior-year quarter. First quarter revenue increased 33 percent to $334.4
million, versus $252.0 million in the first quarter of fiscal 2003. It was the
14th consecutive quarter of year-over-year revenue growth, and the segment set
quarterly records for both revenue and income. Operating margin improved as a
result of program execution and performance award fees.
Revenue growth continued to be driven by classified programs in which Harris is
supporting a number of U.S. Government agencies. Growth also came from new
strategic programs won during the past two years, including Joint Strike Fighter
in the defense market, Space-Based Radar (SBR) in the national market, the FAA
Telecommunications Infrastructure and U.S. Census Bureau (MAF/TIGER) programs in
the civil market, and the U.S. Air Force Mission Communications Operations and
Maintenance (MCOM) program in the technical services market.
Awards during the quarter included numerous new wins in the classified area. In
addition, the company won contracts for satellite communications equipment for
the U.S. Missile Defense Agency's Sea-Based X-band Radar program and for
anti-jam electronics for the U.S. Air Force Small Diameter Bomb program. Harris
received a $38 million option on SBR and a $47 million option on MCOM. During
the quarter, Harris was named to the Northrop Grumman team that is pursuing the
Battle Management Command and Control II program for the E-10A multi-sensor
aircraft, and to the Lockheed Martin team pursuing Aerial Common Sensor, which
is a next-generation surveillance and reconnaissance program.
"This business segment is driven in great part by our ability to apply superior
technical solutions to meet challenging Assured Communications customer
requirements on both classified programs and other long-term strategic
government initiatives," Lance said. "To support this growth the segment has
hired more than 1,000 engineers and scientists in the past 15 months, a 20
percent increase in personnel. We recently reorganized this business to better
focus our resources on key customer markets where Harris has technical strength
and effective customer relationships."
RF Communications
The RF Communications segment reported operating income of $25.0 million in the
first quarter, a 69 percent increase compared to $14.8 million in the prior-year
quarter. Revenue in the segment increased 40 percent to $89.2 million, compared
to $63.8 million in the first quarter of 2003.
"The global War on Terrorism continues to drive strong domestic and
international demand for Harris' Falcon(R) II tactical radio," Lance said.
"Orders exceeded $100 million for the second consecutive quarter." New orders
during the quarter included the U.S. Army's 10th Mountain Division and 2nd
Infantry Division, and the U.S. Navy Seabees construction force. International
orders included radios for defense forces in Poland, Slovenia, Estonia, and
Turkey.
During the quarter, Harris joined with ITT and Boeing to pursue contracts under
Cluster 5 of the U.S. Joint Tactical Radio System (JTRS) program, which has a
potential value to Harris in excess of $500 million. The company's RF
Communications and Government Communications Systems segments have combined
resources to support JTRS Cluster 5. Led by the U.S. Army Communications and
Electronics Command (CECOM), Cluster 5 will encompass the DoD's next generation
of tactical systems that require manpack and handheld radios. The contract is
expected to be awarded in calendar 2004. In 2002, Harris was awarded a contract
for Cluster 1 of JTRS and is expected to provide approximately $600 million in
hardware development, security architecture, and cryptography over the next 15
years.
Microwave Communications
Revenue in the Microwave Communications segment was $65.6 million in the first
quarter of fiscal 2004, representing a 17 percent increase over the prior-year
quarter. The segment narrowed its operating loss to $2.2 million, compared to a
loss of $7.3 million in the first quarter of 2003.
Increased sales volume and cost reduction actions improved the results of this
segment during the quarter. North American orders and sales increased
significantly, compared to the prior-year quarter. "While we did see some
improvement in international orders and revenue this quarter, the international
markets are still relatively weak," Lance said. "We are not yet seeing a
consistent pattern of order activity that would signal a broad-based recovery in
the international telecom market.
"Last week, we introduced an important new Harris microwave radio platform,
called TRuepoint(TM), at the ITU World Telecom show in Geneva," Lance said.
"TRuepoint will provide our customers with a scalable platform that can easily
adapt to meet current and future requirements. TRuepoint is currently in trial
with a cellular network operator and shipments to customers will begin in the
first quarter of calendar 2004."
Network Support
The Network Support segment reported first quarter revenue of $15.1 million, a
14 percent increase over the prior-year quarter. The segment reported operating
income of $1.8 million, compared to an operating loss of $2.7 million in the
first quarter of fiscal 2003.
"Revenue improvement in the quarter was driven primarily by initial deliveries
of our new field technician test system, called EXP(TM)," Lance said. "We also
saw modest revenue improvement in our tools and test-set business. Higher
revenue, coupled with cost-reduction actions taken over the past two years in
this business, has resulted in strong improvement in operating margin."
Broadcast Communications
The Broadcast Communications segment reported sales of $58.4 million in the
first quarter, representing a 14 percent decline from the prior-year quarter.
Operating income was $1.1 million for the first quarter, compared to $1.9
million in the prior-year quarter.
"This tends to be a seasonally weak revenue quarter in our Broadcast segment,
however results were clearly disappointing, especially in our studio products
and systems business," Lance said. "Capital spending by both TV and radio
broadcasters did not pick up during the first quarter. DTV equipment sales
continued to be weak, but were partially offset by increased shipments of
international analog radio transmitters. Cost reductions are flowing through to
improve operating margins in our Broadcast business, and we will continue to
assess additional cost-reduction opportunities.
"Although we are currently experiencing a lull in broadcaster spending,
improvement in DTV equipment sales eventually will be driven by the requirement
for full-power conversion, which is scheduled to be completed by the end of
2006. Consumer demand continues to increase as indicated by growing sales of DTV
sets, additional hours of DTV programming, and the more than 1,000 stations
currently on the air. Harris is ideally positioned to take advantage of the
digital conversion as capital spending resumes."
Financial Position
The financial position and level of liquidity of Harris continues to be very
strong. Positive cash flow provided by operations during the first quarter
totaled $81.5 million, compared to $25.8 million in the prior-year quarter. Cash
and cash equivalents on hand at the end of the quarter were $506.6 million,
substantially greater than the $432.2 million total debt outstanding. The
earliest scheduled maturity of any long-term debt is in 2007, and the company
has in excess of $300 million of unused committed credit facilities available.
"Continuing improvement in operating cash flows provides the company with
flexibility to implement strategic initiatives," Lance said.
Outlook
"Clearly, we are off to a very good start in our first fiscal quarter. Revenue
and income were substantially ahead of expectations on the outstanding
performance of our two government-related businesses. We anticipate continuing
strong results from both businesses. First quarter results give us increased
confidence in achieving our fiscal year 2004 guidance of $1.50 to $1.65 per
diluted share."
Harris Corporation is an international communications technology company focused
on providing product, system and service solutions for government and commercial
customers. The company's five operating divisions serve markets for government
communications, tactical radio, broadcast, microwave, and network support
systems. Harris provides systems and service to customers in more than 150
countries. Additional information about Harris Corporation is available at
www.harris.com. |
