HRS does it again....and that Gap is now in sight.
Harris Corporation Reports Record Earnings Per Share of $.57 on 27% Revenue Growth in Fourth Quarter
MELBOURNE, Fla., Jul 28, 2004 /PRNewswire-FirstCall via COMTEX/ -- Harris
Corporation (NYSE: HRS) today announced results for its fiscal 2004 fourth
quarter. The company reported strong revenue growth and improved operating
performance across each of its government and commercial businesses.
Revenue in the fourth quarter of fiscal 2004 increased 27 percent to $723
million, compared to $571 million in the prior-year quarter. Fourth quarter
results include the previously announced sale of the tools and test systems
product line, which is reported as discontinued operations, and charges
associated with cost-reduction actions. Net income for the fourth quarter of
fiscal 2004 was $38.2 million, or $.57 per diluted share, compared to $0.7
million, or $.01 per diluted share in the prior-year quarter. Net income in the
fourth quarter of fiscal 2003 also included charges associated with
cost-reduction actions.
Non-GAAP income from continuing operations in the fourth quarter, which excludes
charges associated with cost-reduction actions, increased 44 percent to $38.2
million, or $.57 per diluted share. This compares to non-GAAP income from
continuing operations of $26.5 million, or $.40 per diluted share in the
prior-year quarter, which excludes charges associated with cost-reduction
actions, the discontinuation of telecom products, and the exit of the telecom
switch business.
Total revenue for fiscal year 2004 increased 22 percent to $2.52 billion,
compared to $2.06 billion in fiscal 2003. Net income for the fiscal year
increased 123 percent to $132.8 million, or $1.99 per diluted share. This
compares to prior-year net income of $59.5 million, or $.90 per diluted share.
"Improved fourth quarter financial results in our commercial businesses --
Broadcast Communications and Microwave Communications -- are encouraging," said
Howard L. Lance, chairman, president, and chief executive officer. "We delivered
top-line growth in both businesses as revenue increased 19 percent in Microwave
and 15 percent in Broadcast, compared to the prior-year quarter. The Microwave
division returned to profitability, excluding the impact of fourth quarter
cost-reduction actions. Profitability in the Broadcast segment also improved.
Fourth quarter cost-reduction actions implemented in both businesses will
support further profitability improvement in fiscal 2005.
"Our two government businesses continued to deliver strong revenue growth and
excellent operating performance," Lance added. "Government Communications
Systems and RF Communications divisions are expected to continue to benefit from
their diverse customer base and broad portfolio of tactical and strategic
programs that support U.S. government and international customers."
Government Communications Systems
Fourth quarter revenue in the Government Communications Systems segment
increased 37 percent to $435 million, compared to $317 million in the prior-
year quarter. Operating income increased 40 percent to $42.2 million. The
division continued to demonstrate outstanding performance on defense,
intelligence, civil, and technical service programs.
Segment revenue exhibited strong momentum across the entire business. Major
contributors to growth during the quarter included numerous classified programs,
the FAA Telecommunications Infrastructure (FTI) program, the Iraqi Media Network
(IMN) program, the MAF/Tiger database modernization program for the U.S. Census
Bureau, and additional Department of Defense programs for avionics, satellite
communications, and missile defense.
Following the quarter, Harris completed the acquisition of Orkand Corporation
for $66 million in cash. Orkand revenue was $84 million for the 12 months ended
June 2004. The acquisition is expected to be immediately accretive to earnings.
Orkand adds significant scale to the company's mission-critical services
business and provides insight into business development opportunities with
several new customers including the Department of State, Department of Labor,
Department of the Interior, Department of Health and Human Services, Department
of Energy, and the U.S. Postal Service.
RF Communications
The RF Communications segment reported a 21 percent increase in fourth quarter
revenue to $120 million, compared to $99 million in the prior-year quarter.
Operating income increased 18 percent to $31.4 million in the fourth quarter.
Harris' Falcon(R) II tactical radio is well known as the "radio of choice" on
the battlefield and has experienced unprecedented demand. The interoperability
of the Falcon family of radios has become increasingly important as countries
seek communications superiority for joint missions. Orders in the quarter
included a $15 million contract to provide tactical radios for forces being
deployed to Iraq and Afghanistan as part of the U.S. Army
rapid-fielding-initiative. Additional orders came from the U.S. Marine Corps,
U.S. Air Force, and from NATO members Romania, Latvia, Norway, and France.
Additional orders were received from Pakistan, Albania, Oman, Uganda, and
Tunisia.
The next generation radio for the U.S. government, the Falcon III(TM), is
currently under development and incorporates JTRS (Joint Tactical Radio System)
technology and waveforms, and will be compatible with radios currently in the
field.
Microwave Communications
Fourth quarter revenue grew 19 percent in the Microwave Communications segment.
Revenue reached $97 million, compared to $81 million in the prior year. Revenue
improvement was driven by growth in the Middle East and Africa. This included a
project with MTN Nigeria to supply, design, and implement Harris MegaStar(R)
radios for its high-capacity GSM network, and a project with MTC-Vodafone in
Kuwait utilizing Harris NetBoss(R) software as the foundation of an Integrated
Network Management System.
The segment reported a fourth quarter loss of $5.8 million, compared to a loss
of $9.2 million in the prior year. Gross margin improved in the quarter both
sequentially and compared to the prior year, and the segment returned to
profitability, excluding the impact of a $7.3 million charge for cost- reduction
actions. There was an $8.6 million charge for cost reductions in the prior-year
quarter.
Results in the fourth quarter do not reflect the future benefit of the
cost-reduction actions announced in the quarter, which are expected to have a
payback period of less than 12 months. The actions include a workforce reduction
of 100 worldwide and the transfer of 140 jobs related to administration and
support functions in Redwood Shores, California, to the lower-cost operations in
Research Triangle Park, North Carolina. The division also established production
and support for the new TRuepoint(TM) microwave radio family at its San Antonio,
Texas, facility where the successful Constellation(R) and MegaStar(R) product
lines are manufactured.
During the quarter, Harris' new TRuepoint(TM) 5000 radio was selected for
wireless infrastructure projects in Argentina, Indonesia, and Romania.
Broadcast Communications
Revenue in the Broadcast Communications segment grew 15 percent to $89 million,
up from $77 million in the prior-year quarter. Revenue from the IMN project
drove the increase.
During the fourth quarter, the Broadcast division won a $6.5 million order for
12 high-power DTV transmitters from a major station group and an order for 17 HD
Radio(TM) transmitters from Clear Channel, the largest radio broadcaster in the
U.S. Automation orders were received from Sky Italia Roma, PCTV in Mexico, and
Corinthian Television in the United Kingdom.
The segment reported income of $3.9 million in the fourth quarter. Cost-
reduction actions taken in the fourth quarter included a headcount reduction of
100 in the U.S. and Europe and are expected to provide further profitability
improvement in fiscal 2005. The related charges of approximately $4 million in
the quarter were offset by the reversal of a previously established reserve for
the consolidation of the company's European broadcast operations. The prior-year
quarter had an operating loss of $2.4 million and included a $4.4 million charge
associated with cost-reduction actions.
"The rebound in revenue to $89 million and the improvement in profitability are
encouraging," said Lance. "We also have realigned the organization into five
market-focused, customer-facing business units to drive revenue growth and
improve customer responsiveness. To further support this effort, we have added
bench-strength to an already seasoned management team."
Financial Position
The company's financial position and level of liquidity continue to be very
strong. Positive cash flow provided by operations during fiscal 2004 totaled
$270 million, compared to $153 million in the prior year. Cash and cash
equivalents on hand at the end of the year were $628 million, substantially
greater than the $411 million total debt outstanding. Days sales outstanding and
inventory turnover for the fiscal year improved significantly compared to the
prior year.
Outlook
"Harris is uniquely positioned to leverage opportunities in both the government
and commercial communications markets," said Lance. "In our Broadcast and
Microwave businesses, we have taken additional cost-reduction actions, realigned
organization structures to better serve our markets, and introduced important
new products. We expect the contribution from our commercial businesses to
increase the overall profitability of Harris in fiscal 2005.
"In our government businesses, strong demand for mobility, interoperability, and
speed of communications around the world supports continued momentum. We have a
sizeable program backlog and numerous new opportunities that we are pursuing.
Although we continue to be cautious regarding total U.S. government spending
levels, we will benefit from our well-diversified customer and program base. We
believe that the long overdue transformation of the global defense
communications infrastructure currently underway is absolutely critical to
provide greater national security, and it will remain an area of great focus and
investment.
"We are confident in our ability to deliver earnings growth for fiscal 2005 in
the range of $2.25 to $2.35 per diluted share," Lance said. "This represents
growth of 15 to 20 percent compared to income from continuing operations of
$1.96 per diluted share on a non-GAAP basis for fiscal 2004."
Harris Corporation is an international communications technology company focused
on providing assured communications(TM) products, systems and services for
government and commercial customers. The company's operating divisions serve
markets for government communications, tactical radio, broadcast, and microwave
systems. Harris provides systems and service to customers in more than 150
countries. Additional information about Harris Corporation is available at
harris.com.
NOTE: In conjunction with the quarterly earnings release, the company will
conduct a conference call on Wednesday, July 28 at 5 p.m. (ET). Interested
individuals are invited to listen to the call by using a dial-in number: (719)
457-2621, access code: 662982. The conference call also will be broadcast live
via the Internet at harris.com and a replay will be
available at the same site.
Non-GAAP Financial Measures |
