Harris Corporation Reports Fiscal 2017 Second Quarter Results

Attachments: Financial statements (8 tables)

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 on 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 and revenue guidance for fiscal 2017; potential contract opportunities and awards; the potential value of contract awards; the anticipated uses of proceeds from the sales of the CapRock Communications and government IT services businesses; the anticipated level of share repurchases for fiscal 2017; reporting current and prior period financial results for government IT services as discontinued operations beginning in the third quarter of fiscal 2017; statements regarding the focus on growing core franchises with a technology advantage to deliver compelling value to customers; and other statements regarding outlook or that are not historical facts. 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, future trends and forward-looking statements could be affected by many factors, risks and uncertainties, including but not limited to: the loss of the company's relationship with the U.S. Government or a change or reduction in U.S. Government funding; potential changes in U.S. Government or customer priorities and requirements (including potential deferrals of awards, terminations, reductions of expenditures, changes to respond to the priorities of Congress and the Administration, budgetary constraints, debt ceiling implications, sequestration and cost-cutting initiatives); a security breach, through cyber attack or otherwise, or other significant disruptions of the company's IT networks and systems or those the company operates for customers; the level of returns on defined benefit plan assets and changes in interest rates; risks inherent with large long-term fixed-price contracts, particularly the ability to contain cost overruns; changes in estimates used in accounting for the company’s programs; financial and government and regulatory risks relating to international sales and operations; effects of any non-compliance with laws; the continued effects of the general weakness in the global economy and U.S. Government's budget deficits and national debt and sequestration; the company's ability to continue to develop new products that achieve market acceptance; the consequences of uncertain economic conditions and future geo-political events; strategic acquisitions and divestitures and the risks and uncertainties related thereto, including the company's ability to manage and integrate acquired businesses (including achieve estimated synergy savings and realize other expected benefits), the actual amount and timing of integration and other acquisition-related items and potential disruption to relationships with employees, suppliers and customers, including the U.S. Government, and to the company's business generally; performance of the company's subcontractors and suppliers; potential claims related to infringement of intellectual property rights or environmental remediation or other contingencies, litigation and legal matters and the ultimate outcome thereof; risks inherent in developing new and complex technologies and/or that may not be covered adequately by insurance or indemnity; changes in the company's effective tax rate; increased indebtedness and significant unfunded pension liability and potential downgrades in the company's credit ratings; unforeseen environmental issues; natural disasters or other disruptions affecting the company's operations; changes in future business or other market conditions that could cause business investments and/or recorded goodwill or other long-term assets to become impaired; the company's ability to attract and retain key employees, maintain reasonable relationships with unionized employees and manage escalating costs of providing employee health care; potential tax, indemnification and other liabilities and exposures related to Exelis' spin-off of Vectrus, Inc. and Exelis' spin-off from ITT Corporation; delays in, or failures in respect of, anticipated satisfaction of closing conditions or otherwise achieving the closing of the sale of the government IT services business; uses of proceeds from the sales of the CapRock Communications and government IT services businesses different from the company’s current expectations; or a level of share repurchases different from the company’s current expectations. Further information relating to these and other factors that may impact the company's results, future trends and forward-looking statements are disclosed in the company's filings with the SEC. The forward-looking statements contained in this release are made as of the date of this release, and the company 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.

For additional information, contact Harris Corporation at webmaster@harris.com.

Table 1

HARRIS CORPORATION

FY '17 Second Quarter Summary

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

   
Quarter Ended Two Quarters Ended

December 30,
2016

 

January 1,
2016 (A)

December 30,
2016

 

January 1,
2016 (A)

 
(In millions, except per share amounts)
Revenue from product sales and services $ 1,700 $ 1,748 $ 3,378 $ 3,458
Cost of product sales and services (1,138 ) (1,203 ) (2,258 ) (2,347 )
Engineering, selling and administrative expenses (276 ) (217 ) (572 ) (525 )
Non-operating income 1 2 1
Interest income 1 1 1
Interest expense (44 ) (46 ) (88 ) (93 )
Income from continuing operations before income taxes 244 282 463 495
Income taxes (76 ) (85 ) (139 ) (152 )
Income from continuing operations 168 197 324 343
Discontinued operations, net of income taxes 9   (349 ) 13   (347 )
Net income (loss) $ 177   $ (152 ) $ 337   $ (4 )
 
Net income (loss) per common share
Basic
Continuing operations $ 1.35 $ 1.59 $ 2.60 $ 2.77
Discontinued operations 0.07   (2.82 ) 0.11   (2.81 )
$ 1.42   $ (1.23 ) $ 2.71   $ (0.04 )
Diluted
Continuing operations $ 1.33 $ 1.58 $ 2.57 $ 2.75
Discontinued operations 0.07   (2.80 ) 0.11   (2.78 )
$ 1.40   $ (1.22 ) $ 2.68   $ (0.03 )
 
Cash dividends paid per common share $ 0.53 $ 0.50 $ 1.06 $ 1.00
Basic weighted average common shares outstanding 123.7 123.8 123.8 123.6
Diluted weighted average common shares outstanding 125.4 124.9 125.5 124.7
 

(A) Certain amounts have been reclassified to conform to current presentation of Harris CapRock Communications as discontinued operations

Table 2

HARRIS CORPORATION

FY '17 Second Quarter Summary

BUSINESS SEGMENT INFORMATION

(Unaudited)

     
Quarter Ended Two Quarters Ended
December 30,
2016
  January 1,
2016
December 30,
2016
  January 1,
2016
 
(In millions)
Revenue
Communication Systems $ 413 $ 489 $ 843 $ 943
Space and Intelligence Systems 468 446 921 881
Electronic Systems 384 381 745 756
Critical Networks (A) 454 446 905 910
Corporate eliminations (19 ) (14 ) (36 ) (32 )
$ 1,700   $ 1,748   $ 3,378   $ 3,458  
Income From Continuing Operations Before Income Taxes
Segment Operating Income:
Communication Systems $ 121 $ 121 $ 240 $ 259
Space and Intelligence Systems 77 68 157 135
Electronic Systems 79 63 153 132
Critical Networks (A) 75 63 135 123
Unallocated corporate income (expense) (65 ) 14 (135 ) (61 )
Corporate eliminations (1 ) (1 ) (2 ) (2 )
Non-operating income 1 2 1
Net interest expense (43 ) (46 ) (87 ) (92 )
$ 244   $ 282   $ 463   $ 495  
 

(A) Certain amounts in the quarter and two quarters ended January 1, 2016 have been adjusted to conform to current presentation of Harris CapRock Communications, which was formerly part of our Critical Networks segment, as discontinued operations

 

Table 3

HARRIS CORPORATION

FY '17 Second Quarter Summary

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 
Two Quarters Ended

December 30,
2016

 

January 1,
2016 (A)

 
(In millions)
Operating Activities
Net income (loss) $ 337 $ (4 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 101 114
Amortization of intangible assets from Exelis Inc. acquisition 66 66
Share-based compensation 22 19
Qualified pension plan contributions (103 ) (97 )
Pension income (49 ) (12 )
Net liability reduction for certain post-employment benefit plans (101 )
Impairment of goodwill and other assets 367
Adjustment to loss on sales of businesses, net 21
(Increase) decrease in:
Accounts receivable 125 220
Inventories (50 ) (91 )
Increase (decrease) in:
Accounts payable and accrued expenses (132 ) (128 )
Advance payments and unearned income (58 ) (59 )
Other 36   72  
Net cash provided by operating activities 295   387  
Investing Activities
Net additions of property, plant and equipment (49 ) (49 )
Adjustment to proceeds from sale of business (25 )  
Net cash used in investing activities (74 ) (49 )
Financing Activities
Proceeds from borrowings 185 209
Repayments of borrowings (300 ) (395 )
Proceeds from exercises of employee stock options 27 33
Repurchases of common stock (100 )
Cash dividends (134 ) (127 )
Other financing activities (19 ) (15 )
Net cash used in financing activities (341 ) (295 )
Effect of exchange rate changes on cash and cash equivalents (6 ) (13 )
Net increase (decrease) in cash and cash equivalents (126 ) 30
Cash and cash equivalents, beginning of year 487   481  
Cash and cash equivalents, end of quarter $ 361   $ 511  
 

 

(A) Certain amounts have been reclassified to conform to current period presentation

   

Table 4

HARRIS CORPORATION

FY '17 Second Quarter Summary

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

 
December 30, 2016 July 1, 2016 (A)
 
(In millions)
Assets
Cash and cash equivalents $ 361 $ 487
Receivables 762 871
Inventories 1,001 950
Property, plant and equipment 908 943
Goodwill 5,848 5,839
Other intangible assets 1,437 1,518
Other assets 1,301   1,385
$ 11,618   $ 11,993
Liabilities and Equity
Short-term debt $ 183 $ 15
Accounts payable 540 591
Compensation and benefits 130 166
Advance payments and unearned income 260 314
Current portion of long-term debt 130 382
Defined benefit plans 2,144 2,296
Long-term debt, net 4,087 4,120
Other liabilities 986 1,052
Equity 3,158   3,057
$ 11,618   $ 11,993
 

(A) Certain balances have been reclassified to conform to current presentation of Harris CapRock Communications as discontinued operations, which are included in the "Other assets" and "Other liabilities" captions above

HARRIS CORPORATION

FY '17 Second Quarter Summary

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE


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