-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NIAqygsfA1FPlFDw4htxGaDbUCBG1tQQ8/LLb/4Q9PTCX7L75MsmKdGCrX4QKB57 2iPDyte/aKF84NJugEVxtw== 0000950152-96-005774.txt : 19961111 0000950152-96-005774.hdr.sgml : 19961111 ACCESSION NUMBER: 0000950152-96-005774 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961108 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARRIS CORP /DE/ CENTRAL INDEX KEY: 0000202058 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 340276860 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03863 FILM NUMBER: 96656731 BUSINESS ADDRESS: STREET 1: 1025 W NASA BLVD CITY: MELBOURNE STATE: FL ZIP: 32919 BUSINESS PHONE: 4077279100 MAIL ADDRESS: STREET 1: 1025 W NASA BLVD CITY: MELBOURNE STATE: FL ZIP: 32919 FORMER COMPANY: FORMER CONFORMED NAME: HARRIS SEYBOLD CO DATE OF NAME CHANGE: 19600201 10-Q 1 HARRIS CORPORATION 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form l0-Q [X] QUARTERLY REPORT PURSUANT TO SECTION l3 or l5(d) OF THE SECURITIES EXCHANGE ACT OF l934 For the quarterly period ended September 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------- ------------ Commission File Number l-3863 HARRIS CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 34-0276860 ========================= ================== (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) l025 West NASA Boulevard Melbourne, Florida 329l9 ===================================== (Address of principal executive offices) (407) 727-9l00 =============================== (Registrant's telephone number, including area code) =============================== Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5 (d) of the Securities Exchange Act of l934 during the preceding l2 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the registrant's common stock, as of October 29, 1996 was 38,969,998 shares. 2 PART I. FINANCIAL INFORMATION ----------------------------- Item 1. Financial Statements - ----------------------------- HARRIS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF INCOME The following information for the quarters ended September 30, 1996 and September 30, 1995 has not been audited by independent accountants, but in the opinion of management reflects all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results for the indicated periods. The results of operations for the quarter ended September 30, 1996 are not necessarily indicative of the results for the full fiscal year.
Quarter Ended --------------------------- September 30, September 30, 1996 1995 ------------- ------------- (In millions, except per share amounts) Revenue Revenue from sales, rentals and services $ 883.4 $ 816.7 Interest 9.1 8.7 ------- ------- 892.5 825.4 Costs and Expenses Cost of sales, rentals and services 585.7 545.1 Engineering, selling and administrative expenses 230.9 211.5 Interest 14.8 15.0 Other - net 2.9 2.2 ------- ------- Income before income taxes 58.2 51.6 Income taxes 20.1 18.1 ------- ------- Net Income $ 38.1 $ 33.5 ======= ======= Net Income Per Common Share (Primary) $ .98 $ .86 ======= ======= Cash Dividends Paid Per Common Share $ .38 $ .34 ======= =======
See Notes to Financial Statements (2) 3 HARRIS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET
September 30, June 30, 1996 1996 ------------- -------- ASSETS (In millions) Current Assets Cash and cash equivalents $ 67.7 $ 74.6 Marketable securities 26.4 24.8 Trade accounts and notes receivable - net, less allowance for collection losses of $32,200,000 at September 30, 1996 and $31,300,000 at June 30, 1996 705.3 727.8 Unbilled costs and accrued earnings on fixed price contracts based on percentage-of-completion accounting, less progress payments of $225,600,000 at September 30, 1996 and $216,600,000 at June 30, 1996 399.3 397.8 Inventories: Work in process and finished products 462.5 412.7 Raw materials and supplies 133.6 131.4 -------- -------- 596.1 544.1 Deferred income taxes 165.3 171.8 -------- -------- Total Current Assets 1,960.1 1,940.9 Plant and equipment, less allowances for depreciation of $1,299,600,000 at September 30, 1996 and $1,278,100,000 at June 30, 1996 780.8 721.7 Notes receivable - net 199.8 190.7 Intangibles resulting from acquisitions 208.8 212.8 Other assets 177.1 140.6 -------- -------- $3,326.6 $3,206.7 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term debt $ 174.4 $ 181.3 Trade accounts payable 170.2 209.0 Compensation and benefits 215.7 209.3 Other accrued items 220.0 190.8 Advance payments and unearned income 295.3 287.8 Income taxes 100.1 102.7 Current portion of long-term debt 2.0 2.2 -------- -------- Total Current Liabilities 1,177.7 1,183.1 Deferred income taxes 60.5 62.2 Long-term debt 688.8 588.5 Shareholders' Equity Capital stock: Preferred Stock, without par value: Authorized - 1,000,000 shares; issued - none -- -- Common Stock, par value $1 per share: Authorized - 250,000,000 shares; issued 38,961,770 shares at September 30, 1996 and 38,871,603 at June 30, 1996 39.0 38.9 Other capital 275.4 266.0 Retained earnings 1,096.1 1,072.7 Net unrealized gain on securities available-for-sale (net of taxes) 12.1 11.1 Unearned compensation (8.5) .3 Cumulative translation adjustments (14.5) (16.1) -------- -------- Total Shareholders' Equity 1,399.6 1,372.9 -------- -------- $3,326.6 $3,206.7 ======== ========
See Notes to Financial Statements (3) 4 HARRIS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Quarter Ended ---------------------------- September 30, September 30, 1996 1995 ------------- ------------- (In millions) Cash flows from operating activities Net income $ 38.1 $ 33.5 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of plant and equipment 41.8 41.3 Non-current deferred income tax (1.7) 6.5 (Increase) decrease in: Accounts and notes receivable 13.4 32.8 Unbilled costs and inventories (53.5) (54.2) Other assets (37.1) (16.3) Increase (decrease) in: Trade payables and accrued expenses (3.2) (40.7) Advance payments and unearned income 7.5 (2.2) Income taxes 3.9 (21.8) Other 5.3 (2.2) ------ ------ Net cash provided by (used in) operating activities 14.5 (23.3) Cash flows from investing activities Cash paid for acquisition of business -- (8.1) Additions of plant and equipment (101.6) (45.0) ------ ------ Net cash used in investing activities (101.6) (53.1) ------ ------ Cash flows from financing activities Increase (decrease) in short-term debt (7.1) 12.0 Increase in long-term debt 100.3 .1 Proceeds from sale of Common Stock 2.4 2.6 Purchase of Common Stock for treasury -- (1.7) Cash dividends (14.7) (13.3) ------ ------ Net cash provided by (used in) financing activities 80.9 (.3) ------ ------ Effect of exchange rate changes on cash and cash equivalents (.7) .5 ------ ------ Net decrease in cash and cash equivalents (6.9) (76.2) Cash and cash equivalents, beginning of year 74.6 119.3 ------ ------ Cash and cash equivalents, end of quarter $ 67.7 $ 43.1 ====== ======
See Notes to Financial Statements (4) 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1996 Note A -- Basis of Presentation - ------------------------------- The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and changes in cash flows in conformity with generally accepted accounting principles. For further information refer to the financial statements and notes to financial statements included in the Corporation's Annual Report on Form 10-K for the fiscal year ended June 30, 1996. Note B -- Reclassifications - --------------------------- Prior year amounts have been reclassified to conform with current year classifications. Note C -- Litigation - -------------------- In December 1992, a jury in a California state court awarded a California software company $13.4 million in compensatory damages and $85.0 million in punitive damages against the Corporation. In May 1993, the court reduced the punitive damages to $53.4 million, and entered judgment for the compensatory and punitive damages, together with interest and costs of suit. The suit arose from an August 11, 1989 contract between the plaintiff and a discontinued operation of the Corporation. The Corporation appealed the award to the California Court of Appeal and on July 23, 1996, the court rendered its opinion. The Court of Appeal reversed the award of punitive damages. The breach of contract judgment was affirmed but remanded to the trial court for retrial solely on the issue of compensatory damages with directions to limit the period of time for which damages can be awarded. The plaintiff's petitions for rehearing by the California Court of Appeal and for review by the California Supreme Court have been denied. In light of the Court of Appeal's opinion, it is management's belief that the ultimate outcome of this litigation will not have a material effect on the Corporation's financial results. (5) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results - ------------------------------------------------------------------------------- of Operation - ------------ Net sales, operating profit and net income for the first quarter were higher than the same period last year by 8.2 percent, 12.8 percent and 13.7 percent, respectively. Segment net sales, operating profit and net income were as follows:
Quarter Ended --------------------------- September 30, September 30, Percent 1996 1995 Change ------------ ------------- ------- (Dollars in Millions) NET SALES Electronic Systems $254.4 $213.7 19 Semiconductor 161.5 172.6 (6) Communications 208.1 180.6 15 Lanier Worldwide 259.4 249.8 4 ------ ------ Total $883.4 $816.7 8 ====== ====== OPERATING PROFIT Electronic Systems $ 19.3 $ 20.4 (5) Semiconductor 20.7 19.1 8 Communications 19.6 15.8 24 Lanier Worldwide 22.7 21.4 6 Corporate Expense (9.3) (10.1) (8) Interest Expense (14.8) (15.0) (1) ------ ------ Total $ 58.2 $ 51.6 13 ====== ====== NET INCOME Electronic Systems $ 8.0 $ 7.6 5 Semiconductor 10.0 9.4 6 Communications 9.6 7.6 26 Lanier Worldwide 10.5 8.9 18 ------ ------ Total $ 38.1 $ 33.5 14 ====== ======
Sales were up strongly in the Electronic Systems segment while operating profit was marginally lower and net income was marginally higher. This year's first quarter included write-offs on certain programs where follow-on business now appears unlikely. Additionally, net income benefited from lower income tax rates compared to last year's first quarter. Semiconductor segment sales were moderately lower as sales of commodity products declined due to an industry-wide downturn in orders. Segment operating profit and net income increased on significantly higher royalty income and improved margins in military and space products and intelligent power circuits compared to the same period last year. Increases in the Communications segment sales and earnings were led by strong growth in the segment's microwave and telephone test equipment businesses. The 24 percent increase in operating profit and 26 percent increase in net income reflected increasing gross margin and slightly lower income tax rates. Lanier Worldwide reported a small increase in sales for both domestic and international operations. Earnings in this year's first quarter benefited from the strength of the U.S. dollar verses the Japanese Yen, resulting in lower product costs and higher operating margins. Cost of sales as a percentage of net sales decreased to 66.3 percent versus 66.7 percent in last year's first quarter. Cost ratios were lower in the Semiconductor segment due to increased royalties and in the Lanier segment due to favorable foreign exchange rates. (6) 7 Engineering, selling, and administrative expenses as a percentage of net sales increased from 25.9 percent last year to 26.1 percent in this year's first quarter. Higher research and development in all four segments contributed to higher operating expenses. Interest expense in the first quarter decreased from the prior year due to capitalization of interest on plant and equipment under construction and lower interest rates. This decrease was partially offset by higher average borrowings. The provision for income taxes as a percentage of pretax income was 34.5 percent in the first quarter, compared to 35.0 percent in the prior year's first quarter. The statutory federal tax rates for both periods was 35.0 percent. The tax rates on foreign source income and export sales benefited both periods. Income as a percentage of sales was 4.3 percent in the first quarter, compared to 4.1 percent in the same period last year for the previously stated reasons. Working capital increased from 757.8 at June 30, 1996, to 782.4 at the end of the first quarter due to higher inventories. The Corporation continues to invest heavily in the capital expansion of its Semiconductor business. Total capital expenditures for the Corporation in fiscal 1997 are expected to be between $300-$400 million. The requirement for funds to finance this investment and other operational requirements during fiscal 1997 will be met by cash flow from operations and unused borrowing capacity. From time to time, the Corporation invests in emerging technology companies that complement existing product lines. These investments are normally accounted for on a cost basis. One such investment, Advanced Fiber Communications, Inc., undertook an initial public offering of its common stock on October 1, 1996. Because of certain restrictions, the Corporation cannot sell any of its approximately 5% interest until April 1, 1997. Based upon the quoted market price of AFC on October 31, 1996, the unrealized gain on this investment was $59.6 million after tax. At the present time, the Corporation has no definitive plans to sell this investment when the restrictions expire. (7) 8 PART II. OTHER INFORMATION -------------------------- Item 1. Legal Proceedings. ------------------ See Notes to Financial Statements. Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) Exhibits: (11) Statement re: computation of per share earnings. (27) Financial Data Schedule (b) Reports on Form 8-K. The Registrant filed with the Commission a Current Report on Form 8-K on July 23, 1996 relating to the decision of the California Court of Appeal dicussed under "Note C -- Litigation" of the Notes to the Condensed Consolidated Financial Statements, the announcement of its financial results for the fiscal year ended June 30, 1996 and the declaration of effectiveness of the Registrant's Registration Statement on Form S-3. Items 2, 3, 4, and 5 of Part II are not applicable and have been omitted. SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HARRIS CORPORATION ------------------------------- (Registrant) Date: November 8, 1996 By:/s/Bryan R. Roub ------------------------------- Bryan R. Roub Senior Vice President & Chief Financial Officer (principal financial officer and duly authorized officer) (8) EX-11 2 EXHIBIT 11 1 EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE ----------
Quarter Ended ---------------------------- September 30, September 30, 1996 1995 ------------- ------------- (In millions except per share amounts) Primary: Average shares outstanding 38.9 39.1 ====== ====== Net income $ 38.1 $ 33.5 ====== ====== Net income per share - primary $ .98 $ .86 ====== ====== Fully diluted: Total primary average shares outstanding 38.9 39.1 Dilutive stock options and employee stock purchase plan shares - based on treasury stock method using the greater of quarter- end market price or average market price .1 .1 ------ ------ Average fully diluted shares outstanding 39.0 39.2 ====== ====== Net income per share - fully diluted $ .98 $ .86 ====== ======
EX-27 3 EXHIBIT 27
5 1,000 3-MOS JUN-30-1997 JUL-01-1996 SEP-30-1996 67,700 26,400 737,500 32,200 596,100 1,960,100 2,080,400 1,299,600 3,326,600 1,177,700 688,800 39,000 0 0 1,360,600 3,326,600 883,400 892,500 585,700 230,900 2,900 0 14,800 58,200 20,100 38,100 0 0 0 38,100 .98 .98
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