-----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, SDiUIZXiQH3ZudF772VIbZSRbfcDd5nKtMEm7CQDZyp+eCh5p2GY9+NJg/tfu8Yl MX2nyOPPwWw42anO/J53Mw== 0000950152-98-000693.txt : 19980205 0000950152-98-000693.hdr.sgml : 19980205 ACCESSION NUMBER: 0000950152-98-000693 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980102 FILED AS OF DATE: 19980204 SROS: NYSE 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: SEC FILE NUMBER: 001-03863 FILM NUMBER: 98521268 BUSINESS ADDRESS: STREET 1: 1025 W NASA BLVD CITY: MELBOURNE STATE: FL ZIP: 32919 BUSINESS PHONE: 4077279125 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 FORM 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 January 2, 1998 or [ ] 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 (I.R.S. Employer Identification No.) incorporation or organization) l025 West NASA Boulevard Melbourne, Florida 32919 ================================================ (Address of principal executive offices)(Zip Code) (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 January 30, 1998 was 79,895,841 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 January 2, 1998 and December 31, 1996, 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 January 2, 1998 are not necessarily indicative of the results for the full fiscal year.
Quarter Ended Two Quarters Ended ----------------------- ------------------------ January 2, December 31, January 2, December 31, 1998 1996 1998 1996 ---------- ----------- ---------- ------------ (In millions, except per share amounts) Revenue Revenue from sales, rentals and services $970.0 $945.9 $1,949.6 $1,829.3 Interest 9.7 9.1 19.5 18.2 ----- ----- ------- ------- 979.7 955.0 1,969.1 1,847.5 Costs and Expenses Cost of sales, rentals and services 641.0 634.3 1,296.8 1,220.0 Engineering, selling and administrative expenses 245.6 239.0 496.5 469.9 Interest 16.4 16.0 33.3 30.8 Other - net (3.1) (3.8) (3.4) (.9) ----- ----- ------ ------- Income before income taxes 79.8 69.5 145.9 127.7 Income taxes 27.1 24.0 49.6 44.1 ----- ----- ------ ------- Net Income $ 52.7 $ 45.5 $ 96.3 $ 83.6 ====== ====== ======= ======== Net Income Per Common Share Basic $.67 $.59 $1.22 $1.08 ==== ==== ===== ===== Diluted $.66 $.58 $1.20 $1.07 ==== ==== ===== ===== Average Shares Outstanding Basic 79.2 77.1 79.2 77.2 ==== ==== ==== ==== Diluted 80.2 78.2 80.1 78.2 ==== ==== ==== ==== Cash Dividends Paid Per Common Share $.22 $.19 $ .44 $ .38 ==== ==== ===== =====
See Notes to Financial Statements (2) 3 HARRIS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET
June 27, January 2, 1997 1998 (audited) ---------- --------- (In millions) ASSETS Current Assets Cash and cash equivalents $ 30.8 $ 70.7 Marketable securities 73.9 91.3 Accounts and notes receivable - net, less allowance for collection losses of $26,500,000 at January 2, 1998 and $28,300,000 at June 27, 1997 786.3 820.6 Unbilled costs and accrued earnings on fixed price contracts based on percentage-of-completion accounting, less progress payments of $191,400,000 at January 2, 1998 and $187,800,000 at June 27, 1997 309.7 324.8 Inventories: Work in process and finished products 508.4 493.1 Raw materials and supplies 122.1 118.0 ------- ------- 630.5 611.1 Deferred income taxes 130.9 145.0 ------- ------- Total Current Assets 1,962.1 2,063.5 Plant and equipment, less allowances for depreciation of $1,318,400,000 at January 2, 1998 and $1,282,300,000 at June 27, 1997 918.4 878.3 Notes receivable - net 213.2 217.7 Intangibles resulting from acquisitions 219.5 227.5 Other assets 302.7 250.9 -------- -------- $3,615.9 $3,637.9 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term debt $ 315.1 $ 296.3 Accounts payable 170.3 196.8 Compensation and benefits 198.9 216.9 Other accrued items 189.7 191.7 Advance payments and unearned income 258.1 290.9 Income taxes 93.6 96.0 -------- -------- Total Current Liabilities 1,225.7 1,288.6 Deferred income taxes 80.9 84.4 Long-term debt 686.4 686.7 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 79,834,460 shares at January 2, 1998 and 79,625,670 at June 27, 1997 79.8 39.8 (shares adjusted to reflect September 1997 two-for-one stock split) Other capital 266.9 289.9 Retained earnings 1,281.2 1,219.9 Net unrealized gain on securities available-for-sale (net of taxes) 43.2 53.8 Unearned compensation (7.7) 4.4 Cumulative translation adjustments (40.5) (29.6) -------- -------- Total Shareholders' Equity 1,622.9 1,578.2 -------- -------- $3,615.9 $3,637.9 ======== ========
See Notes to Financial Statements (3) 4 HARRIS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Two Quarters Ended -------------------------- January 2, December 31, 1998 1996 ---------- ------------ (In millions) OPERATING ACTIVITIES Net income $ 96.3 $ 83.6 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of plant and equipment 97.3 85.5 Non-current deferred income tax (3.4) 8.4 (Increase) decrease in: Accounts and notes receivable 40.9 (54.8) Unbilled costs and inventories (3.0) (65.4) Other assets (43.6) (37.4) Increase (decrease) in: Trade payables and accrued expenses (47.7) 8.6 Advance payments and unearned income (32.7) 9.0 Income taxes 11.3 (21.0) Other 4.9 8.8 ------ ------ Net cash provided by operating activities 120.3 25.3 ------ ------ INVESTING ACTIVITIES Cash paid for acquisitions (9.9) (5.6) Additions of plant and equipment (140.7) (197.5) ------ ------ Net cash used in investing activities (150.6) (203.1) ------ ------ FINANCING ACTIVITIES Increase in short-term debt 18.8 88.8 (Increase) decrease in long-term debt (.2) 100.4 Proceeds from sale of Common Stock 6.3 5.0 Cash dividends (35.0) (29.5) ------ ------ Net cash provided by (used in) financing activities (10.1) 164.7 ------ ------ Effect of exchange rate changes on cash and cash equivalents .5 (.1) ------ ------ Net decrease in cash and cash equivalents (39.9) (13.2) Cash and cash equivalents, beginning of year 70.7 74.6 ------ ------ Cash and cash equivalents, end of period $ 30.8 $ 61.4 ====== ======
See Notes to Financial Statements (4) 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 2, 1998 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/A for the fiscal year ended June 27, 1997. Note B -- Stock Split - --------------------- On August 23, 1997, the Board of Directors authorized a two-for-one stock split to shareholders of record on September 4, 1997. All references in the financial statements and exhibits to number of shares and per share amounts (except for the number of shares shown in Item 4 of this 10-Q) of the Corporation's Common Stock have been restated to reflect the increased number of shares outstanding. Note C -- Accounting Change - --------------------------- For the quarter ended January 2, 1998, the Corporation adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share". This standard requires reporting of both "basic" and "diluted" earnings per share. For periods presented, these amounts do not differ materially from amounts previously shown as "primary" and "fully diluted" earnings per share. Prior year results have been restated to conform with the new standard. Note D -- Credit Arrangements - ----------------------------- In October 1997, the Corporation extended the 364-Day $300 million portion of the $800 million syndicated credit facility for an additional 364-Day period. The $800 facility provides for drawings at interest rates determined by a pricing matrix based upon the Corporation's long-term debt rating. Note E -- Financial Instruments - ------------------------------- The Company uses foreign exchange contracts to hedge off-balance sheet foreign currency commitments and anticipated transactions. The Company has significant manufacturing operations in Malaysia and has a hedging program in place to set the exchange rates on the Company's foreign currency operating commitments in Malaysia. Under this hedging program, increases or decreases in the Company's local currency manufacturing costs and operating expenses are partially offset by realized gains and losses, respectively, on the hedging instruments. Malaysian Ringgit contracts at January 2, 1998 were as follows:
Contract Amount --------------- Deferred Gains Maturities In millions Ringgits U.S. Dollars and (Losses) (in months) - ---------------------------------------------------------------------------------------- Commitments to Buy 563.6 $203.5 $(61.7) 1-21 Commitments to Sell 10.3 2.6 .1 1-6
(5) 6 Item 2. Management's Discussion & Analysis of Financial Condition & Results of - ------------------------------------------------------------------------------ Operations. - ----------- RESULTS OF OPERATIONS Results for the second quarter and first two quarters were higher than the comparable periods a year ago. Segment net sales, operating profit and net income were as follows:
Quarter Ended Two Quarters Ended ----------------------------------------- --------------------------------------- Jan. 2, Dec. 31, Percent Jan. 2, Dec. 31, Percent 1998 1996 Inc./(Dec.) 1998 1996 Inc./(Dec.) ----------------------------------------- --------------------------------------- (Dollars in millions) NET SALES Communications $238.8 $248.4 (4) $ 479.0 $ 456.5 5 Semiconductor 174.7 161.3 8 355.5 322.8 10 Lanier Worldwide 318.9 294.1 8 616.1 553.5 11 Electronic Systems 237.6 242.1 (2) 499.0 496.5 (1) ----- ----- ------- ------- Total $970.0 $945.9 3 $1,949.6 $1,829.3 7 ===== ===== ======= ======= OPERATING PROFIT Communications $ 29.3 $ 22.0 33 $ 53.5 $ 41.6 29 Semiconductor 23.0 19.1 20 44.9 39.8 13 Lanier Worldwide 35.8 33.0 8 64.0 55.6 15 Electronic Systems 18.7 17.3 8 39.4 36.6 8 Corporate Expense (10.6) (5.9) 80 (22.6) (15.1) 50 Interest Expense (16.4) (16.0) 3 (33.3) (30.8) 8 ----- ----- ----- ----- Total $ 79.8 $ 69.5 15 $145.9 $127.7 14 ===== ===== ===== ===== NET INCOME Communications $15.7 $11.2 40 $ 28.0 $ 20.8 35 Semiconductor 12.1 9.6 26 22.7 19.6 16 Lanier Worldwide 17.2 16.7 3 29.4 27.2 8 Electronic Systems 7.7 8.0 (4) 16.2 16.0 1 ---- ---- ----- ----- Total $52.7 $45.5 16 $ 96.3 $ 83.6 15 ==== ==== ===== =====
Communications segment sales were slightly lower in the second quarter compared to a very strong prior year second quarter. Segment sales for the current quarter were negatively impacted by difficult market conditions associated with the Asian economy and the deferral of the use of microwave radios in the PCS rollout in the U.S. For the first two quarters sales were modestly higher. Earnings for the segment were significantly higher for the second quarter and year-to-date primarily due to gains from the sale of an investment security (Advanced Fibre Communications, Inc.), which was partially offset by the significant marketing expenses associated with the rollout of the segment's digital television product line. Net after-tax gains from the sale of AFCI securities in the current quarter were $7.4 million. Improvement in the segment's digital switch business, coupled with growth in the segment's microwave systems, broadcast products and telephone test equipment businesses, is expected to result in higher sales and earnings in fiscal 1998. Semiconductor segment sales were moderately higher for the quarter and year-to-date, while earnings were up sharply for the second quarter and moderately higher year-to-date. Improved sales and margins in the segment's power product line and productivity improvements throughout the business have helped offset the impact of industry-wide pricing pressure and the downturn in Asian markets. Royalty income continues to be significant for all periods presented. For the second half of fiscal 1998, the segment expects increased sales of higher margin products that should result in increased sales and earnings. The Lanier Worldwide segment had strong domestic sales for both the second quarter and the year-to-date compared to the prior year periods. Segment earnings did not keep pace with the increase in sales due to higher than anticipated product discounting which resulted in part from the weakening Japanese yen. For the second half of the fiscal year, the segment expects continuing strong sales growth and improving margins. Electronic Systems segment reported relatively flat sales for both the second quarter and the first two quarters reflecting declines in FAA programs and the spin-out of sales to a joint venture. Operating profit was modestly higher for both periods, while net income was slightly lower for the second quarter and flat for the year-to-date compared to last year's results. (6) 7 Segment results were bolstered by strong performance from the segment's information systems business. Revenue for the year is expected to be flat with moderately lower earnings, due to reduced margins from the segment's core defense products. Corporate expense increased significantly in the second quarter compared to the prior year's second quarter due to foreign currency gains included in the prior year results. Cost of sales as a percentage of net sales decreased to 66.1 percent in the second quarter and 66.5 percent in the first two quarters of this year, compared to 67.1 percent and 66.7 percent for the respective periods last year. Cost ratios were lower for the Communications and Electronic Systems segments. Engineering, selling, and administrative expenses as a percentage of net sales were unchanged for the second quarter and decreased to 25.5 percent for the year, compared to 25.7 percent last year due to lower operating expense ratios for the Lanier Worldwide and Electronic Systems segments. Total research and development expense, which includes both Company funded and customer sponsored, increased $24.1 million to $346.1 million for the first two quarters. Interest expense is higher for the second quarter and the first two quarters due to higher borrowings. The decrease in "Other-net" expense for the first two quarters compared to the prior year period resulted from increased gains from the sale of investment securities which were offset in part by losses on foreign currency transactions. The provision for income taxes as a percentage of pretax income was 34.0 percent in both the second quarter and the first two quarters, compared to 34.5 percent for the same periods a year ago. The statutory federal tax rate for all periods was 35.0 percent. All periods benefited from lower tax rates on foreign source income and export sales. Net income as a percentage of sales was 5.4 percent for the second quarter and 4.9 percent for the year-to-date, compared to 4.8 percent and 4.6 percent in the same periods last year for the previously stated reasons. LIQUIDITY AND FINANCIAL POSITION Working capital decreased from $774.9 million at June 27, 1997, to $736.4 million at the end of the second quarter due to lower receivables and unbilled costs on fixed price contracts. The Company continues to invest in the capital expansion of its semiconductor business. Total capital expenditures in fiscal 1998, including expenditures for customer rental equipment, are expected to be approximately $300 million. The requirement for funds to finance this investment and other operational requirements are expected to be met by cash flow from operations and unused borrowing capacity. YEAR 2000 ISSUE Certain software and hardware systems are time sensitive. Older time sensitive systems often use a two digit dating convention (e.g., "00" rather than "2000") that could result in system failure and disruption of operations as the Year 2000 approaches. The Year 2000 problem will impact the Company, its vendors and suppliers, customers, and other third parties that interface with the Company. The Company determined it needed to replace or modify many of its software applications so that these applications function properly in the future. The Company has replaced, or is in the process of replacing, many of its software applications that are time sensitive. The Company has programs for testing and reprogramming all other time sensitive software programs and equipment and anticipates completing its Year 2000 projects during fiscal 1999. The Company has also initiated communications with significant suppliers, customers and other relevant third parties to minimize disruptions to the Company's operations and to ensure that Year 2000 issues are satisfactorily resolved. However, there can be no certainty that the systems and products of other companies on which the Company relies will not have an adverse effect on the Company's operations. The Company has initiated formal programs to advise and work with customers to resolve Year 2000 problems; however, the Company believes it has no material exposure to contingencies related to the Year 2000 issue for the products it has sold. (7) 8 The Company believes that it will satisfactorily resolve all significant Year 2000 problems and that related costs will not be material. Estimates of Year 2000 related costs are based on numerous assumptions and there is no certainty that estimates will be achieved and actual costs could materially differ from those anticipated. Specific factors that might cause such differences include, but are not limited to, the continuing availability of personnel trained in this area, the ability to identify and correct all relevant computer programs, and similar uncertainties. FORWARD-LOOKING STATEMENTS This report contains, and certain of the Company's other public documents and statements and oral statements contain and will contain, forward-looking statements that reflect management's current assumptions and estimates of future performance and economic conditions. Such statements are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 projected, stated, or implied by the forward-looking statements. The Company's consolidated results and the forward-looking statements could be affected by, among other things, general economic conditions in the markets in which the Company operates; economic developments that have a particularly adverse effect on one or more of the markets served by the Company; ability to execute management's internal operating plans; fluctuation in foreign currency exchange rates and the effectiveness of the Company's currency hedging program; worldwide demand for integrated semiconductor circuits, particularly power products; reductions in the U.S. and worldwide defense and space budgets; effect of continuing consolidation in the U.S. defense industry on the Company's direct and indirect business with the U.S. government; the Company's ability to recover costs incurred on fixed price contracts; termination of customer contracts; continued development and market acceptance of new products, especially digital television broadcast products and semiconductor wireless products; continued success of the Company's patent licensing programs, particularly as it relates to the Semiconductor segment; and the successful resolution of patent infringement and other general litigation. (8) 9 PART II. OTHER INFORMATION -------------------------- Item 4. Submission of Matters to a Vote of Security Holders. - ------------------------------------------------------------- At the Annual Meeting of Shareholders held on October 24, 1997, the following proposals were adopted by the margins indicated. 1. To elect three nominees to the Board of Directors:
Nominee Number of Shares ------- ---------------- For Withheld --- -------- Ralph D. DeNuzio 34,375,322 266,769 Joseph L. Dionne 34,371,970 270,121 Alexander B. Trowbridge 34,375,122 266,969
2. To ratify the selection of Ernst & Young LLP as the independent public auditors of the Company for fiscal 1998: For 34,378,265 Against 199,628 Abstain 64,190 Item 6. Exhibits and Reports on Form 8-K. - ------------------------------------------ (a) Exhibits: (10) Material Contracts. (i) Supplemental Executive Retirement Plan (amended and restated effective January 1, 1998). (11) Statement re: Computation of Per Share Earnings. (27) Financial Data Schedule. (b) Reports on Form 8-K. No Current Reports on form 8-K were filed during the fiscal quarter ended January 2, 1998. Items 1, 2, 3 and 5 of Part II are not applicable and have been omitted. (9) 10 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: February 4, 1998 By:/s/Bryan R. Roub ------------------------------- Bryan R. Roub Senior Vice President & Chief Financial Officer (principal financial officer and duly authorized officer) (10) 11 EXHIBIT INDEX ------------- Exhibit No. Under Reg. S-K, Item 601 Description - ------------- ----------- 10(i) Supplemental Executive Retirement Plan (amended and restated effective January 1, 1998). (11) Statement re: Computation of Per Share Earnings. (27) Financial Data Schedule. EX-10.I 2 EXHIBIT 10(I) 1 Exhibit 10(i) HARRIS CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ARTICLE I - PURPOSE AND EFFECTIVE DATE The Harris Corporation Supplemental Executive Retirement Plan (the "SERP") is intended to provide deferred compensation to a "select group of management or highly compensated employees" (as defined in section 201(2) of ERISA) who are eligible to participate in the SERP. The SERP, as amended and restated herein, is effective as of January 1, 1998. ARTICLE II - DEFINITIONS Each capitalized term used herein shall have the meaning set forth in the Harris Corporation Retirement Plan, except as otherwise set forth below. 2.1. ACCOUNT - means an account established on the books of the Corporation on behalf of a Participant pursuant to Section 5.1. 2.2. CODE - means the Internal Revenue Code of 1986, as amended from time to time. 2.3. COMMITTEE - means the Corporation Committee, the members of which shall be appointed by the Investment Committee -- Retirement Plans of the Board of Directors of the Corporation. 2.4. COMPENSATION - means "Compensation" as defined in the Retirement Plan, except that the dollar limitation imposed on tax-qualified plans under section 401(a)(17) of the Code shall not apply. 2.5. CORPORATION - means Harris Corporation, a Delaware corporation. 2.6. ERISA - means the Employee Retirement Income Security Act of 1974, as amended from time to time. 2.7. FINANCIAL HARDSHIP - means a severe financial hardship resulting from a sudden and unexpected illness or accident of the Participant or his dependent (within the meaning of section 152(a) of the Code), loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising from events beyond the Participant's control. 2.8. PARTICIPANT - means an individual who satisfies the requirements of Section 3.1 or 3.2 and, if applicable, files an election form with the Committee pursuant to Article IV. 2.9. RETIREMENT PLAN - means the Harris Corporation Retirement Plan, as amended from time to time. 2 2.10. SERP - means this Harris Corporation Supplemental Executive Retirement Plan, as amended from time to time. ARTICLE III - ELIGIBILITY AND PARTICIPATION 3.1. ELIGIBILITY. Any employee shall be eligible to participate in the SERP for any Plan Year if he receives compensation for such Plan Year from the Corporation at least equal to an amount to be determined for such year by the Committee in its sole discretion, and such employee either (i) is a participant in the Retirement Plan whose Pre-Tax Contributions, Matching Pre-Tax Contributions or Profit Sharing Contributions under the Retirement Plan are limited by section 401(a)(17), 401(k)(3), 401(m)(2)(A), 402(g) or 415 of the Code, or (ii) is designated by the Committee to be eligible to participate in the SERP. An eligible employee shall become a Participant by completing an election form described in Article IV. As a condition to participation, each employee shall agree to receive any payments made pursuant to the SERP in the form of direct deposit (or other method determined by the Committee). 3.2. CONTINUED PARTICIPATION. Any individual who was a participant in the SERP on December 31, 1997 shall continue to be a Participant in the SERP as long as he has a balance credited to his Account. ARTICLE IV - CONTRIBUTIONS 4.1. ELECTION BY RETIREMENT PLAN PARTICIPANT. An amount equal to the Pre-Tax Contributions, Matching Pre-Tax Contributions and Profit Sharing Contributions under the Retirement Plan that exceed the limitations of section 401(a)(17), 401(k)(3), 401(m)(2)(A), 402(g) or 415 of the Code shall be credited to a Participant's Account, provided that the Participant completes an election form in the time and the manner prescribed by the Committee. 4.2. PERMITTED SALARY DEFERRAL ELECTIONS. In addition to the Compensation a Participant elects to defer under Section 4.1, the Committee, in its sole discretion, may permit a Participant to elect to defer the receipt of any portion of his Compensation, by completing an election form in the time and manner prescribed by the Committee. An amount equal to such portion of the Participant's Compensation shall be credited to his Account. 4.3. SPECIAL AWARD AMOUNTS. The Corporation or the Committee, in its sole discretion, may grant a special award to any Participant by crediting his Account in an amount equal to the award. 4.4. TRANSFERRED ACCOUNTS. The Committee, in its sole discretion, may provide that a Participant's Account shall be credited with an amount credited to him under a nonqualified deferred compensation plan maintained by his prior employer. If the Committee so provides, then the Committee shall determine the extent to which the Participant shall be vested in the balance of his Account attributable to such amount. 2 3 ARTICLE V - ACCOUNTS AND INVESTMENTS 5.1. ESTABLISHMENT OF ACCOUNTS. An Account shall be established on the books of the Corporation in the name of and on behalf of each Participant. A Participant's Account shall be credited in an amount equal to (i) the Compensation the Participant elected to defer pursuant to Sections 4.1 and 4.2, (ii) any special awards granted to the Participant pursuant to Section 4.3, (iii) any amount permitted to be credited to the Participant's Account by the Committee pursuant to Section 4.4 and (iv) any deemed investment gains and losses determined pursuant to Section 5.2. 5.2. ACCOUNT INVESTMENTS. (a) RETIREMENT PLAN PARTICIPANTS. If a Participant is a participant in the Retirement Plan in any Plan Year, then amounts credited to his Account for such Plan Year shall be deemed to be invested in the same investment funds designated by the Participant for the investment of his account under the Retirement Plan and in the same proportion designated by the Participant for the investment of his Retirement Plan contributions. Notwithstanding the immediately preceding sentence, the Corporation, in its sole discretion, may decide that the Harris Stock Fund is not available under the SERP. (b) OTHER PARTICIPANTS. If a Participant is not eligible to participate in the Retirement Plan, then the Participant may file an investment election with the Committee directing the deemed investment of his Account in the investment funds available under the Retirement Plan, except that the Participant may not direct the investment of his Account to reflect the performance of the Harris Stock Fund. (c) INVESTMENT ELECTIONS TO REMAIN IN EFFECT. A Participant's investment election shall remain in effect until he changes it. If an investment fund selected by a Participant is no longer offered under the SERP and the Participant does not file a new investment election with the Committee, then the portion of the Participant's Account previously deemed invested in such investment fund shall be invested in the Balanced Fund, unless the Committee designates another investment fund for such purpose. (d) TIMING. A Participant's Account shall be credited annually or, in the discretion of the Committee, more frequently with amounts equal to the gains and losses that would have been realized by the Corporation if the Account had been invested as it is deemed to be invested. ARTICLE VI - VESTING AND DISTRIBUTIONS 6.1. VESTING. Amounts credited to a Participant's Account pursuant to Section 4.1 (as adjusted for deemed gains and losses pursuant to Section 5.2) shall become vested at the same 3 4 time and to the same extent as their corresponding contributions to the Retirement Plan. A Participant shall be 100% vested in all other amounts credited to his Account, provided, however, that the Committee may determine the vesting schedule for amounts credited to a Participant's Account pursuant to Section 4.3 or 4.4. 6.2. TIME OF PAYMENT. A Participant shall commence receiving distributions from his Account at the later of (i) his attainment of age 55 and (ii) the beginning of the calendar year following the year in which he terminates employment with the Corporation and its affiliates; provided that a Participant who terminates employment prior to attaining age 55 and whose Account balance at the time of such termination is less than $50,000 (or such other amount as may be designated by the Committee) shall receive a single sum distribution of his Account as soon as practicable following his termination of employment. 6.3. FORM OF DISTRIBUTION. (a) A Participant may elect the form of distribution of his Account by filing an election form with the Committee at the time and in the manner prescribed by the Committee. A Participant may change a prior election regarding the form of distribution by filing a new election form with the Committee at the times and in the manner permitted by the Committee; provided that such form is received by the Committee no later than a date within the calendar year prior to the year in which such distribution was to be paid or commence pursuant to the Participant's prior election. (b) A participant may elect to receive payment of his Account distribution in any one of the following forms: (1) a single sum; (2) annual installments over a five-year period; (3) annual installments over a seven-year period; (4) annual installments over a ten-year period; or (5) annual installments over a fifteen-year period. (c) A Participant who has not filed an election under Section 6.3(a) shall receive the distribution of his Account in annual installments over ten years. (d) Notwithstanding any provision of the SERP to the contrary, if a Participant's vested interest in his Account is less than an amount determined by the Committee, in its sole discretion, to be eligible for installment distributions, then the Participant's vested interest in his Account shall be paid in a single sum as soon as reasonably practicable upon entitlement to a distribution. 4 5 6.4. DEATH. If a Participant shall die before the entire vested balance of his Account is distributed, then the remaining vested balance shall be paid, in the manner such vested balance would have been paid to the Participant, to the beneficiary or the beneficiaries designated by the Participant on the form and in the manner prescribed by the Committee. A Participant may revoke or change his beneficiary designation at any time by filing a new beneficiary designation form with the Committee. If a Participant does not designate a beneficiary under the SERP or if no designated beneficiary survives the Participant, then the vested balance of his Account shall be distributed to the Beneficiary or Beneficiaries entitled to his accounts under the Retirement Plan (or who would be so entitled if the Participant had Retirement Plan accounts). 6.5. FINANCIAL HARDSHIP. A Participant may request a payment of all or a portion of his vested Account balance on account of a Financial Hardship by submitting a written request to the Committee accompanied by documentation evidencing the Participant's Financial Hardship. The Committee shall review the request and shall determine, in its sole discretion, whether a Financial Hardship exists. Any payment on account of the Participant's Financial Hardship shall be limited to an amount that the Committee, in its sole discretion, determines is reasonably necessary to meet the hardship. 6.6. CHANGE IN CONTROL. Notwithstanding anything herein to the contrary, in the event of a Change in Control, each Participant shall become entitled to an immediate, single sum distribution of the entire vested balance of his Account, provided that the Participant has previously elected to receive such a distribution by filing an election form with the Committee at the time and in the manner prescribed by the Committee. A Participant may change his prior election under this Section 6.6 by filing a new election form with the Committee at the times and in the manner permitted by the Committee; provided that such election form is received by the Committee by the earlier of (i) the calendar year prior to the year in which such Change in Control occurs and (ii) the last date the Committee, in its sole discretion, determines that the Participant was not likely to be aware that a Change in Control was pending. The provisions of this Section 6.6 may not be amended after the date of a Change in Control without the written consent of a majority of those individuals with an Account balance under the SERP on the date of such Change in Control. 6.7. OVERPAYMENTS OF INSTALLMENTS. In the event that a payment is made with respect to a Participant's Account which exceeds the amount to which the Participant is entitled, future payments shall be reduced in any manner which the Committee, in its sole discretion, deems equitable. 6.8. WITHHOLDING FOR TAXES. For each calendar year in which a Participant's Compensation is reduced pursuant to the Participant's election under the SERP, the Corporation shall withhold from the Participant's payments of compensation for such year any taxes imposed upon the Participant pursuant to section 3121(v) of the Code in respect to the amount by which the Participant's Compensation is reduced. The Corporation shall have the right to deduct any federal, state or local income, employment or other taxes required by law to be withheld with respect to any payments to be made under the SERP, and to withhold such amounts from any 5 6 payment otherwise due the Participant (or his beneficiary). ARTICLE VII -- ADMINISTRATION 7.1. AUTHORITY OF COMMITTEE. The SERP shall be administered by the Committee. The Committee shall, in its sole and absolute discretion, have the complete authority to interpret the SERP, to adopt rules for carrying out the purposes of the SERP and to make all other determinations necessary or advisable for the administration of the SERP. To the extent practicable, the SERP shall be administered in a manner consistent with the administration of the Retirement Plan. Nevertheless, any decision or interpretation of any provision of the SERP made by the Committee shall be final and conclusive, and shall be binding on all Participants (and their beneficiaries). A Participant who has been delegated the authority to make decisions with respect to the SERP may not participate in any decision that may affect his rights or obligations under this SERP, unless the decision affects all Participants. 7.2. DELEGATION OF AUTHORITY. The Committee may delegate any of its responsibilities, powers or duties under the SERP to any person or committee. The Committee or its delegate may employ such attorneys, agents, and advisors as the Committee or such delegate may deem necessary or advisable to assist it in carrying out its duties hereunder. 7.3. LIABILITY. No member of the Committee and no individual to whom the Committee has delegated any responsibility, power or duty under the SERP shall be liable for any action or failure to act under this SERP, except where such action or failure to act was due to gross negligence or fraud. ARTICLE VIII - GENERAL PROVISIONS 8.1. AMENDMENT AND TERMINATION. Subject to Section 6.6, the Board of Directors of the Corporation, or the Investment Committee -- Retirement Plans thereof, may amend or terminate the SERP at any time, provided that no such amendment or termination shall reduce or cancel the amount credited to any Participant's Account prior to the date of the adoption of such amendment or the date of such termination. 8.2. ANTI-ALIENATION. A Participant's rights and interest under the SERP may not be assigned or transferred except by will or the laws of descent or distribution, or as may be required under ERISA pursuant to a qualified domestic relations order. Any other purported transfer, assignment, pledge or other encumbrance or attachment of any payments or benefits under the SERP shall not be permitted or recognized and shall be void. 8.3. FUNDING. The Corporation may, but is not required to, establish a trust to fund the amounts credited to Accounts under this SERP, provided that the assets in such trust are subject to the claims of the Corporation's general creditors in the event of insolvency. Any payments pursuant to the SERP shall be made out of the general assets of the Corporation and 6 7 Participants (and beneficiaries) shall have no interest in any fund or specific asset of the Corporation. The rights of each Participant (and beneficiary) to any payments under the SERP shall be solely those of any unsecured creditor of the Corporation. 8.4. SEVERABILITY. If any provision of the SERP is found unlawful by any court having proper jurisdiction, then such provision shall be construed by such court to reflect most nearly the Corporation's original intent in adopting the SERP, consistent with applicable law. 8.5. NOT A CONTRACT OF EMPLOYMENT. The SERP shall not constitute a contract of employment or in any manner obligate the Corporation to continue the employment of any employee. 8.6. SUCCESSORS AND ASSIGNS. The provisions of the SERP shall bind and inure the Corporation and its successors and assigns, as well as each Participant and beneficiary. 8.7. CONSTRUCTION. The SERP shall be construed in accordance with the laws of the State of Florida. IN WITNESS WHEREOF, Harris Corporation has caused this SERP, as amended and restated herein, to be executed in its name and on its behalf on this 5th day of January, 1998. HARRIS CORPORATION By: /s/ Philip W. Farmer -------------------- Title: Chairman, President and Chief ----------------------------- Executive Officer ----------------- ATTEST: /s/ Richard L. Ballantyne --------------------------------- 7 EX-11 3 EXHIBIT 11 1 EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS ----------
Quarter Ended Two Quarters Ended -------------------------- ------------------------- January 2, December 31, January 2, December 31, 1998 1996 1998 1996 ---------- ----------- ---------- ----------- (In millions, except per share amounts) Basic: Average shares outstanding 79.9 77.9 79.8 77.9 Less nonvested performance shares .7 .8 .6 .7 ---- ---- ---- ---- Total basic average shares outstanding 79.2 77.1 79.2 77.2 ==== ==== ==== ==== Net income $52.7 $45.5 $96.3 $83.6 ==== ==== ===== ==== Basic net income per share $ .67 $ .59 $1.22 $1.08 ==== ==== ==== ==== Diluted: Average shares outstanding 79.9 77.9 79.8 77.9 Plus dilutive stock options .3 .3 .3 .3 ---- ---- ---- ---- Total diluted average shares outstanding 80.2 78.2 80.1 78.2 ==== ==== ==== ==== Diluted net income per share $ .66 $ .58 $1.20 $1.07 ==== ==== ==== ====
EX-27 4 EXHIBIT 27
5 1,000 6-MOS JUL-03-1998 JUN-28-1997 JAN-02-1998 30,800 73,900 786,300 26,500 630,500 1,962,100 918,400 1,318,400 3,615,900 1,225,700 686,400 0 0 79,800 1,543,100 3,615,900 1,949,600 1,969,100 1,296,800 496,500 (3,400) 0 33,300 145,900 49,600 96,300 0 0 0 96,300 1.22 1.20
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