1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1995 Commission File Number 1-3863
HARRIS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-0276860
- - ------------------------ ------------------
(State of Incorporation) (IRS Employer Identification No.)
1025 West NASA Boulevard
Melbourne, Florida 32919
---------------------------------------
(Address of principal executive offices)
(407) 727-9100
-------------------------------
(Registrant's telephone number)
_______________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 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
------ -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
39,217,858 Shares
----------
2
PART I. FINANCIAL INFORMATION
- - ------------------------------
HARRIS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
The following information for the quarters ended September 30, 1995 and
September 30, 1994 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, 1995 are not necessarily indicative of the results for the full fiscal
year.
Quarter Ended
---------------------------
September 30, September 30,
1995 1994
------------ ------------
(In millions, except per
share amounts)
Revenue
Revenue from sales, rentals
and services $816.7 $807.3
Interest 9.0 8.8
------ ------
825.7 816.1
Costs and Expenses
Cost of sales, rentals and
services 545.1 561.5
Engineering, selling and
administrative expenses 211.5 195.9
Interest 15.3 14.8
Other - net 2.2 (.4)
------ ------
Income before income taxes 51.6 44.3
Income taxes 18.1 15.5
------ ------
Net Income $ 33.5 $ 28.8
------ ------
Net Income Per Common Share (Primary) $.86 $.73
---- ----
Cash Dividends Paid Per Common Share $.34 $.31
---- ----
3
HARRIS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, June 30,
1995 1995
-------------- ---------
(In millions)
ASSETS
Current Assets
Cash and cash equivalents $ 43.1 $ 119.3
Marketable securities 21.2 22.3
Trade accounts and notes receivable - net, less allowance
for collection losses of $31,100,000 at September 30, 1995
and $30,000,000 at June 30, 1995 627.9 657.1
Unbilled costs and accrued earnings on fixed price contracts
based on percentage-of-completion accounting, less progress
payments of $253,800,000 at September 30, 1995 and
$240,200,000 at June 30, 1995 386.7 374.9
Inventories:
Work in process and finished products 446.7 411.2
Raw materials and supplies 93.0 83.7
------- -------
539.7 494.9
Deferred income taxes 139.4 142.2
------- -------
Total Current Assets 1,758.0 1,810.7
Plant and equipment, less allowances for depreciation of
$1,251,500,000 at September 30, 1995 and $1,236,200,000 at
June 30, 1995 592.5 581.0
Notes receivable - net 164.4 166.6
Intangibles resulting from acquisitions 179.7 166.6
Other assets 136.6 111.1
-------- --------
$2,831.2 $2,836.0
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 50.4 $ 37.7
Trade accounts payable 147.6 168.7
Compensation and benefits 167.0 193.4
Other accrued items 188.5 168.4
Advance payments and unearned income 262.3 264.0
Income taxes 64.0 90.5
Current portion of long-term debt 131.9 132.6
-------- --------
Total Current Liabilities 1,011.7 1,055.3
Deferred income taxes 62.5 56.0
Long-term debt 476.0 475.9
Shareholders' Equity
Capital stock:
Preferred Stock, without par value:
Authorized - 1,000,000 shares; issued - none - -
Common Stock, par value $1 per share:
Authorized - 100,000,000 shares; issued 39,217,858 shares
at September 30, 1995 and 38,877,019 at June 30, 1995 39.2 38.9
Other capital 263.0 240.3
Retained earnings 988.2 969.4
Net unrealized gain on securities available-for-sale (net of
taxes) 11.7 12.2
Unearned compensation (9.7) (1.7)
Cumulative translation adjustments (11.4) (10.3)
-------- --------
Total Shareholders' Equity 1,281.0 1,248.8
-------- --------
$2,831.2 $2,836.0
======== ========
4
HARRIS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Quarter Ended
----------------------------
September 30, September 30,
1995 1994
------------- -------------
(In millions)
Cash flows from operating activities
Net income $ 33.5 $ 28.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of plant and equipment 41.3 41.5
Non-current deferred income tax 6.5 (.4)
(Increase) decrease in:
Accounts and notes receivable 32.4 14.5
Unbilled costs and inventories (55.4) (19.5)
Other assets (26.3) (2.6)
Increase (decrease) in:
Trade payables and accrued expenses (30.7) (59.9)
Advance payments and unearned income (1.7) 5.9
Income taxes (21.5) 6.3
Other (4.0) (.2)
----- -----
Net cash provided by (used in) operating activities (25.9) 14.4
----- -----
Cash flows from investing activities
Additions of plant and equipment-net of
normal disposals (50.5) (56.1)
----- -----
Net cash used in investing activities (50.5) (56.1)
----- -----
Cash flows from financing activities
Increase in short-term debt 12.0 6.0
Increase (decrease) in long-term debt .1 .4
Proceeds from sale of Common Stock 2.6 6.6
Purchase of Common Stock for treasury (1.7) (4.3)
Cash dividends (13.3) (20.5)
----- -----
Net cash used in financing activities (.3) (11.8)
----- -----
Effect of exchange rate changes on cash and cash
equivalents .5 1.1
----- -----
Net decrease in cash and cash equivalents $(76.2) $(52.4)
====== ======
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
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 Form
10-K for the fiscal year ended June 30, 1995.
Note B -- Litigation
- - --------------------
In 1993, a California state court awarded damages against the Corporation in
the amount of $66.9 million, together with interest and costs of suit, to a
California software company. The suit arose from a contract between the
plaintiff and a discontinued operation of the Corporation. The Corporation
believes the judgment is unjustified and has filed an appeal with the
California Court of Appeals. The appeals court is expected to render its
decision by June 1996. The ultimate outcome of this litigation is unknown.
Accordingly, no provisions, beyond those already provided as part of prior
discontinued operation charges, have been made in the accompanying consolidated
financial statements. Prior discontinued operations charges included legal
costs the Corporation expects to incur in defending itself in this matter.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
- - ------------------------------------
Net sales and net income for the first quarter were higher than the same period
last year by 1.2 percent and 16.3 percent, respectively.
Segment net sales, operating profit, and net income were as follows:
Quarter Ended
-------------------------------
September 30, September 30, Percent
1995 1994 Change
-------------- -------------- ---------
NET SALES
Communications $180.6 $159.6 13%
Semiconductor 172.6 155.7 11%
Lanier Worldwide 249.8 228.6 9%
Electronic Systems 213.7 263.4 -19%
------ ------
Total $816.7 $807.3 1%
====== ======
OPERATING PROFIT
Communications $15.8 $12.1 31%
Semiconductor 19.1 12.5 53%
Lanier Worldwide 21.4 18.5 16%
Electronic Systems 20.4 25.8 -21%
Corporate Expense -9.8 -9.8 0%
Interest Expense -15.3 -14.8 3%
------ ------
Total $51.6 $44.3 16%
====== ======
NET INCOME
Communications $7.6 $5.5 38%
Semiconductor 9.4 5.2 81%
Lanier Worldwide 8.9 7.1 25%
Electronic Systems 7.6 11.0 -31%
------ ------
Total $33.5 $28.8 16%
====== ======
Increases in the Communications segment sales and earnings were led by the
segment's microwave, broadcast and telephone test equipment businesses. An
increase in the segment's gross margin was partially offset by increases in
research and development and marketing expenses.
Semiconductor segment earnings continue to benefit from increased sales of
power control products, continuing improvements in operating margins and patent
royalty income. Increased research and development expenses partially offset
the increase in the gross margin.
Strong sales in both domestic and international markets resulted in increased
sales in the Lanier Worldwide segment. Earnings benefited from increased sales
and lower income taxes.
The decreases in sales and earnings in the Electronic Systems segment were
caused by unexpected delays in several government awards, the performance of
the energy management systems business and a one-time write-off on a
development program whose production follow-on now appears unlikely. Cost of
sales and operating expense ratios were relatively level with respective
ratios for last year's first quarter.
Cost of sales as a percentage of net sales decreased to 66.7 percent versus
69.6 percent in last year's first quarter. Cost of sales ratios were down in
the Semiconductor and Communications segments.
Engineering, selling, and administrative expenses as a percentage of net sales
increased from 24.3 percent last year to 25.9 percent in this year's first
quarter. Higher research and development and marketing expenditures in the
Semiconductor and Communications segments caused the higher operating expense
ratio.
7
Interest expense in the first quarter increased from the prior year due to
higher interest rates. The increase in "other net" resulted from higher
provisions for doubtful accounts and foreign currency losses.
The provision for income taxes as a percentage of pretax income was 35.0
percent in both years. The statutory federal tax rates for both periods was
35.0 percent.
Income as a percentage of sales was 4.1 percent in the first quarter, compared
to 3.6 percent in the same period last year for the previously stated reasons.
Working capital decreased slightly from 755.4 to 746.3 at the end of the first
quarter due to a reduction in cash and trade receivables. In September 1995,
the Corporation announced plans to invest $250 million in its power
semiconductor business. The Corporation anticipates that the requirement for
funds to finance this investment and other operational requirements during
fiscal 1996 will be met by cash flow from operations and unused borrowing
capacity.
8
PART II OTHER INFORMATION
- - -------------------------
Item 5. Other Information
-----------------
On October 12, 1995, the Registrant filed with the Securities
and Exchange Commission (the "Commission"), pursuant to Rule 424(b)(5)
under the Securities Act of 1933, as amended, a Prospectus and
Prospectus Supplement, both dated October 12, 1995, relating to the
proposed offer and sale of up to $162,500,000 aggregate principal
amount of the Registrant's Medium-Term Notes. The Prospectus and
Prospectus Supplement form part of the Registrant's Registration
Statement on Form S-3 (Commission File No. 33-35315) (the
"Registration Statement") that was declared effective by the
Commission on October 3, 1990, which Registration Statement originally
registered $200,000,000 aggregate principal amount of the Registrant's
Medium-Term Notes.
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.
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
SIGNATURES
----------
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 14, 1995 By: /s/ Bryan R. Roub
------------------------------
Bryan R. Roub
Senior Vice President & Chief
Financial Officer