1
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 12, 1995)
$100,000,000
Harris Corporation [LOGO]
7% DEBENTURES DUE JANUARY 15, 2026
------------------------
Interest payable January 15 and July 15
------------------------
THE DEBENTURES WILL NOT BE REDEEMABLE PRIOR TO MATURITY AND WILL NOT BE SUBJECT
TO ANY SINKING FUND. THE DEBENTURES WILL BE REPRESENTED BY A GLOBAL
SECURITY REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE
"DEPOSITARY") OR ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL
SECURITY WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE
EFFECTED THROUGH, RECORDS MAINTAINED BY THE DEPOSITARY OR
ITS PARTICIPANTS. EXCEPT AS DESCRIBED HEREIN,
DEBENTURES IN DEFINITIVE FORM WILL NOT BE
ISSUED. SEE "DESCRIPTION OF DEBENTURES."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE 99.503% AND ACCRUED INTEREST
------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
---------------- ---------------- ----------------
Per Debenture...................... 99.503% .875% 98.628%
Total.............................. $99,503,000 $875,000 $98,628,000
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(1) Plus accrued interest from January 15, 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deduction of estimated expenses of $150,000 payable by the
Company.
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The Debentures are offered, subject to prior sale, when, as and if accepted
by the Underwriters and subject to approval of certain legal matters by Brown &
Wood, counsel for the Underwriters. It is expected that delivery of the
Debentures will be made on or about January 16, 1996, through the book-entry
facilities of the Depositary, against payment therefor in immediately available
funds.
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MORGAN STANLEY & CO. SALOMON BROTHERS INC
Incorporated
January 10, 1996
2
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER OR DEALER. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
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The Company........................................................................... S-3
Use of Proceeds....................................................................... S-6
Capitalization........................................................................ S-7
Selected Financial Data............................................................... S-8
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... S-9
Description of Debentures............................................................. S-13
Underwriting.......................................................................... S-14
Legal Matters......................................................................... S-15
PROSPECTUS
Available Information................................................................. 2
Incorporation of Certain Documents by Reference....................................... 2
The Company........................................................................... 3
Use of Proceeds....................................................................... 3
Ratio of Earnings to Fixed Charges.................................................... 3
Description of Debt Securities........................................................ 4
Plan of Distribution.................................................................. 9
Legal Matters......................................................................... 10
Experts............................................................................... 10
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IN CONNECTION WITH THE OFFERING THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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THE COMPANY
Harris Corporation, along with its subsidiaries (hereinafter called
"Harris" or the "Company"), is a worldwide company focused on four core
businesses: advanced electronic systems, semiconductors, communications and an
office equipment distribution network.
The Company's four core businesses are carried out through three business
sectors and a subsidiary, which correspond to its business segments used for
financial reporting purposes: Communications Sector, Semiconductor Sector,
Lanier Worldwide, Inc. and Electronic Systems Sector. Harris structures its
operations primarily around the markets it serves. Its operating divisions,
which are the basic operating units, have been organized on the basis of
technology and markets. For the most part, each operating division has its own
marketing, engineering, manufacturing and service organizations. The Company's
three business sectors and the subsidiary and their principal products are as
follows:
Communications Sector: produces broadcast, radio-communication, and
telecommunication products and systems, including transmitters and studio
equipment for radio and TV, HF, VHF and UHF radio-communication equipment,
microwave radios, digital telephone switches, telephone subscriber-loop
equipment, and in-building paging equipment.
Semiconductor Sector: produces advanced analog, digital and mixed-signal
integrated circuits and discrete semiconductors for power, signal processing,
data-acquisition, and logic applications for automotive systems, wireless
communications, telecommunications line cards, video and imaging systems,
industrial equipment, computer peripherals, and military and aerospace systems.
Lanier Worldwide, Inc.: sells, services, supports and provides supplies for
copying systems, facsimile systems and networks, dictation systems,
optical-based electronic-image management systems, continuous recording systems
and PC-based health care management systems.
Electronic Systems Sector: engages in advanced research, and develops,
designs and produces advanced information processing and communication systems
and software for defense applications, air traffic control, avionics, satellite
communications, space exploration, public safety, simulation, energy management,
law enforcement, electronic systems testing, airports, and newspaper
composition.
Harris was incorporated in Delaware in 1926 as the successor to three
companies founded in the 1890's. The executive offices of the Company are
located at 1025 W. NASA Boulevard, Melbourne, Florida 32919, and the telephone
number is (407) 727-9100.
COMMUNICATIONS
The Communications Sector of the Company designs, manufactures, and sells
products characterized by three principal communication technologies:
telecommunications, including microwave products and systems, digital telephone
switches, telephone test equipment and auxiliary telecommunication products;
broadcast, including radio and television products and transmission systems; and
two-way radio, including high-frequency (HF), very high frequency (VHF) and
ultra-high frequency (UHF) products, and complete turnkey communication systems.
The sector is a worldwide supplier of voice and data digital network
switches and private-branch exchanges (PBXs) to long-distance carriers,
utilities, corporations and government agencies.
The sector also supplies telecommunication products and systems under the
Dracon trademark, including telephone test systems and tools, ISDN terminal
adapters and telephone-integrated voice-paging systems for a wide variety of
in-plant applications.
Under the Farinon trademark, the sector is the largest producer of low- and
medium-capacity analog and digital microwave systems in North America.
The sector is the largest supplier of radio and television broadcast
transmission equipment and radio-studio equipment in the United States. The
sector's products include radio and television transmitters,
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antennas, and audio, remote-control and video production systems. The sector is
also a leading supplier of mobile broadcast units.
This sector is a leading supplier of two-way HF, VHF and UHF radio
equipment and offers a comprehensive line of products and systems for long- and
short-distance communications. The sector also designs and installs turnkey
communication systems involving a variety of communication technologies,
including HF, VHF, microwave, fiber-optics and switching systems with command
and control centers. The products are sold to commercial and government
customers worldwide.
Internationally, particularly in the developing and oil-producing nations,
the sector designs, sells, installs and services communication systems involving
radio and television broadcasting equipment and long- and short-range radios on
both a product and a turnkey basis.
Principal customers for products of the Communications Sector include
foreign and domestic government and military agencies, commercial and industrial
firms, radio and TV broadcasters, telephone companies, utilities, construction
companies and oil producers.
In general, these products are sold and serviced domestically directly to
customers through the sales organizations of the Company's operating divisions
and through established distribution channels. Internationally, the sector
markets and sells its products and services through established distribution
channels. See "--International Business."
SEMICONDUCTOR
The Semiconductor Sector of the Company produces advanced analog, digital,
power and mixed-signal integrated circuits and discrete semiconductors for
data-acquisition, signal processing, logic and power applications that demand
the highest levels of performance in terms of speed, precision, low power
consumption and reliability, often in harsh environments.
The sector produces discrete-power products, including MOS (metal oxide
semiconductors) power devices, transistors, rectifiers, power control circuits
and transient suppression products. The sector pioneered development of
"intelligent-power" technology which permits the combination of analog, logic
and power circuits on the same chip. Such products are widely used in automotive
electronic systems, such as automotive ignition systems, anti-lock braking and
engine control, and instrument display.
The sector is a major supplier of devices which address the communications
market through the provision of complex functions, including wireless, broadband
and data conversion components. In addition, the sector is a leader in
mixed-signal telecommunication line card applications, including SLICs
(subscriber line interface circuits), CODECs (Coder/Decoder), and cross-point
switches used in private-branch-exchange (PBX) systems and of other circuits for
cellular communications, high resolution medical imaging, broadcast and
interactive cable video and military radar systems.
The sector is a major supplier of integrated circuits and discrete devices
to the military and aerospace markets, with an emphasis on commercial and
military space applications. The sector is the leading supplier of
radiation-hardened circuits. The sector's custom, semicustom and standard
integrated circuits are based on CMOS (complementary metal oxide semiconductor),
SOS (silicon-on-sapphire), SOI (silicon-on-insulator), bipolar analog and power
analog/digital process technologies.
The sector is also a leading supplier of custom and semicustom integrated
circuits, known as application specific integrated circuits (ASICs). These
circuits are designed for high-performance military, space, automotive and
industrial applications.
Principal customers for the products of this sector include video imaging,
computer, communication, telephone, industrial, medical and other electronic
equipment manufacturers, automobile manufacturers, defense contractors and U.S.
government agencies. In general, these products are sold directly to customers
through a worldwide sales organization, which includes independent
manufacturers' representatives, and to distributors who, in turn, resell to
their customers. Internationally, this sector also sells through distributors.
See "--International Business."
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The integrated circuit manufacturing technology and integrated circuit
industry is characterized by rapid advances in product performance technology.
Harris is a party to technology exchange agreements with other companies to
develop new and expanded technologies.
LANIER WORLDWIDE
Lanier Worldwide, Inc. is a wholly-owned subsidiary of Harris which
markets, sells, and services office equipment and business communication
products on a global basis.
Lanier Worldwide provides copying, dictation, continuous recording,
facsimile systems and multi-functional devices, as new management solutions,
facilities management operations and other services through a global network of
direct sales and service centers and authorized dealers. Lanier Worldwide also
leases certain of these products to customers on a short-term basis.
ELECTRONIC SYSTEMS
The Electronic Systems Sector of Harris is composed of several operating
divisions and is engaged in advanced research, development, design and
production of advanced information processing and communication systems and
sub-systems for government and commercial organizations in the United States and
overseas. Applications of the sector's state-of-the-art technologies include air
traffic control, avionics, communications, space exploration, energy management,
electronics systems testing, newspaper composition and information management
systems.
The Electronic Systems Sector is a major supplier of advanced-technology
and electronic systems to the United States Department of Defense, Federal
Aviation Administration, National Aeronautics and Space Administration, Federal
Bureau of Investigation and other federal and local government agencies,
aircraft manufacturers, airports, electric utilities, newspapers and publishing
houses.
The sector is the leading supplier of air-traffic control communication
systems. The sector is also a major supplier of custom aircraft and spaceborne
communication and information processing systems, a leading supplier of
terrestrial and satellite communication systems and a preeminent supplier of
super-high-frequency military satellite ground terminals for the Department of
Defense.
The sector is a major supplier of custom ground-based systems and software
designed to collect, store, retrieve, process, analyze, display and distribute
information for government, defense and law enforcement applications, including
meteorological data processing systems and range management information systems.
The sector also provides computer controlled electronic maintenance, logistic,
simulation and test systems for military aircraft, ships and ground vehicles.
The sector is a worldwide supplier of energy management and distribution
automation systems for electric utilities and information-processing systems for
newspapers and publishing houses.
Most of the sales of this sector are made directly or indirectly to the
United States government under contracts or subcontracts containing standard
government clauses providing for redetermination of profits, if applicable, and
for termination for the convenience of the government or for default of the
contractor. These sales consist of a variety of contracts and programs with
various governmental agencies, with no single program accounting for 10 percent
or more of total Harris sales.
INTERNATIONAL BUSINESS
In fiscal 1995, sales of products exported from the United States or
manufactured abroad were $1,016 million or 29.5 percent of the corporate total,
compared with $982 million or 29.4 percent of the corporate total in fiscal 1994
and $877 million (28.3 percent) in fiscal 1993. Exports from the United States,
principally to Europe and Asia, totalled $525 million or 51.6 percent of the
international sales in fiscal 1995, $388 million or 39.5 percent of the
international sales in fiscal 1994 and $295 million or 33.7 percent in fiscal
1993 of the international sales.
Foreign operations represented 14.3 percent of consolidated net sales and
22.7 percent of consolidated total assets as of June 30, 1995. Electronic
products and systems are produced principally in the United States
S-5
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and international electronic revenues are derived primarily from exports.
Semiconductor assembly facilities are located in Malaysia and Ireland and
electronic products assembly facilities are located in Canada and England.
International marketing activities are conducted through subsidiaries which
operate in Canada, Europe, Central and South America, Asia and Australia.
Harris utilizes indirect sales channels, including dealers, distributors
and sales representatives, in the marketing and sale of some lines of equipment,
both domestically and internationally. These independent representatives may buy
for resale, or, in some cases, solicit orders from commercial or governmental
customers for direct sales by Harris. Prices to the ultimate customer in many
instances may be recommended or established by the independent representatives
and may be on a basis which is above or below the Company's list prices. Such
independent representatives generally receives a discount from the Company's
list prices and may mark-up such prices in setting the final sales prices paid
by the customer. During the fiscal year, orders came from a large number of
foreign countries, no one of which accounted for as much as five percent of
total orders.
Certain of Harris' exports are paid for by letters of credit, with the
balance either on open account or installment note basis. Advance payments,
progress payments or other similar payments received prior to or upon shipment
often cover most of the related costs incurred. Performance guarantees are
generally required on significant foreign government contracts.
The particular economic, social and political conditions for business
conducted outside the United States differ from those encountered by domestic
business. Management believes that the composite business risk for the
international business as a whole is somewhat greater than that faced by its
domestic operations as a whole. International business may subject the Company
to, among other things: the laws and regulations of foreign governments relating
to investments, operations, currency exchange controls, revaluations, taxes, and
fluctuations of currencies; uncertainties as to local laws and enforcement of
contract and intellectual property rights; occasional requirements for onerous
contract clauses; and, in certain areas, the risk of war, rapid changes in
governments and economic and political policies, the threat of international
boycotts and United States anti-boycott legislation. Nevertheless, in the
opinion of management, these risks are offset by the diversification of the
international business and the protection provided by letters of credit and
advance payments.
Except for inconsequential matters involving road and utility
rights-of-way, Harris has never been subjected to threat of government
expropriation, either within the United States or abroad.
RECENT DEVELOPMENTS
On December 28, 1995, Moody's Investors Service announced that it had
upgraded the senior unsecured debt rating of the Company to A3 from Baa1.
Further, on December 18, 1995, Standard & Poor's Corporation revised its outlook
for the Company to "positive" from "stable" and stated that continued financial
performance near recently achieved levels and consistent operating performance
could lead to a ratings upgrade over the next one to two years. Standard &
Poor's reaffirmed the Company's corporate credit rating of BBB+. These ratings
reflect only the views of Moody's and Standard & Poor's, respectively, and are
not a recommendation to buy, sell or hold the Debentures. There is no assurance
that such ratings shall be retained for any given period of time or that they
shall not be revised downward or withdrawn entirely by Moody's or Standard &
Poor's if, in their respective judgment, circumstances so warrant. There is no
assurance that the "positive credit watch" issued by Standard & Poor's shall not
be revised downward or withdrawn entirely by Standard & Poor's if, in its
judgment, circumstances so warrant.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Debentures
to repay at maturity the Company's 8.99% Senior Note due March 1, 1996, issued
in 1991, which has an aggregate principal amount of $100,000,000.
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CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company and its subsidiaries as of September 30, 1995, and as adjusted to
reflect (i) the issuance of the Debentures and the application of the estimated
proceeds (without reduction for the underwriting discount and estimated offering
expenses) and (ii) the issuance of $62,500,000 aggregate principal amount of
Medium-Term Notes subsequent to September 30, 1995 and the application of the
proceeds thereof:
SEPTEMBER 30, 1995
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ACTUAL AS ADJUSTED
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(UNAUDITED, IN MILLIONS)
Current portion of long-term debt................................... $ 131.9 $ 1.9
======= ===========
Long-term debt...................................................... $ 476.0 $ 638.5
Shareholders' Equity
Common stock...................................................... 39.2 39.2
Other capital..................................................... 263.0 263.0
Retained earnings................................................. 988.2 988.2
Net unrealized gain on securities available-for-sale (net of
taxes)......................................................... 11.7 11.7
Unearned compensation............................................. (9.7) (9.7)
Cumulative translation adjustments................................ (11.4) (11.4)
-------- -----------
Total Shareholders' Equity..................................... 1,281.0 1,281.0
Total Capitalization......................................... $1,757.0 $ 1,919.5
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SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data
relating to the Company. The historical financial data relating to each of the
years in the five-year period ended June 30, 1995 are derived from the audited
consolidated financial statements of the Company and its subsidiaries. The
historical financial data for each of the three-month periods ended September
30, 1995 and 1994 are derived from unaudited consolidated financial statements
of the Company. In the opinion of Company management, such unaudited financial
statements include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the financial data for such
periods. The results for the three months ended September 30, 1995 and 1994 are
not necessarily indicative of the results to be achieved for the full year. The
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" herein and the consolidated
financial statements and notes thereto of the Company incorporated by reference
in this Prospectus Supplement and the accompanying Prospectus.
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
SEPTEMBER 30
(UNAUDITED) YEAR ENDED JUNE 30
------------------- ----------------------------------------------------
1995 1994 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
Net sales.................... $ 816.7 $ 807.3 $3,444.1 $3,336.1 $3,099.1 $3,004.0 $3,040.1
Income from continuing
operations before
extraordinary item and
cumulative effect of change
in accounting principle.... 33.5 28.8 154.5 121.9 111.1 87.5 19.5
Discontinued operations...... -- -- -- -- -- (9.3) --
Extraordinary loss from early
retirement of debt......... -- -- -- -- -- (3.0) --
Cumulative effect of change
in accounting principle.... -- -- -- (10.1) -- -- --
Net income................... 33.5 28.8 154.5 111.8 111.1 75.2 19.5
Per share data:
Income from continuing
operations before
extraordinary item and
cumulative effect of
change in accounting
principle............... .86 .73 3.95 3.07 2.82 2.24 .50
Discontinued operations.... -- -- -- -- -- (.24) --
Extraordinary loss......... -- -- -- -- -- (.08) --
Cumulative effect of
accounting change....... -- -- -- (.25) -- -- --
Net income................. .86 .73 3.95 2.82 2.82 1.92 .50
Cash dividends............. .34 .31 1.24 1.12 1.04 1.04 1.04
Net working capital.......... 746.3 880.0 755.4 893.6 792.5 768.9 643.0
Total assets................. 2,831.2 2,606.2 2,836.0 2,677.1 2,542.0 2,483.8 2,485.8
Long-term debt............... 476.0 662.2 475.9 661.7 612.0 612.5 563.3
Total shareholders' equity... 1,281.0 1,172.4 1,248.8 1,188.0 1,141.3 1,068.5 1,028.4
Ratio of earnings to fixed
charges(1)................. 3.64 3.33 3.88 3.56 3.17 2.47 1.11
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<FN>
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
are divided by fixed charges. Earnings represent the sum of income from
continuing operations before income taxes for the Company and its
subsidiaries plus fixed charges, minus interest capitalized, plus
amortization of interest capitalized. Fixed charges represent interest
expenses of the Company and its subsidiaries (including interest
capitalized) plus one-third (the proportion deemed representative of the
interest factor) of rents.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information set forth below consists of the management's discussion and
analysis contained in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 and the Company's Annual Report on Form 10-K
for the year ended June 30, 1995. Such information is presented in this
Prospectus Supplement for convenience of reference and has not been updated in
any material respect since the date of each respective document. The
management's discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto of the Company incorporated
by reference in this Prospectus Supplement and the accompanying Prospectus.
THREE MONTHS ENDED SEPTEMBER 30, 1995
Results of Operations
Net sales and net income for the first quarter were higher than the same
period last year by one percent and 16 percent, respectively.
Segment net sales, operating profit, and net income were as follows:
THREE MONTHS ENDED
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SEPTEMBER 30, SEPTEMBER 30, PERCENT
1995 1994 CHANGE
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(DOLLARS IN MILLIONS)
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%
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Total....................................... $ 816.7 $ 807.3 1%
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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%
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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%
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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
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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.
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 periods. 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.
Financial Condition
Working capital decreased slightly from $755.4 million to $746.3 million at
the end of the first quarter due to a reduction in cash and trade receivables.
In September 1995, the Company announced plans to invest $250 million in its
power semiconductor business. The Company 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.
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YEAR ENDED JUNE 30, 1995
Results of Operations
Net sales and net income in fiscal 1995 were higher than fiscal 1994 by 3
percent and 16 percent, respectively. Income for 1994 included a $17.8 million
charge ($11.5 million after income taxes) for the Company's write-off of
securities received from a prior year sale of a discontinued business.
Segment net sales, operating profit, and net income were as follows:
YEAR ENDED
---------------------
JUNE 30, JUNE 30, PERCENT
1995 1994 CHANGE
-------- -------- -------
(IN MILLIONS)
NET SALES
Communications............................................... $ 724.8 $ 628.2 15%
Semiconductor................................................ 658.7 635.3 4%
Lanier Worldwide............................................. 1,024.8 943.7 9%
Electronic Systems........................................... 1,035.8 1,128.9 -8%
-------- --------
Total................................................. $3,444.1 $3,336.1 3%
======= =======
OPERATING PROFIT
Communications............................................... $ 68.5 $ 57.6 19%
Semiconductor................................................ 83.0 70.2 18%
Lanier Worldwide............................................. 105.7 89.8 18%
Electronic Systems........................................... 95.5 101.3 -6%
Corporate Expense............................................ -49.7 -67.1 -26%
Interest Expense............................................. -65.4 -58.3 12%
-------- --------
Total................................................. $ 237.6 $ 193.5 23%
======= =======
NET INCOME(1)
Communications............................................... $ 31.9 $ 26.9 19%
Semiconductor................................................ 42.2 30.7 37%
Lanier Worldwide............................................. 45.1 35.6 27%
Electronic Systems........................................... 35.3 40.2 -12%
-------- --------
Total................................................. $ 154.5 $ 133.4 16%
======= =======
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<FN>
(1) Fiscal 1994 results include a $17.8 million ($11.5 million after income
taxes or 29 cents per share) charge for the write-off of securities received
from a prior-year sale of a discontinued business. This charge has not been
allocated.
Communications segment sales and net income increased significantly. The
increases resulted from growth in the segment's radio communications, broadcast
equipment, and telecommunication systems businesses. Domestic sales were up
sharply for the year and international sales were maintained despite economic
disruptions in certain major markets such as Mexico.
Semiconductor segment sales increased moderately despite a significant
decline in defense business. Strong sales of high-margin commercial products
more than offset the decline in military shipments. The segment reported a
significant increase in net income for the year as earnings benefited from
increased sales of core commercial products, continuing improvements in
operating margins, and increased patent royalty income. These increases were
partially offset by reduced gains from the ongoing sales of investment
securities.
Strong sales in both domestic and international markets resulted in
increased sales in the Lanier Worldwide segment. Segment earnings benefited from
the increased profitability of Lanier's European and other international
operations.
Electronic Systems segment sales and net income were decreased due to the
adverse impact of lower sales to the U.S. Government and delays in shipments of
a new energy management system. Prior year results
S-11
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included a computer systems business which was spun off to shareholders in the
first quarter of fiscal 1995. Excluding the computer systems business from
fiscal 1994 results, sales and net income decreased 3 and 9 percent,
respectively.
Cost of sales, rentals, and services as a percentage of sales decreased to
67.6 percent from 68.2 percent in the prior year. Continuing margin improvement
in the Semiconductor and Communications segments was offset in part by a higher
cost ratio in the Electronic Systems segment. Engineering, selling, and
administrative expenses as a percentage of sales were 24.3 percent in fiscal
1995, compared to 24.9 percent in the prior year. Electronic Systems segment
operating expenses were sharply lower due to cost reduction efforts begun in the
second quarter of fiscal 1995. Company-sponsored research and development
expenditures were 4.9 percent more than the previous year's expenditures.
Interest income and interest expenses were higher in fiscal 1995 due to
higher interest rates. "Other-net" expense is higher in fiscal 1995 because 1994
included a $15.6 million gain from the sale of a facility.
The provision for income taxes in fiscal 1995 was 35.0 percent of income
before income taxes compared to 37.0 percent in fiscal 1994. The lower rate in
fiscal 1995 resulted from increased tax benefits associated with foreign income.
Financial Condition
CASH AND MARKETABLE SECURITIES -- At June 30, 1995, cash and cash
equivalents totaled $119 million, a decrease from $139 million at June 30, 1994.
Marketable securities were $22 million at June 30, 1995.
RECEIVABLES, UNBILLED COSTS AND INVENTORIES -- Notes and accounts
receivable amounted to $824 million at June 30, 1995, compared to $798 million a
year earlier. Unbilled costs and inventories increased $37 million over the
prior year to $870 million. The increase in these accounts is proportionate to
the increase in revenues.
CAPITAL EXPENDITURES -- Expenditures for land, buildings, and equipment
totaled $140 million in 1995 up from $117 million in the prior year. In
addition, during fiscal 1995, $65 million was invested in equipment for rental
to customers, up from $51 million invested in the prior year. Substantially all
of this investment in rental equipment is related to Lanier Worldwide products.
BORROWING ARRANGEMENTS -- The Company has available $500 million under
revolving credit agreements until May 1, 2000. Under these segments $160 million
was outstanding at June 30, 1995. In addition, the Company has available $143
million in open bank credit lines, of which $106 million was available at June
30, 1995.
CAPITALIZATION -- At June 30, 1995, debt totaled $646 million, representing
34.1 percent of total capitalization (defined as the sum of total debt plus
shareholders' equity). A year earlier, debt of $683 million was 36.5 percent of
total capitalization. Year-end long-term debt included $150 million of 10 3/8
percent debentures due 2018, $300 million of notes payable to banks, and $26
million of other long-term debt.
In 1995, the Company issued 484,937 shares of the Common Stock to employees
under the terms of the Company's stock purchase, option and incentive plans.
The Company expects to maintain operating ratios, fixed-charge coverages,
and balance-sheet ratios sufficient for retention of its present debt ratings.
RETIREMENT PLANS -- Retirement benefits for substantially all of the
Company's employees are provided primarily through a retirement plan having
profit-sharing and savings elements. The Company also has non-contributory
defined benefit pension plans. All obligations under the Company's retirement
plans have been fully funded by the Company's contributions, the provision for
which totaled $71 million during the 1995 fiscal year. The Company provides
limited health-care benefits to retirees who have 10 or more years of service.
In 1994, the Company adopted Statement of Financial Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions". The
implementation of this accounting standard resulted in a one-time after-tax
charge of $10.1 million. The ongoing impact of this accounting standard is not
expected to have a material effect in future years.
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IMPACT OF FOREIGN EXCHANGE -- Approximately 80 percent of the Company's
international business is transacted in local currency environments. The impact
of translating the assets and liabilities of these operations to U.S. dollars is
included as a component of Shareholders' Equity. At June 30, 1995 the cumulative
translation adjustment reduced Shareholders' Equity by $10 million compared to a
reduction of $22 million at June 30, 1994.
The Company utilizes exchange rate agreements with customers and suppliers
and foreign currency hedging instruments to minimize the currency risks of
international transactions. Gains and losses resulting from currency rate
fluctuations did not have a material effect on the Company's results in 1995,
1994 or 1993.
IMPACT OF INFLATION -- To the extent feasible, the Company has consistently
followed the practice of adjusting its prices to reflect the impact of inflation
on wages and salaries for employees and the cost of purchased materials and
services.
DESCRIPTION OF THE DEBENTURES
The Debentures, which are a series of Debt Securities described in the
accompanying Prospectus, will be limited to $100,000,000 aggregate principal
amount and will mature on January 15, 2026. The following description of the
particular terms of the Debentures supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and provisions of the
Debt Securities set forth in the accompanying Prospectus. Reference should be
made to the accompanying Prospectus for a detailed summary of additional
provisions of the Debentures and of the Indenture between the Company and
National City Bank, dated as of October 1, 1990 (the "Indenture"), under which
the Debentures are to be issued. Whenever a defined term is referred to and not
herein defined, the definition thereof is contained in the accompanying
Prospectus or in the Indenture referred to therein. The Debentures will not be
redeemable prior to maturity and will not be subject to any sinking fund.
INTEREST
Except as otherwise provided in the Indenture, the Debentures will bear
interest from January 15, 1996 at the annual rate set forth on the cover page of
this Prospectus Supplement, payable semi-annually on January 15 and July 15 of
each year, beginning July 15, 1996, to the persons in whose names the Debentures
are registered at the close of business on the immediately preceding December 31
and June 30, respectively.
TRUSTEE
The Trustee for the Debentures is National City Bank, Cleveland, Ohio.
BOOK-ENTRY SYSTEM
The Debentures initially will be represented by one or more global
securities (the "Global Securities") deposited with The Depository Trust Company
("DTC") and registered in the name of a nominee of DTC. Except as set forth
below, the Debentures will be available for purchase in denominations of $1,000
and integral multiples thereof in book-entry form only. The term "Depositary"
refers to DTC or any successor depositary.
DTC has advised the Company and Morgan Stanley & Co. Incorporated and
Salomon Brothers Inc (the "Underwriters") as follows: DTC is a limited-purpose
trust company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of its participating organizations ("DTC Participants") and to
facilitate the clearance and settlement of securities transactions between DTC
Participants through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of
certificates. DTC Participants include securities brokers and dealers (including
the Underwriters), brokers, banks, trust companies and clearing corporations and
may include certain other organizations. Indirect access
S-13
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to the DTC system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a DTC Participant, either directly or indirectly ("Indirect DTC Participants").
Unless and until the Global Securities are exchanged in whole or in part
for individual certificates evidencing the Debentures represented thereby, such
Global Securities may not be transferred except as a whole by the Depositary for
such Global Securities to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee of such Depositary to a successor Depositary or any
nominee of such successor Depositary.
Neither the Company, the Trustee, any paying agent nor the registrar for
the Debentures will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Debentures represented by such Global Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Settlement for the Debentures will be made by the Underwriters in
immediately available or same-day funds. Secondary trading on long term-debt
securities of corporate issuers is generally settled in clearinghouse or
next-day funds. In contrast, the Debentures will trade in the Depositary's
Same-Day Funds Settlement System until maturity, and secondary market trading
activity in the Debentures will therefore be required by the Depositary to
settle in same-day funds. No assurance can be given as to the effect, if any, of
settlement in same-day funds on trading activity in the Debentures.
OPTIONAL REPURCHASE; RESTRICTIONS ON CERTAIN TYPES OF DEBT
The Company may purchase Debentures at any price in the open market or
otherwise. Debentures so purchased by the Company may, at the discretion of the
Company, be held or resold or surrendered to the Trustee for cancellation.
The provisions of the Indenture described in the Prospectus under
"Description of Debt Securities -- Certain Restrictions -- Limitations on Liens"
and "-- Limitations on Sales and Leasebacks" restrict the ability of the Company
to incur debt secured by Principal Properties or shares of stock or indebtedness
of Restricted Subsidiaries and to engage in sale and leaseback transactions
involving Principal Properties. As described in the Prospectus under
"Description of Debt Securities -- Certain Restrictions -- Certain Definitions",
a Principal Property is defined in the Indenture as any manufacturing plant
located within the United States, except for any plant that, in the opinion of
the Board of Directors of the Company, is not of material importance to the
business conducted by the Company and its subsidiaries taken as a whole, and a
"Restricted Subsidiary" is a subsidiary that owns or leases a Principal
Property.
These covenants give the Board of Directors of the Company some discretion
to exclude from the term "Principal Property" properties that are not of
material importance to the Company and its subsidiaries taken as a whole, but
the Board has no ability to waive the applicability of these covenants. However,
because these covenants do not restrict the ability of the Company to incur
unsecured debt, such covenants would not necessarily either impede a change in
control of the Company or afford holders of the Debentures protection in the
event of a highly leveraged or other transaction involving the Company that
might adversely affect holders of the Debentures.
UNDERWRITING
Subject to the terms and conditions contained in an Underwriting Agreement
dated the date hereof, the Company has agreed to sell to each of the
Underwriters named below, severally, and each of the Underwriters has severally
agreed to purchase, the respective principal amount of Debentures set forth
below.
S-14
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PRINCIPAL
AMOUNT OF
NAME DEBENTURES
---- ------------
Morgan Stanley & Co. Incorporated.................................... $ 50,000,000
Salomon Brothers Inc................................................. 50,000,000
------------
Total...................................................... $100,000,000
===========
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Debentures are subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are committed to take and pay for all the
Debentures if any are taken.
The Underwriters initially propose to offer the Debentures directly to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a concession not
in excess of .50% of the principal amount of the Debentures. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of .25% of
the principal amount of the Debentures to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed by the Underwriters.
The Company does not intend to apply for listing of the Debentures on a
national securities exchange. The Underwriters presently intend to make a market
in the Debentures in the secondary trading market. However, the Underwriters are
not obligated to make a market in the Debentures and any such market making may
be discontinued at any time at the sole discretion of the Underwriters. No
assurance can be given as to the liquidity of, or the trading markets for, the
Debentures.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Underwriters have from time to time performed various investment
banking services for the Company and its subsidiaries, for which compensation
has been received.
LEGAL MATTERS
The validity of the Debentures will be passed upon for the Company by
Crowell & Moring, Washington, D.C. Certain legal matters relating to the
Debentures will be passed upon for the Underwriters by Brown & Wood, New York,
New York. Certain matters will be passed upon for the Company by Richard L.
Ballantyne, Vice President and General Counsel of the Company.
S-15
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PROSPECTUS
$162,500,000
[LOGO]
Harris Corporation
DEBT SECURITIES
------------------
Harris Corporation ("Harris" or the "Company") may offer and issue from
time to time up to $162,500,000 aggregate principal amount of its Debt
Securities in one or more series. The Company will offer Debt Securities to the
public on terms to be determined by market conditions.
The accompanying Prospectus Supplement or the applicable Pricing Supplement
sets forth the specific designation, aggregate principal amount, purchase price,
maturity, interest rate (or manner of calculation thereof), time of payment of
interest (if any), listing (if any) on a securities exchange, and any other
specific terms of the Debt Securities, and the name of and compensation to each
dealer, underwriter or agent (if any) involved in the sale of Debt Securities.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The Debt Securities may be offered directly, through dealers, through
underwriters or through agents designated from time to time, as set forth in the
Prospectus Supplement. Net proceeds to the Company will be the purchase price in
the case of a purchaser or dealer, the public offering price less discount in
the case of an underwriter, or the purchase price less commission in the case of
an agent -- in each case, less other expenses attributable to issuance and
distribution. See "Plan of Distribution" for indemnification arrangements for
dealers, underwriters and agents.
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement and applicable Pricing Supplement.
October 12, 1995
17
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, THE PROSPECTUS SUPPLEMENT OR ANY
PRICING SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
UNDERWRITER, AGENT OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT ATTACHED HERETO (TOGETHER "THIS SUPPLEMENTED PROSPECTUS")
OR ANY PRICING SUPPLEMENT NOR ANY SALE MADE THEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF. THIS SUPPLEMENTED PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION TO BUY DEBT SECURITIES IN ANY
JURISDICTION TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------
AVAILABLE INFORMATION
Harris is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning Harris can be inspected and copied
at Room 1024 of the Commission's office at 450 Fifth Street, N.W., Washington,
D.C. 20549, and the Commission's Regional Offices in New York (7 World Trade
Center, New York, New York 10048) and Chicago (500 West Madison Street, Chicago,
Illinois 60661). Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington. D.C.
20549, at prescribed rates. Reports, proxy material and other information
concerning Harris also may be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005. This Prospectus does
not contain all information set forth in the Registration Statement, of which
this Prospectus is a part, and Exhibits thereto which Harris has filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
and to which reference is hereby made.
------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended June 30, 1995,
which was filed by Harris (Commission File No. 1-3863) with the Commission under
the Exchange Act, is incorporated in this Prospectus by reference.
All documents filed by Harris pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Debt Securities shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of filing
of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Harris will provide without charge to any person receiving a copy of this
Prospectus, including any beneficial owner, upon oral or written request, a copy
of any and all of the documents incorporated by reference herein, except for the
exhibits to such documents which are not specifically incorporated by reference
into such documents. Requests should be directed to Richard L. Ballantyne,
Secretary, Harris Corporation, 1025 W. NASA Boulevard, Melbourne, Florida 32919
(407) 727-9100.
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THE COMPANY
Harris, along with its subsidiaries, is a worldwide company focused on four
major core businesses: advanced electronic systems, semiconductors,
communications and an office equipment distribution network. The executive
offices of the Company are located at 1025 W. NASA Boulevard, Melbourne, Florida
32919, and the telephone number is (407) 727-9100.
The Company's operations are carried out through three operating sectors
and a subsidiary, which correspond to its business segments used for financial
reporting purposes: Electronic Systems, Semiconductor, Communications and Lanier
Worldwide, Inc. Harris structures its operations primarily around the markets it
serves. Its operating divisions, which are the basic operating units, have been
organized on the basis of technology and markets. For the most part, each
operating division has its own marketing, engineering, manufacturing and service
organizations.
The Electronic Systems sector of Harris is engaged in advanced research,
development, design and production of high technology systems for government
agencies and commercial organizations in the United States and overseas.
Applications of the sector's state-of-the-art technologies include avionics and
space systems, support equipment, C(3)I (Command, Control, Communication and
Intelligence), energy management, newspaper composition, real-time and
high-performance computing and design automation.
The Semiconductor sector of the Company produces standard, semicustom and
custom integrated circuits and discrete devices based on complementary metal
oxide semiconductor (CMOS), bipolar, dielectric isolation, gallium arsenide
(GaAs) and radiation hardening technologies. These products are focused on
signal processing and control segments of the worldwide semiconductor market
that demand the highest levels of performance in terms of speed, precision,
low-power consumption and reliability in harsh environments.
The Communications sector of the Company produces a comprehensive line of
communications equipment and systems, including microwave, lightwave, two-way
radio, broadcast radio and television systems, digital telephone switches,
satellite systems, auxiliary telecommunication products and turnkey
communication systems.
Lanier Worldwide, Inc., is a wholly-owned subsidiary of Harris which
markets, sells and services office equipment and business communication products
on a global basis. Lanier Worldwide is among the industry's largest (measured by
sales) independent distributors of copying systems, facsimile units, laser
printers and presentation and document systems. Through its Voice Products
Division, Lanier Worldwide is a market leader in dictation equipment ranging
from pocket-size units to large-capacity analog and digital systems. Lanier
Worldwide is also a leading supplier of business telephone systems, private
branch exchanges and continuous-recording systems for monitoring and logging
two-way voice communications.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement or the applicable
Pricing Supplement, the net proceeds from the sale of the Debt Securities
offered hereby will be used for general corporate purposes, including the
repayment of existing indebtedness and additions to working capital. Such
indebtedness may include notes issued under the Indenture (as defined herein) in
November 1990 in an aggregate principal amount of $30,000,000, bearing interest
rates from 9.50% to 9.70% and maturing from October 30, 1995 to November 30,
1995. The Company may raise additional funds from time to time through equity or
debt financings.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated.
FISCAL YEAR ENDED JUNE 30
----------------------------------------------------------------------
1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
1.11 2.47 3.17 3.56 3.88
3
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For purposes of computing the ratio of earnings to fixed charges, earnings
are divided by fixed charges. Earnings represent the sum of income from
continuing operations before income taxes for the Company and its subsidiaries
plus fixed charges, minus interest capitalized, plus amortization of interest
capitalized. Fixed charges represent interest expense of the Company and its
subsidiaries (including interest capitalized) plus one-third (the proportion
deemed representative of the interest factor) of rents.
DESCRIPTION OF DEBT SECURITIES
The statements under this caption relating to the Debt Securities and the
Indenture are summaries and do not purport to be complete. Such summaries use
terms defined in, and are qualified in their entirety by reference to, the Debt
Securities and the Indenture and the cited provisions thereof. All references to
"Section" or "Article" in this "Description of Debt Securities" are to the
applicable Section or Article of the Indenture. A copy of the Indenture is filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
GENERAL
The Debt Securities will be issued under an Indenture dated as of October
1, 1990 (the "Indenture") between the Company and National City Bank (the
"Trustee"). The Indenture authorizes the issuance by the Company from time to
time of Debt Securities in one or more series. The Indenture does not limit the
amount of Debt Securities which may be issued thereunder, and provides that the
specific terms of any series of Debt Securities shall be set forth in, or
determined pursuant to, an authorizing resolution of the Board of Directors of
the Company or in a supplemental indenture relating to such series. The Debt
Securities will be unsecured obligations of the Company and will rank pari passu
with all other unsecured and unsubordinated obligations of the Company. The Debt
Securities will be a new issue of securities with no established trading market.
No assurance can be given as to the liquidity of the trading market for the Debt
Securities.
Reference is made to the Prospectus Supplement or applicable Pricing
Supplement for the following terms of the Debt Securities ("Offered Debt
Securities") in respect of which this Prospectus is being delivered (to the
extent such terms are applicable to such Debt Securities): (i) designation,
aggregate principal amount and purchase price; (ii) date of maturity; (iii)
interest rate or rates (or method by which such rate or rates will be
determined), if any; (iv) the dates on which any such interest will be payable;
(v) the place or places where the principal of and interest, if any, on the
Offered Debt Securities will be payable; (vi) any redemption or sinking fund
provisions; (vii) whether the Offered Debt Securities are to be issued in the
form of one or more global securities and, if so and different from the
depositary identified below, the identity of a depositary for such global
securities; and (viii) any other specific terms of the Offered Debt Securities.
The Prospectus Supplement or Pricing Supplement relating to each series of
Debt Securities will indicate either that Debt Securities of such series cannot
be redeemed prior to maturity or that such Debt Securities will be redeemable at
the option of the Company, at the option of the holder or both, on or after a
specified date or dates prior to maturity on terms set forth therein. Except as
set forth in the applicable Prospectus Supplement or Pricing Supplement, the
Debt Securities will not be subject to any sinking fund.
The Company may purchase Debt Securities at any price in the open market or
otherwise. Debt Securities so purchased by the Company may, at the discretion of
the Company, be held or resold or surrendered to the Trustee for cancellation or
in satisfaction of any redemption requirements.
Debt Securities will bear interest at a fixed rate or a floating rate. Debt
Securities bearing no interest or interest at a rate which, at the time of
issuance, is below the prevailing market rate will be sold at a substantial
discount below their stated principal amount. Special United States federal
income tax considerations applicable to any such discounted Debt Securities or
to certain Debt Securities issued at par which are treated as having been issued
at a discount for United States federal income tax purposes are described in the
relevant Prospectus Supplement.
4
20
Debt Securities will be issued only in fully registered form and will be
represented either by Debt Securities issued in definitive form or by one or
more Global Securities registered in the name of a depositary or its nominee
(see "Global Securities" below). In the case of Debt Securities issued in
definitive form, the applicable Prospectus Supplement or Pricing Supplement will
specify the manner of payment of principal and interest thereon and the place or
places where the Debt Securities may be presented for exchange or transfer.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in the form of one or more
fully registered global securities (each a "Global Security") that will be
deposited with The Depository Trust Company (the "Depositary"), or with a
nominee for the Depositary. In such case, one or more Global Securities will be
issued in a denomination or aggregate denominations equal to the portion of the
aggregate principal amount of outstanding Debt Securities of the series to be
represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive registered form,
a Global Security may not be transferred except as a whole by the Depositary to
a nominee of the Depositary or by a nominee of the Depositary to the Depositary
or to another nominee of the Depositary or by the Depositary or any such nominee
to a successor of the Depositary or a nominee of such successor.
The Depositary has advised the Company that it is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. The Depositary was created to
hold securities for persons that have accounts with the Depositary
("participants") and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own the Depositary. Access to the Depositary's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Persons who are not participants may
beneficially own securities held by the Depositary only through participants.
Upon the issuance of a Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
participants. The accounts to be credited shall be designated by any
underwriters or agents participating in the distribution of such Debt
Securities, or by the Company if such Debt Securities are offered and sold
directly by the Company. Ownership of beneficial interests in a Global Security
will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in such Global Security will be
shown on, and the transfer of such ownership will be effected only through,
records maintained by the Depositary or its nominee (with respect to beneficial
interests of participants) or by participants or persons that hold through
participants (with respect to beneficial interests of beneficial owners). The
laws of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Debt Securities represented by such
Global Security for all purposes under the Indenture. Except as set forth below,
owners of beneficial interests in a Global Security will not be entitled to have
the Debt Securities represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of such Debt
Securities in definitive form and will not be considered the owners or holders
thereof under the Indenture.
Principal, premium, if any, and interest payments on Debt Securities
represented by a Global Security registered in the name of the Depositary or its
nominee will be made to the Depositary or its nominee, as the case may be, as
the registered owner of such Global Security. None of the Company, the Trustee,
any paying agent or any security registrar for such Debt Securities will have
any responsibility or liability for any aspect of
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the records relating to or payments made on account of beneficial ownership
interests in such Global Security, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal, premium, if any, or interest in respect of a Global
Security, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of the Depositary or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in a Global Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in "street names," and will
be the responsibility of such participants.
If the Depositary is at any time unwilling, unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within ninety days, the Company will issue Debt Securities of any series
then represented by one or more Global Securities in definitive form in exchange
for such Global Security or Securities. In addition, the Company may at any time
and in its sole discretion determine not to have the Debt Securities of a series
represented by one or more Global Securities and, in such event, will issue Debt
Securities of such series in definitive form in exchange for the Global Security
or Securities representing such Debt Securities. Further, if the Company so
specifies with respect to the Debt Securities of a series, an owner of a
beneficial interest in a Global Security representing such Debt Securities may,
on terms acceptable to the Company and the Depositary for such Global Security,
receive such Debt Securities in definitive form. In any such instance, an owner
of a beneficial interest in such a Global Security will be entitled to have Debt
Securities equal in principal amount to such beneficial interest registered in
its name and will be entitled to physical delivery of such Debt Securities in
definitive form. Debt Securities so issued in definitive form will, except as
set forth in the applicable Prospectus Supplement, be issued in denominations of
$100,000 and any integral multiple of $1,000 in excess thereof and will be
issued in registered form only, without coupons.
CERTAIN RESTRICTIONS
The restrictions summarized below apply to the Offered Debt Securities
unless the Prospectus Supplement provides otherwise. Certain terms used in the
following description of such restrictions are defined under "Certain
Definitions" below. The following description does not purport to be complete
and is qualified in its entirety by reference to the Indenture.
Limitations on Liens
The Indenture provides that the Company and its Restricted Subsidiaries
will not create, incur, assume or suffer to exist any mortgage, pledge or other
lien or encumbrance of or upon any Principal Property or any shares of capital
stock or indebtedness of any Restricted Subsidiary, whether now owned or
hereafter acquired, if after giving effect thereto (but not to certain permitted
liens) the aggregate principal amount of indebtedness secured by mortgages,
pledges, liens or other encumbrances would be in excess of 5% of the Company's
Consolidated Net Worth (as defined in the Indenture) unless the Debt Securities
then outstanding will be secured by such mortgage, pledge, lien or encumbrance
equally and ratably with (or prior to) any and all obligations, indebtedness or
claims secured by such mortgage, pledge, lien or encumbrance; except that the
Company and its Restricted Subsidiaries may incur certain liens and encumbrances
described in the Indenture without so securing the Debt Securities. Among such
permitted liens are (i) purchase money mortgages, including conditional sales
and other title retention agreements; (ii) liens securing certain construction
and improvement loans; (iii) liens in connection with government contracts; (iv)
liens securing indebtedness of a Restricted Subsidiary outstanding at the time
it became a Subsidiary; and (v) certain liens in favor of an instrumentality of
the United States or any State or any political subdivision thereof to secure
indebtedness incurred to finance the acquisition, construction or improvement of
the property subject to the lien. (Section 5.11)
Limitations on Sales and Leasebacks
The Indenture provides that the Company and its Restricted Subsidiaries
will not sell or transfer any Principal Property with the intention of entering
into a lease of such facility for a term of more than three
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years, unless the Attributable Debt in respect of all such sales and leasebacks
involving Principal Properties shall not exceed 5% of Consolidated Net Worth, or
unless the net proceeds of such sale are applied to the redemption of Debt
Securities or the reduction of other Funded Debt in an aggregate principal
amount (or, in the case of an Original Issue Discount Security, such portion of
the principal as would have been payable if such Securities had been accelerated
to such date) equal to such net proceeds, or unless the Company applies such net
proceeds to the purchase of properties, facilities or equipment to be used for
operating purposes. (Section 5.10)
Consolidation, Merger or Sale of Assets
The Company covenants in the Indenture that it will not consolidate or
merge with or into any other corporation, or sell or transfer all or
substantially all of its property and assets to any other corporation, (i)
unless the surviving or successor corporation assumes the obligations of the
Company under the Indenture and is not in default thereunder immediately after
the consummation of the transaction or (ii) if, upon such consolidation, merger,
sale or transfer becoming effective, any of the property or assets of the
Company would become or be subject to any mortgage or other lien (an "additional
lien"), other than liens existing thereon prior thereto and liens permitted by
Section 5.11 (see "Limitations on Liens" above), unless, prior to such
consolidation, merger, sale or transfer, the Debt Securities are directly
secured by a lien ranking prior to such additional lien on all of the property
and assets of the Company that would become subject to such additional lien or
the Debt Securities outstanding immediately after such consolidation, merger,
sale or transfer shall be equally and ratably secured with (or prior to) any and
all obligations, indebtedness and claims secured by such additional lien.
(Section 12.01)
In the event of a sale or transfer of substantially all of the assets of
the Company and the assumption of the Company's obligations under the Indenture
by the purchaser, the Company will be discharged from all obligations under the
Indenture and the Debt Securities. (Section 12.02)
Certain Definitions
The term "Attributable Debt" with respect to any sale and leaseback
transaction means, at the time of the determination, the present value
(discounted at the rate of interest implicit in the terms of the lease) of the
obligation of the lessee for net rental payments during the remaining term of
the lease (including any period for which such lease has been extended or may,
at the option of the lessor, be extended). "Net rental payments" as used in the
preceding sentence means the sum of the rental and other payments required to be
paid in such period by the lessee under any lease, not including, however, any
amounts required to be paid by such lessee (whether or not designated as rental
or additional rental) on account of maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges required to be paid by such lessee
thereunder or any amounts required to be paid by such lessee thereunder
contingent upon the amount of sales, maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges. (Section 1.01)
The term " Original Issue Discount Security" means any Debt Security that
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof pursuant to
Section 7.01 of the Indenture. (Section 1.01)
The term "Principal Property" means any manufacturing plant located within
the United States of America (other than its territories or possessions) and
owned or leased by the Company or any Subsidiary, except any such plant that, in
the opinion of the Board of Directors, is not of material importance to the
business conducted by the Company and its Subsidiaries, taken as a whole.
(Section 1.01)
The term "Restricted Subsidiary" means any Subsidiary that owns or leases a
Principal Property. As noted above, the definition of Principal Property does
not include foreign facilities. "Subsidiary" means any corporation of which the
Company, or the Company and one or more Subsidiaries, directly or indirectly own
at the time (i) more than 50% of the outstanding capital stock having under
ordinary circumstances (not dependent upon the happening of a contingency)
voting power in the election of members of the board of directors, managers or
trustees of said corporation, and (ii) securities having at such time voting
power to elect at least a majority of the members of the board of directors,
managers or trustees of said corporation. (Section 1.01)
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EVENTS OF DEFAULT
As used in the Indenture, the term "Event of Default" with respect to any
series of Debt Securities includes (i) the failure of the Company to pay
interest on such Debt Securities that continues for a period of 30 days after
such payment is due, or to make any principal or premium payment when due; (ii)
the failure of the Company to comply with any other agreements contained in the
Indenture or such Debt Securities for 90 days after notice of such failure;
(iii) certain events of bankruptcy, insolvency or reorganization of the Company;
and (iv) an event of default as defined in any mortgage, indenture or instrument
under which is issued, or securing or evidencing, indebtedness of the Company
(other than the Debt Securities of such series) that results in such
indebtedness becoming or being declared due and payable prior to maturity, if
such acceleration is not rescinded within 10 days after notice to the Company
from the Trustee (or to the Company and the Trustee from the holders of not less
than 25% of the then outstanding Securities of all series) under the Indenture.
The Indenture provides that the Trustee may withhold notice to the holders of
any series of Debt Securities of any default (except a default in payment of
principal of, premium, if any, or interest on any Debt Security) if the Trustee
determines it is in the best interest of the holders of such Debt Securities to
do so. (Section 7.01 and Section 7.07)
The Indenture provides that, (i) if an Event of Default due to the default
in payment of principal of, premium, if any, or interest on, any series of Debt
Securities issued under the Indenture, or due to the default in the performance
or breach of any other covenant or warranty of the Company applicable to the
Debt Securities of such series but not applicable to all outstanding Debt
Securities issued under the Indenture, shall have occurred and be continuing,
either the Trustee or the holders of not less than 25% in principal amount of
the Debt Securities of each affected series (voting as a single class) issued
under the Indenture and then outstanding may then declare the principal (or, in
the case of Original Issue Discount Securities, such portion of the principal as
may be specified in the terms thereof) of all Debt Securities of each such
affected series and interest accrued thereon to be due and payable immediately
and (ii) if an Event of Default due to a default in the performance of any other
of the covenants or agreements in the Indenture applicable to all outstanding
Debt Securities issued thereunder and then outstanding, due to certain events of
bankruptcy, insolvency and reorganization of the Company, or due to defaults
under and acceleration of other indebtedness under circumstances described in
the Indenture, shall have occurred and be continuing, either the Trustee or the
holders of not less than 25% in principal amount of all Debt Securities then
outstanding under the Indenture (treated as a single class) may declare the
principal (or, in the case of Original Issue Discount Securities, such portion
of the principal as may be specified in the terms thereof) of all such Debt
Securities and interest accrued thereon to be due and payable immediately;
provided that upon certain conditions such declarations may be annulled, and
past defaults may be waived (except a continuing default in payment of principal
of or premium, if any, or interest on such Debt Securities), by the holders of a
majority in principal amount of the Debt Securities of such series (or of all
series, in the case of defaults described in clause (ii)) then outstanding.
(Section 7.01 and Section 7.06)
The Trustee may refuse to enforce the Indenture or the Debt Securities
unless it first receives satisfactory security or indemnity. Subject to certain
limitations specified in the Indenture, the holders of a majority in principal
amount of the Debt Securities of an affected series then outstanding will have
the right to direct the time, methods and place of conducting any proceeding for
any remedy available to the Trustee. (Section 8.02 and Section 7.06)
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture provides that the Company will be discharged from obligations
in respect of the Indenture and the outstanding Debt Securities of a series upon
deposit in trust with the Trustee of money or U.S. Government Obligations
sufficient for payment of all principal and interest on the Debt Securities of
such series, when due; provided, however, that, in the event of such deposit,
certain of the Company's obligations under the Indenture, including the
obligation to pay the principal of and interest on the Debt Securities of such
series, shall continue until all of such Debt Securities of such series issued
under the Indenture are no longer outstanding. Such a deposit in trust may occur
only if, among other things, the Company has received an opinion of counsel
stating that holders of Debt Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and discharge and will be subject to federal
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income tax on the same amounts and in the same manner and at the same times as
would have been the case if such deposit and discharge had not occurred.
(Article Four)
MODIFICATION
Under the Indenture, subject to certain exceptions, the rights and
obligations of the Company and the rights of the holders of a series of Debt
Securities may be modified by the Company and the Trustee only with the consent
of the holders of at least 66 2/3% in aggregate principal amount of Debt
Securities of such series then outstanding. However, no extension of the
maturity of any Debt Securities, or reduction in the interest rate, principal
amount, or premium, if any, payable upon redemption, or extension of the time of
payment of interest, or reduction in the amount of principal due and payable
upon an acceleration of maturity upon an Event of Default or the amount thereof
provable in bankruptcy, or impairment or effect upon the right of any holder of
the Debt Securities to institute suit for the payment thereof or, if the
securities provide therefor, any right of repayment at the option of the holder
of the Debt Securities, or reduction of the percentage of any series of Debt
Securities required for modification, will be effective without the consent of
the holder of each Debt Security so affected. (Section 11.02)
REPORTS TO TRUSTEE
The Company covenants in the Indenture that it will provide Trustee with an
officers' certificate stating that the activities of the Company during the
preceding fiscal year have been reviewed and that, to the best of the knowledge
of such officers, the Company is not in default in the performance, observance
or fulfillment of the terms, provisions and conditions of the Indenture and that
no default exists or, if a default exists, specifying all such defaults of which
such officers may have knowledge. (Section 5.13)
REGARDING THE TRUSTEE
The Trustee, National City Bank, is one of a number of banks with which the
Company maintains ordinary banking relationships and credit facilities.
PLAN OF DISTRIBUTION
The Company may sell Offered Debt Securities to one or more underwriters
for public offering and sale by them or may sell the Offered Debt Securities to
investors directly or through agents. Any such underwriter or agent involved in
the offer and sale of the Offered Debt Securities will be named in the
applicable Prospectus Supplement. The Company also may, from time to time,
authorize dealers, acting as the Company's agents, to offer and sell the Offered
Debt Securities upon the terms and conditions as are set forth in the Prospectus
Supplement. The Company has reserved the right to sell Offered Debt Securities
directly to investors on its own behalf in those jurisdictions where it is
authorized to do so.
Underwriters may offer and sell the Offered Debt Securities at a fixed
price or prices, which may be changed, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. In connection with the sale of the Offered Debt Securities, underwriters
may be deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of the Offered Debt Securities for whom they may act as agent.
Underwriters may sell the Offered Debt Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Debt Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers, are
set forth in the applicable Prospectus Supplement or Pricing Supplement.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
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LEGAL MATTERS
The validity of the Offered Debt Securities will be passed upon for the
Company by Crowell & Moring, Washington, D.C. Certain legal matters relating to
the Offered Debt Securities will be passed upon for the underwriters by Brown &
Wood, New York, New York. Certain matters will be passed upon for the Company by
Richard L. Ballantyne, Vice President and General Counsel of the Company.
EXPERTS
The consolidated financial statements of Harris Corporation and
subsidiaries appearing in the Company's Annual Report (Form 10-K) for the year
ended June 30, 1995, have been audited by Ernst & Young, independent certified
public accountants, as set forth in their report included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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