15 Jan 03. Harris Corporation (NYSE:HRS – News) today reported that second quarter fiscal 2003 revenue climbed 16 percent to $523.9m, (2002: $451.5m). Quarter highlights included accelerating growth in Harris’ two government businesses and better-than-anticipated improvement in the company’s microwave business. New orders were higher than sales.
Second quarter net income was $16.3m or $.25 per share. Net income and earnings per share were reduced by expenses related to the previously announced cost reduction actions in the company’s microwave business. These expenses lowered pre-tax income by $8.3m and net income per share by $.08. Absent these cost reduction expenses, net income per share would have been $.33. The $.33 exceeded analysts’ consensus expectations of $.26 per share, which was established on the same basis.
Government Communications Systems
Second quarter sales in the company’s Government Communications Systems segment climbed 24 percent to $272.7m and orders were higher than sales. Sales growth was all organic and was across all areas of the business. Operating income increased 21 percent to $24.5m. The outstanding financial performance resulted from Harris’ broad spectrum of recent wins, solid government funding, and excellent execution by the management team. The expanding backlog includes contracts with the Department of Defense, FAA, and other government agencies. Harris is providing communication and information products and systems for the nation’s increased emphasis on defense and security. New business during the second quarter included contracts for classified programs, digital map systems for new aircraft, satellite GPS systems, and technical service contracts.
The RF Communications segment reported record sales of $75.3m, an increase of 17 percent compared to the prior-year quarter. Segment operating income was also a record, increasing 68 percent to $19.1m. Income improvement reflected increased sales volume and manufacturing efficiencies. The War on Terrorism has created unparalleled demand for Harris’ industry-leading Falcon(r) II tactical radios. The division has expanded capacity to meet continuing new demands for its product line from the U.S., NATO, and Partnership for Peace countries around the world. Development activities at the division are continuing on schedule for two programs that are redefining the world’s tactical radios of the future – the U.S. Joint Tactical Radio System Program and the United Kingdom’s Bowman Tactical Radio Programme.
Broadcast Communications segment sales of $94.2m increased 19 percent, compared to the prior-year quarter. As anticipated, new opportunities materialized in international markets, including China, Germany, Romania, and the Middle East.
Sales in the Microwave Communications segment were $75.6m, up 4 percent compared to the prior-year quarter and increasing 35 percent compared to the first quarter of fiscal 2003. Strength continued in North America where sales increased as a result of capacity upgrades by cellular and PCS providers and from Harris’ solid position in the private network business. While capital constraints still remain a concern in the international market, improvement in Harris’ international microwave business was encouraging. Eastern Europe, Africa, and Asia all showed relative strength. The segment reported an operating loss of $8.2m. Included in the loss was $8.3m of expenses related to previously announced cost-reduction actions in the quarter. Excluding these expenses, the microwave business was essentially breakeven during the second quarter.
Second quarter sales were $12.1 million in the company’s Network Support segment. The business reported an operating loss of $2.5 million. Continued cost-cutting programs helped to minimize losses in this te