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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(MARK ONE)
[X] AMENDMENT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
-------------------------------- to ----------------------------------
Commission File Number 1-3863
HARRIS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 34-0276860
(STATE OR OTHER JURISDICTION OF INCORPORATION OR
ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1025 WEST NASA BOULEVARD
MELBOURNE, FLORIDA 32919
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (407) 727-9100
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
-----------------------------------------------
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Common Stock, par value $1 per share New York Stock Exchange
7 3/4% Sinking Fund Debentures due 2001 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value (based upon the closing price on the New York
Stock Exchange) of the voting stock held by non-affiliates of the registrant as
of August 21, 1997 was $3,406,757,000.
The number of outstanding shares of the registrant's Common Stock, on
August 21, 1997 was 39,831,053.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 24, 1997 are incorporated by reference into
Part III of this Report on Form 10-K
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HARRIS CORPORATION
FORM 10-K
TABLE OF CONTENTS
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PAGE NO.
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PART I:
ITEM 1. Business....................................................... 1
ITEM 2. Properties..................................................... 7
ITEM 3. Legal Proceedings.............................................. 8
ITEM 4. Submission of Matters to a Vote of Security Holders............ 9
PART II:
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters............................................ 13
ITEM 6. Selected Financial Data........................................ 14
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 15
ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk...... 17
ITEM 8. Financial Statements and Supplementary Data.................... 18
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... 18
PART III:
ITEM 10. Directors and Executive Officers of the Registrant............. 19
ITEM 11. Executive Compensation......................................... 19
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management................................................. 19
ITEM 13. Certain Relationships and Related Transactions................. 19
PART IV:
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K............................................................ 20
SIGNATURES ............................................................ 22
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ......................................... 23
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PART I
INTRODUCTORY NOTE: Harris Corporation has declared a two-for-one stock
split to be effected in the form of a 100% stock dividend to be paid on or about
September 26, 1997 to holders of record as of the close of business on September
4, 1997. Except for information on the cover page, all share and per-share
amounts described in this Annual Report on Form 10-K/A (including the financial
statements included herein) have been restated to give effect to such stock
split.
ITEM 1. BUSINESS.
THE COMPANY
GENERAL
Harris Corporation was incorporated in Delaware in 1926 as the successor to
three companies founded in the 1890's. The principal executive offices of the
Company are located at 1025 West NASA Boulevard, Melbourne, Florida 32919, and
the telephone number is (407) 727-9100.
Harris Corporation, along with its subsidiaries (hereinafter called
"Harris" or the "Company"), is a worldwide company focused on four core
businesses: communications, semiconductors, office systems and equipment, and
advanced electronic systems.
The Company's four core businesses were carried out during fiscal 1997
through three business sectors and a subsidiary, which correspond to the
Company's 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. The operating divisions within each of the sectors and the
subsidiary, 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 organization.
Reference is made to the Note Business Segments in the Notes to Financial
Statements for further information with respect to business sectors and the
subsidiary.
Total sales in fiscal 1997 increased to $3.8 billion from $3.6 billion a
year earlier. Total sales in the United States increased 11 percent from a year
earlier while international sales, which amounted to 29 percent of the corporate
total, decreased 7 percent. Net income increased 16 percent to $207.5 million
from $178.4 million.
The markets served and principal products of the Company's three business
sectors and Lanier Worldwide, Inc. are as follows:
COMMUNICATIONS SECTOR: produces a comprehensive line of communications
equipment and systems for broadcast, radio-communication, telecommunication, and
network systems, including: transmitters and studio equipment for analog
television and digital television (formerly HDTV); analog and digital AM and FM
radio, HF, VHF, UHF radio-communication equipment; air traffic communication
systems; microwave radios and transmission equipment; digital telephone
switches; telephone subscriber-loop and test systems equipment; office wireless
systems; and in-building paging equipment.
SEMICONDUCTOR SECTOR: produces standard, custom and semi-custom integrated
circuits and discrete devices for analog, digital, mixed-signal, and power
control and protection applications. These products are used in signal
processing, data-acquisition, and logic applications for automotive systems,
wireless communications, telecommunications line cards, video and imaging
systems, multimedia, industrial equipment, computer peripherals, and military
and aerospace systems.
LANIER WORLDWIDE, INC.: markets, sells, distributes, services, supports and
provides supplies for copying systems, facsimile systems and networks, dictation
systems, multi-function devices, optical-based electronic-image management
systems, document productivity solutions, continuous recording systems and
computer-based healthcare information management systems and provides a variety
of outsourcing services including transcription, systems integration,
reprographics, binding and mailroom management.
ELECTRONIC SYSTEMS SECTOR: engages in the design, development and
production of state-of-the-art electronic, communication and information systems
for defense, air traffic, aerospace, telecommunications,
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law enforcement and newspaper composition markets. Applications of the sector's
technologies include advanced avionics systems, terrestrial and satellite
communication terminals and networks, global positioning system-based controls
systems, signal and image processing, weather support systems, civil and
military air traffic control systems and integrated airport communication and
management systems.
FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
The financial results shown in the following tables are presented to comply
with current financial accounting standards relating to business segment
reporting. Information concerning the identifiable assets of the Company's
business segments is contained in the Note Business Segments in the Notes to
Financial Statements. In calculating operating profit, allocation of certain
expenses among the business segments involves the exercise of business judgment.
Intersegment sales, which are insignificant, are accounted for at prices
comparable to those paid by unaffiliated customers.
NET SALES AND OPERATING PROFIT BY BUSINESS SEGMENT
(DOLLARS IN MILLIONS)
NET SALES
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COMMUNI- SEMI- LANIER ELECTRONIC
FISCAL YEAR ENDED CATIONS CONDUCTOR WORLDWIDE SYSTEMS TOTAL
----------------------- ---------- -------- -------- ---------- ---------
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June 30, 1995.......... $724.8 $658.7 $1,024.8 $1,035.8 $ 3,444.1
June 30, 1996.......... 841.6 707.7 1,117.2 954.7 3,621.2
June 27, 1997.......... 948.0 679.7 1,171.7 997.8 3,797.2
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OPERATING PROFIT
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COMMUNI- SEMI- LANIER ELECTRONIC CORPORATE INTEREST
FISCAL YEAR ENDED CATIONS CONDUCTOR WORLDWIDE SYSTEMS EXPENSE EXPENSE TOTAL
----------------------- ------- ------- ------- ------- ------- ------- ------
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June 30, 1995.......... $68.5 $ 83.0 $105.7 $95.5 $(49.7) $(65.4) $237.6
June 30, 1996.......... 82.4 101.0 120.7 76.7 (43.9) (62.5) 274.4
June 27, 1997.......... 83.5 111.9 129.3 84.4 (37.2) (59.9) 312.0
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DESCRIPTION OF BUSINESS
COMMUNICATIONS
The Communications Sector of the Company, which is composed of seven
operating divisions, designs, manufactures, and sells products characterized by
three principal communication technologies: (i) telecommunications, including
microwave radio products and systems, digital telephone switches, telephone test
equipment, wireless cellular, local loop and turnkey telecommunication network
management systems; (ii) broadcast, including digital and analog television and
radio studio and transmission systems; and (iii) wireless radio, including
high-frequency (HF), very high frequency (VHF) and ultra-high frequency (UHF)
products, and complete turnkey communication systems.
Sales in fiscal 1997 for this business segment increased 13 percent to
$948.0 million from $841.6 million for the prior year. The sector recorded
operating profit of $83.5 million, up from $82.4 million in fiscal 1996. The
sector contributed 25 percent of Company total sales in fiscal 1997 and 23
percent in fiscal 1996.
The sector is a worldwide supplier of voice and data digital network
switches, private-branch exchanges (PBXs), automatic call distributors and
standards-based computer telephone integration products to long-distance
carriers, local carriers, utilities, corporations and government agencies.
The sector also supplies telecommunication products and systems, including
telephone test systems and tools and operational support systems to manage
telephone subscriber loops.
Under the Farinon trademark, the sector is the largest producer of analog
and digital microwave communication systems in North America.
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The sector is the leading supplier of analog and digital radio and
television broadcast transmission equipment and radio-studio equipment in the
United States and provided the nation's first advanced television transmitter to
broadcast digital television as well as the first commercial digital television
application. The sector's products include radio and television transmitters,
antennas, and audio, remote-control and video production systems. The sector is
also a leading supplier of mobile broadcast units.
The sector is a leading supplier of secure wireless radio communication
products, systems and services including two-way HF, VHF and UHF radio equipment
and offers a comprehensive line of products including ground-to-air avionics
radios and systems for long- and short-distance communications for commercial,
military, law enforcement and government applications.
The sector designs, manufactures and markets cellular and wireless local
loop telephony equipment for private, government and public phone system
customers operating worldwide.
The sector also designs and installs turnkey communication systems
involving a variety of communication technologies, including HF, VHF, microwave,
and switching systems with command and control centers.
Internationally, particularly in the emerging markets, the sector designs,
sells, installs and services communication systems involving radio and
television broadcasting equipment, rural telecommunication networks and long-
and short-range radios on both a product and a turnkey system basis.
Principal customers for products of the Communications Sector include
foreign and domestic commercial and industrial firms, radio and TV broadcasters,
telephone companies, governmental and military agencies, utilities, construction
companies and oil producers. In general, these products are sold and serviced
domestically directly to customers through the sales organizations of the
operating divisions and through established distribution channels.
Internationally, the sector markets and sells its products and services through
established distribution channels. See "International Business."
The backlog of unfilled orders for this segment of Harris' business was
$351 million at July 25, 1997, substantially all of which is expected to be
filled during the 1998 fiscal year, compared with $360 million a year earlier.
SEMICONDUCTOR
The Semiconductor Sector of the Company produces standard, custom and
semi-custom integrated circuits and discrete semiconductors for analog, digital,
mixed signal, power control and protection applications and produces devices 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.
Sales in fiscal 1997 for this business segment decreased 4 percent to
$679.7 million from $707.7 million in fiscal 1996. The sector's operating profit
was $111.9 million in fiscal 1997, compared with $101.0 million in fiscal 1996.
The sector contributed 18 percent of Company total sales in fiscal 1997 and 20
percent of Company total sales in fiscal 1996.
The sector produces discrete-power products, including metal oxide
semiconductor 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. In addition to industrial and electronic
data processing applications for motor controllers and power supplies, these
products are widely used in automotive electronic systems, such as automotive
ignition systems, anti-lock braking and engine controls, and instrument
displays.
The sector is a major supplier of devices addressing 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), coder/decoder and filter products, and
cross-point switches used in private-branch-exchange systems and of other
circuits for cellular communications, high resolution medical imaging, broadcast
and interactive cable, video, multimedia and military radar systems.
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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, and other applications for radiation hardened
circuits. The sector also supplies custom and semi-custom integrated circuits,
known as application specific integrated circuits, designed for high-performance
commercial, space and military applications.
The sector's circuits are based primarily on complementary metal oxide
semiconductor, bipolar analog, power analog/digital, metal oxide varistors,
radiation hardening and other process technologies.
Principal customers for the sector's products include video imaging,
electronic data processing, communications, 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."
The integrated circuit industry and technology are characterized by intense
competition and rapid advances in product performance. In addition to its own
research and development, Harris is a party to technology development and
exchange agreements with other companies to develop new and expanded
technologies.
The backlog of unfilled orders for this segment of Harris' business was
$294 million at July 25, 1997, substantially all of which is expected to be
filled during the 1998 fiscal year, compared with $352 million a year earlier.
LANIER WORLDWIDE
Lanier Worldwide, Inc. is a wholly-owned subsidiary of Harris which
markets, sells, and services office equipment and business communication
products and offers a variety of outsourcing services, including transcription,
systems integration, reprographics, binding and mailroom management.
Sales in fiscal 1997 for this business segment increased 5 percent to
$1,171.7 million from $1,117.2 million in fiscal year 1996. Operating profit was
$129.3 million, up from $120.7 million last year. Lanier Worldwide contributed
31 percent of Company total sales in both fiscal 1997 and fiscal 1996.
Through a global network of direct sales, national accounts and service
centers and authorized dealers, Lanier Worldwide provides copying, dictation,
continuous recording, facsimile products and systems, multi-functional devices,
document productivity systems and computer-based healthcare information
management systems. Lanier also provides facilities management operations and
other related outsourcing services. Lanier Worldwide leases certain of its
products to customers on a short-term basis.
Due to the nature of its business, backlog of unfilled orders is not
considered significant to an understanding of this segment's business.
ELECTRONIC SYSTEMS
The Electronic Systems Sector of Harris is composed of several operating
divisions and is engaged in advanced research, design, development and
production of advanced electronic, information processing and communication
systems and sub-systems for government and commercial organizations in the
United States and internationally. Applications of the sector's state-of-the-art
technologies include air traffic control, advanced aerospace products, weather
support systems, image processing, testing of complex electronics systems,
newspaper composition, law enforcement and communication 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 and newspapers and publishing houses.
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Sales in fiscal 1997 for this business segment increased 5 percent to
$997.8 million from $954.7 million in fiscal 1996. Operating profit was $84.4
million, an increase from $76.7 million in the previous fiscal year. This sector
contributed 26 percent of Company total sales in both fiscal 1997 and fiscal
1996.
The sector is a 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's electronic products enable high speed communications for platforms
such as the USAF F-22 air superiority fighter and the Army's Commanche advanced
armed reconnaissance helicopter.
The sector is a worldwide supplier of information-processing systems for
newspapers and publishing houses.
The sector has recently formed two joint ventures with the General Electric
Company. One relates to an energy control and management system and distribution
automation system business for electric and other utilities; a second venture
relates to transportation and electronic systems for railways, OEM and freight
shipping customers worldwide.
Most of the sales of this sector are made directly or indirectly to the
United States government under contracts or subcontracts containing standard
government contract 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.
The backlog of unfilled orders for this segment of Harris' business was
$470 million at July 25, 1997, a substantial portion of which is expected to be
filled during the 1998 fiscal year, compared with $592 million a year earlier.
INTERNATIONAL BUSINESS
Sales in fiscal 1997 of products exported from the United States or
manufactured abroad were $1,119 million or 29 percent of the Company's total
sales, compared with $1,206 million or 33 percent of the Company's total sales
in fiscal 1996 and $1,016 million or 30 percent in fiscal 1995. Exports from the
United States, principally to Europe and Asia, totalled $550 million or 49
percent of the international sales in fiscal 1997, $632 million or 52 percent of
the international sales in fiscal 1996 and $525 million or 52 percent in fiscal
1995 of the international sales.
Foreign operations represented 15 percent of consolidated net sales and 20
percent of consolidated total assets as of the end of fiscal 1997. Electronic
products and systems are produced principally in the United States, and
international electronic revenues are derived primarily from exports. Copying
and facsimile products are produced primarily in Asia. Semiconductor assembly
and test facilities are located in Malaysia and Ireland; and communication
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.
Reference is made to Exhibit 21 "Subsidiaries of the Registrant" for further
information regarding foreign subsidiaries.
Harris utilizes indirect sales channels, including dealers, distributors
and sales representatives, in the marketing and sale of some lines of products
and 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 representative and may be on a basis which is above or below
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the Company's list prices. Such independent representatives generally receive 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 1997 fiscal year, orders
came from a large number of foreign countries, no one of which accounted for
five percent of the Company's total orders.
Certain of Harris' exports are paid for by letters of credit, with the
balance carried either on an 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
by the Company 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 such risks as 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, rapid changes in governments and
economic and political policies, political or civil unrest or 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.
Financial information regarding the Company's domestic and international
operations is contained in the Note Business Segments in the Notes to Financial
Statements.
COMPETITION
The Company operates in highly competitive businesses that are sensitive to
technological advances. Although successful product and systems development is
not necessarily dependent on substantial financial resources, some of Harris'
competitors in each of the sectors of its business are larger and can maintain
higher levels of expenditures for research and development than Harris. Harris
concentrates in each of its sectors on the market opportunities which management
believes are compatible with its resources, overall technological capabilities
and objectives. Principal competitive factors in these sectors are
cost-effectiveness, product quality and reliability, service and ability to meet
delivery schedules as well as, in international areas, the effectiveness of
dealers.
PRINCIPAL CUSTOMERS
Sales to the U.S. government, which is the Company's only customer
accounting for 10 percent or more of total sales, were 23 percent, 26 percent,
and 30 percent of the Company's total sales in fiscal 1997, 1996 and 1995
respectively. It is not expected that Defense Department budget cutbacks will
have a material effect on the profitability of the Company due in part to the
Company's continuing efforts to diversify and reduce its reliance on defense
contracts.
BACKLOG
Harris' backlog of unfilled orders was approximately $1.1 billion at July
25, 1997 and $1.3 billion at July 26, 1996. Substantially all of the backlog
orders at July 25, 1997 are expected to be filled by June 30, 1998.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research and engineering expenditures by Harris totaled approximately $680
million in fiscal 1997, $603 million in fiscal 1996 and $601 million in fiscal
1995. Company-sponsored research and product development costs were $175 million
in fiscal 1997, $160 million in fiscal 1996 and $134 million in fiscal 1995. The
balance was funded by government and commercial customers. Company-funded
research is directed to the development of new products and to building
technological capability in selected semiconductor,
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communications and electronic systems areas. Government-funded research helps
strengthen and broaden the technical capabilities of Harris in its areas of
interest. Almost all of the operating divisions within the Company's sectors
maintain their own engineering and new product development departments, with
scientific assistance provided by advanced-technology departments.
PATENTS AND INTELLECTUAL PROPERTY
Harris holds numerous patents which it considers, in the aggregate, to
constitute an important asset. However, the Company does not consider its
business or any sector to be materially dependent upon any single patent or any
group of related patents. The Company is engaged in a pro-active patent
licensing program, especially in the Semiconductor Sector, and has entered into
a number of unilateral license and cross-license agreements, many of which
generate substantial royalty income. Although existing license agreements have
generated income in past years and will do so in the future, there can be no
assurances the Company will enter into additional income producing license
agreements. Numerous trademarks used on or in connection with Harris products
are considered to be a valuable asset of Harris.
ENVIRONMENTAL AND OTHER REGULATIONS
The manufacturing facilities of Harris, in common with those of industry
generally, are subject to numerous laws and regulations designed to protect the
environment, particularly in regard to wastes and emissions. Harris believes
that it has materially complied with these requirements, and such compliance has
not had a material adverse effect on its business or financial condition.
Expenditures to protect the environment and to comply with current environmental
laws and regulations over the next several years are not expected to have a
material impact on the Company's competitive or financial position. If future
laws and regulations contain more stringent requirements than presently
anticipated, expenditures may be higher than the Company's present estimates of
future expenditures.
Waste treatment facilities and pollution control equipment have been
installed to satisfy legal requirements and to achieve the Company's waste
minimization and prevention goals. An estimated $.4 million was spent on
environmental capital projects in fiscal 1997 and $.3 million in fiscal 1996.
The Company currently forecasts authorization for environmental-related capital
projects totalling $3.3 million in fiscal 1998. Such amounts may increase in
future years.
EMPLOYEES
As of June 27, 1997, Harris had approximately 29,000 employees. Harris
believes that its relations with its employees are good.
ITEM 2. PROPERTIES.
Harris operates approximately 37 plants and approximately 430 offices in
the United States, Canada, Europe, Central and South America, Asia and Australia
consisting of about 7.2 million square feet of manufacturing, administrative,
engineering and office facilities that are owned and about 3.9 million square
feet of sales, office and manufacturing facilities that are leased. The leased
facilities are occupied under leases for terms ranging from one year to 30
years, a majority of which can be terminated or renewed at no longer than
five-year intervals at Harris' option. The location of the principal
manufacturing plants owned by the Company in the United States and the sectors
which utilize such plants are as follows: Electronic Systems -- Malabar,
Melbourne and Palm Bay, Florida; Semiconductor -- Palm Bay, Florida; Findlay,
Ohio; and Mountaintop, Pennsylvania; Communications -- Camarillo, Novato and
Redwood Shores, California; Greensboro, North Carolina; San Antonio, Texas;
Quincy, Illinois; and Rochester, New York; and Lanier Worldwide -- Atlanta,
Georgia. The location of the principal manufacturing plants owned by the Company
outside of the United States, and the sectors which utilize such plants are as
follows: Semiconductor -- Dundalk, Ireland; and Kuala Lumpur, Malaysia; and
Communications -- Calgary and Montreal, Canada, and Shenzhen Guangdong, China,
and Cambridge, U.K.
Harris considers its facilities to be suitable and adequate for the
purposes for which they are used.
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As of June 27, 1997, the following facilities were in productive use by
Harris:
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SQ. FT. TOTAL SQ. FT. TOTAL
SECTOR FUNCTION OWNED LEASED
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Communications Office/Manufacturing 885,010 757,086
Semiconductor Office/Manufacturing 2,213,084 44,344
Lanier Worldwide Office/Manufacturing 204,912 710,166
Electronic Systems Office/Manufacturing 2,895,112 296,690
OTHER
Corporate Offices 959,549 93,659
Sales/Service Offices 13,700 1,967,874
------------- -------------
TOTALS 7,171,367 3,869,819
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
From time to time, as a normal incident of the nature and kind of business
in which the Company is engaged, various claims or charges are asserted and
litigation commenced against the Company arising from or related to product
liability; patents, trademarks, or trade secrets; breach of warranty; antitrust;
distribution; or contractual relations. Claimed amounts may be substantial but
may not bear any reasonable relationship to the merits of the claim or the
extent of any real risk of court awards. In the opinion of management, final
judgments, if any, which might be rendered against the Company in currently
existing litigation are reserved against or would not have a material adverse
effect on the financial condition or the business of the Company as a whole.
Government contractors, such as the Company, engaged in supplying goods and
services to the U.S. government are dependent on congressional appropriations
and administrative allotment of funds and may be affected by changes in U.S.
government policies. U.S. government contracts typically involve long lead times
for design and development and are subject to significant changes in contract
scheduling and may be unilaterally modified or cancelled by the government.
Often these contracts call for successful design and production of complex and
technologically advanced products or systems. The Company may participate in
supplying goods and services to the U.S. government as either a prime contractor
or a subcontractor to a prime contractor. Disputes may arise between the prime
contractor and the government and the prime contractor and its subcontractor and
may result in litigation between the contracting parties.
From time to time, the Company, either individually or in conjunction with
other U.S. government contractors, may be the subject of U.S. government
investigations for alleged criminal or civil violations of procurement or other
federal laws. These investigations may be conducted without the Company's
knowledge. The Company is currently cooperating with certain government
representatives in investigations relating to potential violations of the
federal procurement laws. The Company is unable to predict the outcome of such
investigations or to estimate the amounts of resulting claims or other actions
that could be instituted against it, its officers or employees. Under present
government procurement regulations, if indicted or adjudged in violation of
procurement or other federal civil laws, a government contractor could be
suspended or debarred from eligibility for awards of new government contracts
for up to three years. In addition, a government contractor's foreign export
control licenses could be suspended or revoked. Management does not believe that
the outcome of these disputes or investigations will have a material adverse
effect on the financial condition or the business of the Company as a whole.
In addition, the Company is subject to numerous federal and state
environmental laws and regulatory requirements and is involved from time to time
in investigations or litigation of various potential environmental issues
concerning ongoing activities at its facilities or remediation as a result of
past activities. The Company from time to time receives notices from the United
States Environmental Protection Agency and equivalent state environmental
agencies that it is a potentially responsible party ("PRP") under the
Comprehensive Environmental Response, Compensation and Liability Act (commonly
known as the "Superfund Act") and/or equivalent state legislation. Such notices
assert potential liability for cleanup costs at various sites,
8
<PAGE> 11
most of which are non-Company owned treatment or disposal sites, allegedly
containing hazardous substances attributable to the Company from past
operations. The Company has been named as a PRP at 10 such sites, excluding
sites as to which the Company's records disclose no involvement or as to which
the Company's liability has been finally determined. In the opinion of
management, any payments the Company may be required to make as a result of
currently existing claims will not have a material adverse effect on the
financial condition or the business of the Company as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of fiscal 1997.
9
<PAGE> 12
EXECUTIVE OFFICERS OF THE REGISTRANT (AS OF SEPTEMBER 1, 1997*).
<TABLE>
<CAPTION>
EXECUTIVE OFFICE
NAME AGE CURRENTLY HELD PAST BUSINESS EXPERIENCE
- ------------------------------ ------------------------- -------------------------------------
<S> <C> <C> <C>
Phillip W. Farmer 59 Chairman of the Board, Chairman of the Board and Chief
President and Chief Executive Officer since July, 1995.
Executive Officer President since April, 1993. Chief
Operating Officer 1993-95.
Executive Vice President and Acting
President -- Semiconductor Sector,
1991 to 1993. President --
Electronic Systems Sector, 1989 to
1991. Senior Vice President --
Sector Executive, 1988 to 1989.
Vice President -- Palm Bay
Operations, 1986 to 1988. Vice
President -- General Manager,
Government Support Systems
Division, 1982 to 1986. Director
since 1993.
Wesley E. Cantrell 62 President and President and Chief Executive
Chief Executive Officer, Lanier Worldwide, Inc.
Officer, since March, 1987. Senior Vice
Lanier Worldwide, Inc. President -- Sector Executive,
Lanier Business Products Sector,
1985 to 1987. President, Lanier
Business Products, 1977 to 1987.
Executive Vice President and
National Sales Manager, Lanier
Business Products, 1972 to 1977.
Vice President, Lanier Business
Products, 1966 to 1972. Employed by
Lanier Business Products since
1955.
E. Van Cullens 51 President -- President -- Communications Sector
Communications Sector since June, 1997. Formerly Senior
Vice President and Head of Internet
Business Unit of Siemens Public
Communication Networks Group,
Siemens Stromberg-Carlson, 1996 to
June 1997. Senior Vice President of
Marketing and Business Development
of Siemens Stromberg-Carlson from
1991 to 1996. Various management
assignments with Stromberg-Carlson,
1984 to 1991.
John C. Garrett 54 President -- President -- Semiconductor Sector
Semiconductor Sector since April, 1993. Formerly
Executive Vice President,
Industrial Business, Square D
Company 1987 to 1993, and various
general management assignments with
General Electric Company 1964 to
1987.
</TABLE>
- ---------------
*This listing identifies the executive officers of the Company, as defined
pursuant to the Securities Exchange Act of 1934, as well as all other corporate
vice presidents.
10
<PAGE> 13
<TABLE>
<CAPTION>
EXECUTIVE OFFICE
NAME AGE CURRENTLY HELD PAST BUSINESS EXPERIENCE
- ------------------------------ ------------------------- -------------------------------------
<S> <C> <C> <C>
Albert E. Smith 47 President -- Electronic President -- Electronic Systems
Systems Sector Sector since April, 1996. Formerly
President -- Space Systems
Division, Lockheed Martin, June
1994 to April 1996. Various
management assignments with
Lockheed Corporation, 1985 to June
1994.
Bryan R. Roub 56 Senior Vice President -- Senior Vice President -- Chief
Chief Financial Officer Financial Officer since October,
1993. Senior Vice
President -- Finance July, 1984 to
October, 1993. Formerly with
Midland-Ross Corporation in the
capacities of Executive Vice
President -- Finance, 1982 to 1984;
Senior Vice President, 1981 to
1982; Vice President and
Controller, 1977 to 1981; and
Controller, 1973 to 1977.
Richard L. Ballantyne 57 Vice President -- General Vice President -- General Counsel and
Counsel and Secretary Secretary since November, 1989.
Formerly Vice President -- General
Counsel and Secretary, Prime
Computer, Inc., 1982 to 1989.
James L. Christie 45 Vice President -- Vice President -- Internal Audit
Internal Audit since August, 1992. Director --
Internal Audit, 1986 to 1992.
Formerly Director -- Internal Audit
and Division Controller at Harris
Graphics Corporation, 1985 to 1986.
Various corporate and division
financial positions at Harris, 1978
to 1985.
Robert W. Fay 50 Vice President -- Vice President -- Controller since
Controller January, 1993. Acting Vice
President -- Controller,
Semiconductor Sector, 1991 to 1993.
Vice President -- Treasurer, 1988
to 1993. Treasurer, 1985 to 1988.
Director -- Financial Operations,
Semiconductor Sector, 1984 to 1985.
Controller -- Bipolar Digital
Semiconductor Division, 1981 to
1984. Manager -- Corporate Finance
and Cash Management, 1978 to 1981.
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
EXECUTIVE OFFICE
NAME AGE CURRENTLY HELD PAST BUSINESS EXPERIENCE
- ------------------------------ ------------------------- -------------------------------------
<S> <C> <C> <C>
Nick E. Heldreth 55 Vice President -- Vice President -- Human Resources and
Human Resources and Corporate Relations since July,
Corporate Relations 1996. Vice President -- Human
Resources since June, 1986.
Formerly Vice
President -- Personnel and
Industrial Relations, Commercial
Products Division, Pratt & Whitney
and various related assignments
with
United Technologies Corporation,
1974 to 1986.
John G. Johnson 61 Vice President -- Vice President -- Quality and New
Quality and Processes since 1994. Formerly Vice
New Processes President and Program Manager of
Core Program. Various management
assignments with the Electronic
Systems Sector, 1962 to 1994.
Herbert N. McCauley 64 Vice President -- Vice President -- Information
Information Management Management since August, 1980. In
July 1996, also Vice President --
General Manager, Telecommunications
Systems Division. Director --
Management Information Systems,
1976 to 1980.
Ronald R. Spoehel 39 Vice President -- Vice President -- Corporate
Corporate Development Development since October, 1994.
Formerly, Senior Vice President,
ICF Kaiser International, Inc., in
various general management
assignments including member of the
office of the chairman, chief
financial officer, and treasurer,
1990 to 1994; and, Vice President,
Investment Banking, Lehman Brothers
(formerly Shearson Lehman Hutton
Inc.), 1985 to 1990.
David S. Wasserman 54 Vice President -- Vice President -- Treasurer since
Treasurer January, 1993. Vice President --
Taxes 1987 to 1993. Formerly Senior
Vice President, Midland-Ross
Corporation, 1979 to 1987.
</TABLE>
There is no family relationship between any of the Company's executive
officers or directors and there are no arrangements or understandings between
any of the Company's executive officers or directors and any other person
pursuant to which any of them was elected as an officer or director, other than
arrangements or understandings with directors or officers of the Company acting
solely in their capacities as such. All of the Company's executive officers are
elected annually and serve at the pleasure of the Board of Directors.
12
<PAGE> 15
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Harris Corporation Common Stock, par value $1 per share (the "Common
Stock"), is listed on the New York Stock Exchange, Inc. ("NYSE"), under the
ticker symbol "HRS," and is also traded on the Boston, Chicago, Philadelphia and
Pacific Stock Exchanges and through the Intermarket Trading System. As of August
21, 1997, there were approximately 10,694 holders of record of the Common Stock.
The high and low sales prices as reported in the consolidated transaction
reporting system and the dividends paid on the Common Stock for each quarterly
period in the last two fiscal years are reported below:
<TABLE>
<CAPTION>
CASH
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
FISCAL 1996
First Quarter...................... $30 11/16 $25 3/4 $0.17
Second Quarter..................... $30 5/16 $25 3/8 $0.17
Third Quarter...................... $34 7/16 $24 7/16 $0.17
Fourth Quarter..................... $34 $28 13/16 $0.17
-----
$0.68
=====
FISCAL 1997
First Quarter...................... $32 15/16 $25 1/8 $0.19
Second Quarter..................... $35 11/16 $30 7/8 $0.19
Third Quarter...................... $40 $33 11/16 $0.19
Fourth Quarter..................... $46 1/16 $36 5/16 $0.19
-----
$0.76
=====
</TABLE>
In August, the Board declared a quarterly cash dividend of $.22 per share.
The Company has paid cash dividends in every year since 1941 and currently
expects that cash dividends will continue to be paid in the future; however,
there can be no assurances as to future dividend payments.
On August 23, 1997, the Board of Directors approved a two-for-one stock
split to shareholders of record at the close of business on September 4, 1997.
The additional shares will be distributed on or around September 26, 1997.
EXCEPT FOR THE COVER PAGE, ALL INFORMATION IN THIS ANNUAL REPORT ON FORM 10-K/A
(INCLUDING THE FINANCIAL STATEMENTS AND NOTES) HAS BEEN RESTATED TO REFLECT THE
STOCK SPLIT.
SALES OF UNREGISTERED SECURITIES
On March 28, 1997, in connection with the acquisition of all shares of
Quorum Group, Inc., a privately-held Minnesota corporation, the Company issued
an aggregate of 1,390,610 shares of its Common Stock to the eight shareholders
of Quorum Group, Inc. Based upon the closing price of the shares of Common Stock
on the NYSE, the 1,390,610 shares delivered at the closing of the acquisition
had a market value of approximately $54 million. The sale and issuance of the
securities in connection with the acquisition of Quorum Group, Inc. were deemed
to be exempt from registration under the Securities Act of 1933 (the "Securities
Act") in reliance upon Section 4(2) of the Securities Act or Regulation D
promulgated thereunder, as transactions by an issuer not involving any public
offering. The eight former shareholders of Quorum Group, Inc. receiving shares
of Common Stock of the Company each represented his or her intention to acquire
the shares for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends were affixed to the
securities issued in such transaction. All recipients had adequate access
through their relationship to the Company to information about the Company.
13
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes selected financial information of Harris
Corporation and its subsidiaries for each of the last five fiscal years. This
table should be read in conjunction with other financial information of Harris,
including "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and financial statements included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenue from sales, rentals, and
services......................... $3,797.2 $3,621.2 $3,444.1 $3,336.1 $3,099.1
Cost of sales, rentals, and
services......................... 2,519.2 2,404.6 2,328.5 2,274.8 2,086.0
Interest expense................... 59.9 62.5 65.4 58.3 59.9
Income before income taxes......... 312.0 274.4 237.6 193.5 169.8
Income taxes....................... 104.5 96.0 83.1 71.6 58.7
Income before cumulative effect of
change in accounting principle... 207.5 178.4 154.5 121.9 111.1
Cumulative effect of change in
accounting principle............. -- -- -- (10.1) --
Net income......................... 207.5 178.4 154.5 111.8 111.1
Average shares outstanding......... 78.8 78.0 78.3 79.4 78.9
Per share data:
Income before cumulative effect
of change in accounting
principle..................... 2.63 2.29 1.97 1.53 1.41
Cumulative effect of change in
accounting principle.......... -- -- -- (.13) --
Net income....................... 2.63 2.29 1.97 1.41 1.41
Cash dividends................... .76 .68 .62 .56 .52
Net working capital................ 774.9 757.8 755.4 893.6 792.5
Net plant and equipment............ 878.3 721.7 581.0 551.3 564.1
Long-term debt..................... 686.7 588.5 475.9 661.7 612.0
Total assets....................... 3,637.9 3,206.7 2,836.0 2,677.1 2,542.0
Shareholders' equity............... 1,578.2 1,372.9 1,248.8 1,188.0 1,141.3
Book value per share............... 19.82 17.66 16.06 15.12 14.41
</TABLE>
14
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information in this review, along with the Business Segment data shown
on page 2, reflects the Company's continuing operations.
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED WITH 1996 -- Sales in fiscal 1997 increased 4.9 percent
while net income increased 16.3 percent.
Communications segment sales increased 12.6 percent and net income
increased 7.9 percent. The segment benefited from strong sales and earnings
growth in its microwave systems business, as well as lower tax rates.
Significant gains from the sale of investment securities were substantially
offset by very poor performance in the segment's digital switch business. This
poor performance relates to high margin orders expected in fiscal 1997 which
were delayed until fiscal 1998. Improvement in the digital switch business
coupled with expected strong performance in the microwave systems and broadcast
products businesses should result in higher sales and earnings in fiscal 1998.
Semiconductor segment sales were 4.0 percent lower than last year while net
income increased 10.7 percent. Lower earnings for the segment's discrete power
and digital products were offset by improved margins for intelligent power
products and significantly increased royalty income. Improving market conditions
for the industry and increased manufacturing capacity is expected to result in a
significant increase in fiscal 1998 sales, and higher earnings.
Lanier Worldwide segment sales and net income increased 4.9 percent and
17.1 percent, respectively. Sales in European markets were adversely affected by
currency fluctuations, while both domestic and international margins increased
due to the favorable impact of sourcing yen-based products. This segment expects
both improved sales and earnings in fiscal 1998.
Sales for the Electronic Systems segment were 4.5 percent higher than the
prior year due to growth in its information systems business. Net income for the
year increased 37.2 percent over last year due to higher margins for the
segment's core defense products and reduced losses in its energy management
business which was transferred to a joint venture in January of 1997. Earnings
in fiscal 1997 include a gain from the sale of a building which was
substantially offset by write-offs on certain long-term contracts. While the
segment continues to adjust to reduced appropriations in its core defense
business, fiscal 1998 sales are expected to be slightly higher than the prior
year with a moderate decrease in earnings.
Cost of sales, rentals, and services as a percentage of sales decreased to
66.3 percent from 66.4 percent in the prior year. For the current year, cost
ratios were lower in the Semiconductor segment due to significantly increased
royalty income and the Lanier segment due to favorable currency exchange rates.
Engineering, selling, and administrative expenses as a percentage of sales
increased from 25.2 percent in fiscal 1996 to 25.4 percent in the current year.
Lower administrative costs were offset by increased marketing expenses and
Company-sponsored research and development.
Interest income and expense were slightly lower for the year as additional
interest on borrowed funds used for major new construction projects has been
capitalized as a component of plant and equipment under construction.
"Other-net" expense was $26.2 million lower in fiscal 1997 due to gains
resulting from the sale of investment securities and a gain on the sale of a
building.
The provision for income taxes in fiscal 1997 was 33.5 percent of income
before income taxes compared to 35.0 percent in fiscal 1996. The reduction from
the statutory U.S. income tax rate of 35.0 percent in 1997 resulted from tax
benefits associated with foreign income and export sales.
CAPITAL EXPENDITURES -- Expenditures for land, buildings, and equipment totaled
$279 million in 1997, up from $225 million in the prior year. In addition,
during fiscal 1997, $71 million was invested in equipment for rental to
customers, up from $68 million invested in the prior year. Substantially all of
this investment in rental equipment is related to Lanier Worldwide products.
15
<PAGE> 18
FISCAL 1996 COMPARED WITH 1995 -- Sales in fiscal 1996 increased 5.1 percent
while net income increased 15.5 percent.
Communications segment sales increased 16.1 percent and net income
increased 30.7 percent. The segment's strong growth in sales and earnings
reflected strong demand in the segment's telecommunications and wireless
businesses, particularly microwave systems, broadcast products, and telephone
test equipment. International sales were higher than the previous year and
accounted for 49 percent of total segment sales in fiscal 1996.
Semiconductor segment sales increased 7.4 percent despite an industry-wide
slowdown in new orders during the second half of the fiscal year. Strong sales
of the segment's power control products, improved margins on military products,
and increased royalty income contributed to the segment's 23.7 percent earnings
growth.
Sales in the Lanier Worldwide segment increased 9.0 percent while net
income increased 24.2 percent. Sales and earnings were strong in both domestic
and international markets.
Electronic Systems segment sales and net income decreased 7.8 and 19.3
percent, respectively. Segment results were impacted by write-offs on
development programs, whose production follow-on is unlikely, and significantly
lower sales and losses in the segment's energy management business.
Cost of sales, rentals, and services as a percentage of sales decreased to
66.4 percent from 67.6 percent in the prior year. Continuing margin improvement
in the Semiconductor and Communications segments was offset in part by higher
costs in the Electronic Systems segment. Engineering, selling, and
administrative expenses as a percentage of sales increased to 25.2 percent from
24.3 percent last year. Higher marketing expenses and a 19.4 percent increase in
Company-sponsored research and development expenditures contributed to higher
operating expenses.
Interest income increased in 1996 due to an increase in the balance of
notes receivable from customers. Interest expense decreased due to lower
interest rates and an increase in the amount of interest capitalized.
"Other-net" expense was $7.7 million lower in fiscal 1996 due to gains from
foreign currency transactions.
The provision for income taxes in fiscal 1996 and 1995 was 35.0 percent of
income before income taxes.
CAPITAL EXPENDITURES -- Expenditures for land, buildings, and equipment totaled
$225 million in fiscal 1996, up from $139 million in the prior year. In
addition, during fiscal 1996, $68 million was invested in equipment for rental
to customers, up from $65 million invested in the prior year. Substantially all
of this investment in rental equipment is related to Lanier Worldwide products.
FINANCIAL CONDITION
CASH POSITION -- At June 27, 1997, cash and cash equivalents totaled $71
million, a decrease from $75 million at June 30, 1996. Marketable securities
were $91 million at June 27, 1997.
RECEIVABLES, UNBILLED COSTS, AND INVENTORIES -- Notes and accounts receivable
amounted to $1,038 million at June 27, 1997, compared to $919 million a year
earlier. The increase in receivables reflects increased fourth quarter revenues
and a substantial increase in notes from customer leasing. Unbilled costs and
inventories decreased $6 million from the prior year to $936 million.
BORROWING ARRANGEMENTS -- The Company has available $800 million syndicated
credit facilities. Under these agreements $347 million was outstanding at June
27, 1997. The Company also has available $142 million in open bank credit lines,
of which $99 million was available at June 27, 1997. In addition, Harris filed a
Registration Statement effective May 1996 for $250 million of medium-term notes
and subsequently issued $100 million of 6.65% Notes due 2006. Additional amounts
under the Registration Statement may be offered to the public from time to time
on terms to be determined by market conditions.
CAPITALIZATION -- At June 27, 1997, debt totaled $983 million, representing 38.4
percent of total capitalization (defined as the sum of total debt plus
shareholders' equity). A year earlier, debt of $772 million was 36.0 percent of
total capitalization. Year-end long-term debt included $350 million of
debentures, $313 million of notes payable to banks and insurance companies, and
$24 million of other long-term debt.
16
<PAGE> 19
In 1997, the Company issued 692,302 shares of the Common Stock to employees
under the terms of the Company's stock purchase, option and incentive plans and
1,390,610 shares for the acquisition of Quorum Group, Inc.
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 and provides limited health-care benefits to retirees who have 10
or more years of service. All obligations under the Company's retirement plans
have been fully funded by the Company's contributions, the provision for which
totaled $80 million during the 1997 fiscal year.
DEFERRED INCOME TAXES -- The liability for non-current deferred income taxes was
$84 million at June 27, 1997, up from $62 million a year earlier.
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 27, 1997 the cumulative
translation adjustment reduced Shareholders' Equity by $30 million compared to a
reduction of $16 million at June 30, 1996.
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 1997,
1996 or 1995.
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.
FORWARD-LOOKING INFORMATION
This report contains forward-looking statements that reflect management's
current assumptions and estimates of future performance and economic conditions.
Under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995, the Company cautions investors that any forward-looking statements are
subject to risks and uncertainties that may cause actual results and future
trends to differ materially from those stated or implied by the forward-looking
statements.
The Company's consolidated results and the forward-looking statements could
be affected by, among other things, general economic conditions in the markets
in which the Company operates; successful execution of management's internal
operating plans; fluctuations in foreign currency exchange rates; worldwide
demand for integrated semiconductor circuits, particularly power products;
reductions in the U.S. and worldwide defense and space budgets, consolidations
within the defense industry and recovery of costs incurred on fixed price
contracts; termination of customer contracts; continued development and market
acceptance of new products, especially digital television broadcast products and
semiconductor wireless and multi-media products; continued success of the patent
licensing program; and the successful resolution of patent infringement and
other general litigation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The Company uses foreign exchange contracts and options to hedge foreign
currency commitments. Specifically, these foreign exchange contracts offset
foreign currency denominated inventory and purchase commitments from Japanese
suppliers, intercompany loans, firm committed operating expenses in Malaysia and
Ireland, and accounts receivable from and future committed sales to customers.
Management believes the use of foreign currency financial instruments should
reduce the risks which arise from doing business in international markets. At
June 27, 1997, the Company had open foreign exchange contracts with a notional
amount of $259 million. The use of foreign exchange contracts did not have a
material effect on income or cash flows in fiscal 1997 and prior years and,
based on open contracts at June 27, 1997, the Company does not expect a material
effect on income or cash flows in fiscal 1998.
17
<PAGE> 20
The Company also maintains a portfolio of marketable equity securities
available for sale. These investments result from the funding of start-up
companies that have technology or products that are of interest to the Company.
The fair market value of these securities at June 27, 1997, was $91.3 million
with the corresponding unrealized gain included as a component of shareholders'
equity. These investments have historically had higher volatility than most
market indices. If the quoted market price of marketable equity securities was
to increase or decrease 10 percent, the fair market value of these securities
would correspondingly increase or decrease $9.1 million.
The Company utilizes both fixed-rate and variable-rate debt as described in
the Notes to Financial Statements. The Company does not expect changes in
interest rates to have a material effect on income or cash flows in fiscal 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by this Item are
set forth in the pages indicated in Item 14(a)(1) and (2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
18
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item, with respect to Directors of the
Company, is incorporated herein by reference to the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held on October 24, 1997, which
proxy statement is expected to be filed within 120 days after the end of the
Company's 1997 fiscal year. Certain information regarding executive officers of
the Company is included in Part I hereof in accordance with General Instruction
G(3) of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item, with respect to compensation of
Directors and Executive Officers of the Company, is incorporated herein by
reference to the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 24, 1997, which proxy statement is expected
to be filed within 120 days after the end of the Company's 1997 fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item, with respect to security ownership
of certain beneficial owners and management of the Company, is incorporated
herein by reference to the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 24, 1997, which proxy statement is expected
to be filed within 120 days after the end of the Company's 1997 fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the fiscal year ended June 27, 1997, there existed no relationships
and there were no transactions reportable under this Item.
19
<PAGE> 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
PAGE
<S> <C>
(1) Financial Statements:
Report of Independent Accountants................................... 24
Consolidated Statement of Income -- Years ended June 27, 1997, June
30, 1996 and June 30, 1995......................................... 25
Consolidated Statement of Retained Earnings --
Years ended June 27, 1997, June 30, 1996 and June 30, 1995........ 25
Consolidated Balance Sheet -- June 27, 1997 and June 30, 1996....... 26
Consolidated Statement of Cash Flows --
Years ended June 27, 1997, June 30, 1996 and June 30, 1995........ 27
Notes to Financial Statements....................................... 28
(2) Financial Statement Schedules:
For each of the years ended June 27, 1997, June 30, 1996 and June
30, 1995
Schedule II -- Valuation and Qualifying Accounts............... 35
</TABLE>
All other schedules are omitted because they are not applicable, the
amounts are not significant or the required information is shown in the
financial statements or the notes thereto.
(3) Exhibits
(3)(i) Restated Certificate of Incorporation of Harris Corporation
(December 1995), incorporated herein by reference to Exhibit 3(i) to the
Company's Form 10-Q Quarterly Report for the quarter ended March 31,
1996.
(3)(ii) By-Laws of Harris Corporation as in effect February 23,
1996, incorporated herein by reference to Exhibit 3(ii) to the Company's
Form 10-Q Quarterly Report for the quarter ended March 31, 1996.
(4)(a) Specimen stock certificate for the Company's Common Stock.
(4)(b) Stockholder Protection Rights Agreement, between the Company
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, dated as
of December 6, 1996, incorporated herein by reference to Exhibit 1 to
the Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission on December 6, 1996.
(4)(c) Indenture, dated as of May 1, 1996, between the Company and
Chemical Bank, as Trustee, relating to unlimited amounts of debt
securities which may be issued from time to time by the Company when and
as authorized by the Company's Board of Directors or a Committee of the
Board, incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-3, Registration Statement No.
333-03111.
(4)(d) Pursuant to Regulation S-K Item 601(b)(iii), Registrant by
this filing agrees, upon request, to furnish to the Securities and
Exchange Commission a copy of other instruments defining the rights of
holders of long-term debt of the Company.
(10) Material Contracts:
*(a) Form of Senior Executive Severance Agreement, incorporated
herein by reference to Exhibit 10(a) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996.
*(b) Harris Corporation Annual Incentive Plan, incorporated herein
by reference to Exhibit 10(b) to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1996.
*(c) Harris Corporation Stock Incentive Plan.
20
<PAGE> 23
*(d) Harris Corporation 1981 Stock Option Plan for Key
Employees, incorporated herein by reference to Exhibit 10(d) of the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1991.
*(e) Lanier Worldwide, Inc. Key Contributor Bonus Plan,
incorporated herein by reference to Exhibit 10(e) of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1995.
*(f) Lanier Worldwide, Inc. Long-Term Incentive Plan for Key
Employees, incorporated herein by reference to Exhibit 10(f) of the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1995.
*(g) Harris Corporation Retirement Plan, incorporated herein by
reference to Exhibit 10(g) to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1996.
*(h) Harris Corporation Supplemental Executive Retirement Plan,
incorporated herein by reference to Exhibit 10(h) to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1996.
*(i) Lanier Worldwide, Inc. Pension Equity Plan.
*(j) Lanier Worldwide, Inc. Savings Incentive Plan.
*(k) Lanier Worldwide, Inc. Supplemental Executive Retirement
Plan.
*(l) Lanier Worldwide, Inc. Supplemental Executive Retirement
Savings Plan.
*(m) Directors Retirement Plan, incorporated herein by reference
to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996.
*(n) Harris Corporation 1997 Deferred Compensation Plan for
Outside Directors.
(o) Harris Corporation $300,000,000 364-Day Credit Agreement,
dated as of November 6, 1996, incorporated herein by reference to
Exhibit 10(i) to the Company's Form 10-Q Quarterly Report for the
quarter ended December 31, 1996.
(p) Harris Corporation $500,000,000 5-Year Credit Agreement,
dated as of November 6, 1996, incorporated herein by reference to
Exhibit 10(ii) to the Company's Form 10-Q Quarterly Report for the
quarter ended December 31, 1996.
(11) Statement regarding computation of net income per share.
(21) Subsidiaries of the Registrant.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the last
quarter of the fiscal year ended June 27, 1997.
- ------------------
*Management contract or compensatory plan or arrangement.
21
<PAGE> 24
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
HARRIS CORPORATION
(Registrant)
Dated: September 4, 1997
By /s/ BRYAN R. ROUB
-----------------------------------
Bryan R. Roub
Senior Vice President-Chief
Financial Officer
22
<PAGE> 25
ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FISCAL YEAR ENDED JUNE 27, 1997
HARRIS CORPORATION
MELBOURNE, FLORIDA
23
<PAGE> 26
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Harris Directors and Shareholders:
We have audited the accompanying consolidated balance sheets of Harris
Corporation and subsidiaries as of June 27, 1997 and June 30, 1996, and the
related consolidated statements of income, retained earnings, and cash flows for
each of the three fiscal years in the period ended June 27, 1997. Our audits
also include the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Harris
Corporation and subsidiaries at June 27, 1997 and June 30, 1996, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended June 27, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth herein.
ERNST & YOUNG LLP
Orlando, Florida
July 23, 1997, except for
the information under "Stock Split" on page 28,
as to which the date is August 23, 1997
24
<PAGE> 27
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Fiscal years ended
--------------------------------------------
(In millions except per share amounts) 1997 1996 1995
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Revenue from product sales and rentals $ 3,335.7 $3,189.2 $3,032.2
Revenue from services 461.5 432.0 411.9
Interest 37.4 38.1 36.8
--------------------------------------------
3,834.6 3,659.3 3,480.9
COSTS AND EXPENSES
Cost of product sales and rentals 2,267.4 2,151.9 2,075.9
Cost of services 251.8 252.7 252.6
Engineering, selling and administrative expenses 963.8 911.9 835.8
Interest 59.9 62.5 65.4
Other -- net (20.3) 5.9 13.6
---------------------------------------------
3,522.6 3,384.9 3,243.3
---------------------------------------------
Income before income taxes 312.0 274.4 237.6
Income taxes 104.5 96.0 83.1
---------------------------------------------
Net income $ 207.5 $ 178.4 $ 154.5
---------------------------------------------
Net income per share $ 2.63 $ 2.29 $ 1.97
----------
</TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Fiscal years ended
--------------------------------------------
(In millions except per share amounts) 1997 1996 1995
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 1,072.7 $ 969.4 $ 943.1
Net income for the year 207.5 178.4 154.5
Cash dividends ($.76 per share in 1997, $.68 per share in
1996 and $.62 per share in 1995) (60.3) (52.8) (48.2)
Non-cash dividend -- -- (55.2)
Treasury stock retired -- (22.3) (24.8)
--------------------------------------------
Balance at end of year $ 1,219.9 $1,072.7 $ 969.4
----------
</TABLE>
See Notes to Financial Statements.
25
<PAGE> 28
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 27 June 30
--------------------------
(In millions) 1997 1996
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 70.7 $ 74.6
Marketable securities 91.3 24.8
Receivables 820.6 727.8
Unbilled costs and accrued earnings on fixed price contracts 324.8 397.8
Inventories 611.1 544.1
Deferred income taxes 145.0 171.8
--------------------------
Total current assets 2,063.5 1,940.9
OTHER ASSETS
Plant and equipment 878.3 721.7
Notes receivable-net 217.7 190.7
Intangibles resulting from acquisitions 227.5 212.8
Other assets 250.9 140.6
---------------------------
$ 3,637.9 $3,206.7
---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 288.5 $ 181.3
Accounts payable 196.8 209.0
Compensation and benefits 216.9 209.3
Other accrued items 191.7 190.8
Advance payments by customers 99.3 95.2
Unearned leasing and service income 191.6 192.6
Income taxes 96.0 102.7
Current portion of long-term debt 7.8 2.2
---------------------------
Total current liabilities 1,288.6 1,183.1
OTHER LIABILITIES
Deferred income taxes 84.4 62.2
Long-term debt 686.7 588.5
SHAREHOLDERS' EQUITY
Preferred Stock, without par value; 1,000,000 shares authorized; none issued
Common Stock, $1.00 par value; 250,000,000 shares authorized; issued and
outstanding 79,625,670 shares in 1997 and 77,743,206 shares in 1996 (shares
adjusted to reflect September 1997 two-for-one stock split) 39.8 38.9
Other capital 289.9 266.0
Retained earnings 1,219.9 1,072.7
Net unrealized gain on securities available for sale 53.8 11.1
Unearned compensation 4.4 .3
Cumulative translation adjustments (29.6) (16.1)
---------------------------
Total Shareholders' Equity 1,578.2 1,372.9
---------------------------
$ 3,637.9 $3,206.7
---------------------------
</TABLE>
See Notes to Financial Statements.
26
<PAGE> 29
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal years ended
----------------------------------------------
(In millions) 1997 1996 1995
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 207.5 $ 178.4 $ 154.5
Adjustments to reconcile income to net cash provided by
operating activities:
Depreciation 170.3 158.1 155.0
Amortization 13.2 12.6 10.3
Non-current deferred income taxes 22.2 7.4 33.3
Changes in assets and liabilities:
Receivables (188.8) (88.1) (47.0)
Unbilled costs and inventories 7.1 (65.0) (52.3)
Accounts payable and accrued liabilities (7.2) 63.7 (1.2)
Advance payments and unearned income 2.4 23.3 76.0
Income taxes (3.9) (14.8) (35.9)
Other (18.4) (13.8) 17.4
----------------------------------------------
Net cash provided by operating activities 204.4 261.8 310.1
INVESTING ACTIVITIES
Cash paid for acquired businesses (24.3) (69.9) (11.4)
Capital expenditures:
Plant and equipment (279.4) (225.4) (139.3)
Rental equipment (70.5) (67.5) (64.9)
--------------------------------------------
Net cash used in investing activities (374.2) (362.8) (215.6)
FINANCING ACTIVITIES
Proceeds from borrowings 6,519.4 1,152.2 750.0
Payments of borrowings (6,305.4) (1,025.3) (787.8)
Cash dividends (60.3) (52.8) (56.6)
Purchase of Common Stock for treasury -- (26.0) (29.8)
Proceeds from sale of Common Stock 10.9 9.2 8.6
--------------------------------------------
Net cash used in (provided by) financing activities 164.6 57.3 (115.6)
--------------------------------------------
Effect of translation on cash and cash equivalents. 1.3 (1.0) 1.3
--------------------------------------------
DECREASE IN CASH AND CASH EQUIVALENTS (3.9) (44.7) (19.8)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 74.6 119.3 139.1
--------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 70.7 $ 74.6 $ 119.3
--------------------------------------------
</TABLE>
See Notes to Financial Statements.
27
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include the
accounts of the Corporation and its subsidiaries. These statements have been
prepared in conformity with generally accepted accounting principles and require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Significant intercompany transactions and accounts have been
eliminated.
FISCAL YEAR -- In 1997, the Corporation changed its fiscal year to end on the
Friday nearest June 30. Fiscal years prior to 1997 ended on June 30. Each of the
years presented consist of 52 weeks.
CASH EQUIVALENTS -- Cash equivalents are temporary cash investments with a
maturity of three months or less when purchased. These investments include
accrued interest and are carried at the lower of cost or market.
MARKETABLE SECURITIES -- Marketable equity securities are stated at fair value,
with unrealized gains and losses, net of tax, included as a separate component
of shareholders' equity. Realized gains and losses from marketable securities
are determined using the specific identification method. The cost basis of
marketable securities was $5.8 million at June 27, 1997, and $6.6 million at
June 30, 1996. The amount of gross realized gains included in operating profit
in 1997 was $24.6 million. Gross realized gains for 1996 and 1995 were not
material.
INVENTORIES -- Inventories are priced at the lower of cost (determined by
average and first-in, first-out methods) or market.
PLANT AND EQUIPMENT -- Plant and equipment are carried on the basis of cost.
Depreciation of buildings, machinery and equipment is computed by straight-line
and accelerated methods. The estimated useful lives of buildings range between 5
and 50 years. The estimated useful lives of machinery and equipment range
between 3 and 10 years. Depreciation of rental equipment is computed by the
straight-line method using estimated useful lives from 3 to 5 years.
INTANGIBLES -- Intangibles resulting from acquisitions are being amortized by
the straight-line method principally over periods between 15 and 40 years.
Recoverability of intangibles is assessed using estimated undiscounted cash
flows of related operations.
INCOME TAXES -- The Corporation follows the liability method of accounting for
income taxes.
REVENUE RECOGNITION -- Revenue is recognized from sales other than on long-term
contracts when a product is shipped, from rentals as they accrue, and from
services when performed. Revenue on long-term contracts is accounted for
principally by the percentage-of-completion method, whereby income is recognized
based on the estimated stage of completion of individual contracts. Unearned
income on service contracts is amortized by the straight-line method over the
term of the contracts. Royalty income is included as a component of cost of
product sales and rental and is recognized on the basis of terms specified in
contractual settlement agreements.
RETIREMENT BENEFITS -- The Corporation and its subsidiaries provide retirement
benefits to substantially all employees primarily through a retirement plan
having profit-sharing and savings elements. Contributions by the Corporation to
the retirement plan are based on profits and employees' savings with no other
funding requirements. The Corporation may make additional contributions to the
fund at its discretion. The Corporation also has non-contributory defined
benefit pension plans which are fully funded.
Retirement benefits also include an unfunded limited healthcare plan for U.S.
based retirees and employees on long-term disability. The Corporation accrues
the estimated cost of these medical benefits, which are not material, during an
employee's active service life.
FUTURES AND FORWARD CONTRACTS -- Gains and losses on foreign currency exchange
and option contracts that qualify as hedges are deferred and recognized as an
adjustment of the carrying amount of the hedged asset or liability or
identifiable foreign currency firm commitment. Gains and losses on foreign
currency exchange and option contracts that do not qualify as hedges are
recognized in income based on the fair market value of the contract.
FOREIGN CURRENCY TRANSLATION -- The functional currency for most international
subsidiaries is the local currency. Assets and liabilities are translated at
current rates of exchange, and income and expense items are translated at the
weighted average exchange rate for the year. The resulting translation
adjustments are recorded as a separate component of shareholders' equity.
UNEARNED COMPENSATION -- Compensation resulting from performance shares granted
under the Corporation's long-term incentive plan is amortized to expense over
the vesting period of the performance shares and is adjusted for changes in the
market value of the Common Stock.
NET INCOME PER SHARE -- Net income per share is based upon the weighted average
number of common shares outstanding during each year.
STOCK SPLIT -- On August 23, 1997, the Board of Directors authorized a
two-for-one stock split to be distributed on or around September 26, 1997, to
shareholders of record on September 4, 1997. All references in the financial
statements and notes to financial statements to number of shares, per share
amounts, and market prices of the Corporation's Common Stock have been restated
to reflect the increased number of shares outstanding.
ACCOUNTING CHANGE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earn-
28
<PAGE> 31
ings per Share." This statement establishes standards for computing and
presenting earnings per share and is effective beginning in the third quarter of
fiscal 1998. It is expected that implementation will not result in a material
difference from earnings per share as currently reported.
RECEIVABLES
Receivables are summarized below:
<TABLE>
<CAPTION>
-------------------
(In millions) 1997 1996
---------------------------------------------------------------
<S> <C> <C>
Accounts receivable $734.0 $653.5
Notes receivable due within one year -- net 114.9 105.6
--------
848.9 759.1
Less allowances for collection losses 28.3 31.3
---------
$820.6 $727.8
---------
</TABLE>
INVENTORIES AND UNBILLED COSTS
Inventories are summarized below:
<TABLE>
<CAPTION>
-------------------
(In millions) 1997 1996
---------------------------------------------------------------
<S> <C> <C>
Finished products $238.0 $160.9
Work in process 255.1 251.8
Raw materials and supplies 118.0 131.4
----------
$611.1 $544.1
---------
</TABLE>
Unbilled costs and accrued earnings on fixed-price contracts are net of
progress payments of $187.8 million in 1997 and $216.6 million in 1996.
PLANT AND EQUIPMENT
Plant and equipment are summarized below:
<TABLE>
<CAPTION>
----------------------
(In millions) 1997 1996
---------------------------------------------------------------
<S> <C> <C>
Land $ 31.6 $ 31.5
Buildings 514.0 490.5
Machinery and equipment 1,364.3 1,241.1
Rental equipment 250.7 236.7
------------
2,160.6 1,999.8
Less allowances for depreciation 1,282.3 1,278.1
-----------
$ 878.3 $ 721.7
-----------
</TABLE>
INTANGIBLES
Accumulated amortization of intangible assets was $60.8 million at June 27,
1997, and $52.3 million at June 30, 1996.
CREDIT ARRANGEMENTS
The Corporation maintains syndicated credit facilities with various banks which
provide for borrowings up to $800 million. These facilities consist of a 364-day
$300 million facility which expires November 1997 and a five-year $500 million
facility which expires November 2001. Interest rates on borrowings under these
facilities are determined by a pricing matrix based upon the Corporation's
long-term debt rating assigned by Standard and Poor's Ratings Group and Moody's
Investors Service. A facility fee is payable on the credit and determined in the
same manner as the interest rates. The Corporation is not required to maintain
compensating balances in connection with these agreements. Under these
agreements, $346.7 million was outstanding at June 27, 1997, $100 million of
which has been classified as long-term based on the Corporation's intent to
maintain borrowings of at least that amount for the next year.
The Corporation also has lines of credit for short-term financing aggregating
$141.5 million from various U.S. and foreign banks, of which $99 million was
available on June 27, 1997. These arrangements provide for borrowing at various
interest rates, are reviewed annually for renewal, and may be used on such terms
as the Corporation and the banks mutually agree. These lines do not require
compensating balances.
Short-term debt is summarized below:
<TABLE>
<CAPTION>
-------------------
(In millions) 1997 1996
---------------------------------------------------------------
<S> <C> <C>
Bank notes $278.0 $168.1
Other 10.5 13.2
----------
$288.5 $181.3
---------
</TABLE>
The weighted average interest rate for bank notes was 6.0 percent at June 27,
1997 and 6.5 percent at June 30, 1996.
LONG-TERM DEBT
Long-term debt includes the following:
<TABLE>
<CAPTION>
-------------------
(In millions) 1997 1996
---------------------------------------------------------------
<S> <C> <C>
Notes payable to banks, due from 2001 to
2016 $162.5 $167.0
10 3/8% debentures, due 2018 150.0 150.0
7% debenture, due 2026 100.0 100.0
6.65% debenture, due 2006 100.0 --
Notes payable to insurance companies, due
from 1999 to 2001. 150.0 150.0
Other 24.2 21.5
----------
$686.7 $588.5
---------
</TABLE>
The weighted average interest rate for notes payable to banks was 6.5 percent
at June 27, 1997, and June 30, 1996. The weighted average interest rate for
notes payable to insurance companies was 9.7 percent at June 27, 1997, and June
30, 1996.
Indentures and note agreements contain certain financial covenants including
maintenance of at least $800 million of tangible net worth and total debt not to
exceed 45 percent of total capital.
Maturities of long-term debt for the five years following 1997 are: $7.8
million in 1998, $58.6 million in 1999, $38.5 million in 2000, $98.0 million in
2001, and $108.7 million in 2002.
29
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
SHAREHOLDERS' EQUITY
Changes in shareholders' equity accounts other than retained earnings are
summarized as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------
Common Net Unrealized Cumulative
Stock Other Gain On Unearned Translation
(In millions) Amount Capital Securities Compensation Adjustments
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JULY 1, 1994 $39.3 $ 230.3 -- $ (3.2) $ (21.5)
Adjustment to beginning balance for change in accounting
method, net of income taxes of $7.1 -- -- $ 11.1 -- --
Shares issued under Stock Option Plan (272,116 shares) .1 4.0 -- -- --
Shares granted under Stock Incentive Plans (499,900
shares) .3 10.6 -- (10.9) --
Compensation expense -- -- -- 11.8 --
Termination and award of shares granted under Stock
Incentive Plans (405,072 shares) (.2) (4.7) -- .6 --
Shares sold under Employee Stock Purchase Plans (197,858
shares) .1 4.4 -- -- --
Change in unrealized gain on securities, net of income
taxes of $.7 -- -- 1.1 -- --
Foreign currency translation adjustments -- -- -- -- 11.2
Purchase and retirement of Common Stock for treasury
(1,407,000 shares) (.7) (4.3) -- -- --
-----------------------------------------------------------
BALANCE AT JUNE 30, 1995 38.9 240.3 12.2 (1.7) (10.3)
Shares issued under Stock Option Plans (221,890 shares) .1 3.6 -- -- --
Shares granted under Stock Incentive Plans (245,500
shares) .1 6.2 -- (6.3) --
Compensation expense -- -- -- 10.0 --
Termination and award of shares granted under Stock
Incentive Plans (263,384 shares) (.1) (2.1) -- (1.7) --
Shares sold under Employee Stock Purchase Plans (172,414
shares) .1 5.0 -- -- --
Change in unrealized gain on securities, net of income
taxes of $(.8) -- -- (1.1) -- --
Foreign currency translation adjustments -- -- -- -- (5.8)
Purchase and retirement of Common Stock for treasury
(962,000 shares) (.5) (3.2) -- -- --
Shares issued for acquisition of company (574,748
shares) .3 16.2 -- -- --
-----------------------------------------------------------
BALANCE AT JUNE 30, 1996 38.9 266.0 11.1 .3 (16.1)
Shares issued under Stock Option Plan (254,690 shares) .1 4.4 -- -- --
Shares granted under Stock Incentive Plans (251,900
shares) .1 7.5 -- (7.6) --
Compensation expense -- -- -- 12.9 --
Termination and award of shares granted under Stock
Incentive Plans (200,450 shares) (.1) (.9) -- (1.2) --
Shares sold under Employee Stock Purchase Plans (185,712
shares) .1 6.2 -- -- --
Change in unrealized gain on securities, net of income
taxes of $24.5 -- -- 42.7 -- --
Foreign currency translation adjustments -- -- -- -- (13.5)
Shares issued for acquisition of company (1,390,610
shares) .7 6.7 -- -- --
-----------------------------------------------------------
BALANCE AT JUNE 27, 1997 $39.8 $289.9 $53.8 $ 4.4 $(29.6)
-----------------------------------------------------------
</TABLE>
PREFERRED STOCK PURCHASE RIGHTS
On December 6, 1996, the Corporation declared a dividend of one preferred share
purchase right for each outstanding share of Common Stock. These rights, which
expire on December 6, 2006, are evidenced by Common Stock share certificates,
trade with the Common Stock until they become exercisable and giving effect to
the stock split described above, entitle the holder to purchase one
two-hundredth of a share of Participating Preferred Stock for $125, subject to
adjustment. The rights are not exercisable until the earlier of 10 business days
(or such later date fixed by the Board) after a party commences a tender or
exchange offer to acquire a beneficial interest of at least 15% of the
Corporation's outstanding Common Stock, or the first date of public announcement
by the Corporation that a person has acquired a beneficial interest of at least
15% of the Corporation's outstanding Common Stock or such later date fixed by
the Board of Directors of the Corporation.
Upon the first date of public announcement by the Corporation that a person
has acquired a beneficial interest of at least 15% of the Corporation's
outstanding Common Stock, or such later date fixed by the Board of Directors of
the Corporation, each right (other than rights beneficially owned by an
acquiring person or any affiliate or associate thereof) would entitle the holder
to purchase shares of Common Stock of the Corporation having a market value
equal to twice the exercise price of the right. In addition, each right (other
than rights beneficially owned by an acquiring person or any affiliate or
associate thereof) would entitle the rightholder to exercise the right and
receive shares of common stock of the acquiring company, upon a merger or other
business combination, having a market value of twice the exercise price of the
right.
Under certain circumstances after the rights become exercisable, the Board
of Directors may elect to exchange all of the then outstanding rights for shares
of Common Stock at an exchange ratio of one share of Common Stock per right,
subject to adjustment. The rights have no voting privileges and may be redeemed
by the Board of Directors at a price of $.01 per right at any time prior to the
acquisition of
30
<PAGE> 33
a beneficial ownership of 15% of the outstanding Common
Stock.
NON-CASH DIVIDEND
In 1995, the Corporation spun off as a tax-free dividend its computer systems
business by distributing one share of Harris Computer Systems Corporation common
stock for every twenty shares of the Corporation's Common Stock. Cash dividends
shown in the Consolidated Statement of Cash Flows include the $8.4 million cash
balance of the Harris Computer System Corporation at the time of the spin-off;
the remainder of the dividend was a non-cash transaction.
STOCK OPTIONS AND AWARDS
The following information relates to stock option and incentive stock awards.
Option prices are 100 percent of market value on the date the options are
granted. Option grants are for a maximum of ten years after dates of grant and
may be exercised in installments.
<TABLE>
<CAPTION>
----------------------------------------------
Number of Weighted Average Option Prices
Shares Exercise Price Per Share
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Exercised during the year:
1995 567,208 $17.11 $11.88 to $25.25
1996 449,614 $19.59 $ 7.19 to $28.88
1997 472,208 $21.12 $ 7.19 to $34.88
Granted during 1997 717,788 $32.51 $29.88 to $45.50
Expired during 1997 27,504 $32.40 $31.13 to $33.00
Terminations during 1997 49,886 $28.91 $12.22 to $33.44
Outstanding at June 30, 1996 1,374,438 $23.49 $ 7.19 to $33.57
Outstanding at June 27, 1997 1,542,628 $28.08 $ 7.19 to $45.50
Exercisable at June 30, 1996 708,486 $18.38 $ 7.19 to $30.63
Exercisable at June 27, 1997 594,754 $22.61 $ 7.19 to $33.57
-----------------------------------------------------
</TABLE>
Price ranges of outstanding and exercisable options as of June 27, 1997 are
summarized below:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Outstanding Options Exercisable Options
----------------------------------------------- ----------------------------
Average Weighted Weighted
Number of Remaining Life Average Number of Average
Range of Exercise Prices Options (Years) Exercise Price Options Exercise Price
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 7.19-$18.88 242,968 4 $15.89 242,968 $15.89
$ 20.50-$32.94 1,156,988 5 $29.19 338,904 $27.03
$ 33.00-$45.50 142,672 5 $39.73 12,882 $33.06
--------- ---------
1,542,628 $28.08 594,754 $22.61
========= =========
</TABLE>
Pro forma information regarding net income and net income per share is
required by Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" and has been determined as if the Corporation had
accounted for stock options using the fair value method of that statement. The
fair value of each option grant is estimated on the grant date using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1997 and 1996, respectively: risk-free interest
rates of 6.3% and 6.4%, expected dividend yields of 2.1% in each year, expected
volatility of 22.4% and 20.8%, and expected lives of 4 years each.
For purposes of pro forma disclosure, the estimated fair value of options is
amortized to expense over their 3 year vesting period. Under the fair value
method, the Corporation's net income and net income per share would have been
reduced as follows:
<TABLE>
<CAPTION>
---------------------
(In millions, except per share amounts) 1997 1996
--------------------------------------------------------------------
<S> <C> <C>
Net income $ 2.7 $ 1.4
Net income per share $0.03 $0.02
---------
</TABLE>
Because the fair value method of accounting for options applies only to
options granted subsequent to June 30, 1995, the pro forma effect will not be
fully reflected until 1999.
The Corporation has a stock incentive plan for directors and key employees.
Awards under this plan may include the grant of performance shares, restricted
stock, stock options, stock appreciation rights or other stock-based awards. The
aggregate number of shares of Common Stock which may be awarded under the plan
in each fiscal year is one percent of the total outstanding shares of Common
Stock plus shares available from prior years. Performance shares outstanding
were 827,110 at June 27, 1997; 1,005,222 at June 30, 1996, and 1,251,102 at June
30, 1995. Shares of Common Stock reserved for future awards under the plan were
2,380,516 at June 27, 1997; 2,297,636 at June 30, 1996, and 2,093,434 at June
30, 1995.
Under the Corporation's domestic retirement plan, employees may purchase a
limited amount of the Corporation's Common Stock at 70 percent of current market
value. Shares of Common Stock reserved for future purchases by the retirement
plan were 2,365,010 at June 27, 1997.
31
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS
RETIREMENT PLANS
Retirement and defined benefit plans expense amounted to $79.7 million in 1997,
$77.6 million in 1996, and $71.2 million in 1995.
RESEARCH AND DEVELOPMENT
Corporation-sponsored research and product development costs were $174.9 million
in 1997, $159.8 million in 1996, and $133.9 million in 1995.
INTEREST EXPENSE
Total interest was $68.9 million in 1997, $64.0 million in 1996, and $65.4
million in 1995, of which $9.0 million was capitalized in 1997, and $1.5 million
was capitalized in 1996. Interest paid was $65.6 million in 1997, $64.2 million
in 1996, and $64.8 million in 1995.
LEASE COMMITMENTS
Total rental expense amounted to $56.0 million in 1997, $49.8 million in 1996,
and $52.7 million in 1995. Future minimum rental commitments under leases,
primarily for land and buildings, amounted to approximately $174.4 million at
June 27, 1997. These commitments for the years following 1997 are: 1998 -- $53.1
million, 1999 -- $36.2 million, 2000 -- $21.6 million, 2001 -- $14.9 million,
2002 -- $12.7 million, and $35.9 million, thereafter.
INCOME TAXES
The provisions for income taxes are summarized as follows:
<TABLE>
<CAPTION>
------------------------------
(In millions) 1997 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States $ 33.8 $ 82.3 $ 89.0
International 33.5 19.3 19.9
State and local 6.7 17.3 11.7
--------
74.0 118.9 120.6
--------
Deferred:
United States 30.2 (19.3) (32.5)
International (2.9) -- (4.7)
State and local 3.2 (3.6) (.3)
---------
30.5 (22.9) (37.5)
---------
$104.5 $ 96.0 $ 83.1
---------
</TABLE>
The components of deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
----------------------------------------
1997 1996
<S> <C> <C> <C> <C>
----------------------------------------
<CAPTION>
(In millions) Current Non-Current Current Non-Current
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Completed contracts -- -- $ 18.7 --
Inventory valuations $ 64.9 -- 16.8 --
Accruals 96.0 $ 8.8 133.4 $ 8.6
Depreciation -- (85.0) -- (61.6)
Leases (2.0) (19.3) (.8) (20.5)
International tax loss
carryforwards -- 6.7 -- 6.5
All other -- net (13.9) 11.1 3.7 11.3
--------------------
145.0 (77.7) 171.8 (55.7)
Valuation allowance -- (6.7) -- (6.5)
--------------------
$ 145.0 $(84.4) $171.8 $ (62.2)
--------------------
</TABLE>
A reconciliation of the statutory United States income tax rate to the
effective income tax rate follows:
<TABLE>
<CAPTION>
------------------------------
1997 1996 1995
-------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. income tax rate 35.0% 35.0% 35.0%
State taxes 2.0 3.2 3.1
International income (2.4) (3.2) (4.0)
Tax benefits related to export
sales (1.7) (2.1) (1.4)
Nondeductible amortization .8 .7 .8
Other items (.2) 1.4 1.5
----------
Effective income tax rate 33.5% 35.0% 35.0%
----------
</TABLE>
United States income taxes have not been provided on $511.4 million of
undistributed earnings of international subsidiaries because of the
Corporation's intention to reinvest these earnings. The determination of
unrecognized deferred U.S. tax liability for the undistributed earnings of
international subsidiaries is not practicable.
Pretax income of international subsidiaries was $76.4 million in 1997, $74.2
million in 1996, and $63.2 million in 1995.
Income taxes paid were $75.1 million in 1997, $95.6 million in 1996, and $79.2
million in 1995.
BUSINESS SEGMENTS
The Corporation is structured primarily around the markets it serves and
operates in four business segments: Communications, Semiconductor, Lanier
Worldwide, and Electronic Systems. The Communications segment produces
broadcast, radio communications, and telecommunications products and systems.
The Semiconductor segment produces advanced analog, digital, and mixed signal
integrated circuits and discrete semiconductors for power, signal processing,
data-acquisition, and logic applications. Lanier Worldwide sells and services
copying and facsimile products, and PC-based healthcare management systems. The
Electronic Systems segment engages in advanced research and develops, designs,
and produces advanced communication and information processing systems.
Communication and electronic products and systems are produced principally in
the United States with international revenues derived primarily from exports.
Copying and facsimile products are produced principally in Asia with
international revenues derived from the Corporation's international
subsidiaries.
Net sales and operating profit by segment are on page 2. That information is
an integral part of these financial statements.
Sales made to the U.S. government by all segments (primarily Electronic
Systems segment) were 22.7 percent of total sales in 1997, 25.7 percent of total
sales in 1996, and 30.4 percent of total sales in 1995. Intersegment sales,
which are insignificant, are accounted for at prices comparable to unaffiliated
customers.
32
<PAGE> 35
Selected information by business segment and geographical area is summarized
below:
<TABLE>
<CAPTION>
-------------------------------------
(In millions) 1997 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Communications $ 756.0 $ 691.5 $ 442.5
Semiconductor 964.2 746.6 639.2
Lanier Worldwide 1,034.6 867.1 831.6
Electronic Systems 605.1 658.1 672.3
Corporate 278.0 243.4 250.4
-------------
$ 3,637.9 $3,206.7 $2,836.0
-------------
CAPITAL EXPENDITURES
Communications $ 29.2 $ 33.8 $ 22.6
Semiconductor 176.4 146.8 80.4
Lanier Worldwide 35.9 11.7 12.3
Electronic Systems 24.1 28.1 18.6
Corporate 13.8 5.0 5.4
-------------
$ 279.4 $ 225.4 $ 139.3
-------------
DEPRECIATION
Communications $ 20.5 $ 17.9 $ 14.8
Semiconductor 50.2 47.6 44.5
Lanier Worldwide 16.8 10.3 10.0
Electronic Systems 25.2 24.2 25.7
Corporate 9.0 8.9 10.2
-------------
$ 121.7 $ 108.9 $ 105.2
-------------
GEOGRAPHICAL INFORMATION
U.S. operations:
Net sales $ 3,227.8 $3,046.4 $2,952.4
Operating profit 235.6 200.2 174.4
Identifiable assets 2,914.3 2,544.4 2,191.9
International operations:
Net sales $ 569.4 $ 574.8 $ 491.7
Operating profit 76.4 74.2 63.2
Identifiable assets 723.6 662.3 644.1
-------------
</TABLE>
Capital expenditures and depreciation do not include equipment for rental to
customers. Corporate assets consist primarily of cash, marketable securities,
deferred income taxes and plant and equipment.
Export sales approximated $550.0 million in 1997, $631.6 million in 1996, and
$524.6 million in 1995. Export sales and net sales of international operations
were principally to Europe and Asia.
FINANCIAL INSTRUMENTS
The carrying values of cash equivalents, marketable securities, accounts
receivable, notes receivable, accounts payable and short-term debt approximates
fair value. The fair value of long-term debt was $701.0 million at June 27, 1997
and $618.6 million at June 30, 1996.
The Corporation uses foreign exchange contracts and options to hedge
intercompany accounts and off-balance-sheet foreign currency commitments.
Specifically, these foreign exchange contracts offset foreign currency
denominated inventory and purchase commitments from suppliers, accounts
receivable from and future committed sales to customers, and firm committed
operating expenses. Management believes the use of foreign currency financial
instruments should reduce the risks which arise from doing business in
international markets. Contracts are for periods consistent with the terms of
the underlying transaction, generally one year or less. At June 27, 1997, open
foreign exchange contracts were $259.3 million (as described below), of which
$166.1 million were to hedge off-balance-sheet commitments. Additionally, for
the year ended June 27, 1997, the Corporation purchased and sold $1,069.2
million of foreign exchange forward and option contracts.
Deferred gains and losses are included on a net basis in the Consolidated
Balance Sheet as other assets and are recorded in income as part of the
underlying transaction when it is recognized.
At June 27, 1997, the Corporation had $7.8 million in open option contracts.
Total open foreign exchange contracts at June 27, 1997, are described in the
table below.
COMMITMENTS TO BUY FOREIGN CURRENCIES
<TABLE>
<CAPTION>
-----------------------------------------
Contract Amount
---------------
Foreign Deferred Gains Maturities
(In millions) Currency U.S. and (Losses) (in months)
---------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENCY
Malaysian Ringgit 267.2 $106.0 -- 1-16
Irish Punt 24.2 37.3 $(.7) 1-9
Japanese Yen 1,600.0 13.6 .3 1-5
German Mark 17.7 10.5 (.2) 1-3
Swiss Franc 8.3 6.0 (.2) 2
British Pound 1.9 3.1 .1 1-5
Norwegian Krone 13.5 1.9 (.1) 1
Dutch Guilder 3.5 1.9 (.1) 1-12
French Franc 11.0 1.9 -- 12
Belgian Franc 50.0 1.7 (.3) 2
Italian Lira 2,000.0 1.3 (.1) 2-12
Spanish Peseta 50.0 .3 -- 3
-----------------------------------------
</TABLE>
COMMITMENTS TO SELL FOREIGN CURRENCIES
<TABLE>
<CAPTION>
-----------------------------------------
Contract Amount
---------------
Foreign Deferred Gains Maturities
(In millions) Currency U.S. and (Losses) (in months)
---------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENCY
British Pound 15.9 $ 25.8 $(.8) 1-11
German Mark 37.6 23.4 1.6 1-13
Canadian Dollar 20.6 15.0 .2 1-2
French Franc 24.1 4.2 .1 1-6
Japanese Yen 320.0 2.8 -- 1-6
Belgian Franc 60.7 1.8 .1 1-3
Italian Lira 500.0 .3 -- 2
Dutch Guilder .6 .3 -- 3
Norwegian Krone 1.5 .2 -- 1
-----------------------------------------
</TABLE>
33
<PAGE> 36
QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data is summarized below.
[CAPTION]
<TABLE>
<CAPTION>
Quarters Ended
<S> <C> <C> <C> <C> <C>
Dollars in Millions Except Per
Share Amounts 9-30-96 12-31-96 3-31-97 6-27-97 Total Year
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FISCAL 1997
Net sales $883.4 $945.9 $921.4 $1,046.5 $3,797.2
Gross profit 297.7 311.6 311.6 357.1 1,278.0
Income before income taxes 58.2 69.5 83.3 101.0 312.0
Net income 38.1 45.5 55.6 68.3 207.5
Per share:
Net income .49 .58 .70 .86 2.63
Cash dividends .19 .19 .19 .19 .76
Stock prices (high/low) 32 15/16-25 1/8 35 11/16-30 7/8 40-33 11/16 46 1/16-36 5/16
-------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended
<S> <C> <C> <C> <C> <C>
<CAPTION>
Dollars in Millions Except Per
Share Amounts 9-30-95 12-31-95 3-31-96 6-30-96 Total Year
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FISCAL 1996
Net sales $816.7 $916.6 $875.9 $1,012.0 $3,621.2
Gross profit 271.6 301.1 298.2 345.7 1,216.6
Income before income taxes 51.6 62.1 68.0 92.7 274.4
Net income 33.5 40.4 44.2 60.3 178.4
Per share:
Net income .43 .52 .57 .78 2.29
Cash dividends .17 .17 .17 .17 .68
Stock prices (high/low) 30 11/16-25 3/4 30 5/16-25 3/8 34 7/16-24 7/16 34-28 13/16
-------------------------------------------------------------------
</TABLE>
34
<PAGE> 37
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
HARRIS CORPORATION AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ----------------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------------
(1) (2)
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS-- BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 27, 1997:
Amounts Deducted From Respective Asset Accounts $ 812(A)
11,838(B)
-----------
Allowances for collection losses........... $ 31,380 $ 8,880 $ 656(C) $12,650 $28,266
======== ======== =========== ========== ==========
YEAR ENDED JUNE 30, 1996:
Amounts Deducted From Respective Asset Accounts $ 40(A)
132(C)
--------------
Allowances for collection losses........... $ 29,976 $ 8,407 $ 172 $ 7,175(B) $31,380
======== ======== =========== ========== ==========
YEAR ENDED JUNE 30, 1995:
Amounts Deducted From Respective Asset Accounts $ 7,746(B)
257(C)
-----------
Allowances for collection losses........... $ 29,492 $ 7,897 $ 590(A) $ 8,003 $29,976
======== ======== =========== ========== ==========
</TABLE>
Note A -- Foreign currency translation gains and losses.
Note B -- Uncollectible accounts charged off, less recoveries on accounts
previously charged off.
Note C -- Amounts reclassified to (from) other accounts in the Consolidated
Balance Sheets.
35
<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
UNDER REG. S-K,
ITEM 601 DESCRIPTION
- --------------- ------------------------------------------------------------------------------
<S> <C>
11 Statement regarding computation of net income per share.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------
JUNE 27, 1997 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- -------------
<S> <C> <C> <C>
Primary:
Average shares outstanding.......................... 78,776 77,950 78,292
========== ========== ==========
Net Income.......................................... $ 207,508 $ 178,367 $ 154,466
========== ========== ==========
Net income per share............................. $2.63 $2.29 $1.97
========== ========== ==========
Fully diluted:
Total primary average shares outstanding............ 78,776 77,950 78,292
Dilutive stock options and employee stock purchase
plan shares -- based on treasury stock method
using the greater of year-end market price or
average market price............................. 432 256 264
------------- ------------- -------------
Total fully diluted average shares outstanding...... 79,208 78,206 78,556
========== ========== ==========
Net income per share............................. $2.62 $2.28 $1.97
========== ========== ==========
</TABLE>
36
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the following registration
statements of Harris Corporation and in each related Prospectus of our report
dated July 23, 1997, with respect to the consolidated financial statements and
schedule of Harris Corporation and subsidiaries included in this Annual Report
on Form 10-K/A for the fiscal year ended June 27, 1997:
<TABLE>
<S> <C> <C>
Form S-8 No. 2-74551 Harris Corporation 1981 Stock Option Plan for Key
Employees
Form S-8 No. 33-50169 Harris Corporation Retirement Plan
Form S-8 No. 33-50167 Harris Corporation Union Retirement Plan
Form S-8 Nos. 33-37969; Harris Corporation Stock Incentive Plan
33-51171; and
333-7985
Form S-3 No. 333-3111 Harris Corporation Debt Securities
Form S-8 No. 333-01747 Lanier Worldwide, Inc. Savings Incentive Plan
</TABLE>
ERNST & YOUNG LLP
Orlando, Florida
September 2, 1997
37
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-27-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-27-1997
<CASH> 70,700
<SECURITIES> 91,300
<RECEIVABLES> 820,600
<ALLOWANCES> 28,300
<INVENTORY> 611,100
<CURRENT-ASSETS> 2,063,500
<PP&E> 2,160,600
<DEPRECIATION> 1,282,300
<TOTAL-ASSETS> 3,637,900
<CURRENT-LIABILITIES> 1,288,600
<BONDS> 686,700
<COMMON> 39,800
0
0
<OTHER-SE> 1,538,400
<TOTAL-LIABILITY-AND-EQUITY> 3,637,900
<SALES> 3,797,200
<TOTAL-REVENUES> 3,834,600
<CGS> 2,519,200
<TOTAL-COSTS> 963,800
<OTHER-EXPENSES> (20,300)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,900
<INCOME-PRETAX> 312,000
<INCOME-TAX> 104,500
<INCOME-CONTINUING> 207,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207,500
<EPS-PRIMARY> 2.63
<EPS-DILUTED> 2.62
</TABLE>
