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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 3, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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
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
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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. [ ]
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, 1998 was $3,015,835,040.
The number of outstanding shares of the registrant's Common Stock on August
21, 1998 was 80,027,778.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 23, 1998 are incorporated by reference into
Part III of this Annual Report on Form 10-K to the extent described therein.
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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.................................................. 8
ITEM 3. Legal Proceedings........................................... 9
ITEM 4. Submission of Matters to a Vote of Security Holders......... 10
Executive Officers of the Registrant................................... 11
PART II:
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 15
ITEM 6. Selected Financial Data..................................... 16
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 17
ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk... 21
ITEM 8. Financial Statements and Supplementary Data................. 22
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 22
PART III:
ITEM 10. Directors and Executive Officers of the Registrant.......... 23
ITEM 11. Executive Compensation...................................... 23
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management.............................................. 23
ITEM 13. Certain Relationships and Related Transactions.............. 23
PART IV:
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 24
SIGNATURES............................................................. 27
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................ 29
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PART I
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 1998
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 divisions 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 revenues in fiscal 1998 increased to $3.9 billion from $3.8 billion a
year earlier. Total sales in the United States decreased 1 percent from a year
earlier while international sales, which amounted to 32 percent of the corporate
total, increased 12 percent. Net income for fiscal 1998 was $133.0 million, down
from $207.5 million for fiscal 1997. The reduction in earnings was due in large
part to restructuring and other one-time charges in the amount of $142.0 million
pre-tax taken during the fourth quarter. Before the charges, net income
increased 10 percent to $227.4 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 and application solutions for television and radio
broadcast, radio-communication and telecommunication, including: transmitters
and studio equipment for analog television and digital television (formerly
HDTV); analog and digital AM and FM radio equipment; HF, VHF, UHF
radio-communication equipment; air traffic and national law enforcement
communication systems; microwave radios and transmission equipment; digital
telephone switches; telephone subscriber-loop and test systems equipment; and
network management and workforce management systems.
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, telecommunication line cards, video and imaging
systems, multimedia, industrial equipment, personal computers and 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, litigation support services, 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, law enforcement and
newspaper composition markets. Applications of the sector's technologies and
products
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include advanced avionics systems; aircraft, spacecraft and missile
communications; terrestrial and satellite communication antennas, terminals and
networks; command, control, communication and intelligence systems, products and
services; global positioning system-based controls systems; signal and image
processing; weather support systems; electronic warfare simulation; 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, 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
July 3, 1998................ 970.5 710.2 1,256.5 953.0 3,890.2
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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, 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
July 3, 1998*............... 105.1 14.1 129.2 63.5 (38.7) (73.2) 200.0
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* Fiscal 1998 results include a $130.0 million ($86.4 million after income taxes
or $1.08 per share) restructuring charge and a $12.0 million ($8.0 million
after income taxes or 10 cents per share) provision for costs associated with
an international contract.
DESCRIPTION OF BUSINESS
COMMUNICATIONS
The Communications Sector of the Company, which has recently been
restructured to consist of four operating divisions, designs, manufactures, and
sells products characterized by three principal communication technologies: (i)
communications products and systems, including digital telephone switches,
enhanced services systems, telephone test equipment and systems, and
telecommunication network management systems; (ii) broadcast, including digital
and analog television and radio studio and transmission systems; and (iii)
wireless radio, including microwave radio products and systems, high-frequency
(HF), very high frequency (VHF) and ultra-high frequency (UHF) products, and air
traffic and national law enforcement systems.
Sales in fiscal 1998 for this business segment increased 2 percent to
$970.5 million from $948.0 million for the prior year. Sector operating profit,
which included a $23.3 million restructuring charge, increased to $105.1
million, up from $83.5 million in fiscal 1997. The sector contributed 25 percent
of Company total sales in both fiscal 1998 and fiscal 1997.
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-
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distance carriers, local carriers, utilities, corporations and government
agencies. The sector also offers a pre-paid calling card system.
The sector also supplies telecommunication products and systems, including
telephone test systems and tools (including portable and remote test units),
operational support systems to manage telephone subscriber loops, and workforce
and network management systems.
The sector is the largest producer of analog and digital microwave
communication products and systems in North America and is expanding its
international presence in such markets, particularly in Latin America. The
sector is also a leading supplier of multiband and 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 wireless local loop telephony
equipment for private, government and public phone system customers operating
worldwide.
The sector is a leading manufacturer and supplier of analog and digital
radio and television broadcast encoding and transmission equipment, systems and
services and radio-studio equipment, systems and services 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, encoders and audio, remote-control and video production systems. The
sector is also a leading supplier of mobile broadcast units and provides
comprehensive studio integration services.
Principal customers for products of the Communications Sector include
foreign and domestic commercial and industrial firms, radio and television
broadcasters, telephone companies, governmental and military agencies,
utilities, construction companies and oil producers. In general, the sector's
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 and has recently
increased its focus in South America and other promising international markets,
particularly in the microwave radio area. See "International Business."
The backlog of unfilled orders for this segment of Harris' business was
$311 million at July 31, 1998, substantially all of which is expected to be
filled during the 1999 fiscal year, compared with $351 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 1998 for this business segment increased 4 percent to
$710.2 million from $679.7 million in fiscal 1997. The sector's operating
profit, which included restructuring charges of $90.4 million, was $14.1 million
in fiscal 1998, compared with $111.9 million in fiscal 1997. The sector
contributed 18 percent of Company total sales in both fiscal 1998 and fiscal
1997.
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, personal computers, computer
peripherals 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.
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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 wireless communications, high resolution medical imaging, broadcast
and interactive cable, video, multimedia and military radar systems.
The sector is a major supplier of integrated circuits and discrete devices
to the military and aerospace markets, with an emphasis on commercial and
military space applications, 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 electronic data
processing, communications, telephone, industrial, medical, video imaging and
other electronic equipment manufacturers, automobile manufacturers, defense
contractors and U.S. government agencies.
In general, the sector's 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
$216 million at July 31, 1998, substantially all of which is expected to be
filled during the 1999 fiscal year, compared with $294 million a year earlier.
As a response to difficult conditions in the semiconductor industry,
particularly the logic product line, and in an effort to reduce costs, the
sector has recently announced a restructuring which includes a reduction of
approximately 1,900 employees, or about 25 percent of the sector's workforce,
and a structured phase-out of the logic product line.
LANIER WORLDWIDE
Lanier Worldwide, Inc. is a wholly-owned subsidiary of Harris which,
together with its subsidiaries and affiliated companies, markets, sells, and
services office equipment and business communication products and computer based
healthcare information systems and offers a variety of outsourcing services,
including transcription, systems integration, reprographics, litigation support
services, binding and mailroom management.
Sales in fiscal 1998 for this business segment increased 7 percent to
$1,256.5 million from $1,171.7 million in fiscal year 1997. Operating profit,
which includes an $8.5 million restructuring charge, was $129.2 million,
compared to $129.3 million last year. Lanier Worldwide contributed 32 percent of
Company total sales in fiscal 1998 and 31 percent in fiscal 1997.
Lanier Worldwide is one of the world's largest providers of office products
and document management solutions, services and support, with more than 1,600
sales and service centers in nearly 100 countries. Through its global network of
direct sales, national and global accounts, 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 has
also increased its product line focus on digital products, color copiers and
print-on-demand. Additionally, Lanier provides facilities management operations
and other related outsourcing services and also provides legal support services.
Lanier Worldwide leases certain of its products to customers on a short-term
basis. Lanier sources substantially all of its products from a variety of
manufacturers.
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Due to the nature of its business, backlog of unfilled orders is not
considered significant to an understanding of this segment's business.
During the first quarter of fiscal 1999 Lanier completed the acquisition of
the Copying Systems Business Unit of the Agfa-Gevaert Group, which is a member
of the Bayer Group. The acquired business, which had annual sales of
approximately $250 million for 1997, will double Lanier Worldwide's sales and
market size in the European office equipment market.
ELECTRONIC SYSTEMS
The Electronic Systems Sector of Harris is composed of three operating
divisions and is engaged in advanced research, design, development and
production of advanced electronic, information processing and communication
products, services, 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; terrestrial and satellite communications terminals and
networks; 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.
Sales in fiscal 1998 for this business segment decreased 4 percent to
$953.0 million from $997.8 million in fiscal 1997. Operating profit, which
included a $7.8 million restructuring charge and a $12.0 million provision for
an international contract, was $63.5 million, a decrease from $84.4 million in
the previous fiscal year. This sector contributed 25 percent of Company total
sales in fiscal 1998 and 26 percent in fiscal 1997.
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, including large deployable
satellite antenna systems and flat panel phased array and single mission
antenna, and is a preeminent supplier of super-high-frequency military satellite
ground terminals for the Department of Defense. The sector is also diversifying
into the commercial satellite business and has recently been awarded a contract
to supply the communications payload for a series of next generation broadband
satellites to GE Americomm.
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 and
provides sophisticated ground based and shipboard command, control,
communication and intelligence systems, products and services for many
government end-users. 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 formed three joint ventures with the General Electric
Company. GE Harris Energy Controls Systems is a leading supplier of intelligent
energy management systems and services the electric utilities. GE-Harris Railway
Electronics is a leader in communication based electronic planning, scheduling
and control systems for railways worldwide. GE Harris Aviation Information
Solutions provides information systems and services that enable airlines to
monitor and analyze aircraft and engine performance data easier and faster,
helping to improve airline efficiency and safety. The sector has, also formed a
joint venture with BE Aerospace, Inc. to provide live television transmission to
individual seats on commercial airliners.
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
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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
$430 million at July 31, 1998, a substantial portion of which is expected to be
filled during the 1999 fiscal year, compared with $470 million a year earlier.
INTERNATIONAL BUSINESS
Sales in fiscal 1998 of products exported from the United States or
manufactured abroad were $1,248.2 million or 32 percent of the Company's total
sales, compared with $1,119.4 million or 29 percent of the Company's total sales
in fiscal 1997 and $1,206.4 million or 33 percent in fiscal 1996. Exports from
the United States, principally to Europe, Latin America and Asia, totalled
$646.0 million or 52 percent of the international sales in fiscal 1998, $550.0
million or 49 percent of the international sales in fiscal 1997 and $631.6
million or 52 percent of the international sales in fiscal 1996.
Foreign operations represented 15 percent of consolidated net sales and 24
percent of consolidated total assets as of the end of fiscal 1998. 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 Brazil, 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 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 1998 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.
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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 its businesses 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 24 percent, 23 percent
and 26 percent of the Company's total sales in fiscal 1998, 1997 and 1996
respectively. It is not expected that Defense Department budget cutbacks will
have a material effect on the profitability of the Company in fiscal 1999 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 $1.0 billion at July
31, 1998, $1.1 billion at July 25, 1997 and $1.3 billion at July 26, 1996.
Substantially all of the backlog orders at July 31, 1998 are expected to be
filled during fiscal 1999.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research and engineering expenditures by Harris totaled approximately $686
million in fiscal 1998, $680 million in fiscal 1997 and $603 million in fiscal
1996. Company-sponsored research and product development costs were $183 million
in fiscal 1998, $175 million in fiscal 1997 and $160 million in fiscal 1996. 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, 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 the Communications
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. Harris has
recently adopted a new trademark.
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
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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 $1.7 million was spent on
environmental capital projects in fiscal 1998 and $.4 million in fiscal 1997.
The Company currently forecasts authorization for environmental-related capital
projects totalling $2.0 million in fiscal 1999. Such amounts may increase in
future years.
RAW MATERIALS
Because of the diversity of the Company's products and services, as well as
the wide geographic dispersion of its facilities, the Company uses numerous
sources for the wide array of raw materials needed for its operations and for
products that it sells. To date, the Company has not been materially adversely
affected by the inability to obtain raw materials or products.
EMPLOYEES
As of July 3, 1998, Harris had approximately 28,500 employees, of whom
approximately 19,400 were located in the United States. In general, Harris
believes that its relations with its employees are good. During the first
quarter of fiscal 1999, Harris announced that it is reducing its workforce by
approximately 2,300 or about 8 percent of its worldwide workforce, and of that
reduction about 1,900 will be Semiconductor Sector employees.
ITEM 2. PROPERTIES.
Harris operates approximately 40 plants and approximately 290 offices in
the United States, Canada, Europe, Central and South America, Asia and Australia
consisting of about 7.3 million square feet of manufacturing, administrative,
warehousing, engineering and office facilities that are owned and about 4.1
million square feet of sales, office and manufacturing facilities that are
leased. The leased facilities are for the most part 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
Company's corporate headquarters are owned and located in Melbourne, Florida.
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; Shenzhen
Guangdong, China; and Cambridge, U.K.
In the opinion of management, the Company's facilities are suitable and
adequate for their intended purposes and have capacities adequate for current
and projected needs. Unused or under-utilized facilities are not considered
significant.
8
<PAGE> 11
As of July 3, 1998, the following facilities were in productive use by
Harris:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
SQ. FT. TOTAL SQ. FT. TOTAL
SECTOR FUNCTION OWNED LEASED
------ -------- ------------- -------------
<S> <C> <C> <C>
Communications Office/Manufacturing 874,510 1,026,589
Semiconductor Office/Manufacturing 2,213,084 44,344
Lanier Worldwide Office/Manufacturing/Warehouse 204,912 759,908
Electronic Systems Office/Manufacturing 2,997,657 312,707
OTHER
Corporate Offices 959,549 93,034
Sales/Service Offices 13,700 1,870,247
--------- ----------
TOTALS 7,263,412 4,106,829
</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; labor and employee disputes;
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. While it is
not feasible to predict the outcome of these matters with certainty, in the
opinion of management, final judgments, if any, which might be rendered against
the Company in currently existing litigation are reserved against, covered by
insurance 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 and its various agencies 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 contractor, such as the Company, or
one or more of its operating sectors or divisions, 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 current 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
9
<PAGE> 12
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, 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 9 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. While it is not feasible to predict the outcome of many of
these proceedings, 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 1998.
10
<PAGE> 13
EXECUTIVE OFFICERS OF THE REGISTRANT (AS OF SEPTEMBER 1, 1998*).
<TABLE>
<CAPTION>
EXECUTIVE OFFICE
NAME AGE CURRENTLY HELD PAST BUSINESS EXPERIENCE
---- --- ---------------- ------------------------
<S> <C> <C> <C>
Phillip W. Farmer 60 Chairman of the Board, Chairman of the Board and Chief Executive
President and Chief Executive Officer since July, 1995. President since
Officer April, 1993. Chief Operating Officer, 1993
to 1995. 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 63 President and President and Chief Executive Officer, Lanier
Chief Executive Officer, Worldwide, Inc. since March, 1987. Senior
Lanier Worldwide, Inc. Vice 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 52 President -- Communications President -- Communications Sector since
Sector 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.
</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.
11
<PAGE> 14
<TABLE>
<CAPTION>
EXECUTIVE OFFICE
NAME AGE CURRENTLY HELD PAST BUSINESS EXPERIENCE
---- --- ---------------- ------------------------
<S> <C> <C> <C>
John C. Garrett 55 President -- Semiconductor President -- Semiconductor Sector since
Sector 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. Mr. Garrett
has announced that effective September 30,
1998 he will be retiring from the Company.
Charles J. Herbert 62 Acting President -- Electronic Acting President -- Electronic Systems Sector
Systems Sector since February, 1998. Vice President
Melbourne Operations -- Electronic Systems
Sector since July, 1997. Vice President --
General Manager, Government Aerospace
Systems Division, 1981 to 1997. Various
product line and management assignments
with the Electronic Systems Sector from
1960 to 1981.
Bryan R. Roub 57 Senior Vice President -- Chief Senior Vice President -- Chief Financial
Financial Officer 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 58 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 46 Vice President -- Vice President -- Internal Audit since
Internal Audit 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.
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
EXECUTIVE OFFICE
NAME AGE CURRENTLY HELD PAST BUSINESS EXPERIENCE
---- --- ---------------- ------------------------
<S> <C> <C> <C>
Robert W. Fay 51 Vice President -- Vice President -- Controller since January,
Controller 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.
Nick E. Heldreth 56 Vice President -- Vice President -- Human Resources and
Human Resources and Corporate Corporate Relations since July, 1996. Vice
Relations 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 62 Vice President -- Vice President -- Quality and New Processes
Quality and since 1994. Formerly Vice President and
New Processes Program Manager of Core Program. Various
management assignments with the Electronic
Systems Sector, 1962 to 1994.
Pamela Padgett 42 Vice President -- Investor Vice President -- Investor Relations since
Relations December, 1996. Formerly Vice President --
Mergers and Acquisitions MC Financial
Services Ltd., a subsidiary of Mitsubishi
Corporation, 1990 to December 1996.
Ronald R. Spoehel 40 Vice President -- Corporate Vice President -- Corporate Development since
Development 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.
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
EXECUTIVE OFFICE
NAME AGE CURRENTLY HELD PAST BUSINESS EXPERIENCE
---- --- ---------------- ------------------------
<S> <C> <C> <C>
David S. Wasserman 55 Vice President -- Treasurer Vice President -- Treasurer since January,
1993. Vice President -- Taxes, 1987 to
1993. Formerly Senior Vice President,
Midland-Ross Corporation, 1979 to 1987.
Raymon M. White 60 Vice President -- Washington Vice President -- Washington Operations since
Operations July, 1995. Vice President -- Congressional
Relations, November, 1994 to July, 1995.
Corporate Director Congressional Relations,
August, 1988 to 1994. Director
Congressional Relations, Harris Electronic
Systems Sector, July, 1986 to 1988.
Greg L. Williams 45 To become President -- Vice President -- General Manager -- Power
Semiconductor Sector Products Business, Semiconductor Sector
(effective October 1, 1998) since January, 1998. Formerly with
Motorola, Inc. (July 1984 to January 1998)
in various positions including Vice
President -- Assistant General Manager,
Semiconductor Components Group, Vice
President and General Manager, Power
Products Division and Vice President --
Director, Automotive World Marketing. With
General Electric Company from 1977 to 1984,
positions included sales management,
consulting, software support and
development positions for global data
communications network.
</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.
14
<PAGE> 17
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 and traded on the New York Stock Exchange, Inc. ("NYSE"),
under the ticker symbol "HRS," and is also traded on the Boston, Chicago,
Pacific and Philadelphia Stock Exchanges and through the Intermarket Trading
System. As of August 21, 1998, there were approximately 10,656 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 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
=====
FISCAL 1998
First Quarter.............................. $ 49 $ 40 3/16 $0.22
Second Quarter............................. $ 50 $ 40 3/4 $0.22
Third Quarter.............................. $ 55 5/16 $ 41 3/4 $0.22
Fourth Quarter............................. $ 53 $ 40 3/8 $0.22
-----
$0.88
=====
</TABLE>
On August 21, 1998, the last sale price of the Common Stock as reported in
the consolidated transaction reporting system was $38.00 per share.
On August 29, 1998, the Board declared a quarterly cash dividend of $.24
per share which will be paid on September 23, 1998 to holders of record on
September 14, 1998. The Company has paid cash dividends 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
because they are dependent upon future operating results, capital requirements
and financial condition. The Board also authorized the Company to repurchase up
to 1,000,000 shares of its Common Stock periodically in the open-market.
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.
All share information in this Annual Report on Form 10-K has been restated to
reflect the stock split.
15
<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes selected historical financial information of
Harris Corporation and its subsidiaries for each of the last five fiscal years.
The selected financial information shown below has been derived from the
Company's audited consolidated financial statements. 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 the financial statements included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenue from sales, rentals, and
services............................. $3,890.2 $3,797.2 $3,621.2 $3,444.1 $3,336.1
Cost of sales, rentals, and services... 2,585.2 2,519.2 2,404.6 2,328.5 2,274.8
Restructuring expense.................. 130.0 -- -- -- --
Interest expense....................... 73.2 59.9 62.5 65.4 58.3
Income before income taxes............. 200.0 312.0 274.4 237.6 193.5
Income taxes........................... 67.0 104.5 96.0 83.1 71.6
Income before cumulative effect of
change in accounting principle....... 133.0 207.5 178.4 154.5 121.9
Cumulative effect of change in
accounting principle................. -- -- -- -- (10.1)
Net income............................. 133.0 207.5 178.4 154.5 111.8
Average shares outstanding (diluted)*.. 80.0 78.8 77.8 78.2 79.4
Per share data (diluted)*:
Income before cumulative effect of
change in accounting principle.... 1.66 2.63 2.29 1.98 1.54
Cumulative effect of change in
accounting principle.............. -- -- -- -- (.13)
Net income........................... 1.66 2.63 2.29 1.98 1.41
Cash dividends....................... .88 .76 .68 .62 .56
Net working capital.................... 837.9 774.9 757.8 755.4 893.6
Net plant and equipment................ 947.0 878.3 721.7 581.0 551.3
Long-term debt......................... 768.6 686.7 588.5 475.9 661.7
Total assets........................... 3,784.0 3,637.9 3,206.7 2,836.0 2,677.1
Shareholders' equity................... 1,609.3 1,578.2 1,372.9 1,248.8 1,188.0
Book value per share*.................. 20.11 19.82 17.66 16.06 15.12
</TABLE>
- ---------------
* All per share data reflect the two-for-one stock split in September, 1997.
16
<PAGE> 19
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 1998 COMPARED WITH 1997 -- Sales in fiscal 1998 increased 2.4 percent
while net income decreased 35.9 percent. Net income for fiscal 1998 included
fourth quarter restructuring and other one-time charges of $142.0 million ($94.4
million after tax). Excluding these charges, net income increased 9.6 percent.
Restructuring charges of $130 million ($86.4 million after tax) were incurred
for reduction of personnel and write-off or write-down of assets related to the
exit of several product lines. In connection with the restructure, the Company
currently expects a total work force reduction of approximately 2,300 employees.
Of that number, 209 were terminated prior to year end. Fiscal 1998 income also
includes a provision of $12.0 million ($8.0 million after tax) for costs related
to an international contract of the Electronic Systems segment. This provision
relates to additional contract costs incurred in the fourth quarter and Asian
currency problems. Segment results, as discussed below, exclude the fiscal 1998
restructuring and one-time charge.
Communications segment sales increased 2.4 percent while net income
increased 53.1 percent. Significant sales and earnings improvement in the
segment's digital switch and telephone test equipment businesses helped offset
the impact of substantially lower earnings in the segment's microwave radio
business, due to the slowdown in the PCS market. Segment earnings also benefited
from substantially higher gains from the sale of investment securities and
higher royalty income.
Semiconductor segment sales increased 4.5 percent as record volume
shipments were offset in part by lower product prices. Excluding restructuring
expense, segment net income increased 3.8 percent. Royalty income, which is
significant for both years, was lower in fiscal 1998. Restructuring actions will
reduce the segment's workforce by approximately 25 percent and once completed,
these actions should reduce annual operating costs by $70.0 to $80.0 million,
much of which should occur in time to benefit fiscal 1999.
Lanier Worldwide segment sales increased 7.2 percent in fiscal 1998 due to
growth in both domestic and international markets. Segment net income increased
2.3 percent due to higher sales. In the fourth quarter of fiscal 1998, Lanier
Worldwide entered into a definitive agreement to acquire the copying systems
business of the Agfa-Gevaert Group. The transaction was completed in the first
quarter of fiscal 1999 and should increase the segment's sales by more than $250
million annually. The acquisition will double Lanier's presence and market share
in the European office equipment market.
Electronic Systems segment sales were 4.5 percent lower in fiscal 1998,
while net income declined 19.7 percent. Reduced sales in the segment's air
traffic control and aerospace systems businesses more than offset growth in the
segment's information systems business. Lower sales, higher interest expense and
gain from the sale of a building in fiscal 1997 contributed to the fiscal 1998
earnings decline.
Cost of sales, rentals and services as a percentage of sales increased to
66.5 percent from 66.3 percent in the prior year. Both the Electronic Systems
and Lanier Worldwide segments had lower operating margins in the current fiscal
year. Engineering, selling, and administrative expenses as a percentage of sales
decreased from 25.4 percent in fiscal 1997 to 25.1 percent in the current year.
Lower marketing expense helped offset a small increase in company-sponsored
research and development.
Interest income was higher in fiscal 1998 due to interest received from the
Internal Revenue Service. Interest expense was also higher in fiscal 1998 due to
higher average borrowings and a lower amount of interest
17
<PAGE> 20
capitalized on new construction projects. "Other-net" expense was $5.9 million
lower in fiscal 1998 due to gains resulting from the sale of investment
securities.
The provision for income taxes in both fiscal 1998 and 1997 was 33.5
percent of income before income taxes. The reduction from the statutory U.S.
income tax rate of 35.0 percent in fiscal 1998 resulted from tax benefits
associated with foreign income and export sales.
CAPITAL EXPENDITURES -- Expenditures for land, buildings, and equipment totaled
$207 million in 1998, down from $279 million in the prior year. In addition,
during fiscal 1998, $78 million was invested in equipment for rental to
customers, up from $71 million invested in the prior year. Substantially all of
this investment in rental equipment is related to Lanier Worldwide products.
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.
18
<PAGE> 21
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.
FINANCIAL CONDITION
CASH POSITION -- At July 3, 1998, cash and cash equivalents totaled $184
million, an increase from $71 million at June 27, 1997. Marketable securities
were $45 million at July 3, 1998.
RECEIVABLES, UNBILLED COSTS, AND INVENTORIES -- Notes and accounts receivable
amounted to $1,038 million at July 3, 1998, unchanged from a year earlier.
Unbilled costs and inventories decreased $85 million from the prior year to $851
million. This decrease reflects a substantial reduction in unbilled costs within
the Electronic Systems segment.
BORROWING ARRANGEMENTS -- The Company currently has available $800 million
syndicated credit facilities. Under these agreements $243 million was
outstanding at July 3, 1998. The Company also has available $151 million in open
bank credit lines, of which $62 million was available at July 3, 1998.
CAPITALIZATION -- At July 3, 1998, debt totaled $1,056 million, representing
39.6 percent of total capitalization (defined as the sum of total debt plus
shareholders' equity). A year earlier, debt of $983 million was 38.4 percent of
total capitalization. Year-end long-term debt included $500 million of
debentures, $259 million of notes payable to banks and insurance companies, and
$10 million of other long-term debt.
In 1998, the Company issued 590,733 shares of the Common Stock to employees
under the terms of the Company's stock purchase, option and incentive plans.
The Company expects to maintain operating ratios, fixed-charge coverages,
and balance-sheet ratios sufficient for retention of its present debt ratings.
RETIREMENT PLANS -- Retirement benefits for substantially all of the Company's
employees are provided primarily through a retirement plan having profit-sharing
and savings elements. The Company also has non-contributory defined benefit
pension plans 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 $82.3 million during the 1998 fiscal year.
DEFERRED INCOME TAXES -- The liability for non-current deferred income taxes was
$144 million at July 3, 1998, up from $84 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 July 3, 1998, the cumulative
translation adjustment reduced Shareholders' Equity by $47 million compared to a
reduction of $30 million at June 27, 1997.
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 1998,
1997 or 1996.
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.
YEAR 2000 ISSUE
Certain software and hardware systems are time sensitive. Older time
sensitive systems often use a two digit dating convention (e.g., "00" rather
than "2000") that could result in system failure and disruption of operations as
the Year 2000 approaches. The Year 2000 problem will impact the Company, its
vendors and suppliers, customers, and other third parties that interface with
the Company.
19
<PAGE> 22
With regard to the Year 2000 problem, more than 400 project initiatives of
varying magnitudes have been identified throughout the Company and its various
business segments. Each project has been assigned a leader and prioritized based
on the size of the task and the perceived business risk. A steering team
comprised of senior management in key functional areas including: accounting,
finance, legal, quality & new processes and information management has been
established to monitor and oversee the progress of each project. Some of these
projects have been completed and a substantial number are steadily progressing.
The Company has determined it needs to replace or modify several of its
software systems and is in the process of replacing or outsourcing many of its
time sensitive software systems. In addition, the Company has software programs
for reprogramming other time sensitive software and equipment.
The Company has initiated formal programs to advise and work with customers
to resolve Year 2000 problems. However, the Company believes it has no material
exposure to contingencies related to the Year 2000 issue for the products it has
sold. The Company has Year 2000 exposure in its operating systems and business
systems; including engineering, manufacturing, order fulfillment, program
management, financial and administrative functions. It is the Company's belief
that the greatest potential risk from the Year 2000 issue could be its inability
to meet commitment dates on delivery of product and has focused the majority of
the Company's effort and dedicated resources to address this issue. In addition,
the Company believes that a limited number of the non-information technology
systems, such as manufacturing machinery, equipment and test equipment with date
sensitive software and embedded microprocessors may be affected, and evaluation
and remediation are underway.
The Company has also initiated communications with significant suppliers,
customers and other relevant third parties to identify and minimize disruptions
to the Company's operations and to assist in resolving Year 2000 issues.
However, there can be no certainty that the systems and products of other
companies on which the Company relies will not have an adverse effect on the
Company's operations.
The Company believes it is diligently addressing the Year 2000 issues and
that it will satisfactorily resolve significant Year 2000 problems. The Company
anticipates completing substantially all of its Year 2000 projects during fiscal
1999, with major completion milestones being targeted for the second and fourth
quarters of fiscal 1999. In the event the Company falls short of these
milestones, additional internal resources will be focused on completing these
projects or developing contingency plans. The estimated cost for resolving Year
2000 issues is approximately $42 million with approximately $20 million planned
for fiscal 1999. These costs are generally not incremental to existing
information technology budgets; internal resources were re-deployed and time
tables for implementation of replacement systems were accelerated. The largest
portion of this expenditure is being used to replace existing software and
hardware. Estimates of Year 2000 related costs are based on numerous assumptions
and there is no certainty that estimates will be achieved and actual costs could
be materially greater than anticipated. Specific factors that might cause such
differences include, but are not limited to, the continuing availability of
personnel trained in this area, the ability to timely identify and correct all
relevant computer programs, and similar uncertainties.
EURO CONVERSION
On January 1, 1999, certain member nations of the European Economic and
Monetary Union ("EMU") will adopt a common currency, the Euro. For a three-year
transition period, both the Euro and individual participants' currencies will
remain in circulation. After January 1, 2002, the Euro will be the sole legal
tender for EMU countries. The adoption of the Euro will affect a multitude of
financial systems and business applications as the commerce of these nations
will be transacted in the Euro and the existing national currency. For the year
ended July 3, 1998, approximately 9 percent of the Company's revenues were
derived from EMU countries.
The Company is currently addressing Euro related issues and its impact on
information systems, currency exchange rate risk, taxation, contracts,
competition and pricing. Action plans currently being implemented are expected
to result in compliance with all laws and regulations; however, there can be no
certainty that such plans will be successfully implemented or that external
factors will not have an adverse effect on the Company's operations. Any costs
associated with the adoption of the Euro will be expensed as incurred and
20
<PAGE> 23
the Company does not expect these costs to be material to its results of
operations, financial condition or liquidity.
OUTLOOK
Overall, the Company believes the fourth quarter restructuring actions,
along with continuing investment in new products and services, should enable the
Company to grow revenues and earnings in fiscal 1999. However, revenue growth
will be difficult in the first half due to on-going weakness in the
semiconductor market, softness in the North American microwave radio market, and
economic instability in the international markets served by the Company's
communications businesses.
In the Communications segment, continuing improvement in the digital switch
business coupled with expected strong performance in its other businesses,
particularly microwave and broadcast products, should result in higher sales in
fiscal 1999. Earnings in this segment are expected to be relatively flat as
higher operating income is expected to be offset by lower gains from the sale of
investment securities. Restructuring actions are expected to help the
Semiconductor segment remain profitable in the face of difficult market
conditions and be well positioned when the industry eventually turns around.
Lower operating costs in the Lanier segment, resulting from fiscal 1998
restructuring actions, and higher sales are expected to result in improved
earnings. The Electronic Systems segment expects relatively flat sales and a
strong increase in fiscal 1999 earnings.
FORWARD-LOOKING STATEMENTS
This report contains, and certain of the Company's other public documents
and statements and oral statements contain and will contain, forward-looking
statements that reflect management's current assumptions and estimates of future
performance and economic conditions. Such statements are made in reliance upon
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. The Company cautions investors that any forward-looking statements are
subject to risks and uncertainties that may cause actual results and future
trends to differ materially from those projected, stated, or implied by the
forward-looking statements.
The Company's consolidated results and the forward-looking statements could
be affected by, among other things, general economic conditions in the markets
in which the Company operates; economic developments that have a particularly
adverse effect on one or more of the markets served by the Company; the ability
to execute management's internal operating plans (specifically, management's
announced restructuring plan which includes employee reductions, cost reductions
in its commodity semiconductor lines, particularly Logic products, consolidation
of administrative, technical, sales and marketing functions, and manufacturing
facilities, and the successful exit of several product lines and a program);
stability of key markets for communications products, particularly Asia, Brazil
and Russia; fluctuation in foreign currency exchange rates and the effectiveness
of the Company's currency hedging program; worldwide demand and product pricing
for integrated semiconductor circuits, particularly power products; reductions
in the U.S. and worldwide defense and space budgets; effect of continuing
consolidation in the U.S. defense industry on the Company's direct and indirect
business with the U.S. government; the Company's ability to recover costs
incurred on fixed price contracts; continued development and market acceptance
of new products, especially digital television broadcast products and
semiconductor wireless products; continued success of the Company's patent
licensing programs, particularly as it relates to the Semiconductor and
Communications segments; and the successful resolution of patent infringement
and other general litigation. The Company disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The Company, in the normal course of doing business, is exposed to the
risks associated with foreign currency exchange rates, fluctuations in the
market value of its equity securities available for sale, and changes in
interest rates. The Company employs established policies and procedures
governing the use of financial instruments to manage its exposure to such risks.
21
<PAGE> 24
The Company uses foreign exchange contracts and options to hedge both
balance sheet 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, intercompany loans, and firm committed operating
expenses in Malaysia and Ireland. Management believes the use of foreign
currency financial instruments should reduce the risks which arise from doing
business in international markets. Contracts are generally one year or less. At
July 3, 1998, the Company had open foreign exchange contracts with a notional
amount of $434 million, of which $222.7 million were to hedge off-balance sheet
commitments. Additionally, for the fiscal year ended July 3, 1998, the Company
purchased and sold $1,474.5 million of foreign exchange forward and option
contracts. Reference is made to the Note Financial Instruments in the Notes to
Financial Statements for further information with respect to commitments to buy
or sell foreign currencies. The Company's hedging activities provide only
limited protection against currency exchange risks. Factors that could impact
the effectiveness of the Company's hedging programs include accuracy of sales
estimates, volatility of currency markets and the cost and availability of
hedging instruments. A 10 percent adverse change in currency exchange rates for
the Company's foreign currency derivatives held July 3, 1998, would have an
impact of approximately $4.3 million on the fair value of such instruments. This
quantification of exposure to the market risk associated with foreign exchange
financial instruments does not take into account the offsetting impact of
changes in the fair value of the Company's foreign denominated assets,
liabilities and firm commitments.
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 July 3, 1998, was $45 million with
the corresponding unrealized gain included as a component of shareholders'
equity. These investments have historically had higher volatility than most
market indices. A 10 percent adverse change in the quoted market price of
marketable equity securities would have an impact of approximately $4.0 million
on the fair market value of these securities.
The Company utilizes a balanced mix of debt maturities along with both
fixed-rate and variable-rate debt to manage its exposures to changes in interest
rates. The Company does not expect changes in interest rates to have a material
effect on income or cash flows in fiscal 1999, although there can be no
assurances that interest rates will not significantly change.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary financial information and 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.
22
<PAGE> 25
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 discussion under the heading
Board of Directors in the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 23, 1998, which proxy statement is expected
to be filed within 120 days after the end of the Company's 1998 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.
Reference is also made to the information relating to Section 16(a) compliance
which is presented under the heading Section 16(a) Beneficial Ownership
Reporting Compliance in the Company's Proxy Statement for the 1998 Annual
Meeting of Shareholders, which information is incorporated herein by reference.
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 23, 1998, which proxy statement is expected
to be filed within 120 days after the end of the Company's 1998 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 discussion under the heading Security Ownership of
Directors and Executive Officers and Certain Beneficial Owners in the Company's
Proxy Statement for the Annual Meeting of Shareholders to be held on October 23,
1998, which proxy statement is expected to be filed within 120 days after the
end of the Company's 1998 fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the fiscal year ended July 3, 1998, there existed no relationships
and there were no transactions reportable under this Item.
23
<PAGE> 26
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 Certified Public Accountants..... 30
Consolidated Statement of Income -- Fiscal Years ended
July 3, 1998, June 27, 1997 and June 30, 1996......... 31
Consolidated Statement of Retained Earnings --
Fiscal Years ended July 3, 1998, June 27, 1997 and
June 30, 1996......................................... 31
Consolidated Balance Sheet -- July 3, 1998 and June 27,
1997.................................................. 32
Consolidated Statement of Cash Flows --
Fiscal Years ended July 3, 1998, June 27, 1997 and
June 30, 1996......................................... 33
Notes to Financial Statements.......................... 34
(2) Financial Statement Schedules:
For each of the years ended July 3, 1998, June 27, 1997
and June 30, 1996
Schedule II -- Valuation and Qualifying
Accounts......................................... 42
</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 fiscal 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 fiscal quarter ended March 31, 1996.
(4)(a) Specimen stock certificate for the Company's Common Stock,
incorporated herein by reference to Exhibit 4(a) to the Company's Annual
Report on Form 10-K for the fiscal year ended June 27, 1997.
(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.
24
<PAGE> 27
*(c)(i) Harris Corporation Stock Incentive Plan, incorporated herein
by reference to Exhibit 10(c) to the Company's Annual Report on Form
10-K for the fiscal year ended June 27, 1997.
(ii) Forms of Stock Option Agreement and Performance Share
Agreement under the Harris Corporation Stock Incentive Plan,
incorporated herein by reference to Exhibit 10(v) to the Company's
Form 10-Q Quarterly Report for the fiscal quarter ended October 3,
1997.
(iii) Form of Outside Directors' Stock Option Agreement.
*(d) Harris Corporation 1981 Stock Option Plan for Key
Employees, incorporated herein by reference to Exhibit 10(d) to 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) to 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) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1995.
*(g) Harris Corporation Retirement Plan (amended and restated
effective January 1, 1998), incorporated herein by reference to
Exhibit 10(i) to the Company's Form 10-Q Quarterly Report for the
fiscal quarter ended April 3, 1998.
*(h) Harris Corporation Supplemental Executive Retirement Plan
(amended and restated effective January 1, 1998), incorporated herein
by reference to Exhibit 10(i) to the Company's Form 10-Q Quarterly
Report for the fiscal quarter ended January 2, 1998.
*(i)(i) Lanier Worldwide, Inc. Pension Equity 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 27, 1997.
(ii) Amendment No. One to the Lanier Worldwide, Inc. Pension
Equity Plan.
(iii) Amendment No. Two to the Lanier Worldwide, Inc. Pension
Equity Plan.
*(j) Lanier Worldwide, Inc. Savings Incentive Plan, incorporated
herein by reference to Exhibit 10(j) to the Company's Annual Report
on Form 10-K for the fiscal year ended June 27, 1997.
*(k)(i) Lanier Worldwide, Inc. Supplemental Executive Retirement
Plan, incorporated herein by reference to Exhibit 10(k) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
27, 1997.
(ii) Amendment No. One to the Lanier Worldwide, Inc.
Supplemental Executive Retirement Plan.
*(l) Lanier Worldwide, Inc. Supplemental Executive Retirement
Savings Plan, incorporated herein by reference to Exhibit 10(l) to
the Company's Annual Report on Form 10-K for the fiscal year ended
June 27, 1997.
*(m)(i) 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.
(ii) Amendment to Director's Retirement Plan, incorporated
herein by reference to Exhibit 10(ii) to the Company's Form 10-Q
Quarterly Report for the fiscal quarter ended October 3, 1997.
*(n) Harris Corporation 1997 Directors' Deferred Compensation
and Annual Stock Unit Award Plan (amended and restated effective
October 24, 1997), incorporated herein by reference to Exhibit 10(i)
to the Company's Form 10-Q Quarterly Report for the fiscal quarter
ended October 3, 1997.
25
<PAGE> 28
(o)(i) 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 fiscal quarter ended December 31, 1996.
(ii) Amendment No. One to 364-Day Credit Agreement, dated
as of October 21, 1997, incorporated herein by reference to Exhibit
10(iii) to the Company's Form 10-Q Quarterly Report for the fiscal
quarter ended October 3, 1997.
(p)(i) 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
fiscal quarter ended December 31, 1996.
(ii) Amendment No. One to 5-Year Credit Agreement, dated as
of October 21, 1997, incorporated herein by reference to Exhibit
10(iv) to the Company's Form 10-Q Quarterly Report for the fiscal
quarter ended October 3, 1997.
*(q) Harris Corporation Union Retirement Plan (amended and
restated effective January 1, 1998), incorporated herein by reference
to Exhibit 10(ii) to the Company's Form 10-Q Quarterly Report for the
fiscal quarter ended April 3, 1998.
*(r) Form of Director and Executive Officer Indemnification
Agreement.
(12) Statement regarding computation of earnings to fixed charges.
(21) Subsidiaries of the Registrant.
(23) Consent of Ernst & Young LLP.
(27) (i) Financial Data Schedule.
(27) (ii) Restated Financial Data Schedule.
(b) Reports on Form 8-K.
The Company filed with the Commission a Current Report on Form 8-K on
April 22, 1998 relating the announcement of its impending acquisition of
the assets of the Copying Systems Division of the Agfa-Gevaert Group.
- ------------------
*Management contract or compensatory plan or arrangement.
26
<PAGE> 29
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: August 29, 1998
By /s/ BRYAN R. ROUB
-----------------------------------
Bryan R. Roub
Senior Vice President-Chief
Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PHILLIP W. FARMER Chairman of the Board, President August 29, 1998
- ------------------------------------------------ and Chief Executive Officer
Phillip W. Farmer (Principal Executive Officer)
/s/ BRYAN R. ROUB Senior Vice President -- Chief August 29, 1998
- ------------------------------------------------ Financial Officer
Bryan R. Roub (Principal Financial Officer)
/s/ ROBERT W. FAY Vice President -- Controller August 29, 1998
- ------------------------------------------------ (Principal Accounting Officer)
Robert W. Fay
/s/ ROBERT CIZIK Director August 29, 1998
- ------------------------------------------------
Robert Cizik
/s/ LESTER E. COLEMAN Director August 29, 1998
- ------------------------------------------------
Lester E. Coleman
/s/ ALFRED C. DECRANE, JR. Director August 29, 1998
- ------------------------------------------------
Alfred C. DeCrane, Jr.
/s/ RALPH D. DENUNZIO Director August 29, 1998
- ------------------------------------------------
Ralph D. DeNunzio
/s/ JOSEPH L. DIONNE Director August 29, 1998
- ------------------------------------------------
Joseph L. Dionne
/s/ JOHN T. HARTLEY Director August 29, 1998
- ------------------------------------------------
John T. Hartley
/s/ KAREN KATEN Director August 29, 1998
- ------------------------------------------------
Karen Katen
/s/ ALEXANDER B. TROWBRIDGE Director August 29, 1998
- ------------------------------------------------
Alexander B. Trowbridge
</TABLE>
27
<PAGE> 30
(This page intentionally left blank)
28
<PAGE> 31
ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FISCAL YEAR ENDED JULY 3, 1998
HARRIS CORPORATION
MELBOURNE, FLORIDA
29
<PAGE> 32
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 July 3, 1998 and June 27, 1997, and the
related consolidated statements of income, retained earnings, and cash flows for
each of the three fiscal years in the period ended July 3, 1998. 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 July 3, 1998 and June 27, 1997, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended July 3, 1998, 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, presents fairly in all material respects the
information set forth herein.
ERNST & YOUNG LLP
Orlando, Florida
July 29, 1998
30
<PAGE> 33
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Fiscal years ended
-------------------------------------------
(In millions except per share amounts) 1998 1997 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Revenue from product sales and rentals $3,226.7 $3,335.7 $3,189.2
Revenue from services 663.5 461.5 432.0
Interest 48.9 37.4 38.1
-------------------------------------------
3,939.1 3,834.6 3,659.3
COSTS AND EXPENSES
Cost of product sales and rentals 2,164.5 2,267.4 2,151.9
Cost of services 420.7 251.8 252.7
Engineering, selling and administrative expenses 976.9 963.8 911.9
Restructuring expenses 130.0 -- --
Interest 73.2 59.9 62.5
Other-net (26.2) (20.3) 5.9
-----------------------------------------
3,739.1 3,522.6 3,384.9
-----------------------------------------
Income before income taxes 200.0 312.0 274.4
Income taxes 67.0 104.5 96.0
-----------------------------------------
Net income $ 133.0 $ 207.5 $ 178.4
=========================================
Net income per share
Basic $ 1.68 $ 2.66 $ 2.32
Diluted $ 1.66 $ 2.63 $ 2.29
=========
</TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Fiscal years ended
-------------------------------------------
(In millions except per share amounts) 1998 1997 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $1,219.9 $1,072.7 $ 969.4
Net income for the year 133.0 207.5 178.4
Cash dividends ($.88 per share in 1998, $.76 per share in
1997 and $.68 per share in 1996) (70.1) (60.3) (52.8)
Treasury stock retired -- -- (22.3)
-------------------------------------------
Balance at end of year $1,282.8 $1,219.9 $1,072.7
===========
</TABLE>
See Notes to Financial Statements.
31
<PAGE> 34
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
July 3 June 27
--------------------------
(In millions) 1998 1997
-----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 184.3 $ 70.7
Marketable securities 44.5 91.3
Receivables 805.1 820.6
Unbilled costs and accrued earnings on fixed price contracts 247.0 324.8
Inventories 603.6 611.1
Deferred income taxes 215.2 145.0
--------------------------
Total current assets 2,099.7 2,063.5
OTHER ASSETS
Plant and equipment 947.0 878.3
Notes receivable-net 232.5 217.7
Intangibles resulting from acquisitions 214.4 227.5
Other assets 290.4 250.9
-------------------------
$3,784.0 $3,637.9
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 231.0 $ 288.5
Accounts payable 190.3 196.8
Compensation and benefits 230.0 216.9
Other accrued items 241.9 191.7
Advance payments by customers 71.5 99.3
Unearned leasing and service income 156.7 191.6
Income taxes 83.9 96.0
Current portion of long-term debt 56.5 7.8
-------------------------
Total current liabilities 1,261.8 1,288.6
OTHER LIABILITIES
Deferred income taxes 144.3 84.4
Long-term debt 768.6 686.7
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 80,012,625 shares in
1998 and 79,625,670 shares in 1997 (shares adjusted to
reflect September 1997 two-for-one stock split) 80.0 39.8
Other capital 271.3 289.9
Retained earnings 1,282.8 1,219.9
Net unrealized gain on securities available for sale 25.3 53.8
Unearned compensation (3.2) 4.4
Cumulative translation adjustments (46.9) (29.6)
-------------------------
Total Shareholders' Equity 1,609.3 1,578.2
-------------------------
$3,784.0 $3,637.9
=========================
</TABLE>
See Notes to Financial Statements.
32
<PAGE> 35
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal years ended
---------------------------------------------
(In millions) 1998 1997 1996
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 133.0 $ 207.5 $ 178.4
Adjustments to reconcile income to net cash provided by
operating activities:
Depreciation 196.6 170.3 158.1
Amortization 13.6 13.2 12.6
Non-current deferred income taxes 59.9 22.2 7.4
Changes in assets and liabilities:
Receivables (3.7) (188.8) (88.1)
Unbilled costs and inventories 87.1 7.1 (65.0)
Accounts payables and accrued liabilities 53.6 (7.2) 63.7
Advance payments and unearned income (62.9) 2.4 23.3
Income taxes (82.3) (3.9) (14.8)
Other (3.3) (18.4) (13.8)
---------------------------------------------
Net cash provided by operating activities 391.6 204.4 261.8
INVESTING ACTIVITIES
Cash paid for acquired businesses (12.9) (24.3) (69.9)
Capital expenditures:
Plant and equipment (206.9) (279.4) (225.4)
Rental equipment (78.0) (70.5) (67.5)
-------------------------------------------
Net cash used in investing activities (297.8) (374.2) (362.8)
FINANCING ACTIVITIES
Proceeds from borrowings 5,454.9 6,519.4 1,152.2
Payments of borrowings (5,379.6) (6,305.4) (1,025.3)
Cash dividends (70.1) (60.3) (52.8)
Purchase of Common Stock for treasury -- -- (26.0)
Proceeds from sale of Common Stock 12.1 10.9 9.2
-------------------------------------------
Net cash provided by financing activities 17.3 164.6 57.3
-------------------------------------------
Effect of translation on cash and cash equivalents 2.5 1.3 (1.0)
-------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 113.6 (3.9) (44.7)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 70.7 74.6 119.3
-------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 184.3 $ 70.7 $ 74.6
-------------------------------------------
</TABLE>
See Notes to Financial Statements.
33
FINANCIAL STATEMENTS
<PAGE> 36
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. The 1998
fiscal year includes 53 weeks, while 1997 and 1996 fiscal years include 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 $4.4 million at July 3, 1998, and $5.8 million at June
27, 1997. The amount of gross realized gains included in operating profit was
$44.7 million in 1998 and $24.6 million in 1997. Gross realized gains for 1996
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 shareholders of record on September 4, 1997. All references in 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.
34
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS
SUBSEQUENT EVENT
In July 1998, the Corporation completed the acquisition of the Copying Systems
Business Unit of the Agfa-Gevaert Group, which is a member of the Bayer Group,
Leverkusen, Germany. The acquisition which had 1997 annual sales of
approximately $250 million will double the Lanier Worldwide segment's sales and
market size in the European office equipment market.
The cash purchase price of the acquisition was approximately $162 million.
ACCOUNTING CHANGES
Effective January 2, 1998, the Corporation adopted Statement of Financial
Accounting Standards (FAS) No. 128, "Earnings per Share." This Statement
establishes standards for computing and presenting earnings per share. All prior
years have been restated to conform with the provisions of the new Statement.
In fiscal 1999, the Corporation will implement two accounting standards issued
by the Financial Accounting Standards Board in June 1997. FAS No. 130,
"Reporting Comprehensive Income," and FAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information," will not impact results of operation,
cash flows or financial position as they require only changes in or additions to
current disclosures.
RESTRUCTURING
In fiscal 1998, the Corporation recorded a $130.0 million charge ($86.4 million
after income tax) for the restructuring of its operations. Restructuring actions
included a reduction of approximately 2,300 employees, primarily manufacturing
and administrative, and provisions for the write-down of equipment, inventory,
intangible assets, and other assets associated with the exit from certain
nonstrategic product lines.
The components and utilization of reserves are summarized below:
<TABLE>
<CAPTION>
Use of Reserve
Original --------------- Reserve Balance
(In millions) Reserve Cash Non-Cash at July 3, 1998
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Severance benefits $ 50.3 $2.2 $ -- $48.1
Asset write-downs 69.8 -- 69.8 --
Other exit costs 9.9 -- -- 9.9
------ ---- ----- -----
$130.0 $2.2 $69.8 $58.0
======================================
</TABLE>
RECEIVABLES
Receivables are summarized below:
<TABLE>
<CAPTION>
--------------------
(In millions) 1998 1997
- --------------------------------------------------------------------
<S> <C> <C>
Accounts receivable $ 711.0 $734.0
Notes receivable due within one year-net 124.7 114.9
--------
835.7 848.9
Less allowances for collection losses 30.6 28.3
--------
$ 805.1 $820.6
========
</TABLE>
INVENTORIES AND UNBILLED COSTS
Inventories are summarized below:
<TABLE>
<CAPTION>
---------------------
(In millions) 1998 1997
- -------------------------------------------------------------------
<S> <C> <C>
Finished products $209.5 $238.0
Work in process 271.7 255.1
Raw materials and supplies 122.4 118.0
--------
$603.6 $611.1
========
</TABLE>
Unbilled costs and accrued earnings on fixed-price contracts are net of
progress payments of $179.0 million at July 3, 1998 and $187.8 million at June
27, 1997.
PLANT AND EQUIPMENT
Plant and equipment are summarized below:
<TABLE>
<CAPTION>
-------------------------
(In millions) 1998 1997
- --------------------------------------------------------------------
<S> <C> <C>
Land $ 30.8 $ 31.6
Buildings 535.5 514.0
Machinery and equipment 1,471.7 1,364.3
Rental equipment 269.9 250.7
--------
2,307.9 2,160.6
Less allowances for depreciation 1,360.9 1,282.3
----------
$ 947.0 $ 878.3
==========
</TABLE>
INTANGIBLES
Accumulated amortization of intangible assets was $66.0 million at July 3, 1998,
and $60.8 million at June 27, 1997.
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 1998 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, $243.0 million was outstanding at July 3, 1998, $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
$150.9 million from various U.S. and foreign banks, of which $62.2 million was
available on July 3, 1998. 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.
35
<PAGE> 38
Short-term debt is summarized below:
<TABLE>
<CAPTION>
---------------------
(In millions) 1998 1997
- -------------------------------------------------------------------
<S> <C> <C>
Bank notes $182.1 $278.0
Other 48.9 10.5
--------
$231.0 $288.5
---------
</TABLE>
The weighted average interest rate for bank notes was 6.2 percent at July 3,
1998 and 6.0 percent at June 27, 1997.
LONG-TERM DEBT
Long-term debt includes the following:
<TABLE>
<CAPTION>
---------------------
(In millions) 1998 1997
- -------------------------------------------------------------------
<S> <C> <C>
Notes payable to banks, due from 2001 to
2016. $162.5 $162.5
10 3/8% debentures, due 2018 150.0 150.0
6.35% debentures, due 2028. 150.0 --
7% debentures, due 2026 100.0 100.0
6.65% debentures, due 2006 100.0 100.0
Notes payable to insurance companies, due
from 1999 to 2001. 96.0 150.0
Other 10.1 24.2
--------
$768.6 $686.7
---------
</TABLE>
The weighted average interest rate for notes payable to banks was 6.0 percent
at July 3, 1998 and 6.5 percent at June 27, 1997. The weighted average interest
rate for notes payable to insurance companies was 9.7 percent at July 3, 1998
and at June 27, 1997.
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 1998 are: $56.5
million in 1999, $36.6 million in 2000, $95.5 million in 2001, $100.9 million in
2002, and $31.3 million in 2003.
SHAREHOLDERS' EQUITY
Changes in shareholders' equity accounts other than retained earnings are
summarized as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------
Net
Common 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, 1995 $38.9 $240.3 $12.2 $(1.7) $(10.3)
Shares issued under Stock Option Plan (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)
Two-for-one stock split (39,949,231 shares) 39.9 (39.9) -- -- --
Shares issued under Stock Option Plan (237,476 shares) .2 5.6 -- -- --
Shares granted under Stock Incentive Plans (238,550 shares) .3 10.1 -- (10.3) --
Compensation expense -- -- -- 7.8 --
Termination and award of shares under Stock Incentive Plans
(340,174 shares) (.3) (.5) -- (5.1) --
Shares sold under Employee Stock Purchase Plans (114,707
shares) .1 6.1 -- -- --
Change in unrealized gain on securities net of income taxes
of $(16.7) -- -- (28.5) -- --
Foreign Currency translation adjustments -- -- -- -- (17.3)
----------------------------------------------------------
BALANCE AT JULY 3, 1998 $80.0 $271.3 $25.3 $(3.2) $(46.9)
----------------------------------------------------------
</TABLE>
36
NOTES TO FINANCIAL STATEMENTS
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS
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 and
trade with the Common Stock until they become exercisable, entitle the holder to
purchase one two-hundredth of a share of Participating Preferred Stock for $250,
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 a beneficial ownership of 15% of the outstanding Common Stock.
NET INCOME PER SHARE
Average outstanding shares used in the computation of net income per share are
summarized below:
<TABLE>
<CAPTION>
-----------------------------
(In millions) 1998 1997 1996
- -------------------------------------------------------------------
<S> <C> <C> <C>
Basic:
Weighted average shares outstanding 79.9 78.8 78.0
Contingently issuable shares (.6) (.7) (1.0)
-------
79.3 78.1 77.0
Diluted:
Weighted average shares outstanding 79.9 78.8 78.0
Dilutive stock options .3 .3 .2
Contingently issuable shares (.2) (.3) (.4)
-------
80.0 78.8 77.8
=======
</TABLE>
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:
1996 449,614 $19.59 $ 7.19 to $28.88
1997 472,208 $21.12 $ 7.19 to $34.88
1998 439,703 $26.46 $10.94 to $45.50
Granted during 1998 751,300 $44.14 $41.31 to $53.63
Terminations during 1998 119,782 $36.64 $29.31 to $49.94
Outstanding at June 27, 1997 1,542,628 $28.08 $ 7.19 to $45.50
Outstanding at July 3, 1998 1,734,443 $34.83 $ 7.19 to $53.63
Exercisable at June 27, 1997 594,754 $22.61 $ 7.19 to $33.57
Exercisable at July 3, 1998 683,297 $27.68 $ 7.19 to $49.88
</TABLE>
Price ranges of outstanding and exercisable options as of July 3, 1998 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-$29.31 534,889 4 $25.11 430,358 $24.21
$30.69-$42.69 479,194 5 $31.62 217,850 $31.64
$43.19-$53.63 720,360 4 $44.18 35,089 $45.62
--------- -------
1,734,443 683,297
========= =======
</TABLE>
37
<PAGE> 40
Presented below is pro forma information regarding net income and net income
per share. It has been determined as if the Corporation had accounted for stock
options using the fair value method of accounting for stock options. The fair
value of each option grant is estimated on the grant date using the
Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
-------------------------------
1998 1997 1996
- --------------------------------------------------------------------
<S> <C> <C> <C>
Expected dividend yield 2.1% 2.1% 2.1%
Expected stock price volatility 20.4% 22.4% 20.8%
Risk-free interest rate 5.8% 6.3% 6.4%
Expected life (years) 4 4 4
</TABLE>
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) 1998 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 4.9 $ 2.7 $ 1.4
Basic net income per share $ .06 $ .04 $ .02
Diluted net income per share $ .06 $ .03 $ .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 625,365 at July 3, 1998; 827,110 at June 27, 1997; and 1,005,222 at June
30, 1996. Shares of Common Stock reserved for future awards under the plan were
2,509,002 at July 3, 1998; 2,380,516 at June 27, 1997; and 2,297,636 at June 30,
1996.
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 2,250,303 at July 3, 1998.
RETIREMENT PLANS
Retirement and defined benefit plans expense amounted to $82.3 million in 1998,
$79.7 million in 1997 and $77.6 million in 1996.
RESEARCH AND DEVELOPMENT
Corporation-sponsored research and product development costs were $182.7 million
in 1998, $174.9 million in 1997 and $159.8 million in 1996.
INTEREST EXPENSE
Total interest was $80.7 million in 1998, $68.9 million in 1997 and $64.0
million in 1996, of which $7.5 million was capitalized in 1998, $9.0 million was
capitalized in 1997, and $1.5 million in 1996. Interest paid was $58.6 million
in 1998, $65.6 million in 1997, and $64.2 million in 1996.
LEASE COMMITMENTS
Total rental expense amounted to $66.6 million in 1998, $56.0 million in 1997,
and $49.8 million in 1996. Future minimum rental commitments under leases,
primarily for land and buildings, amounted to approximately $181.5 million at
July 3, 1998. These commitments for the years following 1998 are: 1999 -- $50.8
million, 2000 -- $34.7 million, 2001 -- $25.6 million, 2002 -- $19.6 million,
2003 -- $13.3 million, and $37.5 million thereafter.
INCOME TAXES
The provisions for income taxes are summarized as follows:
<TABLE>
<CAPTION>
-------------------------------
(In millions) 1998 1997 1996
- -------------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States $ 43.7 $ 33.8 $ 82.3
International 8.9 33.5 19.3
State and local 8.0 6.7 17.3
-------
60.6 74.0 118.9
-------
Deferred:
United States 6.5 30.2 (19.3)
International (.2) (2.9) --
State and local .1 3.2 (3.6)
-------
6.4 30.5 (22.9)
-------
$ 67.0 $104.5 $ 96.0
-------
</TABLE>
The components of deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------
1998 1997
<S> <C> <C> <C> <C>
----------------------------------------
<CAPTION>
(In millions) Current Non-Current Current Non-Current
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inventory valuations $ 46.5 -- $ 64.9 --
Accruals 163.1 $ (21.7) 96.0 $ 8.8
Depreciation -- (125.2) -- (85.0)
Leases (2.9) (12.6) (2.0) (19.3)
International tax loss
carryforwards -- 8.7 -- 6.7
All other-net 8.5 14.6 (13.9) 11.1
-----------------------
215.2 (136.2) 145.0 (77.7)
Valuation allowance -- (8.1) -- (6.7)
-----------------------
$215.2 $(144.3) $145.0 $(84.4)
-----------------------
</TABLE>
A reconciliation of the statutory United States income tax rate to the
effective income tax rate follows:
<TABLE>
<CAPTION>
----------------------------
1998 1997 1996
- -------------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. income tax rate 35.0% 35.0% 35.0%
State taxes 2.6 2.0 3.2
International income (4.6) (2.4) (3.2)
Tax benefits related to export sales (2.8) (1.7) (2.1)
Nondeductible amortization 1.3 .8 .7
Other items 2.0 (.2) 1.4
----------
Effective income tax rate 33.5% 33.5% 35.0%
----------
</TABLE>
United States income taxes have not been provided on $544 million of
undistributed earnings of international subsidiaries because of the
Corporation's intention to reinvest these earnings. The determination of
unrecognized deferred
38
NOTES TO FINANCIAL STATEMENTS
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS
U.S. tax liability for the undistributed earnings of international subsidiaries
is not practicable.
Pretax income of international subsidiaries was $13.5 million in 1998, $76.4
million in 1997 and $74.2 million in 1996.
Income taxes paid were $44.6 million in 1998, $75.1 million in 1997 and $95.6
million in 1996.
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 24.0 percent of total sales in 1998, 22.7 percent of total
sales in 1997 and 25.7 percent of total sales in 1996. Intersegment sales, which
are insignificant, are accounted for at prices comparable to unaffiliated
customers.
Selected information by business segment and geographical area is summarized
below:
<TABLE>
<CAPTION>
----------------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Communications $ 716.7 $ 756.0 $ 691.5
Semiconductor 1,022.0 964.2 746.6
Lanier Worldwide 1,166.5 1,034.6 867.1
Electronic Systems 545.7 605.1 658.1
Corporate 333.1 278.0 243.4
-----------
$3,784.0 $3,637.9 $3,206.7
===========
CAPITAL EXPENDITURES
Communications $ 32.7 $ 29.2 $ 33.8
Semiconductor 103.8 176.4 146.8
Lanier Worldwide 16.3 35.9 11.7
Electronic Systems 24.9 24.1 28.1
Corporate 29.2 13.8 5.0
-------------
$ 206.9 $ 279.4 $ 225.4
=============
DEPRECIATION
Communications $ 23.9 $ 20.5 $ 17.9
Semiconductor 67.0 50.2 47.6
Lanier Worldwide 19.9 16.8 10.3
Electronic Systems 23.9 25.2 24.2
Corporate 8.4 9.0 8.9
-------------
$ 143.1 $ 121.7 $ 108.9
=============
GEOGRAPHICAL INFORMATION
U.S. operations:
Net sales $3,288.0 $3,227.8 $3,046.4
Operating profit 186.5 235.6 200.2
Identifiable assets 2,867.5 2,914.3 2,544.4
International operations:
Net sales $ 602.2 $ 569.4 $ 574.8
Operating profit 13.5 76.4 74.2
Identifiable assets 916.5 723.6 662.3
</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 $646.0 million in 1998, $550.0 million in 1997, and
$631.6 million in 1996. Export sales and net sales of international operations
were principally to Europe, Asia and Latin America.
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 $787.2 million at July 3, 1998
and $701.0 million at June 27, 1997.
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 generally one year or less. At July 3,
1998, open foreign exchange contracts were $433.6 million (as described below),
of which $222.7 million were to hedge off-balance-sheet commitments.
Additionally, for the year ended July 3, 1998, the Corporation purchased and
sold $1,474.5 million of foreign exchange forward and option contracts.
39
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS
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 July 3, 1998, the Corporation had $6.5 million in open option contracts.
Total open foreign exchange contracts at July 3, 1998, 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 417.8 $145.8 $(45.0) 1-15
Belgian Franc 1,402.3 37.9 (0.4) 1-9
Irish Punt 13.0 19.1 (.9) 1-5
German Mark 31.3 17.5 (0.2) 3-9
French Franc 103.9 17.1 0.1 1-3
Swiss Franc 8.7 6.3 (0.6) 3
Japanese Yen 601.0 4.8 (0.4) 1-3
Norwegian Krone 23.6 3.1 -- 6
Canadian Dollar 4.5 3.1 -- 1-6
British Pound 1.9 3.1 0.1 1-6
Netherlands Guilder 3.1 1.5 -- 9
Italian Lira 1,692.6 1.0 -- 12
South African Rand 5.2 0.9 -- 1
Hungarian Forint 192.9 0.8 -- 6
Australian Dollar 0.2 0.1 -- 8
</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
Swiss Franc........... 91.9 $60.7 0.2 1-3
British Pound......... 25.6 42.0 (0.6) 1-23
German Mark........... 37.8 21.4 0.5 1-9
Belgian Franc......... 345.8 9.4 0.1 9
Canadian Dollar....... 13.0 9.3 0.4 6-8
French Franc.......... 47.2 7.9 0.1 1-8
Malaysian Ringgit..... 19.7 4.8 -- 3-4
Italian Lira.......... 6,100.0 3.5 -- 1-6
Danish Krone.......... 18.4 2.7 -- 9
Korean Won............ 1,501.3 1.5 0.4 13-14
Netherlands Guilder... 2.9 1.4 -- 9
Swedish Krona......... 10.3 1.3 -- 12
Finnish Markka........ 6.4 1.2 -- 9
Irish Punt............ 0.8 1.2 -- 9
Hungarian Forint...... 192.9 0.8 -- 6
Czech Republic
Koruna............... 25.0 0.7 -- 6
Norwegian Krone....... 5.1 0.7 -- 6
Spanish Peseta........ 78.3 0.5 -- 3
Australian Dollar..... 0.7 0.5 -- 6-8
</TABLE>
40
<PAGE> 43
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 Total
Amounts 10-3-97 1-2-98 4-3-98 7-3-98(1) Year
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FISCAL 1998
Net sales.............................. $979.6 $970.0 $961.6 $979.0 $3,890.2
Gross profit........................... 323.8 329.0 334.1 318.1 1,305.0
Income before income taxes............. 66.1 79.8 90.8 (36.7) 200.0
Net income............................. 43.6 52.7 59.9 (23.2) 133.0
Per share:
Basic net income..................... .55 .67 .76 (.29) 1.68
Diluted net income................... .55 .66 .75 (.29) 1.66
Cash dividends....................... .22 .22 .22 .22 .88
Stock prices (high/low).............. 49-40.19 50-40.75 55.31-41.75 53-40.38
=============================================================
</TABLE>
(1) Fiscal 1998 fourth quarter results include a $130.0
million ($86.4 million after income taxes or $1.08 per
share) restructuring charge and a $12.0 million ($8.0
million after income taxes or 10 cents per share)
provision for costs associated with an international
contract.
[CAPTION]
<TABLE>
<CAPTION>
Quarters Ended
<S> <C> <C> <C> <C> <C>
Dollars in Millions Except Per Share Total
Amounts 9-30-96 12-31-96 3-31-97 6-27-97 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:
Basic net income..................... .49 .59 .71 .86 2.66
Diluted net income................... .49 .58 .70 .86 2.63
Cash dividends....................... .19 .19 .19 .19 .76
Stock prices (high/low).............. 32.94-25.13 35.69-30.88 40-33.69 46.06-36.31
=============================================================
</TABLE>
41
<PAGE> 44
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 JULY 3, 1998:
Amounts Deducted From Respective Asset Accounts $ 515(A)
$ 7,477(B)
-------
Allowances for collection losses........... $28,266 $10,383 $ -- $ 7,992 $30,657
======= ======= ======= ======= =======
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
======= ======= ======= ======= =======
</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 from other accounts in the consolidated balance
sheet.
42
<PAGE> 1
Exhibit 10(c)(iii)
OUTSIDE DIRECTORS
STOCK OPTION AGREEMENT
HARRIS CORPORATION
STOCK INCENTIVE PLAN
Amended as of 10/24/97
This Stock Option Agreement ("Agreement") is entered into as of the ____ day of
___________, 199_ between Harris Corporation (the "Corporation"), a Delaware
corporation having its principal office in Melbourne, Florida, and [___________]
(the "Director"), an outside director of the Corporation.
1. THE OPTION: Under and subject to the provisions of the Corporation's
Stock Incentive Plan as in effect from time to time (the "Plan"), the
Corporation hereby grants to the Director the option to purchase an aggregate of
2,000 shares of Common Stock of the Corporation at the price of [price per
share], subject to the following conditions:
(a) During the lifetime of the Director, this option shall be
exercisable only by the Director, and (except when Section 2
is applicable) only while the Director continues to serve as a
Director of the Corporation.
(b) Notwithstanding any other provision of this Agreement,
this option shall expire no later than ten years from the date
of this Agreement, and shall not be exercisable thereafter.
(c) The number of shares of Common Stock with respect to which
the option may be exercised from time to time is limited to
the following percentages of the aggregate number of shares
optioned hereby:
(i) After the end of one year and prior to the end of
two years from the date hereof, not more than fifty
percent;
(ii) After the end of two years and prior to the end
of three years from the date hereof, not more than
seventy-five percent;
(iii) After the end of three years from the date
hereof, one-hundred percent.
(d) Upon a "Change of Control" of the Corporation any option
which has been outstanding for more than one year shall
immediately become exercisable. For purpose of this Agreement,
a "Change of Control" is defined in Section 11 of the Plan.
2. RETIREMENT. The option may be exercised by the Director and for a
period of three (3) years following retirement, provided that only those Options
exercisable at the date of the Director's retirement may be exercised during the
period following retirement.
1
<PAGE> 2
3. DEATH. In the event of the death of the Director, the Option shall
be exercisable only within the twelve (12) months next succeeding the date of
death, and then only (i) by the executor or administrator of the Director's
estate or by the person or persons to whom the Director's rights under the
Option shall pass by the Director's will or the laws of descent and
distribution, and (ii) if and to the extent that the Director was entitled to
exercise the Option at the date of the Director's death.
4. EXERCISE OF OPTION. This option may be exercised by delivering to
the Corporation at the office of its Secretary (i) a written notice, signed by
the person entitled to exercise the option, stating the number of shares such
person then elects to purchase hereunder, (ii) payment in an amount equal to the
full purchase price of the shares then to be purchased, and (iii) in the event
the option is exercised by any person other than the Director, evidence
satisfactory to the Corporation that such person has the right to exercise the
option. Payment shall be made in cash, shares of common stock, or any
combinations thereof. Upon the due exercise of the option, the Corporation shall
issue in the name of the person exercising the option, and deliver to the
Director, one or more certificates for the shares in respect of which the option
shall have been so exercised. The Director agrees that no holder of the option
shall have any rights as a shareholder in respect of any shares as to which the
option shall not have been duly exercised and that no rights as a shareholder
shall arise in respect of any shares as to which the option shall have been duly
exercised until and except to the extent that a certificate or certificates for
such shares shall have been issued.
5. PROHIBITION AGAINST TRANSFER. The option and rights granted by the
Corporation under this Agreement are not transferable except by will or the laws
of descent and distribution. Without limiting the generality of the foregoing,
the option may not be assigned, transferred except as aforesaid, pledged or
hypothecated, shall not be assignable by operation of law, and shall not be
subject to execution, attachment or similar process. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of the option contrary to
the provisions hereof, or the levy of any execution, attachment or similar
process upon the option, shall be null and void and without effect.
6. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, thereafter the number of
shares subject to outstanding Options granted to Directors and the number of
shares subject to Options to be granted to Directors under the Plan shall be
increased or decreased, as the case may be, in direct proportion to the increase
or decrease in the number of shares of Common Stock by reason of such change in
corporate structure, provided that the number of shares shall always be a whole
number, and the purchase price per share of any outstanding Options shall, in
the case of an increase in the number of shares, be proportionately reduced, and
in the case of a decrease in the number of shares, shall be proportionately
increased.
7. COMMITTEE. The Committee administering the Plan shall have
authority, subject to the express provisions of the Plan as in effect from time
to time, to construe this Agreement.
2
<PAGE> 3
8. INCORPORATION OF PLAN PROVISIONS. This Agreement is made pursuant to
the Plan, the provisions of which are hereby incorporated by reference.
Capitalized terms not otherwise defined herein have the meanings set forth in
the Plan. In the event of a conflict between the terms of this Agreement and the
Plan, the terms of the Plan shall govern.
HARRIS CORPORATION
By:
-----------------------------------
Chairman, President and
Chief Executive Officer
3
<PAGE> 1
Exhibit 10(i)(ii)
AMENDMENT NUMBER ONE
TO THE
LANIER WORLDWIDE, INC. PENSION EQUITY PLAN
WHEREAS, Lanier Worldwide, Inc. (the "Corporation") maintains
for the benefit of certain employees the Lanier Worldwide, Inc. Pension Equity
Plan (as amended and restated as of July 1, 1997)(the "Plan");
WHEREAS, the Corporation has the authority to amend the Plan
pursuant to Section 11.5 of the Plan; and
WHEREAS, the Corporation desires to amend the Plan in certain
respects effective July 1, 1997.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
granted in Section 11.5 of the Plan, Section 3.32 of the Plan is hereby amended
as follows:
3.32. PRIOR PLAN ACCRUED BENEFIT. For each Participant
employed by Lanier Puerto Rico, Inc. in the Plan on July 15,
1997, and for each other Participant in the Plan on June 30,
1997, his Accrued Benefit determined in accordance with the
terms of the Plan in effect as of June 30, 1997.
FURTHER RESOLVED, the first sentence of Section 5.2(b) is
hereby amended as follows:
Except as provided in Section 5.2(c),(d),(e) and (f), a
Participant's Accrued Benefit Percentage shall be equal to the
sum of the following applicable percentages:
<PAGE> 2
FURTHER RESOLVED, the first sentence of Section 5.2(c)
is hereby amended as follows:
Except as provided in Section 5.2(e) and (f) for Participants
employed by Lanier Puerto Rico, Inc., the Accrued Benefit
Percentage of a Participant with an Accrued Benefit on June
30, 1997 shall be equal to the greater
of the following:
FURTHER RESOLVED, Section 5.2(d) is hereby amended as
follows:
(d) ALTERNATIVE BENEFIT DETERMINATION FOR CERTAIN PLAN
PARTICIPANTS WITH A PRIOR PLAN ACCRUED BENEFIT. If a
Participant satisfies the requirements of (i) or (ii) below,
then such Participant's benefit payable under the Plan shall
be the greater of (a) his Accrued Benefit determined as of his
Employment Termination Date and (b) his Prior Plan Accrued
Benefit. In the case of a Participant who satisfies the
requirements of clause (i) below, the Average Compensation and
Years of Service used in determining his Prior Plan Accrued
Benefit shall be determined as of his Employment Termination
Date. In the case of a Participant who satisfies the
requirements of clause (ii) below, the Years of Service used
in determining his Prior Plan Accrued Benefit shall be
determined as of his Employment Termination Date and the
Average Compensation used in determining his Prior Plan
Accrued Benefit shall be determined as of December 31, 1997.
(i) The Participant had attained his Early Retirement
Date or his Normal Retirement Age as of July 1, 1997,
or in the case of a Participant employed by Lanier
Puerto Rico, Inc., as of July 15, 1997; or
(ii) The Participant's Early Retirement Date was
within five years of July 1, 1997 (or in the case of
a Participant employed by Lanier Puerto Rico, Inc.,
as of July 15, 1997) provided the Participant
remained employed by an Employer during that period,
or the Participant is a Former 3M Participant (as
defined in Exhibit A) who is eligible for an early
unreduced retirement benefit in accordance with
Section 3.4 of Exhibit A.
For purposes of this Section 5.2(d), the Prior Plan Accrued
Benefit will be expressed in the form of a lump sum payment (a
lump sum Actuarial Equivalent) and will be reduced by 1.5% of
the Participant's Average Compensation (determined as of the
Participant's Employment Termination Date or December 31, 1997
as provided above) multiplied by the Participant's Years of
Service for purposes of benefit accrual since July 1, 1997.
<PAGE> 3
FURTHER RESOLVED, Section 5.2(e) is hereby amended as
follows:
ACCRUED BENEFIT PERCENTAGES OF EMPLOYEES OF LANIER PUERTO
RICO, INC. Except as provided in Section 5.2(f), the Accrued
Benefit Percentage of a Participant who is an employee of
Lanier Puerto Rico, Inc. shall be equal to the sum (1) plus
(2) where:
"(1)" is the sum of the following applicable
percentages based on the Participant's age:
(i) 1.5% for each Year of Service before the
Participant attains age 35;
(ii) 4% for the Year of Service in which the
Participant attains age 35, as provided in
clause (vii), and for each Year of Service
thereafter before the Participant attains
age 40;
(iii) 6% for each Year of Service in which
the Participant attains age 40, as provided
in clause (vii), and for each Year of
Service thereafter before the Participant
attains age 50;
(iv) 10% for each Year of Service in which
the Participant attains age 50, as provided
in clause (vii), and for each Year of
Service thereafter before the Participant
attains age 55;
(v) 12% for each Year of Service in which
the Participant attains age 55, as provided
in clause (vii), and for each Year of
Service thereafter before the Participant
attains age 60;
(vi) 13% for each Year of Service in which
the Participant attains age 60, as provided
in clause (vii), and for each Year of
Service thereafter.
(vii) for each Year of Service in which the
Participant attains age 35, 40, 50, 55 or
60, the relevant applicable percentage shall
be the sum of pro-rata portions of each of
the percentages applicable before and after
the Participant attains the relevant age.
Such pro-rata portions shall be determined
as follows:
(1) THE PRE-ATTAINED AGE PORTION.
The product of 1.5%, 4%, 6%, 10%, or
12%, as applicable, multiplied by a
fraction, the numerator of which
shall be the number of full months
during such year up to, but not
including, the month in
<PAGE> 4
which the Participant attained the
relevant age and the denominator of
which shall be 12.
(2) THE POST-ATTAINED AGE PORTION.
The product of 4%, 6%, 10%,12% or
13%, as applicable, multiplied by a
fraction, the numerator of which
shall be the number of full months
during such year beginning with the
month in which the Participant
attained the relevant age and the
denominator of which shall be 12.
(viii) For the year in which a Participant
terminates employment, the relevant
percentage shall be determined by
multiplying the applicable percentage by a
fraction, the numerator of which is the
number of full months during which the
Participant is employed by an Employer and
the denominator of which is 12.
"(2)" is the sum of the following applicable
percentages based on the Participant's Years of
Service:
(i) 1% for each Year of Service up to and
including the Participant's 20th Year of
Service;
(ii) 2% for each Year of Service commencing
with the Participant's 21st Year of Service
and up to and including the Participant's
25th Year of Service;
(iii) 3% for each Year of Service commencing
with the Participant's 26th Year of Service.
Nothwithstanding anything in the Plan to the contrary, the benefits of
a Participant who is an employee of Lanier Puerto Rico, Inc. and who
terminates employment with Lanier Puerto Rico, Inc. prior to July 15,
1997 shall be determined in accordance with the terms of the Plan in
effect on June 30, 1997.
FURTHER RESOLVED, the Plan is amended to include the following
Section 5.2(f):
(f) ACCRUED BENEFIT PERCENTAGES OF PARTICIPANTS
EMPLOYED BY LANIER PUERTO RICO, INC. ON JULY 15, 1997.
The Accrued Benefit Percentage of a Participant
employed by Lanier Puerto Rico, Inc. with an Accrued
Benefit on July 15, 1997 shall be equal to the greater
of the following:
(1) the Participant's Accrued Benefit Percentage
under Section 5.2(e), except that if the Participant
had attained age 40 and had at least five Years of
<PAGE> 5
Service on July 15, 1997, the Participant's Accrued
Benefit Percentage shall be increased by 1% for each
year of the Participant's full Years of Service prior
to such date; and
(2) the sum of (A) and (B) where:
"(A)" is the Participant's Accrued Benefit
Percentage under Section 5.2(e) for Years of
Service after July 15, 1997;
"(B)" is the percentage which is equal to
(I) divided by (II), where:
"(I)" is the lump sum Actuarial
Equivalent of the Participant's
Prior Plan Accrued Benefit on July
15, 1997 determined in accordance
with Section 3.3(a), provided that
for this purpose only the interest
rate shall be the rate in effect one
month prior to the month identified
in Section 3.3(a); and
"(II)" is 150% of the Participant's
Average Compensation as of July 15,
1997 (determined in accordance with
the terms of the Plan in effect on
June 30, 1997), minus the lesser of
(I) 50% of his Average Compensation
as of July 15, 1997 (determined in
accordance with the terms of the
Plan in effect on June 30, 1997) and
(II) 50% of his Covered Compensation
as of July 15, 1997 (determined in
accordance with the terms of the
Plan in effect on June 30, 1997).
FURTHER RESOLVED, Section 5.1 of Exhibit A is hereby amended
as follows:
GENERAL. Notwithstanding anything in the Plan or this Exhibit
A to the contrary, the Accrued Benefit of a Participant shall
not be less than the Participant's Accrued Benefit under the
Plan as of June 30, 1997 (as determined under the terms of the
Plan in effect as of such date), or in the case of a
Participant employed by Lanier Puerto Rico, Inc. as of July
15, 1997 (as determined under the terms of the Plan in effect
as of June 30, 1997).
<PAGE> 1
Exhibit 10(i)(iii)
AMENDMENT NUMBER TWO
TO THE
LANIER WORLDWIDE, INC.
PENSION EQUITY PLAN
WHEREAS, Lanier Worldwide, Inc. a Delaware corporation (the
"CORPORATION"), heretofore has adopted and maintains the Lanier Worldwide, Inc.
Pension Equity Plan (as amended and restated as of July 1, 1997) (the "PLAN");
and
WHEREAS, the Plan was amended and restated effective July 1,
1997 to, among other things, modify the definition of "Compensation" to exclude
therefrom payments made to a Participant under long-term incentive plans,
including the Harris Corporation Stock Incentive Plan; and
WHEREAS, notwithstanding the amendment referred to above, the
Corporation now desires to include amounts received under the Harris Corporation
Stock Incentive Plan in respect of the exercise of options on or prior to
December 31, 1997 (which date corresponds to amounts reported on a Participant's
W-2 for calendar 1997) in the definition of Compensation and to make certain
clarifying amendments to the Plan.
NOW, THEREFORE, pursuant to the power of amendment contained
in Section 11.5 of the Plan, the Plan is hereby amended as follows:
1. Effective as of the date hereof, Section 3.13 is amended in
its entirety to read as follows:
3.13. COMPENSATION - For each Participant, the term
"Compensation" includes remuneration described in paragraphs (a) and
(b) below, except for the remuneration described in paragraph (c)
below, which is excluded.
(a) The Participant's base salary and wages paid by
the Participant's Employer, and certain other amounts paid by
the Employer that are includible in the Participant's gross
income, including income attributable to the grant, vesting or
exercise of an option or performance share award under the
Harris Corporation Stock Incentive Plan, overtime payments,
commission payments, annual bonuses, regional and shift
differentials, vacation pay, compensation received while on an
Authorized Leave of Absence, and short-term disability
payments.
(b) Elective deferrals made by an Employer on behalf
of the Participant that are not includible in the
Participant's gross income for federal income tax purposes for
such period because such deferrals either (i) are contributed
to a cash or deferred arrangement described in Section 401(k)
of the Code or (ii) are excluded under Section 125 of the
Code.
(c) Any payment made under a severance pay plan or
program, any payment made in consideration of the
Participant's release of claims in favor of an
8
<PAGE> 2
Employer or an Affiliate, any foreign or domestic assignment
allowance, any contest payments, any expense related
reimbursements (including reimbursements commonly referred to
as "Runzheimer" payments), any signing bonuses, any payment
made under any long-term incentive plan (including, but not
limited to, income attributable to the grant, vesting or
exercise of an option or performance share award under the
Harris Corporation Stock Incentive Plan, other than income
attributable to the exercise of options under the Harris
Corporation Stock Incentive Plan on or prior to December 31,
1997), the value of life insurance includible in the
Participant's gross income, and any non-cash perquisites.
2. Section 5.2(d) is amended by substituting the words "under
the terms of this Plan in effect on his Employment Termination Date" for the
words "as of his Employment Termination Date" (i) appearing in the second and
third sentences thereof and (ii) appearing in the parenthetical in the last
sentence thereof.
3. Section 11.1 is amended by inserting the words "or the
Committee" immediately after the words "the Board" appearing in the first
sentence thereof.
4. Section 11.3 is amended by inserting the words "or the
Committee" immediately after the term "Plan Sponsor" wherever such term appears
in such Section.
5. Section 11.5 is amended by inserting the words "or the
Committee" immediately after the words "the Board."
IN WITNESS WHEREOF, Lanier Worldwide, Inc. has caused this
instrument to be executed on its behalf by its duly authorized officer on this
11th day of June, 1998.
LANIER WORLDWIDE, INC.
By: /s/ Wesley E. Cantrell
-------------------------------
Name: Wesley E. Cantrell
Title: President & CEO
<PAGE> 1
Exhibit 10(k)(ii)
AMENDMENT NUMBER ONE
TO THE
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Lanier Worldwide, Inc. a Delaware corporation (the
"CORPORATION"), heretofore has adopted and maintains the Lanier Worldwide, Inc.
Supplemental Executive Retirement Plan (as amended and restated as of July 1,
1997) (the "SERP"); and
WHEREAS, the Corporation desires to amend the SERP in certain
respects;
NOW, THEREFORE, pursuant to the power of amendment contained
in Section 8.1 of the SERP, the SERP is amended as follows:
1. Article II of the SERP is amended to add the following new
Section 2.3 immediately after Section 2.2 thereof and to renumber the existing
Sections 2.3 through 2.7 accordingly:
2.3 COMPENSATION - For each Participant, the term
"Compensation" includes remuneration described in paragraphs
(a) and (b) below, except for the remuneration described in
paragraph (c) below, which is excluded.
(a) The Participant's base salary and wages
paid by the Participant's Employer, and certain other
amounts paid by the Employer that are includible in
the Participant's gross income, including income
attributable to the grant, vesting or exercise of an
option or performance share award under the Harris
Corporation Stock Incentive Plan, overtime payments,
commission payments, annual bonuses, regional and
shift differentials, vacation pay, compensation
received while on an Authorized Leave of Absence, and
short-term disability payments.
(b) Elective deferrals made by an Employer
on behalf of the Participant that are not includible
in the Participant's gross income for federal income
tax purposes for such period because such deferrals
either (i) are contributed to a cash or deferred
arrangement described in Section 401(k) of the Code
or (ii) are excluded under Section 125 of the Code.
(c) Any payment made under a severance pay
plan or program, any payment made in consideration of
the Participant's release of claims in favor of an
Employer or an Affiliate, any foreign or domestic
assignment allowance, any contest payments, any
expense related reimbursements (including
reimbursements commonly referred to as "Runzheimer"
payments), any signing bonuses, any payment made
under any long-term incentive plan (including, but
not limited to, income attributable to the grant,
vesting or exercise of an option or performance share
award under the Harris Corporation Stock Incentive
Plan, other than income
<PAGE> 2
attributable to the exercise of options under the
Harris Corporation Stock Incentive Plan on or prior
to December 31, 1997), the value of life insurance
includible in the Participant's gross income, and any
non-cash perquisites.
For purposes of the Plan and to the extent required
by the Uniformed Service Employment and Reemployment Rights
Act of 1994, the Participant's Compensation during a period of
qualified military service shall be deemed to equal the
Compensation the Participant would have received during the
period of qualified military service but for his absence due
to qualified military service. If the Compensation the
Participant would have received during such period is not
reasonably certain, the Participant's Compensation for his
period of qualified military service shall be based on the
Participant's Compensation during the 12-month period (or, if
shorter, the period of employment) immediately preceding the
qualified military service.
2. Article IV of the SERP is amended in its entirety to read
as follows:
The supplemental pension benefit payable hereunder to
a Participant shall be equal to (a) the Accrued Benefit that
would have been payable under the Pension Plan but for the
limitations contained in the Pension Plan to effect compliance
with Sections 401(a)(17) and 415 of the Code, except that the
Participant's Compensation as defined herein shall be used in
determining his Accrued Benefit for purposes of the SERP,
rather than the Participant's "Compensation" as defined in the
Pension Plan, less (b) the amount of the Participant's Accrued
Benefit under the Pension Plan.
3. Section 8.1 of the SERP is amended to delete the word
"written" immediately preceding the phrase "action of its Board of Directors."
IN WITNESS WHEREOF, Lanier Worldwide, Inc. has caused this
instrument to be executed on its behalf by its duly authorized officer on this
11th day of June, 1998.
LANIER WORLDWIDE, INC.
By: /s/ Wesley E. Cantrell
---------------------------------------
Name: Wesley E. Cantrell
Title: President & CEO
<PAGE> 1
Exhibit 10(r)
INDEMNIFICATION AGREEMENT
This Agreement made as of ______________, between Harris Corporation, a
Delaware corporation (the "Company") and ________________, a director, officer,
employee or agent of the Company (the "Indemnitee");
WHEREAS, the Company and the Indemnitee are each aware of conditions in
the insurance industry that have affected and may continue to affect the
Company's ability to obtain appropriate directors' and officers' liability
insurance on an economically acceptable basis;
WHEREAS, the Company and the Indemnitee are also aware of the exposure
to litigation of officers, directors, employees and agents of corporations as
such persons exercise their duties to the Company;
WHEREAS, the Company desires to continue to benefit from the services
of highly qualified and experienced persons such as the Indemnitee;
WHEREAS, the Indemnitee desires to serve or to continue to serve the
Company as a director, officer, employee or agent, including service at the
request of the Company as a director, officer or trustee of another corporation,
joint venture, trust or other enterprise, for so long as the Company continues
to provide on an acceptable basis indemnification against certain liabilities
and expenses which may be incurred by the Indemnitee.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereto agree as follows:
1. INDEMNIFICATION. The Company shall indemnify the Indemnitee with respect to
his activities as a director, officer or employee of the Company or as a person
who is serving or has served at the request of the Company ("agent") as a
director, officer or trustee of another corporation, joint venture, trust or
other enterprise against expenses (including attorneys' fees, judgments, fines,
and amounts paid in settlement) actually and reasonably incurred by him
("Expenses") in connection with any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), to which he was, is, or is threatened to be made a party by
reason of facts which include his being or having been such a director, officer,
employee, or agent, to the extent of the highest and most advantageous to the
Indemnitee, as determined by the Indemnitee, of one or any combination of the
following:
(a) The benefits provided by the Company's Certificate of Incorporation
or By-Laws in effect on the date hereof, a copy of the relevant portions of
which are attached hereto as Exhibit I;
(b) The benefits provided by the Company's Certificate of Incorporation
or By-Laws or their equivalent in effect at the time Expenses are incurred by
Indemnitee;
(c) The benefits allowable under Delaware law in effect at the date
hereof;
<PAGE> 2
(d) The benefits allowable under the law of the jurisdiction under
which the Company exists at the time Expenses are incurred by the Indemnitee;
(e) The benefits available under liability insurance obtained by the
Company; and
(f) Such other benefits as may be other wise available to Indemnitee
under then existing practices of the Company.
Combination of two or more of the benefits provided by (a) through (f)
shall be available only to the extent that the Applicable Document, as hereafter
defined, does not require that the benefits provided therein must be exclusive
of other benefits. The document or law providing for the benefits listed in
items (a) through (f) above is called the "Applicable Document" in this
Agreement. Company hereby undertakes to assist Indemnitee, in all proper and
legal ways, to obtain the benefits selected by Indemnitee under items (a)
through (f) above.
2. INSURANCE. The Company shall maintain directors' and officers' liability
insurance for so long as Indemnitee's services are covered hereunder, provided
and to the extent that such insurance is available on a commercially reasonable
basis. However, the Company agrees that the provisions hereof shall remain in
effect regardless of whether liability or other insurance coverage is at any
time obtained or retained by the Company; except that any payments made under an
insurance policy shall reduce the obligations of the Company hereunder.
3. PAYMENT OF EXPENSES. At Indemnitee's request, the Company shall pay the
Expenses and when incurred by Indemnitee upon receipt of an undertaking in the
form of Exhibit II attached hereto by or on behalf of Indemnitee to repay such
amounts so paid on his behalf if it shall ultimately be determined under the
Applicable Document that he is not entitled to be indemnified by the Company for
such Expenses. That portion of Expenses which represents attorneys' fees and
other costs incurred in defending any Proceeding shall be paid by the Company
within thirty (30) days of its receipt of such request, together with such
reasonable documentation evidencing the amount and nature of such Expenses as
the Company shall require, subject to its also receiving such undertaking.
4. ESCROW. The Company shall dedicate up to an aggregate of $2 million as
collateral security for the funding of its obligations hereunder and under
similar agreements with other directors, officers, employees and agents by
depositing assets or bank letters of credit in escrow in the dedicated amount
(the "Escrow Reserve"); provided, however, that the terms of any such Escrow
Reserve may provide that the cash, securities or letter of credit available
therefor shall only be utilized for the indemnification or advancement of
expenses provided for herein in the event that there shall have occurred within
the preceding five years a Change in Control of the Company, as defined below.
For purposes of this Agreement, a "Change in Control" of the Company shall have
occurred if at any time during the Term (as hereafter defined) any of the
following events shall occur:
2
<PAGE> 3
(a) any "person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act, is or becomes a "beneficial owner"
(as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); PROVIDED, HOWEVER, that the
event described in this paragraph (i) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions: (a) by the Company or
any subsidiary, (b) by any employee benefit plan sponsored or maintained by the
Company or any subsidiary, (c) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (d) pursuant to a Non-Control
Transaction (as defined in paragraph (iii), or (e) pursuant to any acquisition
by Indemnitee or any group of persons including Indemnitee;
(b) individuals who, on July 1, 1996, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at least a majority of
the Board, provided that any person becoming a director subsequent to July 1,
1996, whose election or nomination for election was approved by a vote of at
least two-thirds of the Incumbent Directors who remain on the Board (either by a
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such nomination)
shall also be deemed to be an Incumbent Director; PROVIDED, HOWEVER, that no
individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to directors or
any other actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the Board of Directors shall be deemed to be an
Incumbent Director;
(c) the consummation of a merger, consolidation, share exchange or
similar form of corporate reorganization of the Company or any such type of
transaction involving the Company or any of its Subsidiaries that requires the
approval of the Company's stockholders (whether for such transaction or the
issuance of securities in the transaction or otherwise) (a "Business
Combination"), unless immediately following such Business Combination: (a) more
than 80% of the total voting power of the corporation resulting from such
Business Combination (including, without limitation, any corporation which
directly or indirectly has beneficial ownership of 100% of the Company Voting
Securities eligible to elect directors of such corporation is represented by
shares that were Company Voting Securities immediately prior to such Business
Combination (either by remaining outstanding or being converted), and such
voting power is in substantially the same proportion as the voting power of such
Company Voting Securities immediately prior to the Business Combination, (b) no
person (other than any publicly traded holding company resulting from such
Business Combination, any employee benefit plan sponsored or maintained by the
Company (or the corporation resulting from such Business Combination)) becomes
the beneficial owner, directly or indirectly, of 20% or more of the total voting
power of the outstanding voting securities eligible to elect directors of the
corporation resulting from such Business Combination, and (c) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were Incumbent Directors at the time of the
Board's approval of the execution of the initial agreement providing for such
Business Combination (any Business Combination which satisfies the conditions
specified in (a), (b) and (c) shall be deemed to be a "Non-Control
Transaction"); or
3
<PAGE> 4
(d) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or the direct or indirect sale or
other disposition of all or substantially all of the assets of the Company and
its subsidiaries.
Notwithstanding the foregoing, a Change in Control of the
Company shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 20% of the Company Voting Securities as a
result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; PROVIDED, THAT, if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.
5. ADDITIONAL RIGHTS. The indemnification provided in this Agreement shall not
be deemed exclusive of any other indemnification or rights to which Indemnitee
may be entitled and shall continue after Indemnitee has ceased to occupy a
position as an officer, director, employee, or agent as described in Paragraph 1
above with respect to Proceedings relating to or arising out of Indemnitee's
acts or omissions during his service in such position.
6. NOTICE TO COMPANY. Indemnitee shall provide to the Company prompt written
notice of any proceeding brought, threatened, asserted or commenced against
Indemnitee with respect to which Indemnitee may assert a right to
indemnification hereunder. Indemnitee shall not make any admission or effect any
settlement without the Company's written consent unless Indemnitee shall have
determined to undertake his own defense in such matter and has waived the
benefits of this Agreement. The Company shall not settle any Proceeding to which
Indemnitee is a party in any manner which would impose any penalty on Indemnitee
without his written consent. Neither Indemnitee nor the Company will
unreasonably withhold consent to any proposed settlement. Indemnitee shall
cooperate to the extent reasonably possible with the Company and/or its
insurers, in attempts to defend and/or settle such Proceeding.
7. ASSUMPTION OF DEFENSE. Except as otherwise provided below, to the extent that
it may wish, the Company jointly with any other indemnifying party similarly
notified will be entitled to assume Indemnitee's defense in any Proceeding, with
counsel mutually satisfactory to Indemnitee and the Company. After notice from
the Company to Indemnitee of the Company's election so to assume such defense,
the Company will not be liable to Indemnitee under this Agreement for Expenses
subsequently incurred by Indemnitee in connection with the defense thereof other
than reasonable costs of investigation or as otherwise provided below.
Indemnitee shall have the right to employ counsel in such Proceeding, but the
fees and expenses of such counsel incurred after notice from the Company of its
assumption of the defense thereof shall be at Indemnitee's expense unless:
(a) The employment of counsel by Indemnitee has been authorized by
the Company;
4
<PAGE> 5
(b) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between Indemnitee and the Company in the conduct of the
defense of such Proceeding; or
(c) The Company shall not in fact have employed counsel to assume the
defense of such Proceeding, in each of which cases the fees and expenses of
counsel shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of Indemnitee in any Proceeding brought by or
on behalf of the Company or as to which Indemnitee shall have made the
conclusion provided for in clause (b) above.
8. ARBITRATION AND ENFORCEMENT. In the event that any dispute or controversy
shall arise between Indemnitee and the Company with respect to whether the
Indemnitee is entitled to indemnification in connection with any Proceeding or
with respect to the amount of Expenses incurred, such dispute or controversy
shall be submitted by the parties to binding arbitration before a single
arbitrator at Melbourne, Florida. If the parties cannot agree on a designated
arbitrator 15 days after arbitration is requested in writing by either of them,
the arbitration shall proceed before an arbitrator appointed by the American
Arbitration Association and under the rules then in effect of that Association.
The award shall be rendered in such form that judgment may be entered thereon in
any court having jurisdiction thereof. The prevailing party shall be entitled to
prompt reimbursement of any costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred in connection with such arbitration.
9. EXCLUSIONS. No indemnification, reimbursement or payment shall be required of
the Company hereunder:
(a) With respect to any claim as to which Indemnitee shall have been
adjudged by a court of competent jurisdiction to have acted with bad faith,
willful misfeasance, or willful disregard of his duties, except to the extent
that such court shall determine upon application that, despite the adjudication
of liability, but in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnify for such expenses as the court shall
deem proper; or
(b) With respect to any obligation of Indemnitee under Section 16(b) of
the Exchange Act.
10. EXTRAORDINARY TRANSACTIONS. The Company covenants and agrees that, in the
event of any merger, consolidation or reorganization in which the Company is not
the surviving entity, any sale of all or substantially all of the assets of the
Company or any liquidation of the Company (each such event is hereinafter
referred to as an "extraordinary transaction"), the Company shall use its best
efforts to:
(a) Obtain insurance in Indemnitee's favor from a reputable insurance
carrier in reasonable amounts (if such insurance is available at commercially
reasonable rates) for a period of not less than one (1) year from the date of
such extraordinary transaction against any liability to which the
indemnification provided in this Agreement relates;
5
<PAGE> 6
(b) Have the obligations of the Company under this Agreement expressly
assumed by the survivor, purchaser or successor, as the case may be, in such
extraordinary transaction; or
(c) Otherwise adequately provide for the satisfaction of the Company's
obligations under this Agreement, in a manner acceptable to Indemnitee.
11. NO PERSONAL LIABILITY. Indemnitee agrees that neither the Directors, nor any
officer, employee, representative or agent of the Company shall be personally
liable for the satisfaction of the Company's obligations under this Agreement,
and Indemnitee shall look solely to the assets of the Company and the escrow
referred to in Section 4 hereof for satisfaction of any claims hereunder.
12. SEVERABILITY. If any provision, phrase, or other portion of this Agreement
should be determined by any court of competent jurisdiction to be invalid,
illegal or unenforceable, in whole or in part, and such determination should
become final, such provision, phrase or other portion shall be deemed to be
severed or limited, but only to the extent required to render the remaining
provisions and portions of the Agreement enforceable, and the Agreement as thus
amended shall be enforced to give effect to the intention of the parties insofar
as that is possible.
13. GOVERNING LAW. The parties hereto agree that this Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Delaware.
14. NOTICES. All notices, requests, demands and other communications hereunder
shall be in writing and shall be considered to have been duly given if delivered
by hand and receipted for by the party to whom the notice, request, demand or
other communication shall have been directed, or mailed by registered mail with
postage prepaid:
(a) If to the Company, to: Harris Corporation
1025 West Nasa Boulevard
Melbourne, Florida 32919
Attention: Secretary
(b) If to Indemnitee, to:
15. TERMINATION. This Agreement may be terminated by either party upon not less
than sixty (60) days prior written notice delivered to the other party, but such
termination shall not in any way diminish the obligations of Company hereunder
(including the obligation to maintain the escrow referred to in Section 4
hereof) with respect to Indemnitee's activities prior to the effective date of
termination.
6
<PAGE> 7
This Agreement is and shall be binding upon and shall inure to the
benefits of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
INDEMNITEE HARRIS CORPORATION
- ----------------------------- -----------------------------
Phillip W. Farmer
Chairman, President and
Chief Executive Officer
7
<PAGE> 8
EXHIBIT I
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each person who is or was a director or officer of the Company or is
or was serving at the request of the Company as a director or officer of another
enterprise (and his heirs, executors and administrators) shall be indemnified by
the Company against reasonable expenses (including attorneys' fees, judgments,
fines and amounts paid in settlement) incurred by him in his capacity as a
director or officer or arising out of his status as such, in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative,
(1) to the extent, and according to the procedures and requirements,
set forth in the General corporation law of Delaware and, in addition,
(2) to the extent authorized upon a determination that such person
acted in good faith and is fairly and reasonably entitled to be indemnified in
view of all the circumstances, such determination, including the authorized
extent of indemnification, to be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel selected by the Board of Directors of the Company in a written
opinion, or (c) by the stockholders.
8
<PAGE> 9
EXHIBIT II
FORM OF UNDERTAKING
THIS UNDERTAKING has been entered into by ______________ (hereinafter
"Indemnitee") pursuant to an Indemnification Agreement dated ______________ (the
"Indemnification Agreement") between Harris Corporation (hereinafter "Company"),
a Delaware corporation and Indemnitee.
W I T N E S S E T H:
WHEREAS, pursuant to the Indemnification Agreement, Company agreed to
pay Expenses (within the meaning of the Indemnification Agreement) as and when
incurred by Indemnitee in connection with any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative or
investigative, to which Indemnitee was, is, or is threatened to be made a party
by reason of facts which include Indemnitee's being or having been a director,
officer or employee of the Company or a person who is serving or has served at
the request of the Company as a director, officer, or trustee of another
corporation, joint venture, trust or other enterprise;
WHEREAS, a claim has been asserted against the Indemnitee and the
Indemnitee has notified the Company thereof in accordance with the terms of
Section 6 of the Indemnification Agreement (hereinafter the "Proceeding");
WHEREAS, Indemnitee believes that Indemnitee should prevail in this
Proceeding and it is in the interest of both the Indemnitee and Company to
defend against the claim against Indemnitee thereunder.
NOW THEREFORE, Indemnitee hereby agrees that in consideration of
Company's advance payment of Indemnitee's Expenses incurred prior to a final
disposition of the Proceeding, Indemnitee hereby undertakes to reimburse the
Company for any and all legal fees, costs and expenses paid by Company on behalf
of the Indemnitee prior to a final disposition of the Proceeding in the event
that Indemnitee is determined under the Applicable Document (within the meaning
of the Indemnification Agreement) not to be entitled to indemnification. Such
payments or arrangements for payments shall be consummated within ninety (90)
days after a determination that Indemnitee is not entitled to indemnification
and reimbursement pursuant to the Indemnification Agreement and applicable law.
IN WITNESS WHEREOF, the undersigned has set his/her hand this _____
day of __________, 19___.
-------------------------------------------
<PAGE> 1
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------
JULY 3, JUNE 27, JUNE 30,
1998 1997 1996
--------- ---------- ----------
(MILLIONS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C>
EARNINGS:
Net income.................................................. $133.0 $207.5 $178.4
Plus: Income Taxes.......................................... 67.0 104.5 96.0
Fixed Charges............................................. 102.9 87.6 80.4
Amortization of Capitalized Interest...................... 2.0 1.6 1.2
Less: Interest Capitalized During the Period................ (7.5) (9.0) (1.5)
------ ------ ------
$297.4 $392.2 $354.5
====== ====== ======
FIXED CHARGES:
Interest expense............................................ $ 73.2 $ 59.9 $ 62.5
Plus: Capitalized Interest.................................. 7.5 9.0 1.5
Portion of Rents Deemed Representative of the
Interest Factor...................................... 22.2 18.7 16.4
------ ------ ------
$102.9 $ 87.6 $ 80.4
====== ====== ======
RATIO OF EARNINGS TO FIXED CHARGES.......................... 2.89 4.48 4.41
====== ====== ======
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
AS OF AUGUST 29, 1998
Each of the below listed subsidiaries is 100% directly or indirectly owned
by Harris Corporation except as otherwise indicated, and all are included in the
consolidated financial statements.
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
------------------ ----------------
<S> <C>
Harris K.K. ................................................ Japan
Harris S.A ................................................. Belgium
Harris S.A. de C.V. ........................................ Mexico
Harris Srl ................................................. Italy
Harris Advanced Technology (Malaysia) Sdn. Bhd ............. Malaysia
Harris Airport Systems Sdn. Bhd ............................ Malaysia
Harris Australia Pty. Ltd. ................................. Australia
Harris Broadcast Systems (Nigeria) Limited (40% of voting
securities owned) ........................................ Nigeria
Harris Canada, Inc. ........................................ Canada
Harris Comunication Argentina SA ........................... Argentina
Harris Communications Honduras, S.A. de C.V. ............... Honduras
Harris Communications Limited Liability Company ............ Russia
Harris Communications Ltd. ................................. Hong Kong
Harris Communications (Shenzhen) Ltd. ...................... China
Harris Communications (India) Private Limited .............. India
Harris Controls Australia Limited .......................... Australia
Harris do Brasil Limitada .................................. Brazil
Harris Far East Limited .................................... Delaware
Harris Foreign Sales Corporation, Inc. ..................... Virgin Islands
Harris International Sales Corporation ..................... Delaware
Harris Investments of Delaware, Inc. ....................... Delaware
Harris Ireland Development Company Limited ................. Ireland
Harris Ireland Ltd. ........................................ Ireland
Harris Leasing, L.C. ....................................... Florida
Harris Mauritius Limited ................................... Mauritius
Harris Pension Management Limited .......................... England
Harris Publishing Systems Corporation ...................... Delaware
Harris Semiconducteurs Sarl ................................ France
Harris Semiconductor B.V. .................................. Netherlands
Harris Semiconductor China, Ltd. ........................... Hong Kong
Harris Semiconductor Design & Sales Pte. Ltd. .............. Singapore
Harris Semiconductor GmbH .................................. Germany
Harris Semiconductor, Inc. ................................. Delaware
Harris Semiconductor Limited ............................... England
Harris Semiconductor (Ohio), Inc. .......................... Delaware
Harris Semiconductor Patents, Inc. ......................... Delaware
Harris Semiconductor (Pennsylvania), Inc. .................. Delaware
Harris Semiconductor Pte. Ltd. ............................. Singapore
Harris Semiconductor (Suzhou) Co., Ltd. .................... China
Harris Semiconductor (Taiwan) Ltd. ......................... Taiwan
Harris Semiconductor Y.H. .................................. Korea
Harris Solid-State (Malaysia) Sdn. Bhd ..................... Malaysia
Harris Southwest Properties, Inc. .......................... Delaware
Harris Systems Limited ..................................... England
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
------------------ ----------------
<S> <C>
Harris Technical Services Corporation ...................... Delaware
Allied Broadcast Equipment Canada, Ltd. .................... Canada
American Coastal Insurance Ltd. ............................ Bermuda
Anshan Harris Broadcast Equipment Company, Limited (51%) ... China
ARM Harris Communications (India) Pvt. Ltd. ................ India
Baseview Products, Inc. .................................... Michigan
BE/Harris LiveTV, LLC (46.5%) .............................. Delaware
Berkeley s.r.o. ............................................ Czech Republic
ECCO Parent Limited ........................................ Ireland
Executive Conference Center, Inc. .......................... Georgia
Fredal Office Equipment, Inc. .............................. Quebec
GE Harris Aviation Information Solutions, LLC (49%) ........ Delaware
GE Harris Energy Control Systems, LLC (49%) ................ Delaware
GE-Harris Railway Electronics, LLC (49%) ................... Delaware
Guangzhou Harris Telecommunications Company Ltd. (51%) ..... China
HAL Technologies, Inc. ..................................... Delaware
Hebei Far East Communications Co. Ltd. (51%) ............... China
ITIS S.A.R.L. .............................................. France
Lanier (Australia) Pty. Ltd. ............................... Australia
Lanier Belgium S.A ......................................... Belgium
Lanier Burosysteme GmbH .................................... Austria
Lanier Burosysteme GmbH & Co. KG ........................... Austria
Lanier Business Products, Inc. ............................. Georgia
Lanier Canada, Inc. ........................................ Canada
Lanier de Chile, S.A. ...................................... Chile
Lanier Colombia, S.A. ...................................... Colombia
Lanier de Costa Rica S.A. .................................. Costa Rica
Lanier C.V. ................................................ Netherlands
Lanier Danmark A/S ......................................... Denmark
Lanier Deutschland GmbH .................................... Germany
Lanier Deutschland Holding GmbH ............................ Germany
Lanier Dominicana, S.A. .................................... Dominican Republic
Lanier de El Salvador, S.A. de C.V. ........................ El Salvador
Lanier Espana S.A. ......................................... Spain
Lanier Espana Holding S.L. ................................. Spain
Lanier Europe A.G. ......................................... Switzerland
Lanier Europe, B.V. ........................................ Netherlands
Lanier Financial Services, Inc. ............................ Georgia
Lanier de Guatemala, S.A. .................................. Guatemala
Lanier Hellas AEBE ......................................... Greece
Lanier Holding A.G. ........................................ Switzerland
Lanier Holdings, Inc. ...................................... Delaware
Lanier Holding B.V. ........................................ Netherlands
Lanier Holdings Pty. Ltd. .................................. Australia
Lanier Hungaria Kft ........................................ Hungary
Lanier International, Inc. ................................. Delaware
Lanier Italia S.p.A. ....................................... Italy
Lanier Leasing, Inc. ....................................... Delaware
Lanier Litigation Services, Inc. ........................... Minnesota
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
------------------ ----------------
<S> <C>
Lanier Luxembourg S.a.r.l. ................................. Luxembourg.
Lanier Norge A/S ........................................... Norway
Lanier Pacific Pty. Ltd. ................................... Australia
Lanier de Panama, S.A. ..................................... Panama
Lanier Professional Services, Inc. ......................... Delaware
Lanier Puerto Rico, Inc. ................................... Puerto Rico
Lanier (Schweiz) A.G. ...................................... Switzerland
Lanier Singapore Pte. Ltd. ................................. Singapore
Lanier Suomi Oy ............................................ Finland
Lanier Svenska AB .......................................... Sweden
Lanier United Kingdom Ltd. ................................. England
Lanier Worldwide, Inc. ..................................... Delaware
Maritime Communication Services, Inc. ...................... Delaware
Quorum Litigation Services (Phils.), Inc. .................. Philippines
RF Communications, Inc. .................................... Delaware
Touston Limited ............................................ Ireland
TAP Technology, Inc. ....................................... Delaware
VFC Capital, Inc. .......................................... Delaware
Wallaby Network Services, Inc. ............................. Delaware
Worldwide Electronics, Inc. ................................ Delaware
</TABLE>
<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 29, 1998, with respect to the consolidated financial statements and
schedule of Harris Corporation and subsidiaries included in this Annual Report
on Form 10-K for the fiscal year ended July 3, 1998:
<TABLE>
<S> <C> <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. 333-03111 Harris Corporation Debt Securities
Form S-8 No. 333-01747 Lanier Worldwide, Inc. Savings Incentive Plan
</TABLE>
ERNST & YOUNG LLP
Orlando, Florida
September 2, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-03-1998
<PERIOD-START> JUN-28-1997
<PERIOD-END> JUL-03-1998
<CASH> 184,300
<SECURITIES> 44,500
<RECEIVABLES> 805,100
<ALLOWANCES> 30,600
<INVENTORY> 603,600
<CURRENT-ASSETS> 2,099,700
<PP&E> 2,307,900
<DEPRECIATION> 1,360,900
<TOTAL-ASSETS> 3,784,000
<CURRENT-LIABILITIES> 1,261,800
<BONDS> 768,600
0
0
<COMMON> 80,000
<OTHER-SE> 1,529,300
<TOTAL-LIABILITY-AND-EQUITY> 3,784,000
<SALES> 3,890,200
<TOTAL-REVENUES> 3,939,100
<CGS> 2,585,200
<TOTAL-COSTS> 976,900
<OTHER-EXPENSES> (26,200)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,200
<INCOME-PRETAX> 200,000
<INCOME-TAX> 67,000
<INCOME-CONTINUING> 133,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133,000
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 1.66
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> JUN-27-1997 JUN-30-1996
<PERIOD-START> JUL-01-1996 JUL-01-1995
<PERIOD-END> JUN-27-1997 JUN-30-1996
<CASH> 70,700 74,600
<SECURITIES> 91,300 24,800
<RECEIVABLES> 820,600 727,800
<ALLOWANCES> 28,300 31,300
<INVENTORY> 611,100 544,100
<CURRENT-ASSETS> 2,063,500 1,940,900
<PP&E> 2,160,600 1,999,800
<DEPRECIATION> 1,282,300 1,278,100
<TOTAL-ASSETS> 3,637,900 3,206,700
<CURRENT-LIABILITIES> 1,288,600 1,183,100
<BONDS> 686,700 588,500
0 0
0 0
<COMMON> 39,800 38,900
<OTHER-SE> 1,538,400 1,334,000
<TOTAL-LIABILITY-AND-EQUITY> 3,637,900 3,206,700
<SALES> 3,797,200 3,621,200
<TOTAL-REVENUES> 3,834,600 3,659,300
<CGS> 2,519,200 2,404,600
<TOTAL-COSTS> 963,800 911,900
<OTHER-EXPENSES> (20,300) 5,900
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 59,900 62,500
<INCOME-PRETAX> 312,000 274,400
<INCOME-TAX> 104,500 96,000
<INCOME-CONTINUING> 207,500 178,400
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 207,500 178,400
<EPS-PRIMARY> 2.66 2.32
<EPS-DILUTED> 2.63 2.29
</TABLE>
