10-KPeriod: FY2003

L3HARRIS TECHNOLOGIES, INC. /DE/ Annual Report, Year Ended Jun 27, 2003

Filed August 28, 2003For Securities:LHX

Summary

L3Harris Technologies, Inc. (formerly Harris Corporation) reported revenues of $2.09 billion for the fiscal year ended June 27, 2003, a 11.6% increase from the previous year. However, net income decreased to $59.5 million from $82.6 million in fiscal 2002, resulting in diluted earnings per share of $0.90, down from $1.25. The decline in profitability was attributed to several factors, including lower gross margins in certain segments due to inventory write-downs and product mix shifts, increased operating losses in the Microwave Communications and Network Support segments, and higher headquarters expenses, partially offset by strong performance in the Government Communications Systems and RF Communications segments. The company's performance was significantly influenced by the ongoing "War on Terrorism" and homeland security initiatives, which drove demand for its Government Communications Systems and RF Communications products. The telecommunications and broadcast equipment industries, however, faced continued challenges, impacting the Microwave Communications, Network Support, and Broadcast Communications segments. Despite the overall decrease in net income, the company's revenue growth and strong backlog in key defense-related segments indicate resilience, supported by significant government contract wins.

Key Highlights

  • 1Total revenue increased by 11.6% to $2.09 billion in fiscal 2003.
  • 2Net income decreased by 28% to $59.5 million in fiscal 2003, with diluted EPS at $0.90.
  • 3Government Communications Systems segment revenue grew by 23.0%, driven by strong U.S. government demand.
  • 4RF Communications segment revenue increased by 26.1%, benefiting from defense spending related to homeland security.
  • 5Microwave Communications segment experienced a revenue decrease of 2.5% and an increased operating loss.
  • 6Broadcast Communications segment revenue declined by 11.2%, with a significant drop in operating income.
  • 7The company reported a funded backlog of $912 million as of July 25, 2003, up from $888 million the prior year.

Frequently Asked Questions

The primary drivers for the revenue growth were strong demand from U.S. government and defense customers, particularly for the Government Communications Systems and RF Communications segments. These segments benefited from increased spending related to homeland security and the "War on Terrorism," leading to significant contract awards and program expansions.

Net income decreased by 28% due to several factors. These included lower gross margins in segments like Broadcast Communications due to a shift to lower-margin products and lower volumes, increased operating losses in the Microwave Communications and Network Support segments, and higher headquarters expenses. Additionally, fiscal 2003 included significant charges related to cost reductions and asset disposals.

The Government Communications Systems and RF Communications segments showed robust growth, driven by defense and government spending. In contrast, the Microwave Communications segment experienced declining revenues and increased operating losses due to weak international telecom markets. The Network Support segment also saw revenue decline and an increased operating loss. The Broadcast Communications segment's revenue and operating income decreased, impacted by delayed customer capital spending and a shift in product mix.

The company expressed an optimistic outlook for fiscal 2004, expecting continued strong performance from its government communications businesses. It also anticipated noticeable improvement in operating income for its commercial businesses due to cost-reduction actions and the potential for increased market demand. The company highlighted recent positive rulings in intellectual property litigation that could potentially increase non-operating income.