01—Abstract
Summary
Summary of the 10-K filed August 31, 2015. Cited figures are marked; the original filing is the authoritative source.
Harris Corporation's 2015 10-K filing reveals a pivotal year marked by the transformative acquisition of Exelis Inc., significantly expanding the company's scale and technological capabilities in the aerospace and defense sectors.
This strategic move, completed in May 2015, was financed through a substantial mix of debt and equity, impacting the company's financial structure. While overall revenue saw a modest increase driven by the Exelis integration, income from continuing operations experienced a notable decline, primarily due to significant acquisition-related charges, including financing, integration, and restructuring costs. The company's core segments, RF Communications and Government Communications Systems, showed resilience, with RF Communications benefiting from international tactical communications demand and Government Communications Systems seeing growth driven by key programs like FGCM and NextGen initiatives.
However, the Integrated Network Solutions segment faced challenges with a decrease in revenue and operating income, partly due to the divestiture of its commercial healthcare business. Looking ahead, Harris is focused on integrating Exelis, realizing synergy savings, and navigating a constrained U.S. government budget environment while continuing to invest in innovation and technology leadership.
02—Key points
Key Highlights
- Completed the significant acquisition of Exelis Inc. for approximately $4.7 billion in May 2015, creating a larger, more diversified aerospace and defense company.
- Revenue increased by 1.4% to $5.1 billion, primarily driven by the inclusion of Exelis's results for the final month of the fiscal year.
- Income from continuing operations decreased by 38.1% to $334 million, largely impacted by $217 million in after-tax charges related to the Exelis acquisition (financing, integration, restructuring costs).
- The RF Communications segment revenue decreased slightly by 2.9% to $1.775 billion, with tactical communications revenue up 1% offset by a 12% decline in public safety communications.
- The Government Communications Systems segment saw a 3.0% revenue increase to $1.855 billion, supported by strong performance in key programs.
- The Integrated Network Solutions segment experienced a significant revenue decline of 14.4% to $1.253 billion, partly due to the divestiture of its commercial healthcare solutions business.
- Ended the fiscal year with a substantial funded backlog of $12.2 billion, indicating strong future revenue potential.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, L3HARRIS Technologies, Inc. kept $0.09.
- Revenue$3.88B100.0%
- Cost of revenue−$2.37B61.0%
- Gross profit$1.51B39.0%
- Operating costs−$1.18B30.4%
- Operating income$334.0M8.6%
- Interest, other & tax$-00.0%
- Net income$334.0M8.6%
Where FY2015 revenue went
$3.88B- Cost of revenue: $2.37B, 61% of revenue
- Operating costs: $1.18B, 30% of revenue
- Net income: $334.0M, 8.6% of revenue
Kept 8.6% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed August 31, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $3.88B$5.01B | −22.5% |
| Cost of Revenue | $2.37B$3.31B | −28.4% |
| Gross Profit | $1.51B$1.70B | −11.0% |
| Operating Expenses | $883.00M$820.00M | +7.7% |
| Operating Income | $334.00M$540.00M | −38.1% |
| Interest Expense | $130.00M$94.00M | +38.3% |
| Net Income | $334.00M$535.00M | −37.6% |
| EPS (Basic) | $3.15$5.00 | −37.0% |
| EPS (Diluted) | $3.11$4.95 | −37.2% |
| Shares Outstanding (Basic) | 105.70M— | — |
| Shares Outstanding (Diluted) | 106.80M107.30M | −0.5% |
05—Questions
Frequently Asked Questions
What was the main strategic initiative undertaken by Harris Corporation in fiscal year 2015?
The primary strategic initiative was the acquisition of Exelis Inc. for approximately $4.7 billion, completed on May 29, 2015. This acquisition significantly increased Harris's scale and broadened its technological capabilities, particularly in aerospace and defense.
How did the Exelis acquisition impact the company's financial performance in fiscal year 2015?
The acquisition led to a 1.4% increase in overall revenue, reaching $5.1 billion. However, it also resulted in significant acquisition-related costs, including financing, integration, and restructuring expenses, which caused a substantial decrease in income from continuing operations by 38.1% to $334 million.
Which business segments performed strongly, and which faced challenges during fiscal year 2015?
The Government Communications Systems segment showed strong performance with a 3.0% revenue increase. The RF Communications segment saw a slight revenue decline but maintained operational resilience. The Integrated Network Solutions segment faced challenges, with revenue down 14.4%, partly due to the divestiture of its commercial healthcare business.
What is the company's outlook regarding government spending, and how does it affect Harris?
Harris Corporation's business is heavily reliant on U.S. government spending, which remained constrained in fiscal 2015 and is expected to continue to be so. The company anticipates a challenging spending environment due to factors like sequestration and budget uncertainties, but it is focused on adapting and leveraging its capabilities to secure government contracts.
06—Continue