01—Abstract
Summary
Summary of the 10-K filed August 29, 2016. Cited figures are marked; the original filing is the authoritative source.
Harris Corporation, a leading technology innovator, presented its 2016 10-K filing, detailing a robust business structure focused on addressing critical mission challenges for government and commercial customers across over 100 countries.
The company operates through four key segments: Communication Systems, Space and Intelligence Systems, Electronic Systems, and Critical Networks. A significant event highlighted was the acquisition of Exelis Inc. in May 2015, which aimed to create greater scale and complementary technologies, with legacy Harris shareholders retaining 84%a ownership of the combined entity. The report also detailed divestitures, including the composite aerostructures business and commercial healthcare solutions operation, aligning the company's portfolio with its strategic growth areas.
Financially, the company reported revenue of $7.5 billionb for fiscal year 2016, a substantial increase driven by the Exelis acquisition. While income from continuing operations saw a modest increase, profitability as a percentage of revenue was impacted by a $367 million non-cash impairment charge related to Harris CapRock Communications and integration costs from the Exelis acquisition. Despite these impacts, Harris maintained a strong operational focus, investing in R&D and optimizing its business portfolio, while also managing its debt and returning capital to shareholders through dividends.
02—Key points
Key Highlights
- Harris Corporation completed the transformative acquisition of Exelis Inc. in May 2015, significantly expanding its scale and capabilities across its four business segments: Communication Systems, Space and Intelligence Systems, Electronic Systems, and Critical Networks.
- Revenue for fiscal year 2016 reached $7.5 billion, primarily driven by the full-year inclusion of Exelis' operations following the acquisition.
- The company reported income from continuing operations of $345 million, with a notable 3% increase over fiscal year 2015, although income from continuing operations as a percentage of revenue decreased to 5% due to integration costs and asset impairments.
- A significant non-cash impairment charge of $367 million was recorded in the Critical Networks segment related to Harris CapRock Communications, attributed to the downturn in the energy market.
- The company continued its commitment to shareholder returns by increasing its quarterly cash dividend rate for the fifteenth consecutive year.
- Harris Corporation's business remains heavily reliant on U.S. Government contracts, representing 76% of revenue in fiscal year 2016, underscoring the importance of government spending priorities and stability.
- The company actively manages its financial risk, utilizing hedging strategies for foreign currency exchange rates and managing its debt levels, which stood at $4.5 billion in long-term debt at fiscal year-end 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, L3HARRIS Technologies, Inc. kept $0.05.
- Revenue$5.99B100.0%
- Cost of revenue−$3.83B64.0%
- Gross profit$2.16B36.0%
- Operating costs−$1.10B18.4%
- Operating income$1.05B17.6%
- Interest, other & tax−$731.0M12.2%
- Net income$324.0M5.4%
Where FY2016 revenue went
$5.99B- Cost of revenue: $3.83B, 64% of revenue
- Operating costs: $1.10B, 18% of revenue
- Interest, other & tax: $731.0M, 12% of revenue
- Net income: $324.0M, 5.4% of revenue
Kept 5.4% as net incomeNet income $324.0M · 5.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed August 29, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $5.99B$3.88B | +54.2% |
| Cost of Revenue | $3.83B$2.37B | +61.7% |
| Gross Profit | $2.16B$1.51B | +42.6% |
| Operating Expenses | $1.10B$883.00M | +25.1% |
| Operating Income | $1.05B$334.00M | +215.9% |
| Interest Expense | $183.00M$130.00M | +40.8% |
| Net Income | $324.00M$334.00M | −3.0% |
| EPS (Basic) | $2.61$3.15 | −17.1% |
| EPS (Diluted) | $2.59$3.11 | −16.7% |
| Shares Outstanding (Basic) | 123.80M105.70M | +17.1% |
| Shares Outstanding (Diluted) | 125.00M106.80M | +17.0% |
05—Questions
Frequently Asked Questions
What was the most significant strategic event for Harris Corporation in fiscal year 2016?
The most significant strategic event for Harris Corporation in fiscal year 2016 was the full integration and operational impact of the acquisition of Exelis Inc., completed in May 2015. This acquisition significantly increased the company's scale, expanded its technological capabilities, and contributed substantially to its revenue growth.
What is the company's primary revenue source and what risks are associated with it?
Harris Corporation's primary revenue source is from sales to U.S. Government customers, which accounted for 76% of its revenue in fiscal year 2016. The associated risks include potential reductions in U.S. Government funding, changes in spending priorities, and the competitive bidding process, all of which could adversely affect the company's financial condition and results of operations.
How did the Exelis acquisition impact the company's financial performance in fiscal year 2016?
The Exelis acquisition significantly boosted Harris Corporation's revenue in fiscal year 2016, contributing to a 47% increase. However, the acquisition also led to integration costs and a substantial non-cash impairment charge in the Critical Networks segment related to Harris CapRock Communications. These factors, along with a less favorable contract mix, led to a decrease in income from continuing operations as a percentage of revenue.
What is the company's approach to managing its business portfolio and innovation?
Harris Corporation focuses on optimizing its business portfolio by investing in areas where technology provides differentiation. The company prioritizes growth in its core franchises and extends into adjacent markets by investing in research and development to drive innovation. It also conducts regular, objective assessments of its business segments to ensure strategic fit and enhance shareholder value.
06—Continue