What were the primary drivers of revenue growth in the third quarter?

Revenue growth was primarily driven by strong performance in the Government Communications Systems, RF Communications, and Broadcast Communications segments. The acquisitions of Encoda Systems Holdings, Inc. and The Orkand Corporation also significantly contributed to the revenue increase across these segments.

How did the acquisitions of Encoda and Orkand impact the company's financial results?

Both acquisitions were highly beneficial. Encoda contributed significantly to the Broadcast Communications segment's revenue and operating income growth due to its higher-margin software solutions. Orkand bolstered the Government Communications Systems segment's revenue and operating income. These acquisitions are being integrated effectively and are expected to continue driving future performance.

What is the company's liquidity position, and how is it managing its financial resources?

Harris Corporation's liquidity position is considered strong. The company entered into a new $500 million, five-year revolving credit agreement, replacing a prior facility, which provides significant financial flexibility. Cash flow from operations remains positive, although slightly lower year-over-year due to working capital needs for growth and acquisition investments. Management believes existing cash, operational cash flow, and credit facilities are sufficient to meet its anticipated needs for working capital, capital expenditures, and stock repurchases for the foreseeable future.

Are there any significant legal proceedings that could materially impact the company?

The company is involved in ongoing legal proceedings, including a patent infringement case against Ericsson where a decision is pending from the Court of Appeals, and an arbitration claim from Bourdex Telecommunications Limited. For the Bourdex claim, the arbitration panel indicated a breach of duty, and the current demand is approximately $35 million. Harris believes the potential losses range from no liability to the full demand amount and has not accrued any liability. While these matters are being vigorously defended, their ultimate outcomes could have a material impact.

LHX 10-Q Quarterly Report Q1 FY2006 — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-Q filed April 27, 2005. Cited figures are marked; the original filing is the authoritative source.

Harris Corporation reported a strong third quarter for fiscal year 2005, with significant year-over-year growth in revenue and income from continuing operations.

Revenue increased by 18.1% to $772.1 million^a, driven by robust performance in the Government Communications Systems, RF Communications, and Broadcast Communications segments. Income from continuing operations surged by 57.6% to $55.8 million, translating to diluted EPS of $0.40, up from $0.26 in the prior year. This performance was bolstered by strategic acquisitions, notably Encoda Systems Holdings, Inc. and The Orkand Corporation, which are integrating well and contributing positively to revenue and operating income.

The company's financial health appears solid, with a substantial increase in gross margin to 29.1% from 24.7% in the prior year, largely attributed to the higher-margin profile of Encoda and improved performance in the RF Communications segment. While engineering, selling, and administrative expenses rose, they remained a manageable percentage of revenue, partly due to cost-saving initiatives and strong revenue growth. Harris also continues to manage its capital effectively, with a newly established $500 million^b revolving credit agreement, and a solid cash flow from operations, though slightly lower than the previous year due to increased working capital needs and acquisition-related investments.

02—Key points

Key Highlights

Revenue increased 18.1% to $772.1 million in Q3 FY2005 compared to Q3 FY2004.
Income from continuing operations rose 57.6% to $55.8 million, with diluted EPS growing to $0.40 from $0.26.
Gross margin improved significantly to 29.1% from 24.7% year-over-year, driven by acquisitions and segment performance.
The Government Communications Systems and RF Communications segments showed strong revenue and operating income growth, bolstered by new contract wins and strategic acquisitions (Orkand).
The Broadcast Communications segment experienced substantial revenue growth (40.8%) and improved operating income, primarily due to the acquisition of Encoda.
A new $500 million, five-year senior unsecured revolving credit agreement was entered into, enhancing liquidity and financial flexibility.
The company repurchased shares of common stock, continuing its policy to offset dilution from stock incentive plans.

03—Questions

Frequently Asked Questions

What were the primary drivers of revenue growth in the third quarter?
Revenue growth was primarily driven by strong performance in the Government Communications Systems, RF Communications, and Broadcast Communications segments. The acquisitions of Encoda Systems Holdings, Inc. and The Orkand Corporation also significantly contributed to the revenue increase across these segments.
How did the acquisitions of Encoda and Orkand impact the company's financial results?
Both acquisitions were highly beneficial. Encoda contributed significantly to the Broadcast Communications segment's revenue and operating income growth due to its higher-margin software solutions. Orkand bolstered the Government Communications Systems segment's revenue and operating income. These acquisitions are being integrated effectively and are expected to continue driving future performance.
What is the company's liquidity position, and how is it managing its financial resources?
Harris Corporation's liquidity position is considered strong. The company entered into a new $500 million, five-year revolving credit agreement, replacing a prior facility, which provides significant financial flexibility. Cash flow from operations remains positive, although slightly lower year-over-year due to working capital needs for growth and acquisition investments. Management believes existing cash, operational cash flow, and credit facilities are sufficient to meet its anticipated needs for working capital, capital expenditures, and stock repurchases for the foreseeable future.
Are there any significant legal proceedings that could materially impact the company?
The company is involved in ongoing legal proceedings, including a patent infringement case against Ericsson where a decision is pending from the Court of Appeals, and an arbitration claim from Bourdex Telecommunications Limited. For the Bourdex claim, the arbitration panel indicated a breach of duty, and the current demand is approximately $35 million. Harris believes the potential losses range from no liability to the full demand amount and has not accrued any liability. While these matters are being vigorously defended, their ultimate outcomes could have a material impact.

04—Continue

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