Harris cuts outlook, cites military slowdown
Jan 30, 2013 (Orlando Sentinel - McClatchy-Tribune Information Services via COMTEX) --
With mixed financial results from different divisions, Melbourne-based Harris Corp. posted lower sales and profit in its latest quarter, largely because of a slowdown in defense spending and a big accounting writeoff, the company said Tuesday.
Harris, the largest high-tech company based in Central Florida, also dimmed its outlook for the full year, predicting a 2 percent to 4 percent decline in sales as a result of military cutbacks expected later this year.
Harris earned $48.5 million in the three-month period that ended Dec. 28, compared with $133.1 million in the same quarter a year ago. Sales totaled $1.29 billion, down 1.5 percent from the year-earlier quarter. Results were for the second quarter of Harris' 2013 fiscal year.
Excluding one-time charges and the writeoff tied to its now-sold broadcast-equipment unit, Harris earned $142.2 million, or $1.25 a share, comparable to a year ago. It beat the consensus Wall Street profit forecast of $1.20 a share but missed the sales forecast of $1.31 billion, according to Thomson Reuters.
"Harris' second-quarter results were solid in a very difficult and uncertain government spending environment," Chief Executive Officer Willam M. Brown said in a prepared statement.
Despite the threat of "sequestration" -- large, across-the-board spending cuts mandated by the 2011 deficit-reduction law that's currently being renegotiated in Congress -- Harris booked new orders worth $1.36 billion during its second quarter, a 30 percent increase from $1.04 billion in the year-ago quarter. Orders increased at double-digit percentage rates in each of its business sectors, the company said.
At the same time, quarterly sales fell 7.5 percent to $486 million at the company's largest sector -- RF Communications, based in Rochester, N.Y. Operating profit there was down 12.3 percent to $151 million. While U.S. military orders for the unit's Falcon combat radios have slowed, Harris said sales to international allies have increased, though it also said it is "shifting its product mix" to emphasize civilian customers.
Sales rose at Harris' two other sectors. At its Palm Bay-based Government Communications Systems, they were up 4 percent to $439 million (with a 4 percent increase in operating profit), while at its Washington-based Intregrated Network Solutions, they were up 3 percent to $385 million (with a 66 percent jump in operating profit).
Government Communications also recorded a slowdown in military-equipment sales, but that was offset by an increase in revenue from its satellite-communications work, the company said.
"Right now, Harris is seeing its military customer base starting to behave as if these sequestration cuts [in Congress] are actually going to be implemented," said Mark Jordan, a defense analyst for Noble Financial Capital Markets. "This slowdown will extend for a while, because nobody really knows yet what the longer-term budget levels will be.
"Once that is known," he added, "we believe Harris should fare better than most contractors because their tactical radios have become so critical to military operations."
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