Harris Corp. cuts outlook, cites defense slowdown in lower sales
Jan 29, 2013 (Orlando Sentinel - McClatchy-Tribune Information Services via COMTEX) --
With mixed results across its operations, Melbourne-based Harris Corp. posted lower sales and profit in its latest quarter, prompted largely by slower defense spending and a big accounting writeoff, the company said Tuesday.
The largest high-tech company based in Central Florida also dimmed its outlook for the full year, predicting a sales decrease of 2 percent to 4 percent, as a result of military spending cuts expected later this year.
Harris earned $48.5 million in the three-month period that ended Dec. 28, compared to $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' fiscal year.
Excluding one-time charges and a big accounting writeoff tied to its now-sold broadcast unit, Harris earned $142.2 million in the quarter, 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," CEO Willam M. Brown said in a prepared statement.
Despite the threat of deficit-reduction military spending cuts -- known as sequestration -- Harris booked new orders worth $1.36 billion in the quarter, a 30 percent increase from $1.04 billion in the year-ago quarter. Orders increased at a double-digit percentage point rate in each of its business sectors, the company said.
At the same time, quarterly sales fell 7.5 percent to $486 million at its largest sector -- RF Communications, based in Rochester, N.Y. Operating profit fell 12.3 percent to $151 million. While U.S. military orders for the unit's Falcon combat radios have slowed, Harris said it boosted its sales to international allies. The company said it is also "shifting its product mix" to civilian radio communications customers.
Sales increased at Harris' two other sectors: Palm Bay-based Government Communications Systems, up 4 percent to $439 million, and Washington-based Intregrated Network Solutions, up 3 percent to $385 million. Operating profits rose 4 percent and 66 percent, respectively.
While Government Communications also saw a slowdown in military equipment sales, that was offset by higher revenues in its satellite communications work, the company said.
Harris' diversification and its high-priority military communications work -- such as the Falcon radios -- should help the company weather the budget cutbacks in decent shape, said Mark Jordan, a defense analyst for Noble Financial Capital Markets.
"Right now, Harris is seeing its military customer base starting to behave as if these sequestration cuts are actually going to be implemented," he said. "This slowdown will extend for a while because nobody really knows yet what the longer-term budget levels will be. Once that is known, we believe Harris should fare better than most contractors because their tactical radios have become so critical to military operations."
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