Balance Sheet

At the end of 3Q11, cash & cash equivalents were $885.1 million compared with $405.7 million at the end of 3Q10. At the end of the 3Q11, long-term debt was $1,886.8 million compared with $1,176.7 million at the end of 3Q10.

Cash Flow

At the end of the 3Q11, cash flow from operations was $556.8 million compared with $635.3 million at the end of 3Q10.

Share Repurchase/ Dividend

During 1Q11, HRS bought back $50 million of outstanding stock and expects to buyback an additional $50 million of stock in each quarter, going forward. Harris still has $400 million remaining authorization to repurchase company shares. Harris also continued its quarterly dividend in 1Q11 for a total of $32 million.
 

 Acquisitions

Global Connectivity Services (GCS) business from Schlumberger Information Solutions: On November 8, 2010, HRS entered into a definitive agreement to acquire the Global Connectivity Services (GCS) business from Schlumberger Information Solutions, an operating unit of Schlumberger Limited (NYSE:SLB). The acquisition will significantly extend Harris' capabilities as a global provider of mission-critical, end-to-end managed satellite communications services for customers operating in remote and harsh environments — including the energy, government and maritime industries. Schlumberger GCS will be combined with recently acquired CapRock Communications to form Harris CapRock Communications. The agreement to acquire Schlumberger GCS follows the Harris acquisition of CapRock Communications on July 30, 2010.

Under the terms of the agreement, Harris will purchase the Schlumberger GCS business for $397.5 million in cash, subject to post-closing adjustments. The goodwill arising on completion of the acquisition will be an allowable tax expense with an estimated net present value of $50 million, resulting in an effective purchase price of $347.5 million. For the calendar year ending December 31, 2010, Schlumberger GCS revenue is expected to be $170 million, and earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to be $41 million. Excluding acquisition-related charges, the acquisition is expected to have minimal impact on Harris’ non-GAAP earnings in fiscal 2011; be slightly accretive in fiscal 2012; and a significant contributor to earnings and growth in fiscal 2013 and beyond. The transaction is subject to customary regulatory reviews and closing conditions, and it is expected to close during the third quarter of fiscal 2011. Harris will finance the acquisition using a combination of cash on hand, commercial paper, borrowings under its committed credit facilities, and long-term debt.

CapRock Communications: On July 30, 2010, HRS acquired CapRock Communications, a global provider of mission-critical managed satellite communications solutions for the energy, government, and maritime industries. Earlier on May 21, 2010, HRS entered into a definitive agreement to acquire CapRock Communications. Under the terms of the agreement, HRS purchased privately held CapRock for $525 million in cash. CapRock's audited financial statements for CY09 included revenue of $359 million; earnings before interest, taxes, depreciation and amortization (EBITDA) of $54 million; and operating income of $28 million. The acquisition is expected to be slightly accretive to HRS earnings in FY11, excluding acquisition-related charges, and a more significant contributor to earnings in FY12. Harris financed the acquisition using a combination of cash on hand, commercial paper, and borrowings under its committed credit facilities.

Malibu Media Platform: On February 14, 2011, HRS acquired Malibu Media Platform from Spot Runner, Inc. which offers an online media exchange service that ease out the business of buying and selling TV advertisement.

• Dependability: HRS is dependent on the U.S. government contracts for a major part of its revenue. Cuts in defense spending may have a significant impact on HRS’ revenue.
 

• Expansion: The Company may not be able to expand its market outside the U.S. as expected by management.
• Margin Risk: If costs escalate beyond the contract prices, margins of the Company will be hurt.
 

• Regulations: A shift in the U.S. government policy in foreign relations may result in the termination of some international contracts.
 

• Reduced Defense Expenses: The U.S. government has plans to trim its defense expenditure for fiscal 2011 based on reduced activity levels in Southwest Asia.