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UNITED STATES

Commission File Number 1-3863

HARRIS CORPORATION

Registrant’s telephone number, including area code: (321) 727-9100

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act: None

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes ü   No   

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes ü   No   

      The aggregate market value of the voting stock held by non-affiliates of the registrant was $2,540,060,537 (based upon the $38.31 closing price on the New York Stock Exchange) on the last business day of the registrant’s most recently completed second fiscal quarter (January 2, 2004). For purposes of this calculation, the registrant has assumed that its directors and executive officers are affiliates.

      The number of outstanding shares of the registrant’s common stock as of August 20, 2004 was 66,321,099.

Documents Incorporated by Reference:

      Portions of the registrant’s Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on October 22, 2004, which will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended July 2, 2004, are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent described therein.

HARRIS CORPORATION

ANNUAL REPORT FOR THE FISCAL YEAR ENDED JULY 2, 2004

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      This Annual Report contains trademarks, service marks and registered marks of Harris Corporation and its subsidiaries. HD Radio^TM is a registered trademark of iBiquity Digital Corporation.

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Cautionary Statement Regarding Forward-Looking Statements

PART I

ITEM 1.     BUSINESS.

HARRIS

      Harris was incorporated in Delaware in 1926 as the successor to three companies founded in the 1890s. Our principal executive offices are located at 1025 West NASA Boulevard, Melbourne, Florida 32919, and our telephone number is (321) 727-9100. Our common stock is listed on the New York Stock Exchange under the symbol “HRS.” On August 20, 2004, we employed about 12,000 people. We sell products in more than 150 countries. Unless the context otherwise requires, the terms “we,” “our,” “us,” “Company,” and “Harris” as used in this Annual Report refer to Harris and its subsidiaries.

General

      Each of our business segments, which are also referred to by us as “divisions,” has been organized on the basis of specific communications markets. For the most part, each operating segment has its own marketing, engineering, manufacturing and product service and maintenance organization. We produce most of the products we sell.

      Our total revenues in fiscal 2004 were approximately $2.52 billion compared to approximately $2.06 billion a year earlier. Total revenues in the United States increased approximately 23 percent from a year earlier while international revenues, which amounted to approximately 20 percent of our total revenues in fiscal 2004,

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Financial Information About Our Business Segments

Description of Business by Segment

Government Communications Systems

      Department of Defense Programs: Government Communications Systems is a major supplier of spaceborne communications and information processing systems, including large deployable satellite antenna systems, and flat-panel, phased-array and single-mission antennas. Harris is a leading supplier of high-frequency satellite ground terminals for the U.S. Department of Defense, supplying the Army, Navy, Air Force and Marines. Currently in the design phase is the U.S. Air Force’s Family of Beyond Line-of-Sight (“FAB-T”) program, with Harris providing terminal and antenna hardware integration and operator interface development for both aircraft and ground satellite terminals. The FAB-T program will provide the warfighter with protected, wideband satellite communications on strategic aircraft and at remote ground, fixed and mobile command and control centers. The FAB-T terminals employ the innovative software-defined radio architecture employed in the Joint Tactical Radio System program. During fiscal 2004, Government Communications Systems was awarded a 30-month, $85 million contract to develop four prototypes for the next-generation Advanced Extremely High Frequency (“AEHF”) Multi-Band Terminals for the U.S. Navy. Government Communications Systems also was awarded contracts for the satellite communications equipment for the U.S. Missile Defense Agency’s Sea-Based X-Band Radar program; is supplying portions of the communications systems for the Ground-based Midcourse Defense (“GMD”) program (formerly known as National Missile Defense); has won follow-on awards for the U.S. Army’s Multiple Launch Rocket System program; and provides anti-jam precision munitions electronics for the U.S. Air Force Small Diameter Bomb program.

      In the area of avionics, Government Communications Systems’ electronic products enable high-speed communications for platforms such as the USAF F/A-22 Raptor air-dominance fighter, the F/A-18 E/F Super Hornet and the Lockheed Martin F-35 Joint Strike Fighter aircraft. Harris has a major role in providing advanced avionics systems design, development and production work for the Lockheed Martin F-35 Joint Strike Fighter aircraft. We expect to provide more than $2.5 billion in avionics infrastructure, image processing, digital map software and fiber optics work for the Joint Strike Fighter program through 2023. The Government Communications Systems segment also provides tactical common data links providing high-speed digital data links to support both unmanned and manned airborne reconnaissance platforms.

      National Security Programs: Government Communications Systems is a leading provider of communications equipment and systems, and image and information processing solutions to national intelligence customers. We provide comprehensive solutions for intelligence, surveillance and reconnaissance. A significant portion of this program area involves classified programs. While classified programs are not discussed in this Annual Report, the operating results relating to classified programs are included in our consolidated financial statements, and the business risks associated with such programs do not differ materially from those of other programs for the U.S. Government. Under many of our programs, we are required to maintain facility and personnel security clearances complying with U.S. Department of Defense and other Federal agency requirements.

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      Civil Programs: Government Communications Systems is a leading supplier to civilian agencies of the U.S. Government supplying custom systems and software designed to collect, store, retrieve, process, analyze, interpret, display and distribute information, including meteorological data processing systems and range management information systems. Government Communications Systems is assisting the FAA in modernizing the U.S. air traffic control system and infrastructure. We are the prime contractor on a 15-year, $1.9 billion contract to integrate and modernize the FAA’s Telecommunications Infrastructure (“FTI”). The total contract amount for the FTI program, including options, could reach $3.5 billion through 2017. This program will consolidate telecommunications at more than 5,000 FAA facilities nationwide, while reducing operating costs, enhancing network security and improving service. We are also working with the FAA on other programs, including the Voice Switching and Control System program, which provides critical air-to-ground communications links between en-route air traffic controllers throughout the United States, and the Operational and Supportability Implementation System program to modernize the FAA’s Automated Flight Service Stations, which provide flight planning and weather information to general aviation pilots nationwide. Government Communications Systems is the prime contractor for the U.S. Census Bureau’s Master Address File/ Topologically Integrated Geographic Encoding and Referencing Accuracy Improvement Project (“MAF/ TIGER”). Currently anticipated to provide total revenue of $200 million over an eight-year period ending in 2010, the MAF/ TIGER program will provide a computer database of all addresses and locations where people live or work, covering an estimated 115 million residences and 60 million businesses in the U.S. During fiscal 2004, Government Communications Systems, together with Broadcast Communications, was awarded a one-year, $96 million contract to rebuild the Iraqi Media Network (“IMN”). IMN is bringing modern radio, TV broadcast and newspaper infrastructure and media content to the people of Iraq. Government Communications System is also supplying geospatial and imagery-derived products for the NGA under the Global Geospatial Intelligence (“GGI”) program, including foundation data products, mapping and charting production services, surveying services and production management.

      Technical Services Programs: Government Communications Systems is an industry leader in providing technical engineering, operations and services to the U.S. Government. Under the Mission Communications Operations and Maintenance (“MCOM”) program, Government Communications Systems provides operations and maintenance services for the U.S. Air Force Satellite Control Network’s communications functions at Schriever AFB, Colorado, and Onizuka AFS, California. During the first quarter of fiscal 2005, Harris completed the acquisition of The Orkand Corporation, a privately-held, leading provider of technical services and information technology for U.S. Government agencies, including the Department of State, Department of Labor, Department of the Interior, Department of Health and Human Services, Department of Energy and the U.S. Postal Service. The acquisition of The Orkand Corporation is expected to provide insight into additional opportunities with these new customers. In the first quarter of fiscal 2005, we were selected by the U.S. National Reconnaissance Office (“NRO”) to provide operations, maintenance and support services for the agency’s global communications and information systems. This program has a potential value of $1 billion over ten years.

      Homeland Security Programs: Government Communications Systems is also focused on Homeland Security programs. As a leader in communications, information processing, network systems and surveillance, Harris has the capabilities to support emerging Homeland Security programs.

      Revenues, Backlog and Contracts: Revenues in fiscal 2004 for the Government Communications Systems segment increased 32 percent to $1,506 million from $1,137 million in fiscal 2003. Segment operating income increased 46 percent to $153 million from $105 million in fiscal 2003. This segment contributed 60 percent of our total revenues in fiscal 2004, 55 percent in fiscal 2003 and 50 percent in fiscal 2002. In fiscal 2004, approximately 30 percent of the revenues for this segment were under contracts with prime contractors and approximately 70 percent were direct with customers. Some of the Government Communications Systems segment’s significant programs by revenue in fiscal 2004 included Joint Strike Fighter, MCOM, FTI, GMD, IMN, F/ A-22 Raptor, FAB-T, MAF/ TIGER, AEHF, F/ A-18 E/ F Super Hornet and several classified programs. The largest program by revenue represented approximately 5 percent of this segment’s revenues for fiscal 2004 and fiscal 2003. The 10 largest programs by revenue represented approximately 30 percent of this segment’s revenues in fiscal 2004 and fiscal 2003. This segment currently has a diverse portfolio of approximately 250 programs, each having a value over $1 million. In fiscal 2004, U.S. Government customers, whether directly or through prime contractors, accounted for approximately 93 percent of this segment’s total revenues.

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      The funded backlog of unfilled orders for this segment of our business was $463 million at July 30, 2004, compared with $389 million a year earlier. Substantially all this backlog is expected to be filled during the 2005 fiscal year.

      Most of the sales of the Government Communications Systems segment are made directly or indirectly to the U.S. Government under contracts or subcontracts containing standard government contract clauses providing for redetermination of profits, if applicable, and for termination for the convenience of the U.S. Government or for default of the contractor. This segment’s contracts include both cost-reimbursement and fixed-price contracts. Cost-reimbursement contracts provide for the reimbursement of allowable costs plus the payment of a fee. These contracts fall into three basic types: (i) cost-plus fixed-fee contracts, which provide for the payment of a fixed fee irrespective of the final cost of performance; (ii) cost-plus incentive-fee contracts, which provide for increases or decreases in the fee, within specified limits, based upon actual results compared to contractual targets relating to factors such as cost, performance and delivery schedule; and (iii) cost-plus award-fee contracts, which provide for the payment of an award fee determined at the discretion of the customer based upon the performance of the contractor against pre-established criteria. Under cost-reimbursement contracts, this segment is reimbursed periodically for allowable costs and is paid a portion of the fee based on contract progress.

      This segment’s fixed-price contracts are either firm fixed-price contracts or fixed-price incentive contracts. Under firm fixed-price contracts, this segment agrees to perform a specific scope of work for a fixed price and as a result, benefits from cost savings and carries the burden of cost overruns. Under fixed-price incentive contracts, this segment shares with the U.S. Government both savings accrued from contracts performed for less than target costs as well as costs incurred in excess of targets up to a negotiated ceiling price (which is higher than the target cost), but carries the entire burden of costs exceeding the negotiated ceiling price. Accordingly, under such incentive contracts, profit may also be adjusted up or down depending upon whether specified performance objectives are met. Under firm fixed-price and fixed-price incentive contracts, this segment usually receives either milestone payments equaling 100 percent of the contract price or monthly progress payments from the U.S. Government in amounts equaling 75 percent of costs incurred under U.S. Government contracts. The remaining amounts, including profits or incentive fees, are billed upon delivery and final acceptance of end items and deliverables under the contract. Fixed-price contracts generally have higher profit margins than cost-reimbursement contracts. Production contracts are mainly fixed-price contracts, and development contracts are generally cost-reimbursement contracts. For fiscal 2004, 68 percent of the revenues of this segment were generated from cost-reimbursement contracts and 32 percent were generated from fixed-price contracts. For a discussion of certain risks affecting this segment, see “Business — Principal Customers,” “Legal Proceedings” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

      RF Communication’s Falcon® II family of secure HF, VHF, UHF and multiband software-defined tactical radios shares common operation, logistics and accessories and is built on a software-defined radio platform that is reprogrammable to add features or software upgrades. Software-defined radio technology offers significantly increased flexibility in supporting a variety of wireless communications protocols. These radios also have military-strength embedded encryption and can be linked to computers, providing network capabilities on the battlefield.

      RF Communications is a recognized leader in embedded encryption. This segment’s Sierra^TM II cryptographic subsystem is a miniaturized programmable module that can be integrated into radios and other voice and data communications devices to encrypt classified information prior to transmission and storage. This segment’s encryption modules currently meet or exceed the highest security standards established by the U.S. Government.

      The War on Terrorism, as well as Homeland Defense operations, continue to drive positive results for this segment. In fiscal 2004, the business responded to urgent requirements for its industry-leading Falcon® II radios

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      RF Communications has a key position on two significant next-generation tactical radio programs — the U.K. Ministry of Defence’s Bowman Tactical Radio Programme (“Bowman”) and the Joint Tactical Radio System (“JTRS”) program for the U.S. Under the terms of the Bowman contract with General Dynamics United Kingdom Limited, valued at approximately $245 million, this segment is expected to provide upwards of 10,000 high-frequency radio units over the course of the five-year program. Production for Bowman began in fiscal 2003. Under the JTRS program, the U.S. Department of Defense is developing a family of software programmable radios that share a common digital architecture that can be applied to multiple platforms and support multiple radio waveforms. This segment won a key position on the JTRS program during fiscal 2002 and is providing system design, development and production work for the first “Cluster” of a five-cluster development program that will provide advanced radio communications for all U.S. military forces. Cluster 1 will modernize the vehicular and rotary aircraft communications systems. The RF Communications segment was also selected to incorporate its Sierra^TM-based cryptographic subsystems into all radios to be manufactured under Cluster 1. The anticipated revenue from Cluster 1 of the JTRS program could be as much as $600 million through full production over 15 years.

      Revenues in fiscal 2004 for the RF Communications segment increased 32 percent over fiscal 2003 to $430 million from $326 million. Segment operating income increased 41 percent to $119 million in fiscal 2004 compared to $84 million in fiscal 2003. The RF Communications segment contributed 17 percent of our total revenues in fiscal 2004, 16 percent in fiscal 2003 and 14 percent in fiscal 2002. Approximately 47 percent of the sales of this segment were made outside of the United States in fiscal 2004. A significant portion of these sales were made to NATO and Partnership for Peace customers.

      In general, this segment’s domestic products are sold and serviced directly to customers through its sales organizations and through established distribution channels. Internationally, this segment markets and sells its products and services through regional sales offices and established distribution channels. See “Business — International Business.”

      The backlog of unfilled orders for this segment of our business was $331 million at July 30, 2004, compared with $346 million a year earlier. Approximately $197 million of the backlog of unfilled orders at July 30, 2004 is expected to be filled during fiscal 2005.

	•	Constellation® medium-to-high-capacity family of point-to-point digital radios operating in the 6, 7/8 and 10/11 GHz frequencies, which are designed for network applications and which support both PDH and SONET platforms;
	•	MegaStar® high-capacity, carrier-class digital point-to-point radio operating in the 5, 6, 7/8 and 11 GHz frequencies, with features designed to eliminate test equipment requirements and reduce network installation and operation costs and which conforms to PDH, SONET and SDH standards;
	•	MicroStar® family of PDH digital point-to-point radios ranging from low-frequency/low-capacity products to high-frequency/medium-capacity systems in the 7-38 GHz frequency bands;

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	•	GalaxyTM family of digital point-to-point SONET/ SDH radios, which are designed for high-density urban applications;
	•	AuroraTM family of spread-spectrum digital point-to-point radios designed to meet customer needs while operating in unlicensed frequency bands and which are well-suited for LAN/ WAN, mobile, private network and Internet access systems; and
	•	ClearBurstTM MB point-to-multipoint digital radio system, which operates in the 3.5 and 10.5 GHz frequency bands and is suited for high-speed data and voice applications for small and medium enterprises and small office/home office customers, private network operators and Internet service providers seeking wireless “last mile” broadband access.

      During fiscal 2004, Microwave Communications introduced its next-generation microwave radio platform: the TRuepoint^TM family of microwave radios. TRuepoint^TM provides SDH and PDH in a single platform and is designed to meet the current and future needs of all network operators, including mobile, private network, government and access service providers. The unique architecture of the core platform reduces both capital expenditures and life cycle costs, while meeting all international and North American standards. The wide range of capacities, interfaces, modulation schemes, frequency and channel plans, and power levels are made available to meet the requirements of networks around the world.

      Microwave Communications is an industry leader in turnkey microwave systems and service capabilities, offering complete network and systems engineering support and services — a key discriminator for this segment in the microwave radio industry.

      Microwave Communications also offers a comprehensive network management system. Its NetBoss® integrated communications network management platform supports wireless, wireline and Internet service providers. The NetBoss® product portfolio provides fault management, performance management, service activation, billing mediation and OSS integration. The newest product offering is NetBoss® EM, an element manager. Following the sale of our TTS business during fiscal 2004, the NetBoss® network operations software product line has become part of the Microwave Communications segment and prior periods have been restated to reflect this change.

      Principal customers for Microwave Communications’ products and services include domestic and international cellular/mobile service providers, original equipment manufacturers, as well as private network users such as public safety agencies, utilities, pipelines, railroads and other industrial companies. This segment is the largest supplier of microwave radio systems in North America and one of the largest suppliers worldwide. Approximately 52 percent of the sales of this segment were made outside of North America in fiscal 2004. In general, this segment’s domestic products and services are sold directly to customers through its sales organizations and through established distribution channels. Internationally, this segment markets and sells its products and services through regional sales offices and established distribution channels. See “Business — International Business.”

      Revenues in fiscal 2004 for the Microwave Communications segment increased 11 percent from $298 million in fiscal 2003 to $330 million in fiscal 2004. This segment’s operating loss was $12 million in fiscal 2004, compared to an operating loss of $24 million in fiscal 2003. The Microwave Communications segment contributed 13 percent of our total revenues in fiscal 2004, 14 percent in fiscal 2003 and 17 percent in fiscal 2002.

      The backlog of unfilled orders for this segment of our business was $81 million at July 30, 2004, compared with $78 million a year earlier. Substantially all of this backlog is expected to be filled during the 2005 fiscal year.

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      Principal customers for Broadcast Communications’ products and services include domestic and international television and radio broadcasters. Major products, systems and services offered by the Broadcast Communications segment include: digital solid-state AM, FM, VHF and UHF transmission systems; ATSC digital television, encoding, master control and monitoring systems; high-definition digital radio transmitters; analog radio and television transmission systems; studio broadcast equipment, including encoders, data interfaces, multiplexers, modulators and radio consoles; cable head-end systems; and automation systems, including device control hardware and software, wide-area automation solutions, newsroom automation to control content in real-time and media asset management systems. This segment, together with the Government Communications System segment, is supplying radio and television equipment and products for the Iraqi Media Network program.

      Broadcast Communications provided the nation’s first advanced digital television transmitter as well as the first commercial digital television application and is the market leader with respect to the U.S. digital standard known as “ATSC.” This segment is the industry’s leader in providing digital equipment to over-the-air broadcasters and is also expanding its efforts in the digital radio area and is developing the next wave of radio broadcasting equipment, including systems for digital high definition radio (HD Radio^TM) and Digital Audio Broadcast and Digital Radio Mondiale international standards. During the fourth quarter of fiscal 2004, this segment received an order from Clear Channel Communications, the largest radio broadcaster in the U.S., for 17 HD Radio^TM transmitters. Clear Channel also announced that it plans to roll out digital broadcasting equipment to 1,000 of its radio stations over the next 3 years.

      Broadcast Communications has provided digital television transmitters to many U.S. broadcasters as they comply with the U.S. Government-mandated transition from analog to digital television transmission. In connection with the transition of broadcasting from analog to digital technologies and the trend toward centralized operations, broadcasters have more opportunities to expand channel and service offerings and for automation of many processes. This segment is a leading supplier of automation solutions for broadcasters. This segment’s automation product offerings include master control-play-out systems for single-and multi-channel applications, wide-area automation solutions, media asset management systems, program management services and related support and training.

      Revenues for the Broadcast Communications segment decreased 9 percent from $315 million in fiscal 2003 to $287 million in fiscal 2004. Segment operating income was $8.1 million in fiscal 2004 and $8.0 million in fiscal 2003. The Broadcast Communications segment contributed 11 percent of our total revenues in fiscal 2004, 15 percent in fiscal 2003 and 19 percent in fiscal 2002. The Broadcast Communications segment is North America’s largest supplier of radio and television broadcast equipment. Approximately 39 percent of the sales of this segment were made outside of the United States in fiscal 2004.

      During the fourth quarter of fiscal 2004, the Broadcast Communications segment decided to exit its unprofitable TV systems integration business, which contributed approximately $13 million in revenue in fiscal 2004.

      In general, the segment’s domestic products are sold and serviced directly to customers through its sales organizations and through established distribution channels. Internationally, this segment markets and sells its products and services through regional sales offices and established distribution channels. See “Business — International Business.”

      The backlog of unfilled orders for this segment of our business was $105 million at July 30, 2004, compared with $93 million a year earlier. Substantially all of this backlog is expected to be filled during the 2005 fiscal year.

International Business

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      Principal international manufacturing facilities are located in Canada, China and the United Kingdom. International marketing activities are conducted through subsidiaries which operate in Canada, Europe, Central and South America and Asia. We have also established international marketing organizations and several regional sales offices. Reference is made to Exhibit 21 “Subsidiaries of the Registrant” for further information regarding our foreign subsidiaries.

      We utilize indirect sales channels, including dealers, distributors and sales representatives, in the marketing and sale of some lines of products and equipment, both domestically and internationally. These independent representatives may buy for resale or, in some cases, solicit orders from commercial or governmental customers for direct sales by us. Prices to the ultimate customer in many instances may be recommended or established by the independent representative and may be on a basis which is above or below our list prices. These independent representatives generally receive a discount from our list prices and may mark-up those prices in setting the final sales prices paid by the customer. During fiscal 2004, revenues from indirect sales channels represented 6 percent of our total revenues and 30 percent of our international revenues, compared to revenues from indirect sales channels in fiscal 2003 representing 8 percent of our total revenues and 35 percent of our international revenues.

      Fiscal 2004 revenues came from a large number of foreign countries, no one of which accounted for 5 percent or more of our total revenues. Certain of our exports are paid for by letters of credit, with the balance carried either on an open account or installment note basis. Advance payments, progress payments or other similar payments received prior to or upon shipment often cover most of the related costs incurred. Performance guarantees by us are generally required on significant foreign government contracts. In order to stay competitive in international markets, we also enter into recourse and vendor financing to facilitate sales to certain customers.

      The particular economic, social and political conditions for business conducted outside the U.S. differ from those encountered by domestic businesses. Our management believes that the overall business risk for the international business as a whole is somewhat greater than that faced by its domestic operations as a whole. A description of the types of risks to which we are subject in international business is contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Nevertheless, in the opinion of our management, these risks are offset by the diversification of the international business and the protection provided by letters of credit and advance payments. Financial information regarding our domestic and international operations is contained in Note 23: Business Segments in the Notes to Consolidated Financial Statements.

Competition

      In the Government Communications Systems segment principal competitors include: Boeing, Lockheed Martin, General Dynamics, Northrop Grumman, Raytheon, L-3 Communications, ITT Industries, Computer Sciences and SAIC. The on-going consolidation of the U.S. and global defense, space and aerospace and related industries continues to intensify competition. Consolidation among U.S. defense and aerospace companies has resulted in a reduction in the number of principal prime contractors. As a result of this consolidation, we frequently “partner” with companies which are, from time to time, competitors on other programs.

      In the RF Communications segment competitors include: Thales, General Dynamics, ITT Industries, Raytheon, Rhode & Schwarz, and Tadiran.

      In the Microwave Communications segment competitors include: Alcatel, Stratex Networks, Ericsson, NEC, Nera, Siemens, Nokia, Fujitsu, as well as other companies which are in the development stage. Several of our competitors are original equipment manufacturers through which we sometimes distribute and sell products and services to end-users.

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      In the Broadcast Communications segment competitors include: Broadcast Electronics, Encoda Systems, NEC, Rhode & Schwarz, Thales, as well as other private companies and divisions of large companies.

Principal Customers

Backlog

      We define funded backlog as the value of contract awards received from the U.S. Government for which the U.S. Government has appropriated funds and the appropriating agency has given us authorization to spend these funds under the contract, plus the amount of contract awards and orders received from customers other than the U.S. Government which have yet to be recognized as revenues. We expect to fill approximately 85 percent of our current funded backlog in fiscal 2005. However, there can be no assurance that our funded backlog will become sales in any particular period, if at all. Our funded backlog does not include the full amount of our contract awards, including those pertaining to multi-year, cost-reimbursable contracts, which are generally funded on an annual basis. Funded backlog also excludes the sales amount of unexercised contract options that may be exercised by customers under existing contracts and the sales amount of purchase orders that may be issued under indefinite quantity contracts or basic ordering agreements. Backlog is subject to delivery delays or program cancellations, which are beyond our control.

Research, Development and Engineering

      Company-sponsored research and product development costs, which included research and development for commercial products and independent research and development related to government products and services, were approximately $111 million in fiscal 2004, $100 million in fiscal 2003 and $105 million in fiscal 2002. The portion of total research, development and engineering expenditures not company-sponsored was funded by U.S. Government and commercial customers and is included in our revenues. Company-funded research is directed to the development of new products and to building technological capability in selected communications and electronic systems markets. U.S. Government-funded research helps strengthen and broaden our technical capabilities. Almost all of our segments maintain their own engineering and new product development departments, with scientific assistance provided by advanced-technology departments. We currently employ about 5,000 engineers and scientists and are continuing efforts to make the technologies developed in any of our business segments available for all other business segments.

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Patents and Intellectual Property

Environmental and Other Regulations

      Radio communications are also subject to governmental regulation. Equipment produced by our Broadcast Communications and Microwave Communications segments, in particular, is subject to domestic and international requirements to avoid interference among users of radio and television frequencies and to permit interconnection of telecommunications equipment. We believe that we have complied with such rules and regulations with respect to our existing products, and we intend to comply with such rules and regulations with respect to our future products. Reallocation of frequency spectrum also could impact our business, financial condition and results of operations.

Raw Materials and Supplies

Seasonality

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Employees

Website Access to Harris’ Reports; Available Information

      Additional information relating to our businesses, including our operating segments, is set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

ITEM 2.     PROPERTIES.

      Our principal executive offices are located at owned facilities in Melbourne, Florida. We operate approximately 78 office and manufacturing facilities in the United States, Canada, Europe, Central and South America and Asia, consisting of about 5.1 million square feet of manufacturing, administrative, warehousing, engineering and office space, of which about 4.1 million square feet are owned and about 1 million square feet are leased. There are no major encumbrances on any of our facilities. Our leased facilities are for the most part occupied under leases for terms ranging from one month to 13 years, a majority of which can be terminated or

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      In the opinion of management, our facilities, whether owned or leased, are suitable and adequate for their intended purposes and have capacities adequate for current and projected needs. While we do have some unused or under-utilized facilities, they are not considered significant. We continuously review our anticipated requirements for facilities and will from time to time acquire additional facilities, expand existing facilities, and dispose of existing facilities or parts thereof, as management deems necessary. For more information about our lease obligations, see Note 19: Lease Commitments in the Notes to Consolidated Financial Statements. Our facilities and other properties are generally maintained in good operating condition.

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      General. From time to time, as a normal incident of the nature and kind of businesses in which we are engaged, various claims or charges are asserted and litigation commenced against us arising from or related to: product liability; personal injury; patents, trademarks or trade secrets; labor and employee disputes; commercial or contractual disputes; the sale or use of products containing asbestos; breach of warranty; or environmental matters. Claimed amounts may be substantial but may not bear any reasonable relationship to the merits of the claim or the extent of any real risk of court or arbitral awards. While it is not feasible to predict the outcome of these matters with certainty, and some lawsuits, claims or proceedings may be disposed or decided unfavorably to us, based upon available information, in the opinion of management, settlements and final judgments, if any, which are considered probable of being rendered against us in existing litigation or arbitration are reserved against, covered by insurance or would not have a material adverse effect on our financial position, results of operations or cash flows.

      U.S. Government Business. U.S. Government contractors, such as us, engaged in supplying goods and services to the U.S. Government and its various agencies, are dependent on Congressional appropriations and administrative allotment of funds and may be affected by changes in U.S. Government policies. U.S. Government contracts typically involve long lead times for design and development, are subject to significant changes in contract scheduling and may be unilaterally modified or cancelled by the U.S. Government. Often these contracts call for successful design and production of complex and technologically advanced products or systems. We may participate in supplying goods and services to the U.S. Government as either a prime contractor or as a subcontractor to a prime contractor. Disputes may arise between the prime contractor and the U.S. Government and the prime contractor and its subcontractors and may result in litigation between the contracting parties.

      As a defense contractor, our contract costs are audited and reviewed on a continual basis by the Defense Contract Audit Agency. In addition to these routine audits, from time to time, we may, either individually or in conjunction with other U.S. Government contractors, be the subject of audits and investigations by other agencies of the U.S. Government. These audits and investigations are conducted to determine if our performance and administering of our U.S. Government contracts are compliant with applicable contractual requirements, procurement and other applicable Federal statutes and regulations. These investigations may be conducted without our knowledge. We are unable to predict the outcome of such investigations or to estimate the amounts of resulting claims or other actions that could be instituted against us, our officers or employees. Under present U.S. Government procurement regulations, if indicted or adjudged in violation of procurement or other Federal civil laws, a contractor, such as us, or one or more of our operating divisions or subdivisions, could be subject to fines, penalties, repayments or compensatory or treble damages. U.S. Government regulations also provide that certain findings against a contractor may lead to suspension or debarment from eligibility for awards of new U.S. Government contracts for up to three years. In addition, a U.S. Government contractor’s export privileges could be suspended or revoked. Suspension or debarment could have a material adverse effect on us because of our reliance on U.S. Government contracts.

      International. As an international company, we are, from time to time, the subject of investigations relating to our international operations, including under the U.S. Foreign Corrupt Practices Act and similar U.S. and international laws.

      Environmental. We are subject to numerous Federal, state and foreign environmental laws and regulatory requirements and are involved from time to time in investigations or litigation of various potential environmental issues concerning activities at our facilities or former facilities or remediation as a result of past activities. From time to time we receive notices from the U.S. Environmental Protection Agency and equivalent state or foreign environmental agencies that we are a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as the “Superfund Act”) and/or equivalent legislation. Such notices assert potential liability for cleanup costs at various sites, which include sites owned by us, sites we previously owned and treatment or disposal sites not owned by us, allegedly containing hazardous substances attributable to us from past operations. We have been named as a potentially responsible party at 14 such sites, excluding sites as to which our records disclose no involvement or as to which our liability has been finally determined. While it is not feasible to predict the outcome of many of these proceedings, in the opinion of our management, any payments we may be required to make as a result of currently existing claims will not have a material adverse effect on our financial condition or our business taken as a whole. Additional information regarding environmental matters is set forth in Note 1: Significant Accounting Policies in the Notes to Consolidated Financial Statements, which Note is incorporated herein by reference.

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      Other Matters. We previously filed a patent infringement claim against Ericsson, Inc. in the U.S. Federal District Court for the Northern District of Texas. On October 29, 2002, a jury rendered a verdict in our favor against Ericsson, Inc. and its parent company. The jury awarded us approximately $61 million in compensatory damages and found that Ericsson’s conduct was “willful.” Following such verdict, we filed a motion to enhance the damages based upon the finding of willfulness, and Ericsson filed motions: (i) to decrease the damage award, (ii) to order a new trial, and (iii) for non-infringement and invalidity of the relevant patent notwithstanding the jury’s verdict. On July 17, 2003, the Court issued a ruling on these motions denying Ericsson’s motions for non-infringement and invalidity of the patent, but did rule that unless we agreed to a lowered damage award of $43 million in compensatory damages, it was granting Ericsson’s motion for a new trial on the issue of damages. We agreed to the lowered damages and thus, a judgment was entered for us in the amount of $43 million plus $1 million for enhanced damages and $1 million for attorneys’ fees, as well as pre-judgment interest, which we currently estimate to be approximately $8 million. During the second quarter of fiscal 2004, Ericsson appealed the judgment of the District Court. We have filed a cross appeal seeking to increase the amount of enhanced damages. The briefing for the appeal was completed in the second quarter of fiscal 2004.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      No matters were submitted by us to a vote of our security holders during the fourth quarter of fiscal 2004.

EXECUTIVE OFFICERS OF THE REGISTRANT

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      There is no family relationship between any of our executive officers or directors, and there are no arrangements or understandings between any of our executive officers or directors and any other person pursuant to which any of them was elected as an officer or director, other than arrangements or understandings with our directors or officers acting solely in their capacities as such. All of our executive officers are elected annually and serve at the pleasure of our Board of Directors.

PART II

Market Information

      On August 20, 2004, the last sale price of our common stock as reported in the consolidated transaction reporting system was $46.71 per share.

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Dividends

Issuer Repurchases of Equity Securities

      The following table sets forth information with respect to repurchases by us of common stock during the fiscal quarter ended July 2, 2004:

*	Periods represent our fiscal months.
(1)	On October 22, 1999, we announced that our Board of Directors approved a share repurchase program which authorizes us to repurchase up to 15 million shares through open-market transactions, in negotiated block transactions or pursuant to tender offers. Pursuant to the terms of this 1999 program, as of April 27, 2004, we had authority to repurchase an additional 520,000 shares. On April 27, 2004, we announced that our Board of Directors approved a share repurchase program which authorizes us to repurchase an additional three million shares through open-market transactions or in negotiated block transactions. This new program does not have an expiration date. The maximum number of shares that may yet be purchased under our currently authorized repurchase programs as of July 2, 2004 is 3,220,000. All repurchases made in the quarter ended July 2, 2004, under these programs were made in open-market transactions. As a matter of policy, we do not repurchase shares during the period beginning two weeks prior to the end of a fiscal quarter and ending two days following the public release of earnings and financial results for such fiscal quarter.
(2)	Represents shares delivered to us in satisfaction of the exercise price and/or tax withholding obligation by holders of employee stock options who exercised stock options. Our equity incentive plans provide that the value of such shares delivered to us or withheld shall be the closing price of our common stock on the date the relevant transaction occurs.

Equity Compensation Plan Information

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Equity Compensation Plan Information

	(1)	Includes outstanding options for 6,171 shares of our common stock that were assumed in connection with our acquisition of WavTrace, Inc. in fiscal 2001. No additional awards can be granted under the plans pursuant to which these options were initially issued.
	(2)	Under the Harris Corporation 2000 Stock Incentive Plan, we may grant an aggregate of not more than 2,500,000 shares in the form of performance share awards, restricted stock awards, or other similar types of share awards. As of July 2, 2004, there were issued and outstanding 311,666 shares of such awards under this plan. Because there is no exercise price associated with performance share awards or restricted share awards, such shares are not included in the weighted average price calculation.

     See Note 15: Stock Options and Awards in the Notes to Consolidated Financial Statements for a general description of the Harris Corporation Stock Incentive Plan and the Harris Corporation 2000 Stock Incentive Plan.

      The following table summarizes our selected historical financial information for each of the last five fiscal years. All amounts presented have been restated on a continuing operations basis. Discontinued operations are more fully discussed in Note 2: Discontinued Operations in the Notes to Consolidated Financial Statements. The selected financial information shown below has been derived from our audited consolidated financial statements, which for data presented for fiscal years 2004 and 2003 are included elsewhere in this Annual Report. This table should be read in conjunction with our other financial information, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes to Consolidated Financial Statements, included elsewhere in this Annual Report.

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(1)	Results for fiscal 2004 include an $8.0 million after-tax ($0.12 per share) charge related to cost-reduction actions taken in our Microwave Communications and Broadcast Communications segments, a $5.8 million after-tax ($0.09 per share) loss and a $4.4 million after-tax ($0.07 per share) gain in two unrelated patent infringement cases, a $3.4 million after-tax ($0.05 per share) write-down of our interest in Teltronics, Inc., a $3.0 million after-tax ($0.04 per share) gain from the reversal of a previously established reserve for the consolidation of our Broadcast Communications segment’s European operations and a $3.3 million after-tax ($0.05 per share) income tax benefit from the settlement of a foreign tax audit.
(2)	Results for fiscal 2003 include a $12.2 million after-tax ($0.18 per share) gain on the sale of our minority interest in our LiveTV, LLC joint venture, a $5.6 million after-tax ($0.09 per share) write-down of inventory related to our exit from unprofitable products and the shutdown of our Brazilian manufacturing plant in our Microwave Communications segment, an $8.1 million after-tax ($0.12 per share) charge related to our disposal of assets remaining from our telecom switch business and a $10.8 million after-tax ($0.16 per share) charge for cost-reduction measures taken in our Microwave Communications and Broadcast Communications segments as well as our corporate headquarters.
(3)	Results for fiscal 2002 include a $10.4 million after-tax ($0.15 per share) charge in our Microwave Communications segment related to cost-reduction actions taken in its international operations and collection losses related to the bankruptcy of a customer in Latin America, a $6.8 million after-tax ($0.10 per share) gain on the sale of our minority interest in our GE Harris Energy Control Systems, LLC joint venture and a $6.6 million after-tax ($0.10 per share) write-down of our investment interest in Terion, Inc.
(4)	Results for fiscal 2001 include a $73.5 million after-tax ($1.10 per share) charge for the write-off of purchased in-process research and development, a $21.7 million after-tax ($0.32 per share) gain on the sale of our minority interest in our GE-Harris Railway Electronics, LLC joint venture and a $13.1 million after-tax ($0.20 per share) write-down of marketable securities.
(5)	Results for fiscal 2000 include a $28.7 million after-tax ($0.39 per share) charge for restructuring expenses and a $7.5 million ($0.10 per share) write-off of purchased in-process research and development.

OVERVIEW

      The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand Harris. MD&A is provided as a supplement to, should be read in conjunction with and is qualified in its entirety by reference to, our Consolidated Financial Statements and related Notes to Consolidated Financial Statements (“Notes”) appearing elsewhere in this Annual Report. Except for the historical information contained here, the discussions in the MD&A contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under “Forward-Looking Statements and Factors that May Affect Future Results.”

      The following is a list of the sections of MD&A, together with our perspective on the contents of these sections of MD&A, which we hope will make reading these pages more productive. MD&A includes the following sections:

	•	Business Considerations — a general description of our businesses; the value drivers of our businesses and our strategy for achieving value; measurements and fiscal 2004 highlights; and industry-wide opportunities, challenges and risks that are relevant to Harris in the government and defense, telecommunications equipment and broadcast industries.
	•	Operations Review — an analysis of our consolidated results of operations and of the results in each of our four operating segments, to the extent the operating segment results are material to an understanding of our business as a whole, for the three years presented in our financial statements, our outlook and discontinued operations.
	•	Liquidity, Capital Resources and Financial Strategies — an analysis of cash flows, common stock repurchases, dividend policy, capital structure and resources, contractual obligations, off-balance sheet arrangements, commercial commitments, financial risk management, impact of foreign exchange and impact of inflation.
	•	Application of Critical Accounting Policies — a discussion of accounting policies that require critical judgments and estimates, and of accounting pronouncements that have been issued but not yet implemented by us and their potential impact.
	•	Forward-Looking Statements and Factors that May Affect Future Results — cautionary information about forward-looking statements and a description of certain risks and uncertainties that could cause our actual results to differ materially from our historical results or our current expectations or projections.

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BUSINESS CONSIDERATIONS

General

      We changed our segment reporting structure effective May 28, 2004, in conjunction with the sale of our TTS product line. The TTS product line was formerly part of the Network Support segment. As a result of the sale, our Consolidated Financial Statements and Notes report the TTS product line as discontinued operations, and accordingly, prior periods have been restated. We also have eliminated the Network Support segment as a separate reportable segment. The NetBoss® network operations (“NetBoss®”) product line, which was also part of the Network Support segment, was not included in the sale and is now consolidated in the Microwave Communications reporting segment for all periods presented. The NetBoss® management team reports to the President of the Microwave Communications Division. The continuing operations of Harris are now reported under four business segments: (1) Government Communications Systems, (2) RF Communications, (3) Microwave Communications, and (4) Broadcast Communications. Financial information with respect to all of our other activities, including corporate costs not allocated to the operating segments or discontinued operations, is reported as part of Headquarters Expense or Non-Operating Income (Loss).

      Harris’ mission statement is as follows: “Harris Corporation will be the best-in-class global provider of mission-critical assured communications products, systems and services to both government and commercial customers, combining advanced technology and application knowledge to offer a superior value proposition.”

Value Drivers of Our Business and Our Strategy for Achieving Value

	•	Continued profitable growth;
	•	Cost management; and
	•	Efficient capital structure.

      Continued Profitable Growth: Harris has a three-level approach to deliver continued profitable growth to our shareholders: (1) segment-level strategies, (2) leverage synergies across segments, and (3) a corporate-level strategy.

      Our segment-level strategies include:

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	•	Use our newly introduced TRuepointTM family of microwave radios to improve our long-term position in international markets.

      Our second-level strategy to deliver continued profitable growth is to leverage synergies across our segments. One of the primary synergies is our ability to transfer technology between segments and focus our research and development projects in ways that benefit Harris as a whole. This strategy also includes a plan to increase our revenue through cross-selling sales channels such as selling our Microwave Communications segment’s network management software to our Broadcast Communications and Government Communications Systems segments’ customers, selling our Broadcast Communications segment’s portable broadcast transmission equipment to the customers of our Government Communications Systems and RF Communications segments and selling our Microwave Communications segment’s microwave radios to our Broadcast Communications and Government Communications Systems segments’ customers. Other methods contemplated by this strategy are joint pursuits on new programs for our government customers utilizing supply chain and operations leverage and joint international market development such as shared distributors and coordinated go-to-market strategies.

      On a corporate level, our strategies for continued profitable growth include effective capital allocation following macro-economic market and technology trends and making effective acquisitions and investments to build or complement the strengths in our base divisions. Another corporate strategy is to expand the view of our addressable markets by moving into adjacent markets or into new markets that require similar solutions and to expand our international presence through direct and indirect channels.

      Cost Management: We have a continuing focus on cost management. Our principal focus areas for cost management are to drive down procurement costs with an emphasis on coordinated supply chain management, to improve our manufacturing efficiencies across all divisions, to optimize our facility utilization and to dedicate engineering resources to focus on continuous product cost reductions. The recent development of our lower cost TRuepoint^TM microwave radios and the consolidation of our European manufacturing operations in our Broadcast Communications segment are prime examples of how we continue to implement cost-management initiatives. Also, we constantly evaluate our level of infrastructure costs and adjust them when necessary, which is evidenced by our cost-reduction actions in both the Microwave Communications and Broadcast Communications segments that took place in the fourth quarter of fiscal 2004.

      Efficient Capital Structure: Our capital structure is intended to optimize our cost of capital. We believe our strong capital position, our access to key financial markets, our ability to raise funds at low effective cost and our overall low cost of borrowing provide a competitive advantage. We have $627.5 million in cash as of July 2, 2004 and have experienced increased cash flows over the last fiscal year. Our cash is not restricted and can be used to invest in strategic acquisitions, invest in capital expenditures, repurchase our common stock or pay dividends to our shareholders.

Measurements and Fiscal 2004 Highlights

      Results of Operations Highlights: Income from continuing operations; income from continuing operations per diluted share; revenues; gross margin; and engineering, selling and administrative expenses as a percentage of revenue represent key measurements of our value drivers:

	•	Income from continuing operations increased 79 percent from $70 million in fiscal 2003 to $126 million in fiscal 2004;
	•	Income from continuing operations per diluted share increased 77 percent from $1.06 in fiscal 2003 to $1.88 in fiscal 2004;
	•	Revenues increased 22 percent from $2.06 billion in fiscal 2003 to $2.52 billion in fiscal 2004;

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	•	Gross margin was 25.0 percent of revenue in fiscal 2004 compared to 25.1 percent of revenue in fiscal 2003; and
	•	Engineering, selling and administrative expenses as a percentage of revenue decreased from 20.1 percent in fiscal 2003 to 16.7 percent in fiscal 2004.

      Refer to MD&A heading “Operations Review” for more information.

      Liquidity and Capital Resources Highlights: In fiscal 2004, our net cash provided from operating activities was $270 million, a 77 percent increase from fiscal 2003, and we expect to generate from $200 to $250 million of net cash from operating activities in fiscal 2005. We believe this ability to generate significant cash flows to reinvest in our businesses demonstrates one of Harris’ strengths. It enables us to utilize cash in ways that our management believes provide the greatest value. Principal uses of our cash flows in fiscal 2004 were:

	•	Capital expenditures: In fiscal 2004 capital expenditures totaled $66 million;
	•	Share repurchases: In fiscal 2004 share repurchases were $57 million; and
	•	Dividends: In fiscal 2004 dividends were $27 million or $0.40 per common share.

      Refer to MD&A heading “Liquidity, Capital Resources and Financial Strategies” for more information.

Industry-Wide Opportunities, Challenges and Risks

      Government and Defense Industry: Domestic and worldwide political and economic developments continue to have a profound effect on the defense and security of the U.S. Events such as the global War on Terrorism, Operation Enduring Freedom and Operation Iraqi Freedom have altered the defense and homeland security environment. These events have had, and will for the foreseeable future have, a significant impact on the markets for defense, communications and advanced technology products. At the same time, the U.S. and its allies have undertaken a move toward a more capabilities-based structure, which creates the ability for a more flexible response through greater force mobility, stronger space capabilities, enhanced missile defense and improved information systems capabilities and homeland security. As a result of these trends and technological developments, the U.S. and its allies are placing more reliance on: (i) sophisticated weapon systems that provide long-range surveillance and intelligence, (ii) battlefield management and precision strike expertise, (iii) the ability to quickly and efficiently deploy complete defensive platforms globally, and (iv) better communication and interoperability between law enforcement, civil government agencies, intelligence agencies and the military services of multiple allied nations.

      In August 2004, the U.S. Department of Defense budget for its fiscal year 2005 was approved (the U.S. Department of Defense’s fiscal year begins October 1st). The $423.1 billion U.S. Department of Defense 2005 budget is 6 percent above the U.S. Department of Defense budget for its 2004 fiscal year, excluding the supplemental appropriations for Operation Enduring Freedom and Operation Iraqi Freedom. While the U.S. Department of Defense budget increase can be a positive indicator of growth for the defense industry, we believe that the level of growth and amount of budget ultimately allocated to the U.S. Department of Defense procurement (“Procurement”) and research, development, test and evaluation (“RDT&E”) components of the U.S. Department of Defense budget, are a better indicator of U.S. Department of Defense spending. These accounts are applicable to defense contractors, because they generally represent the amounts that are expended for military hardware and technology. The Procurement component was essentially flat and the RDT&E component increased 12 percent in fiscal 2005 over fiscal 2004.

      The budget for the U.S. Department of Defense for fiscal 2005 and beyond reflects the above-mentioned transformation of national defense policy in addition to the increased needs for homeland security and the defeat of terrorism. Budget increases are projected for operational readiness and personnel needs, as well as Procurement and RDT&E. Although the ultimate size of future defense budgets remains uncertain, current indications suggest the defense budget will continue to increase over the next several years. Our management believes our experience and capabilities are well aligned with the U.S. defense priorities and initiatives which may increase the demand for our capabilities in areas such as imaging, intelligence and surveillance, secure communications and information technology systems.

      We are subject to U.S. Government oversight. Therefore, the U.S. Government may ask about and investigate our business practices and audit our compliance with applicable rules and regulations. Depending on the results of those audits and investigations, the U.S. Government could make claims against us. Under U.S. Government procurement regulations and practices, an indictment of a government contractor could result in that contractor being fined and/or suspended from being able to bid on, or be awarded, new U.S. Government contracts for a period of time. A conviction could result in debarment for a specific period of

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      While recent developments in the government and defense industry have had a positive impact on our Government Communications Systems and RF Communications segments, we remain subject to other risks associated with U.S. Government business, including technological uncertainties, dependence on annual appropriations and allotment of funds, extensive regulations and other risks, which are discussed elsewhere in this Annual Report.

      Telecommunications Equipment Industry: The global telecommunications equipment industry has experienced a number of significant challenges during the last five years. From the mid 1990’s until 2000, network operators invested heavily in mobile infrastructure driven by strong subscriber growth and increased usage. Since the beginning of 2001, the market for telecommunications equipment has contracted sharply. The years of decline can be characterized by:

	•	Auctions of 3G licenses, which led to spending by operators of the equivalent of seven years’ worth of infrastructure investments and licenses. This created a pause in the investment for network equipment for 2G, particularly in many markets in Western Europe.
	•	Significant network capacity was deployed during the growth years and many operators subsequently reduced their capital spending to adjust for over-capacity.
	•	Credit restrictions for telecom operators and vendors due to other investments in the sector caused a series of credit rating downgrades.
	•	The resulting rapid and dramatic decline in demand forced equipment suppliers to reduce costs and adjust to the much lower demand.
	•	Macroeconomic difficulties in certain markets, for example Latin America, put further pressure on the decline in equipment demand.
	•	Technology changes dramatically altered the market, creating more complex networks with additional features and a larger mix of equipment and software from multiple vendors. This complexity has also led many operators to outsource their network management, allowing them to focus on their service offerings to their customer base.

      Our Microwave Communications segment currently remains subject to the general economic slowdown and limited access to capital as well as the other risks associated with this market, which are discussed elsewhere in this Annual Report. Recently, however, the availability of capital has improved along with a greater demand for wireless telecommunications equipment. Our management believes that this recent trend will continue. In North America, service providers are expanding their cellular coverage and capacity. Many private network infrastructures are nearing the end of their lifespan, and Homeland Security grants are also becoming available to private networks for upgrades that solve interoperability issues, which are significant concerns after the events of September 11, 2001.

      Broadcast Industry: The worldwide over-the-air broadcast equipment industry is currently transitioning from analog to digital broadcasting. At the same time, the broadcast industry has been affected by delays in capital spending by broadcasters. The digital transition is occurring most rapidly for television broadcasting in the U.S., where the conversion to digital has been mandated by Congress and is under the management of the Federal Communications Commission (“FCC”). The new digital television technology provides higher-quality TV pictures, a significant increase in the amount of TV programming that can be delivered to consumers and the opportunity for broadcasters to provide an array of new services. In addition, conversion will make broadcast spectrum available to be auctioned by the FCC for new commercial uses. The FCC has recently adopted a Report and Order that implements several steps necessary for the continued conversion of the nation’s television broadcast systems to a digital broadcast environment. Stations in the top one hundred markets will have until 2005 to comply with full-power DTV transmission requirements and all other markets will have until 2006. Our Broadcast Communications segment will monitor the timing of actual implementation as stations go through the final channel selection process. Currently, approximately 1,500 of the nation’s 1,688 commercial and public broadcasters have ordered equipment that would allow them to meet at least the minimum, first-step requirements of the FCC’s mandated digital television rollout schedule. Nearly all U.S. households now have access to at least one digital TV signal and HDTV set sales in the first half of calendar 2004 are up 67 percent. These actions mark additional steps in the progress toward making the completion of the transition to digital television a reality.

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      Domestic radio broadcasters also are taking steps in transitioning from analog to digital technology. There are approximately 12,000 radio stations in the United States. All the previous technical issues delaying adoption of HD radio by the broadcast community have been addressed, and we are seeing signs that the market is about to shift from an early-adopter, trial market to full digital roll-outs. For example, Clear Channel Communications, the largest radio broadcaster in the U.S., recently announced that it will install digital broadcast equipment in 1,000 of its radio stations. Another key trend affecting this area is a competing product, satellite radio, which is gaining consumer awareness and acceptance. The availability and distribution channels for satellite radios are ahead of HD radios. Growing availability and acceptance of satellite radio is driving a competitive response from over-the-air radio broadcasters to offer a digital broadcast alternative.

      Internationally, the transition to digital technologies, for both radio and television, is in various stages of implementation. In general, digital television and radio adoption has been slow across global markets, as there are very few mandated conversions in the international arena. Consequently, many international markets remain primarily analog replacement markets where transmission equipment used by many broadcasters is approaching the end of its life cycle.

      In both television and radio, the industry trend toward consolidation and multiple-location operations is continuing and should drive increased future demand for automation, networking and services to manage the consolidated facilities. Similarly, broadcasters’ desire to find new nontraditional revenue streams, such as datacasting, should also drive increased spending on equipment and services.

      Our broadcast management believes that our experience and capabilities are well aligned with, and that we are poised to take advantage of, the broadcast industry trends noted above. While we believe that these developments generally will have a positive impact on our Broadcast Communications segment, we remain subject to general economic conditions that could adversely affect broadcasters. We also remain subject to other risks associated with the broadcast industry, including technological uncertainties, changes in the FCC’s regulations for the rollout of digital television, slow market adoption of digital radio and other risks which are discussed elsewhere in this Annual Report.

OPERATIONS REVIEW

Highlights

      Operations highlights for fiscal 2004 include:

	•	Income from continuing operations increased 79 percent from $70.3 million, or $1.06 per diluted share, in fiscal 2003 to $125.7 million, or $1.88 per diluted share, in fiscal 2004;
	•	Revenues increased 22 percent from $2.06 billion in fiscal 2003 to $2.52 billion in fiscal 2004;
	•	Government Communications Systems and RF Communications segments achieved record-setting revenue and operating profit results;
	•	Microwave Communications and Broadcast Communications segments continued to focus on profitability improvement and took additional actions in the fourth quarter to lower costs and reduce expenses going forward; and
	•	The TTS product line was sold resulting in an $18.9 million pre-tax gain. As a result of the sale, we have reported the TTS product line as discontinued operations and accordingly, prior periods have been restated. The remainder of this discussion is on a continuing operations basis only.

Revenue and Income From Continuing Operations

      Fiscal 2004 Compared With Fiscal 2003: Our revenue for fiscal 2004 was $2,518.6 million, an increase of 22.2 percent compared to fiscal 2003. Increased revenues in our Government Communications Systems,

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      The increase in income from continuing operations resulted primarily from increased operating income in our Government Communications Systems and RF Communications segments in fiscal 2004 when compared to fiscal 2003. Our Microwave Communications segment also experienced lower operating losses in fiscal 2004 when compared to fiscal 2003, and our corporate headquarters expense and eliminations were lower in fiscal 2004 at $59.0 million compared to $69.6 million in fiscal 2003. In fiscal 2004, we had a non-operating loss of $11.0 million compared to $23.7 million of non-operating income in fiscal 2003.

      Our two government businesses continued to deliver strong revenue growth and strong operating performance. The Government Communications Systems and RF Communications segments have benefited from a diverse customer base and broad portfolio of tactical and strategic programs that support the U.S. Government and international customers. Income from continuing operations was impacted by $8.0 million of after-tax charges associated with cost-reduction actions aimed at reducing expenses in our Microwave Communications and Broadcast Communications segments in fiscal 2004.

      Fiscal 2003 Compared With Fiscal 2002: Our revenue from product sales and services for fiscal 2003 was $2,060.6 million, an increase of 12.2 percent compared to fiscal 2002. Increased revenues in our Government Communications Systems and RF Communications segments were partially offset by decreased revenues in our Broadcast Communications and Microwave Communications segments. Income from continuing operations for fiscal 2003 was $70.3 million, or $1.06 per diluted share, compared to $87.0 million, or $1.31 per diluted share in fiscal 2002.

      The decrease in income from continuing operations resulted primarily from decreased operating income in our Broadcast Communications segment as well as increased corporate headquarters expenses in fiscal 2003 when compared to fiscal 2002. Also, non-operating income decreased from $41.0 million in fiscal 2002 to $23.7 million in fiscal 2003. These items were partially offset by improvements in the operating income of our RF Communications and Government Systems Communications segments.

      Fiscal 2003 income from continuing operations was impacted by $24.5 million of after-tax charges associated with reductions in labor, facility shutdowns, the discontinuation of low-margin telecom products and disposal of assets remaining from the previously exited telecom switch business. The fiscal 2003 results also included a $12.2 million after-tax gain on the sale of our minority interest in our LiveTV, LLC joint venture. Income from continuing operations was impacted in fiscal 2002 by $10.4 million of after-tax charges associated with reductions in labor, facility shutdowns and collection losses related to the bankruptcy of a customer in Latin America, as well as a $6.8 million after-tax gain from the sale of our minority interest in our GE Harris Energy Controls Systems, LLC joint venture.

Gross Margin

      Fiscal 2004 Compared With Fiscal 2003: Our gross margin (revenue less cost of product sales and services) as a percentage of revenue was 25.0 percent in fiscal 2004 compared to 25.1 percent in fiscal 2003. Fiscal 2003 gross margin was impacted by $8.6 million of inventory write-offs associated with the exit from our Microwave Communications segment’s WinRoLL and RapidNet wireless local loop products ($5.8 million) and MDL microwave radio products ($1.3 million) and the shut-down of our manufacturing plant in Brazil ($1.5 million).

      Gross margins as a percentage of revenue improved in our RF Communications, Microwave Communications and Government Communications Systems segments in fiscal 2004 when compared to fiscal 2003. The improved gross margin in our RF Communications segment resulted from manufacturing efficiencies related to

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      The gross margin improvements as a percentage of revenue in these three segments were offset by a larger mix of sales in our Government Communications Systems segment that carries a lower gross margin than our RF Communications segment and our two commercial segments due to the high level of cost-reimbursable programs it performs for the U.S. Government. Also, the Broadcast Communications segment experienced lower gross margins as a percentage of revenue in fiscal 2004 when compared to fiscal 2003, primarily resulting from a lower mix of digital TV transmission product sales.

      Fiscal 2003 Compared With Fiscal 2002: Our gross margin as a percentage of revenue was 25.1 percent in fiscal 2003 compared to 26.3 percent in fiscal 2002. Fiscal 2003 gross margin was impacted by the $8.6 million of inventory write-offs mentioned above. The lower gross margin also resulted from our Broadcast Communications segment, which had lower volume and a shift in product mix away from higher-margin digital television equipment to lower-margin analog products. To a lesser extent, our Microwave Communications segment’s gross margin also was impacted by weak international markets and supply chain issues, including the bankruptcy of a major supplier in France and other disruptions that increased our costs to deliver systems on time to our customers. These gross margin decreases were partially offset by improved gross margin from higher revenue and manufacturing efficiencies in our RF Communications segment. Gross margin in our Government Communications Systems segment was slightly lower than the prior year due to favorable contract closeouts experienced in fiscal 2002.

Engineering, Selling and Administrative Expenses

      Fiscal 2004 Compared With Fiscal 2003: Our engineering, selling and administrative expenses increased from $414.1 million in fiscal 2003 to $421.0 million in fiscal 2004. As a percentage of revenue, these expenses decreased from 20.1 percent of revenue in fiscal 2003 to 16.7 percent of revenue in fiscal 2004. The increase in revenue outpaced the increase in engineering, selling and administrative expenses primarily due to the impact of cost-reduction actions taken in fiscal 2003 at our corporate headquarters and separate cost-reduction actions taken in our Microwave Communications and Broadcast Communications segments.

      Engineering, selling and administrative expenses were impacted by expenses associated with cost-reduction actions of $7.3 million and $4.4 million in our Microwave Communications and Broadcast Communications segments, respectively, in fiscal 2004 and $8.3 million and $4.4 million in our Microwave Communications and Broadcast Communications segments, respectively, in fiscal 2003. Fiscal 2004 engineering, selling and administrative expenses were also impacted by a $4 million reversal of a previously established reserve for the consolidation of our Broadcast Communications segment’s European operations.

      Headquarters expense, which is included in engineering, selling and administration expenses, decreased in fiscal 2004 when compared to fiscal 2003 due mostly to $12.4 million of write-downs in fiscal 2003 related to the disposal of assets remaining from our previously exited telephone switch business and expenses associated with fiscal 2003 cost-reduction actions of $4.0 million. Fiscal 2003 headquarters expense also included a $4.2 million contribution to our retiring Chief Executive Officer’s supplemental executive retirement plan account.

      Engineering, selling and administrative expenses increased in our Government Communications Systems and RF Communications segments to support significant growth in these businesses and included a higher level of selling and marketing and research and development activities. The rate of increase in revenue in these segments, however, exceeded the rate of increase in engineering, selling and administrative expenses.

      Overall company-sponsored research and product development costs, which are included in engineering, selling and administrative expenses, were $111.3 million in fiscal 2004, compared to $99.8 million in fiscal 2003.

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      Customer-sponsored research and development, which does not impact engineering, selling and administrative expenses, increased from $499.9 million in fiscal 2003 to $729.9 million in fiscal 2004 as a result of the U.S. Government’s increased spending on research and development projects. Customer-sponsored research and development is included in our revenues and cost of product sales and services.

      Fiscal 2003 Compared With Fiscal 2002: Our engineering, selling and administrative expenses increased from $378.3 million in fiscal 2002 to $414.1 million in fiscal 2003. As a percentage of revenue, these expenses decreased from 20.6 percent in fiscal 2002 to 20.1 percent in fiscal 2003.

      Fiscal 2003 engineering, selling and administrative expenses were impacted by $29.1 million of expenses associated with cost-reduction actions in our corporate headquarters ($4.0 million), Broadcast Communications segment ($4.4 million) and Microwave Communications segment ($8.3 million), as well as write-downs related to the disposal of assets remaining from our previously exited telephone switch business ($12.4 million). Fiscal 2002 engineering, selling and administrative expenses were impacted by $15.8 million of costs associated with the cost-reduction actions ($8.8 million) and collection losses related to the bankruptcy of a customer in Latin America ($7.0 million) in the Microwave Communications segment.

      Engineering, selling and administrative expenses increased in our Government Communications Systems segment, due to increased volume and bid opportunities, and in our RF Communications segment, due to increased volume and new product development of JTRS and Falcon® III-related products. Headquarters expense, which is included in engineering, selling and administration expenses, also increased in fiscal 2003 when compared to fiscal 2002, which was mainly driven by a $4.2 million contribution to our retiring Chief Executive Officer’s supplemental executive retirement plan account. Engineering, selling and administrative expenses in our Microwave Communications and Broadcast Communications segments also were impacted by on-going cost-reduction actions at these segments.

      Overall company-sponsored research and product development costs, which are included in engineering, selling and administrative expenses, were $99.8 million in fiscal 2003, compared to $104.9 million in fiscal 2002. The decrease was primarily due to a relatively high level of spending on the development of our broadband wireless access products in fiscal 2002. This decrease was partially offset by increased spending by our RF Communications segment for the development of JTRS and Falcon® III-related products.

      Customer-sponsored research and development increased from $412.3 million in fiscal 2002 to $499.9 million in fiscal 2003. This was primarily a result of the U.S. Government continuing significant spending for the War on Terrorism.

Non-Operating Income (Loss)

*	Not meaningful

     Fiscal 2004 Compared With Fiscal 2003: In fiscal 2004, the non-operating loss was $11.0 million compared to $23.7 million of non-operating income in fiscal 2003. Most of the change between fiscal 2004 and fiscal 2003 was due to a decrease in gains from the sale of securities available-for-sale from $21.9 million in fiscal 2003 to $2.3 million in fiscal 2004 as well as an $18.8 million gain from the sale of our minority interest in our LiveTV, LLC joint venture in fiscal 2003. Fiscal 2004 non-operating loss also included a $5.0 million write-down of our interest in Teltronics, Inc. related to impairment of this investment that was other than temporary and an $8.5 million pre-tax loss and a $6.4 million pre-tax gain in two unrelated patent infringement cases. Expenses and fees associated with selected investments were $2.5 million in fiscal 2004 and $13.5 million in fiscal 2003.

      Fiscal 2003 Compared With Fiscal 2002: Our non-operating income decreased from $41.0 million in fiscal 2002 to $23.7 million in fiscal 2003. The decrease in non-operating income was primarily due to a $42.3 million reduction in gains from the sale of securities related to technology investments available-for-sale from

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Interest Income and Interest Expense

      Fiscal 2004 Compared With Fiscal 2003: Our interest income was relatively unchanged from $6.1 million in fiscal 2003 to $6.2 million in fiscal 2004. Our interest expense decreased from $24.9 million in fiscal 2003 to $24.5 million in fiscal 2004 due to a lower level of short-term debt in our foreign subsidiaries.

      Fiscal 2003 Compared With Fiscal 2002: Our interest income decreased from $13.3 million in fiscal 2002 to $6.1 million in fiscal 2003. Fiscal 2002 benefited from interest received from the previous overpayment of income taxes. Our interest expense decreased from $26.7 million in fiscal 2002 to $24.9 million in fiscal 2003, primarily due to the repayment of $98.6 million of our 6.65% debentures in the first quarter of fiscal 2002, the retirement of our $30.5 million 6.38% notes payable to banks in the first quarter of fiscal 2003 and a $6.9 million reduction during fiscal 2003 in high interest rate notes with Brazilian banks. These actions were partially offset by an increase in interest expense due to the private placement of $150 million of our 3.5% convertible debentures in the first quarter of fiscal 2003.

Income Taxes

      Fiscal 2004 Compared With Fiscal 2003: Our provision for income taxes as a percentage of pre-tax income was 30.2 percent in fiscal 2004 and 35.0 percent in fiscal 2003. The decrease in the rate in fiscal 2004 is primarily due to the settlement of a foreign tax audit that resulted in an income tax benefit of $3.3 million. The fiscal 2004 rate also includes a larger benefit from the use of state, local and foreign income tax loss carryforwards. In both fiscal 2004 and fiscal 2003, the impact of export sales reduced our total tax rate below the statutory rate, including state income taxes. Fiscal 2003 benefited from research and development tax credits. The mix of foreign tax rates and sources of foreign income and losses increased our tax rates in fiscal 2004 and fiscal 2003.

      Fiscal 2003 Compared With Fiscal 2002: Our provision for income taxes as a percentage of pre-tax income was 35.0 percent in fiscal 2003 and 34.0 percent in fiscal 2002. In both fiscal 2003 and fiscal 2002, the impact of export sales reduced our total tax rate below the statutory rate, including state income taxes. Fiscal 2002 benefited from the favorable resolution of certain outstanding state tax liabilities, for which we had previously provided. Fiscal 2003 benefited from research and development tax credits. These decreases were partially offset by the impact of the mix of foreign tax rates and sources of foreign income and losses.

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Discussion of Business Segments

Government Communications Systems Segment

      Fiscal 2004 Compared With Fiscal 2003: Government Communications Systems segment revenue increased 32.4 percent and operating income increased 46.2 percent from fiscal 2003 to fiscal 2004. Revenue growth was all organic and was evident in each of this segment’s primary U.S. Government customer groups. Gross margins improved in this segment as a result of outstanding performance on defense, intelligence, civil and technical service programs; higher award fees, including a seldom-awarded incentive fee on a classified program for excellent schedule performance in the third quarter of fiscal 2004; and a successful contract resolution in the second quarter of fiscal 2004. Engineering, selling and administrative expenses increased in our Government Communications Systems segment to support the significant growth in revenue, which drove a higher level of selling and marketing and research and development activities. In this segment, however, the increase in revenue exceeded the increase in engineering, selling and administrative expenses.

      Classified programs and previously awarded non-classified contracts contributed to fiscal 2004 growth, including the JSF program for the U.S. Air Force, the FTI program for the FAA, the MAF/ TIGER database modernization program for the U.S. Census Bureau and the MCOM program for the U.S. Air Force. More recent wins also contributed to the growth in fiscal 2004, including the Iraqi Media Network program, avionics on the F/A-18 Super Hornet aircraft for the U.S. Navy and Marine Corps, the FAB-T program for the U.S. Air Force and the AEHF program for the U.S. Navy.

      Following the end of fiscal 2004, we completed the acquisition of The Orkand Corporation for $66 million in cash, subject to post-closing adjustments. Orkand revenue was $84 million for the 12 months ended June 2004. The acquisition is expected to be immediately accretive to earnings. Orkand adds significant scale to our mission-critical services business. In the first quarter of fiscal 2005, this segment was selected by the NRO to provide operations, maintenance and support services for the agency’s global communications and information systems. This program has a potential value of $1 billion over ten years.

      Fiscal 2003 Compared With Fiscal 2002: Government Communications Systems segment revenue increased 23.0 percent and operating income increased 22.7 percent from fiscal 2002 to fiscal 2003. Growth in our Government Communications Systems segment revenue was all organic and resulted from a broad spectrum of defense and other U.S. Government agencies’ continued investment in newly integrated assured network communications systems which had a positive impact across all areas of this segment. Gross margins as a percentage of revenue in our Government Communications Systems segment were slightly lower than the prior year due to favorable contract closeouts experienced in fiscal 2002. Engineering, selling and administrative expenses increased in our Government Communications Systems segment due to increased volume and bid opportunities; however, these expenses decreased as a percentage of revenue.

      Approximately 40 percent of the $213.0 million increase in revenue from fiscal 2002 to fiscal 2003 came from classified programs, and approximately 30 percent of the increase was attributed to three programs that were awarded after January 2002: the MCOM program; the JSF program; and the FTI program.

      Other recent programs that produced increased revenue included the MAF/ TIGER program for the U.S. Census Bureau, the U.S. Air Force’s FAB-T program, the U.S. Air Force and NGA’s Space-Based Radar program and the NGA’s GGI program.

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RF Communications Segment