harris corporation

Over the longer term, DoD budgets are expected to decrease from current levels. While the DoD budget
proposed by the Administration in February 2011 reflects a modest growth rate of approximately 2% from GFY
2012 through GFY 2021, recently enacted debt-ceiling legislation requires reductions of approximately $350 billion
in Pentagon and national security agency budgets over the next ten years. Further, if a House-Senate committee is
unsuccessful in reaching an agreement upon a deficit reduction plan by late November 2011, the recently enacted
debt-ceiling legislation requires significant cuts in federal spending, which would be expected to result in deeper
reductions to DoD budgets. Despite the expected lower levels of defense spending and the cancellation of particular
platforms and programs, the types of products and services we offer appear to be a funding priority over the long
term, which we believe will positively affect our future orders, sales, income and cash flows. Conversely, a
significant decline in defense spending or a shift in funding priorities may have a negative effect on future orders,
sales, income and cash flows depending on the platforms and programs affected by such budget reductions or shifts
in funding priorities.
Other Federal Markets: Another current funding priority for the U.S. Government is the security of the United
States, which includes better communications interplay among law enforcement, civil government agencies,
intelligence agencies and our military services. Funding for investments in secure tactical communications, IT,
information processing, healthcare IT, cyber security and additional communications assets and upgrades has remained
solid. Another current priority of the U.S. Government is investments in productivity, cost reductions and upgrading to
new IT systems and solutions. As a result, programs that promote these initiatives are also expected to receive funding,
although there is no assurance that such funding will remain a priority. We provide products and services to a number
of U.S. Government agencies including the FAA, NRO, NGA, Department of State, NSA, NOAA and others. For
example, the FAA has announced its Next Generation Air Transportation System (“NextGen”) program to transform
the entire U.S. air transport system to meet future demands and avoid gridlock in the sky and at airports.
State and Local: We also provide products to state and local government agencies that are committed to
protecting our homeland and public safety. Despite near-term budget pressures for state and local government agencies,
we believe more normal spending patterns will resume in the long term as these agencies continue upgrading their
technologies to improve communications and interoperability, although there can be no assurance they will do so.
International: Recently, we have experienced a delay in international orders due to continuing political
uncertainty in Northern Africa, the Middle East and Central Asia. However, over the longer term, we believe
demand for communications and IT infrastructure technology and services in emerging global markets will remain
robust. International markets continue to drive toward tactical communications upgrades and interoperability. We
have also identified substantial opportunities with international governments with respect to their defense spending
on national security and on tactical communications modernization and standardization programs, which we believe
will positively affect our future orders, sales, income and cash flows.
Government Oversight and Risk: As a U.S. Government contractor, we are subject to U.S. Government
oversight. The U.S. Government may investigate our business practices and audit our compliance with applicable
rules and regulations. Depending on the results of those investigations and audits, the U.S. Government could make
claims against us. Under U.S. Government procurement regulations and practices, an indictment or conviction of a
government contractor could result in that contractor being fined and/or suspended from being able to bid on, or
from being awarded, new U.S. Government contracts for a period of time. Similar government oversight exists in
most other countries where we conduct business. We are currently not aware of any compliance audits or
investigations that could result in a significant adverse impact to our financial condition, results of operations or
cash flows.
We are also 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 in “Item 1A. Risk Factors” and “Item 3. Legal Proceedings” of this Report.
Commercial: We are working to leverage our proven technologies for government applications into attractive
commercial applications and expand in high-growth commercial markets. These markets include IT services,
managed services, cyber integration and media solutions supporting energy, healthcare, broadcast and enterprise
networks. We are trusted to run some of the United States’ largest, secure mission-critical information networks, and
demand for communications and IT infrastructure in emerging global markets remains robust. As a cyber integrator,
we see a large opportunity to help large corporations move their complex IT enterprises to a trusted cloud
environment in order to reduce costs, expand IT service delivery and increase security and compliance. Trends and
developments in the broadcast and new media solutions market include the continuing worldwide transition to
digital and HD technologies; a rebound in the global ad spending market; increasing demand for new systems to
deliver rich media content to live sports and entertainment venues, retail establishments and mobile handheld
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