harris corporation

fiscal 2009. See the “Interest Income and Interest Expense,” “Income Taxes” and “Discussion of Business
Segments” discussions below in this MD&A for further information.
Gross Margin
2011 2010
2011/2010
Percent
Increase/
(Decrease) 2009
2010/2009
Percent
Increase/
(Decrease)
(Dollars in millions)
Revenue ........................... $5,924.6 $ 5,206.1 13.8% $ 5,005.0 4.0%
Cost of product sales and services ........ (3,810.5) (3,334.4) 14.3% (3,420.2) (2.5)%
Gross Margin ....................... 2,114.1 1,871.7 13.0% 1,584.8 18.1%
% of revenue. ..................... 35.7% 36.0% 31.7%
Fiscal 2011 Compared With Fiscal 2010: The decrease in gross margin (revenue less cost of product sales
and services) as a percentage of revenue (“gross margin percentage”) in fiscal 2011 compared with fiscal 2010 was
primarily due to a less favorable product mix in our RF Communications segment due to lower sales of radios to
equip the U.S. military’s MRAP vehicles in fiscal 2011 compared with fiscal 2010 and the impact of our acquisition
of CapRock, which has a lower gross margin percentage than our overall gross margin percentage. See the
“Discussion of Business Segments” discussion below in this MD&A for further information.
Fiscal 2010 Compared With Fiscal 2009: The increase in gross margin percentage in fiscal 2010 compared
with fiscal 2009 was primarily due to an increase in the gross margin percentage in our RF Communications
segment as a result of favorable product mix, due to the MRAP vehicle and mine resistant ambush protected allterrain
vehicle (“M-ATV”) programs, and operational efficiencies, as well as a higher percentage of our overall sales
that was generated by this higher-margin segment. See the “Discussion of Business Segments” discussion below in
this MD&A for further information.
Engineering, Selling and Administrative Expenses
2011 2010
2011/2010
Percent
Increase/
(Decrease) 2009
2010/2009
Percent
Increase/
(Decrease)
(Dollars in millions)
Engineering, selling and administrative expenses. . $1,143.9 $958.9 19.3% $791.3 21.2%
% of revenue .......................... 19.3% 18.4% 15.8%
Fiscal 2011 Compared With Fiscal 2010: Engineering, selling and administrative (“ESA”) expenses, and
ESA expenses as a percentage of revenue, increased in fiscal 2011 compared with fiscal 2010 primarily due to our
acquisitions of CapRock, Schlumberger GCS and Carefx, including integration and other costs associated with these
acquisitions, and the pursuit of new growth opportunities. See the “Discussion of Business Segments” discussion
below in this MD&A for further information.
Overall company-sponsored research and product development costs, which are included in ESA expenses,
were $335.6 million in fiscal 2011 compared with $325.8 million in fiscal 2010.
Fiscal 2010 Compared With Fiscal 2009: ESA expenses increased in 2010 compared with fiscal 2009
primarily due to our acquisition of Wireless Systems in the fourth quarter of fiscal 2009. Additionally, ESA
expenses in fiscal 2010 included $20.4 million of acquisition-related costs, compared with $8.9 million of
acquisition-related costs incurred in fiscal 2009. These increases in ESA expenses were partially offset by the
benefit of cost-reduction actions taken in fiscal 2009.
As a percentage of revenue, ESA expenses increased in fiscal 2010 compared with fiscal 2009 primarily due to
our acquisition of Wireless Systems, which has higher ESA expenses as a percentage of revenue compared with our
other businesses. See the “Discussion of Business Segments” discussion below in this MD&A for further
information.
Overall company-sponsored research and product development costs, which are included in ESA expenses,
were $325.8 million in fiscal 2010 compared with $243.5 million in fiscal 2009. The increase in company-sponsored
research and product development costs was primarily due to our acquisition of Wireless Systems.
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