
*NOTE 25:*	*BUSINESS SEGMENTS*

We structure our operations primarily around the products and services we sell and the markets we serve, and we report the financial results of our operations in the following three reportable operating or business segments — RF Communications, Integrated Network Solutions and Government Communications Systems. Our RF Communications segment is a global supplier of secure tactical radio communications and embedded high-grade encryption solutions for military, government and commercial organizations and also of secure communications systems and equipment for public safety, utility and transportation markets. Our Integrated Network Solutions segment provides mission-critical end-to-end information technology (“IT”) services; managed satellite and terrestrial communications solutions; standards-based healthcare interoperability and image management solutions; cyber integrated and cloud application hosting solutions; and digital media management solutions to support government, energy, healthcare, enterprise and broadcast customers. Our Government Communications Systems segment conducts advanced research and produces, integrates and supports highly reliable, net-centric communications and information technology that solve the mission-critical challenges of our civilian, defense and intelligence government customers, primarily the U.S. Government. Each business segment is comprised of multiple program areas and product and service lines that aggregate into such business segment.

As discussed further in the “Business Considerations — General” discussion in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report, our reportable operating segment structure reflects that, effective for the third quarter of fiscal 2011, as a result of a realignment of our operations and as previously reported, we formed our Integrated Network Solutions as a new business segment. The new segment realigns IT Services, Managed Satellite and Terrestrial Communications Solutions, Healthcare Solutions and Cyber Integrated Solutions (all of which were formerly under our Government Communications Systems segment) with Broadcast and New Media Solutions (formerly a separate reportable segment called Broadcast Communications). Our Government Communications Systems segment now is comprised of Civil Programs, Defense Programs and National Intelligence Programs. Our RF Communications segment did not change and continues to be comprised of U.S. Department of Defense and International Tactical Communications and Public Safety and Professional Communications. The historical results, discussion and presentation of our business segments as set forth in this Report have been adjusted to reflect the impact of these changes to our reportable operating segment structure for all periods presented in this Report.

In the fourth quarter of fiscal 2009, in connection with the May 27, 2009 Spin-off in the form of a taxable pro rata dividend to our shareholders of all the shares of HSTX common stock owned by us, we eliminated our former HSTX business segment, which is reported as discontinued operations in this Report. Until the Spin-off, HSTX (formerly our Microwave Communications segment), a provider of wireless network solutions, was our majority-owned subsidiary, and HSTX’s results of operations and financial position were consolidated into our financial statements. Subsequent to the Spin-off, we no longer own an equity interest in HSTX and, therefore, HSTX no longer constitutes part of our business operations. Our historical financial results have been restated to account for HSTX as discontinued operations for all periods presented in this Report. See Note 3: Discontinued Operations in these Notes for additional information regarding discontinued operations.

The accounting policies of our business segments are the same as those described in Note 1: Significant Accounting Policies in these Notes. We evaluate each segment’s performance based on its “operating income (loss),” which we define as profit or loss from operations before income taxes excluding interest income and expense, royalties and related intellectual property expenses, equity income and gains or losses from securities and other investments. Intersegment sales among our segments are transferred at cost to the buying segment and the sourcing segment recognizes a normal profit that is eliminated. The “Corporate eliminations” line item in the tables below represents the elimination of intersegment sales and their related profits. The “Unallocated corporate expense” line item in the tables below represents the portion of corporate expenses not allocated to the business segments.

Our products and systems are produced principally in the United States with international revenue derived primarily from exports. No revenue earned from any individual foreign country exceeded 4 percent of our total revenue during fiscal 2011, 2010 or 2009.

Sales made to U.S. Government customers, including the DoD and intelligence and civilian agencies, as well as foreign military sales through the U.S. Government, whether directly or through prime contractors, by all segments as a percentage of total revenue were 71.6 percent, 74.8 percent and 74.0 percent in fiscal 2011, 2010 and 2009, respectively. Revenue from services in fiscal 2011 was approximately 6.1 percent, 64.8 percent and 20.3 percent of total revenue in our RF Communications, Integrated Network Solutions and Government Communications Systems segments, respectively.

Selected information by business segment and geographical area is summarized below:


	2011		2010		2009
	(In millions)

Total Assets
RF Communications	$	1,493.5	$	1,468.5	$	1,473.0
Integrated Network Solutions		3,002.7		1,672.9		1,541.3
Government Communications Systems		976.9		919.8		922.5
Corporate		699.7		682.4		528.3

	$	6,172.8	$	4,743.6	$	4,465.1

Capital Expenditures
RF Communications	$	77.7	$	52.4	$	30.1
Integrated Network Solutions		162.8		77.9		12.5
Government Communications Systems		45.6		45.9		39.0
Corporate		25.2		13.7		10.1
Discontinued operations		—		—		17.2

	$	311.3	$	189.9	$	108.9

Depreciation and Amortization
RF Communications	$	66.1	$	68.5	$	38.5
Integrated Network Solutions		90.7		45.2		54.2
Government Communications Systems		43.6		43.7		41.8
Corporate		11.6		8.3		16.3
Discontinued operations		—		—		33.9

	$	212.0	$	165.7	$	184.7

Geographical Information for Continuing Operations
U.S. operations:
Revenue	$	5,487.0	$	4,906.1	$	4,754.4
Long-lived assets	$	770.1	$	575.2	$	513.2
International operations:
Revenue	$	437.6	$	300.0	$	250.6
Long-lived assets	$	102.7	$	34.5	$	30.0

Corporate assets consisted primarily of cash, marketable equity securities, buildings and equipment. Depreciation and amortization included intangible assets, capitalized software and debt issuance costs amortization of $76.6 million, $55.7 million and $57.3 million in fiscal 2011, 2010 and 2009, respectively.

Export revenue was $869.5 million, $424.6 million and $766.0 million in fiscal 2011, 2010 and 2009, respectively. Fiscal 2011 export revenue and revenue from international operations was principally from Europe, Asia, the Middle East, Canada and Australia. Fiscal 2011 long-lived assets from international operations were principally in the United Kingdom and Canada, which had $41.9 million and $21.7 million, respectively, of long-lived assets as of July 1, 2011.

Revenue and income from continuing operations before income taxes by segment follows:

Revenue


	2011			2010			2009
	(In millions)

RF Communications	$	2,289.2		$	2,067.2		$	1,760.6
Integrated Network Solutions		1,985.8			1,485.1			1,476.1
Government Communications Systems		1,776.5			1,747.3			1,864.2
Corporate eliminations		(126.9	)		(93.5	)		(95.9	)

	$	5,924.6		$	5,206.1		$	5,005.0

Income From Continuing Operations Before Income Taxes


	2011(2)			2010(3)			2009(4)
	(In millions)

Segment Operating Income (Loss):
RF Communications	$	787.0		$	707.4		$	571.5
Integrated Network Solutions		70.2			85.3			(133.6	)
Government Communications Systems		227.0			227.4			199.2
Unallocated corporate expense		(87.8	)		(90.4	)		(81.4	)
Corporate eliminations		(26.2	)		(16.9	)		(17.7	)
Non-operating loss (1)		(1.9	)		(1.9	)		(3.1	)
Net interest expense		(87.6	)		(70.6	)		(49.6	)

	$	880.7		$	840.3		$	485.3


(1)		“Non-operating loss” includes equity investment income (loss), royalties and related intellectual property expenses, gains and losses on sales of investments and securities available-for-sale, and impairments of investments and securities available-for-sale. Additional information regarding non-operating loss is set forth in Note 20: Non-Operating Loss.

(2)		The operating income in our Integrated Network Solutions segment included a $46.6 million charge for integration and other costs associated with our acquisitions of CapRock, Schlumberger GCS, the Core180 Infrastructure and Carefx.

(3)		The operating income in our RF Communications segment included a $19.3 million charge for integration and other costs associated with our acquisition of Wireless Systems. The operating income in our Integrated Network Solutions segment included a $4.4 million charge for integration and other costs associated with our acquisitions of Patriot Technologies, LLC, SignaCert, Inc. and CapRock, and a $9.5 million charge for cost-reduction actions. The operating income in our Government Communications Systems segment included a $2.4 million charge for integration and other costs associated with our acquisitions of Crucial Security, Inc. and the Air Traffic Control business unit of SolaCom Technologies, Inc.

(4)		The operating income in our RF Communications segment included a $9.5 million charge for integration and other costs associated with our acquisition of Wireless Systems. The operating income in our Integrated Network Solutions segment included a $255.5 million charge for impairment of goodwill and other long-lived assets related to Broadcast and New Media Solutions. The operating income in our Government Communications Systems segment included an $18.0 million ($11.3 million after-tax, or $.09 per diluted share) charge for schedule and cost overruns on commercial satellite reflector programs. Additionally, we initiated a number of cost-reduction actions during fiscal 2009, resulting in charges of $8.1 million, $5.0 million, $13.1 million and $2.4 million in our RF Communications, Integrated Network Solutions and Government Communications Systems segments and at our corporate headquarters, respectively, for severance and other employee-related exit costs and for consolidation of facilities.