Harris Corporation to Acquire the Orkand Corporation
June 07 2004 - 5:00PM
PR Newswire (US)
Harris Corporation to Acquire the Orkand Corporation Company
Increases Earnings Guidance and Begins to Implement Additional Cost
Reductions in Commercial Divisions MELBOURNE, Fla., June 7
/PRNewswire-FirstCall/ -- Harris Corporation (NYSE:HRS) today
announced that it has signed a definitive agreement to acquire
Orkand Corporation, a privately held leading provider of technical
services and information technology for U.S. Government agencies.
The company also provided increased earnings guidance for fiscal
year 2005, and details of additional cost reduction efforts to
improve efficiency and profitability in its Microwave
Communications and Broadcast Communications divisions. Orkand
Acquisition The Orkand Corporation is headquartered in Falls
Church, Virginia and has more than 1,000 employees operating in 22
U.S. states. The company provides information technology services
under contracts with 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, among
others. Orkand revenue for the 12 months ended in March 2004 was
$80 million. Under terms of a definitive agreement, Harris will
purchase Orkand for approximately $66 million in cash, subject to
post-closing adjustments. The transaction, which is subject to
customary regulatory approvals, is expected to close prior to
Harris' 2004 fiscal year end on July 2, 2004. The acquisition is
expected to be immediately accretive to earnings in fiscal year
2005 at approximately $0.05 per diluted share. "The acquisition of
Orkand Corporation expands our mission-critical services business
and adds important new customers to our Government Communications
Systems division," said Howard L. Lance, chairman, president, and
chief executive officer of Harris Corporation. "They have a strong
and well-established prime contractor position with these
customers. As part of the Harris Technical Services business,
Orkand will provide us with increased scale and new contract bid
opportunities, expanding our position as a leading communications
systems and services provider to the U.S. Government." Cost
Reduction Actions As previously announced, Harris initiated further
cost reduction actions within its Microwave Communications and
Broadcast Communications businesses. These actions are expected to
improve operating efficiency and profitability in both divisions,
with a payback period of less than 12 months. In the Microwave
Communications division, approximately 100 jobs are being
eliminated worldwide, and another 140 jobs will be moved to lower
cost locations. Division administration and support functions will
be consolidated at its Research Triangle Park facility in Durham,
North Carolina. Production and support for the new TRuepoint(TM)
microwave radio family will be consolidated at its San Antonio,
Texas manufacturing facility, where the successful Constellation(R)
and MegaStar(R) product lines are currently produced. The company
expects to take a pre-tax charge in the fourth quarter of
approximately $8 million ($0.08 per diluted share) in conjunction
with these restructuring actions. Approximately 100 jobs will be
eliminated in the Broadcast Communications division in the U.S. and
Europe. The organization has been recently realigned into five
customer-facing business units -- Television Broadcast Systems,
Radio Broadcast Systems, Broadcast Systems Europe, Broadcast
Automation Solutions, and Networking & Government Systems. This
new structure will provide better focus on core markets and improve
operational efficiency and competitiveness. Restructuring costs of
approximately $4 million in the fourth quarter will be offset by
the reversal of a previously established reserve for the
consolidation of the company's European broadcast operations. "We
enjoy leading market positions in both Broadcast and Microwave
communications and see excellent growth potential in both
businesses," added Lance. "The additional cost reductions will
better position them to significantly contribute to total company
profitability going forward." Sale of Telecom Product Line During
the quarter, Harris completed the previously announced sale of its
telecom tools, test sets, and test systems product line to Danaher
Corporation. Harris sold this product line for $50 million in cash,
subject to post-closing adjustments. The gain on the sale, combined
with the product line's operating results for April and May, is
expected to result in income from discontinued operations of
approximately $5 million ($0.08 per diluted share) in the fourth
quarter. The Harris NetBoss(TM) network operations software
business, which was part of the Network Support segment, was not
included in the sale and will be consolidated into the Microwave
Communications division. As a result of the sale, the telecom
tools, test sets, and test systems product line will be shown as a
discontinued operation in the company's financial results. The
revised financial results for the past seven quarters will be
detailed in a Form 8-K filing with the U.S. Securities and Exchange
Commission. Outlook The company expects earnings for its fiscal
fourth quarter to be $0.54 per diluted share, and $1.96 per diluted
share for fiscal year 2004. These earnings figures are on a GAAP
basis, and will include the aforementioned restructuring charges in
the fourth fiscal quarter, as well as income from discontinued
operations. For fiscal year 2005, the company is raising its
guidance to a range of $2.25 to $2.35 per diluted share. "With an
improving commercial environment, the continuing momentum from our
government businesses, and the addition of the Orkand acquisition,
the company expects to deliver solid financial performance in our
next fiscal year," added Lance. Harris will host a conference call
today at 5:00 p.m., Eastern Time, to discuss the above items.
Interested individuals are invited to listen to the call by using a
dial-in number: (719) 457-2629, access code: 631945. The conference
call also will be broadcast live via the Internet at
http://www.harris.com/ and a replay will be available at the same
site. Harris Corporation is an international communications
technology company focused on providing assured communications(TM)
products, systems and services for government and commercial
customers. The company's operating divisions serve markets for
government communications, tactical radio, broadcast, and microwave
systems. Harris provides systems and service to customers in more
than 150 countries. Additional information about Harris Corporation
is available at http://www.harris.com/. Forward-Looking Statement
Statements in this press release that are not historical facts are
forward-looking statements that reflect management's current
expectations, assumptions, and estimates of future performance and
economic conditions. Such statements are made in reliance upon the
safe harbor provisions of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements in this release include but are not
limited to: earnings guidance for fiscal 2004, the anticipated
timing of the closing of the Orkand acquisition and the impact of
the acquisition on our fiscal 2005 earnings guidance for fiscal
2005, and the impact of the cost reduction actions. The Company
cautions investors that any forward-looking statements are subject
to risks and uncertainties that may cause actual results and future
trends to differ materially from those matters expressed in or
implied by such forward-looking statements. The Company's
consolidated results and the forward-looking statements could be
affected by many factors, including but not limited to: uncertain
economic conditions which make it difficult to estimate growth in
our markets and, as a result, future income and expenditures; the
telecommunications downturn, which has had and may continue to have
a negative effect on our telecom businesses; our dependence on the
U.S. Government for a significant portion of our revenues, as the
loss of this relationship or a shift in U.S. Government funding
could have adverse consequences on our future business; financial
and government and regulatory risks relating to international sales
and operations, including fluctuations in foreign currency exchange
rates and the effectiveness of our currency hedging program; the
fair values of our portfolio of passive investments, which values
are subject to significant price volatility or erosion; our ability
to continue to develop new products that achieve market acceptance;
the consequences of future geo-political events, which may affect
adversely the markets in which we operate, our ability to insure
against risks, our operations or our profitability; strategic
acquisitions and the risks and uncertainties related thereto,
including our ability to manage and integrate acquired businesses;
potential changes in U.S. Government or customer priorities due to
program reviews or revisions to strategic objectives, including
termination of or potential failure to fund U.S. Government
contracts; risks inherent with large long-term fixed price
contracts, particularly the ability to contain cost overruns; the
performance of critical subcontractors or suppliers; potential
claims that we are infringing the intellectual property rights of
third parties; the successful resolution of patent infringement
claims and the ultimate outcome of other contingencies, litigation
and legal matters; customer demand for financing and customer
credit risk; cost reductions, which may not yield the benefits we
expect and could have adverse effects on our future business; the
impact of competitive products and pricing; risks inherent in
developing new technologies; the ability to recruit and retain
qualified personnel; and general economic conditions in the markets
in which we operate. Further information relating to factors that
may impact the Company's results and forward-looking statements are
disclosed in the Company's filings with the SEC. Harris disclaims
any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events,
or otherwise. DATASOURCE: Harris Corporation CONTACT: Media, Tom
Hausman, +1-321-727-9131, or , or Investor relations, Pamela
Padgett, +1-321-727-9383, or , both of Harris Corporation Web site:
http://www.harris.com/
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