EMS Technologies, Inc.
today announced that its board of directors has approved a
formal plan to sell the Company’s commercial space division, based in
Montreal.
Alfred G. Hansen, president and chief executive officer, commented, “With
world-class facilities, and outstanding technical ability in antennas and
power components, our Space & Technology/Montreal division has long been
established as a leading supplier to the commercial space industry. This
division has played a key role in a long list of successful programs,
including Intelsat, Radarsat, ANIK, and International Space Station.
“However like all competitors in the space industry, the financial
performance of our Montreal division has been volatile, and has been
significantly affected by the current period of slow orders activity. While
it is inevitable that current satellites will someday need to be replaced and
new services will spur demand for more satellites, the timing of this future
business is uncertain.
“Running the Montreal division during this period has required
considerable investment of management’s time and energy, as well as the
Company’s capital. At the same time, our four other main divisions — Space &
Technology/Atlanta, LXE, EMS Wireless and SATCOM — have experienced a period
of vigorous, profitable activity, with new opportunities presenting themselves
practically everyday. We have concluded that selling our commercial space
division would allow the Company to focus its resources and energies, both now
and in the future, toward capitalizing on the considerable momentum that we
have in our other businesses.
“As for the future of the Montreal division, we believe that its
impressive engineering capabilities and superb facilities, its strong base of
annual revenues ($70 million in 2002), and its unique role in Canada’s
international space activities should make the division attractive to a larger
participant in the commercial space business.
“To support our sales efforts and to manage the transition process, we
have assembled strong teams both at Montreal and at EMS corporate. We will be
working diligently to conclude the sales process within a year, and we have
retained Needham & Company to serve as investment banker on this transaction.
“The only part of our Montreal operations that we expect to retain rather
than sell is the Satellite Networks (SatNet) division. This startup operation
is not yet material to the Company’s financial statements, but we believe it
could make a major contribution in the future. SatNet’s hubs and terminals
are based on the industry-standard DVB-RCS architecture that EMS helped
develop. The SatNet initiative will also support the development of broadband
capabilities in our other businesses.”
Financial Implications
Under U.S. accounting rules, in the third quarter of 2003 the Company will
begin reporting the results of its continuing operations — comprising Space &
Technology/Atlanta (mainly defense), LXE, EMS Wireless, and SATCOM, as well as
SatNet and other small product lines — separate from the Space &
Technology/Montreal division, which will be described as discontinued
operations. Comparable historical periods will be restated on a similar
basis.
The net assets to be sold have a total book value of approximately $54
million. These assets include the Montreal division’s SkyBridge LP interest,
which is closely linked to the division’s potential participation in the
development and implementation of SkyBridge’s plans to provide satellite-based
high-data-rate wireless services.
Following is a summary of recent historical financial results and a second
quarter 2003 forecast, each as it is expected to be restated for discontinued
operations. The forecasted results for the second quarter include a $13
million charge for the estimated financial effect on the Montreal division of
schedule changes and technical problems on a commercial satellite program;
major factors contributing to this charge included delays in hardware
deliveries from a key supplier and the status of negotiations for additional
funding with the customer and appropriate government agency.
Statements of Operations
($ in millions, except per share data)
Forecast
Fiscal Year 2002 Q1 2003 Q2 2003
As As As
Expected Expected Expected
To Be To Be To Be
Restated Reported Restated Reported Restated
Net sales $238.7 310.4 58.4 66.5 66.0 to 68.0
Operating profit 17.7 15.4 2.7 0.6 4.3 to 4.8
Pre-tax earnings 16.1 12.8 2.1 --- 3.3 to 3.8
Income tax expense 4.8 4.2 0.7 --- 1.1 to 1.2
Earnings from
continuing operations 11.3 1.4 2.2 to 2.6
Loss from discontinued
operations (2.7) (1.4) (16.5) to
(15.5)
Net earnings (loss) $8.6 8.6 --- --- (14.3) to
(12.9)
Diluted net earnings (loss) per
share:
From continuing
operations $1.05 0.13 0.21 to 0.24
From discontinued
operations (0.25) (0.13) (1.54) to
(1.45)
Net earnings (loss) per
share $0.80 0.80 --- --- (1.33) to
(1.21)
As a result of today’s announced decision, the Company expects that in the
third quarter of 2003 it will recognize a charge to discontinued operations of
approximately $20 million for the loss anticipated upon disposal of the Space
& Technology/Montreal division. This charge is based on management’s
preliminary estimate of the fair value of the assets held for sale, as well as
the opinion of management and its advisors concerning a reasonable price under
current market conditions. The actual charge to be recognized may vary from
this estimate depending upon the results of further analysis. After recording
this charge, the net assets held for sale would be approximately $34 million.
There could be additional charges in the future if it became clear that the
Company would not be able to realize at least $34 million in net proceeds from
the sale of the Space & Technology/Montreal division.
Conference Call
Questions concerning EMS’s sale of its Montreal operations and second
quarter 2003 results will be deferred until the conference call on Tuesday,
July 29, 2003, which is the scheduled release date for the Company’s second
quarter results. Details for access to the conference call will be available
at a later date.
EMS Technologies, Inc. is a leading provider of technology solutions to
wireless and satellite markets. The Company focuses on mobile information
users, and increasingly on broadband applications. The Company is
headquartered in Atlanta, employs approximately 1,700 people worldwide, and
has manufacturing facilities in Atlanta, Montreal, Ottawa and Brazil.
The Company has four main families of products ...
* Space & Technology antennas and other hardware, for space and satellite
communications, radar, surveillance, military countermeasures, and
other specialized uses,
* LXE mobile computers and wireless local area networks, for materials
handling and logistics,
* EMS Wireless base station antennas and repeaters, for PCS/cellular
telecommunications,
* SATCOM antennas and terminals, for aeronautical, land-mobile and
maritime communications via satellite.
Statements contained in this press release regarding the potential for
various businesses and products, potential proceeds from the sale of the Space
& Technology/Montreal division, and the Company’s financial results for the
second and third quarters in 2003, are forward-looking statements. Actual
results could differ from those statements as a result of a wide variety of
factors. Such factors include, but are not limited to…
* uncertainties related to identifying a purchaser of the Space &
Technology/Montreal division and the purchaser's willingness and
ability to complete the transaction on the terms and timing expected
by the Company;
* economic conditions in the U.S. and abroad and their effect on capital
spending in the Company's principal markets;
* volatility of foreign exchange rates relative to the U.S. dollar and
their effect on purchasing power by international customers, as well as
the potential for realizing foreign exchange gains or losses associated
with net foreign assets held by the Company;
* changes in the Company's consolidated effective income tax rate caused
by the extent to which actual taxable earnings in the U.S., Canada, and
other taxing jurisdictions may vary from expected taxable earnings;
* successful completion of technological development programs by the
Company and the effects of technology that may be developed by
competitors;
* successful transition of products from development stages to an
efficient manufacturing environment;
* customer response to new products and services, and general conditions
in our target markets (such as logistics, PCS/cellular telephony, and
space-based communications);
* the availability of financing for satellite data communications systems
and for expansion of terrestrial PCS/cellular phone systems;
* the extent to which terrestrial systems reduce market opportunities for
space-based broadband communications systems by providing extensive
broadband Internet access on a dependable and economical basis;
* the growth rate of demand for various mobile and high-speed
communications services;
* development of successful working relationships with local business and
government personnel in connection with distribution and manufacture of
products in foreign countries;
* the Company's ability to attract and retain qualified personnel,
particularly those with key technical skills; and
* the availability of sufficient additional credit or other financing, on
acceptable terms, to support the Company's expected growth.
Additional relevant factors and risks are identified in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2002.
