Summary
This 8-K filing from Harris Corporation reports a significant impairment charge related to its investment in Terion, Inc. The company will record a $19.8 million charge ($12.9 million after-tax, or $0.09 per diluted share) due to the diminished value of its 19.6% stake in Terion. This impairment is a direct result of Terion losing its largest customer, which represented a substantial portion of its installed base. While the impairment itself does not involve future cash expenditures, it highlights a material negative development for Harris's non-operating income and signals potential challenges for its minority investment. Investors should note that this charge will be reflected in the first quarter of fiscal year 2007.
Key Highlights
- 1Harris Corporation will record a $19.8 million impairment charge on its investment in Terion, Inc.
- 2The impairment charge translates to $12.9 million after-tax, impacting earnings by $0.09 per diluted share.
- 3The impairment is driven by Terion losing its largest customer, impacting approximately 60,000 units of its installed base.
- 4Harris holds a 19.6% ownership interest in Terion, with a current carrying value of $23.0 million prior to the impairment.
- 5The impairment charge will be recognized in the first quarter of fiscal year 2007 as 'Non-operating income (loss)'.
- 6These impairment charges are not expected to result in any future cash expenditures for Harris.
- 7Terion is exploring strategic alternatives for its business, which may affect the future value of Harris's investment.
Frequently Asked Questions
The impairment charge is primarily due to Terion, Inc. losing its largest customer. This customer represented a significant portion of Terion's business and will be moving off of Terion's system over the next two years, severely impacting Terion's future revenue and the value of Harris's investment.
Harris will record a $19.8 million impairment charge ($12.9 million after-tax) in its first quarter of fiscal year 2007. This will be reported as 'Non-operating income (loss)' and will reduce the carrying value of the investment in Terion on the balance sheet. It will also reduce earnings per diluted share by $0.09.
No, the impairment charge itself does not result in any future cash expenditures for Harris. It is an accounting adjustment to reflect the reduced value of the investment.
Terion, Inc. is a privately-held company focused on wireless data communication and information solutions for the transportation industry. Harris holds a 19.6% ownership interest in Terion and made its initial investment in fiscal year 1994. Harris has also invested technology and cash in Terion.