KVH Industries, Inc.,(Nasdaq: KVHI) -- Quarterly Revenue of $17.8
Million, Up 11% Year over Year -- Net Income of $1.0 Million and
$0.07 Per Diluted Share KVH Industries, Inc., (Nasdaq: KVHI), a
leading provider of mobile satellite communications products and
defense-related navigation and guidance systems, today reported its
results for the fourth quarter and year ended December 31, 2005.
Revenue for the fourth quarter 2005 was $17.8 million, up 11% from
$16.0 million for the fourth quarter ended December 31, 2004. Net
income for the quarter was $1.0 million, or $0.07 per share
compared to net income of $0.3 million, or $0.02 per share, during
the same period last year. For the year ended December 31, 2005,
revenue increased 14% to $71.3 million as compared to $62.3 million
for the year ended December 31, 2004. The company reported net
income of $2.9 million, or $0.20 per share, for the year ended
December 31, 2005, compared to a net loss of ($6.1) million, or
($0.44) per share, in the prior year. "The fourth quarter was a
strong one for KVH, capping off a good year in which we
accomplished virtually all of our operational and strategic goals
and achieved a significant improvement over our 2004 results," said
Martin Kits van Heyningen, KVH's president and chief executive
officer. "Revenue was up, we remained profitable for the full year,
and we strengthened our balance sheet. In addition, we positioned
ourselves for the future with the introduction of five new consumer
products, as well as the establishment of valuable strategic
relationships and initiatives that I expect will benefit KVH later
in 2006." In the fourth quarter of 2005, defense-related sales,
including those for KVH's TACNAV(R) military navigation systems and
fiber optic gyro (FOG) solutions, were up 57% on a year-over-year
basis. For the year ended December 31, 2005, defense revenue was up
61% compared to the prior year. "Our defense business made a
significant contribution to our bottom line growth, both in the
fourth quarter and the year as a whole. TACNAV and FOG sales
remained strong and we are currently involved in several new
product development efforts funded by the U.S. Department of
Defense that have the potential to expand the capabilities and
versatility of both product lines," explained Mr. Kits van
Heyningen. In the fourth quarter of 2005, mobile satellite revenue
declined 8% compared to the fourth quarter of 2004. For the year
ended 2005, mobile satellite revenue was up 1% compared to the
prior year. Commenting on the company's mobile satellite business,
Mr. Kits van Heyningen remarked, "Sales of our marine satellite TV
and communication products in North America and abroad showed
continued strength on 17% revenue growth for the year. Our new
TracVision(R) M3 is allowing us to support the large and virtually
untapped market of vessels 25-40 feet long for the first time.
Because of sharply lower RV product sales, our land mobile revenue
was down 13% for the year as a whole despite the solid increase in
annual sales of our TracVision A5 automotive satellite TV system."
Commenting on the company's plans in the RV market, Mr. Kits van
Heyningen said, "Within the land mobile market, our RV sales were
down significantly both for the quarter and year as a whole due to
general market and competitive conditions. In light of the
challenges within the RV marketplace, we are now in the process of
rolling out a new product line for recreational vehicles - the
TracVision R-series, which was introduced in late November 2005.
We've also taken steps to diversify all of our consumer product
lines by bringing mobile high-speed Internet to cars, boats, and
RVs in cooperation with Microsoft and its MSN(R) TV group. This
exciting new product complements our existing mobile satellite
systems while taking advantage of effective, affordable, and
available technology and services." "We have shifted our spending
to drive improvements in productivity and efficiency, including
focusing on several product cost reduction programs and continuing
to invest aggressively for future growth," explained Patrick
Spratt, KVH's chief financial officer. "A favorable mix of revenue
from our relatively higher-margin marine satellite and defense
products contributed to fourth quarter gross margin of 43%, and
drove a 24% increase in gross profit compared to the fourth quarter
of 2004. Asset management continued to be very strong and the
company generated a net increase in cash and marketable securities
in excess of $4 million for the year." Looking ahead to the
company's expected performance for 2006, Mr. Spratt noted, "Based
on current visibility, we anticipate that total revenue growth for
the year will be approximately 10%. We expect that our
defense-related business will show solid growth, but below the pace
that we saw in 2005. Marine and automotive sales should reflect
solid growth as well, but we expect RV sales to remain a challenge
and decline again on a year-over-year basis. Based on this revenue
growth projection, we expect full-year net income, prior to the
effect of stock option expensing, to be up approximately 50%. The
actual impact of option expensing will be a function of several
variables. Based on current assumptions, we expect the 2006 impact
of option expensing to be approximately $0.06 per share. "For the
first quarter, defense sales should show strong year over year
growth, though we expect that they will decline sequentially. First
quarter mobile satellite sales will be challenging due to continued
softness in the RV market. As a result, we expect that overall
revenue growth for the first quarter will be approximately 5% with
earnings roughly double those of the first quarter of 2005, prior
to the effect of option expensing." "We began 2006 with good
momentum in many of our markets including excellent progress in our
efforts to revitalize each of our product lines with new products
and services," concluded Mr. Kits van Heyningen. "At the same time,
we are positioning ourselves with other industry leaders thanks to
important new strategic relationships that will enable us to pursue
some exciting opportunities in the coming year." Recent Highlights:
-- February 15, 2006 - KVH announces that it shipped its 100,000th
mobile satellite antenna. -- January 5, 2006 - Microsoft Corp. and
KVH announced an agreement to bring the MSN(R) TV service to
consumers traveling in cars, trucks, RVs and boats throughout the
United States using a Mobile Internet Receiver with MSN TV service
designed and manufactured by KVH. -- November 29, 2005 - KVH
unveiled its TracVision R-series, a new family of mobile satellite
TV systems for the RV market. The new product line includes the
premier TracVision R6, which offers a compact 12" high design,
electronic dew elimination technology, on-screen messaging and
diagnostics, and an integrated 12V receiver designed for RV
applications. -- October 27, 2005 - KVH introduced its new
TracVision M3, the world's smallest stabilized marine satellite TV
antenna. The 14.5-inch diameter TracVision M3 was designed to bring
DIRECTV(R) service to vessels 25-40 feet in length. -- October 21,
2005 -The National Marine Electronics Association (NMEA) named the
KVH TracVision 4-HP satellite TV system the "Best Entertainment
Product of 2005" while the KVH TracPhone(R) F33 satellite
communication system was named "Best Communications Product of
2005". This was the eighth consecutive year that KVH TracVision and
TracPhone systems received these honors. KVH is webcasting its
fourth quarter conference call live at 10:30 a.m. Eastern time
today through the company's website. The conference call can be
accessed via the company's website at
http://www.kvh.com/InvRelations. The audio archive and an MP3
podcast will also be available on the company website within three
hours of the completion of the call. About KVH Industries, Inc. KVH
Industries, Inc., is a premier manufacturer of systems to provide
access to live mobile media ranging from satellite TV to telephone
and high-speed Internet for vehicles and vessels as well as a
leading source of navigation, pointing, and guidance solutions for
maritime, defense, and commercial applications. The company's
products are based on its proprietary mobile satellite antenna and
fiber optic technologies. An ISO 9001-certified company, KVH is
based in Middletown, Rhode Island. -0- *T KVH Industries, Inc. and
Subsidiary SELECTED FINANCIAL INFORMATION CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS (in thousands, except per share amounts,
unaudited) Three Months Year Ended Ended December 31, December 31,
----------------- ----------------- 2005 2004 2005 2004 --------
-------- -------- -------- Net sales $17,816 $16,011 $71,258
$62,303 TracVision A5 inventory and firm purchase commitment
revaluation charge (100) (55) (100) 2,358 Cost of goods sold 10,233
9,890 41,687 39,934 -------- -------- -------- -------- Gross
profit 7,683 6,176 29,671 20,011 Operating expenses: Research and
development 2,033 1,361 7,692 6,337 Sales and marketing 3,498 4,287
13,845 15,907 General and administrative 1,523 1,317 5,845 5,166
-------- -------- -------- -------- Income (loss) from operations
629 (789) 2,289 (7,399) Other income, net 418 239 931 506 Income
tax (expense) benefit (43) 819 (289) 746 -------- -------- --------
-------- Net income (loss) $ 1,004 $ 269 $ 2,931 $(6,147) ========
======== ======== ======== Net income (loss) per common share Basic
and diluted $ 0.07 $ 0.02 $ 0.20 $ (0.44) ======== ========
======== ======== Weighted average common shares outstanding Basic
14,619 14,468 14,571 14,109 ======== ======== ======== ========
Diluted 14,711 14,599 14,685 14,109 ======== ======== ========
======== KVH Industries, Inc. and Subsidiary SELECTED FINANCIAL
INFORMATION CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands,
unaudited) December December 31, 31, 2005 2004 -------- --------
ASSETS Cash, cash equivalents and marketable securities $50,090
$45,728 Accounts receivable, net 12,283 9,577 Inventories 6,564
7,251 Other assets 1,233 1,878 ------- ------- Total current assets
70,170 64,434 Property and equipment, net 8,663 8,218 Deferred
income taxes 3,334 3,014 Other non-current assets 163 248 --------
-------- Total assets $82,330 $75,914 ======== ======== LIABILITIES
AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses $
8,442 $ 5,678 Current portion of long-term debt 115 107 -------
------- Total current liabilities 8,557 5,785 Deferred revenue 128
- Long-term debt, excluding current portion 2,282 2,397
Stockholders' equity 71,363 67,732 -------- -------- Total
liabilities and stockholders' equity $82,330 $75,914 ========
======== *T This press release contains forward-looking statements
that involve risks and uncertainties. For example, forward-looking
statements include statements regarding our financial and product
development goals for 2006, anticipated revenue growth, anticipated
profitability, anticipated orders for our satellite communications
and military products, and anticipated improvements in our product
margins and competitive position. The actual results we achieve
could differ materially from the statements made in this press
release. Factors that might cause these differences include, but
are not limited to: the unpredictability of the emerging market, as
well as consumer demand, for mobile satellite communications
products in automobiles; failure to gain the acceptance of or
orders from automotive manufacturers for the TracVision A5;
seasonal declines in demand for our mobile satellite communication
and television products; the unpredictability of purchasing
schedules and priorities of the relatively small number of
customers for our defense products; the risk of order cancellations
or unexercised options, particularly for longer-term defense
orders, such as the multi-year SRWS or MK54 torpedo programs;
potential reductions in our overall gross margins in the event of a
general shift in product mix more strongly toward our mobile
satellite communications products; our dependence on sole, limited
source, or foreign suppliers; our dependence on third-party
satellite networks for programming and satellite services; the
impact of continuing increases in fuel prices on the sale and use
of motor vehicles and marine vessels; poor or delayed research and
development results; currency fluctuations, export restrictions,
delays in procuring export licenses, and other international risks;
potential product liability claims; the difficulty in protecting
our proprietary technology; potential claims of intellectual
property infringement; and expenses associated with corporate
governance requirements. These and other factors are discussed in
more detail in our Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on November 9, 2005. Copies are
available through our Investor Relations department and website,
www.kvh.com. We assume no obligation to update our forward-looking
statements to reflect new information and developments. KVH,
TracVision, TracPhone, and TACNAV are registered trademarks of KVH
Industries, Inc. All other trademarks are the property of their
respective companies.
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