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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 |
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Delaware
(State or Other Jurisdiction of Incorporation) |
0-28082
(Commission File Number) |
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05-0420589 |
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50 Enterprise Center
Middletown, RI (Address of Principal Executive Offices) |
02842
(Zip Code) |
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Registrant’s
telephone number, including area code: (401) 847- 3327
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ITEM 12. RESULTS OF OPERATION AND FINANCIAL CONDITION.
SIGNATURES Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| KVH INDUSTRIES, INC. |
| Date: February 19, 2004 |
BY: /s/ Patrick J. Spratt
—————————————— Patrick J. Spratt Chief Financial Officer |
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EXHIBIT INDEX Exhibit No. Description 99.1
February 19, 2004 press release entitled "KVH Industries Announces Results for the |
EXHIBIT 99.1
KVH INDUSTRIES CONTACT: Pat Spratt, Chief Financial Officer
401-847-3327
INVESTOR RELATIONS CONTACT: Kellie Nugent, Financial Dynamics
212-850-5600
KVH INDUSTRIES ANNOUNCES RESULTS FOR THE FOURTH QUARTER
o Results in Line with Previously Announced Estimates
o Quarterly Revenue of $15.7 Million; Loss of $0.14 per share
o Satellite Communications Revenues Up 106%
MIDDLETOWN, RI - February 19, 2004 - KVH Industries (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 fiscal year ended December 31, 2003. Revenue for the fourth quarter
was $15.7 million, up 21% from $13.0 million for the fourth quarter ended
December 31, 2002. Net loss for the period was ($1.6) million, or ($0.14) per
share compared to net income of $0.3 million, or $0.03 per share, during the
same period last year. The results for the fourth quarter ended December 31,
2003, were in line with the preliminary quarterly results provided by the
company on January 6, 2004.
For the fiscal year ended December 31, 2003, revenue increased 19% to $56.7
million versus $47.7 million for the fiscal year ended December 31, 2002. KVH
reported a net loss of ($1.5) million, or ($0.13) per share, for the fiscal year
ended December 31, 2003, equal to a net loss of ($1.5) million, or ($0.13) per
share, in the prior year.
"While both the fourth quarter and full-year revenues were record highs, they
were lower than we had expected primarily as a result of the absence of an
anticipated large order from an existing U.S. military customer," explained
Martin Kits van Heyningen, KVH's president and chief executive officer. "The
absence of this order also contributed significantly to the loss incurred during
the fourth quarter. Nevertheless, there is a great deal to be pleased with in
the fourth quarter and 2003 as a whole. Over the course of the year, we
introduced five new products in our strategic business areas, expanded our
penetration in existing markets, successfully penetrated the automotive and
precision guidance markets, and achieved significant milestones in our defense
business."
Overall, the company's satellite products generated year-over-year revenue
growth of 106% for the fourth quarter, with revenue of $12.0 million.
"In addition to 50% growth in the marine and RV markets, we also experienced a
very positive introduction of the TracVision A5 into the automotive marketplace
as we shipped approximately 1,700 units by the end of the year," continued Mr.
Kits van Heyningen. "We fulfilled the channel backlog that had grown during the
first three quarters of 2003 in anticipation of the TracVision A5 introduction.
Sales of that product represented roughly 28% of our satellite communication
revenue for the quarter, making the TracVision A5 new product launch the most
successful in KVH history. We are now focusing our attention on activities that
will create broad consumer awareness and support the sell-through in the
channel. We are initiating new marketing campaigns, broadening our sales network
among car dealerships, exploring partnerships with consumer electronics
manufacturers to expand our reach into the mass market, and continuing to
develop the potential for the future OEM in-vehicle installation of the
product."
The company has consolidated its tactical navigation and fiber optic product
lines under the umbrella of its defense business, reflecting the increasingly
interconnected nature of these two product areas. Quarterly defense revenue was
$3.3 million with approximately 74% generated by tactical navigation products.
This represents a 50% decline from the company's record defense revenue in the
fourth quarter of 2002 when the company saw the effect of the preparation for
the conflict in Iraq.
Commenting on the company's defense-related business, Mr. Kits van Heyningen
remarked, "We have continued to expand the capabilities of our U.S. Army
standard M100 GMENS vehicle navigation system. Several weeks ago, we
successfully demonstrated a proof-of-concept M100 equipped with a satellite
communication system. This demonstration, carried out for U.S. Army observers,
represents a major step towards increasing the versatility of the M100 on the
battlefield. We are also on track to ship our first production TG-6000 inertial
measurement units to Raytheon this quarter in support of the new Mark 54 torpedo
program."
With regard to the company's financial results, Pat Spratt, chief financial
officer, said, "In the fourth quarter we experienced two operational challenges
that were the primary contributors to our weak bottom line results. These were
the absence of a large anticipated defense order and the high initial production
cost for the TracVision A5. Gross margin for the quarter declined to 29% from
46% in the fourth quarter of 2002. As we exited the fourth quarter the
TracVision A5 product cost had been reduced and we anticipate additional
improvement by mid-2004. We have continued to focus attention on managing
operating expenses in relation to revenue growth and we are pleased with the
continued improvement in this area."
Measured as a percentage of quarterly revenue, the company's operating expenses
declined to 40% compared to 43% in the fourth quarter of 2002. Inventory
management also improved during the fourth quarter. While sales increased 16%
sequentially from the third quarter of 2003, inventory at the end of the year
declined 2% compared to the end of the third quarter and inventory turns
increased to 7 per year. Cash declined more than expected to $2.8 million, due
largely to an increase in days sales outstanding.
"Despite the temporary setback on the defense side of our business, I remain
confident in our overall business plan and in KVH's position within the
marketplace," concluded Mr. Kits van Heyningen. "Looking ahead, I believe that
2004 will be a strong year for KVH with anticipated revenue growth of
approximately 30% to 50%, an expected return to profitability in the first
quarter, and strengthened profitability over the course of the year. Our core
satellite business remains strong, we expect the TracVision A5 to be a long-term
growth driver, and I anticipate that each key portion of our business will
record solid growth over the course of the year. The successful completion of
our recent equity offering also provides new financial resources for the
company. In order to pursue new opportunities, we have invested an enormous
amount of resources and energy into developing new products and services. I am
confident that we will see the expanding benefit of those investments in 2004."
RECENT HIGHLIGHTS
o On October 28, 2003, the KVH TracVision 4 and Tracphone 252 won the "Best
Satellite Television System" and "Best Satellite Communications Product"
awards respectively from the National Marine Electronics Association
(NMEA). This is the sixth consecutive year that KVH TracVision and
Tracphone products have received these honors.
o In November 2003, the KVH M100 Ground Mobility Enhanced Navigation System
(GMENS) for military vehicles was designated a standard product by the
German Army. Also during that month, KVH received an initial order for its
TACNAV systems for use aboard the Republic of Taiwan's new amphibious
assault vehicles as well as a $1.25 million follow-on order from the U.S.
Marine Corps.
o On December 17, 2003, the Consumer Electronics Association named the
TracVision A5 a 2003 Innovations Design and Engineering Award Honoree. On
January 27, 2004, the TracVision A5 was declared an Engineering Award
finalist by Product Design and Development Magazine.
o On February 11, 2004, the company introduced the Tracphone F33, one of the
most compact high-powered satellite communications systems available.
Tracphone F33 offers global voice coverage and is the first antenna
compatible with Inmarsat's Fleet F33 service to also provide access to not
only Fleet's 9.6 Kbps data channel but also the high-speed 64 Kbps Mobile
Packet Data Service (MPDS).
o On February 13, 2004, KVH announced that it had closed its public offering
of 2,750,000 shares of common stock at a public offering price of $18.75
per share, and expected to receive net proceeds from the offering of
approximately $48.1 million. KVH also granted the underwriters the right to
purchase up to an additional 412,500 shares of common stock to cover
over-allotments, if any, at any time on or before March 11, 2004.
KVH is webcasting its fourth quarter conference call live at 10:30 a.m. Eastern
Time today through the company's web site. The conference call can be accessed
at http://www.kvh.com/InvRelations. The audio archive also will be available on
the company web site within three hours of the completion of the call.
KVH Industries, Inc., designs and manufactures products that enable mobile
communication, navigation, and precision pointing through the use of its
proprietary mobile satellite antenna and fiber optic technologies. The company
is developing next-generation systems with greater precision, durability, and
versatility for communications, navigation, and industrial applications. An ISO
9001-certified company, KVH has headquarters in Middletown, Rhode Island, with a
fiber optic and military navigation product manufacturing facility in Tinley
Park, Illinois, and a European sales, marketing, and support office in
Hoersholm, Denmark.
KVH INDUSTRIES, INC. AND SUBSIDIARY
SELECTED FINANCIAL INFORMATION
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 31, 2003 AND DECEMBER 31, 2002
(in thousands, unaudited)
December 31, 2003 December 31, 2002
----------------- -----------------
Assets:
Cash and cash equivalents $ 2,849 $ 7,239
Accounts receivable, net 11,353 9,716
Inventories 6,298 3,947
Property and equipment, net 8,723 7,385
Deferred income taxes 2,888 2,826
All other assets 1,960 1,436
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Total assets $ 34,071 $ 32,549
========== ==========
Liabilities and stockholders' equity:
Accounts payable and accrued expenses 6,124 4,421
Debt obligations 2,614 2,697
Stockholders' equity 25,333 25,431
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Total liabilities and
stockholders' equity $ 34,071 $ 32,549
========== ==========
KVH INDUSTRIES, INC. AND SUBSIDIARY
SELECTED FINANCIAL INFORMATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
Three months ended Year ended
December 31, December 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
Net sales $ 15,655 $ 12,976 $ 56,672 $ 47,694
Cost of goods sold 11,115 6,989 33,795 26,504
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Gross profit 4,540 5,987 22,877 21,190
Operating expenses:
Research & development 2,013 1,858 8,578 8,855
Sales & marketing 3,051 2,540 11,201 9,951
General and administrative 1,129 1,212 4,597 3,594
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Operating earnings (loss) (1,653) 377 (1,499) (1,210)
Other expense, net 60 45 243 181
Income tax expense (benefit) (88) - (272) 86
---------- ---------- ----------- ----------
Net earnings (loss) $ (1,625) $ 332 $ (1,470) $ (1,477)
========== ========== =========== ==========
Net earnings (loss) per common share
Basic and diluted $ (0.14) $ 0.03 $ (0.13) $ (0.13)
========== =========== =========== ==========
Weighted average common shares outstanding:
Basic 11,555 11,106 11,403 11,040
========== =========== =========== ==========
Diluted 11,555 11,458 11,403 11,040
========== =========== =========== ==========
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This press release contains forward-looking statements that involve risks and
uncertainties. For example, these forward-looking statements include statements
regarding the company's financial and product development goals for 2004,
anticipated orders for our military products, expansion of our sales network,
potential partnerships with consumer electronics manufacturers, the potential
for OEM in-vehicle installation of our products, the timing of shipments of our
TG-6000 product, anticipated improvements in our product margins, our
competitive position, our future profitability and revenue growth. The actual
results realized by the company could differ materially from the statements made
herein. Factors that might cause such differences include, but are not limited
to: the unpredictability of the new and emerging market for mobile satellite
communications products in automobiles; the uncertainty of customer demand in
that market; anticipated increases in competition against the TracVision A5 and
our other products; potential difficulties in achieving significant cost
reductions for the TracVision A5; the unpredictability of purchasing schedules
and priorities of the relatively small number of customers for our defense
products; the significant financial impact of the delay of a single order for
our defense products; reductions in our overall gross margins associated with a
shift in product mix toward our mobile satellite communications products; our
dependence on single production lines for our products; our dependence on sole
or limited source suppliers; the need to maintain and expand our distribution
network; our dependence on third-party satellite networks for programming and
satellite services; failure to develop and market new products successfully;
challenges in managing anticipated growth; unforeseen changes in competing
technologies and products; worldwide economic variances; poor or delayed
research and development results; our dependence on our key executive officers
and employees; currency fluctuations, export restrictions and other
international risks; potential product liability claims; changing accounting
principles; the difficulty in protecting our proprietary technology; potential
claims of intellectual property infringement; the potential need for additional
financing; and expenses associated with new corporate governance requirements.
These and other factors are discussed in more detail in the company's prospectus
supplement filed with the Securities and Exchange Commission on February 10,
2004. Copies are available through the company's Investor Relations department
and web site, www.kvh.com. KVH assumes no obligation to update its
forward-looking statements to reflect new information and developments.
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