UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 19, 2007
KVH Industries, Inc.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 0-28082 | |
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
05-0420589
(IRS Employer Identification No.)
| 50 Enterprise Center Middletown, RI |
02842 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (401) 847-3327
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| ITEM 2.02. | RESULTS OF OPERATIONS AND FINANCIAL CONDITION. |
On July 19, 2007, KVH Industries, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2007. The press release is attached hereto as exhibit 99.1 and incorporated by reference herein.
The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.
| ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS |
(d) Exhibits
| 99.1 |
July 19, 2007 press release entitled “KVH Reports Second Quarter Results” (furnished pursuant to Item 2.02). |
2
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.
| KVH INDUSTRIES, INC. | ||||||
| Date: July 19, 2007 | BY: | /s/ PATRICK J. SPRATT | ||||
| Patrick J. Spratt Chief Financial Officer | ||||||
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| EXHIBIT INDEX |
EXHIBIT DESCRIPTION | |
| 99.1 | July 19, 2007 press release entitled “KVH Reports Second Quarter Results” |
4
Exhibit 99.1
FOR IMMEDIATE RELEASE
| Contact: | Patrick Spratt KVH Industries 401-847-3327 |
Christine Mohrmann Financial Dynamics 212-850-5600 |
KVH Reports Second Quarter Results
| • | Record Quarterly Revenue of $23.2 Million |
| • | Net Profit of $1.5 Million; $0.10 Earnings per Share |
MIDDLETOWN, RI – July 19, 2007 – KVH Industries, Inc., (Nasdaq: KVHI) today reported financial results for the second quarter ended June 30, 2007. Revenue for the second quarter of 2007 was $23.2 million, a 6% increase over the second quarter ended June 30, 2006. Net income for the quarter was $1.5 million, or $0.10 on a per-diluted share basis. During the same period last year the company reported net income of $1.7 million, or $0.11 on a per-diluted share basis.
For the six months ended June 30, 2007, revenue increased 3% to $43.6 million from $42.3 million for the six months ended June 30, 2006. KVH reported net income of $1.6 million or $0.10 on a per-diluted share basis for the 2007 period, versus net income of $2.9 million or $0.20 on a per-diluted share basis in the year-ago period.
“Overall, we had a good second quarter that was in line with our expectations. We set a record for quarterly revenue and continued to build our long-term military business. We also made great strides in strengthening our positions in both the marine and land mobile markets through the development and introduction of several new products and services,” said Martin Kits van Heyningen, KVH’s president and chief executive officer.
In the second quarter of 2007, mobile communication revenue was $17.5 million, up 4% on a year-over-year basis. Defense-related sales, including those for KVH’s fiber optic gyro (FOG) solutions and TACNAV® military navigation systems, were approximately $5.7 million, up 11% on a year-over-year basis.
“The recent introduction of our new TracVision® M-series satellite TV systems helped drive our marine sales up 12% over the same quarter last year. Within the land mobile market, quarterly revenue was down 11% compared to a very strong second quarter in 2006, which was our first full quarter of TracVision R6 shipments into the RV market. Looking ahead, we are excited about the potential of our new TracVision SlimLine satellite TV systems, which were introduced publicly today and have already been selected by a number of leading RV manufacturers.
“Within our mobile communications business, last week’s launch of our TracPhone® V7 satellite communications system and the mini-VSAT Broadbandsm service is one of the more important strategic announcements we’ve made in recent years. Our effort to bring broadband, affordable Internet access to mariners has been a large and complex project that involved establishing new relationships with both ViaSat and satellite owner-operator SES AMERICOM. For sales to our customers, KVH will serve as the sole point of contact for hardware and airtime sales, activations, billing, and technical support for this new product and service. In addition, we will receive revenue from hardware sales as well as from the recurring monthly airtime generated by leisure boaters, commercial maritime operations, and government vessels using this unique end-to-end maritime communications solution.”
Turning to the defense market, Mr. Kits van Heyningen remarked, “We enjoyed strong product sales growth in the second quarter. Fiber optic gyro product revenue was up 31% and defense navigation revenue was up 43% year over year from the same quarter in 2006. While customer-funded engineering revenue was down compared to the second quarter of 2006, we continued to add long-term contract value to our military navigation business for 2008 and beyond. At the same time, we aggressively pursued new opportunities, including the potential application of our low-profile satellite antenna technology to high-speed satellite communications-on-the-move for the U.S. military.”
Commenting on the company’s financial results for the second quarter, Patrick Spratt, KVH’s chief financial officer, said, “The second quarter was generally on track with our expectations for both the top and bottom lines. As anticipated, sales of our higher-margin TACNAV systems, which were roughly three times higher on a sequential basis compared to the first quarter, contributed to a healthy improvement in gross margin to 42%. Operating expenses were affected by low levels of customer-funded engineering as well as the expense associated with ongoing patent litigation.
“While defense sales were strong this quarter, we have been informed that two potential orders that we were expecting to receive for the third quarter have been delayed. One is a significant TACNAV order from an international customer. The other is the U.S. Army’s new contract for its CROWS stabilized weapon program, which is now tentatively scheduled to be announced in
September 2007. Since our original expectation was that both of these programs would have been awarded by now, we had built them into our expectations for the second half of 2007. As we generally only include booked defense business in our near-term guidance, we are removing these from our third quarter guidance at this time. This will most likely result in third quarter revenues being in the range of $18 to $19 million. This is also expected to result in a loss of $0.04 to $0.08 cents per share for the third quarter of 2007. We are confident that our mobile communications business will remain strong and in line with our previous expectations for the remainder of the year. Given this outlook, and assuming that the CROWS contract award is made by the end of September and is favorable for us, we anticipate that our fourth quarter revenue will grow approximately 30% on a year-over-year basis to roughly $22 to $23 million while earnings will be in the range of $0.10 to $0.14 cents per share.”
Recent Operational Highlights:
| • | July 19, 2007 – KVH introduced its new 12” high SlimLine series of TracVision satellite TV systems for RVs, which offer fully automatic switching among satellites, built-in HDTV capabilities, and higher antenna efficiency and signal reception than competing 12” high antennas. |
| • | July 12, 2007 – KVH launched the new mini-VSAT Broadband service for maritime applications. This new high-speed service relies on spread spectrum technology to deliver fast, affordable Internet and phone service via KVH’s new 24” TracPhone V7. |
| • | June 27, 2007 – KVH announced that Monaco Coach, a leading manufacturer of recreational vehicles and the United States’ largest builder of Class A motor coaches, will add the KVH TracVision SlimLine mobile satellite TV systems to its new 2008 vehicles. |
| • | June 25, 2007 – KVH received a $1.1 million order for its DSP-3000 fiber optic gyros (FOGs) from a U.S. military customer. KVH’s compact, highly accurate FOGs will be used for real-time image synchronization and stabilization in military training simulator systems. |
| • | June 6, 2007 – KVH received a new contract from an international customer for the purchase of KVH’s TACNAV II FOG-based vehicle navigation systems and displays. The contract has a total value of approximately $2.3 million with shipments starting in 2007 and extending through 2010. |
KVH is webcasting its second 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://investors.kvh.com. 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 leading manufacturer of systems to provide mobile access to satellite TV, communication, and high-speed Internet, as well as navigation, pointing, and guidance solutions for 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. For more information, visit http://www.kvh.com.
This press release contains forward-looking statements that involve risks and uncertainties. For example, forward-looking statements include statements regarding our financial goals for 2007 and 2008, anticipated revenue growth, anticipated profitability, anticipated orders for our mobile communication and military products, and anticipated improvements in our 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: competition presented by alternative maritime satellite communication products and services; seasonal declines in demand for our mobile 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; potential reductions in our overall gross margins in the event of a general shift in product mix toward our mobile communication products; potential continued softness in the U.S. market for marine products; the unpredictability of the emerging market, as well as consumer and automotive manufacturer demand, for mobile communication products in automobiles; the emergence of alternative technology that may compete with or displace wireless mobile Internet services with regard to range and cost; changes in customer response to new product introductions; the impact of increases in fuel prices on the sale and use of motor vehicles and marine vessels; our dependence on third-party satellite networks for programming and satellite services; 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; expenses associated with corporate governance requirements; and changes in our equity compensation practices, including the impact of fluctuations in our stock price. 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 May 8, 2007. Copies are available through our Investor Relations department and website, http://investors.kvh.com. We do not assume any obligation to update our forward-looking statements to reflect new information and developments.
KVH, TracVision, TACNAV, and TracPhone are registered trademarks of KVH Industries, Inc., while mini-VSAT Broadband is a service mark of KVH Industries, Inc. All other trademarks are the property of their respective companies.
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KVH INDUSTRIES, INC. AND SUBSIDIARY
SELECTED FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| Net sales |
$ | 23,247 | $ | 21,968 | $ | 43,645 | $ | 42,257 | ||||||||
| Cost of sales |
13,382 | 13,373 | 26,186 | 24,842 | ||||||||||||
| Gross profit |
9,865 | 8,595 | 17,459 | 17,415 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
2,530 | 1,973 | 4,728 | 4,142 | ||||||||||||
| Sales, marketing and support |
3,779 | 3,428 | 7,791 | 7,273 | ||||||||||||
| General and administrative |
2,339 | 1,790 | 4,123 | 3,685 | ||||||||||||
| Income from operations |
1,217 | 1,404 | 817 | 2,315 | ||||||||||||
| Other income, net |
616 | 511 | 1,252 | 943 | ||||||||||||
| Income tax expense |
(332 | ) | (229 | ) | (511 | ) | (318 | ) | ||||||||
| Net income |
$ | 1,501 | $ | 1,686 | $ | 1,558 | $ | 2,940 | ||||||||
| Net income per common share |
||||||||||||||||
| Basic and Diluted |
$ | 0.10 | $ | 0.11 | $ | 0.10 | $ | 0.20 | ||||||||
| Weighted average common shares outstanding |
||||||||||||||||
| Basic |
15,016 | 14,773 | 14,962 | 14,729 | ||||||||||||
| Diluted |
15,031 | 14,893 | 14,997 | 14,860 | ||||||||||||
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KVH INDUSTRIES, INC. AND SUBSIDIARY
SELECTED FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
| June 30, 2007 |
December 31, 2006 | |||||
| ASSETS |
||||||
| Cash, cash equivalents and marketable securities |
$ | 53,881 | $ | 54,739 | ||
| Accounts receivable, net |
14,184 | 10,556 | ||||
| Inventories |
8,703 | 9,043 | ||||
| Other assets |
1,075 | 1,028 | ||||
| Total current assets |
77,843 | 75,366 | ||||
| Property and equipment, net |
11,158 | 9,569 | ||||
| Deferred income taxes |
3,334 | 3,334 | ||||
| Other non-current assets |
79 | 155 | ||||
| Total assets |
$ | 92,414 | $ | 88,424 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||
| Accounts payable and accrued expenses |
$ | 9,118 | $ | 8,121 | ||
| Current portion of long-term debt |
128 | 123 | ||||
| Total current liabilities |
9,246 | 8,244 | ||||
| Deferred revenue |
60 | 227 | ||||
| Long-term debt, excluding current portion |
2,093 | 2,158 | ||||
| Stockholders’ equity |
81,015 | 77,795 | ||||
| Total liabilities and stockholders’ equity |
$ | 92,414 | $ | 88,424 | ||
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