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KVH Industries Reports Fourth Quarter And Full Year 2010 Results

Stocks in this article: KVHI

"Although we would prefer that our growth be smoother and without quarterly variations, the reality is that we still have some defense business that is quite lumpy," concluded Mr. Kits van Heyningen. "Fortunately, on an annual basis these tend to filter out and we are looking forward to a very strong 2011 despite the challenges in the first quarter. We expect that total mini-VSAT Broadband revenues will roughly double this year as we continue to gain market share and continue to build a solid recurring revenue base. Our full year guidance does not assume any revenue from the U.S. Army's planned CROWS III remote weapon station initiative so if that were to happen, it could present upside to our guidance."

Recent Operational Highlights:

  • In the past three months, KVH more than doubled mini-VSAT Broadband bandwidth in the North Atlantic and doubled the network's capacity supporting Africa, Asia, and the West Indian Ocean.
  • In February 2011, KVH introduced the KVH CommBox Ship/Shore Network Manager, which equips commercial maritime fleets with versatile tools for communication optimization, cost savings, crew services, and security.
  • On October 28, 2010, KVH announced that it had signed a global distribution agreement with Furuno Electric Co., Ltd., to market and sell KVH's mini-VSAT Broadband service through Furuno's worldwide sales and distribution network.

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://investors.kvh.com and listeners are welcome to submit questions pertaining to the earnings release and conference call to ir@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., ( www.kvh.com) is a leading manufacturer of solutions that provide global high-speed Internet, television and voice services via satellite to mobile users at sea, on land, and in the air. KVH is also a premier manufacturer of high performance sensors and integrated inertial systems for defense and commercial guidance and stabilization applications. The company is based in Middletown, RI, with facilities in Illinois, Denmark, Norway, and Singapore.

This press release contains forward-looking statements that involve risks and uncertainties. For example, forward-looking statements include statements regarding our financial goals for future periods, 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: the challenges and potential near-term costs associated with the acquisition and integration of a new company, the impact of extended economic weakness on the sale and use of motor vehicles and marine vessels; the need to increase sales of the TracPhone V7 and related services to improve airtime gross margins; delays or an inability to expand coverage of the mini-VSAT Broadband service to new regions; the potential inability to secure adequate Ku-band satellite capacity or the licenses necessary for any expansion of the mini-VSAT Broadband network; the need for or delays in qualification of products to customer or regulatory standards; unanticipated declines or changes in customer demand, due to economic, seasonal and other factors, particularly with respect to the TracPhone V7; the unpredictability of military budget priorities as well as the order timing, purchasing schedules and priorities for our defense products, including possible order cancellations; potential reductions in our overall gross margins in the event of a shift in product mix; and currency fluctuations, export restrictions, delays in procuring export licenses, and other international risks. 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 5, 2010. 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 Industries, Inc., has used, registered, or applied to register its trademarks in the USA and other countries around the world, including the following marks: KVH, KVH logo, Azimuth, TracVision, TracPhone, Tri-Americas, CommBox, TACNAV, DataScope and the DataScope logo, Sailcomp, mini-VSAT Broadband and the mini-VSAT Broadband logo, and the banded, dome-shaped housing of its satellite antennas. Other trademarks are the property of their respective companies.

 
KVH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
         
  Three Months Ended Year Ended
  December 31, December 31,
  2010 2009 2010 2009
Sales:        
Product   $ 22,049  $ 22,878  $ 92,059  $ 75,191
Service 4,953 3,408 20,184 13,869
Net sales 27,002 26,286 112,243 89,060
         
Costs and expenses:        
Costs of product sales 12,850 13,413 51,348 46,553
Costs of service sales 4,179 2,776 16,086 10,198
Research and development 2,698 2,540 10,715 8,805
Sales, marketing and support 4,855 3,945 18,469 16,316
General and administrative   2,449  2,110 10,084 7,832
Total costs and expenses  27,031  24,784  106,702  89,704
         
(Loss) income from operations (29) 1,502 5,541 (644)
         
Interest income 48 79 301 358
Interest expense 61 26 204 88
Other (expense) income, net  (25)  1 23 (20)
         
(Loss) income before income tax benefit (67) 1,556 5,661 (394)
Income tax benefit  312  291 2,612 261
Net income (loss)  $ 245  $ 1,847  $ 8,273  $ (133)
         
Net income (loss) per common share:        
Basic  $ 0.02  $ 0.13  $ 0.57  $ (0.01)
Diluted  $ 0.02  $ 0.13  $ 0.56  $ (0.01)
         
Weighted average number of common shares outstanding:    
Basic  14,595 14,043 14,420 13,996
Diluted 15,000 14,578 14,850 13,996
 
 
KVH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
 
  December 31, December 31,
  2010 2009
ASSETS    
Cash, cash equivalents and marketable securities  $ 37,307  $ 41,304
Accounts receivable, net  18,770  15,803
Inventories  14,765  13,387
Deferred income taxes  944  17
Other current assets  2,734  1,615
Total current assets  74,520  72,126
     
Property and equipment, net 23,044 15,777
Deferred income taxes 4,982 3,334
Goodwill 4,517  -- 
Intangible assets, net 2,272  -- 
Other non-current assets 5,863 6,509
Total assets  $ 115,198  $ 97,746
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Accounts payable and accrued expenses  $ 12,814  $ 10,358
Deferred revenue 1,011 961
Current portion of long-term debt 124 117
Total current liabilities 13,949 11,436
     
Other long-term liabilities 1,262 902
Long-term debt, excluding current portion 3,684 3,808
Stockholders' equity 96,303 81,600
Total liabilities and stockholders' equity  $ 115,198  $ 97,746
 
 
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
Net Income Excluding Transaction Costs Related to Business Acquisition and Income Tax
Benefit from Change in Deferred Income Tax Asset Valuation Allowance
(in thousands, unaudited)
     
  Three Months Ended   Year Ended
  December 31, 2010  December 31, 2010
     
Net Income - GAAP  $ 245  $ 8,273
     
Transaction costs related to business acquisition of Virtek Communication AS  39  564
Income tax benefit from change in deferred income taxes valuation allowance    --   (3,541)
     
Net Income - Adjusted  $ 284  $ 5,296
     
Net income per common share - Adjusted:    
Basic  $ 0.02  $ 0.37
Diluted  $ 0.02  $ 0.36
     
Note - The impact of the change in the deferred income tax asset valuation allowance on the number of diluted shares outstanding did not alter the diluted net income per common share result presented for both periods. As a result, the inconsequential impact to the diluted share number has not been included.

Adjusted net income excluding the transaction costs related to the acquisition of Virtek Communication AS as well as the income tax benefit from the change in deferred income tax valuation allowance for the three months and year ended December 31, 2010 is presented in the table above. This is a non-GAAP financial measure and should not be considered a replacement for GAAP results. We believe the adjusted information is useful to investors because it is reflective of underlying operational trends, as it excludes significant non-recurring or otherwise unusual transactions as described above. Our criteria for adjusted net income may differ from models used by other companies and should not be considered as an alternative to net income prepared in accordance with US GAAP as an indicator of our operating performance.

CONTACT: Patrick Spratt
         KVH Industries
         401-847-3327
         pspratt@kvh.com
         
         Christine Mohrmann
         Financial Dynamics
         212-850-5600

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