Novatel (MM) (NASDAQ:NGPS)
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NovAtel Inc. (NASDAQ:NGPS), a precise positioning
technology company, today announced its financial results for the
fourth quarter and full year ended December 31, 2005.
Revenues in the fourth quarter 2005 were CDN $16.2 million (US
$13.6 million) compared to CDN $14.4 million (US $11.6 million) in
the similar period a year ago. The Company is reporting net income
for the fourth quarter 2005 of CDN $5.1 million (US $4.3 million) or
CDN $0.58 (US $0.49) per share (diluted) compared to a net income of
CDN $5.8 million (US $4.7 million) or CDN $0.67 (US $0.54) per share
(diluted) in the similar period a year ago.
Revenues in the twelve months ended December 31, 2005 were CDN
$63.3 million (US $51.9 million) compared to CDN $53.9 million (US
$41.4 million) in the similar period a year ago. The Company is
reporting net income for the twelve months ended December 31, 2005 of
CDN $16.7 million (US $13.7 million) or CDN $1.91 (US $1.57) per
share (diluted) compared to a net income of CDN $12.8 million (US
$9.8 million) or CDN $1.51 (US $1.16) per share (diluted), in 2004.
"I am very pleased to announce another record year for NovAtel,
with both revenue and net income reaching new historical levels,"
stated Jon Ladd, President and CEO. "For the full year 2005, we grew
revenue by 17% and net income by 30%, compared to 2004. An important
element of our long-term goal of increasing shareholder value is
continued substantial investment in research and development. In
2005, we invested 17% of revenue in R&D while still maintaining our
operating income margins at about 22% of revenue. Our success
continues to be driven by executing our core strategy of building
market share with large OEM customers and emerging system
integrators." The growth in revenue and net income in 2005 was driven
by such factors as strong sales of precise positioning system
components into the surveying/mapping market and higher product
shipments into China.
NovAtel's Executive Vice President and CFO, Werner Gartner,
commented, "The 17% growth in reported year-over-year 2005 revenue
was achieved after absorbing the impact of the lower US dollar
relative to the Canadian dollar. Our full year 2005 revenues grew at
approximately 25% in US dollars, the base currency of the majority of
our revenues."
The net income for the full year 2005 includes the benefit of
recognizing CDN $2.4 million or $0.27 per share (diluted) of future
income tax assets, related to the tax benefit of existing tax shields
that the Company expects to use to offset earnings in the foreseeable
future, compared to CDN $3.2 million or CDN $0.38 per share (diluted)
in 2004.
The Company's fourth quarter 2005 revenue in its Special
Applications category grew by 17% over the similar period in 2004.
The majority of this year-over-year revenue increase is attributable
to higher product shipments into China and the US across a number of
vertical market applications.
Revenue from the Company's Aerospace and Defence category in the
fourth quarter of 2005 increased by 40% over the similar period a
year ago. "During the fourth quarter 2005, we shipped additional Wide
Area Augmentation System (WAAS) receivers to Raytheon Company in
support of the US FAA WAAS program. We also recognized revenue from
the first stages of a contract we announced in December, to develop
the Navigation Ground Reference Receiver for Europe's future Galileo
system," stated Ladd. "This contract was a significant win for
NovAtel, as it further demonstrates our technological leadership and
positions us for future involvement in this significant European
initiative."
NovAtel's fourth quarter 2005 revenue in its Geomatics category
decreased 17% over the similar period a year ago, due to rescheduling
shipments related to a new product launch into the first quarter of
2006. Revenue in this category is primarily attributable to revenues
related to Point, Inc., NovAtel's joint venture with Sokkia Co., Ltd.
"Our significant investment in R&D over the last few years has
been focused on developing next generation GPS-Plus technologies,"
Ladd continued. "As a result, the first members of our new OEMV
family of precise positioning components will be available to
customers by the end of March 2006. These products support the new
modernized GPS signals as well as signals from the growing Russian
constellation of GLONASS satellites. Our new OEMV product family is
an excellent example of how our development teams drive technical
innovation and integration creating compelling price/performance and
return on investment for our customers worldwide."
Gartner stated, "The growth in revenue, combined with strong
gross margins, resulted in operating income of CDN $3.8 million in
the fourth quarter of 2005, compared to CDN $2.5 million in the
fourth quarter of 2004. For the full year 2005, operating income
increased by 49% over 2004. In terms of cash flow, in the fourth
quarter 2005, we generated positive cash flow from operations of CDN
$5.7 million, increasing our cash/short term investments balance to
CDN $35.1 million. Building a strong balance sheet is central to our
growth strategy."
The acquisition of Waypoint Consulting Inc. on October 1, 2005
contributed approximately CDN $0.5 million in revenue and CDN $0.2
million to net income in the fourth quarter of 2005.
Ladd concluded, "We plan to continue to acquire technologies,
product lines and businesses which align with our strategy of
building a broader base of precise positioning technology in order to
service the growing requirements of our current customers and to
access new markets."
Foreign Exchange
Although approximately 95% of the Company's revenues are earned
in US dollars, the Company's financial results are reported in
Canadian dollars and in accordance with Canadian generally accepted
accounting principles. The CDN/US dollar exchange rate has declined
from an average rate of approximately CDN $1.30 per US dollar in all
of 2004 to a rate of CDN $1.17 per US dollar as of December 31, 2005.
The US dollar financial information presented above is translated
from the Canadian dollar financial information at the average rates
in effect during the relevant reporting periods, as follows:
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Three months ended Twelve months ended
------------------- --------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2005 2004 2005 2004
------------------- --------------------
Canadian dollar per
US dollar $1.186 $1.238 $1.218 $1.304
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During the conference call scheduled for this afternoon, the
Company will be providing updates and further information on the
following: revenues from the Special Applications, Aerospace &
Defence and Geomatics categories; Point, Inc.; the Company's
involvement with the European Union's satellite navigation system;
the performance of its recent acquisition of Waypoint Consulting
Inc.; long-term trends; and tax issues.
The Company will have a conference call today at 4:30 p.m. ET.
Participants may access the NovAtel Inc. conference call by dialing
1-888-280-8771 (North America) or 416-695-7848 (International). This
call is also being web cast and can be accessed at NovAtel's web site
www.novatel.com or at www.fulldisclosure.com.
A replay of the conference call will be available until March 13,
2006 by dialing 1-888-509-0081 (North America) or 416-695-5275
(International), or until May 15, 2006 at the web addresses noted
above.
The web cast is also being distributed over CCBN's Investor
Distribution Network to both institutional and individual investors.
Individual investors can listen to the call through CCBN's individual
investor centre at www.fulldisclosure.com or by visiting any of the
investor sites in CCBN's Individual Investor Network such as America
Online's Personal Finance Channel, Fidelity Investments(R)
(Fidelity.com) and others. Institutional investors can access the
call via CCBN's password-protected event management site,
StreetEvents (www.streetevents.com).
About NovAtel
NovAtel designs, markets and sells high-precision GPS and other
positioning components and sub-systems used in a wide variety of
commercial applications principally in the aviation, geomatics
(surveying and mapping), mining, precision agriculture, marine and
defence industries. NovAtel is also the principal supplier of
reference receivers to national aviation ground networks in the US,
Japan, Europe, China and India. NovAtel's solutions combine hardware,
such as receivers and antennas, with software to enable its customers
to fully integrate the Company's high-precision GPS technology into
their respective products and systems. NovAtel, an ISO 9001 certified
company, is focused on supplying core high-precision positioning
technology to OEMs and system integrators who build systems for
various end market applications. For more information, visit
www.novatel.com.
Certain statements in this news release, including those about
the Company's future plans and intentions, long-term growth
prospects, levels of activity or other future events, are
forward-looking statements. These forward-looking statements are not
based on historical facts but rather on management's current
expectations regarding NovAtel's future growth, results of
operations, performance, future capital and other expenditures,
competitive advantages, business prospects and opportunities.
Wherever possible, words such as ''anticipate'', ''believe'',
''expect'', ''may'', ''could'', ''will'', ''potential'', ''intend'',
''estimate'', ''should'', ''plan'', ''predict'', "forecast" or the
negative or other variations of these words, or similar words or
phrases, have been used to identify these forward-looking statements.
Forward-looking statements involve significant known and unknown
risks, uncertainties and assumptions. Many factors could cause actual
results, performance or achievements to differ materially from the
results discussed or implied in the forward-looking statements,
including operating results of the Company's joint venture Point,
Inc. ("Point"), impact and timing of large orders, U.S. dollar to
Canadian dollar exchange rate fluctuations, establishing and
maintaining effective distribution channels, timely launch of new
products, certification and market acceptance of NovAtel's new
products, impact and timing of large orders, credit risks of
customers and the Company's joint venture Point, pricing pressures in
the market and other competitive factors, maintaining technological
leadership, timing of revenue recognition in connection with certain
contracts, the ability to maintain supply of products from
subcontract manufacturers, the procurement of components to build
products, product defects, the impact of industry consolidations,
vulnerability to general economic, market and business conditions,
competition, environmental and other actions by governmental
authorities, reliance on key personnel and other factors described in
the Company's Form 20-F for the year ended December 31, 2004 and
other SEC filings, many of which are beyond the control of NovAtel.
These factors should be considered carefully and undue reliance
should not be placed on the forward-looking statements. These
forward-looking statements are made as of the date of this news
release, and NovAtel assumes no obligation to update or revise them
to reflect new events or circumstances.
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NOVATEL INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, Canadian dollars)
(Unaudited)
Dec. 31, Dec. 31,
2005 2004
-------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,721 $ 8,949
Short-term investments 32,363 14,410
Accounts receivable 10,694 9,413
Related party receivables 1,331 1,591
Related party notes receivable 1,552 1,614
Inventories 5,436 5,191
Prepaid expenses and deposits 599 268
Future income tax asset 2,370 1,286
-------------------------
Total current assets 57,066 42,722
Capital assets 3,095 3,447
Intangible assets 4,722 2,515
Goodwill 1,494 -
Deferred development costs 1,657 2,359
Future income tax asset 3,221 1,903
-------------------------
Total assets $ 71,255 $ 52,946
-------------------------
-------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 9,784 $ 9,148
Related party payables 15 345
Note payable 1,552 1,614
Deferred revenue 752 755
Provision for future warranty costs 693 538
-------------------------
Total current liabilities 12,796 12,400
Deferred gain on sale/leaseback of capital
assets 342 453
-------------------------
Total liabilities 13,138 12,853
-------------------------
Shareholders' equity:
Capital stock 39,667 38,870
(Common shares issued and outstanding:
8,365 at Dec. 31, 2005 and 8,260 at
Dec. 31, 2004)
Contributed surplus 953 442
Retained earnings 17,497 781
-------------------------
Total shareholders' equity 58,117 40,093
-------------------------
Total liabilities and shareholders'
equity $ 71,255 $ 52,946
-------------------------
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NOVATEL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, Canadian dollars, except per share data)
(Unaudited)
Three months ended Twelve months ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2005 2004 2005 2004
------------------------------------------
Revenues:
Product sales $ 14,501 $ 13,705 $ 59,306 $ 48,802
NRE fees 1,656 666 3,989 5,130
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Total revenues 16,157 14,371 63,295 53,932
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Cost of sales:
Cost of product sales 5,050 5,708 22,323 19,586
Cost of NRE fees 855 493 2,313 2,917
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Total cost of sales 5,905 6,201 24,636 22,503
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Gross profit 10,252 8,170 38,659 31,429
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Operating expenses:
Research and development 3,056 2,758 10,882 9,588
Selling and marketing 1,480 1,218 6,387 5,751
General and administration 1,928 1,377 7,082 5,312
Foreign exchange loss 19 320 255 595
Share offering costs - 12 - 754
------------------------------------------
Total operating expenses 6,483 5,685 24,606 22,000
------------------------------------------
Operating income 3,769 2,485 14,053 9,429
Interest income, net 246 118 787 313
Other expense (12) (15) (72) (67)
Benefit of investment
tax credits 556 4,356 1,592 4,356
------------------------------------------
Income from continuing
operations before income
taxes 4,559 6,944 16,360 14,031
Income taxes
Current provision 549 2,276 2,046 2,328
Future income tax expense
(benefit) (1,121) (1,091) (2,402) (1,091)
------------------------------------------
Income from continuing
operations 5,131 5,759 16,716 12,794
Income from discontinued
operations - 21 - 21
------------------------------------------
Net income $ 5,131 $ 5,780 $ 16,716 $ 12,815
------------------------------------------
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Net income per share
(basic) $ 0.61 $ 0.71 $ 2.01 $ 1.59
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Weighted average shares
outstanding (basic) 8,352 8,156 8,298 8,063
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Net income per share
(diluted) $ 0.58 $ 0.67 $ 1.91 $ 1.51
------------------------------------------
------------------------------------------
Weighted average shares
outstanding (diluted) 8,825 8,639 8,763 8,500
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NOVATEL INC. (Nasdaq:NGPS)