NovAtel Inc. Reports Record Financial Results for the Full Year 2005.CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. -- NovAtel Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :NGPS), a precise positioning Precise Positioning is a term used to describe techniques to obtain the location of an object to better than a few centimeters of accuracy. Historically precise positioning was associated with surveying and geodesy. technology company, today announced its financial results for the fourth quarter and full year ended December December: see month. 31, 2005. Revenues in the fourth quarter 2005 were CDN (Content Delivery Network) A system of distributed content on a large intranet or the public Internet in which copies of content are replicated and cached throughout the network. $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 di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ) 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 (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "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 Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-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 Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. margins at about 22% of revenue. Our success continues to be driven by executing our core strategy of building market share with large OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and customers and emerging system integrators See systems integrator. ." 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 See Chief Financial Officer. , 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 Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents . 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 Tax Shield The reduction in income taxes that results from taking an allowable deduction from taxable income. Notes: For example, because interest on debt is a tax-deductible expense, taking on debt can act as a tax shield. that the Company expects to use to offset earnings in the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. 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 The Wide Area Augmentation System (WAAS) is an elevated-accuracy navigation system developed for civil aviation by the Federal Aviation Administration (FAA), a division of the United States Department of Transportation (DOT). (WAAS (Wide Area Augmentation System) A system of earth stations and satellites that improves the tracking accuracy of the GPS navigation system to approximately 10 feet. ) 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 European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. initiative." NovAtel's fourth quarter 2005 revenue in its Geomatics Geomatics is the discipline of gathering, storing, processing, and delivering of geographic information, or spatially referenced information. Overview The term "Geomatics" refers to:
"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 mod·ern·ize v. mo·dern·ized, mo·dern·iz·ing, mo·dern·iz·es v.tr. To make modern in appearance, style, or character; update. v.intr. To accept or adopt modern ways, ideas, or style. GPS signals The Global Positioning System (GPS) satellites broadcast a variety of signals to receivers (termed the 'user segment' of the system) to enable the determination of location and synchronized time. as well as signals from the growing Russian Russian associated in some way with Russia. Russian blue a breed of cats with short, dense, silver-tipped blue-colored coat and vivid green eyes. constellation Constellation, ship Constellation (kŏnstĭlā`shən), U.S. frigate, launched in 1797. It was named by President Washington for the constellation of 15 stars in the U.S. flag of that time. of GLONASS (GLObal NAvigation Satellite System-GLObalnaya NAvigatsionnaya Sputnikovaya Sistema) A satellite-based radio navigation system run by the Russian Ministry of Defense. It uses 21 MEO satellites and three spares. 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 Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses 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 way·point n. A point between major points on a route, as along a track. 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 align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. 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 Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . 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:
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
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 satellite navigation system satellite n → système m de navigation par satellite ; 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 North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. ) 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 Fidelity Investments is a group of privately held companies in the financial services industry. It is made up by two independent but closely cooperating companies, Fidelity Management and Research Corporation (FMR Co. (R) (Fidelity.com) and others. Institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. 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 (1) See ISO speed. (2) (International Organization for Standardization, Geneva, Switzerland, www.iso.ch) An organization that sets international standards, founded in 1946. The U.S. member body is ANSI. 9001 certified See certification. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . 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 sub·con·tract n. A contract that assigns some of the obligations of a prior contract to another party. intr. & tr.v. sub·con·tract·ed, sub·con·tract·ing, sub·con·tracts manufacturers, the procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or .
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
-------------------------
-------------------------
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
------------------------------------------
Total revenues 16,157 14,371 63,295 53,932
------------------------------------------
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
------------------------------------------
Total cost of sales 5,905 6,201 24,636 22,503
------------------------------------------
Gross profit 10,252 8,170 38,659 31,429
------------------------------------------
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
------------------------------------------
------------------------------------------
Net income per share
(basic) $ 0.61 $ 0.71 $ 2.01 $ 1.59
------------------------------------------
------------------------------------------
Weighted average shares
outstanding (basic) 8,352 8,156 8,298 8,063
------------------------------------------
------------------------------------------
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) |
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