Ituran Location and Control Ltd. Presents Record Results for the Third Quarter of 2005
Pro-forma Revenue Growth of 28% and EPS of $0.19
AZOUR, Israel, November 14 -- Ituran Location and Control Ltd. , today announced its consolidated financial results for the three and nine-month periods ended September 30, 2005.
Revenues for the third quarter of 2005 reached US$23.0 million. This represents an increase of 15.6% compared with revenues of US$19.9 million in the third quarter of 2004 and an increase of 5.8% compared with revenues of $21.7 million in the second quarter of 2005. Pro-forma revenues, excluding the effect of the non-core and the now discontinued project with Partner Communications increased 28.1% to US$23.0 million compared with revenues of US$17.9 million in the third quarter of 2004.
The factors that affected the company's revenue growth were:
1. A year-on-year growth in subscriber fees paid of US$2.2 million, which represents an increase of 23.9% due to the growing number of subscribers. As of September 30, 2005, the company had 320,000 subscribers compared with 243,000 as of September 30, 2004.
2. A year-on-year growth in product sales of US$2.8 million, which represents an increase of 32.5%. This was due to the growth in revenues from projects in China and South Korea, and an increase in sales of AVL (Automatic Vehicle Location) units to new subscribers.
3. A year-over-year reduction from US$2 million to almost zero in revenues due to the discontinuation of the non-core project with Partner Communications in March 2005.
Gross profit for the third quarter of 2005 reached US$11.2 million, or 48.6% of revenues, compared with gross profit of US$8.7 million, or 43.9% of revenues, in the third quarter of 2004 and gross profit of $10.3 million, or 47.5% of revenues for the second quarter of 2005. This represents year-on-year growth in gross profit of 27.8% and sequential quarterly growth of 8.2%.
The improvements in gross margins were due to the following factors:
1. An increase of only US$0.4 million in the cost of service revenues, compared to a growth of US$2.2 million in service revenues.
2. A change in the revenue mix and an increase in sales of higher margin products, in particular the growth in the projects in China and South Korea.
3. The discontinuation of the cellular products in conjunction with Partner Communications (as included in other revenue). The products had lower gross margins compared to the rest of the company's sales.
Net profit for the third quarter of 2005 reached US$3.6 million or diluted earnings per share of $0.19. This represents an increase of 21.5% compared with a net profit of US$3 million or diluted earnings per share of $0.15, in the third quarter of 2004 and an increase of 12.3% compared with a net profit of US$3.2 million, or diluted earnings per share of $0.17, in the previous quarter. Net profit for the third quarter of 2005 also showed an increase of 33.3% compared with pro-forma net profit of US$2.7 million in the third quarter of 2004.
Eyal Sheratzky, Co - CEO of Ituran said, "I am pleased to present record results with very strong pro-forma top-line growth of over 28% since last year. Our core business is growing strongly with above 30% growth in our subscriber base since last year. I am proud that we have been able to increase our gross margins strongly over the last few quarters, and despite a jump in G&A expenses, we increased our operating margin since the last quarter. We expect that the leverage in our business model will allow us to continue to improve our margins in the future as well".
Mr. Sheratzky continued, "A major milestone in the quarter was the secondary offering and listing on the NASDAQ. Through this offering, we have substantially increased our investor-base and expanded it internationally, and we are now strongly positioned to execute our growth strategy."
Mr. Sheratzky concluded, "Throughout 2006, we expect to see continued year - over - year double-digit growth in revenues and profit."
Conference Call Information
The Company will also be hosting a conference call today at 10:00am EST. On the call, management will review and discuss the results and will be available to answer investor questions.
To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 5 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Number: 1-866-229-7198
UK Dial-in Number: 0800-917-4613
ISRAEL Dial-in Number: 03-918-0610
INTERNATIONAL Dial-in Number: +972-3-918-0610
At:
10:00am Eastern Time, 7:00am Pacific Time, 5:00pm Israel Time
For those unable to listen to the live call, a replay of the call will be available for three months from the day after the call in the investor relations section of Ituran's website, at: www.ituran.com
About Ituran
Ituran provides location-based services, consisting predominantly of stolen vehicle recovery and tracking services, as well as wireless communications products used in connection with its location-based services and various other applications. Ituran offers mobile asset location, Stolen Vehicle Recovery, management & control services for vehicles, cargo and personal security, and radio frequency identification products for various purposes including automatic meter reading, electronic toll collection and homeland security applications. Ituran's subscriber base has been growing significantly since the Company's inception to over 320,000 subscribers distributed globally. Established in 1995, Ituran has approximately 760 employees worldwide, provides its location based services and has a market - leading position in Israel, Brazil, Argentina and the United States. The company also sells its products in China and South Korea.
Company Contact
Udi Mizrachi (udi_m@ituran.com)
V.P. of Finance, Ituran
(Israel) +972-3-557-1348
International Investor Relations Contacts
Ehud Helft (Ehud.Helft@gkir.com)
Kenny Green (Kenny.Green@gkir.com)
GK International Investor Relations
(US) +1-866-704-6710
Investor Relations in Israel
Amit Lev Ari (amit@km-ir.co.il)
KM Investor Relations
(Israel) +972-3-5167620
CONSOLIDATED INTERIM BALANCE SHEETS
US dollars
December 31, September 30,
(in thousands) 2004 2005
(audited) (unaudited)
Current assets
Cash and cash equivalents 4,604 6,673
Accounts receivable (net of allowance for
doubtful accounts) 19,993 22,032
Other current assets 1,614 49,393
Contracts in process, net 30 -
Inventories 6,416 7,046
_______ _______
32,657 85,144
Long-term investments and debit balances
Investments in affiliated companies 870 1,056
Deposit 1,393 1,324
Deferred income taxes 5,507 5,369
Funds in respect of employee rights upon
retirement 2,854 2,860
Minority share of shareholders' deficit of
subsidiary - 106
_______ _______
10,624 10,715
Property and equipment, net 9,204 10,016
Intangible assets, net 3,676 3,316
Goodwill 2,862 2,756
_______ _______
Total assets 59,023 111,947
_______ _______
Current liabilities
Credit from banking institutions 6,586 4,632
Accounts payable 10,574 11,117
Deferred revenues 3,824 4,363
Other current liabilities 9,165 13,092
_______ _______
30,149 33,204
Long-term liabilities
Long-term loans from banking institutions 3,615 669
Liability for employee rights upon retirement 4,256 4,225
Deferred income taxes - 470
_______ _______
7,871 5,364
_______ _______
Minority interest 108 167
_______ _______
Capital Notes 5,894 5,894
_______ _______
Total shareholders' equity 15,001 67,318
_______ _______
Total liabilities and shareholders' equity 59,023 111,947
_______ _______
CONSOLIDATED INTERIM STATEMENTS OF INCOME
US dollars US dollars
Three month period Nine month period
ended September 30, ended September 30,
(in thousands except per
share data) 2004 2005 2004 2005
(unaudited) (unaudited)
Revenues:
Location-based services 9,172 11,368 27,029 31,933
Wireless communications
products 8,742 11,586 23,173 32,544
Other 1,950 2 5,740 2,164
_______ _______ _______ _______
19,864 22,956 55,942 66,641
_______ _______ _______ _______
Cost of revenues:
Location-based services 3,185 3,878 10,026 11,272
Wireless communications
products 6,479 7,893 15,600 22,578
Other 1,473 29 4,136 1,602
_______ _______ _______ _______
11,137 11,800 29,762 35,452
_______ _______ _______ _______
Gross profit 8,727 11,156 26,180 31,189
Research and development
expenses 452 642 1,431 2,242
Selling and marketing
expenses 797 1,402 2,925 3,608
General and administrative
expenses 2,691 4,097 8,179 10,920
Other expenses (income), net 102 (1) 91 (6)
_______ _______ _______ _______
Operating income 4,685 5,016 13,554 14,425
Financing expenses (income),
net 180 (238) 1,571 (197)
______ _______ _______ _______
Income (loss) before taxes on
income 4,505 5,254 11,983 14,622
Taxes on income (1,292) (1,578) (3,712) (3,711)
_______ _______ _______ _______
3,213 3,676 8,271 10,911
Share in losses of affiliated
companies, net (113) (9) (280) (97)
Minority interests in loss of
subsidiaries (126) (52) (141) (114)
_______ _______ _______ _______
Net income for the period 2,974 3,615 7,850 10,700
_______ _______ _______ _______
_______ _______ _______ _______
Earnings per share:
Basic 0.16 0.19 0.42 0.57
_______ _______ _______ _______
_______ _______ _______ _______
Diluted 0.15 0.19 0.41 0.55
_______ _______ _______ _______
_______ _______ _______ _______
Weighted average number of
shares outstanding (in
thousands):
Basic 18,577 18,785 18,583 18,671
_______ _______ _______ _______
_______ _______ _______ _______
Diluted 19,116 19,142 19,134 19,141
_______ _______ _______ _______
_______ _______ _______ _______
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
US dollars US dollars
Three month period Nine month period
ended September ended September
30, 30,
(in thousands) 2004 2005 2004 2005
(unaudited) (unaudited)
Cash flows from operating
activities
Net income for the period 2,973 3,615 7,850 10,700
Adjustments to reconcile net
income to net cash from operating
activities:
Depreciation and amortization 896 835 2,523 2,647
Exchange differences on principal
of deposit and loan, net - 327 520 103
Increase (decrease) in liability
for employee rights upon
retirement (60) 29 494 237
Increase (decrease) in liability
for vacation pay (77) (169) - -
Share in losses of affiliated
companies, net 113 9 280 97
Deferred income taxes 550 (106) 580 90
Amortization of deferred
compensation related to employee
stock option plans, net 31 241 102 241
Capital losses (gains) on sale of
property and equipment, net 10 - (16) -
Minority interests in profits
(losses) of subsidiaries, net (156) (176) (141) (114)
Decrease (increase) in accounts
receivable 681 230 (2,922) (3,300)
Increase in other current assets (1,698) (232) (1,594) (1,033)
Decrease (increase) in
inventories and contracts in
process, net 68 (576) (1,147) (1,007)
Increase (decrease) in accounts
payable 396 (1,333) 2,675 1,334
Increase (decrease) in deferred
revenues (486) 1,040 (424) 780
Increase in other current
liabilities 2,052 1,280 3,285 3,704
______ ______ ______ ______
Net cash provided by operating
activities 5,293 5,014 12,065 14,479
______ ______ ______ ______
Cash flows from investment
activities
Decrease (increase) in funds in
respect of employee rights upon
retirement, net of withdrawals 55 (44) (98) (186)
Capital expenditures (510) (1,280) (1,544) (2,934)
Proceeds from sale of property
and equipment 52 127 94 127
Purchase of intangible assets and
minority interest (22) (233) (22) (824)
Loan granted to affiliated
company - (108) - (339)
______ ______ ______ ______
Net cash used in investment
Activities (425) (1,538) (1,570) (4,156)
______ ______ ______ ______
Cash flows from financing
activities
Short-term credit from banking
institutions, net (2,337) 54 (5,773) 32
Receipt of long-term loans (80) - 9,360 -
Repayment of long-term loans (1,204) (1,391) (13,325) (4,717)
Dividend paid 43 (14) (1,284) (2,698)
Issuance expenses - (246) - (596)
Proceeds from sale of Company
shares held by a subsidiary - - 1,416 -
Proceeds from exercise of options
by employees - 1 4 15
______ ______ ______ ______
Net cash used in financing
activities (3,578) (1,596) (9,602) (7,964)
______ ______ ______ ______
Effect of exchange rate changes
on cash and cash equivalents 13 (22) (90) (290)
______ ______ ______ ______
Net increase (decrease) in cash
and cash equivalents 1,303 1,858 803 2,069
Balance of cash and cash
equivalents at beginning of
period 3,418 4,815 3,918 4,604
______ ______ ______ ______
Balance of cash and cash
equivalents at end of period 4,721 6,673 4,721 6,673
______ ______ ______ ______
______ ______ ______ ______
Company Contact, Udi Mizrachi (udi_m@ituran.com), V.P. of Finance, Ituran, (Israel) +972-3-557-1348; International Investor Relations Contacts, Ehud Helft (Ehud.Helft@gkir.com), Kenny Green, (Kenny.Green@gkir.com), GK International Investor Relations, (US) +1-866-704-6710; Investor Relations in Israel, Amit Lev Ari (amit@km-ir.co.il), KM Investor Relations, (Israel) +972-3-5167620