Pointer Telocation Reports its Financial Results for 2005
$37 Million Record High Revenues - 237% Revenue Growth
First Year of Operating Profit
GIVATAYIM, Israel, March 1 --
Updates Guidance for 2006 Results
Pointer Telocation Ltd. (Nasdaq Capital Markets: PNTR), a leading provider of services to insurance companies and car owners, including road side assistance, towing and stolen vehicle retrieval services in Israel, Argentina and Mexico, reported its financial results for the year ended December 31, 2005.
Financial Highlights:
Revenues: Pointer's revenues increased by 237% to a record 37 million in 2005 from $11 million in 2004. This increase in revenue is attributed mainly to the acquisition of Shagrir Motor Vehicle Systems, a leading provider of services to insurance companies and automobile owners in Israel. Revenues from operations in Israel accounted for 89.8% of Pointer's revenues in 2005 as compared to 72.4% in 2004. Revenues from other geographical territories increased by approximately 25%, mainly due to expanded operations in Argentina and Russia.
In 2005, service revenues were 76% of total revenues, as compared to 49% in 2004. This fact reflects the tendency of shifting the business from a focus on the sale of technology to the provision of services.
Gross profit: Gross profit increased in 2005 to $13.7 million or 36.9% of revenues, as compared to $3.4 million or 30.7% in 2004. This increase in gross profit is attributable mainly to the acquisition of Shagrir Motor Vehicle Systems. The increase in gross profit was also affected, to a lesser extent, by the increase in revenues in other geographical territories but was offset partially by the losses of operations in Mexico, which commenced in March 2005.
Operating expenses: In 2005, operating expenses increased by 102% to $12.7 million from $6.3 million in 2004. This increase is mainly due to the consolidation of Shagrir Motor Vehicles and included an increase of $1.5 million in the amortization of intangible assets to a total of $2.5 million in 2005 from $932 thousand in 2004. To a lesser extent, the increase in operating expenses was affected by an increase of 85% in R&D expenses and an increase in the Mexican subsidiary's operating expenses.
Operating Profit (loss): As a result of the foregoing, Pointer is reporting a first time operating profit totaling approximately $1 million in 2005, compared to an operating loss of $2.9 million in 2004.
Net Loss: For the full year of 2005, net loss and net loss per share were reduced by 28% and 55% respectively to $2.7 million or $(1.17) per share compared to $3.8 million or $(2.58) per share in 2004.
EBITDA: Pointer's EBITDA improved to $6.4 million in 2005, as compared to a negative EBITDA of $438 thousand in 2004.
Commenting on the 2005 financial results, Danny Stern, CEO, said: "In 2005, we had concluded the first stage in our strategic repositioning to become a leading provider of value-added services to insurance companies. We currently have a substantial presence in five countries, and we offer an extensive and diversified range of services and customers."
"We are very pleased with our financial results which exceeded our expectations. The improved operating margin reflects the nature of our new business structure, which enables us to capitalize on economies of scale and to start presenting higher operating profits, after many years of operating losses. We are strengthening our positioning in all the markets and expect double-digit growth in our annual revenues abroad," concluded Mr. Stern.
Yossi Ben Shalom, Chairman of the Board said: "2005 has been Pointer's turnaround year, with record revenues and operating profit. As promised to our shareholders, Pointer is now a stronger company with a solid revenue base that presents year-to-year growth in revenues, operational profitability and strong EBITDA. We are looking forward to further accomplishing our goals and to achieve additional growth. "
We are updating our guidance for Pointer's 2006 revenues to approximately $40 million, primarily as a result of our growth in Israel and a double-digit growth in our operations abroad. We expect in 2006 to generate over $3.5 million in operating profits, $8.0 million in EBITDA and to reach profitability in the second half of 2006," concluded Mr. Ben Shalom.
Conference Call Information:
Pointer's management will host two conference calls with the investment community today, March 1st, in Hebrew on 15:00 Israel time and in English on 9:00 EST.
To listen to the conference calls, please dial:
From the US: 1-866-229-7198
From Israel: 03-9180609
A replay of the conference call will be available through March 2nd, 2006 on the Company's website at www.pointer.com.
About Pointer Telocation:
Pointer Telocation Ltd (www.pointer.com) provides
range of services to insurance companies and
automobile owners, including road-side assistance,
vehicle towing, stolen vehicle retrieval, fleet
management and other value added services. Pointer
Telocation provides services, for the most part, in
Israel, through its subsidiary Shagrir and in
Argentina and Mexico through its local subsidiaries.
Independent operators provide similar services in
Russia and Venezuela utilizing Pointer's technology
and operational know-how.
Safe Harbor Statement
This press release contains forward-looking statements
with respect to the business, financial condition and
results of operations of Pointer and its affiliates.
These forward-looking statements are based on the
current expectations of the management of Pointer,
only, and are subject to risk and uncertainties
relating to changes in technology and market
requirements, the company's concentration on one
industry in limited territories, decline in demand for
the company's products and those of its affiliates,
inability to timely develop and introduce new
technologies, products and applications, and loss of
market share and pressure on pricing resulting from
competition, which could cause the actual results or
performance of the company to differ materially from
those contemplated in such forward-looking statements.
Pointer undertakes no obligation to publicly release
any revisions to these forward-looking statements to
reflect events or circumstances after the date hereof
or to reflect the occurrence of unanticipated events.
For a more detailed description of the risks and
uncertainties affecting the company, reference is made
to the company's reports filed from time to time with
the Securities and Exchange Commission.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December 31,
2005 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,696 $ 75
Short-term investments - 15
Trade receivables (net of allowance for doubtful
accounts of $ 363 and $ 568 at December 31, 2005
and 2004, respectively) 6,576 3,828
Other accounts receivable and prepaid expenses 505 639
Inventories 1,389 1,343
Total current assets 10,166 5,900
LONG-TERM ASSETS:
Long-term accounts receivable 219 230
Severance pay fund 2,989 751
Property and equipment, net 7,319 2,670
Goodwill 36,924 13,154
Other intangible assets, net 9,597 2,808
Total long-term assets 57,048 19,613
Total assets $ 67,214 $ 25,513
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share and per share data)
December 31,
2005 2004
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit and current maturities of
long-term loans $ 9,949 $ 7,064
Trade payables 3,904 3,055
Deferred revenues and customer advances 6,477 78
Other accounts payable and accrued expenses 3,835 2,401
Total current liabilities 24,165 12,598
LONG-TERM LIABILITIES:
Long-term loans from banks 16,211 4,423
Long-term loans from shareholders and others 12,082 149
Accrued severance pay 3,951 1,257
32,244 5,829
SHAREHOLDERS' EQUITY:
Share capital -
Ordinary shares of NIS 3 par value:
Authorized - 8,000,000 and 4,000,000 shares at
December 31, 2005 and 2004, respectively; Issued
and outstanding - 2,479,020 and 1,704,505 shares at
December 31, 2005 and 2004, respectively 1,680 1,145
Additional paid-in capital 100,707 94,127
Deferred stock-based compensation (1) (117)
Accumulated other comprehensive loss (1,138) (353)
Accumulated deficit (90,443) (87,716)
Total shareholders' equity 10,805 7,086
Total liabilities and shareholders' equity $ 67,214 $ 25,513
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except per share data)
Year ended December 31,
2005 2004 2003
Revenues:
Products $ 8,856 $ 5,594 $ 2,774
Services 28,108 5,375 2,376
Total revenues 36,964 10,969 5,150
Cost of revenues:
Products 5,727 4,297 2,099
Services 17,587 3,301 2,075
Total cost of revenues 23,314 7,598 4,174
Gross profit 13,650 3,371 976
Operating expenses:
Research and development, net 892 482 664
Selling and marketing 3,693 1,644 621
General and administrative 5,518 2,775 1,343
Amortization of deferred stock-based
compensation *) 126 465 400
Amortization of intangible assets 2,462 932 67
Total operating expenses 12,691 6,298 3,095
Operating income (loss) 959 (2,927) (2,119)
Financial expenses, net 4,027 758 1,105
Other income (expenses), net 341 (42) (32)
Loss before taxes on income (2,727) (3,727) (3,256)
Taxes on income - 37 -
Loss from continuing operations (2,727) (3,764) (3,256)
Gain from discontinued operations - - 8,524
Net income (loss) $ (2,727) $ (3,764) $ 5,268
Basic and diluted loss per share from
continuing operations $ (1.17) $ (2.58) $ (3.81)
Basic and diluted earnings per share
from discontinued operations - - 9.96
Basic and diluted net earnings (loss)
per share $ (1.17) $ (2.58) $ 6.15
*) Stock-based compensation relates to
the following:
Research and development $ - $ - $ 125
General and administrative 126 465 275
Total $ 126 $ 465 $ 400
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
U.S. dollars in thousands (except share data)
Accumulated
Additional Deferred other
Number of Share paid-in stock-based comprehensive
shares capital capital compensation loss
Balance as of
January 1,
2003 112,899 $ 94 $ 77,373 $ - $ (892)
Issuance of
shares, net 868,045 570 3,172 - -
Conversion of
convertible
debenture 164,356 109 614 - -
Deferred
stock-based
compensation - - 966 (966) -
Amortization
of deferred
stock-based
compensation - - - 400 -
Induced
conversion of
convertible
debenture - - 1,011 - -
Issuance of
warrants to a
bank - - 103 - -
Comprehensive
income:
Foreign
currency
translation
adjustments - - - - 52
Net income - - - - -
Total
comprehensive
income
Balance as of
December 31,
2003 1,145,300 773 83,239 (566) (840)
Issuance of
shares,
warrants and
options for
the
acquisition
of additional
interest in a
subsidiary,
net 429,154 286 10,815 - -
Deferred
stock-based
compensation - - 16 (16) -
Amortization
of deferred
stock-based
compensation - - - 465 -
Exercise of
warrants and
options 130,051 86 57 - -
Comprehensive
loss:
Foreign
currency
translation
adjustments - - - - 487
Net loss - - - - -
Total
comprehensive
loss
Balance as of
December 31,
2004 1,704,505 1,145 94,127 (117) (353)
Issuance of
shares,
warrants and
options ,net 722,587 500 6,391 - -
Deferred
stock-based
compensation - - 10 (10) -
Amortization
of deferred
stock-based
compensation - - - 126 -
Exercise of
warrants and
stock options 51,928 35 179 - -
Comprehensive
loss:
Foreign
currency
translation
adjustments - - - - (785)
Net loss - - - - -
Total
comprehensive
loss
Balance as of
December 31,
2005 2,479,020 $ 1,680 $ 100,707 $ (1) $ (1,138)
Total Total
comprehensive shareholders'
Accumulated income equity
deficit (loss) (deficiency)
Balance as of January 1,
2003 $ (89,220) $ (12,645)
Issuance of shares, net - 3,742
Conversion of convertible
debenture - 723
Deferred stock-based
compensation - -
Amortization of deferred
stock-based compensation - 400
Induced conversion of
convertible debenture - 1,011
Issuance of warrants to a
bank - 103
Comprehensive income:
Foreign currency translation
adjustments - $ 52 52
Net income 5,268 5,268 5,268
Total comprehensive income $ 5,320
Balance as of December 31,
2003 (83,952) (1,346)
Issuance of shares, warrants
and options for the
acquisition of additional
interest in a subsidiary,
net - 11,101
Deferred stock-based
compensation - -
Amortization of deferred
stock-based compensation - 465
Exercise of warrants and
options - 143
Comprehensive loss:
Foreign currency translation
adjustments - $ 487 487
Net loss (3,764) (3,764) (3,764)
Total comprehensive loss $ (3,277)
Balance as of December 31,
2004 (87,716) 7,086
Issuance of shares, warrants
and options ,net - 6,891
Deferred stock-based
compensation - -
Amortization of deferred
stock-based compensation - 126
Exercise of warrants and
stock options - 214
Comprehensive loss:
Foreign currency translation
adjustments - $ (785) (785)
Net loss (2,727) (2,727) (2,727)
Total comprehensive loss $ (3,512)
Balance as of December 31,
2005 $ (90,443) $ 10,805
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended December 31,
2005 2004 2003
Cash flows from operating activities:
Net income (loss) $ (2,727) $ (3,764) $ 5,268
Adjustments required to reconcile net
income (loss) to net cash provided by
(used in) operating activities:
Gain from discontinued operations - - (8,524)
Depreciation and amortization 4,997 2,065 1,171
Accrued Interest and revaluation of
convertible debenture and long-term
loans 1,961 (43) (54)
Accrued severance pay, net 484 28 (146)
Write-off of inventories 199 479 111
Loss (gain) from sale of property and
equipment, net (299) (56) 21
Gain from realization of investment in
subsidiary, net (359) - -
Amortization of deferred stock-based
compensation 126 465 400
Induced conversion of convertible
debenture - - 1,011
Decrease (increase) in trade
receivables, net 2,581 (355) (265)
Decrease in other accounts receivable
and prepaid expenses 2,301 289 111
Decrease (increase) in inventories (144) 291 196
Increase in other long-term accounts
receivable (20) (35) (26)
Increase (decrease) in trade payables (359) 1,238 (1,145)
Decrease in other accounts payable and
accrued expenses (2,962) (508) (261)
Net cash provided by (used in)
operating activities 5,779 94 (2,132)
Cash flows from investing activities:
Purchase of property and equipment (2,020) (873) (1,099)
Proceeds from short-term bank deposits 15 - 62
Proceeds from sale of property and
equipment 519 58 -
Proceeds from realization of investment
in subsidiary 6,241 - -
Acquisition of additional interest in
Shagrir Motor Vehicle Systems, net of
cash acquired (a) - 10 -
Acquisition of activities and assets of
Shagrir Towing Services Ltd. and
Shagrir (1985) Ltd. (b) (43,847) - -
Net cash used in investing activities (39,092) (805) (1,037)
Cash flows from financing activities:
Receipt of long-term loans from banks 16,066 743 -
Repayment of long-term loans from banks (2,035) (376) -
Receipt of long-term loans from
shareholders and others 21,136 149 -
Repayment of long-term loans from
others (6,241) - -
Repayment of convertible debenture - - (300)
Issuance of warrants to a bank - - 103
Proceeds from issuance of shares and
exercise of warrants, net 6,176 67 3,742
Short-term bank credit, net (401) (504) 253
Net cash provided by financing
activities 34,701 79 3,798
Effect of exchange rate on cash and
cash equivalents 233 (1) 8
Increase (decrease) in cash and cash
equivalents 1,621 (633) 637
Cash and cash equivalents at the
beginning of the year 75 708 71
Cash and cash equivalents at the end of
the year $ 1,696 $ 75 $ 708
Supplemental disclosure of cash flow
transaction:
Cash paid during the year for interest $ 1,200 $ 469 $ 229
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended December 31,
2005 2004 2003
(a) Acquisition of additional interest in
Shagrir Motor Vehicle Systems:
Fair value of assets acquired and
liabilities assumed at date of
acquisition:
Working capital $ - $ (1,238) $ -
Long-term accounts receivable - (224) -
Property and equipment - (1,117) -
Customer list - (2,646) -
Brand name - (828) -
Goodwill - (12,638) -
Short-term bank credit - 5,282 -
Long-term loan - 1,890 -
Accrued severance pay, net - 276 -
- (11,243) -
Fair value of shares, options and
warrants issued - 11,253 -
$ - $ 10 $ -
(b) Acquisition of activities and assets
of Shagrir Towing Services Ltd. and
Shagrir (1985) Ltd.:
Fair value of assets acquired and
liabilities assumed at date of
acquisition:
Working capital $ 4,568 $ - $ -
Property and equipment (5,760) - -
Customer list (8,558) - -
Brand name (1,920) - -
Goodwill (31,652) - -
Long-term loan (1,175) - -
Accrued severance pay, net 6 - -
(44,491) - -
Fair value of shares, options and
warrants issued 644 - -
$ (43,847) $ - $ -
(c) Non-cash investing and financing
activity:
Conversion of convertible debenture $ - $ - $ 723