EXHIBIT 99
PRESS RELEASE
EMRISE CORPORATION ANNOUNCES FINANCIAL RESULTS FOR FOURTH QUARTER AND FULL YEAR
2005 Friday March 31, 8:45 am ET
RANCHO CUCAMONGA, Calif.--(BUSINESS WIRE)--March 31, 2006--EMRISE CORPORATION
(NYSE Arca:ERI), a multi-national manufacturer of defense and aerospace
electronic components and communications equipment, today announced anticipated
financial results for the three and twelve month periods ended December 31,
2005.
For the quarter ended December 31, 2005, net sales were $12.6 million, an
increase of $2.8 million, or 28.6%, compared to $9.8 million reported in the
fourth quarter of 2004. The increase in net sales includes $3.8 million of
revenues attributable to the March 2005 acquisition of Pascall Electronics Ltd.
("Pascall") and $1.0 million of revenues from RO Associates, Inc. ("RO")
acquired effective August 31, 2005. EMRISE also recorded a $700,000 increase in
sales of digital and rotary switches. These increases were partially offset with
a $1.5 million decline in sales of communications test instruments due to a lack
of year-end budgetary spending by the telecom carriers and a $660,000 decrease
in sales of power supplies due to delays in the delivery schedules for the
Eurofighter Typhoon aircraft.
Gross profit increased by $610,000, or 12.5%, to $5.4 million from $4.8 million
in the fourth quarter of 2004, mainly resulting from the contributions of both
Pascall and RO. Gross margin for the quarter was 43.2% as compared to 49.5%
during the fourth quarter of 2004. Gross margin declined due to lower year-end
budgetary sales of higher margin test equipment and higher sales of lower margin
power supplies. Selling, general and administrative expenses increased by
$647,000, or 17.1%, to $4.1 million from $3.5 million in the prior year
primarily due to acquisitions and increased expenses related to revenue growth.
Engineering and development expenses increased $397,000 or 81.3% to $885,000
from $488,000, resulting from new product development engineering costs for the
Larus carrier class satellite communication timing and synchronization product,
the Company's Digitran Division's low profile rotary switches and new product
engineering at Pascall. Operating margins for the fourth quarter 2005 were 3.5%
as compared to 9.0% last year. Operating margins declined due to lower gross
margin and higher selling, general and administrative and engineering expenses.
EMRISE recorded net income of $801,000, a 9.3% decrease from the net income of
$883,000 reported for the fourth quarter of 2004. Basic and diluted earnings per
share were $0.02 based upon 37.5 million basic and 38.5 million diluted shares
outstanding in 2005, as compared to earnings of $0.04 basic and $0.03 diluted
per share in the fourth quarter of 2004 based upon 24.8 million basic and 25.6
million diluted shares outstanding in 2004.
Carmine T. Oliva, President and Chief Executive Officer of EMRISE CORPORATION,
commented, "Our fourth quarter was unexpectedly impacted by unusually weak
year-end budgetary spending by major U.S. telecommunications carriers. Based
upon initial discussions with eight of our customers, we expected year-end
budgetary sales for CXR Larus of approximately $4.3 million. Unfortunately, we
received and shipped only slightly in excess of $1 million. We believe the
shortfall in the fourth quarter for this segment was primarily a result of the
extraordinary number of mergers and divestitures that occurred among our key
customers in the second half of 2005, which caused a temporary delay in spending
until new operations were rationalized. However, of the eight customers as to
which we experienced delays, spending by four of them began to materialize in
the first quarter, and we expect all of these carriers to return to a more
normalized pattern of spending during 2006."
For the year ended December 31, 2005, EMRISE recorded net sales of $41.0
million, an increase of $11.1 million, or 37.1%, compared to the $29.9 million
reported for 2004. The increase included $11.2 million of net sales attributable
to the acquisition of Pascall, $1.9 million attributable to the acquisition of
RO and $2.9 million for the January through July 12 period of 2005 attributable
to Larus, which did not have a comparable 2004 contribution period because Larus
was acquired on July 13, 2004. The $11.1 million increase in sales was partially
offset by a $1.3 million reduction in sales of communications test instruments
and a $2.9 million reduction in sales at XCEL Power Systems Ltd. primarily due
to delays in shipment of power supplies for the second tranche of the
Eurofighter Typhoon aircraft program.
Gross profit increased by 27.0% to $17.4 million for 2005 from $13.7 million for
the prior year due to the inclusion of Pascall, RO and the January through July
12 period for Larus. Gross margin declined to 42.4% for 2005 compared to 45.9%
for 2004 because of lower sales of high margin test equipment and increased
sales of lower margin power supplies. Selling, general and administrative
expenses increased by $3.5 million, or 34.3%, to $13.7 million for 2005 from
$10.2 million for the prior year, also primarily as a result of the
acquisitions. Engineering and development expenses increased 73.3% to $2.6
million from $1.5 million, attributable to new product development engineering
costs for the Larus carrier class satellite communication timing and
synchronization product, our Digitran Division's low profile rotary switches and
new product engineering at Pascall, all products we expect to realize revenues
from during 2006. Operating income for 2005 was $1.1 million, or 2.6% margin,
compared to $2.0 million, or 6.6% margin, in 2004 due to lower gross margin and
increased selling, general and administrative and engineering expenses.
EMRISE recorded net income of $1.3 million, a 13.0% decline when compared to the
net income of $1.5 million for 2004. Earnings per share was $0.03 based upon
37.3 million basic and 38.4 million diluted shares outstanding for 2005, as
compared to earnings of $0.06 per basic and diluted share based on shares
outstanding of 24.1 million basic and 24.8 million diluted shares outstanding
for 2004.
EMRISE's backlog increased 187% to a record $22.1 million at December 31, 2005,
including $7.2 million and $695,000 of backlog relating to the businesses of
Pascall and RO, respectively, compared to $7.7 million at December 31, 2004.
Excluding Pascall and RO, the Company's backlog increased $6.6 million, or
85.7%. Backlog is converted to revenue typically over a three to four month
period.
EMRISE's cash position was $4.4 million as of December 31, 2005 compared to $1.1
million as of December 31, 2004, primarily due to $16 million of net proceeds
from EMRISE's common stock financing in January 2005, offset by approximately
$10.0 million and $4.0 million used to acquire Pascall and RO, respectively.
EMRISE's working capital position was $13.0 million as of December 31, 2005
compared to $5.5 million as of December 31, 2004 due to the January 2005
financing and increases in inventory and accounts receivables related to the
Pascall and RO acquisitions, while current liabilities increased by $4.4 million
to $13.0 million as of December 31, 2005 compared to those reported as of
December 31, 2004 due to increased advances on the Company's new Lloyds TSB U.K.
credit facility. Stockholders' equity increased $16.1 million, or 147.7%, to
$27.0 million as of December 31, 2005 from $10.9 million as of December 31, 2004
due to net proceeds from EMRISE's common stock financing and reported profits.
Mr. Oliva continued, "We continue to invest in product development and
engineering, particularly for our new Star Clock 200(R) satellite communication
timing and synchronization product and to support the continued development of
our new low profile rotary switch. With our increased backlog, we have entered
into 2006 with a reasonable amount of visibility into our businesses. The
recommencement of shipments for the Eurofighter Typhoon aircraft program is
underway and, we believe, will begin to have a positive impact to our top and
bottom line results in the second quarter of 2006. Given our solid balance
sheet, we believe we are well-positioned to meet the working capital needs
necessary for increased organic growth, and we plan to continue to review
additional acquisitions that would be complementary to our existing businesses."
Year 2005 In Review:
EMRISE successfully completed four of its key objectives in 2005. These included
achieving a greater than $50 million revenue run-rate, obtaining a national
listing for its common stock on the ArcaEx exchange, successfully entering into
the large market for satellite communication timing and synchronization
products, and increasing penetration into the burgeoning market for in flight
entertainment and communications products. Highlights of the year:
o In January, following the acquisition of Larus Corporation in July of
2004, the Company's CXR Larus subsidiary completed the design and
obtained Network Equipment Building Standards ("NEBS") approval for the
new Star Clock 200(R) satellite communication timing and
synchronization product, thus allowing the company to address the North
American market. EMRISE is now working to configure an E1 version that
would allow for the Company to sell its products in Europe, Africa the
Middle East, Asia and South America. This product is expected to be
introduced in the second quarter of 2006.
o In January, the Company completed a private placement offering
receiving net proceeds of $16 million, with use of proceeds intended
for identifying and consummating strategic acquisitions in Europe and
the United States.
o In March, the Company acquired Pascall, an England-based manufacturer
of commercial and military power supplies and RF components and
subsystems.
o XCEL Power Systems Ltd. received a $750,000 contract in May from BAE
Systems for development of a fifth new power supply for the Eurofighter
Typhoon aircraft, bringing the total potential revenue for XPS and
Pascall's RF components and subsystems to approximately $50,000 per
aircraft.
o Also in May, CXR Larus began a program to retrofit an older timing
system for Taiwan's primary public telecommunication carrier with an
updated Star Clock(TM) T1/E1 version product that could result in a
multi-year program of retrofits totaling in excess of $3 million.
o Early in July, EMRISE's Digitran Division received a development
contract from a major Navy contractor to design and produce a custom
high-reliability low profile rotary switch that has initial-year
revenue potential of $1 million. Also in July, XPS was awarded a $1.8
million contract from Smiths Aerospace Ltd. for custom power supplies
to be delivered over a one-year period.
o In September, XPS received a long-awaited contract from BAE Systems for
the Tranch 2 Eurofighter Typhoon aircraft power supplies, worth a
record $7.5 million with deliveries anticipated to commence in the
second quarter of 2006.
o Also in September, EMRISE Electronics Corporation completed the
acquisition of RO, a U.S.-based manufacturer of standard power
supplies. This acquisition provides a U.S. engineering and sales and
marketing support base and possible U.S.-manufactured content to
support our two U.K.-based custom power supply operations. This
acquisition has enhanced addressable market size of prospective
business EMRISE can pursue while strengthening the Company's
relationships with all three of the largest manufacturers of in flight
entertainment systems.
o In October, CXR Larus entered into an agreement under which Hitachi OMD
is to manufacture all of EMRISE's satellite communication timing and
synchronization products. The agreement establishes a world-class
manufacturing capability for CXR Larus' largest customers, while
affording CXR Larus the opportunity to improve gross margins compared
to in-house manufacturing.
o CXR Larus closed the year in December by obtaining NEBS approval for
its new Star Clock 200(R) satellite communication timing system.
Receipt of this approval is a necessary qualification in order to sell
this product to large telecommunication carriers such as Verizon,
AT&T/SBC and Bell South, among others. December also saw CXR Larus
achieve FCC Part 15 regulatory certification for CXR Larus's Halcyon
brand of test equipment. CXR Larus is among the first
telecommunications test equipment manufacturers to achieve this
certification, which is a mandatory requirement in order to sell to
AT&T/SBC in 2006 and is likely to become necessary for sales to many
other carriers going forward.
Subsequent to the end of 2005
o The Royal Saudi Airforce's decision, announced in January 2006, to
purchase 24 Eurofighter Typhoon aircraft as part of the Tranch 2 build
adds potentially $1.2 million to the existing order of $7.5 million
booked in May 2005. This brings total Tranch 2 potentially to $8.7
million.
o In March 2006 EMRISE common stock began trading on the new NYSE Arca
exchange. We believe this trading venue will ultimately accrue benefits
to our Shareholders as the exchange matures and is recognized as an
instrumentality of the NYSE Group Inc.
Teleconference Information
To participate in the third quarter conference call scheduled for March 31, 2006
at 8:30 a.m. PST, dial the following phone number 5 to 10 minutes prior to the
scheduled conference: 877-407-9210. International callers should dial
201-689-8049. There is no pass code required for this call. The conference call
will also be broadcast live over the Internet and can be accessed at
WWW.VCALL.COM. To listen to the live call, go to the Web site at least 15
minutes prior to the start of the call to register, download and install any
necessary audio software.
For those unable to participate during the live broadcast, a replay will be
available shortly after the call on the Vcall site for 90 days. Also, for 24
hours after the conference call, a replay will be available by dialing the
toll-free number 877-660-6853 and for international callers 201-612-7415. The
conference ID number of "197541" and Account number of "286" should be used to
access the recording by phone.
About EMRISE CORPORATION
EMRISE Corporation is a multi-national manufacturer of defense, aerospace and
industrial electronic components and communications equipment. EMRISE's
electronic components business segment, which consists of EMRISE Electronics
Corporation and its international subsidiaries, provides custom power
conversion, RF components and subsystems as well as digital and rotary switches
to the North American, European and Asian electronic components market. These
products are primarily used for defense, aerospace and industrial applications.
EMRISE's communications equipment business segment, consisting of CXR Larus
Corporation and its subsidiary CXR Anderson Jacobson, provides network access
and transmission products, satellite communication timing and synchronization
products as well as communications test equipment to the North American,
European and Asian communications industry. Founded in 1983, EMRISE operates out
of facilities in the United States, England, France and Japan. As of February
28, 2006, EMRISE had a total of 338 employees in its various subsidiaries and
divisions. Website: WWW.EMRISE.COM. Listed on NYSE Arca under the ticker symbol:
ERI
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
With the exception of historical information, the matters discussed in this
press release, including without limitation, forecasts regarding revenues,
income and earnings per share of EMRISE and its subsidiaries, EMRISE's
opportunity and ability to ship and record revenues from any particular type or
amount of products, the anticipated effects on EMRISE's results of operations
and business operations in 2006 and beyond due to contributions from business,
including non-military business, acquired or resulting from the Pascall, Larus
and RO acquisitions as well as due to various products, arrangements,
relationships and planned integration and sales and marketing activities, and
EMRISE's anticipation that its acquisitions will improve future net income and
earnings per share, are forward-looking statements that involve a number of
risks and uncertainties. The actual future results of EMRISE could differ from
those statements. Factors that could cause or contribute to such differences
include, but are not limited to, EMRISE's ability to meet its working capital
needs, fund existing and anticipated product development efforts, identify and
successfully negotiate, fund and integrate recent and future acquisitions and
improve operating efficiency and realize anticipated synergies, lower costs and
increase profitability due to the integration and growth of recently acquired or
potentially acquirable businesses, the receipt and timing of contracts, orders
and payments from existing and potential customers for EMRISE's products and
services, EMRISE's ability to produce and fulfill delayed and backlog orders,
the receipt of production materials and resale products in a timely fashion,
market and economic conditions, the return of normal patterns of spending of
public carriers, the actual timing and volume of shipment of power supplies for
the Eurofighter Typhoon aircraft, the timeliness and success of the introduction
of a new Star Clock 200(R) version to address the European, Asian and other
markets, RO's ability to successfully provide a U.S. support base and
U.S.-manufactured content for our U.K.-based custom power supply operations, the
success of outsourcing to Hitachi OMD to improve gross margins at CXR Larus,
EMRISE's ability to position itself in the markets for satellite communication
timing and synchronization products and in flight entertainment and
communication products, changes in technology, governmental regulations and
policies and customer requirements, competitive products and services,
unforeseen technical issues, unexpected changes in typical seasonal sales trends
and those factors contained in the "Risk Factors" Section of EMRISE's latest
Form 10-K and other public filings.
EMRISE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
and Comprehensive Income
(unaudited)
(in thousands except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
Net sales $ 12,608 $ 9,768 $ 41,046 $ 29,861
Cost of sales 7,159 4,929 23,656 16,146
-------- -------- -------- --------
Gross profit 5,449 4,839 17,390 13,715
Operating expenses:
Selling, general and
administrative 4,124 3,477 13,694 10,226
Engineering and product
development 885 488 2,621 1,521
-------- -------- -------- --------
Income from operations 440 874 1,075 1,968
Other income (expense)
Interest expense (153) (128) (455) (433)
Interest income 17 -- 153 --
Other income (expense) 227 58 248 (6)
-------- -------- -------- --------
Income before income taxes 531 804 1,021 1,529
Income tax expense (benefit) (270) (79) (267) 49
-------- -------- -------- --------
Net income $ 801 $ 883 $ 1,288 $ 1,480
======== ======== ======== ========
Earnings per share:
Basic $ 0.02 $ 0.04 $ 0.03 $ 0.06
======== ======== ======== ========
Diluted $ 0.02 $ 0.03 $ 0.03 $ 0.06
======== ======== ======== ========
EMRISE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
December 31, December 31,
2005 2004
----------- -----------
Current assets:
Cash and equivalents $ 4,371 $ 1,057
Accounts receivable 9,413 5,796
Inventories 10,277 6,491
Deferred tax asset 1,386 352
Prepaid expenses and other 536 417
----------- -----------
Total current assets $ 25,983 14,113
Property, plant and equipment, net 2,073 909
Goodwill, net and other intangibles 15,775 9,441
Other assets 630 623
----------- -----------
$ 44,461 $ 25,086
=========== ===========
Liabilities and stockholders' equity:
Current liabilities:
Borrowing under lines of credit $ 3,283 $ 878
Current portion of long-term debt 1,004 711
Accounts payable 4,949 3,398
Income tax payable 218 572
Accrued expenses 3,571 3,014
----------- -----------
Total current liabilities 13,025 8,573
Long term debt, less current portion 2,492 3,235
Deferred taxes 1,108 1,400
Other liabilities 823 969
----------- -----------
Total liabilities 17,448 14,177
Stockholders' equity
Common stock 124 82
Additional paid in capital 42,877 26,746
Accumulated deficit (15,118) (16,406)
Accumulated other comprehensive
income (870) 487
----------- -----------
Total stockholders' equity 27,013 10,909
$ 44,461 $ 25,086
=========== ===========
CONTACT:
EMRISE CORPORATION
Randolph D. Foote, CFO, 909-987-9220 ext. 3201
or
Hayden Communications
Matt Hayden/Brett Maas, 843-272-4653