Technology Stocks : KVH Industries, Inc.
KVHI 12.90+0.4%Sep 25 4:28 PM EDTNews

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To: Bill Doolittle who wrote (188)1/16/1998 1:10:00 PM
From: Michael Paul Langley   of 7026
Integration Expenses for New KVH Fiber Optic Unit Expected to Reduce 4Q 1997 and Early 1998 Earnings

MIDDLETOWN, R.I. (Jan. 16) BUSINESS WIRE -Jan. 16, 1998--KVH Industries
(NASDAQ:KVHI) today announced that it expects a short-term decline in
earnings growth for the fourth quarter of 1997 and early fiscal 1998 asit continues to rapidly assimilate the company's recently acquired
fiber optics unit. The company acquired its fiber optics assets, which
include technology, products, staff and a significant patent portfolio,from Andrew Corporation on October 30, 1997, for about $1.8 million in cash and warrants to purchase KVH common stock.

Total revenues for the 1997 fourth quarter ended December 31 are
expected to be down about 25% from the comparable 1996 quarter. While
KVH's core products were the sole source of 1997 fourth quarter
revenues, 51% of revenues in the 1996 fourth quarter was derived from
significant, non-recurring sales of $4.4 million to American Mobile
Satellite Corporation. In a core-product, quarter-to-quarter comparison where the one-time AMSC sales are removed from 1996 fourth quarter revenues, KVH achieved a 60% growth in overall revenues for the 1997 fourth quarter. Navigation revenues increased somewhat in the 1997 fourth quarter over the 1996 comparable quarter. Fourth-quarter communications revenues decreased significantly in 1997 from 1996 as KVH continued its transition away from large, non-recurring sales and towards building direct, recurring business with such products as the newly launched Tracphone 50 and TracVision II.

Start-up costs in the 1997 fourth quarter related to the recent
acquisition are partially offset by fiber optic product revenues during the period. Some one-time charges in the 1997 fourth quarter, which ultimately will reduce KVH's long-term operating expense, will
adversely affect earnings for the quarter. Total operating costs for
the 1997 fourth quarter are expected to increase approximately 35% from the comparable 1996 quarter. The company anticipates that these
congruent events will result in earnings per share in the low single
digits for the 1997 fourth quarter, a decline from $.14 EPS in the 1996 fourth quarter.

"The short-term impact on earnings from our fiber optic unit is well
within the projections we developed prior to completing this important
acquisition as part of our long-term growth strategy," said Martin Kits van Heyningen, president and CEO. "Integration of the fiber optic group has been rapid and significant, and I am very confident that this new capability will be instrumental in positioning KVH as a leader in global, mobile satellite communication and navigation product development. We feel very strongly that these actions will increase shareholder value over the long term, and believe that a return to our historical profitability growth rate is possible in the latter half of

For the year ending December 31, 1997, overall revenues are expected
to be flat compared to fiscal 1996 An increase of approximately 25% in
operating costs for fiscal 1997 from fiscal 1996 is attributable
primarily to acquisition and new-product expenses during 1997. The
company expects a 15%-20% decrease in EPS for fiscal 1997 from $.35 in
fiscal 1996.

In positioning itself for long-term growth, KVH is focusing on
enhancing capabilities and market share for existing products and
developing new products to establish a full product pipeline and
ongoing revenue stream. To increase market penetration of existing
fiber optic products, the company is leveraging the extensive customer
base and distribution capabilities it developed in marketing other
product lines, such as Tracphone, TracVision and TACNAV. The
consolidated sales staff is focusing particularly on increasing OEM
contracts for fiber optic products. To expand its fiber optic
applications, KVH is pursuing an aggressive plan for using the
technology to enhance the capabilities of its existing marine and land
navigation and communications systems, and to develop a superior range
of high-bandwidth products for satellite communications. Meanwhile, KVH has kept production at its fiber optic facility on track and the
company strengthened management by appointing Sid Bennett vice
president of the business unit. Bennett has been instrumental in
developing the company's fiber optic technology from concept to
commercialization, and he provides strong leadership to the
professional staff which, almost in its entirety, elected to join KVH
after the acquisition.

To pursue these opportunities for long-term growth, the company is
increasing funding for R&D, manufacturing enhancements and marketing
scale-up. Consequently, the company expects that in the short term
expenses will outpace revenue growth and that quarterly net losses may

"As KVH enters its fiscal 1998 year, we anticipate that revenues from
fiber optic products will rise as we increase their visibility in the
market," said Chief Financial Officer Richard Forsyth. "We also expect
our fiber optic technology to be instrumental long term in establishing a more even revenue stream and reducing sales fluctuations that the company has experienced in the past. TracVision II and Tracphone 50 also are expected to achieve increased market penetration during 1998, and the anticipated launch of Tracphone 25 during the first quarter may further contribute to our communications line. Some of these revenues may be offset near term by periodic softness in military orders and the possibility that Asian markets will continue to struggle for awhile."

KVH Industries produces digital navigation systems and mobile
satellite communications products for commercial, military and marine
applications. The company's headquarters are in Middletown, Rhode
Island, and additional offices are located in Hoersholm, Denmark,
Orland Park, Illinois, and St. Petersburg, Florida.

This press release may contain certain forward looking statements that
involve risks and uncertainties. The actual results realized by the
Company could differ materially from the statements made herein.
Factors that might cause such differences include, but are not limited
to: successfully integrating and leveraging new fiber optics
technology; implementing mobile satellite communications technology;
market potential and penetration; reliability of outside vendors,
service providers and products; regulatory issues; maintaining
appropriate inventory levels; disparities between forecast and realized sales; and design delays and defects. Additional factors are discussedin the company's Annual Report on Form 10K filed with the Securities and Exchange Commission on March 27, 1997. Copies are available from the company's Corporate Communications Department.
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