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Offshore Systems International Reports Fiscal 2003 Second-Quarter and First-Half Earnings & Revenues
Vancouver, Canada -- Offshore Systems International Ltd. (TSX: OSI / OTCBB: OFSYF), a company specializing in situational awareness systems and data with a niche in naval navigation, today announced its operating results for the second quarter and first half ended May 31, 2003.
"We're very pleased to report OSI's fourteenth successive profitable quarter," said John Jacobson, President and CEO Offshore Systems International. "During the quarter, we had many important achievements that kept OSI on track in growing its Situational Awareness systems and data business. Our OSI Geomatics business unit announced a number of great new contracts, and our navigation systems business unit announced marketing agreements with three major industry players."
The first new business was a contract with Furuno Electric Ltd. of Japan to develop a type-approved Electronic Chart Display and Information System ("ECDIS") for the world-wide commercial market. Following that was an agreement with Kelvin Hughes Ltd. of the United Kingdom to develop selected military ECDIS products, while a third arrangement with Lockheed Martin in the United Kingdom will see OSI, as part of Lockheed's industrial team, bidding for the United Kingdom Royal Navy fleet Warship ECDIS procurement.
Since 1999, OSI has followed the United States Navy ECDIS-Navy ("ECDIS-N") requirements as the United States Navy has worked towards its deployment plans. In June 2003, the United States Navy announced that its goal of equipping all deploying ships with systems before the end of the United States Government's 2004 financial year was not feasible, and it would be changing its procurement approach. The company is working with our United States marketing partner, Lockheed Martin Naval Electronics and Surveillance Systems in pursuit of United States Navy business opportunities in ECDIS-N and other technologies.
Financial Highlights
For the second quarter of fiscal 2003, revenues decreased 28% to $3.0 million (US$2.1 million) compared with $3.8 million in the same quarter last year. For the first half of fiscal 2003, revenues decreased 8% to $6.5 million (US$4.4 million) from $7.1 million for the six months ended May 31, 2002. Gross profit remained at levels similar to comparable periods in 2002. The lower revenue and higher gross profit percentage resulted from a change in the mix of contracts executed in the periods.
Net earnings decreased to $152,162 (US$105,695) equal to $0.00 (US$0.00) per diluted share, down from $311,465, or $0.01 a diluted share, in the year-earlier second quarter. Net earnings decreased to $400,410 (US$268,985), equal to $0.01 (US$0.01) per diluted share, from $579,317, or $0.02 a diluted share, in the first six months of fiscal 2002. Increased sales and marketing expenses driven by the company's expansion efforts into American, European and Asia-Pacific markets and the completion of the Technology Partnerships Canada investment in the second quarter reduced earnings for the periods.
At May 31, 2003, the company had current assets of $9.8 million (US$7.1 million) versus current liabilities of $2.5 million (US$1.9 million) which resulted in working capital increasing $2.8 million (US$2.0 million) to $7.2 million (US$5.3 million) from $4.4 million at fiscal 2002 year-end. Cash and cash equivalents were $5.3 million (US$3.9 million) at May 31, 2003 versus $3.2 million at November 30, 2002.
Offshore Systems' total order backlog at the end of the second quarter of fiscal 2003 was in excess of $5.4 million (US$4.0 million) including option backlog of $2.9 million (US$2.1 million) versus $6.1 million at November 30, 2002.
Operational Highlights
In March 2003, the Company:
- announced that through its vertical nautical charting and land-mapping division, OSI Geomatics ("OSIG"), it had won a contract with the City of Ottawa to produce land mapping data critical to the planning and management of city infrastructure in the Nation's capital and
- confirmed that OSI and its teaming partners was short-listed as potential contractors to supply OSI's proprietary Electronic Chart Precise Integrated Navigation System ("ECPINS®") navigation display system to two international customers in the military defence industry. The award of formal contracts is subject to further technical evaluation and preparation of formal agreements.
In April 2003, the Company:
- received a contract from the Canadian Navy to develop submarine navigation systems for deployment on the Canadian Navy's Victoria Class Navy submarines,
- announced that OSIG had received new sales contracts worth over $950,000,
- announced that its systems division, Offshore Systems Ltd. ("OSL"), had received follow-on orders from the Canadian and the Danish navies worth $1,430,000. The orders are for additional services, equipment, and upgrades related to the navies' fleet-wide deployment of Offshore's proprietary ECPINS-Military ("ECPINS®-M") system and
- announced that OSL had entered into an agreement with Kelvin Hughes Limited, part of Smith Marine Systems, to jointly pursue opportunities to supply electronic navigation systems to military customers. With an initial focus on the UK, the companies will offer navigation systems compliant to the NATO Warship Electronic Chart Display and Information System standard ("WECDIS"). In June 2003, OSL and Kelvin Hughes were joined by Lockheed Martin UK to pursue the contract opportunity with the Royal Navy.
In May 2003, the Company announced that OSL has signed a contract with the Royal New Zealand Navy. The contract, valued at more than $1,000,000 with all options exercised, will see Offshore's proprietary ECPINS®-M system deployed across the Navy's entire fleet.
In June 2003, the Company:
- announced that OSIG was awarded a contract by a large US mapping company valued at more than $1,000,000. Under the contract, OSIG will provide data production services in support of a state-wide mapping project,
- announced that OSL has signed a multi-year agreement with Furuno Electric Company Ltd., a world-leading marine electronics company. The agreement will see the two companies work together to produce an electronic ship navigation system which Furuno will sell and service through its worldwide dealer network and
- announced that Lockheed Martin UK has teamed with Kelvin Hughes Ltd and OSL to bid into the initial competitive stage of the UK's Ministry of Defence requirement for WECDIS, which is being considered for installation into all Royal Navy ships. The team includes Babcock Design and Technology Ltd who would manage the task of ship-fitting design and the installation of the systems into the Fleet.
About Offshore Systems International
Offshore Systems International Ltd. (OSI) provides precise electronic display systems and geo-spatial data for situational awareness. Founded in 1977, OSI maintains a position of technological leadership in its field, a record appreciated by military, government, and commercial customers around the world. OSI conducts its operations through two business units: Offshore Systems Ltd. provides systems for the dynamic display of geo-spatial data for mission-critical operations such as fleet navigation; and OSI Geomatics which provides analysis, production, and distribution of geo-spatial data for electronic display. OSI is listed on the Toronto Stock Exchange (TSX:OSI) and in the United States of America on the Over the Counter Bulletin Board (OTCBB:OFSYF).
Forward-Looking Statements
This news release contains discussion of items that may constitute forward-looking statements within the meaning of securities laws including Section 27a of the Securities Act of 1933, as amended, and Section 21e of the Securities Exchange Act of 1934, as amended, with respect to achieving corporate objectives, developing additional project interests, OSI's analysis of opportunities in the acquisition and development of various project interests and other matters. These statements are made under the 'safe harbour' provisions of the Private Securities Litigation Reform Act of 1995 and, as such, involve known and unknown risks and uncertainties and other factors that may cause the actual results to be materially different from the results implied herein. Although Offshore Systems International believes the expectations reflected in such forward-look statements are based on reasonable assumptions, it can give no assurances that its expectations will be achieved. Factors that could cause actual results to differ from expectations include the effects of general economic conditions, changing foreign exchange rates, actions by government authorities, uncertainties associated with contract negotiations, industry supply.
Offshore Systems International Ltd.
Selected Consolidated Financial Information (Unaudited)
(Canadian dollars - Canadian GAAP)
| Statement of Earnings Information |
Three months ended May 31 2003 (unaudited)
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Six months ended May 31 2003 (unaudited)
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2003
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2002
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2003
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2002
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| Revenue |
2,958,027 |
3,827,452 |
6,521,202 |
7,112,970 |
| Gross profit |
1,722,881 |
1,732,688 |
3,611,319 |
3,416,069 |
| Gross profit percentage |
58.2% |
45.3% |
55.4% |
48.0% |
| Earnings for the period |
152,162 |
311,465 |
400,410 |
579,317 |
| Basic earnings per share |
0.00 |
0.01 |
0.01 |
0.02 |
| Fully diluted earnings per share |
0.00 |
0.01 |
0.01 |
0.02 |
| Balance Sheet Information |
May 31 2003 (unaudited)
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November 30 2002 (unaudited)
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| Cash and cash equivalents |
5,306,013 |
3,244,048 |
| Working capital |
7,235,791 |
4,449,492 |
| Current assets |
9,784,065 |
8,810,568 |
| Total assets |
11,772,411 |
10,766,438 |
| Current liabilities |
2,548,274 |
4,361,076 |
| Long-term debt |
226,653 |
372,717 |
| Total liabilities |
2,774,927 |
4,733,793 |
| Shareholder's equity |
8,997,484 |
6,032,645 |
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Jane Hayward
Investor Relations |
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| Phone: (613) 287-8004 |
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| Toll-Free: (888) 880-9797 |
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