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EMRISE CORPORATION ANNOUNCES 2006 YEAR-END RESULTS RANCHO CUCAMONGA, CALIFORNIA, April 3, 2007 - EMRISE CORPORATION (NYSE Arca: ERI), a multi-national manufacturer of defense, aerospace and industrial electronic devices and communications equipment, today announced its 2006 financial results. For the year ended December 31, 2006, EMRISE recorded record net sales of $46.4 million, an increase of $5.1 million, or 12%, over the $41.3 million reported for 2005. The increase included a $1.9 million increase in net sales of power supplies attributable to Pascall Electronics Ltd. (“Pascall”) and a $3.3 million increase in net sales of power supplies attributable to RO Associates, Inc. (“RO”), both of which subsidiaries EMRISE acquired in 2005. XCEL Power Systems Ltd. (“XPS”), one of the Company’s two U.K.-based power supply companies, contributed a $1.8 million increase in net sales of power supplies. Also, the Company recorded a $411,000 increase in net sales of network access equipment sold into the European market by CXR Anderson Jacobson (“CXR-AJ”) located in France. These increases were partially offset by a $1.9 million reduction in net sales of the Company’s communication equipment that primarily was attributable to a $1.4 million reduction in net sales of test instruments due to the Company’s decision to not invest further in this product line and a $972,000 reduction in net sales of network access equipment in the U.S. due to reduced sales volume resulting from competition. Gross profit decreased to $17.0 million for 2006 from $17.6 million for 2005. Gross profit increased by $1.6 million within the Company’s electronic devices segment, mainly due to higher sales volumes, but was offset by a $2.2 million decline in the Company’s communications equipment segment due to a reduction in net sales of communications equipment and certain year-end reductions in inventory valuations. Gross margin declined to 36.6% for 2006 from 42.5% for 2005, owing to lower sales volume of high margin test equipment and increased sales volume of lower margin commercial avionic power supplies. Selling, general and administrative expenses increased by $2.4 million, or 18%, to $16.1 million for 2006 from $13.7 for 2005 due to $1.5 million of reaudit and restatement related expenses, $681,000 of increased expenses due to the full-year inclusion of Pascall and RO in 2006, and a $522,000 increase in compensation-related reserves. Engineering and product development expenses increased $464,000, or 18%, to $3.1 million from $2.6 million, primarily due to the discretionary decision to accelerate the development of the new TiemPo™ 6400 communication timing and synchronization product that resulted in $585,000 of product development expenses in 2006 that allowed the Company to introduce the new product one year ahead of schedule. EMRISE recorded a net loss of $3.6 million for 2006, compared to net income of $1.4 million for 2005. For 2006, basic and diluted loss per share was $0.10 based upon 38.0 million basic and diluted shares outstanding. For 2005, basic and diluted earnings per share was $0.04 based on 37.3 million basic shares outstanding and 38.4 million diluted shares outstanding. EMRISE’s financial results were adversely affected by several matters, among others, as follows:
Except for the reaudit and restatement expenses and engineering expenses, the above expenses were non-cash and therefore did not affect EMRISE’s cash flow. EMRISE’s backlog increased 16%, to a record $25.8 million as of December 31, 2006 from $22.2 million as of December 31, 2005. EMRISE’s cash position was $3.8 million as of December 31, 2006, down from $4.4 million as of December 31, 2005 but up from $2.7 million as of September 30, 2006. EMRISE’s Chairman, President and CEO, Carmine T. Oliva, said, “The EMRISE management team has completed possibly the most challenging year of the Company’s public company existence. The reaudit and restatement were both disruptive and costly. Nonetheless, the process was completed with no adjustments to the three years other than the originally identified need to record in 2005 $224,000 in revenues that had been prematurely recorded in 2004. Furthermore, because of the Company’s cash availability, the reaudit and restatement was completed without undue financial stress.” He continued, “While 2006 was a challenging year, it was also a year of major accomplishments. Principal among these accomplishments in our electronic devices business segment was our broad penetration into the in-flight entertainment and communications market, including the addition of the largest manufacturer of in-cabin systems as a new customer. We also secured a major manufacturer of cabin external micro base stations as a new customer, and added a major customer for our first system assembly that integrates not only our power supplies and RF devices, but also integrates GSM transceivers. We were awarded a patent for our new VLP® rotary switch, which has been selected for a critical application on the new A380 Super Jumbo AirBus.” Mr. Oliva added, “In our communications products business segment, we accelerated by one year the introduction of our TiemPo™ 6400, a new state-of-the-art communication timing and synchronization product. We believe the addition of Hitachi as our contract manufacturing partner for our communications products in the U.S. and France will be a driver of gross margin improvement. Aside from these important accomplishments, overall the most important was an increase in revenue of 12%, while also increasing backlog by 16% to a record high. We ended the year with our cash position at $3.8 million, up from $2.7 million in the third quarter of 2006. We believe our accomplishments in 2006 will support organic revenue growth in 2007 and a return to profitability.” About EMRISE CORPORATION EMRISE Corporation is a multi-national manufacturer of defense, aerospace and industrial electronic devices and communications equipment. EMRISE’s electronic devices group, which consists of EMRISE Electronics Corporation and its international subsidiaries, provides power conversion, RF and microwave devices, and digital and rotary switches to the North American, European and Asian electronic markets. EMRISE’s communications equipment group, consisting of CXR Larus Corporation and its subsidiary CXR Anderson Jacobson, provides network access and communication timing and synchronization products 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 March 16, 2007, EMRISE had approximately 302 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, margins and profitability, 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, especially through Hitachi manufacturing support, 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 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, actual timing and volume of shipment of VLP® rotary switches for the AirBus A380 and other customers, the success of the introduction of the new communication timing and synchronization product, EMRISE’s ability to position itself in the markets for communication timing and synchronization products and in-flight entertainment 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. # # # Tables follow
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