Norsat Reports Fourth Quarter Sales And Full Year 2006 Financials

Norsat International Inc. (TSX: NII) (OTCBB: NSATF) today reported fourth quarter sales of $5.42 million, gross margins of 48%, and a net profit of $0.53 million, or $0.01 earning per share on a diluted basis. For the same period last year, the Company had reported sales of $4.72 million, gross margins of 32%, and a net loss of $2.08 million, or a loss per share of $0.05 on a diluted basis.

“We turned a profit in the fourth quarter, both by growing the top line and by rationalizing our cost structure. I am particularly pleased that we were able to increase earnings per share by five cents in a single quarter,” said Dr. Amiee Chan, President and CEO, Norsat International Inc.

Q4 Results

The company reported $5.42 million in fourth quarter sales of which the Satellite Systems business unit generated $3.13 million; and the Microwave Products business unit produced $2.30 million.

The overall gross margin of 48% was helped by the introduction of new microwave and satellite systems products.

Operating expenses were rationalized significantly following a management change in September. These expenses were reduced to $1.79 million from $2.66 million in the third quarter. Consequently, sales, general and administrative expenses, the biggest contributor to this improvement, decreased to $1.51 million in the fourth quarter from $2.01 million in the third quarter.

FY 2006 Results

Sales, for the year ended December 31, 2006, were $15.26 million, down 15.8% from $18.12 million in the previous year. Sales of Microwave Products, at $9.00 million, were down by 11% from 2005, due to price erosion. Meanwhile, sales of Satellite Systems, at $6.26 million, were down by 22% from 2005, despite a strong fourth quarter. Delays in U.S. government spending depressed sales in the Satellite Systems business unit for much of the first three quarters; substantial improvements were realized in the fourth quarter as sales in the government sector improved and the company’s channel partners became increasingly effective.

The overall gross margin was 41% compared to 45% during the same period last year. The gross margin for Microwave Products was 43% in line with the 45% reported in the prior year. The gross margin for the Satellite Systems business unit declined to 38% in 2006 from 44% in 2005, mainly due to a physical count variance and an obsolescence provision of $1.9 million.

Total operating costs, at $10.02 million, were 20% lower than the same period in the previous year. Compared to the previous year, the selling, general and administrative expense, at $7.74 million, was 20% lower; the product development expense, at $1.77 million, was 22% lower; and the amortization expense, at $0.50 million, was 19% lower.

The Company’s net loss for the year ended December 31, 2006, narrowed to $4.40 million from $5.89 million as the company realized the benefits of its expense rationalization efforts.