EX-99.1 2 image054503_ex99-1.txt PRESS RELEASE EXHIBIT 99.1 500 Spruce Tree Centre [IMAGE SENSING SYSTEMS,INC. LOGO] 1600 University Avenue West St. Paul, Minnesota 55104-3825 USA 651.603.7700 Fax: 651.603.7795 www.imagesensing.com NEWS RELEASE ------------ CONTACTS: ART BOURGEOIS, CHIEF FINANCIAL OFFICER IMAGE SENSING SYSTEMS, INC. PHONE: 651.603.7700 FOR IMMEDIATE RELEASE --------------------- IMAGE SENSING SYSTEMS ANNOUNCES THIRD QUARTER FINANCIAL RESULTS --------------------------------------------------------------- SAINT PAUL, MINN., OCTOBER 31, 2005-Image Sensing Systems, Inc. (ISS) (NASDAQ: ISNS), announced today financial results for its third quarter ended September 30, 2005. Net income for the quarter increased 17.2% to $1,145,000 ($0.30 per fully diluted share) from $977,000 ($0.26 per fully diluted share) for the comparable period in 2004, while net income for the nine-month period ended September 30, 2005 decreased 5.4% to $2,152,000 ($0.56 per fully diluted share) from $2,276,000 ($0.60 per fully diluted share) for the comparable period in 2004. Revenues for the third quarter were $3,463,000, a 12.5% increase from $3,077,000 for the comparable period in fiscal 2004, while revenues for the nine-month period ended September 30, 2005 were $8,114,000, a 5.4% decrease from $8,578,000 for the comparable period a year ago. Revenue from royalty income for the third quarter increased 6.3% to $2,669,000 from $2,511,000 in the third quarter of 2004 and increased 13.5% to $6,468,000 in the first nine months of fiscal 2005 from $5,698,000 in the comparable period of 2004 and reflects the continuing success that ISS's North American distributor, Econolite Control Products, Inc., is having selling the Autoscope Solo product in the United States and Canada. International sales for the third quarter of 2005 increased 40.3% to $794,000 from $566,000 for the comparable quarter in 2004 and decreased 42.8% to $1,646,000 in the first nine months of fiscal 2005 from $2,880,000 in the comparable period of 2004. Revenue improvements for the third quarter came from increased sales volume from both the European and Hong Kong subsidiaries. The decrease in revenue from international sales for the nine-month period ended September 30, 2005 was due to reduced sales from the Hong Kong subsidiary in the first half of 2005. They were unable to repeat a large order sold in the second quarter of 2004 to a customer in Korea. In addition, transition to a new loop detection product for sale in the Asian market was delayed due to technical issues that have since been corrected. Operating expenses for the quarter were $1,368,000, an 8.1% increase from $1,265,000 in 2004 while operating expenses for the first nine months of fiscal 2005 increased 14.2% to $4,027,000 from $3,527,000 in fiscal 2004. The increases were due primarily to the addition of technical and sales staff in Europe and the U.S. Jim Murdakes, Chairman and CEO said, "We were very pleased with the third quarter results, especially to have all three markets show revenue increases over the third quarter of 2004. Although we have had a decline in revenues and earnings for the first nine months of 2005 compared to 2004, we believe the third quarter is a good indicator that we are turning the corner internationally and are positioning ourselves for the coming new fiscal year." Headquartered in St. Paul, Minnesota, Image Sensing Systems, Inc. combines expertise in image processing, hardware and software engineering, and communications to develop video vehicle detection systems for traffic management and control applications. The Autoscope vehicle detection system is the world leader in video detection for advanced traffic management systems for highways, tunnel incident detection, intersection control, and traffic data collection. The Autoscope system provides traffic managers the means to reduce roadway congestion, improve roadway planning, and improve cost efficiencies. SAFE HARBOR STATEMENT: Statements made in this release concerning the Company's or management's intentions, expectations, or predictions about future results or events are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect management's current expectations or beliefs, and are subject to risks and uncertainties that could cause actual results or events to vary from stated expectations, which variations could be material and adverse. Factors that could produce such a variation include, but are not limited to, the following: the inherent unreliability of earnings, revenue and cash flow predictions due to numerous factors, many of which are beyond the Company's control; developments in the demand for the Company's products and services; relationships with the Company's major customers and suppliers; unanticipated delays, costs and expenses inherent in the development and marketing of new products and services; the impact of governmental laws and regulations; and competitive factors. Our forward-looking statements speak only as of the time made, and we assume no obligation to publicly update any such statements. Additional information concerning these and other factors that could cause actual results and events to differ materially from the Company's current expectations are contained in the Company's Form 10-KSB for the year ended December 31, 2004. Image Sensing Systems, Inc. Condensed Statement of Income (in thousands, except per share information): Three-Month Periods Nine-month Periods Ended September 30 Ended September 30 ------------------- ------------------ 2005 2004 2005 2004 ------- ------- ------- ------- Revenue Royalty income $ 2,669 $ 2,511 $ 6,468 $5,698 International sales 794 566 1,646 2,880 ------- ------- ------- ------- 3,463 3,077 8,114 8,578 Cost of revenue Royalty fee 118 102 288 243 Cost of sales 322 219 653 1,415 ------- ------- ------- ------- 440 321 941 1,658 ------- ------- ------- ------- Gross profit 3,023 2,756 7,173 6,920 Operating expenses Selling, marketing and product support 480 565 1,805 1,784 General and administrative 365 369 1,071 947 Research and development 523 331 1,151 796 ------- ------- ------- ------- 1,368 1,265 4,027 3,527 ------- ------- ------- ------- Income from operations 1,655 1,491 3,146 3,393 Other income 66 21 172 45 ------- ------- ------- ------- Income before income taxes 1,721 1,512 3,318 3,438 Income taxes 576 535 1,166 1,162 ------- ------- ------- ------- Net income $ 1,145 $ 977 $ 2,152 $ 2,276 ======= ======= ======= ======= Net income per common share Basic $ 0.32 $ 0.28 $ 0.60 $ 0.67 Diluted $ 0.30 $ 0.26 $ 0.56 $ 0.60 Weighted average shares outstanding Basic 3,625 3,442 3,576 3,378 Diluted 3,851 3,818 3,865 3,798 Image Sensing Systems, Inc. Condensed Balance Sheet (in thousands) September 30, December 31, 2005 2004 ------------- ----------- Assets Current assets Cash and cash equivalents $ 5,902 $ 1,262 Investments 4,050 7,300 Receivables 3,627 2,176 Inventories 450 404 Prepaid expenses and deferred taxes 181 324 ------------- ----------- 14,210 11,466 Property and equipment, net 244 127 Goodwill and capitalized software development costs, net 1,276 1,470 ------------- ----------- $15,730 $13,063 ============= =========== Liabilities and Shareowners' Equity Current liabilities Accounts payable and accrued expenses $ 789 $ 1,110 Income taxes payable 379 30 ------------- ----------- 1,168 1,140 Deferred income taxes 144 144 Shareholders' equity 14,418 11,779 ------------- ----------- $ 15,730 $ 13,063 ============= =========== Image Sensing Systems, Inc. Condensed Statement of Cash Flows (in thousands) Nine-Month Periods Ended September 30 ------------------------ 2005 2004 ---------- ---------- Operating activities Net income $ 2,152 $ 2,276 Adjustments to reconcile net income to net cash provided by operations Depreciation and amortization 275 247 Changes in operating assets and liabilities (1,276) (634) ---------- ---------- Net cash provided by operating activities 1,151 1,889 Investing activities Purchase of property and equipment (199) (61) Sale of short-term investments 3,250 -- Purchase of callable FHLB bonds -- (2,300) ---------- ---------- Net cash provided by (used in) investing activities 3,051 (2,361) Financing activity - proceeds from exercise of stock options 438 472 ---------- ---------- Increase in cash and cash equivalents 4,640 -- Cash and cash equivalents, beginning of period 1,262 5,384 ---------- ---------- Cash and cash equivalents, end of period $ 5,902 $ 5,384 ========== ========== ###