EX-99 2 exhibit_1.htm 6-K

Exhibit 1

ITURAN LOCATION AND CONTROL LTD. PRESENTS RECORD RESULTS FOR THE
FOURTH QUARTER AND FULL YEAR OF 2005

Year over year, pro-forma revenue growth of 25.6% and pro-forma net profit growth of 43%

AZOUR, Israel – February 21, 2006 – Ituran Location and Control Ltd. (NASDAQ: ITRN, TASE: ITRN), today announced its consolidated financial results for the quarter and year ended December 31, 2005.

Revenues for the fourth quarter of 2005 reached US$23.5 million. This represents a 6.8% increase compared with revenues of US$22.0 million in the fourth quarter of last year and a sequential increase of 2% compared with revenues of US$23.0 million in the previous quarter.

Pro-forma revenues in the fourth quarter, excluding the non-core and the now-discontinued project with Partner Communications increased 18.4% over the fourth quarter of last year, which had pro-forma revenues of US$19.8 million. The main increase in revenues over last year was driven by the continued broadening and growth in the Company’s subscriber base as well as the proceeding project work in the Far-East.

Revenues from product sales in the fourth quarter showed a slight sequential decrease of US$0.3 million over the prior quarter due to the reduction of business days in Israel during the fourth quarter because of the holiday period in October, and in the United States due to the hurricanes.

The number of subscribers as of December 31st, 2005 reached 339,000, representing a 29% growth compared with 263,000 subscribers as of December 31st, 2004.

Gross margin in the fourth quarter and third quarter of 2005 was 48% of revenues, compared with 45% in the fourth quarter of 2004. The main reasons for the growth in margin was the operating leverage in the Company’s business model and the discontinuation of the project with Partner Communications, which had a lower gross margin than the rest of the Company’s products.

Net profit was US$4.2 million in the fourth quarter of 2005 representing a growth of 25% over the US$3.4 million reported for the fourth quarter of 2004, or an increase of 17% from US$3.6 million in the previous quarter. Fully diluted EPS in the fourth quarter of 2005 was US$0.18 compared with US$0.17 per fully diluted share in the fourth quarter of 2004, or US$0.19 per share as reported in the previous quarter. Due to the company’s initial public offering on the NASDAQ, the number of shares grew from US$19.1 million in the third quarter to US$23.3 million in the fourth quarter.

Full year 2005 revenues were US$90.1 million compared with US$77.9 million in 2004, a growth of 15.6%. Pro-forma revenues growth, excluding the revenues from the activities with Partner Communications, was US$87.9 million compared with US$70 million in 2004, representing growth of 25.6%.

Net profit was US$14.9 million for 2005 representing a growth of 34% compared to a net profit of US$11.2 million in 2004. Fully diluted EPS was US$0.74 compared with US$0.58 per fully diluted share for 2004. Pro-forma net profit excluding the activities with Partner was US$14.8 million compared with US$10.3 million in 2004, representing growth of 43%.

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There was a general increase during 2005 in marketing, sales, general and administrative expenses. The increase was due to the fact that the Company adjusted its expense level to the revenue growth it has exhibited in recent years. This is in order to maintain the quality of operation and service and to strengthen its brand. Management estimates that those expenses, as a percentage of revenues, are unlikely to increase in the coming quarters.

Cash flow from operations during 2005 was US$17.8 million. As of December 31st, 2005 the company had a net cash position of US$54.7 million compared with net liabilities of US$5.6 million as of December, 31st 2004.

On the 20th February 2006, the Board of Directors declared a dividend distribution of a total of US$3.8 million. The ex-div date will be on 21st March 2006 and payment day on the 4th April 2006.

Eyal Sheratzky, Co-CEO of Ituran said, “Our core business is growing strongly. We saw a 29% growth in our subscriber base in 2005, with the majority of this growth coming from operations in South America, but also a portion from Israel. The leverage inherent in our business model has enabled this increase to lead to an even stronger growth in our bottom line.”

Mr. Sheratzky continued, “Our growth plans outside of Israel have been proceeding according to plan. Based on our existing infrastructure already in place in Brazil, we expect that our new system in Rio de Janeiro will be commercially available towards the end of the second quarter. This will bring us a second large regional market using our existing control center in Sao-Paulo.”

Mr. Sheratzky concluded, “A particular milestone we reached in the quarter was that our revenues from our international operations surpassed those from our local operation in Israel. We are entering 2006 very well positioned internationally in countries with strong growth potential such as Brazil, Argentina, China and South Korea. We therefore expect to see year-over-year double-digit growth in revenues and profit throughout 2006.”

Conference Call Information
The Company will also be hosting a conference call today, February 21, 2006 at 10:00am EST. On the call, management will review and discuss the results and will be available to answer investor questions.

To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 5 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

US Dial-in Number: 1 866 229 7198
UK Dial-in Number: 0 800 917 5108
ISRAEL Dial-in Number: 03 918 0610
INTERNATIONAL Dial-in Number: +972 3 918 0610

At:
10:00am Eastern Time, 7:00am Pacific Time, 5:00pm Israel Time

For those unable to listen to the live call, a replay of the call will be available for three months from the day after the call in the investor relations section of Ituran’s website, at: www.ituran.com

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About Ituran

Ituran provides location-based services, consisting predominantly of stolen vehicle recovery and tracking services, as well as wireless communications products used in connection with its location-based services and various other applications. Ituran offers mobile asset location, Stolen Vehicle Recovery, management & control services for vehicles, cargo and personal security, and radio frequency identification products for various purposes including automatic meter reading, electronic toll collection and homeland security applications. Ituran’s subscriber base has been growing significantly since the Company’s inception to over 339,000 subscribers distributed globally. Established in 1995, Ituran has approximately 800 employees worldwide, provides its location based services and has a market – leading position in Israel, Brazil, Argentina and the United States. The company also sells its products in China and South Korea.

Company Contact

Udi Mizrachi (udi_m@ituran.com)
VP Finance, Ituran
(Israel) +972 3 557 1348

International Investor Relations Contacts

Ehud Helft (Ehud@gkir.com)
Kenny Green (Kenny@gkir.com)
GK International Investor Relations
(US) +1-866-704-6710

Investor Relations in Israel

Amit Lev Ari (amit@km-ir.co.il)
KM Investor Relations
(Israel) +972-3-5167620

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CONSOLIDATED BALANCE SHEETS

US dollars
December 31,
(in thousands)
 2005
 2004
 
Current assets            
   
   Cash and cash equivalents    58,429    4,604  
   Accounts receivable (net of allowance for doubtful accounts)    22,494    19,993  
   Other current assets    2,747    1,614  
   Contracts in process, net    -    30  
   Inventories    6,330    6,416  
     90,000    32,657  
   
Long-term investments and debit balances   
   
   Investments in affiliated companies    918    870  
   Accounts receivable    280    -  
   Deposit    1,300    1,393  
   Deferred income taxes    5,168    5,507  
   Funds in respect of employee rights upon retirement    2,959    2,854  
     10,625    10,624  
   
Property and equipment, net     9,904    9,204  
   
Intangible assets, net     3,201    3,676  
   
Goodwill     2,754    2,862  
   
   
   
Total assets     116,484    59,023  

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CONSOLIDATED BALANCE SHEETS

US dollars
December 31,
(in thousands)
 2005
 2004
 
Current liabilities            
   
   Credit from banking institutions    3,315    6,586  
   Accounts payable    10,298    10,574  
   Deferred revenues    3,900    3,824  
   Other current liabilities    11,492    9,165  
     29,005    30,149  
   
Long-term liabilities   
   
   Long-term loans from banking institutions    373    3,615  
   Liability for employee rights upon retirement    4,504    4,256  
   Deferred income taxes    212    -  
     5,089    7,871  
   
Minority interest     204    108  
   
Capital Notes     5,894    5,894  
   
Total shareholders' equity     76,292    15,001  
   
Total liabilities and shareholders' equity     116,484    59,023  

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CONSOLIDATED INTERIM STATEMENTS OF INCOME

US dollars
 US dollars
Year ended
ended December 31,		 Three months
ended December 31,
(in thousands except per share data)
 2005
 2004
 2005
 2004
(Audited) (Unaudited)
 
Revenues:                    
   
Location-based services    44,128    36,549    12,195    9,520  
Wireless communications products    43,806    33,461    11,260    10,287  
Other    2,192    7,916    29    2,176  
     90,126    77,926    23,484    21,983  
Cost of revenues:   
Location-based services    14,987    12,944    3,715   (*)2,921
Wireless communications products    30,956    23,224    8,378   (*)7,621
Other    1,643    5,720    41    1,584  
     47,586    41,888    12,134    12,126  
   
   Gross profit    42,540    36,038    11,350    9,857  
Research and development expenses    2,799    2,020    557    589  
Selling and marketing expenses    4,876    4,074    1,268    1,149  
General and administrative expenses    14,959    11,693    4,039    3,514  
Other expenses (income), net    (16 )  (12 )  (10 )  (103 )
   Operating income    19,922    18,263    5,496    4,708  
Financing income (expenses), net    906    (2,059 )  711    (488 )
   Income (loss) before taxes on income    20,828    16,204    6,207    4,220  
Taxes on income    (5,295 )  (4,423 )  (1,584 )  (711 )
     15,533    11,781    4,623    3,509  
Share in losses of affiliated companies, net    (355 )  (324 )  (258 )  (44 )
Minority interests in loss of subsidiaries    (257 )  (238 )  (143 )  (97 )
Net income for the period    14,921    11,219    4,222    3,368  
   
Earnings per share:   
   
   Basic    0.76    0.60    0.18    0.18  
   
   Diluted    0.74    0.58    0.18    0.17  
   
Weighted average number of shares outstanding (in   
    thousands):   
   
   Basic    19,736    18,585    22,930    18,503  
   
   Diluted    20,254    19,192    23,343    19,176  

(*) – reclasified

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CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

US dollars
 US dollars
Year ended
ended December 31,		 Three months
ended December 31,
(in thousands)
 2005
 2004
 2005
 2004
(Audited) (Unaudited)
 
Cash flows from operating activities                    
Net income for the period    14,921    11,219    4,222    3,368  
Adjustments to reconcile net income to net cash from operating   
  activities:   
  Depreciation and amortization    3,341    3,536    695    1,014  
  Exchange differences on principal of deposit and loan, net    105    373    2    (147 )
  Increase (decrease) in liability for employee rights upon  
   retirement    521    424    284    (70 )
  Share in losses of affiliated companies, net    355    324    258    44  
  Deferred income taxes    (11 )  1,183    (101 )  603  
  Amortization of deferred compensation related to employee stock  
   option plans, net    243    129    -    27  
  Capital losses (gains) on sale of property and equipment, net    (16 )  (40 )  (16 )  (24 )
  Minority interests in profits of subsidiaries, net    257    238    371    379  
  Increase in accounts receivable    (4,601 )  (3,002 )  (1,301 )  (80 )
  Increase (decrease ) in other current assets    (1,028 )  (1,003 )  5    591  
  Decrease (increase) in inventories and contracts in process, net    (297 )  (1,259 )  710    (112 )
  Increase (decrease) in accounts payable    460    2,582    (874 )  (93 )
  Increase (decrease) in deferred revenues    321    1,033    (459 )  1,457  
  Increase (decrease) in other current liabilities    3,187    1,937    (517 )  (1,348 )
   Net cash provided by operating activities    17,758    17,674    3,279    5,609  
Cash flows from investment activities   
  Increase in funds in respect of employee rights upon retirement,  
   net of withdrawals    (288 )  (366 )  (102 )  (268 )
  Capital expenditures    (3,540 )  (2,374 )  (606 )  (830 )
  Proceeds from sale of property and equipment    133    125    6    31  
  Purchase of intangible assets and minority interest    (746 )  (295 )  78    (273 )
  Loan granted to affiliated company    (452 )  -    (113 )  -  
   Net cash used in investment activities    (4,893 )  (2,910 )  (737 )  (1,340 )
Cash flows from financing activities   
  Short-term credit from banking institutions, net    181    (8,560 )  149    (2,830 )
  Receipt of long-term loans    -    9,360    -    -  
  Repayment of long-term loans    (6,290 )  (15,035 )  (1,572 )  (1,710 )
  Dividend paid    (2,697 )  (1,327 )  -    -  
  Issuance expenses    -    -    596    -  
  Issuance of capital share    50,046    -    50,046    -  
  Proceeds from sale of Company shares held by a subsidiary    -    1,416    -    -  
  Proceeds from exercise of options by employees    15    4    -    -  
   Net cash provided (used) in financing activities    41,255    (14,142 )  49,219    (4,540 )
   
Effect of exchange rate changes on cash and cash equivalents    (295 )  64    (5 )  154  
   
Net increase (decrease) in cash and cash equivalents    53,825    686    51,756    (117 )
Balance of cash and cash equivalents at beginning of period    4,604    3,918    6,673    4,721  
Balance of cash and cash equivalents at end of period    58,429    4,604    58,429    4,604  

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