MIDDLETOWN – KVH Industries Inc. (Nasdaq: KVHI) expects to report third-quarter revenue of $15.6 million to $16 million, a decline of 11.4 percent to 0.9 percent from the year-ago period’s $17.6 million, the company said in an earnings forecast based on unaudited data. KVH blamed the decline on delays in two military-hardware deals and lower mobile-media sales in the hard-hit RV market.

Despite an anticipated shortfall for the three months ended Sept. 30, however, the company still predicted a full-year profit and an increase in sales compared with 2007.

KVH previously had predicted a third-quarter revenue increase of 10 percent to 16 percent year over year – to between $19 million and $20.5 million – on earnings between 1 cent and 5 cents per diluted share.

“As a result of the lower revenue levels, the company now anticipates that its bottom-line results will be well below its original expectations of $0.01 to $0.05 per share for the third quarter,” the company said in last night’s announcement.

By comparison, “in 2007, KVH reported break-even results of $0 per share for the third quarter.” For the 2007 third quarter, the company posted a loss of $20,000 or well under 1 cent per share – compared with a profit of $626,000 or 4 cents per share in the same three months of 2006 – on revenue that fell 9 percent to $17.6 million. (READ MORE)

The company blamed “three key issues” for its decline in sales in the quarter ended Sept. 30.

“First, the final qualification process for KVH's fiber-optic gyros for use in remote weapon stations has taken longer than expected, which prevented shipments during the third quarter,” KVH said.

“Second, the company did not receive an anticipated follow-on order during the quarter for its TG-6000 inertial measurement units, which are used in the MK54 torpedo program, due to ongoing negotiations between the U.S. Navy and the prime contractor.

“Finally, the challenging macroeconomic conditions – especially in the recreational vehicle market – increasingly constrained sales of KVH’s mobile satellite products, with a pronounced impact in the final weeks of the quarter,” the company said.

KVH’s full financial report for the 2008 third quarter is slated for release on Oct. 21.

“Looking ahead to the remainder of the year,” the company added, “larger-scale revenue shipments of KVH’s fiber-optic gyros for use in remote weapon stations are expected to begin in October. In addition, the company anticipates receiving the follow-on order for TG-6000 [motion-sensing] systems and beginning shipments during the fourth quarter. “

“Although economic conditions will continue to be a challenge, the company expects to see year-over-year revenue growth and profitable results for the fourth quarter.” But, KVH said, “The company’s revenue expectations for the full year are now lowered by the amount of the shortfall in the third quarter.”

In its second-quarter report, KVH predicted full-year earnings of roughly 36 cents per diluted share – or more than twice the 17 cents per share the company posted for all of 2007 – on revenue it expected to grow about 10 percent. (READ MORE) “Taking into account the challenging economic conditions and their effect on the leisure land and marine markets, we are taking a cautious outlook,” Patrick Spratt, the company’s chief financial officer, said in a statement this summer.

KVH Industries Inc. (Nasdaq: KVHI) is a maker of live mobile-media systems, including satellite TV, telephone and high-speed Internet for vehicles and vessels, as well as navigation and guidance systems for military and civilian use. Its products are based on its proprietary mobile satellite antenna and fiber-optic technologies. Additional information is available at www.kvh.com.