Financial News
Boomerang Tracking Reports Second Quarter 2004 Results
Company sustains its profitable growth
Boomerang Tracking Inc.
Press Release
Sylvain Dunn, Genevieve Foster
12/4/2003
Quarterly Review and Financial Highlights with an Interim MD&A; can be found at this link, while the complete financials can be found at this link.

SECOND QUARTER HIGHLIGHTS:
· RECORD NET EARNINGS MORE THAN DOUBLED TO $0.76 MILLION
· REVENUES UP 26% TO $6.15 MILLION
· UNEQUALED SERVICE CONTRACT REVENUES OF $4.08 MILLION

MONTREAL, Quebec, December 4, 2003 – Boomerang Tracking Inc. (TSX: BMG), the Canadian leader in stolen asset recovery, announced today its results for the second quarter ended October 31, 2003.

For this period, the Company reached a record quarter with net earnings of $0.76 million ($0.04 per share), which have more than doubled compared with net earnings of $0.35 million ($0.02 per share) for the same period last year. Net earnings were at 12.3% of revenues, compared to 7.2% for the same period last year. The Company achieved revenues of $6.15 million, an increase of 26% compared with revenues of $4.87 million for the same period last year.

Revenues from service contracts jumped by 33% to a record $4,08 million during the second quarter of fiscal 2003, from $3.08 million for the same period last year. New activations of Boomerang units were 10,160 units in the second quarter, compared to 10,052 units for the second quarter of the previous fiscal year, an increase of 1%. The amount of units sold were 9,502 in the second quarter, compared to 8,407 for the second quarter of the previous fiscal year, an increase of 13%. In addition, 2,700 Boomerang devices were transferred to new vehicles during this period. The Company continued its progression in Ontario with near than 1,000 new activations this past quarter.

For the six months ended October 31, 2003, net earnings jumped by 64% to a record $1.45 million ($0.07 per share), compared to $0.89 million ($0.04 per share) for the first six months of the previous year. Revenues saw a 29% increase to $12.76 million, compared to $9.90 million for the six months ended October 31, 2002. Revenues from service contracts jumped by 34% to $7.96 million for the first six-month period of fiscal 2004, from $5.93 million during the same period last year. During this period, new Boomerang activations were 22,935 compared to 22,141 for the same period last year.

“We are proud of these exceptional results, and of the fact that this continued growth occurred in a context of strong profitability, in a period during which we maintained our focus on market development in Ontario and in California,” said Peter Lashchuk, President and CEO, Boomerang Tracking Inc.

Stock market activity

During the quarter ended October 31, 2003, the Company purchased for cancellation, pursuant to the Normal Course Issuer Bid, a total of 183,300 shares. For the six months ended October 31, 2003, the Company purchased for cancellation, pursuant to the Normal Course Issuer Bid, a total of 334,000 shares. Within this Normal Course Issuer Bid, which took effect May 2, 2003 for a 12-month period, the Company is authorized to purchase for cancellation a maximum of 1,093,155 common shares, representing approximately 5% of the issued and outstanding Common Shares as of May 2, 2003.

US Market Update
In June 2003, the Company announced its upcoming entry into California, the gateway to the US market, with its advanced proprietary GSM-based Boomerang device. The Company continued developing its market strategies; however, it does not anticipate any material revenues in the immediate future.

Numbers That Speak Volumes

As of October 31 2003, the Boomerang Tracking System has been instrumental in the recovery of more than 2,912 vehicles and other valuable assets, including incidental recoveries, representing a total value of over $134 million. These impressive results have earned the Company the support of national insurers and the law enforcement community, who recognize the benefits of the Company’s tracking devices.


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Interim Management’s Discussion & Analysis of Financial Condition and Results of Operations for the three months ended October 31, 2003
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Results of Operations

Revenues

For the second quarter ended October 31, 2003 the Company achieved revenues of $6.15 million, representing an increase of 26%, compared to revenues of $4.87 million for the same period last year.

More specifically, revenues from service contracts jumped by 33% to a record $4.08 million, from $3.08 million during the same period last year, whereas product sales increased by $0.25 million (or 15%). New Boomerang and Boomerang2 devices covered by service contracts activated in the period were 10,160 for the quarter ended October 31, 2003, as compared to 10,052 units for the same quarter last year. The Company continued to realize a constant growth of revenues derived from service contracts attributed, in part, to the Company’s customer retention and loyalty programs which accounted for nearly 2,700 Boomerang devices being transferred to new vehicles. The revenues derived from service contracts represented 66% of total revenues for the quarter ended October 31 2003, and 63% for the quarter ended October 21 2002.

Service contracts are available primarily on a 12-, 24-, 36-, or 48-month basis. All services are covered by contracts and, in most cases, payable in full upon activation and/or renewal. For accounting purposes, revenue is recognized over the term of the contract, resulting in deferred revenue of $11.95 million as at October 31, 2003, of which $9.57 million will be recognized as revenues during the next twelve months. This compares to $8.14 million, and $6.86 million respectively as at October 31, 2002.

The number of units sold was 9,502 compared to 8,407 for the same period last year, representing a 13% increase. Revenues derived from the sale of units represent 31% of total revenues for the quarter ended October 31 2003, and 34% for the quarter ended October 21 2002.


Operating Expenses

Tight cost control enabled the Company to cut the ratio of sales, administration and R&D; costs on revenues by 18% during the quarter ended October 31, 2003, compared with the same quarter last year. During this same period, the Company’s sales climbed by 26%.

The service fees of wireless network carriers constitute the major costs involved in asset tracking. These services are the subject of commercial agreements.


Depreciation and Amortization

For the second quarter ended October 31, 2003, quarterly depreciation and amortization of fixed assets increased to $0.25 million from $0.24 million in the quarter ended October 31, 2002.


Income Taxes

Income tax expenses in the second quarter ended October 31, 2003, amounted to $0.45 million, as compared to $0.22 million for the same period in the last fiscal year.


Net Earnings

Net earnings for the first quarter reached a record $0.76 million ($0.04 per share) compared with net earnings of $0.35 million ($0.02 per share) for the same period last year. Net earnings were at 12.3% of revenues compared to 7.2% for the same period last year.


Liquidity and Financial Resources

The Company maintains its excellent financial health with its ongoing strong balance sheet with no external debt. During the second quarter of operations in fiscal 2004, the cash resources increased by $0.21 million to $12.56 million (including short-term investments of $10.34 million with maturity dates up to December 2004).

The increase in liquidity during the past quarter is due to cash generated by operating activities in the amount of $0.94 million, outflows from expenditures for fixed and intangible assets of $0.38 million, and outflows for the repurchase of shares for cancellation in the amount of $0.35 million.

Operating cash flow (representing cash provided by operating activities before changes in working capital items) in the quarter ended October 2003 generated $0.59 million, compared to $0.70 million for the same period last year. Year-over-year positive operating cash flow reflects the efficiency of Boomerang Tracking in generating profits while expanding its internal infrastructures.

The Company’s working capital (current assets less current liabilities) increased to $4.62 million as at October 31, 2003, from $3.33 million in the same quarter last year. The working capital ratio reached 1.37 at the end of the quarter, compared to 1.35 for the same quarter last year.

The Company believes that its cash resources as at October 31, 2003, together with cash flow from future operations, will provide it with sufficient funds to meet its operating and capital expenditure requirements for the upcoming year. Operations are expected to continue to generate positive cash flow into the future. Excess cash is invested by the Company in short-term instruments with financially sound institutions and is readily available when the need for funds arises.

Risks and Uncertainties

Technology

The Boomerang Tracking System employs proprietary wireless-based tracking devices. Presently, there are no known direct competitors in the marketplace using similar technology and locating process as the Company. Competing products utilize other technologies, including Global Positioning System (GPS) technology, that are not as effective at locating assets enclosed within buildings or shipping containers or situated underground.

Although the Company is continuing to invest in research and development, there is no certainty that it will be able to maintain its current technological edge.

Financial Resources

Although the Company is profitable and growing, there is no certainty that it will be able to compete with larger, more financially secure competitors in the marketplace.

Reliance on Strategic Alliances

The Company is currently heavily dependent on its alliance with wireless carriers and insurance companies. Wireless carriers are an integral facet of its stolen asset tracking system. The continued availability and maintenance of the wireless telecommunications networks used by the Company is essential for operating the tracking system. In addition, many insurance companies are strong supporters and advocates of the Boomerang tracking system. The continued existence of these strategic alliances is important for the ongoing development of new and existing markets.

Reliance on Key Employees

The Company’s continued success will be dependent on the performance and continued service of its executive officers and certain key employees. The loss of any of these individuals could have a material adverse impact on the Company’s business.

Risk Related to Territorial Expansion

Certain risks are inherent to the entrance into and development of new markets. These risks include the development of strategic alliances and distribution networks, the acceptance by the automobile industry and consumers of the Boomerang tracking system, and the application of laws and regulations governing the vehicle insurance industry in each territory.

Tracking Risk

Certain risks are inherent to tracking activities. These risks include the contingencies arising out of serious accidents and incidents. At the same time, as a result of various factors, the Company cannot guarantee the recovery of each of the vehicles stolen from its clients. Although the Company believes that its relationships with strategic partners are good, the confidence it receives from its partners depends on the continued success of its performance.

Credit Risk

With respect to the holding of short-term investments, the Company may be exposed to a credit loss in the event of non-performance by the counterparties to these contracts, but does not anticipate such non-performance. The Company manages this credit risk by dealing only with financially sound counterparties.

The Company, in the normal course of business, monitors the financial condition of its customers. It does not have significant exposure to any individual customer or counterparty. The Company establishes an allowance for doubtful accounts that corresponds to the credit risk of its customers, historical trends and economic circumstances. The Company does not believe that it is exposed to an unusual level of customer credit risk.


Statement reflecting outlook and forecasts

Since the statements contained in this report refer to Company or management objectives, projections, estimates, expectations and forecasts for the future, they may be considered “prospective statements” and may be indicated as such by the use of verbs such as “believe”, “predict”, “estimate”, “expect”, “consider” as well as the use of the future or conditional verb tense, regardless of negative or positive tone or the variation used. The Company would like to remind readers that these prospective statements, given their nature, include risks and uncertainties and that the Company’s actual actions or results may differ materially from those contained explicitly or implicitly in such prospective statements and could affect the degree to which a particular projection is achieved.

No regulatory authority has approved or disapproved of the information contained herein.
Boomerang Tracking Inc. markets and distributes the Boomerang® tracking devices, proprietary products using technology patented by the Company. The Boomerang, Boomerang2™ and GSM-based units are the central devices in a system that uses the wireless networks of major regional telecommunications companies for tracking stolen assets. The Boomerang Tracking System is capable of locating stolen automobiles, heavy equipment and valuable assets. As a result of its success, the Company has received the endorsement of members of the insurance industry. The Boomerang devices are available and installed through a network of authorized dealers in Quebec and Ontario. The Company's head office, research and development centre and manufacturing facilities are located in Montreal, Quebec, with regional facilities located in Mississauga, Ontario and Orange County, California. Boomerang is a registered trademark and Boomerang2 is a trademark of Boomerang Tracking Inc. The shares of Boomerang Tracking Inc. trade on The Toronto Stock Exchange under the symbol BMG.