COM DEV Announces First Quarter Fiscal 2014 Results

CAMBRIDGE, ON, March 10, 2014 /CNW/ - COM DEV International Ltd. (TSX:CDV) today announced first quarter results for the three-month period ended January 31, 2014. All amounts are stated in Canadian dollars unless otherwise noted.

First Quarter Highlights

  • Revenue was $51.8 million, in line with the $52.3 million realized in the first quarter of 2013.
  • New orders received in the quarter totaled $36.6 million, following a near record level of orders received in the prior quarter.
  • Backlog was $149.3 million, in line with $148 million in Q1 2013.
  • COM DEV's exactEarth subsidiary had revenue of $3.5 million, up 40 percent from $2.5 million in Q1 2013.
  • exactEarth had EBITDA of $0.4 million in Q1 2014, compared to negative $0.1 million in Q1 2013.

"Both our equipment and data service businesses performed well in the first quarter, but as expected, our U.S. operations were negatively impacted as we adjusted our capacity in line with reduced U.S. government demand", stated Michael Pley, CEO. "Our new commercial business pipeline remains strong and this is bolstered by the continued strong growth of exactEarth."

Financial Review

COM DEV's first quarter 2014 revenues were $51.8 million, a 1.0 percent decline compared to $52.3 million in the previous year. The revenue split between the three market segments was 64 percent commercial, 24 percent civil and 12 percent military, compared to a 44%/34%/22% split in 2013. It is important to note that communication satellite programs are increasingly in the civil segment as emerging country national governments use satellites as efficient means to provide communications infrastructure. These civil satcom satellite programs draw on the Company's same core equipment as the more traditional commercial market segments. Bidding and order activity remains robust.

COM DEV received new orders totaling $36.6 million during the quarter, of which 69 percent were commercial, 28 percent were civil, and 3 percent were military. In Q1 2013 the Company booked $61.8 million of new orders, with a commercial/civil/military split of 58%/41%/1%. Included in the $36.6 million of new orders received in the first quarter of 2014 are orders received under Authorities to Proceed (ATPs). As delivery schedules have become more critical, customers are increasingly using ATPs as a way to start a subcontractor working, under contract, on a program while the full contract negotiations are concluded. At the end of Q1 2014, the amount of potential order value in excess of ATP, which management expects to realize, stood at $38.1 million. This compares to $20.7 million at the end of Q1 2013. The expected full contract amounts are based on bid values, with a historically high percentage of ATPs being ultimately turned into full contract values.

Order backlog at January 31, 2014 was $149.3 million, compared to $148 million for the same period in 2013.  Backlog was split between the Company's commercial, civil and military sectors at a ratio of 58 percent, 35 percent and 7 percent respectively, compared to 43%/39%/18% at January 31, 2013.  The Company expects to convert approximately 70 percent of the total backlog into revenue during fiscal 2014.

Consolidated gross margin was $13.5 million in Q1 2014, representing 26 percent of total revenues, the same as Q1 2013 with gross margin of $13.5 million representing 25.9 percent or total revenues. The increase in revenue generated from exactEarth™, offset by a decline in the equipment segment, contributed to the increase in gross margin.

COM DEV recorded a net research and development expense of $0.4 million in Q1 2014, compared to a recovery of $0.5 million in Q1 2013.  Gross R&D spending declined to $1.8 million from $2.6 million while R&D funding from external sources decreased to $0.1 million from $0.5 million. The Company also recognized $1.3 million of Investment Tax Credits (ITCs) in Q1 2013, compared to $1.6 million in Q1 2013. The reduction in R&D spending is a result of the Company's efforts to focus on strategic R&D activities.

Selling and general expenses increased in Q1 2014 compared to Q1 2013. In general, selling expenses fluctuate from quarter to quarter and year to year depending on the volume of bids and proposal work that is underway. General expenses are managed against the budgets set for the general and administrative functions, with a view to minimizing these costs, while not hindering the achievement of the Company's business objectives.

The strengthening of the U.S. dollar relative to the Canadian dollar resulted in a foreign exchange loss of $1.5 million in the quarter.  Of this loss, $0.9 million is the result of unrealized mark to market valuation reductions in the Company's hedge portfolio, partly offset by unrealized balance sheet translation gains.  Revenues and gross margins were positively impacted by the shift in currency.

EBITDA attributable to shareholders was $6.7 million in Q1 2014, compared to $9.6 million in Q1 2013. The quarter over quarter decrease in EBITDA is the result of lower net income from the Company's U.S. division, offset by a decrease in income tax expense. The equipment segment EBITDA decreased compared to the same quarter last year due to the impact of lower gross margins and foreign exchange losses. The data services segment saw improved EBITDA attributable to shareholders over the prior year. The data services segment is EBITDA positive in 2014 at $0.4 million compared to a 2013 negative EBITDA of $0.1 million. The increase is the result of decreased net loss, interest and amortization expense in exactEarth™.

COM DEV ended Q1 2014 with $30.1 million of cash and equivalents, compared to $26.4 million in Q1 2013. The Company invested $2.5 million of cash from operating activities in Q1 2014, compared with 2013 when $4.1 million was generated. For Q1 2014, $4.8 million of cash was invested compared to $0.6 million generated in Q1 2013.

The Company's operating credit line of $20 million was not drawn upon at the end of Q1 2014, except for $2.8 million (Q1 2013: $2.8 million) in the form of guarantee letters issued to customers in the normal course of operations by the bank on behalf of the Company and to government agencies while certain tax objections are resolved.

The Company's basic share count stood at 76,574,453 on March 10, 2014.

Conference Call

A conference call will be held Monday, March 10, 2014 at 8:00 am EDT to discuss this announcement.  To access the call, dial 647-427-7450 or 1-888-231-8191.  To access the live webcast, please visit the Company's website at www.comdevintl.com or www.newswire.ca for directions.  Participants will require Windows Media Player™ to listen to the webcast.

About COM DEV

COM DEV International Ltd. (www.comdevintl.com) is a leading global provider of space hardware and services. The company has a staff of 1,200, annual revenues of $216 million, and facilities in Canada, the United Kingdom, the United States, India, and China. COM DEV designs manufactures, and integrates advanced products, subsystems and microsatellites that are sold to major satellite prime contractors, government agencies and satellite operators, for use in communications, space science, remote sensing and defense applications. The company has won contracts to supply its equipment on over 900 spacecraft. COM DEV's majority-owned subsidiary, exactEarth Ltd., provides satellite data services for global maritime surveillance.

This news release contains statements that, to the extent they are not recitations of historical fact, may constitute "forward-looking statements" within the meaning of applicable Canadian securities laws. Forward-looking statements may include financial and other projections, as well as statements regarding COM DEV's future plans, objectives or economic performance, or the assumptions underlying any of the foregoing. COM DEV uses words such as "may", "would", "could", "will", "likely", "expect", "anticipate", "believe", "intend", "plan", "forecast", "project", "estimate" and similar expressions to identify forward-looking statements. Any such forward-looking statements are based on assumptions and analyses made by COM DEV in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors COM DEV believes are appropriate under the relevant circumstances. However, whether actual results and developments will conform to COM DEV's expectations and predictions is subject to any number of risks, assumptions and uncertainties.  Many factors could cause COM DEV's actual results, historical financial statements, or future events to differ materially from those expressed or implied by the forward-looking statements contained in this news release.  These factors include, without limitation: uncertainty in the global economic environment; fluctuations in currency exchange rates; delays in the purchasing decisions of COM DEV's customers; the competition COM DEV faces in its industry and/or marketplace; and the possibility of technical, logistical or planning issues in connection with the deployment of COM DEV's products or services.

The triangular logo and the word COM DEV are each registered trademarks and the property of COM DEV Ltd. All rights reserved.

COM DEV International Ltd. 
Consolidated Interim Statements of Financial Position 
(Canadian dollars in thousands) 
Unaudited
      As at January 31,
2014
    As at October 31,
2013
    As at November 1,
2012
            (note 16)     (note 16)
Assets                  
  Current assets                  
    Cash and cash equivalents $     30,057  $   34,897 $    25,794
    Accounts receivable     48,934     37,460     41,722
    Inventory (note 4)     52,359     59,383     64,763
    Prepaid expenses and other     2,585     2,716     3,214
    Income taxes recoverable     2,199     2,245     2,266
    Investment tax credits-current (note 5)     2,961     2,961     2,162
  Total current assets      139,095     139,662     139,921
                   
  Non-current assets                  
    Property, plant and equipment (note 6)     93,832     92,340     86,000
    Intangible assets (note 7)     16,994     16,416     14,600
    Goodwill     -     -     2,205
    Investment tax credits (note 5)     10,783     9,933     2,124
    Deferred income tax assets     8,486     9,552     14,728
  Total non-current assets      130,095     128,241     119,657
Total assets  $     269,190  $   267,903 $     259,578
                   
Liabilities                  
  Current liabilities                  
    Accounts payable and accrued liabilities $    20,858  $   26,334 $     30,622
    Income taxes payable     181     4     851
    Provisions (note 12)     1,046     1,215     430
    Billings in excess of costs and earnings on contracts in progress (note 4)     17,648     17,047     22,448
    Current portion of loans payable (note 8)     6,764     5,787     3,978
  Total current liabilities      46,497     50,387     58,329
                   
  Non-current liabilities                  
    Accounts payable and accrued liabilities     481     33     525
    Loans payable (note 8)     14,739     14,890     16,358
    Employee future benefits (notes 15 and 16)     3,982     3,803     5,514
  Total non-current liabilities      19,202     18,726     22,397
 Total liabilities  $     65,699 $    69,113 $     80,726
                   
Shareholders' equity                  
    Share capital (note 9)     346,954     346,572     345,876
    Treasury stock (note 9)     (1,266)     (1,051)     (432)
    Contributed surplus     8,657     8,326     9,298
    Accumulated other comprehensive income (loss) (note 16)     4,328     1,981     (1,698)
    Non-controlling interest     5,985     6,221     7,317
    Deficit (note 16)     (161,167)     (163,259)     (181,509)
  Total shareholders' equity      203,491     198,790     178,852
                   
Total liabilities and shareholders' equity  $     269,190  $   267,903 $     259,578

 

 

COM DEV International Ltd.
Consolidated Interim Statements of Changes in Equity
(Canadian dollars in thousands)
Unaudited
               
For the three months ended January 31, 2014   Total   Deficit   Accumulated Other
Comprehensive
  Income (Loss)
  Share Capital   Treasury Stock   Non-Controlling
Interest
  Contributed
Surplus
               
Balance, October 31, 2013 (note 16)  $ 198,790  $ (163,259)  $ 1,981  $ 346,572  $ (1,051)  $ 6,221  $ 8,326
Comprehensive income   4,203   2,092   2,347           (236)    
Common stock issued (note 9)   263   -   -   382   -   -   (119)
Expense recognized for ESOP awards (note 9)   61   -   -   -   -   -   61
Treasury stock (note 9)   (261)   -   -   -   (261)   -   -
Settlement of long-term incentive plans (note 9)   (26)   -   -   -   46   -   (72)
Expense recognized for long-term incentive plans (note 9)   362   -   -   -   -   -   362
Expense recognized for stock-based compensation (note 9)   99   -   -   -   -   -   99
Balance, January 31, 2014  $ 203,491  $ (161,167)  $ 4,328  $ 346,954  $ (1,266)  $ 5,985  $ 8,657
               
               
For the three months ended January 31, 2013              
               
Balance, October 31, 2012 (note 16)  $ 178,852  $ (181,509)  $ (1,698)  $ 345,876  $ (432)  $ 7,317  $ 9,298
Comprehensive income   4,786   4,513   685           (412)    
Common stock issued (note 9)   6   -   -   8   -   -   (2)
Expense recognized for ESOP awards (note 9)   62   -   -   -   -   -   62
Treasury stock (note 9)   (511)   -   -   -   (511)   -   -
Settlement of long-term incentive plans (note 9)   -   -   -   -   52   -   (52)
Transfer of long-term incentive plans to equity (note 16)   (205)   -   -   -   -   -   (205)
Expense recognized for long-term incentive plans (note 9)   367   -   -   -   -   -   367
Expense recognized for stock-based compensation (note 9)   102   -   -   -   -   -   102
Balance, January 31 2013  $ 183,459  $ (176,996)  $ (1,013)  $ 345,884  $ (891)  $ 6,905  $ 9,570

 

 

COM DEV International Ltd.
Consolidated Interim Statements of Comprehensive Income
(Canadian dollars in thousands, except for per share figures)
Unaudited
For the three months ended January 31     2014     2013
            (note 16)
             
  Revenue (note 14) $     51,821 $     52,283
  Cost of revenue (note 16)     38,354     38,734
  Gross margin     13,467     13,549
             
  Research and development costs     1,828     2,576
  Research and development recovery     (147)     (481)
  Investment tax credits recoverable (note 5)     (1,267)     (1,613)
  Net research and development (recovery) expense     414     482
             
  Selling expenses     2,836     2,573
  General expenses     4,876     4,539
  Operating income     5,341     5,955
             
  Interest expense     117     118
  Foreign exchange gain     1,512     (352)
  Other expense (income)     (11)     (162)
Income before income taxes     3,723     6,351
             
  Income tax expense     1,867     2,250
Net income $     1,856 $     4,101
             
Attributable to:            
  Shareholders     2,092     4,513
  Non-controlling interest     (236)     (412)
  $    1,856 $    4,101
             
Other comprehensive income:            
  Foreign currency translation     2,347     183
  Actuarial gain (note 16)     -     502
Comprehensive income $    4,203 $     4,786
             
Attributable to:            
  Shareholders     4,178     4,788
  Non-controlling interest     25     (2)
  $     4,203 $     4,786
             
Earnings per share (note 9)            
Basic and diluted earnings per share $     0.03 $    0.06

 


 

COM DEV International Ltd. 
Consolidated Interim Statements of Cash Flows 
(Canadian dollars in thousands) 
For the three months ended January 31     2014     2013
            (note 16)
Operating activities            
    Net income $     1,856 $     4,101
    Amortization (notes 6 and 7)     2,648     2,601
    Loss (gain) on disposal of assets     9     (5)
    Defined benefit plan expenses (notes 15 and 16)     166     211
    Defined benefit plan contributions (notes 15)     (248)     -
    Stock based compensation expense (note 9)     461     469
    Employee stock ownership plan awards (note 9)     61     62
    Non-cash loan adjustments     1,072     243
    Investment tax credits recoverable (note 5)     (1,267)     (1,613)
    Deferred income tax expense (recovery)     1,272     1,093
    Unrealized foreign exchange (gain) loss on derivatives (note 8)     2,982     127
    Cash settlement of restricted stock units (note 9)     (26)     (33)
      8,986     7,256
    Net Change in non-cash working capital items     (11,139)     (3,139)
  Operating activities      (2,153)     4,117
             
Financing activities            
    Shares issued (note 9)     263     6
    Purchase of treasury stock (note 9)     (261)     (511)
    Proceeds from advance of long-term debt     534     -
    Repayment of long-term debt     (780)     (293)
  Financing activities      (244)     (798)
             
Investing activities            
    Acquisition of property, plant and equipment (note 6)     (2,214)     (1,739)
    Proceeds on disposal of property, plant and equipment     -     43
    Acquisition of intangible assets (note 7)     (952)     (727)
Investing activities      (3,166)     (2,423)
               
Effect of exchange rate changes on cash     723     (304)
             
Net (decrease) increase in cash     (4,840)     592
Cash and cash equivalents, beginning of the period     34,897     25,794
Cash and cash equivalents, end of the period $     30,057  $   26,386
             
             
Supplemental cash flow information            
Interest paid $     94 $     148
Taxes paid $     1 $    267

 

SOURCE Com Dev International Ltd.

For further information:

Gary Calhoun
Chief Financial Officer
Tel:  (519) 622-2300 ext. 2826
gary.calhoun@comdev.ca 

Craig MacPhail
TMX Equicom
Tel: (416) 815-0700 ext. 290
cmacphail@tmxequicom.com