COM DEV Announces Third Quarter Fiscal 2014 Results

CAMBRIDGE, ON, Sept. 5, 2014 /CNW/ - COM DEV International Ltd. (TSX: CDV) today announced financial results for the three-month period ended July 31, 2014. All amounts are stated in Canadian dollars unless otherwise noted.

Third Quarter Highlights

  • Revenue was $50.8 million, a 6.3 percent decline from the $54.2 million realized in the third quarter of 2013, largely as a result of continuing U.S. government budget sequestration.
  • Commercial satellite component revenue was $33.5 million, a 13.6 percent increase from $29.5 million achieved in the third quarter of 2013.  Civil and military/defence program revenue declined by 13.9 and 52.4 percent respectively.
  • Backlog was $115.5 million, an 11.8 percent decline from $131.0 million in Q3 2013, with additional Authority To Proceed (ATP) follow on work of $37.1 million expected at the end of Q3 this year, versus $3.6 million at the end of Q3 2013. When ATP's are taken into consideration, expected backlog at the end of Q3 2014 is $152.6 million versus $134.6 million at the end of Q3 2013.
  • COM DEV's exactEarth™ subsidiary had revenue of $3.7 million, up 37.0 percent from $2.7 million in Q3 2013, and EBITDA of $0.6 million in Q3 2014, compared to $0.4 million in Q3 2013.

"In the third quarter we had solid growth in revenue in our commercial satellite components business," said Michael Pley, CEO. "While revenues are still constrained by U.S. budget pressures, demand for commercial communication satellites remains strong with 11 new satellite projects awarded in the third quarter. COM DEV has already won work on five of these satellite projects, and is pursuing work on the remaining six. These will be potential sources of new revenue in future quarters."

"We are also very pleased with the performance of our exactEarth™ subsidiary with its 37 percent increase in revenue and 50 percent growth in EBITDA," Mr. Pley added. "exactEarthTM continues to capture market share through signing new customers, introducing new product lines and expanding relationships with existing customers. They are well on track to achieve expected revenue growth of 20 to 25 percent this year."

Financial Review

COM DEV's third quarter 2014 revenues were $50.8 million, a 6.3 percent decline compared to $54.2 million in the previous year. The revenue split between the three market segments was 66 percent commercial, 24 percent civil and 10 percent military/defence, compared to a 54 percent, 27 percent, 19 percent split respectively in 2013. Revenues in the commercial sector increased13.6 percent in the quarter while the civil and military/defence sectors declined by 13.9 percent and 52.4 percent respectively.

COM DEV received new orders totaling $36.5 million during the quarter, of which 91 percent were commercial, 7 percent were civil, and 2 percent were military/defence. In Q3 2013 the Company booked $36.6 million of new orders, with a commercial/civil/military split of 81 percent, 5 percent, 14 percent respectively.

Included in the $36.5 million of new orders received in the third 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 Q3 2014, the amount of potential order value in excess of ATP, which management expects to realize, stood at $37.1 million. This compares to $3.6 million at the end of Q3 2013. The expected full contract amounts are based on bid values, with a high percentage of ATPs historically being turned into full contract values.

Order backlog at July 31, 2014 was $115.5 million, compared to $131.0 million for the same period in 2013. Backlog was split between the Company's commercial, civil and military/defence sectors at a ratio of 58 percent, 37 percent and 5 percent respectively, compared to 47 percent, 38 percent and 15 percent respectively at July 31, 2013. The Company expects to convert approximately 40 percent of the total backlog into revenue during fiscal 2014.

Consolidated gross margin was $13.3 million in Q3 2014, representing 26.1 percent of total revenues, a 0.9 percent decrease from Q3 2013 with gross margin of $14.6 million representing 27.0 percent of total revenues. The decrease is the result of a decline in operations in the U.S., as well as reduced data segment gross margin, offset by improvements in the non-U.S. equipment segment of the business and a favourable foreign exchange impact. The decrease in the data services segment gross margin percentage is due to higher depreciation costs as new satellites are brought into service and increased product development and ground segment costs. As it expands its fleet, exactEarthTM is able to deliver improved service levels to its customers, resulting in increased revenues.

COM DEV recorded a net research and development expense of $1.4 million in Q3 2014, compared to a net expense of $0.4 million in Q3 2013. Gross R&D spending declined to $2.5 million from $2.8 million while R&D funding from external sources decreased to $0.2 million from $0.4 million. The Company also recognized $0.9 million of Investment Tax Credits (ITCs) in Q3 2014, to offset Canadian Federal taxes, compared to $2.0 million in Q3 2013. The reduction in R&D spending is a result of the Company's efforts to focus on strategic R&D activities.

Selling expenses of $2.9 million in Q3 2014 declined slightly from $3.0 million spent in Q3 2013. General expenses grew by $0.4 million in Q3 2014 to $5.1 million from $4.7 million in Q3 2013. The increase in general expenses reflects the cost of Corporate Development and Enterprise Risk Management functions, as well as increases in legal and finance organization costs.

The Company recorded a foreign exchange gain of $0.3 million in Q3 2014, compared to a gain of $0.6 million in the same quarter in the previous year. Foreign exchange amounts include realized and unrealized gains and losses that result from balance sheet translation of foreign denominated balances, realized gains and losses from settling USD hedge contracts, and mark to market valuation adjustments on the Company's outstanding USD hedge contracts.

EBITDA attributable to shareholders was $7.2 million in Q3 2014, compared to $9.8 million in Q3 2013. The decrease in EBITDA is the result of lower net income and an increase in amortization offset by lower interest and income tax expenses. The equipment segment EBITDA decreased as compared to the same quarter last year, while the data services segment saw an increase in EBITDA attributable to shareholders over the prior year. The data services segment was EBITDA positive in Q3 2014 at $0.6 million, compared to a Q3 2013 positive EBITDA of $0.4 million. The increase is the result of decreased net loss in exactEarthTM, driven by continued revenue growth as exactEarthTM expands its global customer base.

COM DEV ended Q3 2014 with $36.4 million of cash and equivalents, compared to $34.9 million in Q3 2013. The Company invested $1.0 million of cash in operating activities in Q3 2014, compared with Q3 2013 when $2.0 million was generated. During Q3 2014, $8.0 million of cash was used compared to $1.3 million used in Q3 2013.

The Company's operating credit line of $20 million was not drawn upon at the end of Q3 2014, except for  $2.8 million (Q3  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 76,685,327 on September 4, 2014.

Dividend

For the three months ended July 31, 2014, the Board of Directors has declared a dividend of $0.03 per share to be paid on September 30, 2014, to shareholders of record on September 15, 2014.

Conference Call

A conference call will be held Friday, September 5, 2014 at 7:30 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 July 31,
2014

As at October 31,
2013

As at November 1,
2012





Assets




Current assets






Cash and cash equivalents

$

36,399

$

34,897

$

25,794



Accounts receivable

31,120

37,460

41,722



Inventory

56,178

59,383

64,763



Prepaid expenses and other

1,574

2,716

3,214



Income taxes recoverable

3,247

2,245

2,266



Investment tax credits-current

2,961

2,961

2,162


Total current assets

131,479

139,662

139,921








Non-current assets






Property, plant and equipment

93,929

92,340

86,000



Intangible assets

18,541

16,416

14,600



Goodwill

-

-

2,205



Investment tax credits

11,668

9,933

2,124



Deferred income tax assets

7,889

9,552

14,728


Total non-current assets

132,027

128,241

119,657

 Total assets 

$

263,506

$

267,903

$

259,578




Liabilities



Current liabilities







Accounts payable and accrued liabilities

$

19,435

$

26,334

$

30,622



Income taxes payable

349

4

851



Provisions

765

1,215

430



Billings in excess of costs and earnings
on contracts in progress (note 4)

9,834

17,047

22,448



Current portion of loans payable

7,273

5,787

3,978


Total current liabilities

37,656

50,387

58,329







Non-current liabilites






Accounts payable and accrued liabilities

319

33

525



Loans payable

12,506

14,890

16,358



Employee future benefits

3,959

3,803

5,514


Total non-current liabilities

16,784

18,726

22,397

 Total liabilities 

$

54,440

$

69,113

$

80,726





Shareholders' equity





Share capital

177,560

346,572

345,876



Treasury stock

(138)

(1,051)

(432)



Contributed surplus

177,320

8,326

9,298



Accumulated other comprehensive income (loss)

3,777

1,981

(1,698)



Non-controlling interest

5,449

6,221

7,317



Deficit

(154,902)

(163,259)

(181,509)


Total shareholders' equity

209,066

198,790

178,852








 Total liabilities and shareholders' equity 

$

263,506

$

267,903

$

259,578

 

 

COM DEV International Ltd.

Consolidated Interim Statements of Changes in Equity

(Canadian dollars in thousands)

Unaudited









For the nine months ended July 31, 2014

Total

Deficit

Accumulated Other
Comprehensive
Income (Loss)

Share
Capital

Treasury
Stock

Non-Controlling
Interest

Contributed
Surplus









Balance, October 31, 2013

$

198,790

$

(163,259)

$

1,981

$

346,572

$

(1,051)

$

6,221

$

8,326

Comprehensive income

11,674

10,650

1,796

-

-

(772)

-

Common stock issued 

687

-

-

1,261

-

-

(574)

Common stock repurchased
and cancelled

(344)

-

-

(273)

-

-

(71)

Expense recognized for ESOP
awards 

155

-

-

-

-

-

155

Treasury stock 

(675)

-

-

-

(675)

-

-

Reduction in stated capital

-

-

-

(170,000)

-

-

170,000

Dividends paid 

(2,293)

(2,293)

-

-

-

-

-

Settlement of long-term incentive
plans, net of tax 

(240)

-

-

-

1,588

-

(1,828)

Expense recognized for long-term
incentive plans

1,010

-

-

-

-

-

1,010

Expense recognized for stock-based
compensation 

302

-

-

-

-

-

302

Balance, July 31, 2014

$

209,066

$

(154,902)

$

3,777

$

177,560

$

(138)

$

5,449

$

177,320

















For the nine months ended July 31, 2013
















Balance, October 31, 2013

$

178,852

$

(181,509)

$

(1,698)

$

345,876

$

(432)

$

7,317

$

9,298

Comprehensive income

15,521

14,228

2,343

-

-

(1,050)

-

Common stock issued 

66

-

-

473

-

-

(407)

Expense recognized for ESOP awards 

152

-

-

-

-

-

152

Treasury stock 

(1,594)

-

-

-

(1,594)

-

-

Dividends paid 

-

-

-

-

-

-

-

Settlement of long-term incentive plans,
net of tax 

(894)

-

-

-

1,251

-

(2,145)

Expense recognized and deferred tax
for long-term incentive plans 

765

-

-

-

-

-

765

Expense recognized for stock-based
compensation 

288

-

-

-

-

-

288

Balance, July 31 2013

$

193,156

$

(167,281)

$

645

$

346,349

$

(775)

$

6,267

$

7,951

 

 

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 July 31

2014

2013








Revenue

$

50,814

$

54,157


Cost of revenue

37,555

39,554


Gross margin

13,259

14,603





Research and development costs

2,501

2,755


Research and development recovery

(210)

(441)


Investment tax credits recoverable

(910)

(1,957)


Net research and development expense

1,381

357





Selling expenses

2,913

2,953


General expenses

5,140

4,724


Operating income

3,825

6,569





Interest expense

130

153


Foreign exchange gain

(326)

(601)


Other expense

110

368

Income before income taxes

3,911

6,649





Income tax expense

745

1,939

Net income

$

3,166

$

4,710




Attributable to:




Shareholders

3,547

5,015


Non-controlling interest

(381)

(305)


$

3,166

$

4,710




Other comprehensive income:




Foreign currency translation

(171)

343


Actuarial gain

-

551

Comprehensive income

$

2,995

$

5,604




Atributable to:




Shareholders

2,968

5,606


Non-controlling interest

27

(2)


$

2,995

$

5,604




Earnings per share



Basic and diluted earnings per share

$

0.05

$

0.07

 

 COM DEV International Ltd. 

 Consolidated Interim Statements of Cash Flows 

 (Canadian dollars in thousands) 

 Unaudited 




For the three months ended July 31

2014

2013




Operating activities



Net income

$

3,166

$

4,710

Amortization 

2,907

2,694

Loss (gain) on disposal of assets

27

-

Defined benefit plan expenses 

168

212

Defined benefit plan contributions

(245)

(238)

Stock-based compensation expense 

428

380

Employee stock ownership plan awards 

45

42

Non-cash loan adjustments

1

254

Investment tax credits recoverable 

(910)

(1,957)

Deferred income tax expense

512

884

Unrealized foreign exchange gain on derivatives 

(576)

(398)

Withholding tax remittance on stock units settlement

(645)

(834)


4,878

5,749

Net change in non-cash working capital balances

(5,893)

(3,754)

 Operating activities 

(1,015)

1,995




Financing activities



Shares issued 

348

60

Purchase of treasury stock 

(187)

(458)

Proceeds from advance of long-term debt

-

1,445

Repayment of long-term debt

(1,129)

(781)

Dividends paid 

(2,293)

-

 Financial activities 

(3,261)

266




Investing activities



Acquisition of property, plant and equipment 

(2,254)

(3,257)

Proceeds on disposal of property, plant and equipment

23

17

Acquisition of intangible assets 

(1,423)

(345)

 Investing activities 

(3,654)

(3,585)




Effect of exchange rate changes on cash

(90)

64




Net increase in cash

(8,020)

(1,260)

Cash and cash equivalents, beginning of the period

$

44,419

$

33,101

Cash and cash equivalents, end of the period

$

36,399

$

31,841




Supplemental cashflow information



Interest paid

$

162

$

124

Taxes paid

$

1,307

$

809

 

 

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