Dynex Power Announces Year End Results for 2010

Foundations in Place for Growth in 2011 and Beyond

Listing:  TSX Venture Exchange
Symbol:    DNX

 

LINCOLN, England, April 11 /CNW/ - Dynex Power Inc., a leading, high power semiconductor company, today announced results for the year ended December 31st, 2010.

Summary financial information for the twelve months ended December 31st, 2010 is as follows:

     
Dollars (000's) Dec. 31, 2010 Dec. 31, 2009
Revenue
Gross Margin
Expenses
Earnings before Other Income and Tax
Other Income
Income taxes
Net Earnings
Common shares outstanding ¹ - diluted
Earnings per share  - diluted
36,161
6,895
(4,932)
1,963
155
(650)
1,469
80,531,118
$0.02
39,884
9,534
(5,784)
3,750
77
(414)
3,414
40,673,893
$0.08

¹  Weighted average for the period

As has been previously reported, Dynex's priority for 2010 was the construction and commissioning of two new 6 inch IGBT wafer fabrication lines, which are replacing the old 4 inch line. The project will result in a tenfold increase in IGBT die capacity and will lay the foundation for the next phase of Dynex's development. Good progress has been made on this project. The first line was installed and commissioned prior to the year end and the second line is being ramped up with full capacity expected to be available this month. Revenue from the new lines is anticipated to be generated from late in the second quarter of 2011.

The decline in revenue of 9% in 2010 was attributable to the strength of the Canadian dollar. In Sterling terms, the UK operating business recorded 1% growth in revenue. Management were pleased with this modest level of growth in a year when there was disruption to production from the construction involved in the expansion programme as well as weaker economic conditions in Dynex's high power semiconductor sector. The Bipolar Discrete Group, with growth of 4% in Sterling terms and the Power Electronic Assemblies, with growth of 33% in Sterling terms, both recorded all time record revenues in Sterling. Revenue for the Power Modules Product Group declined by 18% in Sterling terms compared to 2009 as a result of the disruption caused by the IGBT wafer fabrication expansion. The Integrated Circuits Product Group saw revenue fall by approximately two-thirds from last year. As has previously been announced, management no longer regard this as a core business.

The 2010 gross margin of 19.1% was below the 23.9% reported last year, with the decline primarily attributable to the impact of the IGBT wafer expansion programme. As had been predicted, the depreciation charge incurred during the year on the new lines and the costs of developing and proving the new 6 inch processes added over $1.1 million of costs to the business, before taking account of the disruption to other production processes caused by the construction work.

The Company reduced expenses by 15% compared to 2009. Approximately two thirds of this reduction was a result of the strength of the Canadian dollar, with the rest of the reduction coming from lower borrowing costs following the rights issue. Expenses now represent 13.6% of revenue, the lowest level ever for the Company.

As a result of these changes, the Company generated earnings before other income and income taxes of $1.96 million. This was a little over half the figure reported last year, with the decline in large part the result of the impact of the IGBT expansion project.

Despite the reduction in earnings before income tax, the Company incurred a higher tax charge in 2010 than in 2009. In 2009, brought forward tax losses had resulted in a reduced tax charge, but such tax losses were fully exhausted in 2009. As a result, net earnings declined from $3.41 million in 2009 to $1.47 million in 2010.

Weaker economic markets saw order in-take decline from $34.7 million last year to $23.3 million this year, resulting in a book to bill ratio of 0.64. As a result, the order book has fallen from $31.4 million at the end of 2009 to $16.8 million at the end of 2010. This represented 24 weeks of sales at the current revenue levels. The book to bill ratio has returned to above 1.0 for each of the first three months of 2011 and management believes this may represent the start of a return to a more robust market. As previously reported, management expects to see a return to growth in both revenue and net earnings in 2011.

Dr. Paul Taylor, President and Chief Executive Officer commented, "We predicted that 2010 would be a challenging year for us with a more difficult external market and the disruption and additional costs coming from installing two new 6 inch IGBT wafer fabrication lines, particularly as revenue would not be flowing from the new lines until 2011: and so it has proven. Against this background, it is pleasing to be able to report growth, albeit very modest, in Sterling revenue. The decline in gross margin and net earnings had both been expected. But in retrospect, I think 2010 will be remembered for the progress we have made on installing and commissioning the new lines and the platform this provides for the development of the business in the coming years. In the circumstances, we are pleased with the results we have achieved. We have also been able to work more closely with CSR Times Electric during 2010 to the mutual benefit of both parties. In particular, it is worth celebrating the new R&D funding agreement that was concluded with CSR Times Electric in 2010. This agreement sees Lincoln become the centre for all high power semiconductor research with a fivefold increase in spending on such research without any additional cost to Dynex."

Bob Lockwood, Chief Financial Officer commented, "In the context of the current environment, our financial results were very solid. The strength of our order book at the end of 2009 meant that we were able to grow our Sterling revenue despite a softer market for our products and the priority given to the IGBT wafer expansion project.  We are hopeful that we have started to see an upturn in orders. The platform created by the expansion project that Paul Taylor has referred to above and our relationship with CSR Times Electric lead us to believe we are well placed to grow strongly over the next few years."

Mr Li, Chairman of Dynex and General Manager of CSR Times Electric, concluded, "CSR Times Electric remains very pleased with the progress that Dynex made in the last year. The foundations have been laid for growth in the Company's business over the next few years and for Dynex to become a key part of the CSR Times Electric supply chain. The management of Dynex has delivered an excellent set of results in 2010, given the challenging operating environment. We look forward to seeing growth in revenue and net earnings starting in 2011."

About the Company

Dynex designs and manufactures high power bipolar semiconductors, high power insulated gate bipolar transistor (IGBT) modules, high power electronic assemblies and radiation hard silicon-on-sapphire integrated circuits (SOS IC's). The company's power products are used worldwide in power electronic applications including electric power transmission and distribution, renewable and distributed energy, marine and rail traction motor drives, aerospace, electric vehicles, industrial automation and controls and power supplies. Our IC products are used in demanding applications in the aerospace industry. Dynex Semiconductor Ltd is its only operating business and is based in Lincoln, England in a facility housing the fully integrated silicon fabrication, assembly and test, sales, design and development operations.  Dynex is majority owned by Zhuzhou CSR Times Electric Co., Ltd.

Zhuzhou CSR Times Electric Co., Ltd. is based in Hunan Province in the People's Republic of China. It is listed on the Hong Kong stock exchange. CSR Times Electric is mainly engaged in the research, development, manufacture and sales of locomotive train power converters, control systems and other train-borne electrical systems, as well as the development, manufacturing and sales of urban railway train electrical systems. In addition, CSR Times Electric is also engaged in the design, manufacturing and sales of electric components including power semiconductor devices for the railway industry, urban railway industry and non-railway purposes.

Press announcements and other information about Dynex are available at www.dynexsemi.com.

Further information on CSR Times Electric can be found at www.timeselectric.cn/en

All monetary values expressed in this release are in Canadian Dollars unless stated otherwise.

The TSX Venture Exchange has neither approved nor disapproved of the information in this press release.

DYNEX POWER INC.
Consolidated Statements of Earnings and Deficit
Years Ended December 31st, 2010 and 2009

            2010   2009
                 

Revenue

        $ 36,160,624 $ 39,883,801

Cost of sales

          29,265,276   30,349,403
                 
Gross margin           6,895,348   9,534,398
                 

Expenses

               
General and administration           2,840,790   3,168,185
Sales and marketing           872,747   949,287
Research and development           1,087,234   1,171,970
Interest expense           131,673   494,955
                 
            4,932,444   5,784,397
                 

Earnings before other income (expenses) and income taxes

          1,962,904   3,750,001
                 

Other income (expenses)

               
Interest and other income           276,398   229,163
Foreign exchange (loss)           (121,161)   (151,714)
                 
            155,237   77,449
                 

Earnings before income taxes

          2,118,141   3,827,450
                 

Income taxes

          (649,532)   (413,777)
                 

NET EARNINGS

          1,468,609   3,413,673
                 

DEFICIT, BEGINNING OF YEAR

          (3,755,471)   (7,169,144)
                 
                 

DEFICIT, END OF YEAR

        $ (2,286,862) $ (3,755,471)

DYNEX POWER INC.
Consolidated Statements of Comprehensive Income
Years Ended December 31st, 2010 and 2009

      2010   2009
           

Net earnings

  $ 1,468,609 $ 3,413,673
           

Other Comprehensive loss, net of tax:

         
           
Unrealized foreign exchange loss on translating financial statements of self-sustaining foreign operations     (2,339,129)   (473,090)
           

OTHER COMPREHENSIVE LOSS

    (2,339,129)   (473,090)
                   

COMPREHENSIVE (LOSS) INCOME

    $ (870,520) $ 2,940,583
           
           

DYNEX POWER INC.
Consolidated Statements of Accumulated Other Comprehensive Loss and Deficit
As at December 31st, 2010 and 2009

                2010   2009
                 

Accumulated other comprehensive loss, beginning of year

    $ (1,853,191) $ (1,380,101)
                 
Other comprehensive loss     (2,339,129)   (473,090)
                 
                 

Accumulated other comprehensive loss

    (4,192,320)   (1,853,191)
Deficit     (2,286,862)   (3,755,471)
   

TOTAL ACCUMULATED OTHER COMPREHENSIVE LOSS AND DEFICIT

  $ (6,479,182) $ (5,608,662)

DYNEX POWER INC.
Consolidated Balance Sheets
As At December 31st, 2010 and 2009

            2010   2009
                 

CURRENT ASSETS

               
Cash         $ 3,094,626 $ 22,942,550
Accounts receivable           5,323,324   6,439,200
Inventories           7,619,442   8,872,155
Amounts owing from parent company           79,938   218,568
Income tax recoverable           51,598   96,413
Prepaid expenses and deposits           272,738   794,170
            16,441,666   39,363,056
                 

PROPERTY, PLANT & EQUIPMENT

          22,492,575   17,420,677
                 
                 
          $ 38,934,241 $ 56,783,733
                 
                 

CURRENT LIABILITIES

               
Accounts payable and accrued liabilities         $ 3,568,678 $ 4,964,864
Short-term loan           -   16,273,732
Amounts owing to parent company           224,629   955,026
Current portion of long-term debt           866   24,921
Obligation under capital leases           110,991   113,602
Current portion of deferred revenue           2,334,550   1,174,803
            6,239,714   23,506,948

LONG-TERM DEBT

          -   942

LONG-TERM OBLIGATION UNDER CAPITAL LEASES

          353,217   512,935

LONG-TERM DEFERRED REVENUE

          751,987   949,290

FUTURE INCOME TAXES

          972,313   380,756
                 
            8,317,231   25,350,871

SHAREHOLDERS' EQUITY

               
Share capital           37,096,192   37,041,524
Deficit           (2,286,862)   (3,755,471)
Accumulated other comprehensive loss           (4,192,320)   (1,853,191)
                 
            30,617,010   31,432,862
                 
          $ 38,934,241 $ 56,783,733

DYNEX POWER INC.
Consolidated Statements of Cash Flows
Years Ended December 31st, 2010 and 2009

            2010   2009

OPERATING

               
Net earnings         $ 1,468,609 $ 3,413,673
Items not affecting cash                
       Amortization           1,554,003   693,984
       Gain on disposal of property, plant and equipment           (122,697)   (137,672)
       Future income taxes           643,827   399,541
       Non-cash interest           1,107   6,248
       Provision for inventory obsolescence           105,087   1,823,084
Changes in non-cash operating working capital           2,747,215   (4,223,368)
            6,397,151   1,975,490
                 

FINANCING

               
Shares issued for cash           9,410   22,509,671
Cost of share issue           (438,069)   (35,943)
Increase in amounts owing to parent company           -   2,521,141
Decrease in amounts owing to parent company           (525,021)   (4,650,459)
(Decrease) increase in short-term loans           (15,849,830)   13,619,037
Payments on capital leases           (114,639)   (99,832)
Decrease in long-term debt           (24,749)   (45,779)
            (16,942,898)   33,817,836
                 

INVESTING

               
Proceeds of disposal of property, plant and equipment           14,440   263
Purchase of property, plant and equipment           (8,729,369)   (13,121,302)
            (8,714,929)   (13,121,039)
Effect of foreign currency translation on cash           (587,248)   (134,375)
                 
                 

NET (DECREASE) INCREASE IN CASH

          (19,847,924)   22,537,912
                 

Cash, beginning of year

          22,942,550   404,638
                 

CASH, END OF YEAR

        $ 3,094,626 $ 22,942,550

SOURCE DYNEX POWER INC.

For further information:

Dr. Paul Taylor     
President and Chief Executive Officer
or
Bob Lockwood
Finance Director and Chief Financial Officer
Dynex Power Inc.
Tel: +44 1522 500 500
Email: investorrelations@dynexsemi.com

Profil de l'entreprise

DYNEX POWER INC.

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