COM DEV Announces First Quarter Fiscal 2015 Results

CAMBRIDGE, ON, March 9, 2015 /CNW/ - COM DEV International Ltd. (TSX:CDV) today announced first quarter results for the three-month period ended January 31, 2015. All amounts are stated in Canadian dollars unless otherwise noted.

First Quarter Highlights

  • Revenue was $53.6 million, a 3.5% increase over $51.8 million realized in Q1 2014.
  • New orders received in the quarter totalled $51.7 million, a 41.3% increase over Q1 2014 and reflected continued strong growth in commercial satellites.
  • Backlog was $165.2 million, a 10.5% increase over $149.5 million at the end of Q1 2014.
  • EBITDA, when adjusted for non-recurring charges, was $12.1 million, compared to $11.4 million in adjusted EBITDA in Q1 2014. (A definition and reconciliation are provided below.)
  • COM DEV's exactEarth™ subsidiary had revenue of $5.3 million, up 60.6% from $3.3 million in Q1 2014.
  • exactEarth™ had EBITDA of $0.6 million in Q1 2015, compared to $0.3 million in Q1 2014, a 100% increase.
  • Net loss attributable to shareholders of $(11.6) million or $(0.15) per share was negatively affected by non-recurring items totalling $19.2 million, and compares to net income attributable to shareholders of $2.1 million or $0.03 per share in Q1 2014.
  • Acquired MESL Microwave Ltd., a leading provider of components and subsystems for the radar, communications, defence and aerospace industries, for £12.8 million. Integration is proceeding well, and new opportunities have already been identified beyond what was initially envisioned.

 

"The strong performance of our core business in the first quarter of fiscal 2015 reflects the continuing growth in demand for commercial satellite components and our market leadership," stated Michael Pley, CEO.  "While these results were affected by one-time, non-cash foreign currency charges, the restructuring and wind-down of our U.S. facilities, and acquisition-related costs, we are confident that industry growth trends combined with the decisions made this quarter to stabilize the business position us well for a successful 2015."

"We are also very pleased with the successful acquisition of MESL Microwave Ltd. during the quarter," Mr. Pley added. "This adds needed capacity for our U.K. operations, expands our product offering and increases our opportunities in the growing European space industry."

Financial Review

COM DEV's first quarter 2015 revenues were $53.6 million, a 3.5% increase compared to $51.8 million in the previous year.  The largest component of total revenues, SatCom equipment revenues, was $38.0 million compared to $39.0 million in Q1 2014.  The breakdown of SatCom equipment revenues by sector during the first quarter of 2015 was 96% commercial (2014: 82%), 2% civil (2014: 5%) and 2% military (2014: 13%). 

Revenues in the quarter were $4.0 million higher as a result of the weakened Canadian dollar due to the impact of contracts denominated in U.S. dollars.  Approximately $2.0 million of that $4.0 million benefit is non-recurring since it reflects the movement in exchange rates between the prior quarter and Q1.  The remainder would be considered ongoing if revenue profiles and rates remain constant.

COM DEV received new orders totalling $51.7 million during the quarter, an increase of 41.3% compared to $36.6 million of new orders in Q1 2014.  SatCom equipment orders grew by 56.4% to $44.9 million, with a breakdown of 94% commercial, 4% civil, and 2% military.  An additional $43.8 million of follow-on orders are expected to be realized from Authorities to Proceed (ATPs) already received, as well as highly probable unexercised options on contracts awarded during the current and previous quarters which management expects to realize. This compares to $38.1 million at the end of Q1 2014. COM DEV only includes these amounts in orders and backlog once the final contracts are in place.

Total backlog at January 31, 2015 was $165.2 million, and includes $12.0 million of backlog acquired in the MESL transaction, compared to $149.5 million a year earlier.  SatCom equipment backlog of $97.6 million was split between the Company's commercial, civil and military sectors at a ratio of 89%, 10% and 1% respectively, compared to 84%, 5% and 11% at January 31, 2014. The Company expects to convert approximately 75% of the total backlog into revenue during fiscal 2015.

Consolidated gross margin was $13.4 million in Q1 2015, representing 24.9% of total revenues, a decrease from Q1 2014 which had gross margin of $13.5 million representing 26.0% of total revenues. The Equipment segment gross margin percentage decreased from 26.5% during Q1 2014 to 24.5%, primarily as a result of the negative gross margin of $3.7 million realized in the Company's U.S. operation.  Excluding the U.S. operation, and the one-time benefit from exchange movement described above, the Equipment segment achieved a gross margin of 29.9% during Q1 2015 compared to 30.0% during the same period in 2014. Gross margin percentage increased during Q1 2015 in the Data Services segment due to higher revenue from its growing customer base, offsetting the increased operational costs of the expanded constellation of low earth orbiting satellites owned and operated by exactEarth™.

COM DEV recorded a net research and development expense of $1.5 million in Q1 2015, compared to an expense of $0.4 million in Q1 2014.  The increase was primarily due to a $1.0 million decrease in investment tax credits recoverable compared to the same quarter of last year.

Selling expenses of $3.5 million were up by $0.7 million due to normal fluctuations that occur from quarter to quarter depending on the volume of bids and proposal work that is underway. General expenses increased by $0.7 million during Q1 2015 primarily as a result of corporate development costs and the inclusion of MESL's general expenses for January 2015. 

As indicated in its news release of February 19, 2015, COM DEV incurred a foreign exchange loss of $9.8 million in Q1 2015, compared with a loss of $1.5 million during Q1 2014.  The foreign exchange loss is primarily attributed to the significant decline in the Canadian dollar relative to the U.S. dollar during the quarter which resulted in an unrealized loss of $11.6 million on the mark to market valuation of the Company's forward currency derivative instruments.  For accounting purposes, the unrealized loss relating to the derivative instruments, which mature over the next 33 months, must be recognized immediately.  Partially offsetting the foreign exchange losses recognized during the first quarter of 2015 was a $4.0 million dollar increase in revenues relating to contracts denominated in U.S. dollars which benefitted from the decline in the Canadian dollar during the quarter.  A review of the Company's foreign exchange management strategy is underway with the objective of ensuring the objectives with respect to managing exchange risk are being met.

EBITDA attributable to shareholders was a loss of $7.1 million in Q1 2015, compared to positive $6.7 million in Q1 2014. The quarter over quarter decrease in EBITDA is primarily related to the higher foreign exchange loss ($8.3 million increase), higher restructuring and termination benefit expenses ($3.0 million increase) and $1.6 million of expenses associated with the acquisition of MESL. Adjusting for these items, EBITDA would be $12.1 million, compared to $11.4 million in Q1 2014.

Net loss attributable to shareholders was $11.6 million in Q1 2015, compared to net income attributable to shareholders of $2.1 million for the same period of 2014.  The decrease in net income is primarily attributable to the foreign exchange loss, the restructuring and wind down of the U.S. operation, the MESL transaction expenses, and the increase in net R&D expense, all described above.

COM DEV ended Q1 2015 with $29.4 million of cash and equivalents, compared to $30.1 million in Q1 2014. The Company generated $5.3 million of cash from operating activities in Q1 2015, compared to Q1 2014 when $2.2 million was used. The Company invested $28.4 million of cash in the quarter, primarily related to the acquisition of MESL.

During Q1 2015, the Company's lending consortium, which consists of CIBC, HSBC, Bank of America and GE Capital Solutions, advanced $17.9 million USD ($20.8 million CAD) to the Company under the non-revolving term facility, the proceeds of which were used to finance the MESL acquisition.  The total amount outstanding under the non-revolving facility is repayable in quarterly payments equal to 5% of the U.S. dollar principal balance outstanding at the time.

The Company's operating credit line of $20 million was not drawn upon at the end of Q1 2015, except for $2.8 million (Q1 2014: $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 76,504,327 on March 6, 2015.

Dividend

The Board of Directors has declared a quarterly dividend of $0.03 per share, to be paid on March 31, 2015, to shareholders of record on March 18, 2015.

Conference Call

A conference call will be held Monday, March 9, 2015 at 10:00 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.comdev.ca) is a leading global provider of space hardware and services. The company has a staff of 1,200, annual revenues of $208 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 defence 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.

Forward-Looking Statements

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.

Non-GAAP Measures

In this news release, the Company provides information about orders, contract backlog and earnings before interest, taxes, depreciation and amortization ("EBITDA"), as well as adjusted EBITDA. Orders, backlog and EBITDA measures are not defined by International Financial Reporting Standards ("IFRS") and the Company's measurement of them may vary from that used by others.  For additional information, please see the "Use of Non-GAAP Measures" section in the Company's Management's Discussion and Analysis dated January 31, 2015.

The Company measures EBITDA as net income attributable to shareholders plus interest, taxes, depreciation and amortization.  The Company defines Adjusted EBITDA as EBITDA adjusted for acquisition-related costs, restructuring and termination benefits, losses related to the wind down of the Company's U.S. operation, and unrealized gain or loss on foreign currency derivatives. These items are considered by management to be outside COM DEV's ongoing operational results. A reconciliation of Adjusted EBITDA to net income determined in accordance with IFRS, is provided below.


Three months ended January 31

In thousands of dollars


2015


2014

Net income attributable to shareholders

$

(11,597)

$

2,092






Interest (recovery) expense


(23)


117

Income taxes


87


1,867

Depreciation & amortization (base)


3,605


2,648

Accelerated amortization of intangibles (U.S. operation)


800


-

EBITDA

$

(7,128)

$

6,724






Adjustments:





Acquisition related costs


1,623


-

Restructuring and termination benefits


2,989


(21)

Loss from US operations excluding restructuring


3,059


1,705

Unrealized loss on foreign currency derivatives


11,555


2,982

Adjusted EBITDA

$

12,098

$

11,390

 

 

 COM DEV International Ltd. 

 Consolidated Statements of Financial Position 

 (Canadian dollars in thousands) 

 Unaudited 





As at January 31,

 2015

As at October 31,

 2014




Assets




Current assets





Cash and cash equivalents

$             29,360

$             33,570



Accounts receivable

49,866

35,613



Inventory

53,731

61,934



Prepaid expenses and other

4,630

3,701



Income taxes recoverable

750

1,002



Investment tax credits

3,195

3,195


 Total current assets 

141,532

139,015





Non-current assets





Property, plant and equipment

101,920

97,499



Intangible assets

34,185

22,110



Goodwill

11,240

-



Investment tax credits

12,483

12,571



Deferred income tax assets

4,335

4,032


 Total non-current assets 

164,163

136,212

 Total assets 

$           305,695

$           275,227




Liabilities




Current liabilities





Accounts payable and accrued liabilities

$             34,708

$             31,492



Income taxes payable

234

296



Provisions

2,316

417



Billings in excess of costs and earnings on contracts in progress

16,894

12,790



Current portion of loans payable

11,168

7,677


Total current liabilities 

65,320

52,672





Non-current liabilities





Accounts payable and accrued liabilities

6,865

283



Loans payable

29,455

11,649



Employee future benefits

9,396

6,207



Deferred income tax liabilities

1,946

-


Total non-current liabilities 

47,662

18,139

 Total liabilities 

$           112,982

$             70,811




Equity





Share capital

$           177,147

$           177,100



Treasury stock

(1,248)

(912)



Contributed surplus

179,015

178,439



Accumulated other comprehensive income

4,556

2,357



Deficit

(171,684)

(157,792)


Equity attributable to shareholders 

187,786

199,192



Non-controlling interest

4,927

5,224


Total equity 

192,713

204,416




 Total liabilities and equity 

$           305,695

$           275,227

 

 

COM DEV International Ltd.

Consolidated Statements of Changes in Equity

(Canadian dollars in thousands)

Unaudited










For the three months ended January 31, 2015

Deficit

Accumulated

 Other

 Comprehensive

 Income

Share Capital

Treasury Stock

Contributed

 Surplus

Total Equity

 Attributable to

 Shareholders

Non-Controlling

 Interest

Total Equity










Balance, October 31, 2014

$   (157,792)

$        2,357

$    177,100

$          (912)

$    178,439

$    199,192

$        5,224

$    204,416

Net loss

(11,597)

-

-

-

-

(11,597)

(263)

(11,860)

Other comprehensive income (loss)

-

2,199

-

-

-

2,199

(34)

2,165

Common shares issued

-

-

47

-

(14)

33

-

33

Expense recognized for ESOP awards

-

-

-

-

64

64

-

64

Treasury stock

-

-

-

(336)

-

(336)

-

(336)

Dividends

(2,295)

-

-

-

-

(2,295)

-

(2,295)

Tax impacts on long-term incentive plans

-

-

-

-

(61)

(61)

-

(61)

Expense recognized for long-term incentive plans

-

-

-

-

498

498

-

498

Expense recognized for stock-based compensation

-

-

-

-

89

89

-

89

Balance, January 31, 2015

$   (171,684)

$        4,556

$    177,147

$       (1,248)

$    179,015

$    187,786

$        4,927

$    192,713



















For the three months ended January 31, 2014


















Balance, October 31, 2013

$   (163,259)

$        1,982

$    346,572

$       (1,051)

$        8,326

$    192,570

$        6,220

$    198,790

Net income

2,092

-

-

-

-

2,092

(236)

1,856

Other comprehensive income (loss)

-

2,370

-

-

-

2,370

(22)

2,348

Common shares issued

-

-

382

-

(119)

263

-

263

Expense recognized for ESOP awards

-

-

-

-

61

61

-

61

Treasury stock

-

-

-

(261)

-

(261)

-

(261)

Settlement of long-term incentive plans, net of tax

-

-

-

46

(72)

(26)

-

(26)

Expense recognized for long-term incentive plans

-

-

-

-

362

362

-

362

Expense recognized for stock-based compensation

-

-

-

-

99

99

-

99

Balance, January 31, 2014

$   (161,167)

$        4,352

$    346,954

$       (1,266)

$        8,657

$    197,530

$        5,962

$    203,492

 

 

COM DEV International Ltd.

Consolidated Statements of Income

(Canadian dollars in thousands, except for per share figures)

Unaudited




For the three months ended January 31

2015

2014








Revenue

$                     53,642

$                     51,821


Cost of revenue

40,259

38,354


Gross margin

13,383

13,467





Selling expenses

3,478

2,836


General expenses

5,552

4,876


Acquisition related costs

1,623

-


Net research and development expenses

1,512

414


Restructuring and termination benefits expense (recovery)

2,989

(21)


Operating expenses

15,154

8,105




Operating (loss) income

(1,771)

5,362





Interest (income) expense

(23)

117


Foreign exchange loss

9,810

1,512


Other expense

215

10

(Loss) income before income taxes

(11,773)

3,723





Income tax expense

87

1,867

Net (loss) income

$                    (11,860)

$                       1,856




Attributable to:




Shareholders

(11,597)

2,092


Non-controlling interest

(263)

(236)


$                    (11,860)

$                       1,856




(Loss) earnings per share




Basic and diluted (loss) earnings per share

$                        (0.15)

$                         0.03

 

 

COM DEV International Ltd.

Consolidated Statements of Comprehensive Income

(Canadian dollars in thousands)

Unaudited


For the three months ended January 31

2015

2014







Net (loss) income

$                    (11,860)

$                       1,856




Other comprehensive income (loss):



Items that may be subsequently reclassified to net income:




Foreign currency translation, net of income tax expense

3,453

2,347




Items that will not be subsequently reclassified to net income:




Actuarial (losses) gains on defined benefit pension plans and other post-retirement plans, net

 of income tax expense

(1,288)

-




Other comprehensive income; net of income taxes

2,165

2,347




Comprehensive (loss) income

$                      (9,695)

$                       4,203




Attributable to:




Shareholders

$                      (9,398)

$                       4,461


Non-controlling interest

(297)

(258)


$                      (9,695)

$                       4,203

 

 

 COM DEV International Ltd. 

 Consolidated Statements of Cash Flows 

 (Canadian dollars in thousands) 

 Unaudited 




For the three months ended January 31

2015

2014




Operating activities





Net (loss) income

$                    (11,860)

$                       1,856



Depreciation and amortization

4,405

2,648



Loss on disposal of assets

4

9



Defined benefit plan expenses

988

166



Defined benefit plan contributions

(9)

(248)



Stock-based compensation expense

587

461



Employee stock ownership plan awards

64

61



Non-cash loan adjustments

2,896

1,072



Investment tax credits recoverable

(330)

(1,267)



Deferred income tax (recovery) expense

(198)

1,272



Unrealized fair value loss on foreign exchange derivatives

11,555

2,982



Withholding tax remittance on stock units settlement

-

(26)


8,102

8,986



Net change in non-cash working capital balances

(2,815)

(11,139)


Operating activities 

5,287

(2,153)




Financing activities





Shares issued

33

263



Purchase of treasury stock

(336)

(261)



Proceeds from advances of long-term debt

21,871

534



Repayments of long-term debt

(3,470)

(780)


Financing activities 

18,098

(244)




Investing activities





Acquisition of property, plant and equipment

(4,491)

(2,214)



Proceeds on disposal of property, plant and equipment

6

-



Acquisition of intangible assets

(518)

(952)



Business acquisition, net of cash acquired

(23,401)

-


Investing activities 

(28,404)

(3,166)




Effect of exchange rate changes on cash and cash equivalents

809

723




Net decrease in cash and cash equivalents

(4,210)

(4,840)

Cash and cash equivalents, beginning of the period

33,570

34,897

Cash and cash equivalents, end of the period

$                     29,360

$                     30,057




Supplemental cash flow information





Interest received

$                            75

$                            39



Interest paid

$                          178

$                            94



Income taxes paid

$                          153

$                              1

 

SOURCE Com Dev International Ltd.

For further information: Gary Calhoun, Chief Financial Officer, Tel: (519) 622-2300 ext. 2826, gary.calhoun@comdev.ca; Jeff Codispodi, Director, Investor Relations & Communications, Tel: (519) 622-2300 ext. 2844, jeff.codispodi@comdev.ca

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