COM DEV Announces Second Quarter Fiscal 2010 Results

CAMBRIDGE, ON, June 10 /CNW/ - COM DEV International Ltd. (TSX:CDV) today announced second quarter financial results for the three month period ended April 30, 2010. All amounts are stated in Canadian dollars unless otherwise noted.

Second Quarter Highlights

    
    -   Revenue was $60.4 million, compared to $64.1 million in the second
        quarter of 2009.
    -   Gross margin was 22%, compared to 28% in Q2 2009.
    -   Net income was $4.1 million, or $0.05 per share, compared to
        $4.9 million or $0.07 per share for the second quarter of the prior
        year.
    -   Sequentially, revenue was up by 7%, and earnings improved by $0.03
        per share.
    -   New orders won in the second quarter totaled $33 million, compared to
        $50 million a year earlier and $51 million in the first quarter of
        fiscal 2010. An additional $45 million of follow-on orders are
        expected to result from Authorities to Proceed (ATPs) received in Q2
        2010.
    -   Backlog at April 30, 2010 was $128 million, compared to $157 million
        three months earlier.
    

"Our commercial products business, which now generates over 60% of revenues, continues to perform very well," said John Keating, CEO of COM DEV. "Cost increases we experienced on a limited number of programs in our other divisions, however, suppressed revenues and gross margins in the second quarter. Orders are likely to be in the same range as last year's record levels, and we remain very encouraged about our longer-term opportunities, but we now expect annual revenue growth to be minimal for the current fiscal year and gross margins to be in the mid-20% range."

Mr. Keating continued: "One of our key growth initiatives, exactEarth, continues to make very good progress. We signed additional countries to trial agreements, and demonstrated the operational effectiveness of our AIS technology by successfully detecting ships for security purposes during the Vancouver Olympics. The launch of our first two operational satellites is now expected in the fall, meaning the timing of our revenue stream is delayed, but we are pursuing alternatives to close that revenue gap.

"The funding of Radarsat Constellation in the recent federal budget could lead to over $80 million of revenues for us over a five year period, but it might also result in deferring the start of the next significant optics program," added Mr. Keating. "An important priority for us is to secure optics work for our COM DEV Canada division to replace the James Webb Space Telescope program which is nearing completion. The Canadian Space Agency's proposed Long-Term Space Plan prioritizes a number of programs that would most likely involve a role for COM DEV, but the Plan has not yet been funded. We are pursuing all possible avenues to win new orders for the division."

Financial Review

COM DEV's fiscal 2010 second quarter revenues of $60.4 million represented a decrease of $3.7 million or 6% compared to the second quarter of 2009. The revenue split between the three market segments was 63% commercial, 25% civil and 12% military, compared to a 58/26/16 split in the second quarter of 2009. While underlying market conditions and the Company's historic success rate at winning new business provide the basis for revenue growth, an unfavourable shift in exchange rates and program execution on several contracts have been disappointing, and has resulted in a slower pace of realizing revenue than expected. As a result, management now expects year-over-year revenue growth to be minimal for fiscal year 2010.

COM DEV received new orders totaling $33 million during the second quarter, of which 76% were commercial, 13% were civil, and 11% were military. While the dollar value of orders secured in Q2 2010 was below recent quarterly levels, follow-on orders expected to be realized from Authorities to Proceed (ATPs) received during the quarter grew significantly to $45 million, compared to $11 million in Q2 2009. COM DEV only includes these ATP amounts in orders and backlog once the final contracts are in place.

Order backlog at quarter-end was $128 million, compared to backlog of $157 million three months earlier, and $173 million one year ago. These variations in backlog are consistent with historical patterns as the order profiles are typically lumpy in nature. Backlog was split between the Company's commercial, civil and military sectors at a ratio of 46%, 32% and 22% respectively, compared to 45%, 40% and 15% at April 30, 2009.

Gross margin was $13.1 million in the second quarter, representing 22% of revenues, compared to $17.8 million or 28% of revenues in the second quarter of 2009. The decrease in gross margin percentage was the result of cost increases on several programs and less favourable exchange rates.

Net research and development expense was $2.3 million in the quarter, compared to $4.5 million in the second quarter of 2009. The 49% decrease was achieved as a major project from last year has been completed and the Company has maintained a disciplined focus on the key priorities of its R&D technology roadmap.

Selling expenses were $3.1 million in the second quarter, compared to $2.4 million in Q2 2009. The increase was due to a higher level of bidding costs in support of increased bidding activity, higher business development and sales and marketing costs in exactEarth and the COM DEV Canada division, and an increase in commission costs. General and administrative expenses were $4.9 million, compared with $5.7 million in Q2 2009, as the Company placed increased scrutiny on G&A spending throughout the organization.

Net income for the quarter was $4.1 million, compared to $4.9 million in Q2 2009, while earnings per share were $0.05, compared to $0.07 a year earlier. Net income in Q2 2010 included a $1.5 million foreign exchange gain, compared to a foreign exchange loss of $0.3 million a year earlier, as gains from the Company's hedging program more than offset the negative impact of translation of foreign denominated balance sheet items.

COM DEV ended the quarter with $10.4 million of cash and equivalents, compared to $18.2 million at January 31, 2010. Operating activities generated $2.1 million of cash in the second quarter. Financing activities used $1.6 million of cash, while investing activities used $8.3 million of cash. At April 30, 2010, COM DEV had outstanding debt of $15.7 million including the current portion, and the Company's $32 million credit facility was not drawn upon.

The Company's basic share count stood at 76,156,127 on June 9, 2010 (fully diluted: 77,799,909).

Conference Call

A conference call will be held Thursday, June 10, 2010 at 5:00 pm EDT to discuss this announcement. 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(TM) to listen to the webcast.

About COM DEV

COM DEV International Ltd. (www.comdevintl.com) is a leading global designer and manufacturer of space hardware subsystems. With facilities in Canada, the United Kingdom and the United States, COM DEV manufactures advanced products and subsystems that are sold to major satellite prime contractors for use in communications, space science, remote sensing and military satellites.

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 Statements of Changes in Equity
                       (Canadian dollars in thousands)
                                  Unaudited

                                    Accumu-
    For the                           lated
     six months                       Other
     ended                          Compre-             Non-cont-   Contrib-
     April 30,                      hensive      Share    rolling       uted
     2010       Total    Deficit     Income    Capital   interest    Surplus
    -------------------------------------------------------------------------

    Balance,
     October
     31,
     2009   $ 157,909  $(188,759) $  (2,507) $ 345,885  $     486  $   2,804

    Comprehen-
     sive
     income
      Net
       Income   6,329      6,350          -          -        (21)         -
      Foreign
       currency
       transla-
       tion
       adjustm-
       ents
       (net of
       taxes
       of
       $nil)   (1,416)         -     (1,416)         -          -          -
            ---------- ---------- ---------- ---------- ---------- ----------
                4,913      6,350     (1,416)         -        (21)         -
    Common
     stock
     issued         -          -          -        183          -       (183)
    Value of
     ESOP
     awards       103          -          -          -          -        103
    Minority
     interest
     purchase
     adjust-
     ment        (640)         -          -          -       (465)      (175)
    Expense
     recogn-
     ized for
     stock-based
     compens-
     ation        522          -          -          -          -        522
            ---------- ---------- ---------- ---------- ---------- ----------
    Balance,
     April 30,
     2010   $ 162,807  $(182,409) $  (3,923) $ 346,068  $       -  $   3,071
            ---------- ---------- ---------- ---------- ---------- ----------
            ---------- ---------- ---------- ---------- ---------- ----------


                                    Accumu-
    For the                           lated
     six months                       Other
     ended                          Compre-             Non-cont-   Contrib-
     April 30,                      hensive      Share    rolling       uted
     2009       Total    Deficit     Income    Capital   interest    Surplus
    -------------------------------------------------------------------------

    Balance,
     October
     31,
     2008   $ 121,584  $(204,065) $    (729) $ 323,975  $     524  $   1,879

    Comprehensive
     income
      Net
       Income   9,187      9,207          -          -        (20)         -
      Foreign
       currency
       transla-
       tion
       adjustm-
       ents
       (net of
       taxes
       of
       $nil)     (833)         -       (833)         -          -          -
            ---------- ---------- ---------- ---------- ---------- ----------
                8,354      9,207       (833)         -        (20)         -
    Common
     stock
     issued    21,873          -          -     22,032          -       (159)
    Value of
     ESOP
     awards        97          -          -          -          -         97
    Expense
     recogn-
     ized for
     stock-based
     compens-
     ation        386          -          -          -          -        386
            ---------- ---------- ---------- ---------- ---------- ----------
    Balance,
     April
     30,
     2009   $ 152,294  $(194,858) $  (1,562) $ 346,007  $     504  $   2,203
            ---------- ---------- ---------- ---------- ---------- ----------
            ---------- ---------- ---------- ---------- ---------- ----------



                         COM DEV International Ltd.
                    Consolidated Statements of Operations
        (Canadian dollars in thousands, except for per share figures)
                                  Unaudited

    For the three months ended April 30                    2010         2009
    -------------------------------------------------------------------------

      Revenue                                        $   60,415   $   64,104
      Cost of revenue                                    47,364       46,338
                                                     -----------  -----------
      Gross margin                                       13,051       17,766
                                                     -----------  -----------
      Research and development costs                      3,022        5,525
      Research and development recovery                     728          987
                                                     -----------  -----------
      Net research and development                        2,294        4,538
      Selling expenses                                    3,124        2,364
      General expenses                                    4,871        5,718
                                                     -----------  -----------
      Operating income                                    2,762        5,146
      Interest expense (income)                             141         (101)
      Foreign exchange (gain) loss                       (1,457)         315
      Other (income) expense                                (24)          99
                                                     -----------  -----------
    Net income                                       $    4,102   $    4,833
                                                     -----------  -----------
                                                     -----------  -----------

    Attributable to:
      Equity holders of the parent                   $    4,105   $    4,853
      Non-controlling interest                               (3)         (20)
                                                     -----------  -----------
                                                     $    4,102   $    4,833
                                                     -----------  -----------
                                                     -----------  -----------

    Earnings per share
    Basic and diluted earnings per share             $     0.05   $     0.07



                         COM DEV International Ltd.
                    Consolidated Statements of Operations
        (Canadian dollars in thousands, except for per share figures)
                                  Unaudited

    For the six months ended April 30                      2010         2009
    -------------------------------------------------------------------------

      Revenue                                        $  117,102   $  120,615
      Cost of revenue                                    90,626       88,171
                                                     -----------  -----------
      Gross margin                                       26,476       32,444
                                                     -----------  -----------
      Research and development costs                      6,707        9,371
      Research and development recovery                   1,496        2,031
                                                     -----------  -----------
      Net research and development                        5,211        7,340
      Selling expenses                                    5,777        4,400
      General expenses                                   11,170       11,075
                                                     -----------  -----------
      Operating income                                    4,318        9,629
      Interest expense                                      288          322
      Foreign exchange gain                              (2,421)         (87)
      Other expense                                         122          207
                                                     -----------  -----------
    Net income                                       $    6,329   $    9,187
                                                     -----------  -----------
                                                     -----------  -----------

    Attributable to:
      Equity holders of the parent                   $    6,350   $    9,207
      Non-controlling interest                              (21)         (20)
                                                     -----------  -----------
                                                     $    6,329   $    9,187
                                                     -----------  -----------
                                                     -----------  -----------

    Earnings per share
    Basic and diluted earnings per share             $     0.08   $     0.13



                         COM DEV International Ltd.
                         Consolidated Balance Sheets
                       (Canadian dollars in thousands)
                                  Unaudited

                                                       As at        As at
                                                      April 30,   October 31,
                                                        2010         2009
    -------------------------------------------------------------------------

    Assets
      Current
        Cash and cash equivalents                    $   10,403   $   21,404
        Accounts receivable                              38,835       53,674
        Inventory                                        62,698       51,114
        Prepaids and other                                5,680        3,112
        Income taxes recoverable                          5,389        4,615
        Future income tax assets - current                6,192        6,192
                                                     -----------  -----------
                                                        129,196      140,111
      Property, plant and equipment                      72,042       69,537
      Intangible assets                                  24,598       21,459
      Goodwill                                            2,242        2,388
      Future income tax assets - long term                1,881        1,723
                                                     -----------  -----------
      Total assets                                   $  229,960   $  235,218
                                                     -----------  -----------

    Liabilities
      Current
        Accounts payable and accrued liabilities     $   27,048   $   32,939
        Deferred revenue                                 22,608       22,510
        Current portion of loans payable                  6,279        6,587
                                                     -----------  -----------
                                                         55,935       62,036
                                                     -----------  -----------

      Long term
        Loans payable                                     9,388       13,401
        Employee future benefits                          1,830        1,872
                                                     -----------  -----------
                                                         11,218       15,273
                                                     -----------  -----------

      Total liabilities                                  67,153       77,309
                                                     -----------  -----------

    Shareholders' equity
      Share capital                                     346,068      345,885
      Contributed surplus                                 3,071        2,804
      Deficit                                          (182,409)    (188,759)
      Non-controlling interest                                -          486
      Accumulated other comprehensive income             (3,923)      (2,507)
                                                     -----------  -----------
      Total shareholders' equity                        162,807      157,909
                                                     -----------  -----------
    Total liabilities and shareholders' equity       $  229,960   $  235,218
                                                     -----------  -----------
                                                     -----------  -----------



                         COM DEV International Ltd.
                    Consolidated Statements of Cash Flows
                       (Canadian dollars in thousands)
                                  Unaudited

    For the three months ended April 30                    2010         2009
    -------------------------------------------------------------------------

    Operating activities
      Net income                                     $    4,102   $    4,833
      Amortization                                        2,626        2,842
      Gain on disposal of assets                              -          (26)
      Defined benefit plan expenses                         165          119
      Defined benefit plan contibutions                    (193)        (156)
      Stock compensation expense                            245          210
      Employee stock ownership plan awards                   46           43
      Unrealized foreign exchange gain on derivatives    (1,854)      (2,426)
                                                     -----------  -----------
                                                          5,137        5,439
      Net change in non-cash working capital items       (3,010)       1,704
                                                     -----------  -----------
    Operating activities                                  2,127        7,143
                                                     -----------  -----------

    Financing activities
      Shares issued                                           -       21,615
      Repayment of long term debt                        (1,647)      (2,045)
                                                     -----------  -----------
    Financing activities                                 (1,647)      19,570
                                                     -----------  -----------

    Investing activities
      Acquisition of property, plant and equipment       (3,862)      (1,432)
      Proceeds on disposal of property, plant, and
       equipment                                              -           26
      Acquisition of intangible assets                   (2,311)      (2,164)
      Business acquisitions                              (2,127)        (140)
                                                     -----------  -----------
    Investing activities                                 (8,300)      (3,710)
                                                     -----------  -----------
    Effect of exchange rate changes on cash                  (5)        (350)
                                                     -----------  -----------

    Net (decrease) increase in cash                      (7,825)      22,653
    Cash and cash equivalents, beginning of period       18,228        9,243
                                                     -----------  -----------
    Cash and cash equivalents, end of period         $   10,403   $   31,896
                                                     -----------  -----------
                                                     -----------  -----------

    Interest paid                                    $      146   $      252
                                                     -----------  -----------
                                                     -----------  -----------
    Taxes paid                                       $        -   $        -
                                                     -----------  -----------
                                                     -----------  -----------



                         COM DEV International Ltd.
                    Consolidated Statements of Cash Flows
                       (Canadian dollars in thousands)
                                  Unaudited

    For the six months ended April 30                      2010         2009
    -------------------------------------------------------------------------

    Operating activities
      Net income                                     $    6,329   $    9,187
      Amortization                                        5,243        5,691
      Loss (gain) on disposal of assets                      53          (26)
      Defined benefit plan expenses                         335          237
      Defined benefit plan contibutions                    (390)        (309)
      Stock compensation expense                            522          386
      Employee stock ownership plan awards                  103           97
      Unrealized foreign exchange gain on derivatives    (2,801)      (2,635)
                                                     -----------  -----------
                                                          9,394       12,628
      Net change in non-cash working capital items       (3,080)      (9,281)
                                                     -----------  -----------
    Operating activities                                  6,314        3,347
                                                     -----------  -----------

    Financing activities
      Shares issued                                           -       21,873
      Repayment of long term debt                        (3,231)      (3,615)
                                                     -----------  -----------

    Financing activities                                 (3,231)      18,258
                                                     -----------  -----------

    Investing activities
      Acquisition of property, plant and equipment       (6,562)      (1,881)
      Proceeds on disposal of property, plant and
       equipment                                              1           26
      Acquisition of intangible assets                   (5,281)      (3,107)
      Business acquisitions                              (2,127)        (140)
                                                     -----------  -----------
    Investing activities                                (13,969)      (5,102)
                                                     -----------  -----------
    Effect of exchange rate changes on cash                (115)        (709)
                                                     -----------  -----------

    Net increase (decrease) in cash                     (11,001)      15,794
    Cash and cash equivalents, beginning of period       21,404       16,102
                                                     -----------  -----------
    Cash and cash equivalents, end of period         $   10,403   $   31,896
                                                     -----------  -----------
                                                     -----------  -----------

    Interest paid                                    $      308   $      575
                                                     -----------  -----------
                                                     -----------  -----------
    Taxes paid                                       $      158   $        -
                                                     -----------  -----------
                                                     -----------  -----------
    

%SEDAR: 00003673E

SOURCE COM DEV International Ltd.

For further information: For further information: Gary Calhoun, Chief Financial Officer, Tel: (519) 622-2300 ext. 2826, gary.calhoun@comdev.ca; Jeff Codispodi, The Equicom Group, Tel: (416) 815-0700 ext. 261, jcodispodi@equicomgroup.com

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