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
For further information: Gary Calhoun, Chief Financial Officer, Tel: (519) 622-2300 ext. 2826, [email protected]; Jeff Codispodi, The Equicom Group, Tel: (416) 815-0700 ext. 261, [email protected]
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