COM DEV Announces Second Quarter Fiscal 2014 Results

CAMBRIDGE, ON, June 5, 2014 /CNW/ - COM DEV International Ltd. (TSX: CDV) today announced second quarter results for the three-month period ended April 30, 2014. All amounts are stated in Canadian dollars unless otherwise noted.

Second Quarter Highlights

  • Revenue was $54.3 million, a two percent decline from the $55.2 million realized in the second quarter of 2013, but 5 percent above the revenue reported in Q1 of this year.
  • Commercial satellite component revenue was $34.5 million, a 33.2 percent increase from $25.9 million achieved in the second quarter of 2013. Civil and military/defence program revenue was impacted by the continuing government budget constraints, largely in the United States.
  • Gross margin increased to $15.8 million, or 29.0 percent of revenue, compared to $14.7 million, or 26.5 percent of revenue in Q2 2013.
  • Backlog was $130.1 million, a 12 percent decline from $149.1 million in Q2 2013, with additional Authority To Proceed (ATP) follow on work of $41.1 million expected at the end of Q2 this year, versus $4.1 million at the end of Q2 2013.
  • COM DEV's exactEarth™ subsidiary had revenue of $4.4 million, up 51.7 percent from $2.9 million in Q2 2013.
  • exactEarth™ received a record level of $9.6 million in orders for Q2 2014, comprised of both new customer subscriptions, and renewals from existing customers.
  • exactEarth™ had EBITDA of $1.0 million in Q2 2014, compared to $0.3 million in Q2 2013.
  • COM DEV announced its first ever quarterly dividend, in the amount of $0.03/share.

"We are very pleased with the continued growth in revenue and backlog from our commercial satellite business as well as our exactEarth™ subsidiary," said Michael Pley, CEO.  "exactEarth had record orders of $9.6 million in the quarter, a 70 percent increase over its previous orders record for a single quarter."

"Our results continue to strengthen," Mr. Pley added. "We have made the necessary adjustments at our U.S. division to balance our costs against the expected revenue, and as expected, the impact to our bottom line in Q2 improved significantly from the prior quarter.  With the continued strengthening of the Company's financial performance, coupled with the investment phase of exactEarth™ nearing completion, our Board of Directors made the decision to initiate our Company's first-ever quarterly dividend in the amount of $0.03 per share."  

Financial Review

COM DEV's second quarter 2014 revenues were $54.3 million, a 1.6 percent decline compared to $55.2 million in the previous year. The revenue split between the three market segments was 64 percent commercial, 25 percent civil and 11 percent military/defence, compared to a 47 percent, 35 percent, 18 percent split respectively in 2013. Revenues in the commercial sector increased 33.2 percent in the quarter while the civil and military/defence sectors declined by 27.7 percent and 41.2 percent respectively.

COM DEV received new orders totaling $35.3 million during the quarter, of which 63 percent were commercial, 25 percent were civil, and 12 percent were military/defence. In Q2 2013 the Company booked $57.0 million of new orders, with a commercial/civil/military split of 44 percent, 41 percent, 15 percent respectively.

Included in the $35.3 million of new orders received in the second 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 Q2 2014, the amount of potential order value in excess of ATP, which management expects to realize, stood at $41.1 million. This compares to $4.1 million at the end of Q2 2013. The expected full contract amounts are based on bid values, with a historically high percentage of ATPs being ultimately turned into full contract values.

Order backlog at April 30, 2014 was $130.1 million, compared to $149.1 million for the same period in 2013.  Backlog was split between the Company's commercial, civil and military/defence sectors at a ratio of 57 percent, 35 percent and 8 percent respectively, compared to 54 percent, 29 percent and 17 percent respectively at April 30, 2013.  The Company expects to convert approximately 60 percent of the total backlog into revenue during fiscal 2014.

Consolidated gross margin was $15.8 million in Q2 2014, representing 29 percent of total revenues, a 2.5 percent increase from Q2 2013 with gross margin of $14.7 million representing 26.5 percent of total revenues. The year over year increase came from improvements in both the data and equipment segments of the business. The increase in the data services segment gross margin percentage is due to higher revenue generated from exactEarth's™ fleet of on-orbit satellites. As exactEarth™ continues to ramp up its revenues, management expects gross margins to increase. The equipment segment increase quarter over quarter was primarily as a result of a change in the mix of contracts in progress, and efficiently advancing the work on customer projects.

COM DEV recorded a net research and development expense of $1.1 million in Q2 2014, compared to a net expense of $0.1 million in Q2 2013.  Gross R&D spending declined slightly to $2.4 million from $2.8 million while R&D funding from external sources decreased to $0.3 million from $0.7 million. The Company also recognized $1.0 million of Investment Tax Credits (ITCs) in Q2 2014, to offset Canadian Federal taxes, compared to $2.0 million in Q2 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 $3.0 million were flat in Q2 2014 compared to Q2 of 2013.  General expenses grew by $0.7 million in Q2 2014 to $5.7 million compared to $4.9 million in Q2 2013. The increase in general expenses reflects the cost of Corporate Development activities, as well as increases in legal and finance organization costs.

The Company recorded a foreign exchange gain of $1.2 million in Q2 2014, compared to a gain of $0.1 million in the same quarter in the previous year. Of the gain, $1.6 million is the result of unrealized mark to market valuation reductions in the Company's hedge portfolio, partly offset by unrealized balance sheet translation losses.

EBITDA attributable to shareholders was $9.7 million in Q2 2014, compared to $9.6 million in Q2 2013. The quarter over quarter increase in EBITDA is the result of higher net income and lower interest and income tax expenses offset by an increase in amortization. The equipment segment EBITDA decreased compared to the same quarter last year, while the data services segment saw improved EBITDA attributable to shareholders over the prior year. The data services segment is EBITDA positive in Q2 2014 at $1.0 million compared to a Q2 2013 EBITDA of $0.3 million. The increase is the result of decreased net loss in exactEarth™, driven by continued revenue growth as exactEarth™ expands its global customer base.

COM DEV ended Q2 2014 with $44.4 million of cash and equivalents, compared to $33.1 million in Q2 2013. The Company generated $19.6 million of cash from operating activities in Q2 2014, compared with Q2 2013 when $11.9 million was generated. During Q2 2014, $14.4 million of cash was generated compared to $6.7 million generated in Q2 2013.

The Company's operating credit line of $20 million was not drawn upon at the end of Q2 2014, except for $2.8 million (Q2 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 76,570,236 on June 5, 2014.

Conference Call

A conference call will be held Thursday, June 5, 2014 at 5:00 pm 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 April 30,
2014
      As at October 31,
2013
      As at November 1,
2012
                           
Assets                          
  Current assets                          
    Cash and cash equivalents       $ 44,419     $  34,897     $  25,794
    Accounts receivable         35,196       37,460       41,722
    Inventory          49,258       59,383       64,763
    Prepaid expenses and other         3,518       2,716       3,214
    Income taxes recoverable         2,212       2,245       2,266
    Investment tax credits-current          2,961       2,961       2,162
  Total current assets          137,564       139,662       139,921
                           
    Non-current assets                          
    Property, plant and equipment          94,056       92,340       86,000
    Intangible assets          17,815       16,416       14,600
    Goodwill         -       -       2,205
    Investment tax credits          10,439       9,933       2,124
    Deferred income tax assets         8,337       9,552       14,728
  Total non-current assets          130,647       128,241       119,657
 Total assets        $  268,211     $  267,903     $ 259,578
                           
Liabilities                          
  Current liabilities                          
    Accounts payable and accrued liabilities       $ 24,137     $ 26,334     $ 30,622
    Income taxes payable         -       4       851
    Provisions          978       1,215       430
    Billings in excess of costs and earnings on contracts in progress         9,932       17,047       22,448
    Current portion of loans payable         7,291       5,787       3,978
  Total current liabilities          42,338       50,387       58,329
                           
  Non-current liabilites                          
    Accounts payable and accrued liabilities         260       33       525
    Loans payable         13,615       14,890       16,358
    Employee future benefits         4,058       3,803       5,514
  Total non-current liabilities          17,933       18,726       22,397
Total liabilities        $ 60,271     $ 69,113     $ 80,726
                           
Shareholders' equity                          
    Share capital          177,053       346,572       345,876
    Treasury stock          (1,488)       (1,051)       (432)
    Contributed surplus          178,753       8,326       9,298
    Accumulated other comprehensive income (loss)          3,948       1,981       (1,698)
    Non-controlling interest         5,830       6,221       7,317
    Deficit          (156,156)       (163,259)       (181,509)
  Total shareholders' equity          207,940       198,790       178,852
                           
Total liabilities and shareholders' equity        $ 268,211     $ 267,903     $  259,578
                           

 

COM DEV International Ltd.
Consolidated Interim Statements of Changes in Equity
(Canadian dollars in thousands)
Unaudited
                                             
For the six months ended April 30, 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       8,679     7,103     1,967                 (391)      
Common stock issued       339     -     -     754     -     -     (415)
Common stock repurchased and
cancelled 
      (344)     -     -     (273)     -     -     (71)
Expense recognized for ESOP awards       110     -     -     -     -     -     110
Treasury stock       (488)     -     -     -     (488)     -     -
Reduction in stated capital       -     -     -     (170,000)     -     -     170,000
Settlement of long-term incentive plans       (30)     -     -     -     51     -     (81)
Expense recognized for long-term
incentive plans
      686     -     -     -     -     -     686
Expense recognized for stock-based
compensation
      198     -     -     -     -     -     198
Balance, April 30, 2014     $   207,940   $   (156,156)   $  3,948   $  177,053   $  (1,488)   $  5,830   $ 178,753
                                             
                                             
For the six months ended April 30, 2013                                            
                                             
Balance, October 31, 2012     $  178,852   $  (181,509)   $  (1,698)   $  345,876   $  (432)   $  7,317   $  9,298
Comprehensive income       9,917     9,213     1,449                 (745)      
Common stock issued       6     -     -     386     -     -     (380)
Expense recognized for ESOP awards       110     -     -     -     -     -     110
Treasury stock       (1,136)     -     -     -     (1,136)     -     -
Settlement of long-term incentive plans       (33)     -     -     -     52     -     (85)
Expense recognized for long-term
incentive plans
      517     -     -     -     -     -     517
Expense recognized for stock-based
compensation
      156     -     -     -     -     -     156
Balance, April 30 2013     $ 188,233   $ (172,296)   $ (249)   $ 346,262   $ (1,516)   $ 6,572   $  9,460
                                             

 

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 April 30                           2014           2013
                                         
                                         
  Revenue                      $     54,332     $      55,229
  Cost of revenue                            38,569           40,572
  Gross margin                           15,763           14,657
                                         
  Research and development costs                           2,360           2,777
  Research and development recovery                           (263)           (658)
  Investment tax credits recoverable                            (1,001)           (2,011)
  Net research and development expense                           1,096           108
                                         
  Selling expenses                           3,002           2,977
  General expenses                           5,662           4,948
  Operating income                           6,003           6,624
                                         
  Interest expense                           134           169
  Foreign exchange gain                           (1,178)           (111)
  Other expense                           489           267
Income before income taxes                           6,558           6,299
                                         
  Income tax expense                           1,702           1,932
Net income                     $      4,856     $      4,367
                                         
Attributable to:                                        
  Shareholders                           5,011           4,700
  Non-controlling interest                           (155)           (333)
                      $     4,856     $     4,367
                                         
Other comprehensive income:                                        
  Foreign currency translation                           (380)           234
  Actuarial gain                            -           530
Comprehensive income                     $     4,476     $      5,131
                                         
Atributable to:                                        
  Shareholders                           4,447           5,133
  Non-controlling interest                           29           (2)
                      $     4,476     $     5,131
                                         
Earnings per share                                         
Basic and diluted earnings per share                     $      0.07     $     0.06
                                         

COM DEV International Ltd.
Consolidated Interim Statements of Cash Flows
(Canadian dollars in thousands)
Unaudited
                                           
For the three months ended April 30                             2014           2013
                                           
Operating activities                                          
    Net income                       $      4,856     $     4,367
    Amortization                             2,865           2,800
    Loss (gain) on disposal of assets                             9           -
    Defined benefit plan expenses                             384           218
    Defined benefit plan contributions                             (250)           (231)
    Stock based compensation expense                             423           204
    Employee stock ownership plan awards                             49           48
    Non-cash loan adjustments                             (120)           284
    Investment tax credits recoverable                             (1,001)           (2,011)
    Deferred income tax expense                             104           16
    Unrealized foreign exchange (gain) loss on derivatives                             (1,560)           159
    Cash settlement of restricted stock units                             (5)           -
                              5,754           5,854
    Net change in non-cash working capital items                             13,873           6,085
  Operating activities                              19,627           11,939
                                           
Financing activities                                          
    Shares issued                              76           -
    Shares repurchased and cancelled                              (344)           -
    Purchase of treasury stock                             (227)           (625)
    Proceeds from advance of long-term debt                             304           540
    Repayment of long-term debt                             (780)           (865)
  Financing activities                              (971)           (950)
                                           
Investing activities                                          
    Acquisition of property, plant and equipment                             (2,491)           (3,787)
    Acquisition of intangible assets                              (1,654)           (480)
  Investing activities                              (4,145)           (4,267)
Effect of exchange rate changes on cash                             (149)           (7)
                                           
Net increase in cash                             14,362           6,715
Cash and cash equivalents, beginning of the period                             30,057           26,386
Cash and cash equivalents, end of the period                       $      44,419     $     33,101
                                           
                                           
Supplemental cashflow information                                          
Interest paid                       $      136     $      133
Taxes paid                       $       -     $      45

 

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

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