COM DEV Announces Second Quarter FY2007 Results



    CAMBRIDGE, ON, June 14 /CNW/ - COM DEV International Ltd. (TSX:CDV) today
announced its second quarter financial results for the three-month period
ended April 30, 2007. All amounts are stated in Canadian dollars.

    
    Second Quarter Highlights

    -   Revenue was $38.6 million, marginally higher than the $38.2 million
        recorded in the second quarter of 2006, and was lower than expected
        due to the time and effort devoted by a number of revenue-generating
        employees to analysis and testing related to a technical issue on a
        program which was uncovered by the Company's quality control
        procedures in April.
    -   Gross margin was 19%, compared to 30% in the comparable period of
        2006. Margins were negatively impacted by a $5.1 million charge
        incurred due to the program cost overrun.
    -   COM DEV recorded a net loss of $1.4 million in the second quarter,
        compared to a net income of $5.4 million a year earlier. Earnings per
        share were ($0.02), compared to $0.09 in Q2 2006.
    -   New orders won in the second quarter totaled $81 million, compared to
        $42 million a year earlier and $22 million in the first quarter of
        fiscal 2007.
    -   Second quarter orders included a $39 million civil space contract
        from the Canadian Space Agency for the production phase of the fine
        guidance sensor on NASA's James Webb Space Telescope. The project
        will be run out of COM DEV's recently opened Ottawa facility.
    -   Backlog at quarter-end was $130 million, compared to $89 million at
        the end of Q1 2007.
    -   Subsequent to quarter-end COM DEV purchased a 46,000 square foot
        facility in El Segundo, California which will be home to the
        production and engineering operations of COM DEV USA and serve as a
        platform for entry into the US government space market.
    

    "We have made significant progress towards our long-term strategic growth
objectives in recent months, including securing a major mandate for our new
Ottawa facility, establishing a location for our US operations, and
undertaking a significant expansion at our Cambridge site to accommodate
expected production volumes. New orders and backlog reached record levels in
the second quarter," said Mike Pley, President of COM DEV. "We also rallied
our team and worked very closely with a customer to rectify a problem
uncovered by our testing procedures. I am very pleased to have resolved that
issue to the customer's satisfaction, and we are undertaking steps to ensure
that this type of problem does not recur."

    Program Cost Overrun Update

    The second quarter saw COM DEV's financial results impacted significantly
by a technical issue on one of the Company's programs. In a press release
dated April 18, 2007, the Company estimated that the total direct and indirect
impacts could be up to $9 million. Subsequently a team of senior technical
subject matter experts worked to determine the root cause of the process
failure and to implement corrective actions. The Company has worked closely
with the customer to determine the extent to which equipment needed to be
rebuilt and the criteria for accepting the remaining equipment. Following an
extensive qualification testing process, the Company and the customer
determined that the majority of the hardware could be used "as is", while some
of the components required rework and a small number of components must be
rebuilt. The Company is well into the required rebuild for the equipment so
dispositioned, has completed rework as required, and is currently delivering
hardware to the customer for integration onto the spacecraft.
    Because much of the equipment originally built could be used, COM DEV has
determined that the total financial impact of this issue is lower than
initially estimated. The Company has included a $5.1 million charge in cost of
goods sold for the second quarter. This amount includes estimated follow-on
effects from other programs that may be delayed. The Company does not
anticipate recording any additional charges relating to this issue.

    Financial Review

    COM DEV's fiscal 2007 second quarter revenues of $38.6 million
represented an increase of $0.4 million or 1% over the prior year period.
Revenue growth was lower than expected due to the time and effort devoted by a
number of revenue-generating employees to analysis and testing related to the
program cost overrun. The revenue split between the three sectors was 45%
commercial, 31% civil and 24% military. Revenues over the first six months of
fiscal 2007 are 10.1% higher than in the comparable period last year.
Management continues to expect revenue growth of at least 10% in fiscal 2007.
    The Company received new orders totaling $81 million during the quarter,
of which 28% were commercial, 60% were civil, and 12% were military. Backlog
at quarter-end was a record high $130 million compared to $89 million three
months earlier. Backlog was split between the Company's commercial, civil and
military sectors at a ratio of 25%, 50% and 25% respectively, compared to 36%,
31% and 33% at the end of Q1 2007.
    Second quarter gross profit was $7.2 million, compared to $11.5 million
in Q2 2006. The gross margin of 19%, which compares to 30% a year earlier, was
below management's target range of mid to high 20's. The $5.1 million impact
of the program cost overrun was incurred entirely at the gross profit level.
Excluding this impact, gross margin would have been 31% in Q2 2007. Management
anticipates a return to its target range in coming quarters, though the
strengthening Canadian dollar is expected to have a suppressive effect on
margins.
    Net research and development expense increased by $0.9 million to
$2.7 million following a strategic decision to pursue near and medium term
growth opportunities. Selling, general and administrative expense increased by
$1.3 million to $5.0 million, due largely to the start-up of operations in
California and higher bid-related costs. Operating loss was $0.5 million in
Q2 2007. The net loss of $1.4 million includes a $0.9 million provision for
discontinued operations resulting from the settlement of a lease obligation in
the UK.
    COM DEV exited the second quarter of 2007 with $25.6 million of cash and
equivalents compared to $15.2 million at January 31, 2007. Cash generated from
operating activities was $13.1 million, compared to $3.1 million in Q2 2006.
The Company's approved credit facilities totaling $45 million remained undrawn
at quarter-end.
    The Company's basic share count averaged 67,585,551 in the second
quarter, and stood at 67,649,638 on June 11, 2007.

    Change to Board of Directors

    COM DEV also announced that Frank Hasenfratz has resigned from the
Company's Board of Directors in order to devote more time to personal
interests. Chairman Keith Ainsworth expressed his thanks to Mr. Hasenfratz on
behalf of the Board, stating: "Frank joined COM DEV's board as a director in
1994, prior to COM DEV going public. His insight, contributions, and
commitment to the Company during his tenure have been most appreciated. We
thank Frank sincerely and wish him all the best in his future endeavors."

    Conference Call

    A conference call will be held today, Thursday, June 14, 2007 at 5:30 pm
EDT to discuss this announcement. To access the live webcast, please visit the
Company's website at www.comdev.ca 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.

    COM DEV and COM DEV Space are registered trademarks of COM DEV
International Ltd. This news release may contain certain forward-looking
statements that involve risks and uncertainties. Actual results may differ
materially from results indicated in any forward-looking statements. The
Company cautions that, among other things, in view of the rapid changes in
communications markets and technologies, and other risks including the cost
and market acceptance of the Company's new products, the level of individual
customer procurements and competitive product offerings and pricing, and
general economic circumstances, the Company's business prospects may be
materially different from forward-looking statements made by the Company.



    
                         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                 2007           2006
    -------------------------------------------------------------------------

    Continuing Operations
      Revenue                                     $   38,590     $   38,162
      Cost of revenue                                 31,353         26,657
                                                 -------------  -------------
      Gross margin                                     7,237         11,505
                                                 -------------  -------------
      Research and development costs                   4,129          2,890
      Research and development recovery                1,384          1,057
                                                 -------------  -------------
      Net research and development                     2,745          1,833
      Selling and general expenses                     4,997          3,705
                                                 -------------  -------------
      Operating (loss) income                           (505)         5,967
      Interest (income) expense                         (159)           491
      Foreign exchange gain                              (50)            (8)
      Other expense                                      221             77
                                                 -------------  -------------
    (Loss) income before non-controlling interest       (517)         5,407
        Non-controlling interest                         (27)            45
                                                 -------------  -------------
    (Loss) income from continuing operations            (490)         5,362
    Provision for discontinued operations                934              -
                                                 -------------  -------------
    Net (loss) income                             $   (1,424)    $    5,362
                                                 -------------  -------------
                                                 -------------  -------------

    (Loss) earnings per share
    Basic and diluted (loss) earnings per share       ($0.02)         $0.09



                         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                   2007           2006
    -------------------------------------------------------------------------

    Continuing Operations
      Revenue                                     $   78,044     $   70,868
      Cost of revenue                                 59,524         49,558
                                                 -------------  -------------
      Gross margin                                    18,520         21,310
                                                 -------------  -------------
      Research and development costs                   6,655          5,096
      Research and development recovery                2,338          1,841
                                                 -------------  -------------
      Net research and development                     4,317          3,255
      Selling and general expenses                     9,093          7,287
                                                 -------------  -------------
      Operating income                                 5,110         10,768
      Interest (income) expense                         (377)         1,046
      Foreign exchange loss (gain)                        73           (296)
      Other expense                                      276            396
                                                 -------------  -------------
    Income before non-controlling interest             5,138          9,622
      Non-controlling interest                             9             72
                                                 -------------  -------------
    Income from continuing operations                  5,129          9,550
    Provision for discontinued operations                934              -
                                                 -------------  -------------
    Net income                                    $    4,195     $    9,550
                                                 -------------  -------------
                                                 -------------  -------------

    Earnings per share
    Basic and diluted earnings per share               $0.06          $0.16



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

                                                       As at          As at
                                                    April 30,    October 31,
                                                        2007           2006
    -------------------------------------------------------------------------
    Assets
      Current
        Cash and cash equivalents                 $   25,598     $   25,711
        Accounts receivable                           37,402         39,372
        Inventory                                     30,564         24,302
        Prepaids and other                             2,603          2,016
        Income taxes recoverable                         383            383
                                                 -------------  -------------
                                                      96,550         91,784
      Capital assets                                  36,670         36,950
      Intangible assets                                4,167          4,165
                                                 -------------  -------------
      Total assets                                $  137,387     $  132,899
                                                 -------------  -------------
                                                 -------------  -------------

    Liabilities
      Current
        Accounts payable and accrued
         liabilities                              $   23,206     $   24,145
        Deferred revenue                              12,044         13,004
        Current portion of loans payable                 102            265
        Current liabilities - discontinued
         operations                                    2,518          1,721
                                                 -------------  -------------
                                                      37,870         39,135
                                                 -------------  -------------

      Long term
        Loans payable                                    272            444
        Long term liabilities - discontinued
         operations                                       49             36
                                                 -------------  -------------
                                                         321            480
                                                 -------------  -------------

      Total liabilities                               38,191         39,615
                                                 -------------  -------------

    Non-controlling interest                             486            477
                                                 -------------  -------------

    Shareholders' equity
      Share capital                                  322,149        320,948
      Contributed surplus                                557            580
      Deficit                                       (223,128)      (227,436)
      Accumulated other comprehensive income            (868)        (1,285)
                                                 -------------  -------------
      Total shareholders' equity                      98,710         92,807
                                                 -------------  -------------

    Total liabilities and shareholders' equity    $  137,387     $  132,899
                                                 -------------  -------------
                                                 -------------  -------------



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

    For the three months ended April 30                 2007           2006
    -------------------------------------------------------------------------

    Cash flows from operating activities
      Net (loss) income from continuing
       operations                                 $     (490)    $    5,362
      Amortization                                     1,811          1,838
      Loss on disposal of assets                          98              -
      Convertible debenture - accretion
       and interest                                        -            192
      Stock compensation expense                         252            107
      Non-controlling interest                           (27)            44
                                                 -------------  -------------
                                                       1,644          7,543
      Net change in non-cash working
       capital items                                  11,448         (4,411)
                                                 -------------  -------------
    Cash flows from operating activities              13,092          3,132
                                                 -------------  -------------

    Cash flows from (used in) financing
     activities
      Shares issued                                      121             44
      Repayment of long term debt                        (61)          (104)
                                                 -------------  -------------
    Cash flows from (used in) financing
     activities                                           60            (60)
                                                 -------------  -------------

    Cash flows (used in) from investing
     activities
      Acquisition of capital assets                   (2,465)          (409)
      Proceeds on disposal of capital assets              22              -
      Acquisition of intangible assets                  (107)           (41)
                                                 -------------  -------------
    Cash flows used in investing activities           (2,550)          (450)
                                                 -------------  -------------
    Effect of exchange rate changes on cash             (179)             5
                                                 -------------  -------------

    Net increase in cash for continuing
     operations                                       10,423          2,627
    Net cash used in discontinued operations             (28)          (150)
                                                 -------------  -------------
    Net increase in cash                              10,395          2,477
    Cash and cash equivalents, beginning of
     period                                           15,203          8,506
                                                 -------------  -------------
    Cash and cash equivalents, end of period      $   25,598     $   10,982
                                                 -------------  -------------
                                                 -------------  -------------

    Interest paid                                 $       16     $       69
                                                 -------------  -------------
                                                 -------------  -------------



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

    For the six months ended April 30                   2007           2006
    -------------------------------------------------------------------------

    Cash flows from operating activities
       Net income from continuing operations      $    5,129     $    9,550
       Amortization                                    3,607          3,521
       Loss (gain) on disposal of assets                  98            (26)
       Convertible debenture - accretion
        and interest                                       -            379
       Stock compensation expense                        511            185
       Non-controlling interest                            9             72
                                                 -------------  -------------
                                                       9,354         13,681
       Net change in non-cash working
        capital items                                 (6,776)        (2,020)
                                                 -------------  -------------
    Cash flows from operating activities               2,578         11,661
                                                 -------------  -------------

    Cash flows from (used in) financing
     activities
      Shares issued                                      667             44
      Repayment of long term debt                       (223)          (282)
                                                 -------------  -------------
    Cash flows from (used in) financing
     activities                                          444           (238)
                                                 -------------  -------------

    Cash flows (used in) from investing
     activities
      Acquisition of capital assets                   (3,170)          (886)
      Proceeds on disposal of capital assets              22             27
      Acquisition of intangible assets                  (174)          (110)
      Business acquisition                                 -         (5,261)
                                                 -------------  -------------
    Cash flows used in investing activities           (3,322)        (6,230)
                                                 -------------  -------------
    Effect of exchange rate changes on cash              311           (125)
                                                 -------------  -------------

    Net increase in cash for continuing
     operations                                           11          5,068
    Net cash used in discontinued operations            (124)          (264)
                                                 -------------  -------------
    Net (decrease) increase in cash                     (113)         4,804
    Cash and cash equivalents, beginning
     of period                                        25,711          6,179
                                                 -------------  -------------
    Cash and cash equivalents, end of period      $   25,598     $   10,983
                                                 -------------  -------------
                                                 -------------  -------------

    Interest paid                                 $       26     $      781
                                                 -------------  -------------
                                                 -------------  -------------
    

    %SEDAR: 00003673E




For further information:

For further information: Gary Calhoun, Chief Financial Officer, Tel:
(519) 622-2300 ext. 2826, Fax: (519) 622-2158, gary.calhoun@comdev.ca; Jeff
Codispodi, The Equicom Group, Tel: (416) 815-0700 ext. 261, Fax: (416)
815-0080, jcodispodi@equicomgroup.com

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