COM DEV Announces Third Quarter Fiscal 2011 Results

CAMBRIDGE, ON, Sept. 2, 2011 /CNW/ - COM DEV International Ltd. (TSX:CDV) today announced third quarter financial results for the three month period ended July 31, 2011.  All amounts are stated in Canadian dollars unless otherwise noted.

Third Quarter Highlights

  • Revenue was $50.5 million, a 4% decrease from revenue of $52.3 million in the third quarter of fiscal 2010.
  • Gross margin in the core space equipment business was 29%, compared to 19% in Q3 2010.
  • Net income attributable to shareholders was $4.2 million, or $0.05 per share, an increase of $6.0 million compared to a net loss of $1.7 million or $(0.02) per share in the third quarter of 2010.
  • New orders won in the third quarter totaled $47 million, compared to $47 million a year earlier and $28 million in the second quarter of 2011.  When expected follow-on orders from current Authority to Proceed (ATP) contracts are considered, the third quarter total reached $74 million compared to $69 million a year earlier, and $42 million in the second quarter of 2011.
  • Backlog at July 31, 2011 was $123 million, plus an additional $27 million in follow-on orders expected from ATPs already awarded, for an expected backlog of $150 million, up from an expected total backlog of $144 million a year earlier.
  • Majority-owned subsidiary exactEarth commissioned its recently launched AIS payload during the quarter, and subsequently launched two additional satellites to bring its constellation to five.

"The third quarter was one of solid execution," said Michael Pley, CEO of COM DEV.  "Gross margins continue to recover, as the impact of the remaining low margin programs diminishes and the more recently added contracts perform to our expectations.  Having also maintained effective control over operating expenses, we recorded our best quarterly profit in over two years."

"Our data services segment achieved important milestones during the quarter," said Mr. Pley.  "exactEarth continued to gain market traction with $3.9 million in new contracts awarded in the third quarter.  This brings total customer orders for the year to $6.4 million, and supports the current expectation that market traction for the full year will reach $10 million in orders for this important new business segment.  In addition to winning customer contracts for this new service, exactEarth continued to build out its constellation of satellites. Its EV2 satellite, launched in April, completed commissioning, and was officially placed into operational service during the quarter.  Subsequent to the end of the third quarter, two additional satellites were launched, which, when commissioning is complete, will bring the total number of operational exactEarth satellites to five.  Three additional satellites are either built or under construction for future launches."

Mr. Pley continued:  "One area of the business that has performed below our expectations has been the civil space segment, which has been affected by a slowdown in near-term orders from our government customers.  This has caused us to reduce our revenue estimates for the year to a decline of 5-to-7 percent from fiscal 2010 levels.  We have taken steps to properly size our business for the current revenue opportunity, resulting in a one-time termination charge of $2.2 million this quarter and ongoing savings of $5 million annually.  We believe the Company remains well positioned to continue to improve profitability through fiscal 2012."

Segmented Results

COM DEV reports results in two business segments.  The Space Equipment segment represents the Company's traditional manufacturing operations, while the Data Services segment consists primarily of the maritime tracking services offered by exactEarth Ltd.  Selected segmented results for the fiscal third quarter are as follows.

Three months ended July 31, 2011 (unaudited, in thousands of dollars)

  Space Equipment   Data Services   Consolidated *
  2011 2010   2011 2010   2011 2010
Revenue 49,472 52,332   981 -   50,453 52,332
Gross margin 14,903 10,707   (762) (864)   13,847 8,381
Gross margin % 29% 19%   - -   27% 16%
Net income 5,996 1,898   (1,464) (2,151)   4,238 (1,715)
* Consolidated figures may not equal the sum of the two segments due to intra-segment adjustments.
Please see Note 9 to the Interim Consolidated Financial Statements for additional details.

Financial Review

COM DEV's fiscal 2011 third quarter revenues of $50.5 million decreased by $1.9 million compared to $52.3 million in the third quarter of 2010.  The revenue split between the three market segments was 60% commercial, 17% civil and 23% military, compared to a 67/20/13 split in the third quarter of 2010.  Civil space revenues have fallen behind the Company's expectations in fiscal 2011 due to a slowdown in government ordering activity.  Some of the large civil programs are approaching completion and in the absence of substantial replacement orders to replenish backlog, the revenue stream has been somewhat reduced in this market segment.

Primarily as a result of current conditions in the civil space segment, management now anticipates that total revenues for fiscal year 2011 will be approximately 5% to 7% below the full-year revenues of $220.9 million reported in fiscal 2010. Management had previously indicated that it expected fiscal 2011 revenues to be relatively flat compared to fiscal 2010.

COM DEV received new orders totaling $47 million in the third quarter, of which 73% were commercial, 22% were civil, and 5% were military. In last year's third quarter the Company also booked $47 million of new orders, with a commercial/civil/military split of 84/6/10.

Order backlog at July 31, 2011 was $123 million, compared to $128 million three months earlier, and $123 million one year earlier.  An additional $27 million of follow-on orders are expected to be realized from ATPs already received; COM DEV only includes these ATP amounts in orders and backlog once the final contracts are in place.  Backlog was split between the Company's commercial, civil and military sectors at a ratio of 53%, 23% and 24% respectively, compared to 51%, 27% and 22% at July 31, 2010.  The Company expects to convert approximately 60% of the total backlog into revenue beyond the end of its current fiscal year.

Consolidated gross margin was $13.8 million in the third quarter, representing 27% of total revenues, compared to $8.4 million or 16% of revenues in Q3 2010.  The improvement was primarily the result of reduced impact from five programs which had negatively affected gross margin by $5.7 million in the third quarter of last year.  The same programs had a negative impact of $1.3 million on margins in Q3 2011.  Gross margin in the core Space Equipment segment was $14.9 million, or 29% of segment revenues in Q3 2011, compared to 19% in Q3 2010.

COM DEV recorded a net research and development recovery of $0.4 million in the third quarter of 2011, compared to a net expense of $1.0 million a year earlier.  Gross R&D spending increased to $3.6 million from $2.5 million, but R&D funding from external sources increased to $2.0 million from $0.7 million.  The Company also recognized a $2.0 million Investment Tax Credit in order to offset the income tax expense incurred in the quarter.

Selling expenses were $2.9 million in Q3 2011, compared to $3.1 million in Q3 2010.  Selling expenses fluctuate from quarter to quarter depending on the bids and proposal work that is underway.  General expenses were $4.0 million, down from $4.9 million a year earlier, as the Company continued to focus on controlling costs throughout the organization.

Net income attributable to shareholders was $4.2 million in the third quarter of 2011, compared to a $1.7 million net loss in Q3 2010.  The $6.0 million increase was the result of improved gross margins, reduced operating expenses, and a $1.3 million gain on foreign exchange, offset by $2.2 million of termination costs incurred in Q3 2011.  Net income in the Space Equipment segment was $6.1 million, compared to $1.9 million in Q3 2010, while the $1.5 million net loss in the Data Services segment compares to a $2.2 million net loss a year earlier.

COM DEV ended the third quarter with $34.8 million of cash and equivalents, compared to $39.8 million at April 30, 2011.  Operating activities generated $1.3 million of cash in the quarter, but the Company used a combined $6.5 million of cash for financing and investing activities.  At July 31, 2011, COM DEV had outstanding debt of $25.3 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 76,416,635 on September 2, 2011. The Company repurchased and cancelled 50,900 common shares during the third quarter.

Conference Call

A conference call will be held Friday, September 2, 2011 at 8:30 am 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™ 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.  With facilities in Canada, the United Kingdom and the United States, COM DEV manufactures advanced 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. COM DEV's majority-owned subsidiary, exactEarth Ltd., provides satellite data services.

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 Operations
(Canadian dollars in thousands, except for per share figures)
Unaudited
 
For the three months ended July 31     2011     2010
                     
  Revenue       $ 50,453   $ 52,333
  Cost of revenue       36,606     43,952
  Gross margin       13,847     8,381
  Research and development costs     3,567     2,517
  Research and development recovery   1,960     707
  Investment tax credits recoverable   2,000     800
  Net research and development      (393)     1,010
  Selling expenses       2,889     3,111
  General expenses       4,036     4,873
  Operating income (loss)     7,315     (613)
  Interest expense       275     128
  Foreign exchange (gain) loss     (1,214)     62
  Other expense        2,558     97
Net income (loss) before taxes   $ $ 5,696    $ (900)
  Income tax expense       2,000     815
Net income (loss)     $ 3,696   $ (1,715)
                     
Attributable to:              
  Shareholders     $ 4,238
  $ (1,715)
  Non-controlling interest       (542)     -
           
$ 3,696   $ (1,715)
                     
Earnings per share              
Basic and diluted earnings per share     $0.05     ($0.02)

 

 

COM DEV International Ltd.
Consolidated Statements of Operations
(Canadian dollars in thousands, except for per share figures)
Unaudited
 
For the nine months ended July 31     2011     2010
                     
  Revenue $ 153,306   $ 169,435
  Cost of revenue   118,588     134,578
  Gross margin       34,718     34,857
  Research and development costs     9,898     9,224
  Research and development recovery   5,692     2,203
  Investment tax credits recoverable   5,200     800
  Net research and development     (994)     6,221
  Selling expenses       8,349     8,888
  General expenses       12,724     16,043
  Operating income       14,639     3,705
  Interest expense       605     416
  Foreign exchange gain       (945)     (2,359)
  Other expense       2,753     219
Net income before income taxes      $ 12,226      $ 5,429
  Income tax expense        5,200     815
Net income       $ 7,026   $ 4,614
                     
Attributable to:              
  Shareholders     $ 8,535   $ 4,635
  Non-controlling interest       (1,509)     (21)
            $ 7,026   $ 4,614
                     
Earnings per share              
Basic and diluted earnings per share     $0.11     $0.06

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









 
 
 
 
 
 
 
 
As at
July 31,
2011
 
 
 
As at
October 31,
2010
Assets                
  Current                
    Cash and cash equivalents   $ 34,815   $ 17,436
    Accounts receivable     40,626     44,357
    Inventory       54,127     58,827
    Prepaids and other       2,609     3,274
    Income taxes recoverable     4,574     4,615
    Future income tax assets - current   4,175     4,175
              140,926     132,684
  Property, plant and equipment     73,977     75,770
  Intangible assets       27,840     27,862
  Goodwill         2,109     2,252
  Future income tax assets - long term   3,898     3,898
Total assets       $ 248,750   $ 242,466
                     
Liabilities                
  Current                
    Accounts payable and accrued liabilities  $ 25,549   $ 27,928
    Deferred revenue       13,913     23,170
    Current portion of loans payable   8,887     6,401
              48,349     57,499
                     
  Long term                
    Loans payable       16,384     10,115
    Accounts payable and accrued liabilities    605     968
    Employee future benefits     1,561     1,910
              18,550     12,993
                     
  Total liabilities       66,899     70,492
                     
                     
Shareholders' equity              
  Share capital       346,708     346,068
  Contributed surplus       8,218     7,314
  Deficit         (177,530)     (186,065)
  Non-controlling interest     9,519     8,328
  Accumulated other comprehensive loss   (5,064)     (3,671)
  Total shareholders' equity     181,851     171,974
                     
Total liabilities and shareholders' equity  $ 248,750   $ 242,466

 

COM DEV International Ltd.
Consolidated Statements of Cash Flows
(Canadian dollars in thousands)
Unaudited
 
For the three months ended July 31   2011   2010
                     
Operating activities              
  Net income (loss)     $ 3,696   $ (1,715)
  Amortization       3,305     3,033
  Loss on disposal of assets     12     20
  Defined benefit plan expenses     14     361
  Defined benefit plan contibutions     (286)     (195)
  Stock compensation expense     431     315
  Employee stock ownership plan awards   47     43
  Investment tax credits recoverable     (2,000)     (800)
  Future tax expense       2,000     642
  Unrealized foreign exchange loss (gain) on derivatives   (114)     1,098
              7,105     2,802
  Net change in non-cash working capital items   (5,780)     2,571
Operating activities       1,325     5,373
                     
Financing activities              
  Shares repurchased and cancelled   (114)     -
  Non-controlling interest investment, net   (2)     -
  Advance of long term debt     -     549
  Repayment of long term debt     (2,280)     (1,749)
Financing activities       (2,396)     (1,200)
                     
Investing activities              
  Acquisition of property, plant and equipment   (3,008)     (3,085)
  Proceeds on disposal of property, plant, and equipment   94     -
  Acquisition of intangible assets     (1,168)     (2,506)
Investing activities       (4,082)     (5,591)
Effect of exchange rate changes on cash   174     (86)
                     
Net decrease in cash       (4,979)     (1,504)
Cash and cash equivalents, beginning of period   39,794     10,403
Cash and cash equivalents, end of period $ 34,815   $ 8,899
                     
Interest paid       $ 349   $ 134
Taxes paid       $ -   $ 15

 

COM DEV International Ltd.
Consolidated Statements of Cash Flows
(Canadian dollars in thousands)
Unaudited
  
For the nine months ended July 31   2011     2010
                     
Operating activities              
  Net income       $ 7,026   $ 4,614
  Amortization       8,826     8,276
  (Gain) loss on disposal of assets   (270)     73
  Defined benefit plan expenses    502     696
  Defined benefit plan contibutions   (694)     (585)
  Stock compensation expense    1,067     837
  Employee stock ownership plan awards    160     146
  Investment tax credits recoverable    (5,200)     (800)
  Future tax expense    5,200     642
  Unrealized foreign exchange loss (gain) on derivatives    -     (1,703)
              16,617     12,196
  Net change in non-cash working capital items   (2,499)     (509)
Operating activities       14,118     11,687
                     
Financing activities              
  Shares issued       514     -
  Shares repurchased and cancelled   (114)     -
  Non-controlling interest investment, net    2,618     -
  Advance of long term debt      15,000     549
  Repayment of long term debt     (5,611)     (4,980)
Financing activities       12,407     (4,431)
                     
Investing activities              
  Acquisition of property, plant and equipment   (6,034)     (9,647)
  Proceeds on disposal of property, plant and equipment   1,560     1
  Acquisition of intangible assets     (3,963)     (7,787)
  Business acquisitions       -     (2,127)
Investing activities       (8,437)     (19,560)
Effect of exchange rate changes on cash   (709)     (201)
                     
Net increase (decrease) in cash     17,379     (12,505)
Cash and cash equivalents, beginning of period   17,436     21,404
Cash and cash equivalents, end of period $ 34,815   $ 8,899
                     
Interest paid       $ 618   $ 441
Taxes paid       $ -   $ 173

COM DEV International Ltd.
Consolidated Statements of Changes in Equity
(Canadian dollars in thousands)
Unaudited
 
For the nine months ended July 31, 2011   Total     Deficit     Accumulated Other
Comprehensive Loss
    Share
Capital
    Non-controlling
interest
    Contributed
Surplus
                                     
Balance, October 31, 2010 $ 171,974   $ (186,065)   $ (3,671)   $ 346,068   $ 8,328   $ 7,314
                                     
Comprehensive income                                  
  Net income (loss)   7,026     8,535     -     -     (1,509)     -
  Foreign currency translation adjustments (net of taxes of $nil)   (1,393)     -     (1,393)     -     -     -
      5,633     8,535     (1,393)     -     (1,509)     -
Common stock issued   514     -     -     871     -     (357)
Common stock repurchased and cancelled   (114)                 (231)           117
Value of ESOP awards   160     -     -     -     -     160
Non-controlling interest investment    2,618     -     -     -     2,700     (82)
Expense recognized for stock-based compensation and long-term incentive plans   1,067     -     -     -     -     1,067
Balance, July 31, 2011 $ 181,852   $ (177,530)   $ (5,064)   $ 346,708   $ 9,519   $ 8,219
                                     
                                     
                                     
For the nine months ended July 31, 2010                                  
                                     
Balance, October 31, 2009 $ 157,909   $ (188,759)      $ (2,507)   $ 345,885   $ 486   $ 2,804
                                     
Comprehensive income                                  
  Net Income (loss)   4,614     4,635     -     -     (21)     -
  Foreign currency translation adjustments (net of taxes of $nil)   (1,242)     -     (1,242)     -     -     -
      3,372     4,635     (1,242)     -     (21)     -
Common stock issued   -     -     -     183     -     (183)
Value of ESOP awards   146     -     -     -     -     146
Non-controlling interest purchase adjustment   (640)     -     -     -     (465)     (175)
Expense recognized for stock-based compensation and long-term incentive plans   837     -     -     -     -     837
Balance, July 31, 2010 $ 161,624   $ (184,124)   $ (3,749)   $ 346,068   $ -   $ 3,429

 

 

SOURCE Com Dev International Ltd.

For further information:

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

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