RuggedCom Posts Record Revenue for Q3 Fiscal 2012

(All dollar amounts are in US dollars)

Highlights from the Quarter:

  • 17% increase in Revenue year over year, to $29.9 million, a new record
  • 13% increase in Purchase Orders year over year, to $28.1 million
  • 21% increase in Gross Margin year over year
  • Net Income of $2.8 million, EPS (fully diluted) of  $0.22
  • Added 112 new customers

CONCORD, ON, Feb. 14, 2012 /CNW/ - RuggedCom Inc. ("RuggedCom") (TSX:RCM), a leading provider of rugged communications networking solutions designed for mission-critical applications in harsh environments, today announced its financial results for the third quarter of fiscal 2012, ended December 31, 2011.

"RuggedCom has achieved another record quarter for revenues," said Marzio Pozzuoli, President and Chief Executive Officer.  "Contributing to this quarter's solid performance was a 36% increase in our North American revenue, a 5th consecutive record quarter for that region."

       
Key Financial Metrics (All $ amounts in US$000s)
  (Q3-F12) (Q3-F11) Change
Orders $28,054 $24,840 +13%
Revenue $29,862 $25,595 +17%
Gross Margin % 58.6% 56.5% +210 bps
Operating Expenses (OpEx) $13,413 $9,605 +40%
OpEx as a % of revenue 44.9% 37.5% +740 bps
Adjusted OpEx* $13,589 $10,568 +29%
Adjusted OpEx as a % of revenue* 45.5% 41.3% +420 bps
Net Income $2,814 $3,360 -16%
Net Profit Margin % 9.4% 13.1% - 370 bps
Adjusted Net Income* $2,684 $2,669 +1%
Adjusted Net Profit Margin %* 9.0% 10.4% - 140 bps
Earnings Per Share (basic) $0.23 $0.28 - 5 cents
Adjusted Earnings Per Share (basic)* $0.22 $0.22 --
Earnings Per Share (diluted) $0.22 $0.27 - 5 cents
Adjusted Earnings Per Share (diluted)* $0.21 $0.21 --

* Adjusted is defined as excluding all foreign exchange gains and losses

Third Quarter Results

Total revenue for the quarter was $29.9 million, representing an increase of 17% from the comparable quarter a year ago and a new company record.  Revenue was driven primarily by the electric power market, which grew 17% over the same quarter last year.  Military sales also contributed to the quarter's record performance, increasing 74% over the same quarter last year.

The Company booked customer purchase orders totaling $28.1 million for the quarter, representing an increase of 13% over the same quarter last year.

Gross margin for the quarter was $17.5 million, an increase of 21% over the comparable period last year.  On a percentage of revenue basis, third quarter gross margin was 58.6%, an increase of 2.1 percentage points from a gross margin of 56.5% for the same period last year.  The increase in gross margin percentage was due to favourable sector, product and region mix as well as improved material cost productivity.

Beginning in Q1-F12 the Company converted to a US dollar functional currency as a result of implementing IFRS.  Accordingly, the Company converted most of its Canadian dollar denominated cash balances to US dollars at the beginning of fiscal 2012 in order to minimize the foreign exchange effect on cash.  The application of IFRS on the Company's comparable fiscal 2011 results however, has created significant foreign exchange losses and gains for those periods due to the fact that most of the Company's cash balances during that time were still denominated in Canadian dollars.  This has resulted in skewed comparisons when measuring current results against the prior year's quarters.  Accordingly, beginning with Q2-F12, the Company incorporated additional key financial metrics, as shown in the table above, which factor out the effect of foreign exchange gains and losses.  Management believes the "adjusted" metrics, which are non-IFRS financial measures, are a more accurate measure of the Company's past financial performance.

Third quarter operating expenses increased to $13.4 million, or 44.9% of revenue compared with $9.6 million, or 37.5% of revenue for the same period a year ago, as reported under IFRS.  The increase in percentage of revenue is principally due to the inclusion of a $1.0 million foreign exchange gain in Q3-F11 compared to only a $0.2 million gain for Q3-F12 - a net effect of $0.8 million.  If the effect of foreign exchange is factored out, the "adjusted" operating expenses show a narrower increase year over year, to 45.5% for Q3-F12 from 41.3% for Q3-F11. Also contributing to the increase was approximately $0.3 million of professional fees related to the Siemens Canada Limited Offer, described later in this press release.

Net income for the third quarter was $2.8 million, compared to $3.4 million in the comparable period a year ago, representing 9.4% and 13.1% of revenue respectively, as reported under IFRS.  When the after-tax effect of foreign exchange is eliminated from both periods, Q3-F12 "adjusted" net income becomes $2.7 million, unchanged from the year ago period, or 9.0% and 10.4% of revenue respectively.

Third quarter basic earnings per share were $0.23 compared to $0.28 for the same quarter last year while fully diluted earnings per share were $0.22 compared to $0.27 for the same quarter last year, as reported under IFRS.  On an "adjusted" basis with the effect of foreign exchange removed, third quarter basic "adjusted" earnings per share were $0.22 compared to $0.22 for the same quarter last year.  Fully diluted "adjusted" earnings per share were $0.21 for Q3-F12 compared to $0.21 for the same quarter last year.

The Company added 112 new customers in the quarter.

Siemens Canada Limited Offer to Purchase RuggedCom Inc.

As previously announced, on January 27, 2012, RuggedCom entered into an agreement with Siemens Canada Limited ("Siemens"), pursuant to which Siemens agreed to make an offer to purchase all outstanding common shares of RuggedCom by way of take-over bid at a price of C$33.00 per share in cash (the "Siemens Offer").  For details of the reasons for the Board's recommendation to accept the Siemens Offer, refer to the Directors' Circular of the Board dated February 8, 2012 available on SEDAR at www.sedar.com and on RuggedCom's website.

The Siemens Offer is open for acceptance until 8:00 p.m. (Toronto time) on March 15, 2012. Full details of the Siemens Offer are included in a take-over bid circular that was mailed to RuggedCom's shareholders during the week of February 6, 2012, and is available on SEDAR at www.sedar.com.

Non-IFRS Measures

This press release contains references to certain non-IFRS financial measures such as EBITDA, EBITDA Margin, Adjusted Operating Expenses, Adjusted Net Income and Adjusted Earnings Per Share (Basic and Diluted). Non-IFRS financial measures are used by management to evaluate the performance of the Company. Non-IFRS financial measures do not have any meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other reporting issuers. Non-IFRS financial measures used herein have been applied on a consistent basis.  "EBITDA" means earnings before interest, income taxes, depreciation and amortization.  "EBITDA Margin" means the percentage obtained by dividing "EBITDA" by revenue.  "EBITDA" is a measure used by many investors to compare issuers on the basis of their ability to generate cash from operations. Adjusted Operating Expenses means operating expenses excluding the effect of foreign exchange included therein. Adjusted Net Income means net income excluding the after-tax foreign exchange effect included therein. Adjusted Earnings Per Share (Basic and Diluted) is the adjusted net income divided by the weighted average number of common shares outstanding for the period (basic or diluted). We believe that EBITDA and EBITDA Margin is useful supplemental information as they provide an indication of the results generated by the Company's main business activities before taking into consideration how they are financed or taxed. Adjusted Operating Expenses, Adjusted Net Income and Adjusted Earnings Per Share (Basic and Diluted) are useful measures of the Company's business activities and exclude the effect of foreign exchange gains and losses. Investors are cautioned that non-IFRS measures, such as those presented herein, should not be construed as an alternative to net income or loss determined in accordance with IFRS.

About RuggedCom Inc.
RuggedCom is a leading provider of rugged communications networking solutions designed for mission-critical applications in harsh environments. RuggedCom's technology solutions include Ethernet switches, network routers, wireless devices, serial servers, media converters, software and professional services. RuggedCom's products are

designed for use in harsh environments such as those found in electrical power substations and "Smart Grids", intelligent transportation systems, industrial process control and military applications. For further information, please visit www.RuggedCom.com.

The unaudited consolidated interim financial statements and management's discussion and analysis of the results of operations and financial condition for the three month periods ended December 31, 2011 and December 31, 2010 can be found under the Company's profile at www.sedar.com.  They can also be found in the Investor Relations section of the Company's website at www.RuggedCom.com.

Forward Looking Information

This news release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Forward-looking statements include all disclosure regarding possible events, conditions, results of operations or the Siemens Offer that is based on assumptions about future economic conditions and courses of action. RuggedCom cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements are based on RuggedCom's current plans, estimates, projections, beliefs and opinions, and RuggedCom does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change, except as required by law. When used in this news release, words such as "plans", "expects", "intends", "anticipates", "will", "believes" or variations of such words and phrases often, but not always, identify forward-looking statements. The forward-looking information in this news release includes, but is not limited to, the Siemens Offer. Although RuggedCom believes that the expectations reflected in such forward-looking statements are reasonable, all forward-looking information is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. The factors which could cause actual results or events to differ materially from current expectations include, but are not limited to: Siemens' ability to consummate the proposed transaction (including the satisfaction of the conditions to the Siemens Offer), continued growth in RuggedCom's key markets; RuggedCom's ability to manage its growth; RuggedCom's dependence on the electric power industry; the impact of the global financial crisis; foreign currency fluctuations; RuggedCom's ability to identify suitable acquisitions at reasonable prices and its ability to manage their integration; changes in environmental and other regulation; RuggedCom's reliance on key personnel; RuggedCom's reliance on third-party suppliers, contract manufacturers and channel partners; RuggedCom's ability to protect its intellectual property; rapid technological change; potential product liability claims; RuggedCom's dependence on certain licensed intellectual property; potential infringement by RuggedCom of third party intellectual property rights; and other factors identified under the headings "Risks and Uncertainties" in RuggedCom's management's discussion and analysis for the third quarter ended December 31, 2011, dated February 14, 2012, and "Risk Factors" in RuggedCom's annual information form dated June 15, 2011, each filed on SEDAR at www.sedar.com.

RuggedCom Inc.


Third Quarter 2012 Consolidated Interim Financial Statements and Results of Operations}
(Unaudited)

RuggedCom Inc.
Consolidated Interim Balance Sheets
(In thousands of US dollars)
(Unaudited)

     
  December 31
2011
$
March 31
2011
$
Assets    
Current assets    
Cash and cash equivalents (note 6) 42,886 38,106
Trade receivables (note 7) 21,070 18,265
Inventories (note 8) 17,172 14,509
Prepaid expenses 2,487 2,184
  83,615 73,064
Non-current assets    
Prepaid expenses 248 272
Deferred income taxes 615 676
Property and equipment (note 9(a)) 10,832 10,299
Intangible assets (note 9(b)) 8,870 10,311
Goodwill 3,133 3,133
  23,698 24,691
Total assets 107,313 97,755
Liabilities    
Current liabilities    
Trade and other payables (note 10) 9,534 7,835
Income taxes payable 1,038 1,299
Provisions (note 11) 997 921
Other liabilities (note 12) 900 351
  12,469 10,406
Non-current liabilities    
Provisions (note 11) 589 697
Other liabilities (note 12) 2,819 3,221
  3,408 3,918
Total liabilities 15,877 14,324
Equity    
Share capital 51,188 49,574
Contributed surplus 5,567 5,147
Retained earnings 34,681 28,710
Total equity 91,436 83,431
Total liabilities and equity 107,313 97,755
     
Contingencies and guarantees (note 15)            
Peter Crombie - Director         J. Ian Giffen - Director    

The accompanying notes form an integral part of these consolidated interim financial statements.


RuggedCom Inc.
Consolidated Interim Statements of Operations and Comprehensive Income
(In thousands of US dollars, except share and per share amounts)
(Unaudited)

 
  Three months ended
December 31
Nine months ended
December 31
  2011 2010 2011 2010
  $ $ $ $
       
Revenues 29,862 25,595 85,048 67,277
Cost of sales 12,350 11,135 35,739 28,220
Gross profit 17,512 14,460 49,309 39,057
         
Operating expenses        
Sales and marketing 6,219 4,744 18,241 13,382
Research and product development (note 14) 3,805 3,082 11,282 9,183
General and administrative 3,389 1,779 10,383 7,613
  13,413 9,605 39,906 30,178
Income from operations 4,099 4,855 9,403 8,879
         
Finance income (expenses), net        
Interest income 24 84 82 179
Interest expense (34) (41) (92) (71)
Other finance income (expenses) (143) (91) 27 (235)
Finance income (expenses), net (153) (48) 17 (127)
         
Income before income taxes 3,946 4,807 9,420 8,752
Income tax expense (note 17) 1,132 1,447 3,449 3,375
Net income and comprehensive income for the period 2,814 3,360 5,971 5,377
         
         
         
Income per common share (note 16)        
Basic 0.23 0.28 0.48 0.44
Diluted 0.22 0.27 0.47 0.43
         
Weighted average number of common shares outstanding (note 16)        
 

The accompanying notes form an integral part of these consolidated interim financial statements.

RuggedCom Inc.
Consolidated Interim Statements of Changes in Equity
(In thousands of US dollars, except share and per share amounts)
(Unaudited)

         
  Share capital Contributed Retained Total
  Number
Amount
surplus
earnings
equity
    $ $ $ $
Balance at April 1, 2010 12,144,458 48,963 3,695 20,033 72,691
Comprehensive income for the period - - - 5,377 5,377
Employee stock options exercised 43,859 346 (119) - 227
Stock option expense for the period - - 1,279 - 1,279
Balance at December 31, 2010 12,188,317 49,309 4,855 25,410 79,574
           
Balance at April 1, 2011 12,241,495 49,574 5,147 28,710 83,431
Comprehensive income for the period - - - 5,971 5,971
Employee stock options exercised 188,492 1,614 (532) - 1,082
Stock option expense for the period - - 952 - 952
Balance at December 31, 2011 12,429,987 51,188 5,567 34,681 91,436

The accompanying notes form an integral part of these consolidated interim financial statements.

RuggedCom Inc.
Consolidated Interim Statements of Cash Flows
(In thousands of US dollars)
(Unaudited)

         
  Three months ended
December 31
Nine months ended
December 31
  2011
$
2010
$
2011
$
2010
$
Cash and cash equivalents provided by (used in)        
Operating activities        
Net income for the period 2,814 3,360 5,971 5,377
Items not affecting cash        
  Amortization and depreciation 1,403 1,277 4,143 3,717
  Unrealized finance (gain) loss  143 91 (27) 235
  Stock-based compensation 295 389 952 1,279
  Gain on disposal of property and equipment (14) (27) (72) (27)
  Deferred income tax expense 67 29 61 315
Net change in non-cash working capital (note 18(a)) (505) (1,112) (4,167) (3,493)
  Cash provided by operating activities 4,203 4,007 6,861 7,403
         
Investing activities        
Purchase of property and equipment (761) (326) (2,821) (1,461)
Acquisition of business assets - (2,119) - (2,119)
Proceeds from disposal of property and equipment 111 31 199 51
Purchase of intangibles (113) (76) (541) (435)
  Cash used in investing activities (763) (2,490) (3,163) (3,965)
         
Financing activities        
Common shares issued for options exercised 401 150 1,082 227
   Cash provided by financing activities 401 151 1,082 228
         
Increase in cash and cash equivalents during the period 3,841 1,667 4,780 3,666
         
Cash and cash equivalents - Beginning of period 39,045 35,144 38,106 33,145
Cash and cash equivalents - End of period 42,886 36,811 42,886 36,811
         
Supplemental disclosure (note 18(b))        

The accompanying notes form an integral part of these consolidated interim financial statements.

 

SOURCE RuggedCom Inc.

For further information:

Roy Dalton
Chief Financial Officer
RuggedCom Inc.
Tel:   905-856-5288
Email:  Investor@RuggedCom.com

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