Ruggedcom reports record revenues and record booked orders for Q3 fiscal 2010

    
    (All dollar amounts are in US dollars)

    Highlights from the Quarter:
      -  35% increase in Purchase Orders year over year, a new company record
      -  30% increase in Revenue year over year, a new company record
      -  19% increase in Gross Margin year over year
      -  70% decrease in Net Income year over year
      -  Added 119 new customers, up from 98 in the year ago period
    

CONCORD, ON, Feb. 10 /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 2010, ended December 31, 2009.

"Record growth in both the electric power and industrial sectors contributed to RuggedCom posting record revenues in the third quarter. We also recorded a third consecutive record quarter in purchase orders. However, net income was impacted by several factors, including foreign exchange losses, increased amortization expense as well as increased research and development investment resulting from our recent WiNetworks acquisition." said Marzio Pozzuoli, President and Chief Executive Officer.

Third Quarter Results

Total revenue for the quarter set a new record at $20.6 million, representing an increase of 30% from the comparable quarter a year ago. Excluding the effect of the WiNetworks acquisition, revenue would have been $19.9 million, representing an increase of 26% over the comparable period a year ago. Revenue growth was primarily driven by increased sales in both the electric power and industrial markets, both of which set new records for quarterly sales.

RuggedCom booked record customer purchase orders totaling $20.7 million for the quarter, representing an increase of 35% over the same quarter last year.

Gross margin for the quarter was $12.4 million, an increase of 19% over the comparable period last year. On a percentage of revenue basis, third quarter gross margin was 60.0%, a decrease of 5.7 percentage points from a gross margin of 65.7% for the same period last year, but an increase of 0.9 percentage points over the gross margin percentage for the second quarter of fiscal 2010. For Q3-F10, gross margins were mostly influenced by material and labour productivity cost reductions, which were offset somewhat by customer discounting and to a lesser extent, a slight strengthening of the Canadian dollar versus the U.S. dollar. A large portion of the relatively higher gross margin percentage of 65.7% in the prior year period was due to a significant weakening of the Canadian dollar versus the U.S. dollar between Q2-F09 and Q3-F09. Gross margins are generally unaffected by movements in the Canadian to US dollar exchange rate, however during periods of high exchange rate volatility, as was experienced in the prior year period, gross margins are impacted by exchange rate translations.

Third quarter net income was $1.2 million, representing RuggedCom's 19th consecutive quarter of profitability. This represents a decrease of 70% from net income of $4.0 million in the third quarter last year. Net income for Q3-F10 was impacted by a combination of:

    
    -  the inclusion of WiNetworks' resultant loss of $1.2 million for the
       period, which included expenditures of $0.9 million of research and
       development investment;

    -  a negative foreign exchange impact of $0.9 million which was due to
       foreign exchange losses of $0.3 million from a strengthening Canadian
       dollar relative to the US dollar, compared to a foreign exchange gain
       of $0.6 million in the same period a year ago;

    -  increased amortization expense as a result of the leasehold
       improvements and other capital expenditures made this fiscal year in
       combination with the amortization of intangible assets acquired in the
       WiNetworks purchase;

    -  falling interest rates contributing to the decrease in earnings for
       the current quarter, as the Company earned only $25,000 net interest
       income compared to $0.3 million in the same period last year; and

    -  increased operating expenditures in research and development, sales
       and marketing, and general administration to support the growth of our
       core business.
    

WiNetworks contributed approximately $0.7 million of revenues and resulted in the inclusion of a $1.2 million loss before and after taxes in RuggedCom's consolidated financial results.

RuggedCom recorded a provision for income taxes of $1.1 million with an effective tax rate of 48.2%. This compares to $2.0 million income tax expense in the same period last year with an effective tax rate of 33.2%. The significantly higher effective tax rate for Q3-F10 is due to the inclusion of $1.2 million of pre-tax losses from WiNetworks with no offsetting tax benefit.

Third quarter basic earnings per share were $0.10 compared to $0.34 for the same quarter last year while fully diluted earnings per share were $0.10 compared to $0.33 for the same quarter last year.

RuggedCom added 119 new customers in the quarter, up from 98 in the year ago period.

    
    Conference Call and Webcast
    ---------------------------
    

Management will host a conference call at 8:30 a.m. (ET) on Thursday, February 11, 2010. Listeners may attend the conference call by dialing 647-427-7450 or 1-888-231-8191. The live audio webcast can be accessed at RuggedCom's web site at www.RuggedCom.com. The webcast will also be archived on the site. A taped rebroadcast will be available to listeners following the call until 11:59 PM (ET) on February 18, 2010. To access the rebroadcast, please call 416-849-0833 or 1-800-642-1687 and enter passcode 50992792 followed by the number sign (No.).

    
    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 and six month periods ended December 31, 2008 and December 31, 2009 can be found under the RuggedCom's profile at www.sedar.com. They can also be found in the Investor Relations section of the RuggedCom's website at www.RuggedCom.com.

    
                               RuggedCom Inc.
                  CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                     3rd Quarter ended December 31, 2009


                               RuggedCom Inc.
                         CONSOLIDATED BALANCE SHEETS
                   (in thousands of United States dollars)

                                                    December 31,   March  31,
                                                       2009           2009
                                                    (unaudited)    (audited)
                                                              $            $
    Assets
    Current
    Cash and cash equivalents (note 5)                   31,546       45,099
    Accounts receivable (note 6)                         15,349        9,780
    Prepaid expenses and other                            1,000        1,025
    Inventories (note 4 and note 7)                      10,096        4,555
    Income taxes recoverable                              3,283            -
    Future income taxes                                     424          283
                                                    -------------------------
                                                         61,698       60,742
    Future income taxes                                       -          246
    Property and equipment                               10,014        2,662
    Goodwill                                              3,456            -
    Other assets (note 3)                                11,687          580
                                                    -------------------------
                                                         86,855       64,230
                                                    -------------------------
                                                    -------------------------
    Liabilities
    Current
    Accounts payable and accrued liabilities             10,777        5,793
    Current portion of warranty                             672          482
    Income taxes payable                                    140        2,268
    Current portion of deferred income                      108           50
    Current portion of lease costs                           25            -
    Current portion of obligations under
     capital lease                                          108          126
                                                    -------------------------
                                                         11,830        8,719
                                                    -------------------------

    Warranty                                                438          347
    Future income taxes                                   2,031            -
    Deferred income                                          32           21
    Obligations under capital lease                         117           48
    Lease costs payable                                     249            6
                                                    -------------------------
                                                          2,867          422
                                                    -------------------------
                                                         14,697        9,141
                                                    -------------------------
                                                    -------------------------
    Shareholders' Equity
    Capital stock (note 8)                               48,836       46,820
    Contributed surplus (note 9)                          2,227        1,559

    Accumulated other comprehensive
     income (loss) (note 10)                              2,350       (8,952)
    Retained earnings                                    18,745       15,662
                                                    -------------------------
                                                         21,095        6,710
                                                    -------------------------
                                                         72,158       55,089
                                                    -------------------------
                                                         86,855       64,230
                                                    -------------------------
                                                    -------------------------

    Contingent liabilities (note 19)
    See accompanying notes to consolidated interim financial statements.


                               RuggedCom Inc.
          CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
    (in thousands of United States dollars, except per share information)
                                 (unaudited)

                        3 month       3 month       9 month       9 month
                      period ended  period ended  period ended  period ended
                      December 31,  December 31,  December 31,  December 31,
                          2009          2008          2009          2008
                                 $             $             $             $
                                 -             -             -             -
    Revenue                 20,600        15,821        53,357        42,957
    Cost of goods
     sold                    8,248         5,420        22,035        15,897
                      -------------------------------------------------------
    Gross margin            12,352        10,401        31,322        27,060
                      -------------------------------------------------------
    Operating
     expenses
    Research and
     development             2,536         1,191         6,341         3,553
    Sales and
     marketing               3,942         2,666        10,405         7,743
    General and
     administrative          2,602         1,346         6,363         4,043
    Investment tax
     credits                  (344)         (139)         (730)         (638)
    Loss (gain) on
     foreign exchange          335          (595)        1,864          (787)
    Amortization             1,002           271         1,903           859
                      -------------------------------------------------------
                            10,073         4,740        26,146        14,773
                      -------------------------------------------------------
    Operating income         2,279         5,661         5,176        12,287
    Net interest
     income                     25           303           126         1,131
                      -------------------------------------------------------
    Income before
     income taxes            2,304         5,964         5,302        13,418
                      -------------------------------------------------------
    Income taxes
     (note 15)
    Current                  1,001         1,829         1,998         4,357
    Future                     110           153           221           151
                      -------------------------------------------------------
                             1,111         1,982         2,219         4,508
                      -------------------------------------------------------
    Net income for
     the period              1,193         3,982         3,083         8,910

    Retained earnings
     - Beginning of
     period                 17,552         8,262        15,662         3,334
                      -------------------------------------------------------
    Retained earnings
     - End of period        18,745        12,244        18,745        12,244
                      -------------------------------------------------------
                      -------------------------------------------------------
    Net earnings per
     share (note 11)
    Basic             $       0.10  $       0.34  $       0.26  $       0.76
    Diluted           $       0.10  $       0.33  $       0.25  $       0.72

    Basic weighted
     average number
     of common shares
     outstanding        12,115,981    11,798,435    12,054,376    11,760,669
    Diluted weighted
     average number
     of common shares
     outstanding        12,463,263    12,251,346    12,571,357    12,296,445

    See accompanying notes to consolidated interim financial statements.


                               RuggedCom Inc.
               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                   (in thousands of United States dollars )
                                 (unaudited)

                        3 month       3 month       9 month       9 month
                      period ended  period ended  period ended  period ended
                      December 31,  December 31,  December 31,  December 31,
                          2009          2008          2009          2008
                                 $             $             $             $
    Net income for
     the period              1,193         3,982         3,083         8,910
    Foreign currency
     translation gain
     (loss) (note 10)        1,309       (7,067)        11,302        (9,101)
                      -------------------------------------------------------
    Comprehensive
     income                  2,502       (3,085)        14,385          (191)
                      -------------------------------------------------------
                      -------------------------------------------------------

    See accompanying notes to consolidated interim financial statements.


                               RuggedCom Inc.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                   (in thousands of United States dollars )
                                 (unaudited)

                        3 month       3 month       9 month       9 month
                      period ended  period ended  period ended  period ended
                      December 31,  December 31,  December 31,  December 31,
                          2009          2008          2009          2008
                                 $             $             $             $
    Cash provided
     by (used in)
    Operating
     activities
    Net income for
     the period              1,193         3,982         3,083         8,910
    Non-cash items
      Amortization
       of property
       and equipment           459           253         1,024           808
      Amortization
       of other assets         542            18           877            51
      Future income
       taxes                   110           153           221           151
      Stock based
       compensation            276           139           848           475
      Warranty                 (39)          104            (9)          295
      Lease costs               88            (7)          252           (23)
      Net change in
       non-cash
       working capital
       (note 14a)           (5,526)          (29)       (9,525)           87
                      -------------------------------------------------------
                            (2,897)        4,613        (3,229)       10,754
                      -------------------------------------------------------

    Investing
     activities
    Additions to short
     term investments            -             -             -        34,787
    Acquisition of
     subsidiary
     (note 4)                 (130)            -        (8,100)            -
    Additions to
     property and
     equipment              (4,319)         (619)       (7,199)       (1,632)
    Additions to
     other assets             (256)          (63)       (1,251)         (160)
                      -------------------------------------------------------
                            (4,705)         (682)      (16,550)       32,995
                      -------------------------------------------------------

    Financing
     activities
    Repayment of
     obligations under
     capital lease             (66)          (56)         (158)         (196)
    Receipts from
     capital lease             189                         189
    Repayment of loan
     (note 4)                    -             -        (4,875)            -
    Issuance of common
     shares                    105             3         1,842           176
                      -------------------------------------------------------
                               228           (53)       (3,002)          (20)
                      -------------------------------------------------------
    Effect of exchange
     rates on cash           1,649        (5,785)        9,228        (7,998)
                      -------------------------------------------------------
    Increase (decrease)
     in cash and cash
     equivalents
     during the period      (5,725)       (1,907)      (13,553)       35,731
    Cash and cash
     equivalents -
     Beginning of
     period                 37,271        45,675        45,099         8,037
                      -------------------------------------------------------
    Cash and cash
     equivalents -
     End of period
     (note 14b)             31,546        43,768        31,546        43,768
                      -------------------------------------------------------
                      -------------------------------------------------------
    Supplemental
     disclosures

    Interest paid     $          7  $          9  $         30  $         38
    Income taxes
     paid             $        717  $        443  $      6,626  $      1,882
    

SOURCE RUGGEDCOM INC.

For further information: For further information: Roy Dalton, Chief Financial Officer, RuggedCom Inc., Tel: (905) 856-5288, Email: Investor@RuggedCom.com

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RUGGEDCOM INC.

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