COM DEV Announces Fourth Quarter and Year End Fiscal 2010 Results

CAMBRIDGE, ON, Jan. 13 /CNW/ - COM DEV International Ltd. (TSX:CDV) today announced fourth quarter and year end financial results for the three- and twelve-month periods ended October 31, 2010.  All amounts are stated in Canadian dollars unless otherwise noted.

Commenting on the results for Q4, and the year, Mike Pley, COM DEV's CEO noted, in particular, the strength of the new order book in Q4, the reduced impact in the quarter from several problematic programs, and the continued reduction in the Company's operating expenses.

"I am pleased to see the realization of $80 million in new orders in the quarter, which is both a solid foundation for us for 2011, and a validation of the continued robustness of the commercial satellite market," said Mr. Pley. "While timing issues pushed some anticipated revenues into fiscal 2011, in Q4 we demonstrated effective control of operating expenses.

"We continued to focus our efforts, as promised, on completing the five troublesome programs that have plagued the Company for the past year.  We did see some cost growth during the quarter on the programs, but at a lower level than previously experienced.  At the end of Q4 these programs ranged between 79% and 100% complete, with the average at 90%.  That number continues to be driven towards 100%. Achieving 20% gross margin in the quarter is a reflection of the reduced impact these programs are having on our performance, and is right in line with our previously stated expectations for the quarter.

"Our top priority for 2011 is to increase profitability.  We have been conducting a thorough review of all our assets.  We have already taken steps to improve the operating models of certain businesses, and we are committed to making any further decisions as necessary to deliver acceptable returns.  We currently expect 2011 revenues to be relatively flat compared to 2010, but improved margin and operating expense performance should enable us to show significant bottom line improvement over the year.  Our operating expenses continued to trend downward in Q4 as we managed these costs tightly."

Fiscal Year 2010 Highlights

  • Revenue was $220.9 million, an 8% decrease from fiscal 2009 revenue of $240.4 million.
  • Gross margin was 20%, compared to 27% in 2009.
  • Net income attributable to shareholders was $2.7 million, or $0.04 per share, compared to a net income of $15.3 million or $0.21 per share the previous year.
  • New orders totaled $210 million in the fiscal year, compared to $249 million in 2009.
  • exactEarth Ltd, originally a wholly-owned COM DEV subsidiary, sold a 27% equity interest for $15 million to Madrid-based satellite operator and service provider HISDESAT Servicios Estratégicos S.A.

Fourth Quarter 2010 Highlights

  • Q4 2010 revenue was $51.5 million, compared to $58.3 million recorded a year earlier.
  • Gross margin was 20%, compared to 25% in the fourth quarter of 2009.
  • Net loss attributable to shareholders was $1.9 million, or $(0.02) per share, and included approximately $3 million of restructuring costs resulting from a 5% workforce reduction.  Net income in Q4 2009 was $0.9 million or $0.01 per share.
  • New orders won in the fourth quarter totaled $80 million, compared to $67 million a year earlier  and $47 million in Q3 2010.
  • Backlog at October 31, 2010 was $149 million, compared to $123 million at the end of Q3 2010.

Financial Review

COM DEV's fiscal 2010 revenues of $220.9 million decreased by $19.5 million or 8% compared to the previous year.  Revenue fell short of management's expectations due primarily to cost growth and resulting revenue delays on five customer programs.  The revenue split between the three market segments was 65% commercial, 23% civil and 12% military, compared to a 58/26/16 split in 2009. Commercial revenues grew by 4% to $143.8 million, while civil and military revenues declined by 20% and 31%, respectively.  The Company's fourth quarter 2010 revenues of $51.5 million were 12% below Q4 2009 revenues of $58.3 million.

COM DEV received new orders totaling $210 million during the year, of which 79% were commercial, 10% were civil, and 11% were military.  In fiscal 2009 the Company booked $249 million of new orders, with a commercial/civil/military split of 55/23/22.

Order backlog at year-end was $149 million, up from $123 million on July 31, 2010, but down from $163 million at the end of fiscal 2009.  These variations in backlog are consistent with historical patterns as order profiles are typically lumpy in nature.  An additional $10 million of follow-on orders are expected to be realized from Authorities to Proceed (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 65%, 19% and 16% respectively, compared to 51%, 27% and 22% three months earlier.  The Company expects to convert approximately 80% of the total backlog into revenue during fiscal 2011.

Gross margin was $45.1 million in fiscal 2010, representing 20% of revenues, compared to $64.9 million or 27% of revenues in 2009.  As described above, the decrease in gross margin percentage in the year was primarily the result of cost increases on a small number of programs.  The ongoing effects of earlier write-downs, and some cost increases had the expected effect of suppressing margins, which were 20% in Q4 2010, compared to 25% in Q4 2009.

Net research and development expense decreased 51% to $6.6 million in 2010 from $13.6 million in 2009.  The decrease was due primarily to a reduction in gross R&D spending from $17.5 million to $12.4 million, as the Company was more stringent in evaluating R&D project proposals.  In addition, external R&D funding grew from $3.9 million in 2009 to $5.7 million in 2010.  The 2010 funding includes a $2.1 million Investment Tax Credit recognized in order to offset the income tax expense incurred for the year.

Selling expenses were $11.8 million in 2010, compared to $10.0 million in 2009.  The increase was due to higher business development and sales and marketing costs in the exactEarth division and an increase in commission costs.  General and administrative expenses were $20.7 million, compared with $23.1 million in 2009, as the Company continued to rationalize G&A spending throughout the organization.

Fiscal 2010 net income attributable to shareholders of $2.7 million decreased by $12.6 million compared to 2009 net income of $15.3 million.  Net income was favourably impacted by a $2.6 million foreign exchange gain in 2010, which compared to a $2.0 million foreign exchange loss in 2009.

COM DEV ended the year with $17.4 million of cash and equivalents, compared to $21.4 million at October 31, 2009.  Operating activities generated $13.4 million of cash for the year.  Financing activities generated $10.3 million of cash, notably due to a $12.3 million cash investment by HISDESAT and $4.7 million of funding received from the Southern Ontario Development Program.  Investing activities used $26.9 million of cash.  At October 31, 2010, COM DEV had outstanding debt of $16.5 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 76,156,127 on October 31, 2010.

Conference Call

A conference call will be held Thursday, January 13, 2011 at 5:00 pm EST 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 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.

 

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)
                   
For the three months ended
October 31
  2010   2009
                   
  Revenue         $            51,486   $             58,344
  Cost of revenue       41,224   43,942
  Gross margin       10,262   14,402
  Research and development costs     3,142   3,573
  Research and development
recovery
  2,726   971
  Net research and
development
    416   2,602
  Selling expenses       2,957   3,179
  General expenses       4,646   5,892
  Operating income       2,243   2,729
  Interest expense       137   167
  Foreign exchange (gain)
loss
                     (219)                   1,579
  Other expense                      3,213                      138
Net (loss) income before taxes     $              (888)   $                  845
  Income taxes                      1,300                        -  
Net (loss) income       $           (2,188)   $                  845
                   
Attributable to:            
  Shareholders       $           (1,941)   $                858
  Non-controlling interest                        (247)                       (13)
              $           (2,188)   $                845
                   
Earnings per share            
Basic and diluted earnings per share     ($0.02)   $0.01
 
 
COM DEV International Ltd.
Consolidated Statements of Operations
(Canadian dollars in thousands, except for per share figures)
                   
For the year ended October 31     2010   2009
                   
  Revenue         $         220,921   $          240,410
  Cost of revenue                   175,802                175,553
  Gross margin                    45,119                 64,857
  Research and development costs                  12,366                 17,475
  Research and development recovery                  5,729                   3,914
  Net research and development                    6,637                 13,561
  Selling expenses                    11,845                 10,002
  General expenses                    20,689                 23,063
  Operating income                      5,948                 18,231
  Interest expense                         553                      533
  Foreign exchange (gain) loss                   (2,578)                   2,002
  Other expense                      3,432                      428
Net income         $            4,541   $            15,268
  Income taxes                      2,115                        -  
Net income         $            2,426   $            15,268
                   
Attributable to:            
  Shareholders       $            2,694   $            15,306
  Non-controlling
interest
                       (268)                       (38)
              $            2,426   $            15,268
                   
Earnings per share            
Basic and diluted earnings per share     $0.04   $0.21
Basic weighted average number of shares 76,137,922   73,551,227
Diluted weighted average number of shares 76,282,809   73,604,941
 
 
COM DEV International Ltd.
Consolidated Balance Sheets
(Canadian dollars in thousands)
              As at   As at
              October 31,   October 31,
              2010   2009
Assets              
     Current              
      Cash and cash equivalents     $           17,436   $            21,404
    Accounts receivable                   44,357                 53,674
    Inventory                      58,827                 51,114
    Prepaids and other                      3,274                   3,112
    Income taxes recoverable                     4,615                   4,615
    Future income tax assets - current                  4,175                   6,192
                          132,684                140,111
  Property, plant and equipment                  75,770                 69,537
  Intangible assets                    27,862                 21,459
  Goodwill                        2,252                   2,388
  Future income tax assets - long term                  3,898                   1,723
  Total assets       $         242,466   $          235,218
                   
Liabilities              
  Current              
    Accounts payable and accrued liabilities $           27,928   $            32,939
    Deferred revenue                    23,170                 22,510
    Current portion of loans payable                  6,401                   6,587
                           57,499                 62,036
                   
  Long term              
    Loans payable                    10,115                 13,401
    Accounts payable and accrued liabilities                   968                        -  
    Employee future benefits                    1,910                   1,872
                           12,993                 15,273
                   
  Total liabilities                    70,492                 77,309
                   
Shareholders' equity            
  Share capital                   346,068                345,885
  Contributed surplus                      7,314                   2,804
  Deficit                    (186,065)               (188,759)
  Non-controlling interest                    8,328                      486
  Accumulated other comprehensive loss               (3,671)                  (2,507)
  Total shareholders' equity                 171,974                157,909
                   
Total liabilities and shareholders' equity   $         242,466   $          235,218
 
 
COM DEV International Ltd.
Consolidated Statements of Cash Flows
(Canadian dollars in thousands)
                   
For the three months ended October 31   2010   2009
                   
Operating activities            
  Net (loss) income       $           (2,188)   $                845
  Amortization                      2,985                   2,800
  Loss on disposal of assets                       102                        41
  Defined benefit plan expenses                       248                        52
  Defined benefit plan contibutions                      (194)                     (134)
  Stock compensation expense                       456                      241
  Employee stock ownership plan awards                     52                        48
  Fair value adjustment for SODP loan                    (855)                        -  
  Investment tax credits recognized                   (2,100)    
  Deferred tax expense                      1,942    
  Unrealized foreign exchange loss
(gain) on derivatives
                  559                   1,843
                             1,007                   5,736
  Net change in non-cash working capital items                   760                   6,598
Operating activities                      1,767                 12,334
                   
Financing activities            
  Shares issued                           -                         (61)
  Non-controlling interest investment, net              11,952                        -  
  Advance of long term debt                    4,147                        -  
  Repayment of long term debt                   (1,351)                  (1,597)
Financing activities                    14,748                  (1,658)
                   
Investing activities            
  Acquisition of property, plant and equipment               (4,202)                  (7,309)
  Proceeds on disposal of property, plant, and equipment                     -                          35
  Acquisition of intangible assets                   (3,139)                  (3,595)
Investing activities                     (7,341)                (10,869)
Effect of exchange rate changes on cash                    (637)                   1,795
                   
Net increase in cash                      8,537                   1,602
Cash and cash equivalents, beginning of period                8,899                 19,802
Cash and cash equivalents, end of period $           17,436   $            21,404
                   
Interest paid         $                118   $                 186
Taxes paid         $                   -     $                    -  
                   
 
COM DEV International Ltd.
Consolidated Statements of Cash Flows
(Canadian dollars in thousands)
                   
For the year ended October 31     2010   2009
                   
Operating activities            
  Net income         $            2,426   $            15,268
  Amortization                    11,261                 11,300
  Loss on disposal of assets                       175                        -  
  Defined benefit plan expenses                       944                      398
  Defined benefit plan contibutions                      (779)                     (584)
  Stock compensation expense                    1,293                      898
  Employee stock ownership plan awards                   198                      185
  Fair value adjustment for SODP loan                    (855)                        -  
  Investment tax credits recognized                   (2,100)                        -  
  Deferred tax expense                      1,942                        -  
  Unrealized foreign exchange gain on derivatives               (1,144)                  (3,639)
                           13,361                 23,826
  Net change in non-cash working capital items                   251                (14,339)
Operating activities                    13,612                   9,487
                   
Financing activities            
  Shares issued                           -                   21,752
  Non-controlling interest investment, net              11,952                        -  
  Advance of long term debt                    4,696                        -  
  Repayment of long term debt                   (6,331)                  (6,923)
Financing activities                    10,317                 14,829
                   
Investing activities            
  Acquisition of property, plant and equipment             (13,849)                (13,016)
  Proceeds on disposal of property, plant and equipment                     -                          79
  Acquisition of intangible assets                 (10,926)                  (7,548)
  Business acquisitions                     (2,127)                     (140)
Investing activities                   (26,902)                (20,625)
Effect of exchange rate changes on cash                    (995)                   1,611
                   
Net (decrease) increase in cash                   (3,968)                   5,302
Cash and cash equivalents, beginning of period              21,404                 16,102
Cash and cash equivalents, end of period $           17,436   $            21,404
                   
Interest paid         $                560   $                 965
Taxes paid         $                173   $                    -  

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.com

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Com Dev International Ltd.

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