COM DEV Announces Fourth Quarter and Year End Fiscal 2011 Results

CAMBRIDGE, ON, Jan. 12, 2012 /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, 2011.  All amounts are stated in Canadian dollars unless otherwise noted.

Fiscal Year 2011 Highlights

• Revenue was $203.2 million, an 8% decrease from revenue of $220.9 million in fiscal 2010.
• Gross margin in the core Space Equipment business showed continuous improvement over the year, and for the full year was 24%, compared to 22% in 2010.
• Net income attributable to shareholders was $13.6 million, or $0.18 per share, an increase of $10.9 million compared to $2.7 million or $0.04 per share in 2010.
• New orders totaled $188 million in fiscal 2011, compared to $210 million the previous year.
• Backlog at October 31, 2011 was $126 million, plus an additional $20 million in follow-on orders expected from Authorities to Proceed (ATPs) already awarded, for an expected backlog of $146 million, compared to an expected total backlog of $158 million a year earlier.
• Majority-owned subsidiary exactEarth booked nearly $10 million of customer orders during the year, while continuing to expand its constellation of satellites.

Fourth Quarter Highlights

• Revenue was $49.9 million in the fourth quarter of fiscal 2011, a 3% decrease from revenue of $51.5 million in the fourth quarter of 2010.
• Gross margin in the core Space Equipment business was 26%, compared to 25% in Q4 2010.
• Net income attributable to shareholders was $5.1 million, or $0.07 per share, an increase of $7.0 million compared to a net loss of $1.9 million or $(0.02) per share in the fourth quarter of 2010.
• New orders won in the fourth quarter totaled $54 million, compared to $79 million a year earlier and $47 million in the third quarter of 2011.

"We said our top priority for 2011 was to improve our bottom line performance. I am pleased with the progress we made during the year, but we still have work to do to reach the level of sustainable profitability this organization is capable of delivering," said Michael Pley, CEO of COM DEV.  "We controlled expenses, completed four of the five programs that had been suppressing our results, and executed effectively on our other programs. A slowdown in orders in the civil space sector contributed to reduced revenues, but we have taken steps to properly size the business and focus our efforts on available opportunities."

Mr. Pley continued:  "Our priorities for fiscal 2012 are unchanged.  We will continue to focus on capitalizing on a very exciting opportunity for exactEarth, driving results in our core commercial business, expanding the market presence of our U.S. division, and completing the last of the challenging programs. In 2012 we expect our core equipment market to be relatively flat."

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.

Year ended October 31 (unaudited, in thousands of dollars)

	Space Equipment			Data Services			Consolidated *
	2011	2010		2011	2010		2011	2010
Revenue	198,435	219,036		4,760	1,885		203,195	220,921
Gross margin	50,267	49,891		(2,274)	(1,497)		46,581	45,119
Gross margin %	24%	22%		-	-		23%	20%
Net income	20,558	11,794		(5,540)	(5,825)		13,606	2,694

* Consolidated figures may not equal the sum of the two segments due to intra-segment adjustments. Please see Note 15 to the Consolidated Financial Statements for additional details.

Financial Review

COM DEV's fiscal 2011 revenues of $203.2 million decreased by $17.7 million or 8% compared to $220.9 million the previous year. The revenue split between the three market segments was 61% commercial, 20% civil and 18% military, compared to a 65/23/12 split in 2010. Revenue growth of 37% in the military sector was offset by declines of 13% in the commercial sector and 18% in the civil sector. The decline in commercial revenues was due in part to a decision to exit certain unprofitable activities. Civil space revenues fell behind the Company's expectations in 2011 due to a slowdown in ordering activity attributable to the current government fiscal climate.

COM DEV received new orders totaling $188 million during the year, of which 56% were commercial, 23% were civil, and 21% were military. In fiscal 2010 the Company booked $210 million of new orders, with a commercial/civil/military split of 79/10/11.

Order backlog at October 31, 2011 was $126 million, compared to $123 million three months earlier, and $149 million at the end of fiscal 2010.  An additional $20 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 50%, 29% and 21% respectively, compared to 65%, 19% and 17% at October 31, 2010.  The Company expects to convert approximately 72% of the total backlog into revenue during fiscal 2012.

Consolidated gross margin was $46.6 million in fiscal 2011, representing 23% of total revenues, compared to $45.1 million or 20% of revenues in 2010. The improvement was primarily the result of reduced impact from five programs which negatively affected gross margin by $15 million in 2010.  In 2011, the negative impact from these programs was reduced to $8 million with all but one being completed during the year.  Gross margin in the core Space Equipment segment was $50.3 million, or 24% of segment revenues in 2011, compared to $49.9 million or 22% in 2010.

COM DEV recorded a net research and development recovery of $7.0 million in 2011, compared to a net expense of $6.6 million in 2010.  Gross R&D spending grew to $13.3 million from $12.4 million, but R&D funding from external sources increased to $7.0 million from $3.6 million. The Company also recognized $13.3 million of Investment Tax Credits (ITCs) in 2011, compared to $2.1 million in 2010.

Selling expenses were $11.4 million in 2011, compared to $11.8 million in 2010. Selling expenses fluctuate from quarter to quarter depending on the bids and proposal work that is underway. General expenses were $17.6 million, down from $20.7 million a year earlier, as a result of a continued focus on rationalization of spending throughout the organization.

Net income attributable to shareholders was $13.6 million in 2011, compared to $2.7 million in 2010.  The $10.9 million increase was the result of improved gross margins, reduced operating expenses, and the increase in ITCs recognized, offset by a foreign exchange loss of $0.9 million compared to a $2.6 million gain in 2010.  Net income in the Space Equipment segment was $20.6 million, compared to $11.8 million in 2010, while the $5.5 million net loss in the Data Services segment compares to a $5.8 million net loss in the prior year.

COM DEV ended the year with $27.6 million of cash and equivalents, compared to $17.4 million at October 31, 2010. Operating activities generated $14.7 million of cash for the year, compared to $13.6 million in fiscal 2010. Financing activities generated $10.0 million in 2011, primarily due to a $15.0 million increase in the term loan. The Company used $13.9 million of cash for investing activities.  At October 31, 2011, COM DEV had outstanding debt of $23.6 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 76,394,409 on January 12, 2012. The Company repurchased and cancelled 280,500 common shares during fiscal 2011.

Conference Call

A conference call will be held Thursday, January 12, 2012 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 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) 

For the three months ended October 31

2011

2010

Revenue

 $ 49,889

 $ 51,486

Cost of revenue

38,026

41,224

Gross margin

11,863

10,262

Research and development costs

3,420

3,142

Research and development recovery

1,269

1,426

Investment tax credits recoverable

8,117

1,300

Net research and development (recovery) expense

(5,966)

416

Selling expenses

3,018

2,957

General expenses

4,914

4,646

Operating income

9,897

2,243

Interest expense

283

137

Foreign exchange loss (gain)

1,859

(219)

Other expense

256

3,213

Income before income taxes

 $ 7,499

 $ (888)

Income tax expense

2,970

1,300

Net income (loss)

 $ 4,529

 $ (2,188)

Attributable to:

Shareholders

 $ 5,071

 $ (1,941)

Non-controlling interest

(542)

(247)

 $ 4,529

 $ (2,188)

Earnings per share

Basic and diluted earnings per share

$0.07

($0.02)

 COM DEV International Ltd. 

 Consolidated Statements of Operations 

 (Canadian dollars in thousands, except for per share figures) 

For the year ended October 31

2011

2010

Revenue

 $ 203,195

 $ 220,921

Cost of revenue

156,614

175,802

Gross margin

46,581

45,119

Research and development costs

13,318

12,366

Research and development recovery

6,961

3,629

Investment tax credits recoverable

13,317

2,100

Net research and development (recovery) expense

(6,960)

6,637

Selling expenses

11,367

11,845

General expenses

17,638

20,689

Operating income

24,536

5,948

Interest expense

888

553

Foreign exchange loss (gain)

914

(2,578)

Other expense

3,009

3,432

Income before income taxes

 $ 19,725

 $ 4,541

Income tax expense

8,170

2,115

Net income

 $ 11,555

 $ 2,426

Attributable to:

Shareholders

 $ 13,606

 $ 2,694

Non-controlling interest

(2,051)

(268)

 $ 11,555

 $ 2,426

Earnings per share

Basic and diluted earnings per share

$0.18

$0.04

Basic weighted average number of shares

76,394,409

76,137,922

Diluted weighted average number of shares

76,460,835

76,282,809

 COM DEV International Ltd. 

 Consolidated Balance Sheets 

 (Canadian dollars in thousands) 

As at

As at

October 31,

October 31,

2011

2010

 Assets 

 Current 

 Cash and cash equivalents 

 $ 27,618

 $ 17,436

 Accounts receivable

47,563

44,357

 Inventory 

47,763

58,827

 Prepaids and other 

1,422

3,274

 Income taxes recoverable

4,788

4,615

 Future income tax assets - current 

3,477

4,175

132,631

132,684

 Property, plant and equipment 

76,201

75,770

 Intangible assets 

29,178

27,862

 Goodwill 

2,200

2,252

 Future income tax assets - long term 

9,732

3,898

 Total assets 

 $ 249,942

 $ 242,466

 Liabilities 

 Current 

 Accounts payable and accrued liabilities 

 $ 26,373

 $ 27,928

 Income taxes payable 

302

-

 Deferred revenue 

9,653

23,170

 Current portion of loans payable 

8,867

6,401

45,195

57,499

 Long term 

 Loans payable 

14,687

10,115

 Accounts payable and accrued liabilities 

930

968

 Employee future benefits 

1,582

1,910

17,199

12,993

 Total liabilities 

62,394

70,492

 Shareholders' equity 

 Share capital 

345,666

346,068

 Contributed surplus 

9,407

7,314

 Deficit 

(172,459)

(186,065)

 Non-controlling interest

8,977

8,328

 Accumulated other comprehensive loss 

(4,043)

(3,671)

 Total shareholders' equity 

187,548

171,974

 Total liabilities and shareholders' equity 

 $ 249,942

 $ 242,466

 COM DEV International Ltd. 

 Consolidated Statements of Cash Flows 

 (Canadian dollars in thousands) 

For the three months ended October 31

2011

2010

Operating activities

Net income (loss)

 $ 4,529

 $ (2,188)

Amortization

2,844

2,985

Loss on disposal of assets

17

102

Defined benefit plan expenses

61

248

Defined benefit plan contributions

(163)

(194)

Stock compensation expense

490

456

Employee stock ownership plan awards

62

52

Fair value adjustment for SODP loan

(78)

(855)

Investment tax credits recoverable

(7,926)

(2,100)

Future tax expense

2,805

1,942

Unrealized foreign exchange loss (gain) on derivatives

2,661

559

5,302

1,007

Net change in non-cash working capital items

(4,697)

760

Operating activities

605

1,767

Financing activities

Shares issued

-

-

Shares repurchased and cancelled

(400)

-

Non-controlling interest investment, net

(6)

11,952

Advance of long term debt

522

4,147

Repayment of long term debt

(2,482)

(1,351)

Financing activities

(2,366)

14,748

Investing activities

Acquisition of property, plant and equipment

(3,432)

(4,202)

Proceeds on disposal of property, plant, and equipment

8

-

Acquisition of intangible assets

(1,993)

(3,139)

Investing activities

(5,417)

(7,341)

Effect of exchange rate changes on cash

(19)

(637)

Net (decrease) increase in cash

(7,197)

8,537

Cash and cash equivalents, beginning of period 

34,815

8,899

Cash and cash equivalents, end of period

 $ 27,618

 $ 17,436

Interest paid

 $ 332

 $ 118

Taxes paid

 $ -

 $ -

 COM DEV International Ltd. 

 Consolidated Statements of Cash Flows 

 (Canadian dollars in thousands) 

For the year ended October 31

2011

2010

Operating activities

Net income

 $ 11,555

 $ 2,426

Amortization

11,670

11,261

(Gain) loss on disposal of assets

(253)

175

Defined benefit plan expenses

563

944

Defined benefit plan contributions

(857)

(779)

Stock compensation expense

1,557

1,293

Employee stock ownership plan awards

222

198

Fair value adjustment for SODP loan

(78)

(855)

Investment tax credits recoverable

(13,126)

(2,100)

Future tax expense

8,005

1,942

Unrealized foreign exchange loss (gain) on derivatives

2,920

(1,144)

22,178

13,361

Net change in non-cash working capital items

(7,455)

251

Operating activities

14,723

13,612

Financing activities

Shares issued

514

-

Shares repurchased and cancelled

(514)

-

Non-controlling interest investment, net

2,612

11,952

Advance of long term debt

15,522

4,696

Repayment of long term debt

(8,093)

(6,331)

Financing activities

10,041

10,317

Investing activities

Acquisition of property, plant and equipment

(9,466)

(13,849)

Proceeds on disposal of property, plant and equipment

1,568

-

Acquisition of intangible assets

(5,956)

(10,926)

Business acquisitions

-

(2,127)

Investing activities

(13,854)

(26,902)

Effect of exchange rate changes on cash

(728)

(995)

Net increase (decrease) in cash

10,182

(3,968)

Cash and cash equivalents, beginning of year

17,436

21,404

Cash and cash equivalents, end of year

 $ 27,618

 $ 17,436

Interest paid

 $ 950

 $ 560

Taxes paid

 $ -

 $ 173

 

COM DEV International Ltd.
Consolidated Statements of Changes in Equity
(Canadian dollars in thousands)
						Accumulated Other		Share		Non-controlling		Contributed
For the year ended October 31, 2011		Total		Deficit		Comprehensive Loss		Capital		interest		Surplus
Balance, October 31, 2010		$ 171,974		$ (186,065)		$ (3,671)		$ 346,068		$ 8,328		$ 7,314
Comprehensive income
	Net income (loss)	11,555		13,606		-		-		(2,051)		-
	Foreign currency translation adjustments (net of taxes of $nil)	(372)		-		(372)		-		-		-
		11,183		13,606		(372)		-		(2,051)		-
Common stock issued		514		-		-		871		-		(357)
Common stock repurchased and cancelled (note 12(a))		(514)						(1,273)				759
Expense recognized for ESOP awards		222		-		-		-		-		222
Non-controlling interest investment (note 6)		2,612		-		-		-		2,700		(88)
Expense recognized for stock-based compensation and long-term incentive plans		1,557		-		-		-		-		1,557
Balance, October 31, 2011		$ 187,548		$ (172,459)		$ (4,043)		$ 345,666		$ 8,977		$ 9,407
For the year ended October 31, 2010
Balance, October 31, 2009		$ 157,909		$ (188,759)		$ (2,507)		$ 345,885		$ 486		$ 2,804
Comprehensive income
	Net income (loss)	2,426		2,694		-		-		(268)		-
	Foreign currency translation adjustments (net of taxes of $nil)	(1,164)		-		(1,164)		-		-		-
		1,262		2,694		(1,164)		-		(268)		-
Common stock issued		-		-		-		183		-		(183)
Expense recognized for ESOP awards		198		-		-		-		-		198
Non-controlling interest purchase adjustment (note 5(b))		(640)		-		-		-		(465)		(175)
Non-controlling interest investment (note 6)		11,952		-		-		-		8,575		3,377
Expense recognized for stock-based compensation		1,293		-		-		-		-		1,293
Balance, October 31, 2010		$ 171,974		$ (186,065)		$ (3,671)		$ 346,068		$ 8,328		$ 7,314