RuggedCom reports record purchase orders with 16% revenue growth for Q2
fiscal 2010

    
    (All dollar amounts are in US dollars)

    Highlights from the Quarter:
        -  11% increase in Purchase Orders year over year, a new company
           record
        -  16% increase in Revenue year over year
        -  13% increase in Gross Margin year over year
        -  69% decrease in Net Income year over year
        -  Added 100 new customers, up from 97 in the year ago period
    

CONCORD, ON, Nov. 4 /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 second quarter of fiscal 2010, ended September 30, 2009.

"We're pleased to report another quarter in which we received record purchase orders, but for the second quarter in a row, revenues lagged orders due to timing. Both gross and net profit margins continue to be impacted by the strengthening Canadian dollar and by increases in operating expenses to support our continued growth," said Marzio Pozzuoli, President and Chief Executive Officer.

Second Quarter Results

Total revenue for the quarter was $16.7 million, representing an increase of 16% from the comparable quarter a year ago. Revenue growth was primarily driven by increased sales in the electric power market, which set a new Company record for quarterly sales.

The Company booked record customer purchase orders totaling $18.9 million for the quarter, representing an increase of 11% over the same quarter last year.

Gross margin for the quarter was $9.9 million, an increase of 13% over the comparable period last year. On a percentage of revenue basis, second quarter gross margin was 59.1%, a decrease of 2.0 percentage points over a gross margin of 61.1% for the same period last year, but an increase of 2.4 percentage points over the gross margin percentage for the first quarter of fiscal 2010. Approximately half of the decline in gross margin percentage experienced in Q2-F10 compared to the same period last year was due to the continued significant strengthening of the Canadian dollar versus the US dollar. Gross margins are generally unaffected by movements in the Canadian to US dollar exchange rate, however during periods of high exchange rate volatility, gross margins are impacted by exchange rate translations. The other half of the decline in gross margin percentage from a year ago was due mainly to product/sector mix and competitive pricing pressure.

Second quarter net income was $1.0 million, representing the Company's 18th consecutive quarter of profitability. This represents a decrease of 69% from net income of $3.2 million in the second quarter last year. Net earnings before taxes for Q2-F10 decreased significantly compared to the same period a year ago due to slower revenue growth (16%) as compared to the growth in operating expenses (88%), as well as a decrease in gross margin percentage as described earlier. The increase in operating expenses for Q2-F10 was due to an increase in research and development as well as sales and marketing expenses to support our continued growth. Additionally, there was a negative foreign exchange impact of $1.4 million which was due to foreign exchange losses of $1.0 million from a strengthening Canadian dollar relative to the US dollar, compared to a foreign exchange gain of $0.4 million in the same period a year ago. Falling interest rates also contributed to the decrease in earnings for the current quarter, as the Company earned only $38,000 net interest income compared to $0.4 million in the same period last year.

Also, as expected, the recent WiNetworks Ltd. acquisition on September 17, 2009 resulted in the inclusion of a $0.2 million loss before and after taxes in the Company's consolidated financial results. The loss was mainly due to operating expenses, most of which were research and development expenses. WiNetworks recorded only nominal revenue for the period from the acquisition date to the end of the reporting period.

The Company recorded a provision for income taxes of $0.5 million with an effective tax rate of 35.2%. This compares to $1.5 million income tax expense in the same period last year with an effective tax rate of 32.2%.

Second quarter basic earnings per share were $0.08 compared to $0.16 for the same quarter last year while fully diluted earnings per share were $0.08 compared to $0.15 for the same quarter last year.

The Company added 100 new customers in the quarter, up from 97 in the year ago period.

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

Management will host a conference call at 8:30 a.m. (ET) on Thursday, November 5, 2009. Listeners may attend the conference call by dialing 416-644-3416 or 1-800-732-9307. 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 November 12, 2009. To access the rebroadcast, please call 416-640-1917 or 1-877-289-8525 and enter passcode 4171614 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 September 30, 2008 and September 30, 2009 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.

    
                               RuggedCom Inc.
                  CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                     2nd Quarter ended September 30, 2009


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

                                                       September     March
                                                       30, 2009    31, 2009
                                                      (unaudited)  (audited)
                                                               $           $
                                                               -           -
    Assets
    Current
    Cash and cash equivalents  (note 5)                   38,255      45,099
    Accounts receivable (note 6)                          10,278       9,780
    Prepaid expenses and other                             2,164       1,025
    Inventories (note 4 and note 7)                        9,115       4,555
    Income taxes recoverable                               3,064           -
    Future income taxes                                      411         283
                                                     ------------------------

                                                          63,287      60,742
    Future income taxes                                       82         246
    Property and equipment                                 6,023       2,662
    Goodwill                                               2,895           -
    Other assets (note 3)                                 11,522         580
                                                     ------------------------
                                                          83,809      64,230
                                                     ------------------------
                                                     ------------------------
    Liabilities
    Current
    Accounts payable and accrued liabilities              11,015       5,793
    Current portion of warranty                              698         482
    Income taxes payable                                       -       2,268
    Future income taxes                                    1,966           -
    Current portion of deferred income                       106          50
    Current portion of obligations under capital lease        72         126
                                                     ------------------------

                                                          13,857       8,719
                                                     ------------------------

    Warranty                                                 430         347
    Deferred income                                           24          21
    Obligations under capital lease                           35          48
    Leasehold inducements                                    182           6
                                                     ------------------------
                                                             671         422
                                                     ------------------------

                                                          14,528       9,141
                                                     ------------------------

    Shareholders' Equity
    Capital stock (note 8)                                48,695      46,820
    Contributed surplus (note 9)                           1,993       1,559

    Accumulated other comprehensive income (loss)
     (note 10)                                             1,041      (8,952)
    Retained earnings                                     17,552      15,662
                                                     ------------------------
                                                          18,593       6,710
                                                     ------------------------

                                                          69,281      55,089
                                                     ------------------------

                                                          83,809      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     6 month     6 month
                                period      period      period      period
                                ended       ended       ended       ended
                              September   September   September   September
                               30, 2009    30, 2008    30, 2009    30, 2008

                                       $           $           $           $
                                       -           -           -           -

    Revenue                       16,740      14,385      32,757      27,136
    Cost of goods sold             6,847       5,594      13,787      10,477
                             ------------------------------------------------

    Gross margin                   9,893       8,791      18,970      16,659
                             ------------------------------------------------

    Operating expenses
    Research and development       1,780       1,156       3,805       2,362
    Sales and marketing            3,485       2,513       6,463       5,077
    General and administrative     1,808       1,238       3,761       2,697
    Investment tax credits          (199)       (404)       (386)       (499)
    Loss on foreign exchange         998        (384)      1,529        (192)
    Amortization                     508         329         901         588
                             ------------------------------------------------

                                   8,380       4,448      16,073      10,033
                             ------------------------------------------------

    Operating income               1,513       4,343       2,897       6,626
    Net interest income               38         382         101         828
                             ------------------------------------------------

    Income before income taxes     1,551       4,725       2,998       7,454
                             ------------------------------------------------

    Income taxes (note 15)
    Current                          492       1,523         997       2,528
    Future                            54          (3)        111          (2)
                             ------------------------------------------------

                                     546       1,520       1,108       2,526
                             ------------------------------------------------

    Net income for the period      1,005       3,205       1,890       4,928

    Retained earnings -
     Beginning of period          16,547       5,057      15,662       3,334
                             ------------------------------------------------

    Retained earnings -
     End of period                17,552       8,262      17,552       8,262
                             ------------------------------------------------
                             ------------------------------------------------

    Net earnings per share
     (note 11)
    Basic                     $     0.08  $     0.27  $     0.16  $     0.42
    Diluted                   $     0.08  $     0.26  $     0.15  $     0.40

    Basic weighted average
     number of common shares
     outstanding              12,098,002  11,763,504  11,997,705  11,741,683
    Diluted weighted average
     number of common shares
     outstanding              12,574,050  12,356,833  12,599,535  12,318,891

    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     6 month     6 month
                                period      period      period      period
                                ended       ended       ended       ended
                              September   September   September   September
                               30, 2009    30, 2008    30, 2009    30, 2008

                                       $           $           $           $
                                       -           -           -           -

    Net income for the period      1,005       3,205       1,890       4,928
    Foreign currency translation
     gain (loss) (note 10)         5,423      (2,365)      9,993      (2,034)
                             ------------------------------------------------
    Comprehensive income           6,428         840      11,883       2,894
                             ------------------------------------------------
                             ------------------------------------------------

    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     6 month     6 month
                                period      period      period      period
                                ended       ended       ended       ended
                              September   September   September   September
                               30, 2009    30, 2008    30, 2009    30, 2008

                                       $           $           $           $
                                       -           -           -           -

    Cash provided by (used in)
    Operating activities
    Net income for the period      1,005       3,205       1,890       4,928
    Non-cash items
      Amortization of property
       and equipment                 263         311         565         555
      Amortization of
       other assets                  244          18         335          33
      Future income taxes             54          (3)        111          (2)
      Stock based compensation       294         164         572         336
      Warranty                         1          89          30         191
      Leasehold inducements           65          (8)        164         (16)
      Net change in non-cash
       working capital
       (note 14a)                    884       1,299      (3,015)        116
                             ------------------------------------------------

                                   2,810       5,075         652       6,141
                             ------------------------------------------------

    Investing activities
    Additions to short
     term investments                  -      34,787           -      34,787
    Acquisition of
     subsidiary (note 4)          (7,970)          -      (7,970)          -
    Additions to property
     and equipment                (2,327)       (572)     (2,880)     (1,013)
    Additions to other assets       (343)        (38)       (995)        (97)
                             ------------------------------------------------

                                 (10,640)     34,177     (11,845)     33,677
                             ------------------------------------------------

    Financing activities
    Repayment of obligations
     under capital lease             (46)        (70)        (92)       (140)
    Repayment of loan (note 4)    (4,875)          -      (4,875)          -
    Issuance of common shares         31         116       1,737         173
                             ------------------------------------------------

                                  (4,890)         46      (3,230)         33
                             ------------------------------------------------

    Effect of exchange
     rates on cash                 3,870      (2,260)      7,579      (2,213)
                             ------------------------------------------------

    Increase in cash and cash
     equivalents during the
     period                       (8,850)     37,038      (6,844)     37,638
    Cash and cash
     equivalents - Beginning
     of period                    47,105       8,637      45,099       8,037
                             ------------------------------------------------

    Cash and cash
     equivalents - End of
     period (note 14b)            38,255      45,675      38,255      45,675
                             ------------------------------------------------
                             ------------------------------------------------

    Supplemental disclosures

    Interest paid             $        5  $       13  $       11  $       29
    Income taxes paid         $    1,144  $      786  $    5,998  $    1,439
    

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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