CAMBRIDGE, ON, Sept. 2 /CNW/ - COM DEV International Ltd. (TSX:CDV) today announced third quarter financial results for the three month period ended July 31, 2010. All amounts are stated in Canadian dollars unless otherwise noted.
Third Quarter Highlights
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- Revenue was $52.3 million, compared to $61.5 million in the third
quarter of 2009.
- Gross margin was 16%, compared to 29% in Q3 2009.
- Net loss was $1.7 million, or $(0.02) per share, compared to net
income of $5.2 million or $0.07 per share for the third quarter of
the prior year.
- New orders won in the third quarter totaled $47 million, compared to
$45 million a year earlier and $33 million in the second quarter of
fiscal 2010.
- Backlog at July 31, 2010 was $123 million, compared to $128 million
three months earlier.
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"We believe our core strategy is sound and our long-term opportunities are very promising," said Michael Pley, Interim CEO of COM DEV. "We are currently feeling the effects of several underperforming programs which will largely be completed within the next few quarters, and reduced funding availability in the near term from the Canadian government for new programs. In order to mitigate their impacts on the financial performance of the Company, we've taken actions in Q3 and the early part of Q4, including the decision to exit certain commercial electronics products which have not been consistently profitable, and to take steps to right-size the resources across the Company to align with the near term work load. These steps have resulted in a reduction of 81 employees, or approximately 5% of our global workforce. The resulting one-time severance charge of approximately $3 million will be recorded in Q4, with ongoing savings amounting to over $8 million per year."
Financial Review
COM DEV's fiscal 2010 third quarter revenues of $52.3 million represented a decrease of $9.1 million or 15% compared to the third quarter of 2009. The revenue split between the three market segments was 67% commercial, 20% civil and 13% military, compared to a 52/32/16 split in the third quarter of 2009.
Revenue fell short of management's expectations due to cost growth on five customer programs. Under COM DEV's percentage-of-completion accounting methods, these program performance issues negatively impacted both revenue and gross margin by $6.7 million in the quarter, as revenues were realized at a slower pace than expected. While underlying market conditions and the Company's historic success rate at winning new business provide the basis for revenue growth, management now expects annual revenues for fiscal 2010 to be approximately 5% lower than fiscal 2009 revenues.
Gross margin was $8.4 million in the third quarter, representing 16% of revenues, compared to $18.0 million or 29% of revenues in the third quarter of 2009. As described above, the decrease in gross margin percentage was primarily the result of cost increases on a small number of programs.
COM DEV received new orders totaling $47 million during the third quarter, of which 84% were commercial, 6% were civil, and 10% were military. In Q3 2009 the Company booked $45 million of new orders, with a commercial/civil/military split of 60/23/17.
Order backlog at July 31, 2010 was $123 million, compared to backlog of $128 million three months earlier, and $156 million one year earlier. These variations in backlog are consistent with historical patterns as the order profiles are typically lumpy in nature. An additional $21 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 51%, 27% and 22% respectively, compared to 46%, 35% and 19% at July 31, 2009.
Net research and development expense was $1.0 million in the third quarter, compared to $3.6 million in the Q3 2009. The decrease was achieved as a result of both reduced R&D spending, which declined to $2.5 million from $4.5 million a year earlier as the Company focuses its resources on its key R&D priorities, and an increase in external R&D funding to $1.5 million compared to $0.9 million in Q3 2009. The R&D funding includes a $0.8 million Investment Tax Credit recognized in order to offset an income tax expense incurred in the quarter.
Selling expenses were $3.1 million in the Q3 2010, compared to $2.4 million in the third quarter of 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 $4.9 million, compared with $6.1 million in Q3 2009, as the Company continues to rationalize G&A spending throughout the organization.
Net loss for the quarter was $1.7 million, compared to net income of $5.2 million in Q3 2009, while loss per share was $(0.02), compared to earnings per share of $0.07 a year earlier.
COM DEV ended the quarter with $8.9 million of cash and equivalents, compared to $10.4 million at April 30, 2010. Operating activities generated $5.5 million of cash in the third quarter. Financing activities used $1.2 million of cash, while investing activities used $5.6 million of cash. At July 31, 2010, COM DEV had outstanding debt of $14.9 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 July 31, 2010.
Conference Call
A conference call will be held Thursday, September 2, 2010 at 5:00 pm EDT 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(TM) 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.
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COM DEV International Ltd.
Consolidated Statements of Operations
(Canadian dollars in thousands, except for per share figures)
Unaudited
For the three months ended July 31 2010 2009
-------------------------------------------------------------------------
Revenue $ 52,333 $ 61,451
Cost of revenue 43,952 43,440
----------- -----------
Gross margin 8,381 18,011
----------- -----------
Research and development costs 2,517 4,531
Research and development recovery 1,507 912
----------- -----------
Net research and development 1,010 3,619
Selling expenses 3,111 2,423
General expenses 4,873 6,096
----------- -----------
Operating (loss) income (613) 5,873
Interest expense 128 44
Foreign exchange loss 62 510
Other expense 97 83
----------- -----------
Net (loss) income before taxes $ (900) $ 5,236
Income taxes 815 -
----------- -----------
Net (loss) income $ (1,715) $ 5,236
----------- -----------
----------- -----------
Attributable to:
Equity holders of the parent $ (1,715) $ 5,241
Non-controlling interest - (5)
----------- -----------
$ (1,715) $ 5,236
----------- -----------
----------- -----------
Earnings per share
Basic and diluted earnings per share ($0.02) $0.07
COM DEV International Ltd.
Consolidated Statements of Operations
(Canadian dollars in thousands, except for per share figures)
Unaudited
For the nine months ended July 31 2010 2009
-------------------------------------------------------------------------
Revenue $ 169,435 $ 182,066
Cost of revenue 134,578 131,611
----------- -----------
Gross margin 34,857 50,455
----------- -----------
Research and development costs 9,224 13,902
Research and development recovery 3,003 2,943
----------- -----------
Net research and development 6,221 10,959
Selling expenses 8,888 6,823
General expenses 16,043 17,171
----------- -----------
Operating income 3,705 15,502
Interest expense 416 366
Foreign exchange (gain) loss (2,359) 423
Other expense 219 290
----------- -----------
Net income $ 5,429 $ 14,423
Income taxes 815 -
----------- -----------
Net income $ 4,614 $ 14,423
----------- -----------
----------- -----------
Attributable to:
Equity holders of the parent $ 4,635 $ 14,448
Non-controlling interest (21) (25)
----------- -----------
$ 4,614 $ 14,423
----------- -----------
----------- -----------
Earnings per share
Basic and diluted earnings per share $0.06 $0.20
COM DEV International Ltd.
Consolidated Balance Sheets
(Canadian dollars in thousands)
Unaudited
As at As at
July 31, October 31,
2010 2009
-------------------------------------------------------------------------
Assets
Current
Cash and cash equivalents $ 8,899 $ 21,404
Accounts receivable 35,153 53,674
Inventory 59,361 51,114
Prepaids and other 4,594 3,112
Income taxes recoverable 5,327 4,615
Future income tax assets - current 6,192 6,192
----------- -----------
119,526 140,111
Property, plant and equipment 73,871 69,537
Intangible assets 25,983 21,459
Goodwill 2,270 2,388
Future income tax assets - long term 1,881 1,723
----------- -----------
Total assets $ 223,531 $ 235,218
----------- -----------
----------- -----------
Liabilities
Current
Accounts payable and accrued liabilities $ 25,639 $ 32,939
Deferred revenue 19,519 22,510
Current portion of loans payable 6,392 6,587
----------- -----------
51,550 62,036
----------- -----------
Long term
Loans payable 8,468 13,401
Employee future benefits 1,889 1,872
----------- -----------
10,357 15,273
----------- -----------
Total liabilities 61,907 77,309
----------- -----------
Shareholders' equity
Share capital 346,068 345,885
Contributed surplus 3,429 2,804
Deficit (184,124) (188,759)
Non-controlling interest - 486
Accumulated other comprehensive loss (3,749) (2,507)
----------- -----------
Total shareholders' equity 161,624 157,909
----------- -----------
Total liabilities and shareholders' equity $ 223,531 $ 235,218
----------- -----------
----------- -----------
COM DEV International Ltd.
Consolidated Statements of Cash Flows
(Canadian dollars in thousands)
Unaudited
For the three months ended July 31 2010 2009
-------------------------------------------------------------------------
Operating activities
Net (loss) income $ (1,715) $ 5,236
Amortization 3,033 2,809
Loss (gain) on disposal of assets 20 (6)
Defined benefit plan expenses 361 109
Defined benefit plan contributions (195) (141)
Stock compensation expense 315 271
Employee stock ownership plan awards 43 40
Unrealized foreign exchange loss (gain)
on derivatives 1,098 (2,847)
----------- -----------
2,960 5,471
Net change in non-cash working capital items 2,571 (11,657)
----------- -----------
Operating activities 5,531 (6,186)
----------- -----------
Financing activities
Shares issued - (60)
Advance of long term debt 549 -
Repayment of long term debt (1,749) (1,710)
----------- -----------
Financing activities (1,200) (1,770)
----------- -----------
Investing activities
Acquisition of property, plant and equipment (3,085) (842)
Proceeds on disposal of property, plant,
and equipment - 53
Acquisition of intangible assets (2,506) (3,470)
----------- -----------
Investing activities (5,591) (4,259)
----------- -----------
Effect of exchange rate changes on cash (244) 121
----------- -----------
Net decrease in cash (1,504) (12,094)
Cash and cash equivalents, beginning of period 10,403 31,896
----------- -----------
Cash and cash equivalents, end of period $ 8,899 $ 19,802
----------- -----------
----------- -----------
Interest paid $ 134 $ 205
----------- -----------
----------- -----------
Taxes paid $ 15 $ -
----------- -----------
----------- -----------
COM DEV International Ltd.
Consolidated Statements of Cash Flows
(Canadian dollars in thousands)
Unaudited
For the nine months ended July 31 2010 2009
-------------------------------------------------------------------------
Operating activities
Net income $ 4,614 $ 14,423
Amortization 8,276 8,500
Loss (gain) on disposal of assets 73 (32)
Defined benefit plan expenses 696 346
Defined benefit plan contributions (585) (450)
Stock compensation expense 837 657
Employee stock ownership plan awards 146 137
Unrealized foreign exchange gain on
derivatives (1,703) (5,482)
----------- -----------
12,354 18,099
Net change in non-cash working capital items (509) (20,938)
----------- -----------
Operating activities 11,845 (2,839)
----------- -----------
Financing activities
Shares issued - 21,813
Advance of long term debt 549 -
Repayment of long term debt (4,980) (5,325)
----------- -----------
Financing activities (4,431) 16,488
----------- -----------
Investing activities
Acquisition of property, plant and equipment (9,647) (2,723)
Proceeds on disposal of property, plant
and equipment 1 79
Acquisition of intangible assets (7,787) (6,577)
Business acquisitions (2,127) (140)
----------- -----------
Investing activities (19,560) (9,361)
----------- -----------
Effect of exchange rate changes on cash (359) (588)
----------- -----------
Net (decrease) increase in cash (12,505) 3,700
Cash and cash equivalents, beginning of period 21,404 16,102
----------- -----------
Cash and cash equivalents, end of period $ 8,899 $ 19,802
----------- -----------
----------- -----------
Interest paid $ 441 $ 780
Taxes paid $ 173 $ -
----------- -----------
----------- -----------
COM DEV International Ltd.
Consolidated Statements of Changes in Equity
(Canadian dollars in thousands)
Unaudited
Accumu-
For the lated
nine months Other
ended Compre- Non-cont- Contrib-
July 31, hensive Share rolling uted
2010 Total Deficit Loss Capital interest Surplus
-------------------------------------------------------------------------
Balance,
October
31,
2009 $ 157,909 $(188,759) $ (2,507) $ 345,885 $ 486 $ 2,804
Comprehen-
sive
income
Net
Income 4,614 4,635 - - (21) -
Foreign
currency
transla-
tion
adjust-
ments
(net of
taxes
of
$nil) (1,242) - (1,242) - - -
---------- ---------- ---------- ---------- ---------- ----------
3,372 4,635 (1,242) - (21) -
Common
stock
issued - - - 183 - (183)
Value of
ESOP
awards 146 - - - - 146
Minority
interest
purchase
adjust-
ment (640) - - - (465) (175)
Expense
recognized
for stock-
based
compen-
sation 837 - - - - 837
---------- ---------- ---------- ---------- ---------- ----------
Balance,
July 31,
2010 $ 161,624 $(184,124) $ (3,749) $ 346,068 $ - $ 3,429
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
-------------------------------------------------------------------------
For the
nine months
ended
July 31,
2009
Balance,
October
31,
2008 $ 121,584 $(204,065) $ (729) $ 323,975 $ 524 $ 1,879
Compre-
hensive
income
Net
Income 9,182 9,207 - - (25) -
Foreign
currency
transla-
tion
adjust-
ments
(net of
taxes
of
$nil) (833) - (833) - - -
---------- ---------- ---------- ---------- ---------- ----------
8,349 9,207 (833) - (25) -
Common
stock
issued 21,873 - - 22,032 - (159)
Value of
ESOP
awards 97 - - - - 97
Expense
recognized
for stock-
based
compen-
sation 386 - - - - 386
---------- ---------- ---------- ---------- ---------- ----------
Balance,
July 31,
2009 $ 152,288 $(194,858) $ (1,562) $ 346,007 $ 499 $ 2,203
---------- ---------- ---------- ---------- ---------- ----------
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%SEDAR: 00003673E
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
