COM DEV INTERNATIONAL LTD • Full year revenue from the Commercial segment of the Company's operations was
$137.4 million, showing significant (26.5%) growth over 2013 levels of $108.6 million.
• The Company's equipment manufacturing operations in Canada and the UK delivered solid performance, at or above their targets for the year.
• exactEarth™, the Company's Data Service subsidiary, completed the year with significant growth in new orders. The final tally for new orders in 2014 was $34.3 million, up by 137% over 2013's order total of $14.5 million
• exactEarth™ continued to gain traction in its market, with revenue reaching $16 million, a year over year increase of 33% from 2013 revenues of $12 million.
• EBITDA at exactEarth™ expanded in line with its business plan, closing out the year with $1.8 million of EBITDA, representing a growth of 260% over 2013 EBITDA of $0.5 million.
• Total Company revenue in fiscal 2014 was $208.2 million, down 3.4% from fiscal 2013, largely as a result of continued U.S. government spending constraints. In the Company's core commercial equipment sector, revenue increased year over year by 26.5% to
$137.4 million from $108.6 million in fiscal year 2013.
• Total orders for the Company rebounded in Q4 with the awarding of a record $91.1 million in new contracts, bringing the total new business won for the year to $199.5 million, and year-end backlog to $155.1 million. An additional $33.8 million in follow-on orders are expected from Authorities to Proceed (ATPs) that have already been awarded, increasing the ultimate backlog expected to $188.9 million. Orders in the prior year totaled $243.3 million leading to a 2013 backlog of $164.7, or roughly 6% higher than the 2014 ending backlog.
• While there was strength in the performance of the Company's equipment operations in Canada and the UK, as well as at exactEarth™, the Company's operations in the US realized significant losses for the year due to US government spending reductions, and the resulting absence of new contract awards during the year. The lack of work at the El Segundo site led directly to continuing quarterly losses in 2014, which for the full year, totaled approximately $10.3 million, including gross margin losses of $2.2 million from
regular project execution, (compared to positive gross margin of $2.8 million in 2013),
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$3.1 million in write down of unbilled contract amounts and related inventory resulting from a program review and the resulting management decision that it would not proceed with a cost recovery claim, and $2.6 million from the elimination of a deferred tax asset due to the diminished future prospects for taxable income being generated in the existing US operation.
• Gross margins averaged 25.8% for the year compared to 26.9% in fiscal 2013. The decrease in gross margin reflects gross margin losses in the Company's U.S. operation due to reduced U.S. government spending, partially offset by strong program execution during the year in the remainder of the equipment segment of the business, and year- over-year growth in revenues from the Company's exactEarth™ subsidiary.
• Net income attributable to shareholders was $10.1 million or $0.13 per share, after reflecting losses from the Company's U.S. business of approximately $10.3 million for the year. In 2013, net income attributable to shareholders was $18.3 million or $0.24 per share.
Fourth Quarter Highlights• The Company booked $91.1 million in new orders, compared to $87.9 million in the fourth quarter of 2013, and $36.5 million in the third quarter of 2014.
• Revenue was $51.2 million, a 4.8% decline from $53.8 million in the fourth quarter of
2013, reflecting the continuing sales decline in the Company`s government and military businesses.
• Gross margins averaged 22.0%, compared to 26.1% in the third quarter of 2014 and
28.3% in the fourth quarter of 2013. The drop in margin is attributable to $1.0 million negative gross margin on regular project execution in the Company`s U.S. business, along with the aforementioned $3.1 million write down of unbilled contract amounts and related inventory. Excluding the US operations, the Company's gross margins increased year over year for Q4.
• Net income (loss) attributable to shareholders was a net loss of $0.6 million, or $0.02 per share, including $6.6 million of losses from the Company's U.S. operation in Q4, compared to $4.0 million or $0.05 per share in the fourth quarter of 2013.
Events Subsequent to Year-EndOn December 31, 2014, the Company acquired 100% of the outstanding shares of MESL Holdings Ltd. and MESL Microwave Ltd. (collectively "MESL"). MESL is based in Edinburgh, Scotland, and specializes in the global microwave technology market, including the design and manufacture of high-reliability components and subsystems for the radar, communications,
defence and aerospace industries. The primary reason for the acquisition is to provide the
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Company with greater access to the aerospace market with microwave component products that are complementary to the Company's product offering in the space market.
The estimated purchase price for MESL is £12.8 million ($23.0 million CAD) and is subject to final working capital adjustments.
"In fiscal 2014 we had strong results in our Products and Systems divisions which met all of their targets for the year, and our data services subsidiary, exactEarth, performed exceptionally well with a 65% increase in EBITDA." stated Michael Pley, President and CEO. "Our U.S. operations however continued to underperform as the military satellite market remained stagnant. To position COM DEV for future growth we made the difficult decision to substantially cease operations at our El Segundo facility effective March 16, 2015 and consolidate our passive microwave component production in Cambridge. Due to changes in component classifications related to the International Trade in Arms Regulations we expect to be able to satisfy military satellite contracts from our Cambridge facility when the market recovers."
"We will continue to be disciplined in fiscal 2015 and are well-positioned to grow," Mr. Pley added. "In addition to the large order backlog of $155 million, and the $17 million data contract awarded to exactEarth from the Canadian government during 2014, we expect strong results from the acquisition of MESL. This new business is an excellent fit with our International Systems division and will help us maintain our leadership position in the UK space industry."
Financial ReviewCOM DEV received new orders totalling $199.5 million during the year, of which 65% were commercial, 19% were civil, and 16% were military. In fiscal 2013 the Company booked $243.3 million of new orders, with a commercial/civil/military split of 68%, 26%, and 65.
COM DEV's fiscal 2014 revenues of $208.2 million decreased by $7.3 million or 3.4% compared to $215.5 million the previous year. The revenue split between the three market segments was
66% commercial, 24% civil and 10% military, compared to a 50%, 31%, and 19% split in 2013
Order backlog at October 31, 2014 was $155.1 million, compared to $115.5 million three months earlier, and $164.7 million at the end of fiscal 2013. An additional $33.8 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
57%, 26% and 17% respectively, compared to a 58%, 33%, and 9% split at October 31, 2013. The Company expects to convert approximately 84% of the total backlog into revenue during
fiscal 2015
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Consolidated gross margin was $53.8 million in fiscal 2014, representing 25.8% of total revenues, compared to $58.0 million or 26.9% of revenues in 2013.
COM DEV recorded a net expense for research and development of $3.2 million in 2014, compared to a net recovery of $3.9 million in 2013. Gross R&D spending declined to $9.2 million from $9.9 million while R&D funding from external sources decreased to $0.9 million from
$2.1 million. The Company also recognized $5.1 million of Investment Tax Credits (ITCs) in
2014, compared to $11.7 million in 2013.
Selling expenses were $12.0 million in 2014, about even with $11.9 million in 2013. Selling expenses fluctuate from quarter to quarter depending on the bids and proposal work that is underway. General expenses were in line with the prior year, with increases in corporate development costs in support of the Company's strategy, being largely offset by reductions in spending elsewhere.
Net income attributable to shareholders was $10.1 million in 2014, a decrease of $8.2 million from $18.3 million in 2013. The decrease in net income is attributable to $10.3 million in losses from the Company's U.S. operations, reductions in R&D funding, and foreign exchange fluctuations, partly offset by an impairment reversal recognized during 2014 on certain of the Company's property, plant and equipment (PP&E) and intangible assets compared to an impairment loss during 2013.
COM DEV ended the year with $33.6 million of cash and equivalents, compared to $34.9 million at October 31, 2013. Operating activities generated $24.3 million of cash for the year, compared to $31.8 million in fiscal 2013. The Company generated $0.5 million from changes in working capital in 2014 which compares to the $3.5 million generated from changes in working capital in
2013. The change in non-cash working capital in 2014 was mainly due to changes associated with decreases in accounts receivable and income taxes recoverable and increases in accounts payable and accrued liabilities, partially offset by increases in inventory and prepaid expenses and decreases in provisions and billings in excess of costs and earnings on contracts in progress.
The Company's operating credit line of $20 million was not drawn upon at the end of 2014, except for $2.8 million (2013: $2.8 million) in the form of guarantee letters issued to customers and government agencies.
The Company had 76,486,927 outstanding common shares on January 15, 2015.
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Conference CallA conference call will be held Thursday, January 15, 2015 at 5:30 pm EST to discuss this announcement. To access the call, dial 647-427-7450 or 1-888-231-8191. 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 DEVCOM DEV International Ltd. (www.comdevintl.com) is a leading global provider of space hardware and services. The company has a staff of 1,100, annual revenues of $208 million, and facilities in Canada, the United Kingdom the United States, India, and China. COM DEV designs, manufactures and integrates advanced products, 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 defence applications. The company has won contracts to supply its equipment on over 900 spacecraft. COM DEV's majority-owned
subsidiary, exactEarth Ltd., provides satellite data services for global maritime surveillance.
Contact information:Gary Calhoun
Chief Financial Officer
Tel: (519) 622-2300 ext. 2826 gary.calhoun@comdev.ca
Craig MacPhail
TMX Equicom
Tel: (416) 815-0700 ext. 290 cmacphail@tmxequicom.com
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.
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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 Financial Position (Canadian dollars in thousands)
As at October 31,
2014
As at October 31,
2013
As at November 1,
2012
Assets
Current assets
(note 20) (note 20)
Cash and cash equivalents
$ 33,570 $
34,897 $
25,794
Accounts receivable 35,613 37,460 41,722
Inventory 61,934 59,383 64,763
Prepaid expenses and other 3,701 2,716 3,214
Income taxes recoverable 1,002 2,245 2,266
Investment tax credits-current 3,195 2,961 2,162
Total current assets 139,015 139,662 139,921
Non-current assets
Property, plant and equipment 97,499 92,340 86,000
Intangible assets 22,110 16,416 14,600
Goodwill - - 2,205
Investment tax credits 12,571 9,933 2,124
Deferred income tax assets 4,032 9,552 14,728
Total non-current assets 136,212 128,241 119,657
Total assets
$ 275,227 $
267,903 $
259,578
Liabilities
Current liabilities
Accounts payable and accrued liabilities
$ 31,492 $
26,334 $
30,622
Income taxes payable 296 4 851
Provisions 417 1,215 430
Billings in excess of costs and earnings on contracts in progress 12,790 17,047 22,448
Current portion of loans payable 7,677 5,787 3,978
Total current liabilities 52,672 50,387 58,329
Non-current liabilites
Total non-current liabilities 18,139 18,726 22,397
Total liabilities
$ 70,811 $ 69,113 $ 80,726
Equity
Share capital
$ 177,100 $
346,572 $
345,876
Treasury stock (912) (1,051) (432) Contributed surplus 178,439 8,326 9,298
Accumulated other comprehensive income (loss) 2,357 1,982 (1,700) Deficit (157,792) (163,259) (181,509) Equity attributable to shareholders 199,192 192,570 171,533
Non-controlling interest 5,224 6,220 7,319
Total equity 204,416 198,790 178,852
Total liabilities and equity
$ 275,227 $
267,903 $
259,578
COM DEV International Ltd. Consolidated Statements of Changes in Equity (Canadian dollars in thousands)
For the year ended October 31, 2014
Balance October 31, 2013 Net income Other comprehensive income Common shares issued Common shares repurchased and cancelled Expense recognized for ESOP awards Treasury stock Reduction in stated capital Dividends paid Settlement of long-term incentive plans, net of tax Expense recognized for long-term incentive plans Expense recognized for stock-based compensation Balance, October 31, 2014 | $ (163,259) $ 1,982 $ 346,572 $ (1,051) $ 8,326 10,050 - 375 - - - - - 1,261 - (574) - - (733) - (354) - - - - 209 - - - (884) - - - (170,000) - 170,000 (4,583) - - - - - - - 1,023 (1,228) - - - - 1,679 - - - - 381 | $ 192,570 $ 6,220 10,050 (982) 375 (14) 687 - (1,087) - 209 - (884) - - - (4,583) - (205) - 1,679 - 381 - | $ 198,790 9,068 361 687 (1,087) 209 (884) - (4,583) (205) 1,679 381 |
Balance October 31, 2013 Net income Other comprehensive income Common shares issued Common shares repurchased and cancelled Expense recognized for ESOP awards Treasury stock Reduction in stated capital Dividends paid Settlement of long-term incentive plans, net of tax Expense recognized for long-term incentive plans Expense recognized for stock-based compensation Balance, October 31, 2014 | $ (157,792) $ 2,357 $ 177,100 $ (912) $ 178,439 | $ 199,192 $ 5,224 | $ 204,416 |
For the year ended October 31, 2013
Balance October 31, 2013 Net income Other comprehensive income Common shares issued Expense recognized for ESOP awards Treasury stock Settlement of long-term incentive plans, net of tax Expense recognized and deferred tax for long-term incentive plans Expense recognized for stock-based compensation Balance, October 31, 2013 | $ (181,509) $ (1,700) $ 345,876 $ (432) $ 9,298 18,250 - 3,682 - - - - - 696 - (474) - - - - 203 - - - (1,870) - - - - 1,251 (2,118) - - - - 1,030 - - - - 387 | $ 171,533 $ 7,319 18,250 (1,096) 3,682 (3) 222 - 203 - (1,870) - (867) - 1,030 - 387 - | $ 178,852 17,154 3,679 222 203 (1,870) (867) 1,030 387 |
Balance October 31, 2013 Net income Other comprehensive income Common shares issued Expense recognized for ESOP awards Treasury stock Settlement of long-term incentive plans, net of tax Expense recognized and deferred tax for long-term incentive plans Expense recognized for stock-based compensation Balance, October 31, 2013 | $ (163,259) $ 1,982 $ 346,572 $ (1,051) $ 8,326 | $ 192,570 $ 6,220 | $ 198,790 |
COM DEV International Ltd. Consolidated Statements of Comprehensive Income (Canadian dollars in thousands, except for per share figures)
For the years ended October 31 2014 2013 (note 20)
Net income
$ 9,068 $ 17,154
Other comprehensive income (loss):
Items that may be subsequently reclassified to net income:
Foreign currency translation, net of income tax expense 2,423 1,580
Items that will not be subsequently reclassified to net income:
Actuarial (losses) gains on defined benefit pension plans and other post-retirement plans,
net of income tax expense (notes 16 and 20) | (2,062) 2,099 |
Other comprehensive income; net of income taxes | 361 3,679 |
Comprehensive income | $ 9,429 $ 20,833 |
Attributable to: Shareholders | $ 10,425 $ 21,932 |
Non-controlling interest | (996) (1,099) |
$ 9,429 $ 20,833 |
COM DEV International Ltd. Consolidated Statements of Cash Flows (Canadian dollars in thousands)
For the years ended October 31 2014 2013
Operating activities
Net income
$ 9,068 $
17,154
Depreciation and amortization 11,313 10,659
Impairment (reversal) loss (2,687) 3,486 (Gain) loss on disposal of assets (124) 588
Defined benefit plan expenses 800 857
Defined benefit plan contributions (778) (704) Stock-based compensation expense 2,060 1,417
Employee stock ownership plan awards 209 203
Non-cash loan adjustments 1,349 758
Investment tax credits recoverable (5,109) (11,722) Deferred income tax expense 6,216 5,176
Fair value loss on foreign exchange derivatives 1,931 868
Withholding tax remittance on stock units settlement (684) (867) Discounting of investment tax credits 199 398
23,763 28,271
Net change in non-cash working capital balances 523 3,522
Operating activities 24,286 31,793
Financing activities
Shares issued 687 222
Shares repurchased and cancelled (1,087) - Purchase of treasury stock (884) (1,870) Proceeds from advances of long-term debt 1,113 2,959
Repayments of long-term debt (3,813) (3,238) Dividends paid (4,583) - Financing activities (8,567) (1,927)
Investing activities
Acquisition of property, plant and equipment (10,511) (14,100) Proceeds on disposal of property, plant and equipment 192 143
Acquisition of intangible assets (7,319) (5,797) Investing activities (17,638) (19,754)
Effect of exchange rate changes on cash and cash equivalents 592 (1,009) Net (decrease) increase in cash and cash equivalents (1,327) 9,103
Cash and cash equivalents, beginning of the year 34,897 25,794
Cash and cash equivalents, end of the year
$ 33,570 $
34,897
Supplemental cash flow information
Interest received Interest paid Income taxes paid
$ 547 $
$ 582 $
$ 1,551 $
98
527
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