COM DEV Announces Second Quarter Fiscal 2011 Results

CAMBRIDGE, ON, June 9, 2011 /CNW/ - COM DEV International Ltd. (TSX:CDV) today announced second quarter financial results for the three month period ended April 30, 2011.  All amounts are stated in Canadian dollars unless otherwise noted.

Second Quarter Highlights

• Revenue was $54.2 million, a 10% decrease from revenue of $60.4 million in the second quarter of fiscal 2010.
• Gross margin in the core space equipment business was 23%, compared to 20% in Q2 2010.
• Net income attributable to shareholders was $3.0 million, or $0.04 per share, compared to $4.1 million or $0.05 per share in the second quarter of the previous year.
• New orders won in the second quarter totaled $28 million, compared to $33 million a year earlier and $59 million in the first quarter of fiscal 2011.
• Backlog at April 30, 2011 was $128 million, compared to $157 million three months earlier, but unchanged from the second quarter of the previous year.
• Majority-owned subsidiary exactEarth won a multi-million dollar order from the Canadian government, launched an AIS satellite payload, and procured two additional AIS satellites to add to its constellation.

"Second quarter results met our expectations as we focused on our priorities of completing certain challenging programs, controlling costs, and returning to our normal gross margin range," said Michael Pley, CEO of COM DEV.  "We grew margins in our core business, even in the face of currency headwinds and the ongoing impact of the difficult programs.  With three of those five programs now completed and the others scheduled to be shipped within the next few months, we expect to see continuing improvements to revenue and margins in the second half of the year."

Mr. Pley continued:  "We have been especially pleased with recent progress at exactEarth.  Our team has made great strides towards building out its satellite constellation, which will result in a significant strengthening of its service levels.  This, in turn, has contributed to solid customer interest, as evidenced by the recent booking of over $2 million of orders from government agencies in a number of countries."

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 second quarter are as follows.

Three months ended April 30, 2011 (unaudited, in thousands of dollars)

* Consolidated figures may not equal the sum of the two segments due to intra-segment adjustments.  Please see Note 9 to the Interim Consolidated Financial Statements for additional details.

Financial Review

COM DEV's fiscal 2011 second quarter revenues of $54.2 million decreased by $6.3 million compared to $60.4 million in the second quarter of 2010.  While revenues increased on a sequential basis by more than $5.5 million over Q1 2011 levels, further growth was suppressed by the effects of an unfavourable shift in currency exchange rates, and by cost growth and resulting revenue delays on certain customer programs.  The revenue split between the three market segments was 62% commercial, 22% civil and 16% military, compared to a 63/25/12 split in the second quarter of 2010.  Management continues to expect full-year revenues for fiscal 2011 to be relatively flat compared to fiscal 2010, on the basis of the existing order backlog and internal projections.

COM DEV received new orders totaling $28 million in the first quarter, of which 66% were commercial, 31% were civil, and 3% were military. In last year's second quarter the Company booked $33 million of orders, with a commercial/civil/military split of 76/13/11.

Order backlog at April 30, 2011 was $128 million, compared to $157 million three months earlier, and unchanged from $128 million one year earlier.  An additional $14 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 52%, 20% and 28% respectively, compared to 46%, 32% and 22% at April 30, 2010.  The Company expects to convert approximately 72% of the total backlog into revenue during the remainder of fiscal 2011.

Consolidated gross margin was $11.7 million in the second quarter, representing 22% of total revenues, compared to $13.1 million or 22% of revenues in Q2 2010.  Margins were unchanged despite cost increases on a small number of programs, which negatively affected Q2 2011 gross margins by approximately $1.6 million, and the impact of less favourable currency exchange rates.  Overall margins in Q2 2010 benefited from over $1.5 million of one-time revenues in the Data Services segment.  Gross margin in the core Space Equipment segment represented 23% of segment revenues in Q2 2011, compared to 20% in Q2 2010.

COM DEV recorded a net research and development recovery of $0.6 million in the second quarter of 2011, compared to a net expense of $2.3 million a year earlier.  Gross R&D spending increased slightly to $3.1 million from $3.0 million, but R&D funding from external sources increased to $1.9 million from $0.7 million.  The Company also recognized a $1.8 million Investment Tax Credit in order to offset the income tax expense incurred in the quarter.

Selling expenses were $2.9 million in Q2 2011, compared to $3.1 million in Q2 2010.  Selling expenses fluctuate from quarter to quarter depending on the bids and proposal work that is underway.  General expenses were $4.3 million, down from $4.9 million a year earlier, as the Company continued to focus on controlling costs throughout the organization.

Net income attributable to shareholders was $3.0 million in the second quarter of 2011, compared to $4.1 million in Q2 2010.  The decrease was due in part to a $0.1 million foreign exchange loss in Q2 2011, which compared to a $1.5 million gain a year earlier.  Net income in the Space Equipment segment was $4.8 million, compared to $5.1 million in Q2 2010, while the $0.8 million net loss in the Data Services segment compares to a $0.1 million net income a year earlier.

COM DEV ended the second quarter with $39.8 million of cash and equivalents, compared to $16.7 million at January 31, 2011.  Operating activities generated $9.4 million of cash in the quarter, compared to $2.1 million in Q2 2010.  During the quarter the Company increased its term debt by $15 million through an existing facility with GE Capital.  At April 30, 2011, COM DEV had outstanding long-term debt of $27.4 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 76,467,535 on June 9, 2011.

Conference Call

A conference call will be held Thursday, June 9, 2011 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™ 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.

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