COM DEV ANNOUNCES 1998 THIRD QUARTER RESULTS INCLUDING RESTRUCTURING CHARGES
CAMBRIDGE, Ont., Sept. 2 /CNW/ - COM DEV International Ltd. (TSE/ME:CDV)
today announced results for the third quarter ended July 31, 1998. While
revenues grew marginally from $127.8 million in the nine months ended July 31,
1997 to $135.6 million in the nine months ended July 31, 1998, third quarter
revenues were below expectations. Third quarter results were affected by
declining sales in the Wireless Group, and a restructuring charge of $14.0
million was taken as the company transitions through the effects of adverse
conditions encountered in the second quarter. Aggressive actions have been
taken by the company to produce positive results that will strengthen COM
DEV's market position over the long term.
For the third quarter 1998, company revenue was $35.9 million compared to
$51.6 million in the third quarter last year. Revenue for the Space Group was
$76.0 million for the nine months and $23.0 million for the third quarter
compared to $75.9 million and $24.5 million last year respectively. The
Wireless Group revenue for the nine months was $59.6 million and for the third
quarter was $12.9 million compared to $51.9 million and $27.1 million for the
respective prior periods.
Income for the nine months ended July 31, 1998, before other expenses,
including provision for restructuring and asset write downs, was $0.1 million
and the loss for the quarter ended July 31, 1998, before these items, was $5.5
million. During the quarter, management assessed the company's position in its
key markets, and the changes required to serve these markets more effectively.
As a result, the company has made provision for these changes in the third
quarter financial statements. After these non-recurring provisions, the
company's net loss for the nine months ended July 31, 1998 was $14.8 million,
and for the quarter was $19.8 million compared to the net income of $11.9
million and $4.7 million in the respective prior periods.
The restructuring provision made in the third quarter in the amount of
$14.0 million includes a provision to write down inventory and product
development costs in the Wireless Group in the amounts of $4.7 million and
$2.2 million respectively. In addition, a provision for other restructuring
costs was made in the amount of $7.1 million ($8.0 million for the nine month
period.)
Space Group
New orders for the Space Group in the third quarter improved over the
second quarter, including 12 new orders with a total value of $25.8 million.
The bulk of these orders was for geostationary satellite equipment, which
continues to provide a solid base for the Group's core products.
The multimedia market continues to evolve slowly, with some programs
moving steadily towards the financing and implementation phases and the
development of others appearing slow. It is anticipated that the technology
and products developed by the company will position COM DEV to be a key
participant in this new market.
Actions taken to improve productivity are generating positive results and
it is anticipated that margins will recover to prior levels in future periods.
Revenue for the Space Group for the third quarter was $23.0 million
compared to $24.5 million for the same quarter last year. Space Group revenue
for the nine months ended July 31, 1998 was $76.0 million compared to $75.9
million for the same period in the previous year. Backlog as at the end of the
quarter remains strong at a level of approximately $70 million.
Wireless Group
Significant changes have been made within the Wireless Group as
management continues to focus on key actions to restore the Group's
performance. Reductions in staffing levels were made in the third quarter to
reduce overcapacity costs, while at the same time productivity improvements
were implemented to prepare for future growth.
John Keating, formerly head of COM DEV's New Business Initiatives Group,
has been appointed president of the Wireless Group. He will continue to pursue
the aggressive recovery course that has been established for the Group through
ongoing staffing, organizational and operational changes. Other key steps
taken include specific action to strengthen the business development
organization, and several product development initiatives that will provide a
broader range of solutions to a wider customer base. The Group is also
continuing initiatives aimed at maximizing participation in the next
generation of infrastructure products due to begin roll-out in the latter part
of 1999.
Revenue for the Wireless Group in the third quarter was $12.9 million
compared to $27.1 million in the same quarter of the previous year. Revenue
for the Group for the nine months to July 31, 1998 was $59.6 million compared
to $51.9 million in the first nine months of the previous year. In the quarter
the Group made a provision to write down inventory in the amount of $4.7
million. Systems and processes have been implemented to prevent a recurrence
of this situation.
At the strategic level, COM DEV completed in August the acquisition of
3dbm Inc. for $27.5 million. Based in Camarillo, California, 3dbm designs and
develops high performance base stations and coverage enhancement products. The
acquisition supports COM DEV's growth strategy by providing access to new
capabilities in systems engineering, software expertise, and supporting
technologies. In addition, 3dbm will provide COM DEV with access to an
important new customer base, and to the pool of engineering talent in
California. 3dbm will also become a key customer of the Wireless Group. It is
anticipated that these benefits will assist in the expansion and enhancement
of COM DEV's existing product lines for the telecommunications market. The
group within COM DEV that has been working on these products will be merged
with 3dbm to become COM DEV Wireless Systems, to be headed by Paul Graham, the
president of 3dbm.
COM DEV International Ltd., a member of the TSE 300 (TSE/ME:CDV), is a
leading manufacturer of space and ground-based wireless communications
products and subsystems, and consists of two operating units: the Space Group
and the Wireless Group. The Space Group manufactures advanced products that
are sold to the major satellite prime contractors for use in commercial
communications satellites. The Wireless Group manufactures ground-based
infrastructure subsystems used in microwave and radio frequency systems, such
as GSM and CDMA-based digital telephone systems, and wireless local loop
networks. These products are sold primarily to major PCS wireless equipment
vendors. COM DEV is a Canadian-based technology company and employs more than
1,200 people in facilities in Ontario, New Brunswick, the United Kingdom and
China.
This news release may contain certain forward-looking statements that
involve risks and uncertainties. Actual results may differ materially from
results indicated in any forward-looking statements. The company cautions
that, among other things, in view of the rapid changes in the wireless
communications markets and technologies, and other risks including the cost
and market acceptance of the company's new products, the level of individual
customer procurements and competitive product offerings and pricing, and
general economic circumstances, the company's business prospects may be
materially different from forward-looking statements made by the company.
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Consolidated Statement of Income
(Unaudited)
(Canadian dollars in thousands, except for per share figures)
For the nine months ended July 31 1998 1997
-------------------------------------------------------------------------
Revenue $135,615 $127,839
Cost of revenue 104,021 89,689
---------- ----------
Gross margin 31,594 38,150
Selling and general 31,501 25,096
---------- ----------
Operating income 93 13,054
Other items (14,866) (965)
Financial (9) (155)
---------- ----------
Net income (loss) $(14,782) $11,934
---------- ----------
---------- ----------
Basic earnings (loss) per share $(0.46) $0.40
Fully diluted earnings (loss) per share $(0.46) $0.39
Weighted average number of shares 32,122,949 29,746,415
Fully diluted average number of shares 33,350,949 30,844,415
For the three months ended July 31 1998 1997
-------------------------------------------------------------------------
Revenue $35,919 $51,612
Cost of revenue 28,801 36,270
---------- ----------
Gross margin 7,118 15,342
Selling and general 12,654 10,352
---------- ----------
Operating income (5,536) 4,990
Other items (13,959) (322)
Financial (353) 47
---------- ----------
Net income (loss) $(19,848) $4,715
---------- ----------
---------- ----------
Basic earnings (loss) per share $(0.62) $0.16
Fully diluted earnings (loss) per share $(0.62) $0.15
Weighted average number of shares 32,142,077 30,189,391
Fully diluted average number of shares 33,370,077 31,287,391
Consolidated Balance Sheet
(Unaudited)
(Canadian dollars in thousands)
As at July 31 1998 1997
-------------------------------------------------------------------------
Current assets
Cash $45,062 $26,402
Accounts receivable 35,074 40,425
Inventory 45,132 32,590
Prepaids and other 4,392 6,372
Income taxes recoverable 6,894 6,753
---------- ----------
136,554 112,542
Capital assets 68,691 45,320
Goodwill 7,765 7,980
Product development 8,043 --
---------- ----------
Total assets $221,053 $165,842
---------- ----------
---------- ----------
Current liabilities
Bank indebtedness $21,663 $13,780
Accounts payable and accrued liabilities 28,957 34,076
Deferred revenue 4,706 10,796
Current portion of loans payable 4,073 3,516
---------- ----------
59,399 62,168
Long term liabilities
Loans payable 9,296 8,787
---------- ----------
Total liabilities 68,695 70,955
---------- ----------
Shareholders' equity
Share capital 163,762 93,760
Retained earnings (deficit) (11,530) 1,105
Currency translation adjustment 126 22
---------- ----------
Total shareholders' equity 152,358 94,887
---------- ----------
Total liabilities and shareholders' equity $221,053 $165,842
---------- ----------
---------- ----------
Consolidated Statement of Changes in Financial Position
(Unaudited)
(Canadian dollars in thousands)
For the nine months ended July 31 1998 1997
-------------------------------------------------------------------------
Cash provided by (used in) operations
Net income for the period $(14,782) $11,934
Items not requiring an outlay of cash
Amortization 6,629 4,414
Other 7,012 11
---------- ----------
(1,141) 16,359
Net changes in non-cash working capital
items related to operations (10,633) (18,204)
---------- ----------
Total cash used in operations (11,774) (1,845)
---------- ----------
Cash provided by (used in) financing activities
Increase (decrease) in loans and notes payable (142) (9,775)
Redemption of common shares (446) --
Common shares issued for cash -- 76,290
Share issue costs -- (5,611)
Net effect of reorganization -- (14,500)
Interest on convertible debenture -- (159)
---------- ----------
Total cash provided by (used in) financing
activities (588) 46,245
---------- ----------
Cash used in investing activities
Acquisition of capital assets (15,469) (15,656)
Product development (10,243) --
---------- ----------
Total cash used in investing activities (25,712) (15,656)
---------- ----------
Net increase (decrease) in cash for the period (38,074) 28,744
Cash, net of bank indebtedness (bank
indebtedness, net of cash), beginning of period 61,473 (16,122)
---------- ----------
Cash, net of bank indebtedness, end of period $23,399 $12,622
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