IDS Intelligent Detection Systems Reports Revenue Increase of 136 Percent Over 1998 Q2 Results
TORONTO--(BUSINESS WIRE)--Aug. 9, 1999--IDS Intelligent Detection Systems (TSE: ISD - news) reported strong results for the second quarter and six months of June 30, 1999.
Total revenue for the three months ended June 30, 1999 increased to $11.3 million from $ 4.8 million for the same period in 1998 - an increase of 136%. On a year-to-date basis, revenues were $25.8 million, an almost five-fold increase over the first six months of 1998. Revenue for the last twelve months reached more than $42 million. Net income for the second quarter of fiscal 1999 increased to $2.2 million compared to a loss of $ 0.2 million for the same period last year. On a fully diluted basis earnings increased to $0.09 per share compared to a loss of $0.02 for the second quarter of 1998.
``I am pleased with our strong growth in the quarter and the building momentum in our business,' said Dr. Mariusz Rybak, chairman and chief executive officer, IDS. `` We are on track to significantly exceed our forecasts for the year. There is a wide and growing acceptance of our advanced sensory technology from a diverse array of markets around the world.'
Highlights for the quarter include:
- Rapidly growing demand from existing and new customers for our
explosives and drug detection products and solutions
- Lower cost structure and higher margins, achieved through
elimination of more than $2 million of annual overhead throughout
the company
- IDS Europe emerged in the first half of 1999 as a significant
contributor to revenue
Revenue increased as a result of a growing sales in worldwide markets for IDS's analytical and security products and solutions, a broader product offering of power control systems as well as several new consulting contracts awarded to the company. Revenue in the first quarter was 22% higher than in Q2, due primarily to the recognition of $7.4 million of revenue related to the Large Vehicle Bomb Detection System (LVBDS) installation.
``It should be noted that no revenue was recognized from our LVBDS order in the second quarter,' said Sanje Ratnavale, chief financial officer, IDS. ``The balance of this order's revenue (approx. $0.8 million) is expected to be recognized in the third and fourth quarter of 1999,' he added.
``We expect to continue to accelerate our growth through the remainder of 1999 and into the next decade as we build upon a growing profile in new and existing markets,' concluded Rybak.
IDS is a dynamic developer, manufacturer and marketer of sophisticated detection devices and systems. The company operates through seven business units: Analytical & Security Products and Solutions, IDS Power Control Systems, Scintrex Earth Science Instrumentation, Survey & Exploration Technology Services, IEC (Integration, Engineering and Consulting), ChemiCorp International and Caduceon Inc. Its more than 70 products range from drug and explosive detectors to nuclear safety control instruments, airborne and ground geophysical survey services, geophysical instrumentation for mineral, oil and gas exploration and developing technologies for industrial process control and point-of-care health analysis. IDS operates worldwide in Canada, the US, France, UK, Australia and Brazil, and is publicly traded on The Toronto Stock Exchange (symbol: ISD).
A full report of Q2 results is attached. A replay of IDS's Second Quarter 1999 Analyst Call is available on August 10, 1999 after 10:30 a.m. by calling 1-800-777-1228 (Access no. 308687)
More information is available at IDS's website located at: www.idsdetection.com
IDS Announces Strong Second Quarter Results
IDS Intelligent Detection Systems (TSE: ISD - news) reported strong results for the second quarter and six months of June 30, 1999.
Total revenue for the three months ended June 30, 1999 increased to $11.3 million from $ 4.8 million for the same period in 1998 - an increase of 136%. On a year-to-date basis revenues were $25.8 million, an almost five-fold increase over the first six months of 1998. Revenue for the last twelve months reached more than $42 million. Net income for the second quarter of fiscal 1999 increased to $2.2 million compared to a loss of $ 0.2 million for the same period last year. On a fully diluted basis earnings increased to $0.09 per share compared to a loss of $0.02 for the second quarter of 1998.
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FINANCIAL HIGHLIGHTS
in thousands of dollars except
per share amounts Three months Six months
ended June 30 ended June 30
--------------- ---------------
1999 1998 1999 1998
---------------------------------------------------------------
Revenue $11,320 $4,794 $25,769 $5,470
EBITDA 2,975 (323) 6,824 (1,358)
Net earnings (loss) $2,178 $(242) $5,413 $(1,228)
Earnings per share (loss)
Basic $0.10 $(0.02) $0.24 $(0.09)
Fully diluted $0.09 $(0.02) $0.24 $(0.09)
Cash flow per share $0.13 $0.00 $0.31 $(0.03)
---------------------------------------------------------------
"I am pleased with our strong growth in the quarter and the
building momentum in our business," said Dr. Mariusz Rybak chairman
and chief executive officer, IDS. " We are on track to significantly
exceed our internal revenue, EBITDA, and net earnings forecasts for
the year. There is a wide and growing acceptance of our advanced
sensory technology from a diverse array of markets around the world.
Highlights for the quarter include:
- Rapidly growing demand from existing and new customers for our
explosives and drug detection products and solutions. Orders
representing 97 units were received from over 10 organizations in
18 countries during the second quarter.
- Lower cost structure and higher margins. In April 1999, we
eliminated more $2 million of annual overhead throughout the
company. We reviewed, reorganized and restructured each of our
businesses to improve efficiency and refocus management. Selling,
general and administrative expense as a percentage of revenue has
dropped to 22% in the first half of 1999 compared to 46% for same
period last year.
- Almost 50% of our research and development expenditures in 1999
have been funded by external organizations. This validates the
quality of our specialized capabilities and broadens our research
programs.
- IDS Europe emerged in the first half of 1999 as a significant
contributor to revenue with key sales to Italy, France and
Germany. IDS's European team, through our office near Paris,
France, is successfully penetrating markets in explosives and
drug detection, control systems for energy generation as well as
geophysical instrumentation.
We expect to continue to accelerate our growth through the remainder of 1999 and into the next decade as we build upon a growing profile in new and existing markets.``
Financial Review
Revenue
Revenue increased as a result of a growing sales in worldwide markets for our analytical and security products and solutions, a broader product offering of power control systems as well as several new consulting contracts awarded to IEC. Revenue in the first quarter was 22% higher than in Q2, due primarily to the recognition of $7.4 million of revenue related to the Large Vehicle Bomb Detection System (LVBDS) installation. ``It should be noted that no revenue was recognized from our LVBDS order in the second quarter,' said Sanje Ratnavale, chief financial officer, IDS. ``The balance of this order's revenue (approx. $0.8 million) is expected to be recognized in the third and fourth quarter of 1999,' he added.
Despite near record low exploration levels in petroleum and mineral markets, IDS's geophysical businesses, Scintrex Earth Science Instrumentation and Survey and Exploration Technology Services, continued to log significant new orders and contracts while strengthening and consolidating its leadership share in these markets.
EBITDA
Earnings before income taxes, depreciation and amortization (EBITDA) were $3.0 million for Q2 1999 compared to a loss of $ 0.3 million for the same period last year. On a year-to-date basis to June 30, 1999 EBITDA was $6.8 million compared to a loss of $1.4 million for the first six months of 1998.
Net income
On a year-to-date basis, net income increased to $5.4 million for the first six months ended June 30, 1999 compared to a loss of $1.2 million in the same period of 1998. On a per share basis fully diluted earnings for the six months of 1999 were $0.24 compared to a loss of $0.09 for the same period last year.
Cash flow
Cash flow was strong and increased steadily to $3.3 million in the second quarter of 1999 as compared to $1.0 million for the same period last year. On a per share basis cash flow was $0.13 for the second quarter. Cash flow for the comparable period in 1998 was negligible. Cash flow per share for the first six months of 1999 was $0.31 compared to a loss of $0.03 per share for the same period last year. Capital expenditure for the year has been $1.5 million represented principally by expenditures on renovating the Concord manufacturing facility of Scintrex Ltd., and on equipping our new medical company, Caduceon.
Accounts receivable totaled more than $15 million at June 30, 1999.
Backlog
IDS's order backlog remained strong at the end of the second quarter was $16 million. We expect our order backlog to grow during the second half of the year in anticipation of our traditionally strongest quarter, the fourth quarter.
Review of Operations
Analytical and Security Products and Solutions
Sales revenue for the Analytical and Security Products division for the six months ended June 30th, was $11.9 million. This division is achieving strong growth in orders from organizations from around the world-including new sales in the first six months of 1999 to organizations in the U.S., China, India, Sri Lanka, Saudi Arabia and the United Arab Emirates.
``High profile customers such as the US military and the Los Alamos National Laboratory are raising the awareness of IDS's significant technology advantage in markets around the world,' said Andy Rybak, executive vice-president of IDS responsible for the analytical and security division. ``We are now reaping the rewards of over 10 years of research and development and relationship-building with organizations such as the Federal Aviation Administration. These relationships coupled with our focus on superior analytical and security technology are helping to make IDS a leader in explosives and drug detection markets,' he added.
The division hosted a 3-day international partner's conference in April that focused on informing and motivating this important sales network. Strong orders in the quarter received validated the success of this conference. A similar conference and information exchange is planned for the division's North American sales channels later in the year.
Power Control Systems
Sales revenue for the Power Control Systems division for the six months ended June 30th, was $6.8 million. Power Control Systems enjoyed another strong quarter of growth as it ramps up the production of equipment for the nuclear projects in China, currently on backlog. The division benefited from increasing demand for its safety upgrade technology for nuclear reactors. This includes state-of-the-art in-core flux detectors that provide early and reliable indications of reactor anomalies. Recent orders for these systems, totaling more than $1 million have been received from Ontario Hydro, Korea and Romania.
The division is continuing to diversify its business from nuclear reactor control systems to broader energy control applications. They recently received an order from a US customer for ultra-high temperature connectors that are being used in reactor containment facilities. ``This technology has a wide variety of applications in facilities that manage intense levels of heat or energy including steel mills and smelting operations,' said Jay Sarkar vice-president and general manager, Power Control Systems. ``This order represents an important breakthrough in the enormous and influential U.S. market.'
Power Control Systems is currently advising the Government of India as it prepares to build a major water purification facility in Calcutta. This facility is intended to provide fresh drinking water to millions of homes and businesses in one of the most densely populated regions in the world. ``We expect to supply this project with a number of key control and safety systems, opening additional markets for our powerful technology,' added Mr. Sarkar.
The division is also working closely with CAE in Montreal in its development of simulation tools for the energy generation industry. Intended for training and skills upgrading, these simulators will test operator abilities and procedures during emergency situations. ``We are very pleased to be working with CAE in this important new tool in energy safety,' said Mr. Sarkar.
Scintrex Earth Science Instrumentation
Sales revenue for the Earth Sciences Instrumentation division for the six months ended June 30th, was $3.1 million. Scintrex Earth Science Instrumentation continued to build share through adverse market conditions in the second quarter of 1999. The Division's CG-3 AutoGrav Gravimeter, the ENVI Geophysical Systems, the IPR-12 Induced Polarization receiver, the SMARTMAG and CS-2 high-resolution magnetometers remain top sellers and the leading products in their category. The newly introduced SARIS, a fully automated resistivity meter, used for water exploration, environmental applications and mineral exploration, was introduced to the market at recent high-profile industry trade conferences. ``Our market received SARIS with great interest and we have high expectations for its success in the years to come,' said Phil Hembruff, vice-president & general manager, Scintrex Earth Science Instrumentation.
Although the market for geophysical instrumentation is clearly at a low at the present time, the division continues to perform extremely well relative to its competitors. ``The requirement for geophysical instrumentation is directly related to the level of mineral and oil & gas exploration,' said Mr. Hembruff. ``Despite record low commodity prices we have managed to maintain revenue and earnings levels based on our diversity of products, the development of new markets and operational efficiencies. We anticipate that a recovery in commodity prices will in turn trigger an increase in commodity exploration expenditures. Renewed exploration activity combined with our aggressive new product development program gives us optimism for the outlook of Scintrex Earth Science Instrumentation for the remainder of the year.'
Survey and Exploration Technology Services
Sales revenue for the Survey and Exploration technology division for the six months ended June 30th, was $3.2 million. Geophysical exploration markets continued to endure a prolonged downturn through the second quarter of 1999. Both petroleum and mineral exploration industries are at or are approaching decades-old record lows. Despite these adverse market conditions the Survey and Exploration Technology division is pursuing and successfully capturing important new contracts.
The division recently completed a 20,000 square kilometer airborne survey over the northern part of Chile. This survey was conducted in association with 3 mineral exploration organizations. ``A significant aspect of this project is that we will retain ownership of the data gathered in the survey,' said Terry McConnell, vice-president and general manager, Survey and Exploration Technology Services. ``Our exploration partners pay for access to the data and we retain the right to sell it to other organizations in the future. This strategy is enabling us to assemble a comprehensive database of the key mining regions in the world. We intend to become an important knowledge resource for exploration organizations,' added Mr. McConnell.
In other developments in the quarter the division recently conducted comprehensive field trials of the SEAGrav underwater gravity measurement system. These underwater tests were conducted in Lake Erie at Port Dover, Ontario as part of an evaluation program being conducted on behalf of several potential petroleum exploration organizations.
``We believe we have reached the cyclical low in exploration markets and we are optimistic that we will begin seeing signs of renewed activity by the end of the year,' said Mr. McConnell. ``We are exceptionally well-positioned to benefit from a recovery of petroleum and mineral markets.'
IEC (Integration, Engineering and Consulting)
Sales revenue for the IEC division for the six months ended June 30th, was $0.6 million. IEC received several new contracts in the quarter to provide ultra-secure communications systems consulting services. The division's backlog is now more than $ 1 million. Canada's military has been very active in recent years as part of its NATO and United Nations obligations. Their requirement for automated and secure communications systems has never been greater. IEC remains a key supplier of consulting and engineering services to Canada's Department of National Defence.
Caduceon Inc.
Caduceon plans to unveil a fully operational prototype of its diagnostic breath analysis device at the Ontario Hospital Association Convention in Toronto in November. Caduceon has obtained a patent for this unique sensory and analytical technology. At the core of this innovation is IDS's proprietary automated GC/IMS module which should enable clinicians to detect targeted molecules. The presence and quantity of certain compounds in the breath may indicate very early stages of metabolic dysfunction that may be associated with wide variety of conditions such as liver disease, cancer and diabetes. ``Detecting chemical markers of these diseases on a molecular level earlier promises exciting new treatment possibilities,' said Dr. Izabela Rybak, director of application development, Caduceon. ``Compared with the invasive nature of blood and urine testing, a fast and effective breath analyzer may provide important information instantly in a much easier way. As such, it offers the potential to become part of every practitioners complement of diagnostic tools,' she added.
ChemiCorp International
ChemiCorp continued the pursuit of industrial process control applications for IDS's core technology GC/IMS (gas chromatography and ion mobility spectrometry) through the first half of 1999. Among its achievements included the creation of an applications development group headed by Dr. Lawrence Haley, chief technology officer, ChemiCorp International. ``We have commenced initial compound analysis trials with major manufacturers, food processors and environmental organizations in the second quarter of 1999,' said Dr. Haley. ``We are also continuing to build relationships with automation and technology suppliers to improve our market access.'
ChemiCorp's environmental monitoring division Areco Canada Inc. launched an important new service that allows clients to access analytical results online. This means that once a sample has been tested and analyzed our clients can retrieve the data directly through the Internet onto their system wherever they are in the world. ``It is a clear indication of our commitment to seek technology innovation to provide timely information and service to our market,' said Stephanie Vuicic, vice-president, ChemiCorp International.
IDS is a dynamic developer, manufacturer and marketer of sophisticated detection devices and systems. The company operates through seven business units: Analytical & Security Products and Solutions, IDS Power Control Systems, Scintrex Earth Science Instrumentation, Survey & Exploration Technology Services, IEC (Integration, Engineering and Consulting), ChemiCorp International and Caduceon Inc. Its more than 70 products range from drug and explosive detectors to nuclear safety control instruments, airborne and ground geophysical survey services, geophysical instrumentation for mineral, oil and gas exploration and developing technologies for industrial process control and point-of-care health analysis. IDS operates worldwide in Canada, the US, France, UK, Australia and Brazil, and is publicly traded on The Toronto Stock Exchange (symbol: ISD).
Replay of Q2 Analyst Call
A replay of IDS's Second Quarter 1999 Analyst Call may be heard on the Internet at www.idsdetection.com. It will be available beginning on August 11, 1999.
More information is available at IDS's website located at: www.idsdetection.com.
IDS INTELLIGENT DETECTION SYSTEMS INC.
Consolidated Balance Sheets
(In Thousands of Dollars)
---------------------------------------------------------------
June 30 December 31
1999 1998
(Unaudited)
---------------------------------------------------------------
Assets
Current assets:
Cash $4,465 $1,154
Accounts receivable 15,356 10,990
Unbilled revenue - 1,707
Investment tax credit receivable 155 119
Income taxes recoverable 163 29
Inventory 14,387 12,605
Prepaid expenses 899 725
Assets of discontinued operations - 76
---------------------------------------------------------------
35,425 27,405
Long-term investments - 243
Capital assets 14,762 12,943
Deferred development costs 321 979
Goodwill 18,334 18,815
---------------------------------------------------------------
$68,842 $60,385
===============================================================
Liabilities and Shareholders' Equity
Current liabilities:
Bank loan $1,100 $367
Accounts payable and accrued liabilities 7,246 5,472
Deferred revenue 167 125
Income taxes payable 178 130
Current Portion of long-term debt - -
Liabilities of discontinued operations - -
---------------------------------------------------------------
8,691 6,094
Long-term debt - -
Deferred income taxes 81 122
Deferred lease inducement 34 39
Due to related parties 25 -
Non-controlling interest 275 -
Shareholders' equity:
Share capital 54,997 54,997
Cumulative translation adjustment 135 (84)
Retained earnings (deficit) 4,604 (783)
---------------------------------------------------------------
59,736 54,130
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$68,842 $60,385
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IDS INTELLIGENT DETECTION SYSTEMS INC.
Consolidated Statements of Earnings
(In Thousands of Dollars)
(Unaudited)
Six Months Three Months
ended ended
June 30 June 30
1999 1998 1999 1998
---------------------------------------------------------------
Sales $25,769 $5,470 $11,320 $4,794
Cost of Goods Sold 12,539 3,653 5,062 3,117
---------------------------------------------------------------
13,230 1,817 6,258 1,677
Expenses:
Selling, general and
administrative 5,659 2,489 3,224 1,424
Depreciation and amortization 1,528 462 772 337
Interest and finance 97 - 89 -
Research and development 670 424 111 314
---------------------------------------------------------------
7,954 3,375 4,196 2,075
---------------------------------------------------------------
Income (loss) from
continuing operations 5,276 (1,558) 2,062 (398)
Interest and other income (expense) 37 490 27 334
Restructuring costs (35) (250) 30 (250)
Dilution gains - - - -
Non-controlling interest in
income (42) (12) 22 (12)
---------------------------------------------------------------
Earnings (loss) before income
taxes 5,236 (1,330) 2,141 (326)
Income tax (177) 3 (37) 3
---------------------------------------------------------------
Earnings (loss) from continuing
operations 5,413 (1,333) 2,178 (329)
Earnings (loss) from discontinued
operations - 105 - 87
---------------------------------------------------------------
Net earnings (loss) $5,413 $(1,228) $2,178 $(242)
===============================================================
Earnings (loss) per share:
Basic $0.24 $(0.09) $0.10 $(0.02)
Fully diluted $0.24 $(0.09) $0.09 $(0.02)
Cashflow per share $0.31 $(0.03) $0.13 $0.00
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IDS INTELLIGENT DETECTION SYSTEMS INC.
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
(Unaudited)
June 30 June 30
1999 1998
---------------------------------------------------------------
Cash Flows from Operating Activities:
Earnings (loss) from continuing operations $5,413 $(1,228)
Items not involving cash:
Depreciation and amortization 1,528 462
Deferred taxes (41) -
Increase in non-controlling interest - 534
Changes in non-cash operating
working capital (2,843) (3,662)
---------------------------------------------------------------
4,057 (3,894)
Discontinued operations 76 3,820
---------------------------------------------------------------
4,133 (74)
Cash Flows from Investing Activities:
Additions to capital assets (1,498) (1,187)
Acquisition of subsidiaries (58) (18,495)
Increase in deferred development costs - (146)
---------------------------------------------------------------
(1,556) (19,828)
Cash Flows from Financing Activities:
Increase (decrease) in bank loan 734 1,248
Increase in due from affiliated companies - (76)
Increase in due from shareholders - 35
Decrease in due to shareholders - -
Decrease in long-term debt - (88)
Issuance of share capital, net of
issuance costs - 19,787
Cumulative foreign exchange - 37
---------------------------------------------------------------
734 20,943
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Increase (decrease) in cash and cash equivalents 3,311 1,041
Cash and cash equivalents, beginning of year 1,154 13,088
---------------------------------------------------------------
Cash and cash equivalents, end of period $4,465 $14,129
===============================================================
Notes:
1. Interest received and paid
Interest received 37 662
Interest paid 15 54
2. The investment in subsidiaries refers to the 51% acquisition of
Megafisica in 1999 and the 96% acquisition of Scintrex in June
1998. Subsequently in August 1998, IDS acquired the remaining
Scintrex shares.
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Contact:
IDS Intelligent Detection Systems
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