As COM DEV announced its fourth quarter and year-end fiscal 2014 results today they announced that they would be closing their only U.S. facility in El Segundo, California effective March 16, 2015.
Michael Pley, President and CEO of COM DEV said of the closure “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.”
The news was not all bad. Indeed, the performance of all their other units was good and the outlook for those looks according to COM DEV.
“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.”
- 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 237% 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), $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.
Full financial data available here.