Norsat's Revenues up 9% to $9.1 million and posts Adjusted EBITDA of
$1.6 million
- Management to Host Conference Call at 8:30 am Pacific Time (11:30 am
Eastern Time) -
Conference Call Details
Norsat will host a conference call today, May 7, 2014, at 8:30 am
Pacific Time (11:30 am Eastern Time) to discuss 2014 first quarter
financial results. To access the conference call, please dial toll-free
1-888-396-8049 or 416-764-8646. The conference call ID is: 'Norsat
Investor Call'. Please connect approximately 10 minutes prior to the
beginning of the call to ensure participation. A digital recording and
transcript of the call will be available later today at: http://www.norsat.com/investors/financial-information/conference-call-recordings/
VANCOUVER, May 7, 2014 /CNW/ - Norsat International Inc. ("Norsat" or "the Company") (TSX: NII and OTC
BB: NSATF), a leading provider of innovative communication solutions that enable
the transmission of data, audio and video for remote and challenging
applications, today reported financial results for the first quarter
ended March 31, 2014. Norsat serves global customers primarily through
three business units: Sinclair Technologies, Satellite Solutions and
Microwave Products. All financial results are reported in U.S. dollars
and have been prepared in accordance with International Financial
Reporting Standards ("IFRS"), unless otherwise stated.
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Three months ended Mar 31
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(000's) except per share amounts
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2014
|
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2013
|
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Change
|
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Change
|
|
|
|
$
|
|
$
|
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$
|
|
%
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
9,118
|
|
8,354
|
|
764
|
|
9%
|
Gross profit
|
|
|
3,764
|
|
3,362
|
|
402
|
|
12%
|
Gross profit %
|
|
|
41%
|
|
40%
|
|
1%
|
|
|
Net earnings
|
|
|
2,177
|
|
412
|
|
1,765
|
|
>100%
|
EBITDA (1)
|
|
|
2,459
|
|
845
|
|
1,614
|
|
>100%
|
Adjusted EBITDA (1)
|
|
|
1,592
|
|
797
|
|
795
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|
100%
|
|
|
|
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|
|
|
|
|
|
Net earnings per share - basic and diluted
|
|
|
0.04
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|
0.01
|
|
0.03
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>100%
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
57,674
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|
58,037
|
|
|
|
|
|
Diluted
|
|
|
57,710
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|
58,113
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|
|
|
|
(1) EBITDA and Adjusted EBITDA are Non-IFRS Measures that are defined in
the Management's Discussion and Analysis for the three months ended
March 31, 2014
posted on Norsat's website and SEDAR.
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First Quarter 2014 Highlights
-
Launched a number of new products, including the ATOM series of Ku-band
BUCs and SSPAs, and the 700 - 800 MhZ TXC Series of Ceramic Combiners
-
First quarter revenue was up 9% to $9.1 million, compared to $8.4
million during the same period in 2013
-
Gross margin was 41%, compared to 40% in Q1 2013
-
Adjusted EBITDA doubled to $1.6 million, compared to $0.8 million in Q1
2013
"I am pleased to report first quarter revenues increased by 9% to $9.1
million, from $8.4 million a year ago reflecting product deliveries on
the new line of Atom products," said Dr. Amiee Chan, President and CEO
of Norsat.
"We continued to maintain a strict cost discipline across our
operations. To drive ongoing efficiencies we balance cost reductions
with strategic investment throughout our operations. In the longer
term we expect these investments will lead to even better operating
profitability. We also benefited from the strengthening of the US
dollar against the Canadian dollar. In all year-over-year employee
related costs savings and a favorable US to Canadian exchange rate,
have help reduce total expenses, net of government funding, to $1.7
million in the first quarter of 2014 compared to $3.0 million in the
first quarter of 2013". Added Dr. Chan.
Dr. Chan continued, "from a product development perspective I am also
pleased we launched a number of new products this quarter, including
the ATOM series of Ku-band BUCs and SSPAs, and the 700 - 800 MhZ TXC
Series of Ceramic Combiners. The ATOM series of BUCs and SSPAs are the most compact, lightweight, and energy
efficient transmitters available in the market. The TXC Series
Combiners feature improved performance and are designed to allow a
number of transmitters to share a single antenna. These new products
reflect the Company's commitment to focus on research and development
and to diversity its product offerings."
Financial Review
For the three months ended March 31, 2014
For the three months ended March 31, 2014, total sales were $9.1
million, compared to $8.4 million in Q1 2013.
Sales from the Sinclair Technologies segment remained consistent at $5.6
million for the first quarter of 2014, compared to $5.6 million during
the same period in 2013.
First quarter Satellite Solutions sales were $0.6 million, compared to
$1.4 million in Q1 2013, reflecting the continuing decrease in US
military demand and budget constraints among other non-military
customers. Other service revenues were also $0.2 million lower
year-over-year due to the non-renewal of a significant airtime
contract.
First quarter Microwave Products sales were $2.8 million, compared to
$1.4 million in Q1 2013. The $1.4 million increase was mainly driven by
the product deliveries on the Atom contract.
On a consolidated basis, first quarter gross margin percentages were 41%
which is comparable to Q1 2013 margins of 40%. Gross margins in our
Microwave Products segment were 46%, compared to 39% in Q1 2013, which
reflects a greater portion of higher-margin revenues in the mix and the
reduced warranty costs due to the expiry of a significant warranty
obligation acquired as part of the acquisition of certain assets and
liabilities of CVG. Our Sinclair and Satellite Solutions margins were
40% and 30%, respectively for the first quarter in 2014 which are
comparable to the gross margins for the same period in 2013.
For the three months ended March 31, 2014, total expenses decreased to
$1.7 million, from $3.0 million in Q1 2013.
First quarter selling and distributing expenses decreased to $1.3
million, from $1.6 million in 2013, and first quarter general
administration expenses decreased to $0.9 million, from $1.0 million in
2013. The decrease reflects the strengthening of the US dollar against
the Canadian dollar, as a significant portion of the Company's expenses
are in Canadian Dollars, and employee-related costs savings.
First quarter 2014 net product development expenses was $0.3 million
which is comparable to first quarter 2013 net product development
expenses of $0.3 million. The decrease of direct expenses to $0.6
million, from $0.8 million in 2013, reflects the strengthening of the
US dollar against the Canadian dollar as a significant portion of the
Company's product development costs are in Canadian Dollars, and
employee-related costs savings. This was offset by the decrease of
government contributions of $0.4 million in the first quarter of 2014
compared to $0.6 million for the same period in 2013. In 2013 the
timing of the award of the Strategic Aerospace & Defense Initiative
("SADI") program meant over two quarters worth of government
contributions were recorded in Q1 2013, compared to just one in the
first quarter of 2014.
The $0.8 million recovery in other expenses in the first quarter of 2014
compared to the $0.1 million expense in the same period in 2013
reflects a gain in foreign exchange due to the strengthening of the US
dollar against the Canadian dollar.
First quarter earnings before income taxes were $2.1 million, compared
to $0.4 million during the same period last year, reflecting higher
gross profits and lower operating expenses.
Current income tax expense for the first quarter of 2014 was a $nil
compared to $60,000 in the first quarter of 2013. This is a result of
a reorganization of our US legal entity structure effective December
31, 2013. Deferred income tax recovery was $70,000 consistent with the
$69,000 recovery in the first quarter of 2013.
First quarter net earnings were $2.2 million, or $0.04 per share, basic
and diluted, compared to $0.4 million, or $0.01 per share, basic and
diluted in 2013.
Adjusted EBITDA for the three months ended March 31, 2014 improved by
100% to $1.6 million, compared to the same period last year, reflecting
a $0.4 million increase in gross profit contributions from higher sales
volume, and lower total expenses of approximately $0.4 million in the
first quarter of 2014 compared to the same period in 2013. The
decrease in operating expenses mainly reflects the strengthening of the
US dollar against the Canadian dollar, as a significant portion of the
Company's expenses are in Canadian Dollars, and lower expenses from
employee-related cost savings in the first quarter of 2014 compared to
the same period in 2013. This was partially offset by approximately
$0.2 million less government contributions for the first quarter of
2014 compared to the same period in 2013.
Financial Position
Norsat ended the first quarter with cash and cash equivalents of $2.9
million, which is comparable to the $3.3 million as at December 31,
2013.
The Company also has access to undrawn credit facilities totaling $4.15
million as at March 31, 2014 and May 6, 2014.
Working capital as at March 31, 2014 was $11.4 million, compared to
$10.0 million at December 31, 2013. The current ratio as at March 31,
2014 was 2.3 times, compared to 2.0 times as at December 31, 2013.
Outlook
While economic and market conditions remain challenging, we anticipate
continued modest revenue improvement in the second quarter of 2014,
driven by continued increased customer activity in the Sinclair and
Microwave segments. Sales in our Microwave and Sinclair segment will
continue to be further supported by our recent product development
activities, including the launch of the ATOM series of Ku-Band BUCs and
SSPAs and the 700 - 800 MhZ TXC Series of Ceramic Combiners. Sales in
our Satellite Solution business are expected to remain constrained as a
result of weak customer demand. In addition a significant airtime
contract has expired at the end of Q1 2014. We do not expect to
replace the recurring airtime revenue of this size in the near future.
Going forward, we will continue to work to diversify our business by
broadening our product portfolio and expanding our customer base on a
geographic and market sector basis. We are continuing to focus on
markets beyond the US, as well as on the commercial, resource,
transportation and public safety segments. We are also continuing to
pursue other new revenue opportunities.
The current global economic uncertainties, coupled with our stable
financial position and capital structure, continue to create excellent
conditions for realizing growth through business combinations. We will
continue to actively pursue merger and acquisition opportunities that
provide strong value, further our strategic objectives and have the
potential to be accretive to shareholders.
We will also continue to execute a balanced growth strategy that
incorporates investment in staffing levels, new product introductions,
continued enhancement of existing product lines, greater
diversification by geographic region as well as by industry verticals,
and a broadening of the solutions we provide to customers. In
addition, we continue to evaluate other strategic opportunities for
improving our overall operating and financial performance.
A full set of financial statements and Management's Discussion and
Analysis for Norsat is available at www.norsat.com and at www.sedar.com.
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March 31, 2014
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December 31, 2013
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ASSETS
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Current assets
|
|
|
|
|
|
|
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|
Cash and cash equivalents
|
|
|
$
|
2,866,115
|
|
|
$
|
3,272,595
|
Trade and other receivables
|
|
|
|
7,417,143
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|
|
|
6,821,155
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Inventories
|
|
|
|
9,710,701
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|
|
|
9,566,289
|
Prepaid expenses and other
|
|
|
|
376,301
|
|
|
|
572,038
|
Current assets
|
|
|
|
20,370,260
|
|
|
|
20,232,077
|
Non-current assets
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
997,223
|
|
|
|
1,055,160
|
Intangible assets, net
|
|
|
|
6,996,254
|
|
|
|
7,377,107
|
Goodwill
|
|
|
|
4,919,503
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|
|
|
5,104,370
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Long-term prepaid expenses and other
|
|
|
|
9,340
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|
|
|
9,340
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Deferred income tax assets
|
|
|
|
4,900,000
|
|
|
|
4,900,000
|
Non-current assets
|
|
|
|
17,822,320
|
|
|
|
18,445,977
|
Total assets
|
|
|
$
|
38,192,580
|
|
|
$
|
38,678,054
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
$
|
2,200,416
|
|
|
$
|
2,162,196
|
Accrued liabilities
|
|
|
|
1,528,125
|
|
|
|
1,956,998
|
Provisions
|
|
|
|
699,662
|
|
|
|
851,437
|
Taxes payable
|
|
|
|
187,165
|
|
|
|
270,263
|
Deferred revenue
|
|
|
|
472,618
|
|
|
|
586,925
|
Current liabilities before acquisition loan
|
|
|
|
5,087,986
|
|
|
|
5,827,819
|
|
Acquisition loan
|
|
|
|
3,848,542
|
|
|
|
4,413,296
|
Current liabilities
|
|
|
|
8,936,528
|
|
|
|
10,241,115
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Long-term deferred revenue
|
|
|
|
5,486
|
|
|
|
10,457
|
Deferred income tax liabilities
|
|
|
|
1,888,981
|
|
|
|
2,002,973
|
Non-current liabilities
|
|
|
|
1,894,467
|
|
|
|
2,013,430
|
Total liabilities
|
|
|
|
10,830,995
|
|
|
|
12,254,545
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SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Issued capital
|
|
|
|
39,850,648
|
|
|
|
39,850,648
|
Treasury shares
|
|
|
|
(318,255)
|
|
|
|
(318,255)
|
Contributed surplus
|
|
|
|
4,333,875
|
|
|
|
4,278,843
|
Accumulated other comprehensive income
|
|
|
|
(2,609,180)
|
|
|
|
(1,315,478)
|
Deficit
|
|
|
|
(13,895,503)
|
|
|
|
(16,072,249)
|
Total shareholders' equity
|
|
|
|
27,361,585
|
|
|
|
26,423,509
|
Total liabilities and shareholders' equity
|
|
|
$
|
38,192,580
|
|
|
$
|
38,678,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
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|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
|
9,117,705
|
|
|
$
|
8,353,654
|
Cost of sales
|
|
|
|
5,354,183
|
|
|
|
4,991,511
|
Gross profit
|
|
|
|
3,763,522
|
|
|
|
3,362,143
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Selling and distributing expenses
|
|
|
|
1,303,717
|
|
|
|
1,589,491
|
General and administrative expenses
|
|
|
|
859,282
|
|
|
|
1,029,777
|
Product development expenses, gross
|
|
|
|
695,437
|
|
|
|
878,398
|
|
Less: Government contributions
|
|
|
|
(386,991)
|
|
|
|
(625,713)
|
|
|
|
|
2,471,445
|
|
|
|
2,871,953
|
Earnings before other expenses
|
|
|
|
1,292,077
|
|
|
|
490,190
|
|
|
|
|
|
|
|
|
|
Loss on disposal of property and equipment
|
|
|
|
-
|
|
|
|
8,367
|
Interest and bank charges
|
|
|
|
52,615
|
|
|
|
126,754
|
Gain on foreign exchange
|
|
|
|
(867,492)
|
|
|
|
(48,313)
|
Earnings before income taxes
|
|
|
|
2,106,954
|
|
|
|
403,382
|
|
|
|
|
|
|
|
|
|
Current income tax expense
|
|
|
|
-
|
|
|
|
59,535
|
Deferred income recovery
|
|
|
|
(69,792)
|
|
|
|
(68,652)
|
Net earnings for the period
|
|
|
$
|
2,176,746
|
|
|
$
|
412,499
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
Exchange differences on translation of operations in currencies
other than US Dollars
|
|
|
|
(1,293,702)
|
|
|
|
(376,835)
|
Total comprehensive income for the period
|
|
|
$
|
883,044
|
|
|
$
|
35,664
|
|
|
|
|
|
|
|
|
|
Net earnings per share, basic and diluted
|
|
|
$
|
0.04
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
57,674,356
|
|
|
|
58,036,732
|
|
Diluted
|
|
|
|
57,709,914
|
|
|
|
58,113,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
|
|
|
2014
|
|
|
|
2013
|
Cash and cash equivalents provided by (used in)
|
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net earnings for the period
|
|
|
$
|
2,176,746
|
|
|
$
|
412,499
|
Income taxes paid
|
|
|
|
(80,572)
|
|
|
|
-
|
Non-cash adjustments to reconcile net earnings to net cash flows:
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
|
319,432
|
|
|
|
332,334
|
|
Foreign exchange gain
|
|
|
|
(867,492)
|
|
|
|
(48,313)
|
|
Loan acquisition cost amortization
|
|
|
|
6,786
|
|
|
|
6,787
|
|
Loss on disposal of property and equipment
|
|
|
|
-
|
|
|
|
8,367
|
|
Current income tax expense
|
|
|
|
-
|
|
|
|
59,535
|
|
Deferred income tax recovery
|
|
|
|
(69,792)
|
|
|
|
(68,652)
|
|
Share-based payments
|
|
|
|
55,032
|
|
|
|
90,192
|
|
Accretion of promissory notes
|
|
|
|
-
|
|
|
|
31,871
|
|
Government contribution
|
|
|
|
(386,991)
|
|
|
|
(650,887)
|
|
Changes in non-cash working capital
|
|
|
|
(1,528,634)
|
|
|
|
(1,642,964)
|
Net cash flows used in operating actitivies
|
|
|
|
(375,485)
|
|
|
|
(1,469,231)
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Purchase of intangible assets, property and equipment
|
|
|
|
(110,431)
|
|
|
|
(36,164)
|
Proceeds from government contributions for acquisition of property and
equipment
|
|
|
|
26,551
|
|
|
|
-
|
Proceeds from sale of property and equipment
|
|
|
|
-
|
|
|
|
4,200
|
Proceeds from sale of subsidiary
|
|
|
|
-
|
|
|
|
13,583
|
Net cash flows used in investing activities
|
|
|
|
(83,880)
|
|
|
|
(18,381)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Repayment of acquisition loan
|
|
|
|
(480,000)
|
|
|
|
(750,000)
|
Proceeds from government contributions
|
|
|
|
456,121
|
|
|
|
61,094
|
Payment of promissory note
|
|
|
|
-
|
|
|
|
(362,500)
|
Net cash flows used in financing activities
|
|
|
|
(23,879)
|
|
|
|
(1,051,406)
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation on cash and cash equivalents
|
|
|
|
76,764
|
|
|
|
(37,132)
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
|
|
|
(406,480)
|
|
|
|
(2,576,150)
|
Cash and cash equivalents, beginning of period
|
|
|
|
3,272,595
|
|
|
|
5,053,445
|
Cash and cash equivalents, end of period
|
|
|
$
|
2,866,115
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$
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2,477,295
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About Norsat International Inc.
Founded in 1977, Norsat International Inc. is a leading provider of
innovative communication solutions that enable the transmission of
data, audio and video for remote and challenging applications. Norsat's
products and services include leading-edge product design and
development, production, distribution and infield support and service
of fly-away satellite terminals, microwave components, M2M Solutions,
antennas, Radio Frequency (RF) conditioning products, maritime based
satellite terminals and remote network connectivity solutions. More
information is available at www.norsat.com, via email at investor@norsat.com or by phone at 1-604-821-2800.
Forward Looking
The discussion and analysis of this news release contains
forward-looking statements concerning anticipated developments in
Norsat's operations in future periods, the adequacy of its financial
resources and other events or conditions that may occur in the future.
Forward-looking statements are frequently, but not always, identified
by words such as "expects," "anticipates," "believes," "intends,"
"estimates,", "predicts," "potential," "targeted," "plans," "possible"
and similar expressions, or statements that events, conditions or
results "will," "may," "could" or "should" occur or be achieved. These
forward-looking statements include, without limitation, statements
about Norsat's market opportunities, strategies, competition, expected
activities and expenditures as it pursues its business plan, the
adequacy of available cash resources and other statements about future
events or results. Forward-looking statements are statements about the
future and are inherently uncertain, and actual achievements of the
Company or other future events or conditions may differ materially from
those reflected in the forward-looking statements due to a variety of
risks, uncertainties and other factors, such as business and economic
risks and uncertainties. The forward-looking statements are based on
the beliefs, expectations and opinions of management on the date the
statements are made. Consequently, all forward-looking statements made
in this news release are qualified by this cautionary statement and
there can be no assurance that actual results or anticipated
developments will be realized. For the reasons set forth above,
investors should not place undue reliance on forward-looking
statements. These forward-looking statements are made as of the date of
this news release and Norsat assumes no obligation to update or revise
them to reflect new events or circumstances, other than as required by
law.
SOURCE Norsat International Inc.