Wescam Achieves Strong Third Quarter Revenue And Earnings
6 September 2000
Wescam Achieves Strong Third Quarter Revenue And Earnings
FLAMBOROUGH, Ontario--Sept. 6, 2000--Wescam today announced continued strong revenue and earnings performance for the third quarter ended July 29, 2000.Consolidated revenue increased 22 percent to $42.2 million for the third quarter of fiscal 2000, compared with $34.7 million during the same period last year. Earnings applicable to common shares were $2.4 million or $0.16 per basic common share and $0.15 fully diluted, including a net loss of $428,000 or $0.03 per share arising from contingent proceeds net of costs associated with the sale in 1999 of certain non-core business assets of a U.S. subsidiary. These results compared with earnings of $2.9 million or $0.20 per basic common share in the same period in fiscal 1999. Results in 1999 included a net gain of $1.4 million from the sale of the non-core business assets, and a $0.7 million write-down of the assets of a U.K. subsidiary for a net positive earnings per share of $0.06.
"Wescam continues to generate solid financial performance as a result of strong deliveries of the leading-edge WESCAM(TM) 20 camera systems in its government markets, as well as significant activity in its commercial markets," said Mark Chamberlain, Wescam's President and Chief Executive Officer. "The company continues to successfully execute its growth strategy and the outlook for the year remains positive," he added.
Year-to-date, Wescam's revenue has grown 41 percent to $117 million compared with $82.8 million last year while net earnings increased 58 percent, rising from $3.1 million to $4.9 million.
During the quarter, the company delivered a number of turnkey rental services in the commercial market, including for the Molson Indy car race in Toronto and the Euro 2000 soccer championship in Europe.
In addition, the company successfully demonstrated its WESCAM(TM) Stealth system at the Molson Indy by providing images to ESPN that were an integral part of its North American-wide broadcast. The Stealth is an extremely cost-effective, fully integrated aerial video system including a specially-built, almost silent fixed-wing aircraft. As part of its growth strategy, Wescam plans to introduce this new service to other markets, such as news gathering, in the Fall.
Financial Highlights
Among the financial highlights, EBITDA (earnings before interest, taxes, depreciation and amortization) for the third quarter of fiscal 2000 were $6.5 million versus EBITDA for the same period in the prior year of $5.5 million, excluding the pre-tax gain of $3.2 million on the sale of the non core assets from its U.S. subsidiary.
Wescam's backlog of long-term orders was $131 million at the end of the third quarter versus $104 million in the same period last year.
Revenue in the Public Safety and Surveillance division grew 24 percent to $34.8 million in the third quarter of fiscal 2000, from $28.0 million in the prior year. This increase was primarily due to substantial deliveries of the WESCAM(TM) 20 and Wescam(TM)12 as well as higher sales in the airborne law enforcement segment. The Entertainment division generated $7.5 million in revenue in the third quarter, versus $6.9 million last year. This division is currently preparing for Wescam's significant presence at the 2000 Olympic Games in Sydney, Australia.
During the quarter, the company issued 1,287,000 common shares to HSBC Capital (Canada) Inc. pursuant to the conversion of the $5.0 million principal amount outstanding under its 9 percent convertible subordinated debentures. Of the total $5.0 million, $3.0 million was converted at $3.70 per share and $2.0 million was converted at $4.20 per share.
WESCAM INC.
CONSOLIDATED BALANCE SHEETS
[in thousands of dollars]
Fiscal Quarter Ended
July 29 October 31
2000 1999
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(Unaudited)
ASSETS
Current Assets
Cash $ 807 $ 1,351
Accounts receivable 39,184 41,461
Inventories 28,769 26,216
Income taxes receivable - 1,504
Prepaid expenses 1,825 1,562
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70,585 72,094
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Capital Assets, net 20,484 17,807
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Other Assets
Deferred income taxes 531 1,512
Deferred product development
costs, net 4,336 5,248
Goodwill 11,402 12,404
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16,269 19,164
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$ 107,338 $ 109,065
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank indebtedness $ 1,702 $ 7,461
Accounts payable and
accrued liabilities 29,205 31,151
Customer deposits 12,906 11,343
Income taxes payable 818 -
Current portion of
long-term debt 2,000 2,000
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46,631 51,955
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Long-term Debt 4,932 7,709
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Shareholders' Equity
Share capital 44,897 39,895
Convertible debenture - 3,567
Retained earnings 10,878 5,939
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55,775 49,401
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$ 107,338 $ 109,065
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WESCAM INC.
CONSOLIDATED STATEMENTS OF EARNINGS
AND RETAINED EARNINGS
(in thousands of dollars, except per share amount)
Fiscal Quarter Ended Three Fiscal Quarters Ended
July 29 July 31 July 29 July 31
2000 1999 2000 1999
----------------------------------------------------------------------
(Unaudited) (Unaudited)
Revenue $ 42,226 $ 34,720 $ 117,014 $82,762
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Cost of
sales 26,736 22,260 76,804 54,406
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Gross profit 15,490 12,460 40,210 28,356
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Expenses
Research and
development 3,390 3,029 9,875 7,284
Administrative 3,656 2,394 9,967 7,075
Selling 2,155 1,847 5,923 4,775
Depreciation
and
amortization 1,110 1,226 3,398 3,391
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10,311 8,496 29,163 22,525
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Operating
income 5,179 3,964 11,047 5,831
Other income
(expense)
Gain (loss)
on sale of
assets (132) 3,223 (132) 3,223
Interest and
finance charges (355) (336) (1,040) (1,191)
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Earnings before
income taxes
and goodwill
charges 4,692 6,851 9,875 7,863
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Income taxes
Current 1,962 3,077 2,844 2,955
Deferred - - 981 127
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Income taxes 1,962 3,077 3,825 3,082
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Earnings before
goodwill
charges 2,730 3,774 6,050 4,781
Goodwill
charges, net
of tax 280 785 839 1,411
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Net earnings 2,450 2,989 5,211 3,370
Interest on
equity component
of convertible
debenture 90 84 272 244
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Net earnings
applicable to
common shares 2,360 2,905 4,939 3,126
Retained
earnings
(deficit),
beginning of
period 8,518 (192) 5,939 (413)
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Retained
earnings
(deficit), end
of period $ 10,878 $ 2,713 $ 10,878 $ 2,713
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Per Common Share:
Earnings before
goodwill charges
- basic $0.18 $0.25 $0.39 $0.31
Earnings before
goodwill charges
- fully diluted $0.17 N/A $0.37 N/A
Net earnings -
basic $0.16 $0.20 $0.34 $0.22
Net earnings -
fully diluted $0.15 N/A $0.32 N/A
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Weighted
average number
of common shares
outstanding 14,788,580 14,611,159 14,725,334 14,525,607
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Fully diluted
number of
common shares
outstanding 16,174,898 N/A 16,111,652 N/A
-------------------------------------------------------------------------
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Earnings before
interest, taxes,
depreciation
and
amortization
- EBITDA $ 6,455 $ 8,722 $ 15,225 $ 13,098
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WESCAM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
Fiscal Quarter Ended Three Fiscal Quarters Ended
July 29 July 31 July 29 July 31
2000 1999 2000 1999
-------------------------------------------------------------------------
(Unaudited) (Unaudited)
Cash provided by (used in):
Operations:
Net earnings $ 2,360 $ 2,989 $ 5,121 $ 3,370
Items not
involving cash
Depreciation 1,110 1,226 3,398 3,391
Goodwill charges 335 840 1,003 1,576
Amortization of
deferred
development costs 298 309 912 653
Foreign exchange
(gain) loss 2 (54) (10) 98
Deferred
income taxes - - 981 127
(Gain) loss on
sale of
equipment (103) - (165) (79)
(Gain) loss on
sale of assets 132 (3,223) 132 (3,223)
Changes in non-cash
operating working
capital 3,688 8,210 1,598 1,592
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7,822 10,297 12,970 7,505
-------------------------------------------------------------------------
Financing:
Proceeds from
(repayment of)
revolving line
of credit (6,400) (10,856) (5,759) (11,202)
Customer deposits 711 (2,691) 1,563 2,037
Interest on
equity component
of convertible
debenture - (84) (182) (244)
Principal payments
on long-term debt (527) (354) (1,499) (1,613)
Issuance of common
shares, net 4,856 265 5,002 331
Issuance (conversion)
of convertible
debenture, net of
issue costs (4,846) - (4,846) -
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(6,206) (13,720) (5,721) (10,691)
-------------------------------------------------------------------------
Investments:
Investments in
other assets - - - (5)
Expenditures on
capital assets (1,907) (1,007) (6,078) (3,161)
Proceeds from sale
of assets - 9,760 - 9,760
Payment (obligation)
related to sale
of assets 293 (5,382) (1,893) (5,382)
Proceeds from sale
of capital assets - - 168 193
Expenditures on
deferred product
development - - - (528)
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(1,614) 3,371 (7,803) 877
-------------------------------------------------------------------------
Foreign exchange
gain (loss) on
cash held in
foreign currency (2) 54 10 (98)
-------------------------------------------------------------------------
Increase (decrease)
in cash position - 2 (544) (2,407)
Cash, beginning
of period 807 1,405 1,351 3,814
-------------------------------------------------------------------------
Cash, end
of period $ 807 $ 1,407 $ 807 $ 1,407
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