RuggedCom reports record purchase orders with 16% revenue growth for Q2 fiscal 2010 << (All dollar amounts are in US dollars)Highlights from the Quarter: - 11% increase in Purchase Orders year over year, a new company record - 16% increase in Revenue year over year - 13% increase in Gross Margin year over year - 69% decrease in Net Income year over year - Added 100 new customers, up from 97 in the year ago period >>CONCORD, ON, Nov. 4 /CNW/ - RuggedCom Inc. ("RuggedCom") (TSX:RCM - News), a leading provider of rugged communications networking solutions designed for mission-critical applications in harsh environments, today announced its financial results for the second quarter of fiscal 2010, ended September 30, 2009."We're pleased to report another quarter in which we received record purchase orders, but for the second quarter in a row, revenues lagged orders due to timing. Both gross and net profit margins continue to be impacted by the strengthening Canadian dollar and by increases in operating expenses to support our continued growth," said Marzio Pozzuoli, President and Chief Executive Officer. Second Quarter Results Total revenue for the quarter was $16.7 million, representing an increase of 16% from the comparable quarter a year ago. Revenue growth was primarily driven by increased sales in the electric power market, which set a new Company record for quarterly sales. The Company booked record customer purchase orders totaling $18.9 million for the quarter, representing an increase of 11% over the same quarter last year. Gross margin for the quarter was $9.9 million, an increase of 13% over the comparable period last year. On a percentage of revenue basis, second quarter gross margin was 59.1%, a decrease of 2.0 percentage points over a gross margin of 61.1% for the same period last year, but an increase of 2.4 percentage points over the gross margin percentage for the first quarter of fiscal 2010. Approximately half of the decline in gross margin percentage experienced in Q2-F10 compared to the same period last year was due to the continued significant strengthening of the Canadian dollar versus the US dollar. Gross margins are generally unaffected by movements in the Canadian to US dollar exchange rate, however during periods of high exchange rate volatility, gross margins are impacted by exchange rate translations. The other half of the decline in gross margin percentage from a year ago was due mainly to product/sector mix and competitive pricing pressure. Second quarter net income was $1.0 million, representing the Company's 18th consecutive quarter of profitability. This represents a decrease of 69% from net income of $3.2 million in the second quarter last year. Net earnings before taxes for Q2-F10 decreased significantly compared to the same period a year ago due to slower revenue growth (16%) as compared to the growth in operating expenses (88%), as well as a decrease in gross margin percentage as described earlier. The increase in operating expenses for Q2-F10 was due to an increase in research and development as well as sales and marketing expenses to support our continued growth. Additionally, there was a negative foreign exchange impact of $1.4 million which was due to foreign exchange losses of $1.0 million from a strengthening Canadian dollar relative to the US dollar, compared to a foreign exchange gain of $0.4 million in the same period a year ago. Falling interest rates also contributed to the decrease in earnings for the current quarter, as the Company earned only $38,000 net interest income compared to $0.4 million in the same period last year. Also, as expected, the recent WiNetworks Ltd. acquisition on September 17, 2009 resulted in the inclusion of a $0.2 million loss before and after taxes in the Company's consolidated financial results. The loss was mainly due to operating expenses, most of which were research and development expenses. WiNetworks recorded only nominal revenue for the period from the acquisition date to the end of the reporting period. The Company recorded a provision for income taxes of $0.5 million with an effective tax rate of 35.2%. This compares to $1.5 million income tax expense in the same period last year with an effective tax rate of 32.2%. Second quarter basic earnings per share were $0.08 compared to $0.16 for the same quarter last year while fully diluted earnings per share were $0.08 compared to $0.15 for the same quarter last year. The Company added 100 new customers in the quarter, up from 97 in the year ago period. Conference Call and Webcast ---------------------------Management will host a conference call at 8:30 a.m. (ET) on Thursday, November 5, 2009. Listeners may attend the conference call by dialing 416-644-3416 or 1-800-732-9307. The live audio webcast can be accessed at RuggedCom's web site at www.RuggedCom.com. The webcast will also be archived on the site. A taped rebroadcast will be available to listeners following the call until 11:59 PM (ET) on November 12, 2009. To access the rebroadcast, please call 416-640-1917 or 1-877-289-8525 and enter passcode 4171614 followed by the number sign (No.). About RuggedCom Inc. --------------------RuggedCom is a leading provider of rugged communications networking solutions designed for mission-critical applications in harsh environments. RuggedCom's technology solutions include Ethernet switches, network routers, wireless devices, serial servers, media converters, software and professional services. RuggedCom's products are designed for use in harsh environments such as those found in electrical power substations and "Smart Grids", intelligent transportation systems, industrial process control and military applications. For further information, please visit www.RuggedCom.com. The unaudited consolidated interim financial statements and management's discussion and analysis of the results of operations and financial condition for the three month and six month periods ended September 30, 2008 and September 30, 2009 can be found under the Company's profile at www.sedar.com. They can also be found in the Investor Relations section of the Company's website at www.RuggedCom.com. RuggedCom Inc. CONSOLIDATED INTERIM FINANCIAL STATEMENTS 2nd Quarter ended September 30, 2009 RuggedCom Inc. CONSOLIDATED BALANCE SHEETS (in thousands of United States dollars) September March 30, 2009 31, 2009 (unaudited) (audited) $ $ - - Assets Current Cash and cash equivalents (note 5) 38,255 45,099 Accounts receivable (note 6) 10,278 9,780 Prepaid expenses and other 2,164 1,025 Inventories (note 4 and note 7) 9,115 4,555 Income taxes recoverable 3,064 - Future income taxes 411 283 ------------------------ 63,287 60,742 Future income taxes 82 246 Property and equipment 6,023 2,662 Goodwill 2,895 - Other assets (note 3) 11,522 580 ------------------------ 83,809 64,230 ------------------------ ------------------------ Liabilities Current Accounts payable and accrued liabilities 11,015 5,793 Current portion of warranty 698 482 Income taxes payable - 2,268 Future income taxes 1,966 - Current portion of deferred income 106 50 Current portion of obligations under capital lease 72 126 ------------------------ 13,857 8,719 ------------------------ Warranty 430 347 Deferred income 24 21 Obligations under capital lease 35 48 Leasehold inducements 182 6 ------------------------ 671 422 ------------------------ 14,528 9,141 ------------------------ Shareholders' Equity Capital stock (note 8) 48,695 46,820 Contributed surplus (note 9) 1,993 1,559 Accumulated other comprehensive income (loss) (note 10) 1,041 (8,952) Retained earnings 17,552 15,662 ------------------------ 18,593 6,710 ------------------------ 69,281 55,089 ------------------------ 83,809 64,230 ------------------------ ------------------------ Contingent liabilities (note 19) See accompanying notes to consolidated interim financial statements. RuggedCom Inc. CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (in thousands of United States dollars, except per share information) (unaudited) 3 month 3 month 6 month 6 month period period period period ended ended ended ended September September September September 30, 2009 30, 2008 30, 2009 30, 2008 $ $ $ $ - - - - Revenue 16,740 14,385 32,757 27,136 Cost of goods sold 6,847 5,594 13,787 10,477 ------------------------------------------------ Gross margin 9,893 8,791 18,970 16,659 ------------------------------------------------ Operating expenses Research and development 1,780 1,156 3,805 2,362 Sales and marketing 3,485 2,513 6,463 5,077 General and administrative 1,808 1,238 3,761 2,697 Investment tax credits (199) (404) (386) (499) Loss on foreign exchange 998 (384) 1,529 (192) Amortization 508 329 901 588 ------------------------------------------------ 8,380 4,448 16,073 10,033 ------------------------------------------------ Operating income 1,513 4,343 2,897 6,626 Net interest income 38 382 101 828 ------------------------------------------------ Income before income taxes 1,551 4,725 2,998 7,454 ------------------------------------------------ Income taxes (note 15) Current 492 1,523 997 2,528 Future 54 (3) 111 (2) ------------------------------------------------ 546 1,520 1,108 2,526 ------------------------------------------------ Net income for the period 1,005 3,205 1,890 4,928 Retained earnings - Beginning of period 16,547 5,057 15,662 3,334 ------------------------------------------------ Retained earnings - End of period 17,552 8,262 17,552 8,262 ------------------------------------------------ ------------------------------------------------ Net earnings per share (note 11) Basic $ 0.08 $ 0.27 $ 0.16 $ 0.42 Diluted $ 0.08 $ 0.26 $ 0.15 $ 0.40 Basic weighted average number of common shares outstanding 12,098,002 11,763,504 11,997,705 11,741,683 Diluted weighted average number of common shares outstanding 12,574,050 12,356,833 12,599,535 12,318,891 See accompanying notes to consolidated interim financial statements. RuggedCom Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands of United States dollars ) (unaudited) 3 month 3 month 6 month 6 month period period period period ended ended ended ended September September September September 30, 2009 30, 2008 30, 2009 30, 2008 $ $ $ $ - - - - Net income for the period 1,005 3,205 1,890 4,928 Foreign currency translation gain (loss) (note 10) 5,423 (2,365) 9,993 (2,034) ------------------------------------------------ Comprehensive income 6,428 840 11,883 2,894 ------------------------------------------------ ------------------------------------------------ See accompanying notes to consolidated interim financial statements. RuggedCom Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of United States dollars) (unaudited) 3 month 3 month 6 month 6 month period period period period ended ended ended ended September September September September 30, 2009 30, 2008 30, 2009 30, 2008 $ $ $ $ - - - - Cash provided by (used in) Operating activities Net income for the period 1,005 3,205 1,890 4,928 Non-cash items Amortization of property and equipment 263 311 565 555 Amortization of other assets 244 18 335 33 Future income taxes 54 (3) 111 (2) Stock based compensation 294 164 572 336 Warranty 1 89 30 191 Leasehold inducements 65 (8) 164 (16) Net change in non-cash working capital (note 14a) 884 1,299 (3,015) 116 ------------------------------------------------ 2,810 5,075 652 6,141 ------------------------------------------------ Investing activities Additions to short term investments - 34,787 - 34,787 Acquisition of subsidiary (note 4) (7,970) - (7,970) - Additions to property and equipment (2,327) (572) (2,880) (1,013) Additions to other assets (343) (38) (995) (97) ------------------------------------------------ (10,640) 34,177 (11,845) 33,677 ------------------------------------------------ Financing activities Repayment of obligations under capital lease (46) (70) (92) (140) Repayment of loan (note 4) (4,875) - (4,875) - Issuance of common shares 31 116 1,737 173 ------------------------------------------------ (4,890) 46 (3,230) 33 ------------------------------------------------ Effect of exchange rates on cash 3,870 (2,260) 7,579 (2,213) ------------------------------------------------ Increase in cash and cash equivalents during the period (8,850) 37,038 (6,844) 37,638 Cash and cash equivalents - Beginning of period 47,105 8,637 45,099 8,037 ------------------------------------------------ Cash and cash equivalents - End of period (note 14b) 38,255 45,675 38,255 45,675 ------------------------------------------------ ------------------------------------------------ Supplemental disclosures Interest paid $ 5 $ 13 $ 11 $ 29 Income taxes paid $ 1,144 $ 786 $ 5,998 $ 1,439 For further information Roy Dalton, Chief Financial Officer, RuggedCom Inc., Tel: (905) 856-5288, Email: Investor@RuggedCom.com Source: RuggedCom Inc.
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