Saskatoon SK, July 12, 2016 - International Road Dynamics Inc. (TSX: IRD), one of the world’s leading providers of systems and solutions for the global Intelligent Transportation Systems (ITS) market, today announced strong financial results for the three and six months ended May 31, 2016.
“Our strong presence in the North American ITS markets continued to drive our growth and solid operating performance in fiscal 2016,” commented Terry Bergan, President and CEO. “We were also pleased to see year to date growth in our recurring service and maintenance business underpinning our strong cash flow and a reflection of our solid reputation in all our chosen markets.”
“Looking ahead, we believe fiscal 2016 will be another solid year for IRD as our backlog of confirmed orders continues to grow and we see an increased number of new, near-term business opportunities. Over the longer term, we are in a strong position to capitalize on the positive fundamentals in the global ITS business as governments and the private sector continue to invest in systems and solutions to enhance highway and roadway infrastructure,” Mr. Bergan concluded.
For the three and six months ended May 31, 2016, consolidated revenue increased 17.9% and 27.6% respectively compared to the same prior year periods due to the Company’s continued success in the execution of an increased number of contracted projects, improved product sales, and increased service and maintenance revenues for the year to date. Changes in the value of the U.S. dollar compared to the prior year-to-date increased consolidated revenues by approximately $2.4 million for the first six months of fiscal 2016.
Revenue in the Company’s Canada and United States segment for the three and six months ended May 31, 2016 increased 26.6% and 40.3% respectively compared to the same prior year periods primarily due to an increase in contracted project revenues and higher product sales. The Company believes revenues in this segment will increase for the full fiscal 2016 year compared to the prior year due to current backlog levels and identified near-term business opportunities.
Latin America and Mexico segment revenue declined for the three and six months ended May 31, 2016 compared to the same respective prior-year periods due primarily to delays in scheduled delivery requirements on current projects. Management believes revenues for the full fiscal 2016 year in this segment will increase to fiscal 2015 levels due to the completion of existing projects and the awarding of identified near-term contract opportunities.
The decline in India segment revenue reflects the Company’s decision to reduce the level of business activity in this region. The Company remains committed to only accepting new business in this market with acceptable profitability and payment terms.
Gross margin for the three and six months ended May 31, 2016 increased by 8.0% and 21.3% compared to the same respective prior-year periods due primarily to the higher sales volumes. As a percentage of revenue, gross margin for the six months ended May 31, 2016 declined to 30.8% primarily due to changes in product mix compared to the prior year.
Administrative and marketing expenses for the first six months of fiscal 2016 increased compared to the prior year primarily due to higher sales costs consistent with the increased levels of business activity. R&D costs increased as the Company continues to allocate resources to accelerate near term business opportunities and to advance the development and introduction of new products to its markets.
Earnings before interest, income taxes, depreciation and amortization, including gains or losses from foreign exchange and derivatives and earnings or losses from the Company’s equity accounted investments (EBITDA) increased to $785,935 in the second quarter of fiscal 2016 compared to $765,290 in the prior year period. For the first six months of fiscal 2016 EBITDA rose to $1.6 million from $1.0 million in fiscal 2015.
The Company recorded foreign exchange losses in the second quarter of fiscal 2016 and year to date of $300,325 and $512,669 respectively (2015 - $205,589 and $94,721). Foreign exchange losses reflect the year to date decline in the value of the U.S. dollar relative to the Canadian dollar and Chilean peso which results in a reduction in the carrying value of U.S. dollar net assets. In addition, the Company recorded a loss on outstanding U.S. dollar forward sales contracts and a decrease in accrued embedded derivative gains related to the realization of U.S. revenues on open contracts within its Chilean and Mexican subsidiaries. The Company partially reduces its exposure to U.S. currency volatility by maintaining a portion of its bank indebtedness in U.S. funds and by hedging a portion of its future U.S. dollar cash flows.
The Company owns a 50% joint venture interest in Xuzhou-PAT Control Technologies Limited (XPCT), an ITS products and manufacturing service provider in China. XPCT reported increased earnings of $124,693 for the first six months of fiscal 2016 compared to $73,528 in the prior year.
Net earnings in the second quarter of fiscal 2016 were $368,006 or $0.03 per common share compared to $337,449 or $0.02 per common share in the prior year’s second quarter. For the first six months of fiscal 2016 net earnings were $824,806 or $0.06 per common share compared to $294,127 or $0.02 per common share in the prior year.
Financial Highlights (financial statements are available on the Company’s web site at www.irdinc.com)
This news release contains forward-looking statements about the Company, including its business operations, strategy and expected financial performance and conditions. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or contain words such as “expects”, “anticipates”, “plans”, “believes”, “estimates”, “intends”, “forecasts”, or negative versions thereof and other similar expressions, or future or conditional future financial performance, on-going business strategies or prospects, and possible future action by the Company. Forward looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company, the general economic environment and ITS industry, business conditions in all geographic areas where the Company carries on business, interest and foreign exchange rates, changes in accounting policies and methods used to report financial condition, including uncertainties associated with critical accounting assumptions and estimates, the effect of applying future accounting changes, business competition, technological changes, changes in government regulation and legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic events, and the Company’s success in managing the foregoing risks. Readers are cautioned, to consider these and other factors carefully and not place undue reliance on forward-looking statements. Forward-looking information contained in this news release is based on management’s current estimates, expectations and projections, which management believes are reasonable as of July 11, 2016. However, actual future operating results and economic performance could differ materially from what is currently expected. While the Company may elect to, it is under no obligation and does not undertake to update any forward-looking statements at any particular time, unless required by applicable securities law. Additional information on the Company, including our most recently filed Annual Information Form can be found on SEDAR at www.sedar.com.
As used herein, "EBITDA" means earnings before interest, income taxes, depreciation and amortization, and includes gains or losses from foreign exchange and derivatives and earnings or losses from the Company’s equity investments. EBITDA is not a recognized measure under International Financial Reporting Standards ("IFRS"). Management believes that EBITDA is a useful supplemental measure to net earnings, as it provides investors with an indication of operating performance prior to debt service, capital expenditures and income taxes. Investors should be cautioned, however, that EBITDA should not be construed as an alternative to net earnings determined in accordance with IFRS as an indicator of the Company’s performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. The Company’s method of calculating EBITDA may differ from the methods by which other companies calculate EBITDA and, accordingly, EBITDA may not be comparable to measures used by other companies.
Additionally, as used herein, 'Shareholders' equity per share' means total shareholders' equity divided by the number of shares outstanding as at the reporting date. Shareholders' equity per share is not a recognized measure under IFRS however, management believes it is an important metric that shareholders use as an indicator of the Company's value relative to its stock price. The Company’s method of calculating Shareholders' equity per share may differ from methods used by other companies and, accordingly, it may not be comparable to measures used by other companies.
IRD is a highway traffic management technology company specializing in supplying products and systems to the global Intelligent Transportation Systems (ITS) industry. IRD is a North American company based in Saskatoon, Saskatchewan Canada with sales and service offices throughout the United States and overseas. Private corporations, transportation agencies and highway authorities around the world use IRD's products and advanced systems to manage and protect their highway infrastructures.
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