News

14Apr, 11

IRD Announces First Quarter 2011 Results

Saskatoon, April 14, 2011 - International Road Dynamics Inc. (TSX: IRD), the world’s largest provider of Weigh-In-Motion systems and solutions for the global Intelligent Transportation Systems (ITS) market, today announced results for the three months ended February 28, 2011.

Q1 2011 HIGHLIGHTS:

  • Sales up 4.5% on strong product and toll system sales
  • Offshore sales rise 41.7% on growth in Asia, Europe and South America
  • Management implementing programs to enhance profitability
  • Settlement reached on outstanding amount owing for acquisition of Chinese joint venture
  • Recent property transaction significantly strengthens financial position

Sales for the first quarter of fiscal 2011 were $8.9 million compared to $8.5 million for the same period last year. Solid gains in sales of the Company’s off-the-shelf products and toll systems were offset by reduced revenues from commercial vehicle and data collection systems. Maintenance contract and in-vehicle system revenues were generally consistent with the prior year’s first quarter. In addition, the strengthening of the Canadian dollar against the US dollar resulted in a decrease in the Canadian dollar value of the Company’s U.S. dollar-denominated sales of approximately $0.3 million in the first quarter of fiscal 2011 compared to the same prior year period. 

Offshore sales in the first quarter of 2011 increased to $4.5 million compared to $3.2 million last year due to significant product and system deliveries in Asia, Europe and Latin America. The Company’s subsidiary in Chile continues to maintain its strong position in the Latin American market, while its subsidiary in India remains well positioned to take advantage of opportunities afforded by the significant expansion in highway and toll systems in the Southeast Asia region. Management expects offshore revenues to increase in fiscal 2011 from those achieved in fiscal 2010. Sales in the United States in the first quarter of fiscal 2011 were $3.9 million, consistent with the prior year. Management expects revenues from the U.S. market in fiscal 2011 to remain consistent with fiscal 2010 but to increase over the longer term as the country’s economy improves and government expenditure on highway and roadway infrastructure grows. In Canada, sales declined to $0.6 million in the first quarter of fiscal 2011 compared to $1.4 million for the same period last year due to significant commercial vehicle system deliveries in the prior year’s first quarter. Management expects sales in Canada in fiscal 2011 will be modestly lower than in fiscal 2010 but will continue to grow over the longer term.

“While we are encouraged by the solid recovery in our offshore markets, profitability in the quarter did not meet our expectations,” stated Terry Bergan, President and CEO. “We are implementing a number of programs and initiatives aimed at improving profitability and increasing accountability throughout the Company, and look for improved performance in the quarters ahead.”

Gross margin as a percentage of sales was 25.6% in the first quarter of fiscal 2011, up from 24.5% in the fourth quarter of fiscal 2010 but down from 28.2% in the first quarter of the prior year.  The decline in the first quarter of 2011 compared to the same period in the prior year was due primarily to the impact of the change in value of the U.S. dollar and a sales mix which included a lower proportion of higher margin proprietary systems and products.  In addition, the Company’s subsidiary in India experienced lower than normal gross margins during the first quarter of 2011 due to increased costs caused by delays in project deliveries.  

Administrative and marketing expenses increased to $2.3 million in the first quarter of fiscal 2011 from $2.1 million in the prior year due to higher costs for sales commissions, salaries, travel, professional fees and insurance. Net research and development costs increased to $0.3 million from $0.1 million in the prior year’s first quarter as the Company continues its active program of technology development aimed primarily at adding to the functionality of products developed over the past few years. Management expects research and development expenditures to continue at the current level for the remainder of fiscal 2011. Interest expense declined moderately in the first quarter of fiscal 2011 compared to the prior year period primarily due to a reduced level of debt.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were a loss of $(0.4) million in the first quarter of fiscal 2011 compared to earnings of $0.1 million in the same prior year period. The decrease in EBITDA is primarily due to the lower gross margin, increased administrative, marketing and R&D costs, and the impact of foreign exchange losses. In addition, EBITDA in the first quarter of fiscal 2011 was negatively impacted by the equity loss of $(0.6) million reported from the Company’s investment in China compared to an equity loss of $(0.1) million in the prior year. The change was primarily due to a $(0.5) million writedown of values assigned to receivables and inventory on acquisition and is offset by the gain of $0.5 million realized on settlement of the vendor loan as discussed below. The Company incurred a net loss of $(0.7) million or $(0.05) per common share in the first quarter of fiscal 2011 compared to a net loss of $(0.2) million or $(0.01) per share for the same period last year.

As at November 30, 2010 the amount outstanding on the purchase price for the Company’s joint venture in China, Xuzhou-PAT Control Technologies Limited (XPCT) of $1.0 million plus accrued interest was in dispute. In an agreement dated February 15, 2011 the Company agreed to pay $0.7 million in full settlement of the vendor loan and accrued interest and to discontinue all claims against the vendor relating to the acquisition of XPCT. In the first quarter of 2011 the Company recorded a gain on settlement of this vendor loan in the amount of $0.5 million.

The Company’s balance sheet remained solid at February 28, 2011 with working capital at $3.7 million, a current ratio of 1.2 times and a debt to equity ratio of 70%. As at November 30, 2010 the Company was not in compliance with the fixed charge coverage covenant on its credit facilities with Royal Bank of Canada, and as a result total amounts owing under these credit facilities have been included in the current portion of long-term debt. The Royal Bank has given the Company until November 30, 2011 to remedy the default.

On April 6, 2011, the Company entered into an agreement to sell its head office and manufacturing facility located in Saskatoon, Saskatchewan for a sale price of $6.7 million. The Company has also entered into a twelve-year net lease agreement with the purchaser of the property with options to renew the lease for two additional five-year terms. The Company will record a gain of approximately $2.9 million which will be amortized over the term of the lease.  Net cash proceeds from the sale, after the retirement of the $2.6 million mortgage on the property and other costs related to the transaction, will be approximately $3.7 million which will be initially used to reduce the Company’s operating line of credit.  The transaction is expected to close on or before April 15, 2011.

“This innovative transaction enhances our balance sheet and financial position, and provides additional capital to invest in the Company’s long-term growth,” stated Terry Bergan, IRD's President and Chief Executive Officer. “Looking ahead, we remain confident in our long-term prospects as global economies continue to recover and increased emphasis is placed on upgrading transportation infrastructure in major markets around the world.”

Financial Highlights (financial statements are available on the Company’s web site www.irdinc.com )

                                                                                                               Three Months            

Period Ended February 28,

2011

2010

(in $000’s except per share amounts)

 

 

Sales

$   8,916

$   8,534

EBITDA

(373)

136

Net loss

(667)

(181)

Net loss per common share (basic)

  (0.05)

(0.01)

Total assets

37,219

40,151

Total long-term financial liabilities

5,107

7,255

Working capital

3,672

7,921

Shareholders’ equity per share

$     1.27

$     1.29

Common shares outstanding

13,998

13,998

 

As used herein, "EBITDA" means earnings before interest, income taxes, depreciation, and amortization, and includes gains or losses from foreign exchange and earnings or losses from the Company’s equity investments. EBITDA is not a recognized measure under Canadian generally accepted accounting principles ("GAAP"). Management believes that EBITDA is a useful supplemental measure to net earnings (loss), 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 (loss) determined in accordance with GAAP 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.  The following is a reconciliation of EBITDA to net earnings:    

                                                                                                             Three Months            

Period Ended February 28,

2011

2010

(in $000’s)

 

 

EBITDA

$ (373)

$ 136

Amortization expense

(180)

(201)

Interest expense

(168)

(172)

Income tax expense

54

56

Net loss

$ (667)

$ (181)

Certain statements contained in this news release constitute forward-looking information within the meaning of securities laws. Implicit in this information, particularly in respect of future operating results and economic performance of the Company, are assumptions regarding projected revenue and expenses. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual future operating results and economic performance of the Company are subject to a number of risks and uncertainties, including general economic, market and business conditions and could differ materially from what is currently expected. For more exhaustive information on these risks and uncertainties, please refer to our most recently filed annual information form, available at www.sedar.com. Forward-looking information contained in this report is based on management’s current estimates, expectations and projections, which management believes are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to do so, we are under no obligation and do not undertake to update this information at any particular time unless required by applicable securities law.

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.

- 30 -

The Company’s shares trade on the Toronto Stock Exchange under the symbol IRD.

FOR MORE INFORMATION PLEASE CONTACT:
Terry Bergan
President & CEO
Phone: (306) 653-6600
U.S. (303) 355-5998

Francine Senecal-Lepage
Investor Relations
Phone: (306) 653-6603
Fax: (306) 653-1454
Email: irdir@irdinc.com

IRD is listed on the TSX - trading symbol - IRD
www.irdinc.com

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