Saskatoon, February 28, 2012 - 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 and year ended November 30, 2011.
Sales for the fourth quarter of fiscal 2011 were $9.3 million compared to $10.7 million for the same period last year. For the year ended November 30, 2011 sales were $39.1 million compared to $44.5 million in fiscal 2010. The reduction in sales in fiscal 2011 compared to the prior year is primarily due to the slowing global economy and the resulting delayed investment by governments in highway and roadway infrastructure, as well as delays in project deliveries and completion caused by delays in site readiness and the receipt of customer acceptance of work completed. The strengthening of the Canadian dollar against the US dollar also resulted in a decrease in the Canadian dollar value of the Company’s U.S. dollar-denominated sales of approximately $1.4 million in fiscal 2011 compared to the prior year. Approximately 74% of the Company’s sales in fiscal 2011 were denominated in U.S. dollars.
Offshore sales in fiscal 2011 reduced to $14.6 million from $15.6 million last year due primarily to lower product sales to the Company’s partner in China, the reduction in sales at the Company’s Indian subsidiary and the negative impact of the strong Canadian dollar on the recognition of offshore revenues. The Company’s subsidiary in Chile continues to maintain its strong market position in Latin America, while management believes its subsidiary in India is well positioned to take advantage of opportunities afforded by the significant expansion in highway and toll systems in the Southeast Asia region despite the operational challenges it has experienced during fiscal 2011. Management expects offshore revenues in fiscal 2012 will be higher than in fiscal 2011. Sales in the United States for the year ended November 30, 2011 were $20.9 million compared to $21.1 million in the prior year. Management expects revenues in the U.S. market in fiscal 2012 will be consistent with fiscal 2011 due primarily to recent extensions to the U.S. Transportation Funding Bill. In Canada, sales declined to $3.7 million in fiscal 2011 from $7.8 million last year due to significant commercial vehicle system deliveries in the prior year. Management expects sales in Canada in fiscal 2012 will be consistent with fiscal 2011.
“Our results in 2011 reflect the slowing global economy and the resulting delayed investment by governments in highway and roadway infrastructure. However, based on the volume of opportunities we believe are currently available in our markets, and the orders received during and subsequent to the fourth quarter of the year, we expect to see improved results over the near term,” stated Terry Bergan, President and CEO.
“As previously announced, during 2011 we encountered significant management and operational issues at our Southeast Asia subsidiary in India. Looking ahead, we are confident the changes implemented during the year will result in improved profitability over the long term. However, in the fourth quarter we did record certain one-time charges to income related to this subsidiary that impacted our results for the year,” Mr. Bergan added.
Gross margin as a percentage of sales improved to 25.9% in the fourth quarter of fiscal 2011 compared to 24.5% in the fourth quarter of the prior year. For the year ended November 30, 2011 gross margin was 24.4% compared to 28.8% in the same period last year. In addition to the impact of the stronger Canadian dollar, the reduction in gross margin in fiscal 2011 compared with the prior year was due to a sales mix which includes a lower proportion of higher margin proprietary systems and products as well as the lower revenues and the accrued losses on projects recorded by the Company’s subsidiary in India as discussed above. Lower than normal gross margins will continue to be realized by the Indian subsidiary until mid-fiscal 2012 when many of the current projects will be completed.
Administrative and marketing expenses increased to $3.3 million in the fourth quarter of fiscal 2011 from $2.6 million in the same period last year. For the year ended November 30, 2011, administrative and marketing expenses were $10.7 million compared to $10.0 million last year. The increase is primarily due to the previously announced one-time provision for uncollectible accounts receivable of approximately $0.9 million at the Company’s subsidiary in India, as well as increased lease expense as a result of the property sale and leaseback completed in April 2011. Net research and development costs have increased in fiscal 2011 as the Company continues its active program of technology development aimed primarily at adding to the functionality of its products, and expects research and development expenditures to remain at current levels in fiscal 2012. Interest expense has declined in fiscal 2011 compared to the prior year period primarily due to a reduced level of debt.
The Company generated a loss before interest, taxes, depreciation and amortization (EBITDA) of $(1.2) million in the fourth quarter of fiscal 2011 compared with a loss of $(29,708) in the same prior year period. For the year ended November 30, 2011 EBITDA was a loss of $(2.0) million compared to earnings of $2.3 million last year. The decrease in EBITDA is primarily due to the reduced revenues and lower gross margin in fiscal 2011, the one-time provision for uncollectible accounts receivable at the Company’s subsidiary in India, and a previously announced one-time provision for obsolete inventory of approximately $0.4 million. The Company incurred a net loss of $(2.0) million or $(0.14) per common share in the fourth quarter of fiscal 2011 compared to a net loss of $(0.3) million or $(0.03) per share for the same period last year. For the year ended November 30, 2011 the Company generated a net loss of $(3.3) million or $(0.23) per share compared to net profit of $0.4 million or $0.03 per share in the prior year. The net loss in fiscal 2011 included a previously announced one-time charge of approximately $0.9 million related to income tax losses carried forward at the Company’s subsidiary in India. As a result of continuing losses at this subsidiary, management is uncertain that the operations will be able to generate sufficient future earnings to offset these tax losses prior to their expiry.
The Company’s balance sheet remained solid at November 30, 2011 with working capital of $7.2 million, a current ratio of 1.5 times, and a debt to equity ratio of 51%. In July 2011 the Company amended its credit facilities agreement and was in compliance with its total liabilities to tangible net worth quarterly covenant as at November 30, 2011, and expects it will be in compliance with its fixed charge coverage at November 30, 2012.
In April 2011 the Company completed the sale of its head office and manufacturing facility located in Saskatoon, Saskatchewan for net proceeds of approximately $6.5 million. The Company also entered into a twelve-year net lease agreement with the purchaser of the property with two options to renew the lease for additional five-year terms. The Company recorded a gain of approximately $3.0 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, were used to reduce the Company’s operating line of credit.
IRD also announced today that Mr. Mel Karakochuk, the Company's Chief Financial Officer, would be leaving the Company effective April 20, 2012 to pursue other opportunities. The Board of Directors has begun a formal search for his replacement. "Mel has been a valued member of the IRD team for the past 8 years, and we wish him every success in his future endeavors," Mr. Bergan stated.
Financial Highlights (financial statements are available on the Company’s web site www.irdinc.com )
As used herein, "EBITDA" means earnings before interest, income taxes, depreciation and amortization, and gain on sale of property 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 can differ from the methods by which other companies calculate EBITDA and, accordingly, EBITDA cannot not be comparable to measures used by other companies. The following is a reconciliation of EBITDA to net earnings (loss):
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, can 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 can 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.
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The Company's shares trade on the Toronto Stock Exchange under the symbol IRD.
FOR MORE INFORMATION PLEASE CONTACT:
President & CEO
Phone: (306) 653-6600
U.S. (303) 355-5998
Phone: (306) 653-6603
Fax: (306) 653-1454
IRD is listed on the TSX - trading symbol - IRD