International Road Dynamics Inc.
TSX : IRD

International Road Dynamics Inc.

July 14, 2011 12:59 ET

IRD Announces Second Quarter 2011 Results

SASKATOON, SASKATCHEWAN--(Marketwire - July 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 and six months ended May 31, 2011.

Sales for the second quarter of fiscal 2011 were $10.7 million compared to $11.9 million for the same period last year. For the six months ended May 31, 2011 sales were $19.6 million compared to $20.4 million for the same period last year. During fiscal 2011 the Company's Indian subsidiary has experienced delays in project deliveries and completion caused by delays in site readiness, the receipt of customer acceptance of work completed, and the receipt of customer payments. As a result, revenues from the Indian subsidiary were lower by $1.5 million in the second quarter of 2011 compared with the second quarter of the previous year. The remainder of the Company's operations experienced a solid 3% increase in revenues compared with the second quarter of the previous year. In addition, the strengthening of the Canadian dollar against the U.S. dollar resulted in a decrease in the Canadian dollar value of the Company's U.S. dollar-denominated sales of approximately $0.8 million through the first six months of fiscal 2011 compared to the same prior year period.

Offshore sales through the first six months of fiscal 2011 increased to $8.0 million compared to $7.4 million last year due to significant product and system deliveries in Asia, Europe and Latin America, partially offset by the reduction in sales at the Indian subsidiary in the second quarter and the negative impact of the strong Canadian dollar on the recognition of offshore revenues. Management expects offshore revenues to increase in fiscal 2011 from those achieved in fiscal 2010. Sales in the United States for the six months ended May 31, 2011 were $9.9 million, up from $9.1 million in 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 expenditure on highway and roadway infrastructure grows. In Canada, sales declined to $1.7 million in the first half of fiscal 2011 from $4.0 million for the same period last year due to significant commercial vehicle system deliveries in the prior year. Management expects sales in Canada in fiscal 2011 will be lower than in fiscal 2010 but will continue to grow over the longer term.

"While we were pleased with the solid performance through most of our operations, the results at our Indian subsidiary are far from satisfactory and we are taking aggressive steps to return the division to profitability," stated Terry Bergan, President and CEO. "With new management and enhanced oversight, we believe the Indian subsidiary will make a positive contribution to our results over the longer term."

Gross margin as a percentage of sales was 17.1% in the second quarter of fiscal 2011 compared to 28.7% in the second quarter of the prior year. For the six months ended May 31, 2011 gross margin was 21.0% compared to 28.5% in the same period last year. The decline in gross margin in fiscal 2011 was due primarily to the lower revenues at the Indian subsidiary as well as losses accrued in the second quarter of 2011 on certain projects in India where total costs are forecast to exceed the sale price. Management believes lower than normal gross margins will continue to be realized by the Indian subsidiary until the end of the current fiscal year when many of the current projects will be completed.

Administrative and marketing expenses were $2.6 million in the second quarter of fiscal 2011, consistent with the prior year, and $4.9 million through the first six months of fiscal 2011 compared to $4.7 million in the same period of the prior year. Net research and development costs have increased compared to the prior year as the Company continues its active program of technology development aimed primarily at adding to the functionality of its products. Interest expense has declined moderately in fiscal 2011 compared to the prior year period primarily due to a reduced level of debt.

The Company recorded a loss before interest, taxes, depreciation and amortization (EBITDA) of $(0.9) million in the second quarter of fiscal 2011 compared to earnings of $0.7 million in the same prior year period. For the six months ended May 31, 2011 EBITDA was a loss of $(1.3) million compared to earnings of $0.8 million in the same period last year. The decrease in EBITDA is primarily due to the reduced revenues and lower gross margin, increased administrative and marketing and R&D costs, and the impact of foreign exchange losses. The decline in EBITDA in the first six months of fiscal 2011 was partially offset by increased equity earnings at the Company's investment in China compared to an equity loss in the prior year. The Company incurred a net loss of $(0.8) million or $(0.05) per common share in the second quarter of fiscal 2011 compared to net earnings of $0.3 million or $0.02 per share for the same period last year. For the six months ended May 31, 2011 the net loss was $(1.5) million or $(0.10) per share compared to net profit of $0.1 million or $0.01 per share in the same prior year period.

In April 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. 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.

The Company's balance sheet remained solid at May 31, 2011 with working capital at $8.4 million, a current ratio of 1.6 times and a debt to equity ratio of 45%. 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. Based on the Company's financial results for the first six months of 2011 and the forecast for the remainder of the year, management expects that the Company will continue to be in default of the fixed charge coverage covenant until November 30, 2012 and is currently carrying on discussions with Royal Bank of Canada regarding this issue. The Company is in compliance with the liabilities to tangible net worth quarterly covenant at May 31, 2011.

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

Three Months Six Months
Period ended May 31, 2011 2010 2011 2010
(in $000's except per share amounts)
Sales $ 10,717 $ 11,912 $ 19,634 $ 20,446
EBITDA $ (881 ) $ 703 $ (1,254 ) $ 839
Net Earnings (Loss) $ (790 ) $ 258 $ (1,456 ) $ 77
Net Earnings (Loss) per Common Share (Basic) $ (0.05 ) $ 0.02 $ (0.10 ) $ 0.01
Total Assets $ 35,329 $ 40,482
Total Long-Term Financial Liabilities $ 2,256 $ 6,833
Working Capital $ 8,370 $ 7,787
Shareholders' Equity per Share $ 1.21 $ 1.30
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 Six Months
Period Ended May 31, 2011 2010 2011 2010
(in $000's)
EBITDA $ (881 ) $ 703 $ (1,254 ) $ 839
Amortization Expense (212 ) (236 ) (392 ) (436 )
Interest Expense (153 ) (162 ) (320 ) (335 )
Income Tax Recovery (Expense) 456 (47 ) 510 9
Net Earnings (Loss) $ (790 ) $ 258 $ (1,456 ) $ 77

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.

Contact Information

  • International Road Dynamics Inc.
    Terry Bergan
    President & CEO
    (306) 653-6600 or U.S. (303) 355-5998

    International Road Dynamics Inc.
    Francine Senecal-Lepage
    Investor Relations
    (306) 653-6603
    (306) 653-6609 (FAX)
    irdir@irdinc.com
    www.irdinc.com