Norsat Reports 2002 Second Quarter and First Half Financial Results.Business Editors BURNABY Burnaby (bûr`nəbē), city (1991 pop. 158,858), eastern suburb of Vancouver, SW B.C., Canada. A transportation, industrial, and distribution center, its products include steel, trucks, telecommunications and electronic equipment, lumber, , British Columbia--(BUSINESS WIRE)--Aug. 7, 2002 Norsat International Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :NSAT NSAT National Secondary Assessment Test (Philippines) )(TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :NII (National Information Infrastructure) The U.S. government's policy for managing advanced technology in the country. The Clinton/Gore administration (1993-2001) was very enthusiastic about the Internet and proposed that it should be funded by private industry and be ), provider of high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. data transmission microwave microwave, electromagnetic wave having a frequency range from 1,000 megahertz (MHz) to 300,000 MHz, corresponding to a wavelength range from 300 mm (about 12 in.) to 1 mm (about 0.04 in.). Like light waves, microwaves travel essentially in straight lines. products and open standard satellite networks, today announced its financial results for the second quarter and six months ended June June: see month. 30, 2002. Financial Results Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenues in the second quarter of 2002 were $3,126,183 compared to $4,257,719 in the same period last year, a decrease of 27%. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. revenues were $6,131,771 versus $9,840,259 for the first six months of 2001, a decline of 38%. As described in the first quarter report, the revenue decline was a result of expected delays in large satellite infrastructure projects, which in turn impacted demand for products and services from both the Open Networks and Microwave Products business units. Despite reduced revenues, contribution margins in the second quarter increased $437,087, a 51% improvement, to $1,298,935 compared to $861,848 in the same period last year. Contribution margins as a percent of revenue more than doubled to 42% versus 20% in the second quarter of 2001. On a year-to-date basis, the contribution margin was $2,686,567 (44% of revenue) versus $2,776,103 (28% of revenues) in the first six months of 2001. This improvement resulted from higher margin Open Networks service contract revenues and the small volume, high margin traditional Microwave Products orders. In addition, the gross margin in the first six months of 2001 was lower than usual, as it included the initial low margin contract for the new line of Ka-band See satellite bands. outdoor units. The drive to lower operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. continued in the second quarter of 2002. Expenses were $1,790,771 compared to $1,898,444 in the same period last year, a decrease of 6%, while year-to-date expenses were $4,103,017 versus $5,613,816 in the first six months of 2001, a decrease of 27%. As a result of increased emphasis in growing sales and marketing capabilities, selling, general, and administrative (SG&A) expenses were $1,297,676 in the second quarter of 2002 versus $850,379 in the same period last year, an increase of 53%. The SG&A expense included additional sales and marketing spending to drive sales in the second half of 2002, while administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. were kept under tight control to match the lower sales expectations in the second quarter of 2002. In addition, SG&A expenses in 2001 were unusually low due to the sales restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). initiatives that occurred in the first six months of 2001. On a year-to-date basis, SG&A expenses declined 10% to $2,772,532 from $3,065,259 in the first six months of 2001. Product development expenses, net of Technology Partnership Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of (TPC (Transaction Processing Performance Council, San Francisco, CA, www.tpc.org) An organization devoted to benchmarking transaction processing systems. In order to derive the number of transactions that can be processed in a given time frame, TPC benchmarks measure the total performance of ) contributions, were $493,095 in the second quarter of 2002 versus $1,048,065 in the same period last year. Gross product development expenses decreased by 66% to $985,895 in the second quarter of 2002, from $2,879,325 in 2001. This reduced expense level was mainly due to cost reductions, and the redirection Diverting data from their normal destination to another; for example, to a disk file instead of the printer, or to a server's disk instead of the local disk. See virtual directory, symbolic link, shortcut, redirector and DOS redirection. 1. of product development resources to the new PicoTerminal contract that was announced at the end of 2001. The operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. before amortization and restructuring costs was reduced by half to $491,836 in the second quarter of 2002 compared to $1,036,596 during the same period in 2001. Year-to-date, the operating loss before amortization and restructuring also declined by 50% to $1,416,450 from $2,837,713 in the first six months of 2001. The net loss in the second quarter of 2002 was $1,333,878 or $(0.04) per share, as compared to a net loss of $3,589,393 or $(0.11) per share during the same period in 2001. The Year-to-date net loss was $3,420,202 or $(0.10) per share versus a loss of $6,575,168 or $(0.22) per share in the first six months of 2001. "We continue to focus on activities that will drive revenues in the second half of the year. Many of the contracts we announced this quarter are expected to impact our near term revenue levels as we continue to grow our sales backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. for 2002 and beyond," said Mark Ahrens-Townsend, Norsat's President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . Operational Highlights -- Completed the Largest Shipment of Ka/Ku-band Commercial Outdoor Units with the 1000th Ka/Ku-band terminal shipped to EMS Technologies, Inc. for deployment on SES-ASTRA's Broadband Interactive System (BBI) -- Received an order from Dynamic Engineers, Inc., a privately owned international electronic component distributor, for up to 500 of Norsat's VSAT Ku-band terminals -- Signed an agreement with Quick Link Communications Ltd., a Satellite Access Service Provider, to purchase up to 500 VSAT Ku-band terminals for broadband communication to remote locations -- Signed a contract with Globecomm Systems Inc. for an open standard Digital Video Broadcasting (DVB) forward link satellite network that will be used by a large satellite service provider to provide broadband services to customers -- Announced a new Board of Directors that included additional global representation as well as extensive marketing, engineering and financial experience "We will continue to tightly control our non-sales related expenses this year, while strategically investing additional funds in sales and marketing activities," stated Ahrens-Townsend. "We have already seen positive results from these additional activities, and we plan to build on the successful launch of our new products over the remainder of the year." Liquidity and Capital Resources The Company's cash balance as at June 30, 2002 was $3,436,961, compared to $1,660,282 on June 30, 2001 and $2,160,678 on December December: see month. 31, 2001. This improvement in the Company's cash balance was a result of the recent financing agreements Financing Agreements In the context of project financing, the documents which provide the project financing and sponsor support for the project as defined in the project contracts. that contributed $3,514,811 during the first half of 2002. The Company's inventory levels increased from $5,969,642 as of December 31, 2001 to $7,189,822 on June 30,2002. This increase in inventory is a result of the current work in progress level of the PicoTerminal contract as well as the increased inventory of the new transmitter A device that generates signals. Contrast with receiver. and ipe IN A BOX products required to meet the expected future demand. Significant Accounting Policies and Estimates The significant accounting policies are described in note 2 of the Notes to Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge included in Norsat's 2001 Annual Report. A discussion of the critical accounting policies, and the related estimates, are included in Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Results of Operations and Financial Condition in the 2001 Annual Report. There were no significant changes in accounting policies or estimates since the fiscal year ended December 31, 2001, other than that discussed in note 1 to the following unaudited financial statements for the period ended June 30, 2002. Conference Call Please join Norsat President and CEO, Mark Ahrens-Townsend, on Thursday Thursday: see week. , August 8, 2002 at 1:00 p.m. (Eastern) for a live conference call to discuss second quarter results. In North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , dial 1.888.722.1086; for International calls, dial +1.416.641.6709. A taped replay will be available until 11:59 p.m. (Eastern) on August 15 by dialing 1.800.558.5253 in North America and entering reservation A clause in a deed of real property whereby the grantor, one who transfers property, creates and retains for the grantor some right or interest in the estate granted, such as rent or an Easement ,a right of use over the land of another. 20797311. For International access to the replay, dial +1.416.626.4100 and enter reservation 20797152. After that date, the conference call will be available on Norsat's corporate website.
Financial Statements
Norsat International Inc.
Consolidated Balance Sheets
(Expressed in Canadian Dollars)
----------------------------------------------------------------------
June 30, 2002 December 31, 2001
(Unaudited) (Audited)
----------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 3,436,961 $ 2,160,678
Accounts receivable 3,219,039 4,761,064
Inventories 7,189,822 5,969,642
Prepaid expenses 294,615 401,220
Current assets from
discontinued operations 495,000 1,268,030
----------------------------------------------------------------------
14,635,437 14,560,634
Capital assets 3,422,526 4,262,206
Other assets 944,540 1,202,081
----------------------------------------------------------------------
$ 19,002,503 $ 20,024,921
----------------------------------------------------------------------
Liabilities and
Shareholders' Equity
Current Liabilities:
Accounts payable $ 2,685,257 $ 2,391,282
Accrued liabilities 2,095,922 3,404,882
Current liabilities from
discontinued operations 1,777,519 2,281,710
Deferred revenue 565,565 570,618
Promissory note 411,862 -
----------------------------------------------------------------------
7,536,125 8,648,492
Long-term debt 1,168,338 -
Shareholders' Equity:
Share capital 36,316,026 33,974,213
Deficit (25,992,662) (22,572,460)
Cumulative translation
adjustment (25,324) (25,324)
----------------------------------------------------------------------
10,298,040 11,376,429
----------------------------------------------------------------------
$ 19,002,503 $ 20,024,921
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Norsat International Inc.
Consolidated Statements of Operations and Deficit
(Expressed in Canadian Dollars)
(Unaudited)
----------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
----------------------------------------------------------------------
Sales $ 3,126,183 $ 4,257,719 $ 6,131,771 $ 9,840,259
Cost of Sales 1,827,248 3,395,871 3,445,204 7,064,156
----------------------------------------------------------------------
1,298,935 861,848 2,686,567 2,776,103
Expenses
Selling, general
and
administrative 1,297,676 850,379 2,772,532 3,065,259
Product development 493,095 1,048,065 1,330,485 2,548,557
----------------------------------------------------------------------
1,790,771 1,898,444 4,103,017 5,613,816
Operating loss
before amortization
and restructuring (491,836) (1,036,596) (1,416,450) (2,837,713)
Amortization 503,376 1,540,467 1,022,980 2,917,343
Restructuring charge - 861,000 529,539 861,000
----------------------------------------------------------------------
503,376 2,401,467 1,552,519 3,778,343
Operating loss (995,212) (3,438,063) (2,968,969) (6,616,056)
Other items:
Interest expense
(income) 188,569 (28,103) 311,933 24,686
Foreign currency
loss (gain) 150,097 179,433 139,300 (65,574)
----------------------------------------------------------------------
338,666 151,330 451,233 (40,888)
Net loss (1,333,878) (3,589,393) (3,420,202) (6,575,168)
Deficit, beginning
of period (24,658,784) (48,275,848) (22,572,460) (45,290,073)
----------------------------------------------------------------------
Deficit, end of
period $(25,992,662)$(51,865,241)$(25,992,662)$(51,865,241)
----------------------------------------------------------------------
----------------------------------------------------------------------
Basic and fully
diluted net loss
per common share $ (0.04)$ (0.11)$ (0.10)$ (0.22)
----------------------------------------------------------------------
Norsat International Inc.
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)
----------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
----------------------------------------------------------------------
Cash provided by (used in):
Operations:
Net loss $ (1,333,878) $ (3,589,393) $ (3,420,202) $ (6,575,168)
Items not
involving cash:
Amortization 503,376 1,540,467 1,022,980 2,917,343
Interest 131,037 - 174,157 -
Issuance of
common shares
for services 61,845 - 259,845 -
Changes in non-cash
working capital (461,879) (1,520,372) (591,589) (5,305,171)
----------------------------------------------------------------------
Cash used
in operations (1,099,499) (3,569,298) (2,554,809) (8,962,996)
Changes in
non-cash
working
capital
from
discontinued
operations 477,971 (209,711) 363,472 4,177,720
----------------------------------------------------------------------
477,971 (209,711) 363,472 4,177,720
(621,528) (3,779,009) (2,191,337) (4,785,276)
Investments:
Purchase of capital
assets - (217,234) (20,391) (280,126)
----------------------------------------------------------------------
- (217,234) (20,391) (280,126)
Financing:
Proceeds from
promissory
note - - 478,462 -
Proceeds from
long-term
debt - - 3,036,349 -
Issue of common
shares (26,800) 2,657,229 (26,800) 4,912,024
Decrease (Increase)
in bank indebtedness - 158,735 - (2,416,514)
----------------------------------------------------------------------
(26,800) 2,815,964 3,488,011 2,495,510
----------------------------------------------------------------------
Increase (decrease)
in cash and
cash equivalents (648,328) (1,180,279) 1,276,283 (2,569,892)
Cash and cash
equivalents,
beginning of
period 4,085,289 2,840,561 2,160,678 4,230,174
----------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 3,436,961 $ 1,660,282 $ 3,436,961 $ 1,660,282
----------------------------------------------------------------------
Norsat International Inc.
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited)
1 Continuing Operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the These consolidated financial statements have been prepared on the going concern basis, which presumes the realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. of assets and the settlement of liabilities in the normal course of operations. The application of the going concern basis is dependent upon the Company achieving profitable operations to generate sufficient cash flows to fund continued operations, or, in the absence of adequate cash flows from operations, obtaining additional financing. The Company has reported losses and negative cash flows from operations in the last three years. Management has undertaken to significantly reduce costs through a series of actions including, but not limited to, lowering the number of employees, reducing operating costs operating costs npl → gastos mpl operacionales and considering other financing alternatives for its operations. Although there is no assurance that the Company will be successful in these actions, management is confident that it will be able to secure the necessary financing arrangements and improvements in operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. to enable it to continue as a going concern. 2 Significant Accounting policies Basis of presentation The unaudited interim period consolidated financial statements (the "financial statements") have been prepared by the Company in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). These financial statements do not contain all disclosures required by Canadian GAAP for annual financial statements, and accordingly, the financial statements should be read together with the audited annual consolidated financial statements and the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. notes included in the Company's 2001 Annual Report. The preparation of financial data is based on accounting polices and practices consistent with those used in the preparation of annual consolidated financial statements. For 2002, the Company adopted the new HB 3870 "stock-based Compensation and Other Stock-based Payments", which establishes standards for the recognition, measurements and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. . HB 3870 sets out a fair value based method of accounting that is required for certain, but not all, stock-based transactions. The new standard permits the Company to continue its existing policy that no compensation cost is recorded on the grant of stock options to employees when the exercise price is above fair market value at the date of grant. Consideration paid by employees on the exercise of stock options is recorded as share capital. HB 3870, however does require additional disclosures for options granted to employees, including disclosure of proforma Proforma A financial projection based on assumptions. earnings and proforma earning per share Noun 1. earning per share - the portion of a company's profit allocated to each outstanding share of common stock net income, net profit, profit, profits, earnings, lucre, net - the excess of revenues over outlays in a given period of time (including depreciation as if the fair value based accounting method had been used to account for employee stock options. These disclosures are consistent with the disclosures contained in the accompanying notes to the audited annual consolidated financial statements in the Company's 2001 Annual Report.
Norsat International Inc.
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited)
3 Segmented Information
The following tables set forth information by operating segments
from continuing operations for the six months ended June 30, 2002 and
2001 respectively. The comparative balance sheet amounts are as at
December 31, 2001:
----------------------------------------------------------------------
Open
2002 Microwave Networks Consolidated
----------------------------------------------------------------------
Sales $ 5,527,336 $ 604,435 $ 6,131,771
Gross profit $ 2,232,075 $ 454,492 $ 2,686,567
Total assets related
to continuing
operations $ 11,838,454 $ 6,374,552 $ 18,213,006
Capital assets $ 2,361,543 $ 1,060,983 $ 3,422,526
Goodwill $ 404,888 $ - $ 404,888
----------------------------------------------------------------------
----------------------------------------------------------------------
Open
2001 Microwave Networks Consolidated
----------------------------------------------------------------------
Sales $ 7,541,933 $ 2,298,326 $ 9,840,259
Gross profit $ 2,180,357 $ 595,746 $ 2,776,103
Total assets related
to continuing
operations $ 11,939,045 $ 6,428,716 $ 18,367,761
Capital assets $ 2,983,394 $ 1,278,812 $ 4,262,206
Goodwill $ 440,095 $ - $ 440,095
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4 Comparative Figures The comparative quarter ended June 30, 2001 included goodwill amortization of $855,798. Accordingly, the loss before amortization of goodwill for the three months ended June 30, 2001 was $2,733,595 or $0.09 per share. About Norsat Norsat International Inc. designs and markets infrastructure products and open standard networks for high-speed data transmission. With over 1.8 million microwave products shipped and open standard networks installed worldwide, Norsat is a recognized market leader. Statements in this release relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc matters that are not historical fact are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. based on current expectations, forecasts, and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to general economic conditions, changes in technology, reliance on third party manufacturing, managing rapid growth, global sales risks, limited intellectual property protection, and other risks and uncertainties described in Norsat's public filings with securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities . |
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