International Road Dynamics (IRD), the world’s largest provider of weigh-in-motion systems and solutions for the global intelligent transportation systems (ITS) market, today announced its results for the three months and year ending November 30, 2008.
Sales for the fourth quarter of fiscal 2008 increased 23.8% to $12.3 million, compared with $9.9 million for the same period the previous year. The increase in sales in the fourth quarter was primarily due to the timing of delivery and installation for certain projects, higher international sales and increased sales of commercial vehicle and toll road systems. For fiscal 2008, sales were $38.7 million, compared with $39.8 million in fiscal 2007.
International sales continued to grow in the fourth quarter, rising to $4.1 million compared with $3.4 million for the same period last year. For the year ended November 30, 2008, international sales increased 21.4% to $14 million compared with $11.5 million in fiscal 2007. The increase in offshore sales was due primarily to increased revenues from toll systems and a significant weigh station delivery in the Middle East, as well as higher revenues from the company’s subsidiary in Chile. The company expects revenues from its subsidiaries in Chile and India will continue to improve in 2009.
Revenues in the US for the fourth quarter of fiscal 2008 improved 22% to $6.6 million from $5.4 million in the previous year period, due primarily to the timing of the delivery and installation of contracts that had been delayed earlier in fiscal 2008. For the year ended November 30, 2008, sales in the US were $20.1 million, compared with $22.7 million in fiscal 2007.
Canadian sales rose to $1.6 million in the fourth quarter of fiscal 2008, compared with $1.1 million in the previous year. For the year ended November 30, 2008, sales in Canada were $4.6 million, compared with $5.6 million the previous year. Fiscal 2007 included substantial revenues from the delivery and installation of two large data collection and truck pre-clearance site contracts completed in the first half of that year. There were no similar contracts during fiscal 2008.
With the slowdown in the US economy, the company is experiencing delays in the awarding of federally-funded contracts for weigh station and data collection systems. Management believes that, based on early indications, the stimulus packages being implemented by the governments of both the US and Canada may have a positive impact on the company’s business. As a result, the company has increased its sales efforts in the city, municipal and private sectors in the US, and accelerated its efforts in specific international markets with higher growth potential, including India, China and Chile.
During fiscal 2008, new contract awards to the company’s subsidiaries in India and Chile have exceeded forecasts, with the resulting revenues to continue to be realised into early fiscal 2009. In addition, management believes the acquisition of Xuzhou-PAT Control Technologies (XPCT) in China in the first quarter of 2008 will generate increased sales volumes in that region in 2009 and over the longer term.
Randy Hanson, executive vice president and COO, said: “After a slow start to the year, we experienced solid growth through the fourth quarter as we generated strong sales increases in all our geographic markets. Looking ahead, our investments aimed at increasing our presence in international markets are resulting in steady increases in demand for our products and services in a number of regions, while our industry-leading presence and reputation in the US should generate increased business as government-led initiatives to enhance transportation infrastructure accelerate over the longer term.”
Earnings before interest, taxes, depreciation and amortisation (EBITDA) were $0.6 million in the fourth quarter of fiscal 2008, compared with $0.6 million in the same period the previous year. EBITDA includes loss from equity investments of $0.3 million compared with a loss from equity investments of $0.2 million in the fourth quarter of 2007. For the year ended November 30, 2008 EBITDA was $1.2 million, compared with $3.8 million last year.
Gross margin for the fourth quarter of 2008 was 27.4% of sales compared with 32.6% in the fourth quarter of 2007. For the year ended November 30, 2008 gross margin as a percentage of revenues was 28.8% compared with 31.9% for the same period in 2007. The decline in gross margin was due primarily to a provision for inventory obsolescence of approximately $0.2 million recorded in the fourth quarter of 2008, and decreased offshore sales of product in 2008 compared with 2007.
Administrative and marketing expenses in fiscal 2008 have risen compared with the prior year due primarily to increased sales and marketing efforts. However, as a percentage of revenues, administrative and marketing expenses in the fourth quarter of 2008 decreased to 18.1% compared to 21.1% for the same period in fiscal 2007. For fiscal 2008, administrative and marketing expenses as a percentage of revenues were 22.6% of sales compared with 21% in the previous fiscal year.
Research and development costs increased in the fourth quarter and fiscal year compared with the same prior year periods due primarily to the company’s active programme of technology development aimed at adding additional functionality to products developed over the past several years. Amortisation expense decreased in both the fourth quarter of fiscal 2008 as well as the year compared to the same periods the previous year. Interest expense has increased in fiscal 2008 due to additional debt incurred to finance the construction of the company’s new production facility and for the acquisition of XPCT in the first quarter of the year.
In the course of the audit of its financial statements for the year ended November 30, 2008, the company discovered it had incorrectly included in equity earnings currency gains on translation of its investment in XPCT in the first three quarters of fiscal 2008. These translation gains should have been reported as other comprehensive income in shareholders’ equity. In addition, certain expenses in the second quarter of 2008 were understated.
In the aggregate, these adjustments had the effect of reducing net earnings reported previously for the first three quarters of fiscal 2008 by approximately $0.7 million ($0.05 per share) and increasing the accumulated other comprehensive income on the balance sheet by approximately $0.7 million. The table below summarises the items in the financial statements for the first three quarters of 2008 affected by this restatement. The restated financial statements for the first three quarters of fiscal 2008 are available on the company’s website and at www.sedar.com.
In the fourth quarter of 2009 the company generated net earnings of $993 or $0 per share compared with a net loss of $34,260 or $0 per share for the fourth quarter of 2007. The company reported a net loss of $0.5 million or $0.04 per common share for the year ended November 30, 2008, primarily as a result of the loss from equity investments, specifically due to delays in contract awards in China and a sales tax reassessment in Brazil.
Under the terms and conditions of its credit facilities the company is subject to certain covenants. These covenants require that the company not exceed a certain maximum ratio of total liabilities to tangible net worth and that it maintain a certain minimum level of fixed charge coverage. As of November 30, 2008 the company was in breach of these covenants.
Subsequent to November 30, 2008 the company’s bank agreed to tolerate the breach of these covenants as of the fiscal year ended November 30, 2008 and the first quarter ended February 28, 2009. In addition, it agreed to amend the existing covenants beginning with the first quarter of 2009 and add a third covenant requiring the company to maintain a minimum amount of earnings before interest, taxes, depreciation and amortisation (EBITDA) at the end of each fiscal quarter in 2009. The company expects to be in compliance with these new covenants during fiscal 2009.
Mel Karakochuk, vice president of finance and CFO, said: “Our revised bank covenants provide us with enhanced flexibility to work through the challenging economic environment we currently face and the ability to successfully execute our growth strategies over the longer term.”
During the latter half of fiscal 2008, IRD established a new subsidiary in Africa to expand its presence in the region. This new venture enhances IRD’s global presence and joins the company’s wholly and partially owned operations in Canada, the US, China, Brazil, Mexico, India and Chile.
Terry Bergan, president and CEO, said: “Our solid performance in all our geographic regions and across most of our product lines in the fourth quarter bodes well for improved performance in 2009. The global intelligent transportation systems business continues to present significant opportunity over the long term as governments around the world invest in their highway and roadway infrastructure to enhance transportation efficiency and safety. As the world’s leading provider of weigh-in-motion technologies and related products and systems, we are strongly positioned to take advantage of these opportunities.”