Communication Services Pte Ltd

Sales for the three months ended June 30, 2009 were $197.2 million compared to $205.8 million for the same quarter in 2008, a decrease of 4.2%. The Company’s sales results for the second quarter of last year include two months of revenue from the acquisition of the Ericsson Enterprise Communications Business which closed on April 30, 2008.  On a sequential basis, sales decreased by 10.1% from sales of $219.3 million in the first quarter of this year as a result of the weak economic conditions experienced in several markets.

Gross margin was 45.6% of sales in the quarter compared to 42.5% of sales in the same period in 2008 and 48.0% of sales in the first quarter of 2009. Research and development expenses in the second quarter were $21.8 million or 11.1% of sales, compared to $26.8 million or 13.0% of sales in the same quarter of 2008. 

Selling, general and administrative expenses were $56.0 million or 28.4% of sales in the second quarter compared to $53.2 million or 25.8% of sales in the second quarter of 2008.  As a percentage of sales, SG&A expenses increased over the same period last year as operating costs could not be reduced as quickly as the decline in sales that was experienced during the quarter.

Amortization expense recorded in operating expenses was $5.6 million in the second quarter compared to $6.2 million in the same period last year.  The Company recorded interest expense of $0.2 million in the second quarter this year compared to $0.6 million in the second quarter of 2008 as a result of both lower interest rates and a lower long-term debt balance. Losses from foreign exchange were $0.3 million in the second quarter of 2009 compared to a foreign exchange gain of $1.2 million in the second quarter of 2008, due to the strengthening of the Canadian dollar compared to the Euro and U.S. dollar during the second quarter this year.

Investment income totaled $0.7 million in second quarter compared to $0.8 million in the same quarter of 2008. While the investment income earned on excess cash in the quarter has decreased sharply compared to last year, the Company earned a higher amount of financing income on its leasing business.  Income tax expense was $1.2 million or 18.2% of pre-tax income compared to $0.4 million or 15.5% of pre-tax income in the same period last year. 

As a result, net income for the second quarter was $5.5 million or $0.40 diluted earnings per share compared to $2.1 million or $0.13 diluted earnings per share in the same period last year.

Cash and short-term investments totaled $80.6 million at the end of June 2009 compared to $66.9 million as at March 31, 2009 and $98.2 million at the end of December 2008.  During the second quarter of 2009, the Company generated $15.1 million in cash flow from operations, inclusive of an increase in its net investment in leases of approximately $6 million. 

Net earnings improved significantly in the first quarter in 2009 to $14.1 million or $1.02 diluted earnings per share compared to $5.3 million or $0.33 diluted earnings per share in the same period in 2008.

Sales for the three months ended March 31, 2009 were $219.3 million compared to $140.0 million for the same quarter in 2008. The Company experienced a significant increase in revenue in all regions as a result of the acquisition of the Ericsson Enterprise portfolio which closed on April 30, 2008. Sales decreased by 16.2% from $261.8 million in the fourth quarter of 2008. This sequential decrease is partly due to the seasonality of the business, but it also appears that the current economic crisis has had an impact on the sales results in the quarter.

Gross margin increased to 48.0% of sales in the first quarter of 2009 compared to 44.4% of sales in the same period in 2008 and 47.0% of sales in the fourth quarter of 2008. The increase in gross margin in the quarter resulted from the addition of the former Ericsson product lines as well as a continued improvement in overhead costs and a favourable product mix.

Research and development expenses in the first quarter of 2009 were $21.9 million or 10.0% of sales, compared to $13.7 million or 9.8% of sales in the same quarter of 2008 with the increase attributable to the acquisition from Ericsson. The Company continues to streamline its R&D investments and explore synergy opportunities across its product lines.

Selling, general and administrative expenses were $60.3 million or 27.5% of sales in the first quarter of 2009 compared to $38.2 million or 27.3% of sales in the first quarter of 2008. Selling, general and administrative expenses included significantly higher provisions for bad debts in the first quarter this year when compared to the level recorded in the first quarter last year.

Amortization expense recorded in operating expenses increased to $5.9 million in the first quarter of 2009 compared to $3.3 million in the first quarter of 2008 as a result of the inclusion of amortization on the intangible assets added as part of the acquisition from Ericsson.

The Company recorded interest expense of $0.7 million in the first quarter of 2009 as a result of the term loan added as part of the 2008 acquisition. Foreign exchange gains were $0.8 million in the first quarter of 2009, compared to a foreign exchange loss of $0.9 million in the first quarter of 2008, due to the relative weakness in the Canadian dollar to the Euro and U.S. dollar in the first quarter of 2009.

Investment income totaled $0.7 million in the first quarter compared to $1.3 million in the same quarter of 2008, mainly as a result of lower average rates of return on excess cash balances.

As a continue service for our business partners and customers, we have refreshed the design of the corporate web site www.commserv.com to provide better services.  The site is now structured to provide a more up-to-date information and services.

With the new refreshed look, the web site is able to provide enough information and more personal touch for our customers.  We have dedicated a customer area for registered customers.  The area will provide brochures & information downloads, photos sharing, and various other services.

We have a blog section containing messages from our CEO and various key people from CommServ to give you an up-to-date information from us.

There are more services are planned in the near future.  Please stay tuned for updates.