Norsat International Inc. Announces 2010 Second Quarter Financial Results

Norsat International Inc. announced its financial results for the three- and six-month periods ended June 30, 2010. All financial results are in U.S. dollars unless otherwise stated.

Dr. Amiee Chan, President and CEO, Norsat International Inc. stated, “Second quarter results showed several improvements over last year which is reflected in our strong cash and overall balance sheet position. This improvement in our capital structure along with our continued expectation of top line growth in fiscal 2010, we now have the financial wherewithal to pursue additional growth opportunities, both organically and through acquisitions. I am excited by the prospects ahead of us and believe we have taken the necessary steps for revenue and earnings growth – both in the near and long term.”

Financial Review

Overall sales in the second quarter of 2010 were up 6.2% from the same period last year. The sales improvements in microwave products were offset by the decline in satellite systems sales. Overall sales for the quarter were $5.2 million up $0.2 million from the $4.9 million reported for the same period last year.

Sales of microwave products for the quarter were $2.1 million compared to $1.6 million in the same period in 2009. The increased activity during the current quarter is a sign that the microwave sector is beginning to return to normalcy as economies are showing some signs of improvement. The revenue growth over the prior year has also been spurred by the introduction of new products as Norsat continues to deliver innovative technology to remain the market leader in this segment.

Sales of satellite systems for the second quarter were $3.0 million, down from the $3.2 million in sales for the same period in 2009. The second quarter of 2009 was stronger due to the benefits of the backlog of U.S. Department of Defense satellite systems orders carried over from the end of 2008.

The overall gross margin for the quarter ended June 30, 2010 was 50.9% compared to 50.2% for the same period in 2009. Margins realized from microwave products during the quarter were at 44.4%, up from the 42.4% in the same period in 2009. Margin improvement resulted from the product sales mix, which consisted of higher end products and new product introductions, which command healthier margins. Margins from satellite systems remained relatively constant at 55.8% during the quarter as compared to the 55.2% experienced during the same period in 2009. The current gross margin levels for satellite systems are consistent with management expectations.

Selling, general and administrative expenses for the three months ended June 30, 2010, increased by $0.3 million to $1.7 million, as compared to $1.4 million for the same period in 2009. These increases were necessary to ensure that the Company can continue to promise timely product delivery and provide quality customer services to maintain its competitive position.

Operating expenses for Q2 2010 were $1.8 million down from $2.2 million in Q2 2009. This decline in expenses is attributable to foreign exchange losses experienced in the second quarter of 2009 due to fluctuations in the USD/CAD exchange rates. Due to both the Company’s change in functional currency to the USD in Q3 F09, there were no such foreign exchange impacts in Q2 F10.

For Q2 2010, net earnings were $0.8 million, or $0.02 per share, up from $0.2 million or $0.00 per share during Q2 2009.

Cash provided from operating activities was $2.4 million in Q2 2010, up from $1.8 million in Q2 2009. At June 30, 2010, Norsat had cash and cash equivalents of $5.6 million, compared to $2.8 million as of March 31, 2010. As of June 30, 2010, working capital improved to $13.3 million as compared to $12.0 million at the end of 2009. The current ratio as of June 30, 2010 was 4.3x as compared to 3.9x at the end of 2009.

As at June 30, 2010, weighted average common shares outstanding were 53,590,520.