Batm Advanced Communication Limited

Category: Accounting

BATM Advanced Communications Ltd. (LSE: BVC) is a technology company principally engaged in development, production and marketing of data and telecommunication products in the field of local and wide area networks, as well as the development, production and distribution of laboratory diagnostic equipment in the medical sector. The company is listed on the London Stock Exchange and is a constituent of the FTSE techMARK 100 Index.

Batm Advanced Company is committed to providing network edge solutions which enable service providers to migrate their services from a circuit-based network to a more cost effective packet network.


Telco Systems has over 30 years of experience in the design and development of high-performance network communication equipment.

As a wholly-owned subsidiary of BATM Advanced Communications (London stock exchange ticker symbol: BVC), the company has access to over 400 engineers and scientists through BATM's integrated research and development program between all its subsidiary companies. Since its foundation in 1992, BATM has excelled in the design and manufacture of innovative solutions for the telecommunications industry.

Headquartered in Kfar Netter, Israel, Telco Systems has offices throughout the world including the United States, Germany, France, Singapore, Japan and Australia.

MM Propositions:

The Modigliani-Miller theorem (of Franco Modigliani, Merton Miller) forms the basis for modern thinking on capital structure. The basic theorem states that, under a certain market price process in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the value of a firm is unaffected by how that firm is financed. (Jenter, 2003)It does not matter if the firm's capital is raised by issuing stock or selling debt. It does not matter what the firm's dividend policy is. Therefore, the Modigliani-Miller theorem is also often called the capital structure irrelevance principle.

Modigliani was awarded the 1985 Nobel Prize in Economics for this and other contributions.


Miller was a professor at the University of Chicago when he was awarded the 1990 Nobel Prize in Economics, along with Harry Markowitz and William Sharpe, for their "work in the theory of financial economics," with Miller specifically cited for "fundamental contributions to the theory of corporate finance."

Miller and Modigliani derived the theorem and wrote their groundbreaking article when they were both professors at the Graduate School of Industrial Administration (GSIA) of Carnegie Mellon University. The story goes that Miller and Modigliani were set to teach corporate finance for business students despite the fact that they had no prior experience in corporate finance. When they read the material that existed they found it inconsistent

so they sat down together to try to figure it out. The result of this was the article in the American Economic Review and what has later been known as the M&M theorem.

The theorem:

The theorem was originally proven under the assumption of no taxes. It is made up of two propositions which can also be extended to a situation with taxes.

Consider two firms which are identical except for their financial structures. The first (Firm U) is unlevered: that is, it is financed by equity only. The other (Firm L) is levered: it is financed partly by equity, and partly by debt. The Modigliani-Miller theorem states that the value of the two firms is the same.

The free cash flow method to equity valuation

In corporate finance, free cash flow (FCF) is cash flow available for distribution among all the securities holders of an organization. They include equity holders, debt holders, preferred stock holders, convertible security holders, and so on.

This is a measure of how much cash can be paid to the equity shareholders of the company after all expenses, reinvestment and debt repayment.

It is often used by analysts in an attempt to determine the value of a company.

This alternative method of valuation gained popularity as the dividend discount model's usefulness became increasingly questionable.

A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends and reduce debt.

It is important to note that negative free cash flow is not bad in itself. If free cash flow is negative, it could be a sign that a company is making large investments. If these investments earn a high return, the strategy has the potential to pay off in the long run.

The net present value and its limitations.

In finance, the net present value (NPV) or net present worth (NPW) (Lin, Nagalingam, 2000) of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows. In the case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central tool in discounted cash flow (DCF) analysis, and is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely throughout economics, finance, and accounting, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met.

The NPV of a sequence of cash flows takes as input the cash flows and a discount rate or discount curve and outputs a price; the converse process in DCF analysis - taking a sequence of cash flows and a price as input and inferring as output a discount rate (the discount rate which would yield the given price as NPV) - is called the yield, and is more widely used in bond trading.


Net present value as a valuation methodology dates at least to the 19th century. Karl Marx refers to NPV as fictitious capital, and the calculation as capitalizing, writing (Marx, 1909)

The forming of a fictitious capital is called capitalizing. Every periodically repeated income is capitalized by calculating it on the average rate of interest, as an income which would be realized by a capital at this rate of interest.

In mainstream neo-classical economics, NPV was formalized and popularized by Irving Fisher, in his 1907 The Rate of Interest and became included in textbooks from the 1950s onwards, starting in finance texts.(Bichler, Shimshon; Nitzan, Jonathan,. July 2010)

(Nitzan, Jonathan; Bichler, Shimshon, .2009).

Theory Review:

M & M Propositions:

M&M Proposition I

M&M Proposition I states that the value of a firm does NOT depend on its capital structure. For example, think of 2 firms that have the same business operations, and same kind of assets. Thus, the left side of their Balance Sheets looks exactly the same. The only thing different between the 2 firms is the right side of the balance sheet, i.e. the liabilities and how they finance their business activities.

In the diagram, stocks make up 70% of the capital structure while bonds (debt) make up for 30%.

In the diagram, it is the exact opposite. This is the case because the assets of both capital structures are the exactly same.

M&M Proposition 1 therefore says regardless of whether a firm finances itself with debt or equity, its value remains the same. The weighted average cost of capital: ra is constant.

Assumptions of M-M: perfect and frictionless markets, no transaction costs, no default risk, no taxation, both firms and investors can borrow at the same rd interest rate.

Consider two firms: one has no debt while the other is leveraged (i.e. has debts). They are identical in every other respect. In particular they have the same level of operating profits: X. Let A have 1000 shares issued at 1 euro and B have issued 500 (1 euro) shares and 500 euro of debt.

100 shares of B (1/5EB) give right to receive a return:

200 shares of A (1/5EA) bought using 100 euro of borrowed money (100=1/5DB) give the same return:.

The same return is yielded by the Two investments (having similar financial risks).Hence, the values if 1/5 of Aand 1/5 of Bmust be same: equal pricing of both shares is necessary. Otherwise, arbitrageurs will have profitable operations at their disposal.

Firm B is overvalued with respect to A. An operator owning 1% of B can:

He then owns 1% of the unleveraged firm but his debt is equal to 1% of that of B. The risks are unchanged. Previously, he had an expected a return of 64 (=0.16*400). Now he still has a return of 64 (he expects to receive 100 = 0.15*667 but he must pay 36 as interests). But: before he had invested 400 of his money, and now only 367=667-300

Hence, selling B (the overvalued shares) and buying A (the undervalued ones) would be profitable for him. The price of A rises and the price of B falls. A possible position of equilibrium is shown is the table: ra is the same as it should be since, by hypothesis, A and B have the same degree of risk. By contrast, re is higher for B because of its global risk, which is equal to that of A, has to be shared by a lower value of equity.

M&M Proposition II

M&M Proposition II states that the value of the firm depends on three things:

1) Required rate of return on the firm's assets (Ra)

2) Cost of debt of the firm (Rd)

3) Debt/Equity ratio of the firm (D/E)ke is the required rate of return on equity, or cost of equity.

k0 is the company unlevered cost of capital (ie assume no leverage).

kd is the required rate of return on borrowings, or cost of debt.

D / E is the debt-to-equity ratio.

A higher debt-to-equity ratio leads to a higher required return on equity, because of the higher risk involved for equity-holders in a company with debt. The formula is derived from the theory of weighted average cost of capital (WACC).

These propositions are true assuming the following assumptions:

no taxes exist,

no transaction costs exist, and

individuals and corporations borrow at the same rates.

These results might seem irrelevant (after all, none of the conditions are met in the real world), but the theorem is still taught and studied because it tells something very important. That is, capital structure matters precisely because one or more of these assumptions is violated. It tells where to look for determinants of optimal capital structure and how those factors might affect optimal capital structure.

Analysis of M&M Proposition II Graph

- The above graph tells us that the Required Rate of Return on the firm (Re) is a linear straight line with a slope of (Ra - Rd)

- Why is Re linear curved and upwards sloping? This is because as a company borrows more debt (and increases its Debt/Equity ratio), the risk of bankruptcy is even more higher. Since adding more debt is risky, the shareholders demand a higher rate of return (Re) from the firm's business operations. This is why Re is upwards sloping:

- As Debt/Equity Ratio Increases -> Re will Increase (upwards sloping).

- Notice that the Weighted Average Cost of Capital (WACC) in the graph is a straight line with NO slope. It therefore does not have any relationship with the Debt/Equity ratio. This is the basic identity of M&M Proposition I and II, that the capital structure of the firm does not affect its total value.

- WACC therefore remains the same even if the company borrows more debt (and increases its Debt/Equity ratio).

The MM propositions are basically two fold. One proposition asserts the independence of the value of a firm to its capital structure. A capital structure is the ratio of debt to equity in a firm.


Under certain restrictive assumptions MM show

that the fall in WACC as you increase the proportion of debt finance is exactly offset by the rise in the required return on equity, RS

- so the overall WACC remains constant.

In this MM world there is therefore no optimal debt-equity ratio.

So, MM argue that you can finance a project with NPV>0, with any arbitrary mix of debt and equity, without affecting the overall value of the firm.

There is a debt-equity mix which minimises the WACC and hence maximises the firm's market value.


The WACC and the value of the firm V are both independent of the debt-equity mix (used in financing the firm's activities)


Since the WACC (Rw) is independent of debt-equity ratio,

this implies

cost of equity capital Rs rises with the debt-equity ratio B/S

Note: Re-arrange WACC formula, it can be shown that:

RS = Rw + [Rw-Rb] B/S

Rw is constant (MM-1) and Rw - Rb >0

then Rs will rise as B/S increases.

The intuition for this was given above as the ‘increase in leverage risk'

Comments and Criticisms of MM propositions:

The M-M propositions are benchmarks, not end results: apart from market imperfections or costs (f.e. taxes) not specifically considered, financing does not matter. The continuous introduction of financial innovations hints that financing can matter. Firms would have no incentive to innovate, if the new financial products never increased its value.Non-uniqueness of ra: perhaps it is not very important.

Taxation: a leveraged firm has a fiscal benefit, since interests are considered as costs. Its operating earnings net of taxes are: while for an unleveraged firm they are: net profits. The difference: , once it has been capitalized at ra, it makes the value of the leveraged firm greater than that of the unleveraged by the amount: . At the limit: “the optimal capital structure might be all debt” (Miller).The personal taxation of capital gains, dividends and interests that can (partially) offset the firms tax advantages has to be considered. In the absence of offsetting, nothing would stop firms from increasing debt in order to decrease taxation.To prevent aggressive borrowing, there must be some costs.

The formula's use of EBIT / Cost of Capital to calculate a company's value is extremely limiting. It also uses the weighted average cost of capital formula, which calculates the value based on E + D, where E = the value of equity and D = the value of debt. Modigliani and Miller are equating two different formulas to arrive at a number which maximizes a firm's value. It is inappropriate to say that a firm's value is maximized when these two different formulas cross each other because of their striking differences. The formula essentially says a firm's value is maximized when a company has earnings * the discount rate multiple = book value. Modigliani and Miller equate E + D = EBIT / Cost of Capital. This seems to over-simplify the firm's valuation.

Issues Ignored in MM Model

Perceived probability and costs of distress depends on;

the greater the variability in earnings, the higher the risk of liquidation or ‘distress'

costs of distress will be lower the greater the liquidity and marketability of the firm's assets

the probability and costs of distress are lower, the higher the proportion of variable to fixed costs (e.g. can you quickly reduce staffing costs)

Shareholders may persuade managers of ‘near bankrupt' firm to undertake highly risky projects. - ‘go-for-broke' strategy - this worries bondholders

advertising firm (with few tangible assets as security)

versus leisure firm(with hotels to sell off, to repay bondholders).

The latter has a higher ‘debt capacity' than the former.

Managers keep debt levels low to get the benefit of an ‘option to expand' into profitable projects.

Debt levels might influence future cash flows is if they affect managerial incentives. Firms with high leverage, have to meet high interest payments every year.

This may provide incentives for managers to increase productivity, cut costs and concentrate on their ‘core competencies'.

Also, highly leveraged firms may not be able to ‘empire build' since there are little or no ‘free cashflows'.

Hence, high leverage might increase profits by discouraging ‘empire building'.

Economic consequences

While it is difficult to determine the exact extent to which the Modigliani-Miller theorem has impacted the capital markets, the argument can be made that it has been used to promote and expand the use of leverage.

When misinterpreted in practice, the theorem can be used to justify near limitless financial leverage while not properly accounting for the increased risk, especially bankruptcy risk, that excessive leverage ratios bring. Since the value of the theorem primarily lies in understanding the violation of the assumptions in practice, rather than the result itself, its application should be focused on understanding the implications that the relaxation of those assumptions bring.

The free cash flow method to equity valuation

While free cash flow to the firm measures the cash flow available to all investors, free cash flow to equity is intended to measure what is left over (the residual) for equity holders. The basic calculation is:

ElementData Source

EBIT x (1-Tax rate)Current Income Statement

+ Depreciation/AmortizationCurrent Income Statement

- Changes in Working CapitalPrior & Current Balance Sheets

- Capital expenditurePrior & Current Balance Sheets

= Free Cash Flow

Note that the first three lines above are calculated for you on the standard Statement of Cash Flows

You can also calculate it by taking: Net profit+Interest Exp+D&A-CAPEX-Net Change in WC - Tax Shield on interest expense (Net interest expense by effective tax rate)

ElementData Source

Earning Before Interest and Tax x (1-Tax)Current Income Statement

+ Depreciation/AmortizationCurrent Income Statement

- Changes in Working CapitalPrior & Current Balance Sheets

= Cash Flows from Operationssame as Statement of Cash flows


ElementData Source

Cash Flows from OperationsStatement of Cash Flows: section 1,

from Operations

- Capital ExpenditureStatement of Cash Flows: section 2,

from Investment

= Free Cash Flow

There are two differences between Net Income and Free Cash Flow that should be noted. The first is the accounting for the consumption of capital goods. The Net Income measure uses depreciation, while the Free Cash Flow measure uses last period's net capital purchases.

Free Cash Flow: is prior period net investment spending. Its advantage is that spending is in current dollars. Disadvantage is Capital investments are at the discretion of management, so spending may be sporadic.

Net Income: Depreciation charge. Definite advantage is that charges are smoothed, related to cumulative prior purchases. However, disadvantage is allowing for typical 2% inflation per year, equipment purchased 10 years ago for $100 would now cost about $122. With 10 year straight line depreciation the old machine would have an annual depreciation of $10, but the new, identical machine would have depreciation of $12.2, or 22% more

Net Free Cash Flow definition should also allow for cash available to pay off the company's short term debt. It should also take into account any dividends that the company means to pay.

Net Free Cash Flow = Operation Cash flow - Capital Expenses to keep current level of operation - dividends - Current Portion of long term debt - Depreciation

If the Net Income category includes the income from Discontinued operation and extraordinary income make sure it is not be part of Free Cash Flow.

Net of all the above give Free Cash available to be reinvested on operation without having to take more debt.

Comparing Dividends to Free Cash Flows to Equity

The ratio of cash to FCFE to the stockholders shows how much of the cash available to

be paid out to stockholders is actually returned to them in the form of dividends and

stock buybacks. If this ratio, over time, is equal or close to 1, the firm is paying out all

that it can to its stockholders. If it is significantly less than 1, the firm is paying out less

than it can afford to and is using the difference to increase its cash balance or to invest in

marketable securities. If it is significantly over 1, the firm is paying out more than it can

afford and is either drawing on an existing cash balance or issuing new securities (stocks or


We can observe the tendency of firms to pay out less to stockholders than they

have available in free cash flows to equity by examining cash returned to stockholders

paid as a percentage of free cash flow to equity.

Many firms pay out less to stockholders, in the form of dividends and stock

buybacks, than they have available in free cash flows to equity. The reasons vary from

firm to firm and we list some below.

1. Desire for Stability

Firms are generally reluctant to change dividends; and dividends are considered

'sticky' because the variability in dividends is significantly lower than the variability in

earnings or cashflows. The unwillingness to change dividends is accentuated when firms

have to reduce dividends and, empirically, increases in dividends outnumber cuts in

dividends by at least a five-to-one margin in most periods. As a consequence of this

reluctance to cut dividends, firms will often refuse to increase dividends even when

earnings and FCFE go up, because they are uncertain about their capacity to maintain

these higher dividends. This leads to a lag between earnings increases and dividend

increases. Similarly, firms frequently keep dividends unchanged in the face of declining

earnings and FCFE.

2. Future Investment Needs

A firm might hold back on paying its entire FCFE as dividends, if it expects

substantial increases in capital expenditure needs in the future. Since issuing securities is

expensive (from a flotation cost standpoint), it may choose to keep the excess cash to

finance these future needs. Thus, to the degree that a firm may be unsure about its future

financing needs, it may choose to retain some cash to take on unexpected investments or

meet unanticipated needs.

3. Tax Factors

If dividends are taxed at a higher tax rate than capital gains, a firm may choose to

retain the excess cash and pay out much less in dividends than it has available. This is

likely to be accentuated if the stockholders in the firm are in high tax brackets, as is the

case with many family-controlled firms. If on the other hand, investors in the firm likedividends or tax laws favor dividends, the firm may pay more out in dividends than it has

available in FCFE, often borrowing or issuing new stock to do so.

4. Signaling Prerogatives

Firms often use dividends as signals of future prospects, with increases in

dividends being viewed as positive signals and decreases as negative signals. The empirical

evidence is consistent with this signaling story, since stock prices generally go up on

dividend increases, and down on dividend decreases. The use of dividends as signals may

lead to differences between dividends and FCFE.

5. Managerial Self-interest

The managers of a firm may gain by retaining cash rather than paying it out as a

dividend. The desire for empire building may make increasing the size of the firm an

objective on its own. Or, management may feel the need to build up a cash cushion to tide

over periods when earnings may dip; in such periods, the cash cushion may reduce or

obscure the earnings drop and may allow managers to remain in control.

Pros of Free Cash flows:

Free cash flow measures the ease with which businesses can grow and pay dividends to shareholders. Even profitable businesses may have negative cash flows. Their requirement for increased financing will result in increased financing cost reducing future income.

According to the discounted cash flow valuation model, the intrinsic value of a company is the present value of all future free cash flows, plus the cash proceeds from its eventual sale. The presumption is that the cash flows are used to pay dividends to the shareholders. Bear in mind the lumpiness discussed below.

Some investors prefer using free cash flow instead of net income to measure a company's financial performance, because free cash flow is more difficult to manipulate than net income. The problems with this presumption are itemized at cash flow and return of capital.

The payout ratio is a metric used to evaluate the sustainability of distributions from REITs, Oil and Gas Royalty Trusts, and Income Trust. The distributions are divided by the free cash flow. Distributions may include any of income, flowed-through capital gains or return of capital.

Problems with capital expenditures are the expenditures for maintenances of assets is only part of the capex reported on the Statement of Cash Flows. It must be separated from the expenditures for growth purposes.. Management is free to disclose maintenance capex or not. Therefore this input to the calculation of free cash flow may be subject to manipulation, or require estimation. Since it may be a large number, maintenance capex's uncertainty is the basis for some people's dismissal of 'free cash flow'.

A second problem with the maintenance capex measurement is its intrinsic 'lumpiness'. By their nature, expenditures for capital assets that will last decades may be infrequent, but costly when they occur. 'Free cash flow', in turn, will be very different from year to year. No particular year will be a 'norm' that can be expected to be repeated. For companies that have stable capital expenditures, free cash flow will (over the long term) be roughly equal to earnings

Hence, many financial advisors believe that the free cash flow approach provides a better way to analyze the performance of a company than net income or even other methods such as earnings per share etc. Generally if a firm is earning positive free cash flows and shows a strong growth rate, one needs to analyze the composition of its operations. (Robert, 1989) In case of evidence of sustainability of positive free cash flows and high growth rates plus high dividends, the stock is generally preferred to be bought or held. Otherwise, it should be sold. Care needs to be taken that the game of buying and selling stocks is highly based on the perceptions of the market. In today's dynamic environment it becomes hard to maintain the accuracy of a decision to buy or sell for long.

The net present value and its limitations.

The Net Present Value means the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project.

NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield.

Each cash inflow/outflow is discounted back to its present value (PV). Then they are summed. Therefore NPV is the sum of all terms,


t - The time of the cash flow

i - The discount rate (the rate of return that could be earned on an investment in the financial markets with similar risk.)

Rt - the net cash flow (the amount of cash, inflow minus outflow) at time t. For educational purposes, R0 is commonly placed to the left of the sum to emphasize its role as (minus) the investment.

The result of this formula if multiplied with the Annual Net cash in-flows and reduced by Initial Cash outlay will be the present value but in case where the cash flows are not equal in amount then the previous formula will be used to determine the present value of each cash flow separately. Any cash flow within 12 months will not be discounted for NPV purpose. ( Khan,1993)

NPV is an indicator of how much value an investment or project adds to the firm. With a particular project, if Rt is a positive value, the project is in the status of discounted cash inflow in the time of t. If Rt is a negative value, the project is in the status of discounted cash outflow in the time of t. Appropriately risked projects with a positive NPV could be accepted. This does not necessarily mean that they should be undertaken since NPV at the cost of capital may not account for opportunity cost, i.e. comparison with other available investments. In financial theory, if there is a choice between two mutually exclusive alternatives, the one yielding the higher NPV should be selected.

IfIt meansThen

NPV > 0 the investment would add value the project may be

To the firm accepted

NPV < 0 the investment would subtract the project should be

Value from the firm rejected

NPV = 0 the investment would neither we should be indifferent in the

Gain nor lose value for the firm Decision whether to accept or

Reject the project. This

Project adds no monetary value.

Limitations of Net Present Value

NPV is an excellent way to evalue alternative investment proposals. The problem is that in order to use NPV you must estimate the cash flows for each investment alternative. The validity of your answer will depend on the accuracy of your cash flow estimates.

Where cash flows are uncertain, you should incorporate probability theory into your NPV calculations. Discussing how to use probability theory is beyond the scope of this type of question and answer medium. However, in its simplest application, it involves weighting alternative cash flows for each investment alternative by the probability that they will occur.

The other issue with NPV is choosing an appropriate discount rate. Using different discount rates might favor one investment versus another. The best way to deal with this is try multiple discount rates within a range of possibilities to determine the sensitivity of the answer to the discount rate.

Investments with the same present value may have significantly different project lives and different salvage values

Investments with the same net present values may have different cash flows

We assume that we know future interest rates - which we do not

We assume that payments are always made at the end of the period - which is not always the case

The net present value is easy to use if the fore casted cash flows are known. But on the other hand due to uncertainty it is very difficult to obtain the estimates of cash flows.

While estimating the net present value it is very difficult to measure the discount rate.

When there is a mutually exclusive project then the net present value rule may not give accurate results in these situations.

In case of net present value the ranking of investment projects as per the net present value (NPV) rule is not independent of the discount rates.

NPV is not that flexible and only uses information available at the time of the decision. It does not account for changes to the projects after the initial decision is made. NPV factors in risk by using a single discount rate, but in reality choices in the future concerning the project will likely change its payoffs and risk. Try real option analysis instead if you want to get around this problem.

NPV only evaluates tangible and quantifiable projects. Some projects with negative NPVs are carried out anyway because they have some kind of strategic value, eg. It shows the firm in a good light builds goodwill or allows access to as yet unknown earnings in the future.

Thus, NPV is a useful starting point to value investments, but certainly not a definitive answer that an investor can rely on for all investment decisions. To learn more, check out Discounted Cash Flow Analysis and What's the difference between net present value and internal rate of return?


BVC: LN Historical Stock Quote

BVC: LN Advanced Stock Char

BATM Advanced Communications Ltd. Financials

Revenue US$ 134.4 million (2008)

Operating income $ 24.4 million (2008)

Profit $ 24.0 million (2008)

BATM Advanced Communications Ltd. Income Statement

Dec 09 Dec 0 Dec 07

Revenue 133.4133.596.4

Cost of Goods Sold - - -

Gross Profit 133.4 133.596.4

Gross Profit Margin- - -

SG&A Expense - - -

Depreciation & Amortization - - -

Operating Income16.223.416.5

Operating Margin12.1%17.5%17.1%

Nonoperating Income - - -

Nonoperating Expenses - - -

Income Before Taxes - - -

Income Taxes

Net Income After Taxes0.00.00.0

Continuing Operations20.2 24.0 19.8

Discontinued Operations - - 0.0

Total Operations20.224.0 19.8

Total Net Income20.2 24.019.8

Net Profit Margin15.2%18%20.5%

Diluted EPS from Total Net Income

Dividends per Share0.01 0.010.0

All amounts in millions of US Dollars except per share amounts

BATM Advanced Communications Ltd. Balance Sheet

Assets Dec 09 Dec 08Dec 07

Current Assets

Cash27.7 30.5 35.6

Net Receivables30.7 29.0 26.1

Inventories21.7 20.8 12.1

Other Current Assets 33.8 20.9 18.4

Total Current Assets113.9 101.2 92.2

Net Fixed Assets------

Other Noncurrent Assets 64.8 47.0 31.2

Total Assets 178.7 148.3 123.3

LiabilitiesDec 09Dec 08Dec 07

Current Liabilities

Accounts Payable8.6 8.5 12.2

Short-Term Debt------

Other Current Liabilities------

Total Current Liabilities------

Long-Term Debt------

Other Noncurrent Liabilities 45.7 31.4 28.1

Total Liabilities45.7 31.4 28.1

Shareholder's Equity

Preferred Stock Equity----0.0

Common Stock Equity 133.0 116.9 95.2

Total Equity133.0 116.9 95.2

Shares Outstanding (thou.)402,289.0402,289.0402,289.0

All amounts in millions of US Dollars except per share amounts

BATM Advanced Communications Ltd. Cash Flow Statement

Dec 09Dec 08Dec 07

Net Operating Cash Flow20 10 13

Net Investing Cash Flow(25.5)(10.0)7.3

Net Financing Cash Flow 0.2 ( 2.9) 0.4

Net Change in Cash(5.4)(3.8)20.3

Depreciation & Amortization

Capital Expenditures

Cash Dividends Paid

All amounts in millions of US Dollars except per share amounts