Calian Reports Second Quarter Results: Health Services Contract Transition Successful.KANATA, Ontario Kanata is a large suburban area in the western part of Ottawa, Ontario, Canada,it has a population of 90,000 and is growing rapidly. It is located just to the west of the Greenbelt and is one of the largest of several communities that surround central Ottawa. -- All amounts expressed in Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents . Calian Technologies Ltd. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :CTY CTY - /sit'ee/ or /C-T-Y/ [MIT] The terminal physically associated with a computer's system console. The term is a contraction of "Console tty", that is, "Console TeleTYpe". ) today released unaudited results for the second quarter ended March 31, 2005.Revenues for the quarter were $ 38.7 million, a decrease of 21% from the $49.2 million reported in the same quarter of the previous year.Net earnings were $1.8 million or $0.21 per share basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. , compared to $3.2 million or $0.38 per share basic and $0.37 per share diluted in the same quarter last year. "The results were again in line with management's expectations for the quarter keeping in mind that the second quarter 2004 revenues and profitability benefited from the large MSTAR MSTAR Moving and Stationary Target Acquisition and Recognition MSTAR Manportable Surveillance and Target Acquisition Radar MSTAR MLRS Smart Tactical Rocket MSTAR MAGTF C4I Systems/Technical Architecture & Repository contract won earlier that year. The Titan Titan, in astronomy Titan (tī`tən), in astronomy, the largest of the named moons, or natural satellites, of Saturn. Also known as Saturn VI (or S6), Titan is 3,200 mi (5,150 km) in diameter, orbits Saturn at a mean distance of acquisition continues to progress as planned and we successfully completed the transition phase of the DND DND Drag and Drop DND Department of National Defence (Canada & Australia) DND Do Not Disturb DND Dungeons and Dragons DND Den Norske Dataforening DND Direct Nanoparticle Deposition DND Drugs for Neglected Diseases Health Services health services Managed care The benefits covered under a health contract contract," stated Ray Basler, 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. . "On April 1, 2005 the Health Services contract entered the operational phase and we are confident in our ability to meet or exceed our customer's expectations. While we are disappointed in the lack of follow-on fol·low-on adj. Following as a related or consequent aspect or development: "Such contracts involve follow-on sales of maintenance services" Christian Science Monitor. orders for MSTAR, we remain confident in the security and surveillance market and the on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" role MSTAR is expected to play. Our other business units continue to operate to expectations." After considering the likelihood that MSTAR business will not have a significant impact on the balance of 2005, management's current expectations are that consolidated revenues for 2005 will be in the range of $180 million to $190 million and net earnings per share in the range of $0.85 to $0.95. About Calian Calian sells technology services to industry and government in 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 and around the world.Calian provides customers with ready access to an exceptional team of engineers, telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. and technology professionals, health care professionals and other highly qualified staff. The Business and Technology Services Division augments customer workforces with flexible short and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. placements, recruitment and outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. of engineering, health care professionals and other skilled professionals.The Systems Engineering Division plans, designs and implements solutions for many of the world's space agencies and leading communications satellite communications satellite artificial satellite that functions as part of a global radio-communications network. Echo 1, the first communications satellite, launched in 1960, was an instrumented inflatable sphere that passively reflected radio signals back to manufacturers and operators, as well as providing contract manufacturing services for customers 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. . For further information, please visit our website at www.calian.com, or contact us at ir@calian.com DISCLAIMER (networking) disclaimer - Statement ritually appended to many Usenet postings (sometimes automatically, by the posting software) reiterating the fact (which should be obvious, but is easily forgotten) that the article reflects its author's opinions and not necessarily those of the Certain information included in this press release is forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Such statements are generally accompanied by words such as "intend", "anticipate", "believe", "estimate", "expect" or similar statements. Factors which could cause results or events to differ from current expectations include, among other things: the impact of price competition; scarce number of qualified professionals; the impact of rapid technological and market change; loss of business or credit risk with major customers; technical risks on fixed price projects; general industry and market conditions and growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. ; international growth and global economic conditions, and including currency exchange rate fluctuations; and the impact of consolidations in the business services industry. For additional information with respect to certain of these and other factors, please see the Company's most recent annual report and other reports filed by Calian with the Ontario Securities Commission The Ontario Securities Commission (OSC) is a regulatory agency which administers and enforces securities legislation in the Canadian province of Ontario. The OSC is an Ontario Crown corporation which reports to the Ontario legislature through the Minister of Finance. . Calian disclaims any intention or obligation to update or revise any 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. , whether as a result of new information, future events or otherwise. No assurance can be given that actual results, performance or achievement expressed in, or implied by, forward-looking statements within this disclosure will occur, or if they do, that any benefits may be derived from them.
CALIAN TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(dollars in thousands except per share data)
Unaudited
Three months ended Six months ended
March 31 March 31
--------------------------------------------------------------------
2005 2004 2005 2004
--------------------------------------------------------------------
Revenues $38,688 $49,246 $76,725 $86,589
Cost of revenues 31,209 39,838 62,321 70,426
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Gross profit 7,479 9,408 14,404 16,163
Selling and marketing 1,357 1,130 2,744 2,254
General and
administration 2,464 2,418 4,759 4,684
Facilities 693 699 1,349 1,359
Amortization of
capital assets 280 282 548 552
Amortization of
intangibles 99 - 198 -
--------------------------------------------------------------------
Earnings before interest
and income taxes 2,586 4,879 4,806 7,314
Interest income, net 154 123 310 233
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Earnings before
income taxes 2,740 5,002 5,116 7,547
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Income taxes - current 1,022 1,063 1,900 1,688
Income taxes - future (34) 721 (40) 973
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988 1,784 1,860 2,661
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NET EARNINGS 1,752 3,218 3,256 4,886
Retained earnings,
beginning of period 20,581 14,458 19,740 13,202
Dividend (672) (423) (1,335) (835)
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Retained earnings,
end of period $21,661 $17,253 $21,661 $17,253
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Net earnings per share:
Basic $0.21 $0.38 $0.39 $0.58
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Diluted $0.21 $0.37 $0.39 $0.57
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Weighted average number
of shares: (Note 5)
Basic 8,403,165 8,445,037 8,361,228 8,355,990
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Diluted 8,495,296 8,632,283 8,453,525 8,565,736
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CALIAN TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
March 31, 2005 September 30, 2004
(Unaudited)
---------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $28,221 $30,997
Accounts receivable 22,119 18,726
Note receivable 178 158
Work in process 3,714 3,747
Prepaid expenses and other 633 875
Future income taxes 2,399 2,428
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57,264 56,931
NOTE RECEIVABLE 358 358
CAPITAL ASSETS 3,745 3,873
INTANGIBLES 1,214 1,412
GOODWILL 5,923 5,923
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$68,504 $68,497
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
liabilities $18,313 $18,136
Unearned contract revenue 11,516 14,094
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29,829 32,230
FUTURE INCOME TAX LIABILITY 26 96
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29,855 32,326
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CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY
Share capital 16,988 16,431
Retained earnings 21,661 19,740
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38,649 36,171
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$68,504 $68,497
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CALIAN TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Unaudited
Three months ended Six months ended
March 31 March 31
--------------------------------------------------------------------
2005 2004 2005 2004
--------------------------------------------------------------------
CASH FLOWS FROM (USED IN)
OPERATING ACTIVITIES
Net earnings $1,752 $3,218 $3,256 $4,886
Items not affecting cash:
Amortization 379 282 746 552
Investment tax credits - 106 - 389
Future income taxes (34) 720 (40) 973
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2,097 4,326 3,962 6,800
Change in non-cash
working capital
Accounts receivable 220 (1,890) (3,393) 493
Work in process (1,690) (4,014) 33 (2,950)
Prepaid expenses
and other (19) 258 222 (9)
Accounts payable and
accrued liabilities 2,193 3,975 176 (593)
Unearned contract
revenue (3,671) (3,432) (2,578) 701
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(870) (777) (1,578) 4,442
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CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES
Issuance of common shares 278 491 557 973
Dividend (672) (423) (1,335) (835)
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(394) 68 (778) 138
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CASH FLOWS USED IN
INVESTING ACTIVITIES
Acquisition of capital
assets (260) (196) (420) (336)
--------------------------------------------------------------------
NET CASH INFLOW (OUTFLOW)(1,524) (905) (2,776) 4,244
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 29,745 30,334 30,997 25,185
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $28,221 $29,429 $28,221 $29,429
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CALIAN TECHNOLOGIES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the periods ended March 31, 2005 and 2004
(dollars in thousands)
(Unaudited)
1. ACCOUNTING POLICIES These interim 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 have been prepared 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 except that these interim consolidated financial statements do not provide full note disclosure. These interim consolidated financial statements have been prepared using the same accounting policies used in the preparation of the audited annual consolidated financial statements for the year ended September September: see month. 30, 2004, with the exception of the application of the new recommendations described in Note 2.These interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements. 2. ADOPTION OF NEW ACCOUNTING POLICIES Stock-based compensation Effective October October: see month. 1, 2003, the Company early adopted the amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. recommendations of the Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. Handbook
This article is about reference works. For the subnotebook computer, see .
relating to relate prep → bezüglich +gen, mit Bezug auf +acc its Employee Share Purchase Plan. Business combinations, goodwill and other intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. As a result of its recent acquisition of Titan Consulting Group Ltd., the Company adopted the recommendations of the Canadian Institute of Chartered Accountants Handbook Section 1581, Business Combinations and Section 3062, Goodwill and Other Intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. Assets. The standard requires that the acquisition be accounted for using the purchase method of accounting and accordingly, the purchase price is allocated to the assets and liabilities based on their estimated fair values as of the acquisition date. The results of operations relating to the acquisition must be included in the consolidated financial statements from the effective date of acquisition. Intangibles are comprised of acquired customer relationships, order 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. , consultant database and non-competition agreements. Intangibles are amortized on a straight-line straight-line adj. 1. Lying in a straight line. 2. Relating to a device whose linkage produces or copies motion in straight lines. 3. basis over their estimated useful life not to exceed five years. A portion of the purchase price is based on a multiple of earnings achieved during the period September 1, 2004 to August 31, 2005.Once the final purchase price is determined, the final payment will be accounted for as an incremental cost Incremental Cost The encompassing change that a company experiences within its balance sheet due to one additional unit of production. Notes: Incremental cost is the overall change that a company experiences by producing one additional unit of good. of the acquisition resulting in an increase to goodwill. 3. ACCOUNTING ESTIMATES For the period ended March 31, 2005 and the period ended March 31, 2004, there have been no material changes in estimates of amounts reported in prior interim periods or of amounts related to prior fiscal years. 4. SEASONALITY The Company's revenues and earnings have historically been subject to some quarterly seasonality due to the timing of vacation periods and statutory holidays. 5. EARNINGS PER SHARE The diluted weighted average number of shares has been calculated as follows:
Three months ended Six months ended
March 31 March 31
--------------------------------------------------------------------
2005 2004 2005 2004
--------------------------------------------------------------------
Weighted average number
of shares - basic 8,403,165 8,445,037 8,361,228 8,355,990
Additions to reflect
the dilutive effect
of employee stock
options 92,131 187,246 92,297 209,746
--------------------------------------------------------------------
Weighted number of
shares - diluted 8,495,296 8,632,283 8,453,525 8,565,736
--------------------------------------------------------------------
Options that are anti-dilutive because the exercise price was greater than the average market price of the common shares are not included in the computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. of diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of . For the three and six-month period ended March 31, 2005 no stock options were excluded from the above computation of diluted weighted average number of common shares because they were anti-dilutive (2004: nil). The number of options outstanding at March 31, 2005 is 118,025. 6. SEGMENTED INFORMATION Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, regarding how to allocate To reserve a resource such as memory or disk. See memory allocation. resources and assess performance.The Company's chief operating decision maker is the Chief Executive Officer. The Company operates in two reportable segments described below, defined by their primary type of service offering, namely Systems Engineering and Business and Technology Services. - Systems Engineering involves planning, designing and implementing solutions that meet a customer's specific business and technical needs, primarily in the satellite communications sector. - Business and Technology Services involves both short and long-term placements of personnel to augment aug·ment v. aug·ment·ed, aug·ment·ing, aug·ments v.tr. 1. To make (something already developed or well under way) greater, as in size, extent, or quantity: customers' workforces (Staffing) as well as the long-term management of projects, facilities and customer business processes (Outsourcing). The Company evaluates performance and allocates resources based on earnings before interest and income taxes.The accounting policies of the segments are the same as those described in the significant accounting policies note in the audited annual consolidated financial statements.
Three months ended March 31, 2005
---------------------------------------------------------------------
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Business and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
Revenues $12,999 $25,689 $- $38,688
Earnings before
interest and
income taxes 1,812 1,238 (464) 2,586
Interest income, net 154
Income taxes 988
---------------------------------------------------------------------
Net earnings $1,752
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Total assets other than
cash and goodwill $12,527 $21,122 $711 $34,360
Goodwill 5,923 5,923
Cash 28,221
---------------------------------------------------------------------
Total assets $68,504
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Three months ended March 31, 2004
---------------------------------------------------------------------
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Business and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
Revenue $27,133 $22,113 $- $49,246
Earnings before
interest and
income taxes 4,384 899 (404) 4,879
Interest income, net 123
Income taxes 1,784
---------------------------------------------------------------------
Net earnings $3,218
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Total assets other
than cash and
goodwill $16,699 $19,725 $100 36,524
Goodwill 3,246 3,246
Cash 29,429
---------------------------------------------------------------------
Total assets $69,199
---------------------------------------------------------------------
---------------------------------------------------------------------
Six months ended March 31, 2005
---------------------------------------------------------------------
---------------------------------------------------------------------
Business and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
Revenue $26,138 $50,587 $- $76,725
Earnings before
interest and
income taxes 3,463 2,209 (866) 4,806
Interest income, net 310
Income taxes 1,860
---------------------------------------------------------------------
Net earnings $3,256
---------------------------------------------------------------------
---------------------------------------------------------------------
Six months ended March 31, 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Business and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
Revenue $42,709 $43,880 - $86,589
Earnings before
interest and
income taxes 6,440 1,678 (804) 7,314
Interest income, net 233
Income taxes 2,661
---------------------------------------------------------------------
Net earnings $4,886
---------------------------------------------------------------------
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7. CONTINGENCIES Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. On January January: see month. 24, 2005, the Company was served with a Statement of Claim filed in the Ontario Superior Court of Justice The Superior Court of Justice for Ontario, Canada is the successor to the former Ontario Court of Justice (General Division), and was created on April 19 1999. Its predecessor, the Ontario Court (General Division) was the result of the 1990 merger and discontinuance of the previous claiming $100 million in damages from Calian and an employee of the Company for breach of confidence, breach of fiduciary duty Noun 1. fiduciary duty - the legal duty of a fiduciary to act in the best interests of the beneficiary legal duty - acts which the law requires be done or forborne and unlawful interference with economic interests.The claim relates to the recently awarded limitation of expenditure contract by the Department of National Defence (DND) for the provision and management of Health Service Providers. The contract value for the initial 5-year period is in excess of $400 million with 5 additional option years worth an additional $480 million. The plaintiff has also filed a complaint with the Canadian International Trade Tribunal The Canadian International Trade Tribunal is an independent quasi-judicial group operating in Canada's trade remedy system. The administrative tribunal, which considers cases of dumping and subsidizing, reports to Parliament through the Minister of Finance. (CITT CITT Canadian International Trade Tribunal CITT Citizens’ Independent Transportation Trust CITT Canadian Institute for Theatre Technology (Canadian equivalent of USITT) CITT Canadian Institute of Traffic and Transportation ) related to this contract award. Calian has been granted intervener in·ter·vene intr.v. in·ter·vened, in·ter·ven·ing, in·ter·venes 1. To come, appear, or lie between two things: You can't see the lake from there because the house intervenes. 2. status in this matter which will enable Calian to better monitor the CITT proceedings and where appropriate provide submissions to the Tribunal A general term for a court, or the seat of a judge. In Roman Law, the term applied to an elevated seat occupied by the chief judicial magistrate when he heard causes. tribunal n. . The parties have agreed to a stay of proceedings In civil procedure and criminal procedure, a stay of proceedings is a ruling by the court halting further legal process in a trial. The court can subsequently lift the stay and resume proceedings. However, a stay is sometimes used as a device to postpone proceedings indefinitely. of the claim against Calian pending a decision by the CITT, which is expected in or about June June: see month. 2005. If the claim proceeds after the CITT decision is released, Calian intends to vigorously defend the claim, including the basis of the claim and the amounts being sought. Management believes that it will be successful in its defence of the claim advanced against the Company. The likely outcome of the claim cannot be determined at this time. The Company is party to other claims aggregating to approximately $120, which are being contested.The potential outcomes of these matters are not determinable Liable to come to an end upon the happening of a certain contingency. Susceptible of being determined, found out, definitely decided upon, or settled. determinable adj. at this time.The Company intends to defend these actions, and management believes that the resolution of these matters will not have a material adverse effect on the Company's financial condition. On September 7, 2004, the company acquired all of the outstanding shares of Titan Consulting Group Ltd ("Titan").The purchase price is based on the book value of assets and liabilities as of the date of acquisition plus a multiple of 4.5 times Titan's earnings before interest, taxes and amortization (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) of up to $1,567 and 1 times EBITDA in excess of $1,567 achieved during the period September 1, 2004 to August 31, 2005.Following the completion of the 12-month earnout Earnout A contractual provision stating that the seller of a business is to obtain additional future compensation based on the business achieving certain future financial goals. Notes: The financial goals are usually stated as a percentage of gross sales or earnings. period, the balance of the cash and shares are to be calculated and paid during the first six months of fiscal 2006. The final purchase price will be determined and accounted for as an incremental cost of the acquisition resulting in an increase to goodwill. 8. COMMITMENTS As part of its e-business (Electronic-BUSINESS) Doing business online. The term is often used synonymously with e-commerce, but e-business is more of an umbrella term for having a presence on the Web. strategy, during the year 2000, the Company entered into a 10-year lease for an office building in the Ottawa Ottawa, city, Canada Ottawa (ŏt`əwə), city (1991 pop. 313,987), capital of Canada, SE Ont., at the confluence of the Ottawa and Rideau rivers. Hull, Que. area expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. in April 2010.Upon exit of the e-business sector in 2001, the Company did not have any requirements for the space and accordingly sublet sub·let tr.v. sub·let, sub·let·ting, sub·lets 1. To rent (property one holds by lease) to another. 2. To subcontract (work). n. the excess space to a third party for a period of 5 years ending May 2006.In the event the sub-lessee defaults on the payment or the Company cannot sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. the premises premises n. 1) in real estate, land and the improvements on it, a building, store, shop, apartment, or other designated structure. The exact premises may be important in determining if an outbuilding (shed, cabana, detached garage) is insured or whether a person for the remaining 4 years, Calian will be required to assume the lease including related operating costs operating costs npl → gastos mpl operacionales for the remaining term of the lease.The lease payments including operating costs relating to the excess space amount to approximately $960 per year. 9. GUARANTEES In the normal course of business, the Company enters into agreements that may provide for indemnification Indemnification Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgements resulting from and guarantees to customers in transactions such as staffing, outsourcing and engineering. These indemnification undertakings and guarantees may require the Company to compensate customers for costs and losses incurred as a result of various events, including breaches of representations and warranties, intellectual property right infringement The encroachment, breach, or violation of a right, law, regulation, or contract. The term is most frequently used in reference to the invasion of rights secured by Copyright, patent, or trademark. , claims that may arise while providing services, or as a result of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. that may be suffered by customers. The Company mitigates its responsibility by removing from its contracts clauses related to liabilities for indirect or special damages Pecuniary compensation for injuries that follow the initial injury for which compensation is sought. The terminology and classification of types of damages is varied, at times contradictory, and often confusing. such as loss of revenue or profit in all of its engineering agreements. The Company also mitigates the risk of loss by including, where possible, similar indemnification clauses in the agreements entered into with its subcontractors. The term and nature of these indemnifications vary based upon the agreement, which often provides no limit. Consequently, the Company is unable to make a reasonable estimate of the maximum potential amounts that the Company could be required to pay to its customers. Historically, the Company has not been obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to make significant payments under these indemnification clauses. 10. COMPARATIVE FIGURES Certain of the comparative figures have been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the financial statement presentation adopted this fiscal year. Management Discussion and Analysis - Second Quarter 2005: RESULTS OF OPERATIONS - SECOND QUARTER 2005 Revenues: For the second quarter of 2005, revenues were $38.7 million, representing a decrease of 21.4% over the $49.2 million reported in the second quarter of 2004. Systems Engineering's revenues were $13.0 million in the quarter, a decrease of 52.1% over the $27.1 million recorded in the second quarter of last year. While the mix of projects has changed from the previous year, reduced MSTAR revenues account for the majority of this decrease. Due to the project nature of its business, the SED (1) (Stream EDitor) A Unix text editor that processes an entire file. It is the stream-oriented version of ed, an earlier text editor. Sed executes ed commands, but instead of editing one line at a time, sed applies the commands to the whole file. division is susceptible susceptible /sus·cep·ti·ble/ (su-sep´ti-b'l) 1. readily affected or acted upon. 2. lacking immunity or resistance and thus at risk of infection. sus·cep·ti·ble adj. to significant variation in volumes of activity from period to period. Business and Technology Services reported a 16.2% increase with revenues of $25.7 million compared to $22.1 million for the same quarter of last year.The majority of the increase relates to the inclusion of three months of revenues relating to the acquisition of Titan Consulting Group Ltd. The balance of the division was able to achieve revenues similar to the prior year despite a somewhat uncertain federal government environment. During the second quarter, the division successfully completed the transition phase of the DND Health Services Support Contract. The operation phase of the contract begins April 1, 2005. Gross margin: Gross margin was 19.3% in the second quarter of 2005, which is consistent with the 19.1% reported in the second quarter a year ago. Gross margin in Systems Engineering was 24.0% compared to 21.9% in the second quarter of 2004 due to excellent execution and retiring risk on certain large contracts. Gross margin in Business and Technology Services was 17.0% compared to the 15.7% reported in the second quarter of 2004 as a result of the inclusion of Titan, which improved the overall mix for the division. 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. : Selling, marketing, general and administration expenses totaled $4.5 million or 11.7% of revenues in the second quarter of 2005 compared to the $4.2 million or 8.6% of revenues reported in the second quarter of 2004.The increase is mainly attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the inclusion of three months of operating expenses relating to the acquisition of Titan. Amortization of intangibles During 2004, the Company acquired intangibles as a result of its acquisition of Titan in September 2004. These intangibles are amortized over their expected useful life, not exceeding 5 years. During the second quarter of 2005, the Company amortized $0.1 million. Income taxes The provision for income taxes for the second quarter of 2005 was $1.0 million compared to $1.8 million a year ago commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with the level earnings before income taxes. Net earnings: As a result of the foregoing, the Company recorded net earnings of $1.8 million or $0.21 per share basic and diluted in the second quarter of 2005, compared to $3.2 million or $0.38 per share basic and $0.37 per share diluted in the same quarter of the prior year. RESULTS OF OPERATIONS - Six-month period ending March 31, 2005 Revenues: During the first six months of this year, revenues were $76.7 million compared to $86.6 million for the first six months of fiscal 2004, representing a decrease of 11.4%. This is mostly attributable to a decrease in MSTAR revenues offset partially by the inclusion of 6 months of revenues relating to the Titan acquisition. Revenues in the Systems Engineering segment decreased 38.9% to $26.1 million from $42.7 million and revenues in the Business and Technology Services segment increased 15.3% to $50.6 million from 43.9 million. For the Systems Engineering Division we continue to view positively future prospects with the MSTAR product. However, because of the long lead-time lead-time n. The time between the initial stage of a project or policy and the appearance of results: a long lead-time in oil production because of the need for new exploration and drilling. required to deliver this product, we do not expect a significant amount of revenue to be generated during the remaining two quarters of 2005. For the Business and Technology Services Division although the environment is showing signs of modest recovery, we do not expect a significant increase in government spending Government spending or government expenditure consists of government purchases, which can be financed by seigniorage, taxes, or government borrowing. It is considered to be one of the major components of gross domestic product. over the next several quarters. The Health Services Support Contract will begin generating revenues effective April 1, 2005 which will have a significant impact on the overall growth for this division in 2005. Gross Margin: Although the revenue mix was significantly different than in the prior year, gross margin during the first six months of 2005 was 18.8%, compared to 18.7 % for the equivalent period of 2004. With the DND Health Services Support Contract beginning its operations on April 1, 2005, it is expected that the overall gross margin for the Company will decrease. However as explained below, operating expenses on this Health Services Support contract as a percentage of revenues is expected to be lower than the current average for the Company and accordingly will compensate for the lower gross margin. Management expects Company wide net margins to hold or improve. Operating expenses: Selling, marketing and general and administration, totaled $8.9 million or 11.5% of revenues in the first six months of 2005 compared to $8.3 million or 9.6% of revenues for the same period in 2004. The inclusion of Titan's operating expenses represents the majority of this increase. With the addition of the Health Services Support contract, operating expenses will increase to reflect costs associated with managing this contract. However, management expects the overall costs as a percentage of revenues to be less than its current average resulting in a decrease in operating expenses as a percentage of revenues. Income Taxes: The provision for income taxes for the six-month period ending March 31, 2005 was $1.9 million, compared to $2.7 million a year ago. The income tax expense for the first 6 months of 2004 was positively impacted by an increase in the effective income tax rate applied to the valuation of future income tax assets.In 2005 the Company will be required to pay taxes on all of its earnings. Net Earnings: As a result of the foregoing, the Company recorded net earnings of $3.3 million or $0.39 per share basic and diluted for the first six months of fiscal 2005, compared to $4.9 million or $0.58 per share basic and $0.57 per share diluted in the same period of the prior year. BACKLOG The backlog at March 31, 2005 is $1,124 million with terms extending to fiscal 2014. This compares to $257 million reported at the end of September 2004. Contracted backlog represents revenues remaining to be earned on signed contracts, whereas option renewals represent a customer's option to further extend existing contracts under similar terms and conditions. Most contracts provide the customer with the ability to adjust the timing and level of effort throughout the contract life and as such the following represents management's best estimate of the ultimate backlog and related consumption profile. (dollars in millions) TOTAL Fiscal 2005 Fiscal 2006 Beyond --------------------------------------------------------------------- Contracted Backlog $533 $81 $101 $351 Option Renewals 591 1 10 580 --------------------------------------------------------------------- TOTAL $1,124 $82 $111 $931 --------------------------------------------------------------------- --------------------------------------------------------------------- Business and Technology Services 1,094 63 100 931 Systems Engineering 30 19 11 - --------------------------------------------------------------------- TOTAL $1,124 $82 $111 $931 --------------------------------------------------------------------- --------------------------------------------------------------------- FINANCIAL CONDITION AND CASHFLOWS: Cash flows used in operating activities during the first 6 months of 2005 were $1.6 million as compared with a cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. of $4.4 million during the same period of 2004. Cash flows from earnings decreased by $2.8 million. As expected working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. increased by $3.2 million over 2004 mainly due to a decrease in unearned contract revenues as the Company performed the work associated with upfront customer advances. At March 31, 2005, the Company had a short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. credit facility of $10 million with a Canadian chartered bank Chartered Bank A financial institution whose primary roles are to accept and safeguard monetary deposits from individuals and organizations, and to lend money out. The details vary from country to country, but usually a chartered bank in operation has obtained government permission that bears interest at prime and is secured by assets of the Company. An outstanding letter of credit in the amount of $0.6 million was applied against the available line. As a result of increasing its dividend payment to 8 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. during the first quarter of 2005, the Company paid $0.7 million in dividends compared to $0.4 million or 5 cents per share in the second quarter of the prior year. We expect cash balances to decrease further over the course of the year as we meet our obligations associated with advance payments and fund new working capital requirements associated with the Health Services contract. SEASONALITY The Company's operations have historically been subject to some quarterly seasonality due to the timing of vacation periods and statutory holidays. Typically the Company's first and last quarter will be negatively impacted as a result of the Christmas Christmas [Christ's Mass], in the Christian calendar, feast of the nativity of Jesus, celebrated in Roman Catholic and Protestant Churches on Dec. 25. In liturgical importance it ranks after Easter, Pentecost, and Epiphany (Jan. 6). season and summer vacation Summer vacation (also called summer holidays or summer break) is a vacation in the summertime between school years in which students are off for 3 months, depending on the country and district. period.During these periods, the Company can only invoice An itemized statement or written account of goods sent to a purchaser or consignee by a vendor that indicates the quantity and price of each piece of merchandise shipped. A consular invoice is one used in foreign trade. for work performed and is also required to pay for statutory holidays.This results in reduced levels of revenues and in a drop in gross margins. This seasonality may not be apparent in the overall results of the Company depending on the impact of the realized sales mix sales mix See product mix. of its various projects. OUTLOOK Management believes the Company is well positioned for sustained growth in the long-term. The Company operates in markets that will continue to require the services that the Company delivers. To further assure itself of a stable source of revenues, the Company will focus on increasing the percentage of its revenues derived from recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. business. Its acquisition strategy focusing on adding complementary businesses to the Company's mix will also be an additional source for growth. The Systems Engineering Division has been working within a depressed satellite sector for the last few years with no significant rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective expected in the near-term near-term adj. Of, for, or involving a short period of time in the near future. . In addition, several large satellite operators have recently been purchased using highly leveraged financial structures and we believe this may impact capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. , which in turn may reduce new opportunities in the near term.However, management believes that new satellites adopting the latest technologies will be required in the medium term to maintain and improve service offerings. In addition, management believes the surveillance and security market will continue to be strong in the near term and although management cannot predict the timing and extent of future orders, it is confident that systems such as MSTAR will continue to be in demand. The continued strengthening of the Canadian dollar will impact the Systems Engineering Division's competitiveness when bidding against foreign competition on projects denominated in US dollars. The Business and Technology Services Division's services are adaptable a·dapt·a·ble adj. Capable of adapting or of being adapted. a·dapt  a·bil to many different markets. Currently, its strength lies in
providing program management and delivery services to the Department of
National Defence. This was further demonstrated with the recent win of
the Health Services contract. Management believes that this department
and many others within the federal government will continue to require
more support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services from private enterprises to supplement their
current workforce. Although Calian has experienced delays during the
last few years, management believes that the types of service the
division offers will continue to be attractive to government agencies
going forward. With its recent acquisition of Titan and the award to
Calian of two standing agreements for SAP sap, fluid in plants consisting of water and dissolved substances. Cell sap refers to this fluid present in the large vacuole, or cell cavity, that occupies most of the central portion of mature plant cells. and Peoplesoft (PeopleSoft, Inc., Pleasanton, CA, www.peoplesoft.com) A software company that specialized in enterprise-wide applications for client/server environments. Initially specializing in human resources, its package offerings covered the gamut including financial, distribution, manufacturing resources,
Calian is now well positioned to take advantage of the expected growth
in government ERP (Enterprise Resource Planning) An integrated information system that serves all departments within an enterprise. Evolving out of the manufacturing industry, ERP implies the use of packaged software rather than proprietary software written by or for one customer. requirements.As indicated in Note 7 of the Company's financial statements, the Company has been served with a Statement of Claim claiming $100 million in damages from Calian and an employee of the Company. The plaintiff has also filed a complaint with the Canadian International Trade Tribunal (CITT) related to this contract award. Calian has been granted intervener status in this matter which will enable Calian to better monitor the CITT proceedings and where appropriate provide submissions to the Tribunal. The parties have agreed to a stay of proceedings of the claim against Calian pending a decision by the CITT, which is expected in or about June 2005. If the claim proceeds after the CITT decision is released, Calian intends to vigorously defend the claim, including the basis of the claim and the amounts being sought. Management believes that it will be successful in its defence of the claim advanced against the Company. The likely outcome of the claim cannot be determined at this time. GUIDANCE As a result of our present backlog and based on the above information related to the current market conditions and demand, the Company expects 2005 revenues to be in the range of $ 180 million to $190 million and net earnings per share in the range of $0.85 to $0.95. REVIEW OF QUARTERLY STATEMENTS BY AUDITORS AUDITORS, practice. Persons lawfully appointed to examine and digest accounts referred to them, take down the evidence in writing, which may be lawfully offered in relation to such accounts, and prepare materials on which a decree or judgment may be made; and to report the whole, together The Company's auditors have not reviewed the financial statements for the period ending March 31, 2004. FORWARD-LOOKING STATEMENT Certain information included in this management discussion and analysis is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Such statements are generally accompanied by words such as "intend", "anticipate", "believe", "estimate", "expect" or similar statements. Factors which could cause results or events to differ from current expectations include, among other things: the impact of price competition; scarce number of qualified professionals; the impact of rapid technological and market change; loss of business or credit risk with major customers; technical risks on fixed price projects; general industry and market conditions and growth rates; international growth and global economic conditions, and including currency exchange rate fluctuations; and the impact of consolidations in the business services industry. For additional information with respect to certain of these and other factors, please see the Company's most recent annual report and other reports filed by the Company with the Ontario Securities Commission.Calian disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.No assurance can be given that actual results, performance or achievement expressed in, or implied by, forward-looking statements within this disclosure will occur, or if they do, that any benefits may be derived from them. The foregoing discussion and analysis should be read in conjunction with the financial statements for the second quarter of 2005 and 2004, and with the Management Discussion and Analysis in the 2004 annual report, including the section on risks and opportunities. Calian Technologies Ltd. (TSX:CTY) |
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