Calian Technology Ltd. Reports a Return to Profitability.Business Editors KANATA, Ontario--(BUSINESS WIRE)--May 16, 2001 Calian Technology Ltd. (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :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 of fiscal 2001, ended March 31, 2001. Revenues for the quarter were $34.3 million. Net earnings were $185,000 or $0.02 per share basic and fully 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. . 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. at March 31, 2001 totaled $113.2 million. A detailed commentary on the quarterly results is contained in the Management Discussion and Analysis section of this release. Larry O'Brien
Lawrence "Larry" Francis O'Brien, Jr. (July 7 1917 – September 28, 1990) was one of the United States Democratic Party's leading electoral strategists when, for more than two , 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. commented, "Last quarter we expected to return to profitability and we have done so. However, we are not, nor should our shareholders be satisfied with the current level of profitability. There is a lot more work to do." "With the announcement today that Calian is exiting the e-Services An umbrella term for services on the Internet. E-services include e-commerce transaction services for handling online orders, application hosting by application service providers (ASPs) and any processing capability that is obtainable on the Web. See e-speak. business and focusing on its Resourcing and Systems Engineering operations, we are taking the first of a number of steps designed to enhance shareholder value by improving profitability, cash flow and return on equity," stated O'Brien O'Bri·en , Edna Born 1932. Irish writer whose works, including The Lonely Girl (1962) and Johnny I Hardly Knew You (1977), explore the lives of women in modern-day Ireland. Noun 1. . "We are laying the foundation to increase our operational efficiencies and eliminate redundancies. For example, we have consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: our Kanata headquarters into one facility, which will result in significant reductions in indirect expenses." Mr. O'Brien went on to say, "The Systems Engineering division based in Saskatchewan Saskatchewan, province, Canada Saskatchewan (səskăch`əwən, –wän', săs'–), province (2001 pop. 978,933), 251,700 sq mi (651,903 sq km), W Canada. will be unaffected by the announcements made today. We are very comfortable with the 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. prospects of our Western division and, now that we have clarity Clarity is the property of being clear or transparent. Clarity can refer to one's ability to clearly visualize an object or concept, as in thought, understanding, and the "mind's eye", as well as the traditional notion of visual perception, that is, with the of purpose in the East, we expect substantial improvements in our operations' profits and cash flows." Management estimates that the Company will incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. a loss on disposal of its e-Services business of $10.6 million after tax (predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. goodwill), including rationalization rationalization, in psychology: see defense mechanism. costs and the writedown writedown A reduction in the value of an asset carried on a firm's financial statements. For example, the firm's accountants, believing the inventory is overvalued, may decide to take a writedown by reducing inventory valuation. of goodwill and other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. . As the formal plan of disposal was approved during its third fiscal quarter, the Company intends to account for this loss in the third quarter. The details of management's current estimates are set out in Note 7 to the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. unaudited financial statements, and will be discussed at the conference call at 4:30 p.m. today. Management Discussion and Analysis (MD&A) of the second fiscal quarter: Results of operations: Revenues for the second quarter of fiscal 2001 were $34.3 million compared to $31.4 million in the second quarter of fiscal 2000, representing an increase of 9.3%. Growth in revenues was strongest in the Resourcing segment, where revenues increased to $21.7 million from $16.6 million. System Engineering's revenues were $10.2 million in the quarter, down from $11.9 million in the second quarter of last year due to lower levels of materials on projects during the second quarter of the current year. Revenues in the eServices segment were down slightly to $2.4 million. Gross profit was 21.2% in the second quarter of 2001 as compared to 19.4% in the comparable quarter a year ago. Most of this improvement relates to the higher margins achieved in Systems Engineering (26.2% as compared with 21.0% in the same quarter a year ago). This improvement is due to the higher mix of labour, which is typically associated with higher margins. Selling and marketing, general and administration, facilities and amortization of capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) totaled $6.6 million or 19.2% of revenues in the second quarter of 2001. This compares to $4.7 million or 15.1% of revenues in the second quarter of 2000. This increase is related largely to infrastructure costs incurred to support the growth of the Company. Facilities costs and amortization expense are higher in fiscal 2001 because the Company expanded into additional space part way through 2000 and had a relatively high level of 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. last year, relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc its new 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. system and leaseholds. Income taxes - Effective with the fourth quarter of fiscal 2000, Calian adopted the 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. Institute of Chartered Accountants' new rules in accounting for income taxes, which resulted in the Company recognizing the future benefit of investment tax credits created in prior years, of research expenditures not yet deducted de·duct v. de·duct·ed, de·duct·ing, de·ducts v.tr. 1. To take away (a quantity) from another; subtract. 2. To derive by deduction; deduce. v.intr. , and prior years' net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. not yet claimed. Consequently Calian now reports its results on a fully taxed basis, although cash taxes may not be payable for several years. In the second quarter of fiscal 2000 the Company's tax rate was effectively zero, other than for income taxes incurred in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Net earnings were $185,000 or $0.02 per share basic and fully diluted in the second quarter of fiscal 2001, compared with net earnings of $1.2 million or $0.14 per share basic and $0.13 per share fully diluted in the same quarter the previous year. For the fiscal year to date, consolidated revenues in fiscal 2001 were $66.3 million compared to $60.3 million for the first six months of fiscal 2000, representing an increase of 9.9%. Growth in revenues was strongest in the Resourcing segment, where revenues increased to $41.0 million from $30.6 million. System Engineering's revenues have been $20.7 million in the current year to date, lower than the $23.7 million recorded last year. Revenues in the eServices segment are lower than in the prior year to date period by $1.5 million. Gross profit was 19.4% during the first half of 2001, the same as in the equivalent period last fiscal year. Selling and marketing, general and administration, facilities and amortization of capital assets totaled $13.2 million or 19.9% of revenues in the first half of 2001. This compares to $9.2 million or 15.3% of revenues in the first half of 2000. This increase is due to the factors explained above. In its first quarter of the current fiscal year the Company took a special charge against earnings of $2.0 million, including one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. charges and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs relating principally to its eServices division. These costs represent severances, settlement and legal costs, asset write-downs, and pre-accrued facilities costs. Based on the loss recorded in the first quarter of the current fiscal year, the Company recorded a recovery of income taxes. For the first six months in fiscal 2000, the tax provision was minimal, as discussed above. The Company has recorded a net loss of $1.7 million or ($0.17) per share basic and fully diluted in the year to date period ending March 31, 2001, compared with net earnings of $2.3 million or $0.26 per share basic and $0.24 per share fully diluted for the same period the previous year. Financial Condition and Cash Flows Calian maintains a strong balance sheet and cash position which, together with bank lines, are sufficient to support the Company's operations for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future. The Company has a $10 million credit facility 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 , all of which is available as at March 31, 2001. The Company's cash position at the end of the quarter amounted to $10.7 million, compared with $10.6 million at September September: see month. 30, 2000. During the second quarter of 2001, cash provided by operating activities, including changes in working capital, was $2.6 million, as compared to a negative $1.3 million in the second quarter a year ago. This variation reflects primarily a decrease in unbilled un·billed adj. 1. Not having been billed or charged for: unbilled medical charges. 2. Appearing, as in a movie, without being credited: an unbilled walk-on. accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and an increase in accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. . During the second quarter of 2001, $0.6 million was spent to acquire capital assets ($0.7 million last year). During the second quarter of fiscal 2000, $1.1 million was invested to acquire MacDonald Mac·don·ald , Sir John Alexander 1815-1891. Canadian politician and the first prime minister of the Dominion of Canada (1867-1873 and 1878-1891). He is considered the organizer of the Canadian confederation, established in 1867. & Brisson Brisson may refer to:
n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. for the second quarter of fiscal 2001 was $1.8 million, whereas it was negative $3.2 million during the second quarter of fiscal 2000. For the first two quarters of fiscal 2001, cash provided by operating activities, including changes in working capital, was $1.3 million, as\compared to $0.1 million a year ago. This variation reflects primarily an increase in accounts payable and accrued liabilities. During the first half of 2001, $1.2 million was spent in financing and investing activities. During the first half of fiscal 2000, the Company invested $3.2 million in capital assets and in business acquisitions, while repaying $1.4 million of debt and issuing $0.5 million in common shares. Net cash flow for the first two quarters of fiscal 2001 has been neutral, whereas it was negative $4.0 million during the first half of fiscal 2000. The foregoing discussion and analysis should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the financial statements for the second quarter of fiscal 2001 and 2000, and with the Management Discussion and Analysis in the fiscal 2000 annual report, including the section on risks and uncertainties. About Calian: Calian Technology Ltd. (TSE:CTY) sells technical and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. to industry and government. In the 2000 fiscal year Calian had sales in excess of $125 Million.
CALIAN TECHNOLOGY LTD.
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands except per share data)
(Unaudited)
Three months ended Year to Date
March 31 March 31
-----------------------------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Revenues $ 34,282 $ 31,379 $ 66,263 $ 60,307
Cost of revenues 27,024 25,302 53,387 48,628
----------- ----------- ----------- -----------
Gross profit 7,258 6,077 12,876 11,679
----------- ----------- ----------- -----------
Selling and marketing 2,159 1,657 4,217 3,200
General and
administration 2,818 2,007 5,966 3,984
Facilities 992 671 1,792 1,253
Amortization of
capital assets 625 405 1,240 790
Special charges (Note 6) - - 2,000 -
----------- ----------- ----------- -----------
6,594 4,740 15,215 9,227
----------- ----------- ----------- -----------
Earnings (loss) before
interest, taxes and
amortization of
goodwill 664 1,337 (2,339) 2,452
Interest income, net 23 75 67 207
----------- ----------- ----------- -----------
Earnings (loss) before
taxes and
amortization of
goodwill 687 1,412 (2,272) 2,659
Income taxes - current 31 31 18 51
Income taxes - future 303 - (923) -
----------- ----------- ----------- -----------
Earnings (loss) before
amortization of
goodwill 353 1,381 (1,367) 2,608
Amortization of goodwill 168 147 336 275
----------- ----------- ----------- -----------
NET EARNINGS (LOSS) $ 185 $ 1,234 $ (1,703) $ 2,333
----------- ----------- ----------- -----------
Retained earnings,
beginning of period 22,603 13,146 24,491 12,047
----------- ----------- ----------- -----------
Retained earnings,
end of period $ 22,788 $ 14,380 $ 22,788 $ 14,380
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings (loss) per share before amortization of goodwill:
Basic $ 0.04 $ 0.15 $ (0.14) $ 0.29
Fully Diluted $ 0.04 $ 0.14 $ (0.14) $ 0.26
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net earnings (loss) per share:
Basic $ 0.02 $ 0.14 $ (0.17) $ 0.26
Fully Diluted $ 0.02 $ 0.13 $ (0.17) $ 0.24
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of shares:
Basic 9,769,822 9,079,726 9,765,404 9,001,887
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Fully Diluted 10,722,776 9,923,116 10,745,678 10,102,821
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
CALIAN TECHNOLOGY LTD.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
March 31, September 30,
2001 2000
----------- -----------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,701 $ 10,576
Accounts receivable 23,053 23,121
Unbilled accounts receivable 3,963 4,853
Prepaid expenses and other 985 1,336
Future income taxes 3,652 3,276
----------- -----------
42,354 43,162
GOODWILL 11,352 11,686
CAPITAL ASSETS 8,833 9,182
INVESTMENT TAX CREDITS RECOVERABLE 2,243 2,243
FUTURE INCOME TAXES 4,271 3,724
----------- -----------
$ 69,053 $ 69,997
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 15,464 $ 11,586
Unearned contract revenue 12,162 14,947
Note payable - 334
Current portion of long-term debt 274 376
----------- -----------
27,900 27,243
LONG-TERM DEBT 421 515
----------- -----------
28,321 27,758
----------- -----------
CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Share capital 17,944 17,748
Retained earnings 22,788 24,491
----------- -----------
40,732 42,239
----------- -----------
$ 69,053 $ 69,997
----------- -----------
----------- -----------
CALIAN TECHNOLOGY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
Three months ended Year to Date
March 31 March 31
-----------------------------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
CASH FLOWS FROM
(USED IN) OPERATING
ACTIVITIES
Net earnings (loss) $ 185 $ 1,234 ($1,703) $ 2,333
Items not affecting
cash:
Deferred lease
Inducements (3) 3 (6) 6
Amortization 793 552 1,576 1,065
Future Income Taxes 303 - (923) -
----------- ----------- ----------- -----------
1,278 1,789 (1,056) 3,404
Change in non-cash
working capital
Accounts receivable (946) (926) 68 (4,809)
Unbilled accounts
Receivable 3,670 (1,549) 891 (827)
Prepaid expenses
and other 89 400 351 572
Accounts payable and
accrued liabilities 1,921 (846) 3,876 (2,297)
Unearned contract
Revenue (3,429) (169) (2,785) 4,025
----------- ----------- ----------- -----------
2,583 (1,301) 1,345 68
----------- ----------- ----------- -----------
CASH FLOWS FROM
(USED IN) FINANCING
ACTIVITIES
Repayment of debt (354) (402) (524) (1,449)
Issuance of common
Shares 130 442 196 551
----------- ----------- ----------- -----------
(224) 40 (328) (898)
----------- ----------- ----------- -----------
CASH FLOWS FROM
(USED IN) INVESTING
ACTIVITIES
Acquisition of
capital assets (598) (742) (892) (2,058)
Business acquisitions - (1,157) - (1,157)
----------- ----------- ----------- -----------
(598) (1,899) (892) (3,215)
----------- ----------- ----------- -----------
NET CASH INFLOW
(OUTFLOW) 1,761 (3,160) 125 (4,045)
CASH AND CASH
EQUIVALENTS,
BEGINNING OF PERIOD 8,940 18,807 10,576 19,692
----------- ----------- ----------- -----------
CASH AND CASH
EQUIVALENTS,
END OF PERIOD $ 10,701 $ 15,647 $ 10,701 $ 15,647
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
CALIAN TECHNOLOGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the periods ended March 31, 2001 and 2000
(dollars in thousands)
(Unaudited)
1. ACCOUNTING POLICIES
These interim consolidated financial statements have been prepared
in accordance with Canadian generally accepted accounting principles
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, and should be read
in conjunction with those audited annual consolidated financial
statements.
2. ACCOUNTING ESTIMATES
For the period ended March 31, 2001 there have been no material
changes in estimates of amounts reported in prior interim periods or
of amounts related to prior fiscal years.
3. SEASONALITY
The Company's operations are not subject to significant
cyclicality. However, given the nature of its operations, the
Company's revenues may be affected by vacation or holiday schedules.
4. 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 resources and assess performance. The Company's chief
operating decision maker is the Chief Executive Officer.
In fiscal 2001 the Company operates in three reportable segments
described below, defined by their primary type of service offering,
namely Systems Engineering, Resourcing and eServices.
- Systems Engineering involves planning, designing and implementing
solutions that meet a customer's specific business and technical
needs, primarily in the satellite communications sector.
- Resourcing involves both short and long-term placements of
personnel to augment customers' workforces as well as the
long-term management of projects, facilities and customer business
processes.
- eServices includes an eLearning component (strategy development,
learning management systems and services, training delivery),
content management, systems integration, and management
consulting.
In fiscal 2000 the Company operated in two reportable segments,
namely Systems Engineering and Professional Services. During the first
fiscal quarter of 2001 the Company's management structure changed to
separate Professional Services into Resourcing and eServices.
The Company evaluates performance and allocates resources based on
earnings before interest and income taxes. The company does not
segregate assets and other balance sheet accounts between the
Resourcing and eServices business units. 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, 2001
---------------------------------------------------------------------
Systems Corporate
and
Engineering Resourcing eServices Other (a) Total
---------------------------------------------------------------------
Revenue $10,185 $21,712 $2,385 $34,282
Earnings before
interest and
income taxes 1,400 770 (919) (755) 496
Interest income
(expense) 43 (20) 23
Income taxes 334
---------------------------------------------------------------------
Net earnings $185
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Assets $43,958 $25,095 $69,053
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended March 31, 2000
---------------------------------------------------------------------
Systems Corporate
and
Engineering Resourcing eServices Other (a) Total
---------------------------------------------------------------------
Revenue $11,873 $16,634 $2,872 $31,379
Earnings before
interest and
income taxes 1,085 1,244 (524) (615) 1,190
Interest income
(expense) 192 (117) 75
Income taxes 31
---------------------------------------------------------------------
Net earnings $1,234
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Assets $44,427 $17,442 $61,869
---------------------------------------------------------------------
---------------------------------------------------------------------
Six months ended March 31, 2001
---------------------------------------------------------------------
Systems Corporate
and
Engineering Resourcing eServices Other (a) Total
---------------------------------------------------------------------
Revenue $20,713 $41,016 $4,534 $66,263
Earnings before
interest and
Income taxes 2,031 1,084 (3,948) (1,842) (2,675)
Interest income
(expense) 103 (36) 67
Income taxes (905)
---------------------------------------------------------------------
Net earnings $(1,703)
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Assets $43,958 $25,095 $69,053
---------------------------------------------------------------------
---------------------------------------------------------------------
Six months ended March 31, 2000
---------------------------------------------------------------------
Systems Corporate
and
Engineering Resourcing eServices Other (a) Total
---------------------------------------------------------------------
Revenue $23,699 $30,557 $6,051 $60,307
Earnings before
interest and
Income taxes 1,984 2,167 (811) (1,163) 2,177
Interest income
(expense) 352 (145) 207
Income taxes 51
---------------------------------------------------------------------
Net earnings $2,333
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Assets $44,427 $17,442 $61,869
---------------------------------------------------------------------
---------------------------------------------------------------------
(a) Includes corporate services costs and other costs not
appropriate to allocate to the operating segments.
5. CONTINGENCIES
During the first quarter of fiscal year 2001 ended December 31,
2000, the Company settled two claims with respect to former employees
for a total of $310. This amount is included as part of the Special
charge described in Note 6.
The Company is a party to claims which are being contested. The
potential outcomes of these matters are not determinable at this time.
Management of the Company believes that the resolution of these
matters will not have a material adverse effect on Calian's financial
condition.
As described in Note 14 of the audited consolidated financial
statements, during its fiscal year 2000 the Company acquired PPI
Canada Ltd. In the event it is determined that, during the twelve
months following the acquisition, the acquired business achieves a
certain level of profitability (as defined), additional cash
consideration for the shares of PPI will become payable. The maximum
amount of additional consideration is $1,600. The amount of additional
consideration, if any, is not determinable at this time.
6. SPECIAL CHARGES
The following were reflected in the consolidated statement of
earnings for the first fiscal quarter ended December 31, 2000:
--------------------------------------------------------------------
Settlement of claims $310
----
In connection with the restructuring of eServices\operations
announced in January 2001:
Workforce reduction 587
Write-down of other assets 784
Legal and consulting 90
Lease costs 229
------
$1,690
------
$2,000
------
7. SUBSEQUENT EVENT - DISCONTINUED OPERATION
On May 16, 2001 the Company's Board of Directors approved a formal
plan to dispose of all of the assets of the eServices business. The
approved plan consists of rationalizing the eServices operations by
making adjustments to the workforce and facilities commensurate with
the size of the business and selling the resized business. The
estimated date of disposal is June 30, 2001.
As the formal plan of disposal was approved during its third
fiscal quarter, the Company intends to account for the results of
eServices as a discontinued operation beginning in that quarter.
Because the decision to exit eServices is significant to the strategic
direction of the Company and to its reported results, the Company is
providing disclosure of the following, which will be accounted for in
the third fiscal quarter of 2001.
Management estimates that the Company will incur a loss on
disposal of the eServices business of $12,155 before tax and $10,570
after tax, including rationalization costs and operating losses
subsequent to May 16, 2001. Management's current estimates of these
amounts (pre-tax) are:
(i) Rationalization costs:
Workforce reduction $1,180
Write-down of redundant assets 400
Legal and consulting 260
Provision for excess facilities 1,345
-----
$3,185
(ii) Loss on disposal of assets:
Goodwill $7,730
Capital assets 500
Tax asset and other 630
-----
$8,860
-----
(iii) Operating loss from May 16 to
estimated date of disposal $ 110
---
The estimated results of operations of eServices from April 1,
2001 to May 16, 2001 are a pre-tax loss of approximately $280 ($180
after tax). This amount is not included in (iii) above.
The total carrying amount of the net assets of the eServices
business available for sale are approximately $10,600.
If there were to be additional consideration payable for the
shares of PPI Canada Ltd. as described in Note 5, this would be
accounted for as part of the discontinued operations.
As shown in Note 4, the revenues of the eServices business for the
quarter and the six-month period ended March 31, 2001 were $2,385 and
$4,534 respectively. The Net loss (net of applicable income taxes)
from eServices was $558 for the quarter ended March 31, 2001 and
$2,288 for the six-month period then ended.
The net earnings of the Company, excluding eServices, were $743
for the quarter ended March 31, 2001 and $585 for the six-month period
ended March 31, 2001.
8. COMPARATIVE FIGURES
Certain comparative figures in the consolidated financial
statements and notes to the consolidated financial statements have
been reclassified to conform with the current period's presentation.
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