Calian Technology Reports Fourth Quarter Results: Company Forecasts Great Year Ahead.Business Editors/High-Tech Writers KANATA, Ontario--(BUSINESS WIRE)--Nov. 6, 2003 Calian Technology 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 fourth quarter ended September September: see month. 30, 2003. Revenues for the quarter were $34.2 million equal to the $34.2 million reported in the same quarter of the previous year. Net earnings increased by 17% and were $1.4 million or $0.17 per share basic and $0.16 per share 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 $1.2 million or $0.14 per share basic and diluted in the same quarter last year. "We have met our operational goals for 2003 and have exceeded our profit, cash flow and 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. targets," said Ray Basler, President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . "An improving business mix coupled with tight cost controls have enabled us to deliver enhanced returns to shareholders and our healthy backlog provides increased optimism Optimism See also Hope. Bontemps, Roger personification of cheery contentment. [Fr. Lit.: “Roger Bontemps” in Walsh Modern, 66] Candide beset by inconceivable misfortunes, hero indifferently shrugs them off. [Fr. for 2004." Summary of 2003 Results:
Summary of 2003 Results:
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(in millions of dollars, except per share data)
2003 2002 % Change
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Revenues $141.0 $131.9 7%
EPS Continuing Operations $0.66 $0.41 43%
Net EPS $0.60 $0.41 41%
Cash Balance $25.2 $9.5 165%
Backlog $189.3 $122.7 54%
"I am very pleased with the results for 2003," stated 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 , Chairman and Chief Executive Officer. "Based on our current business prospects, we expect 2004 revenues in the range of $165 million to $175 million and achieve net earnings per share in the range of $0.75 to $0.85, excluding the impact of potential acquisitions." About Calian Calian Technology Ltd. (TSX:CTY) 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 over 2,200 engineers, telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. and technology 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 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. . 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 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. 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by, forward-looking statements within this disclosure will occur, or if they do, that any benefits may be derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from them.
CALIAN TECHNOLOGY LTD.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(dollars in thousands except per share data)
Three months ended Year ended
September 30 September 30
(Unaudited)
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2003 2002 2003 2002
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Revenues $34,213 $34,188 $141,040 $131,876
Cost of revenues 28,026 28,044 115,654 109,057
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Gross profit 6,187 6,144 25,386 22,819
Selling and marketing 1,043 1,259 4,409 4,601
General and administration 2,062 2,105 8,574 8,330
Facilities 700 685 2,769 2,720
Amortization of
capital assets 343 432 1,216 1,573
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Earnings before interest,
taxes and amortization
of goodwill 2,039 1,663 8,418 5,595
Interest income, net 124 59 364 202
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Earnings before taxes and
amortization of goodwill 2,163 1,722 8,782 5,797
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Income taxes - current 309 47 1,279 745
Income taxes - future 490 453 2,175 1,397
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799 500 3,454 2,142
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Earnings before
amortization of goodwill 1,364 1,222 5,328 3,655
Amortization of goodwill - 59 - 236
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Earnings from
continuing operations 1,364 1,163 5,328 3,419
Loss on disposal of
discontinued operation
(net of income taxes)
(Note 8) - - 480 -
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NET EARNINGS 1,364 1,163 4,848 3,419
Retained earnings,
beginning of period 12,259 9,938 11,057 9,797
Excess of purchase
price over stated
capital on repurchase
of shares (Note 10) (12) (44) (1,329) (2,159)
Dividend (409) - (1,374) -
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Retained earnings,
end of period $13,202 $11,057 $13,202 $11,507
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Earnings per share
from continuing
operations: (Note 3)
Basic $0.17 $0.14 $0.66 $0.41
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Diluted $0.16 $0.14 $0.64 $0.41
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Net earnings per
share: (Note 3)
Basic $0.17 $0.14 $0.60 $0.41
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Diluted $0.16 $0.14 $0.58 $0.41
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Weighted average
number of shares:
(Note 3)
Basic 8,159,519 8,023,873 8,047,748 8,320,341
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Diluted 8,455,212 8,209,451 8,389,822 8,438,721
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CALIAN TECHNOLOGY LTD.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
September 30, 2003 September 30, 2002
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $25,185 $9,488
Accounts receivable 20,519 25,307
Work in process 4,759 3,472
Prepaid expenses and other 486 726
Future income taxes 3,625 3,325
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54,574 42,318
INVESTMENT TAX CREDITS RECOVERABLE 866 1,705
FUTURE INCOME TAXES 1,271 3,476
CAPITAL ASSETS 4,110 4,282
GOODWILL 3,246 3,246
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$64,067 $55,027
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
liabilities $16,867 $15,291
Unearned contract revenue 18,045 13,483
Current portion of long-term debt 92 164
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35,004 28,938
LONG-TERM DEBT 89 181
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35,093 29,119
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CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY
Share capital (Note 10) 15,772 14,851
Retained earnings 13,202 11,057
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28,974 25,908
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$64,067 $55,027
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CALIAN TECHNOLOGY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Three months ended Year ended
September30 September 30
(Unaudited)
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2003 2002 2003 2002
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CASH FLOWS FROM (USED IN)
OPERATING ACTIVITIES
Net earnings $1,364 $1,163 $4,848 $3,419
Items not affecting cash:
Deferred lease
inducements (2) (2) (9) (9)
Amortization 343 491 1,216 1,809
Investment tax credits 179 122 839 471
Future income taxes 489 453 1,905 1,397
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2,373 2,227 8,799 7,087
Change in non-cash
working capital
Accounts receivable (4,509) (9,293) 4,788 (6.913)
Work in process 658 978 (1,287) 393
Prepaid expenses
and other (185) 160 240 28
Accounts payable and
accrued liabilities (386) 427 1,576 (762)
Unearned contract
revenue 849 3,640 4,562 3,335
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(1,200) (1,861) 18,678 3,168
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CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES
Repayment of debt (37) (39) (155) (151)
Issuance of common shares 373 112 1,510 334
Repurchase of common
shares, including cost
associated with
repurchase (Note 10) (16) (83) (1,918) (5,586)
Dividend (409) - (1,374) -
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(89) (10) (1,937) (5,403)
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CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES
Acquisition of
capital assets (313) (209) (1,044) (788)
Note receivable - 300 - 300
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(313) 91 (1,044) (488)
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NET CASH INFLOW (OUTFLOW) (1,602) (1,780) 15,697 (2,723)
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CASH AND CASH
EQUIVALENTS,
BEGINNING OF PERIOD 26,787 11,268 9,488 12,211
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CASH AND CASH
EQUIVALENTS,
END OF PERIOD $25,185 $9,488 $25,185 $9,488
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CALIAN TECHNOLOGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the periods ended September 30, 2003 and 2002
(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, 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. CHANGE IN ACCOUNTING POLICIES a. 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. Effective October October: see month. 1, 2002, the Company adopted the new 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 .
INDEFINITE, NUMBER. A number which may be increased or diminished at pleasure. 2. When a corporation is composed of an indefinite number of persons, any number of them consisting of a majority of those life will no longer be amortized to earnings and will be assessed for impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. on an annual basis in accordance with the new standards, including a transitional impairment test whereby any resulting impairment will be charged to opening retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. . During the twelve month period ending September 30, 2003, the effect of the non-amortization of goodwill resulted in an increase in the 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: net earnings of $236 or $0.03 per share. The Company completed the transitional impairment test at October 1, 2002 and concluded that no write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. is necessary as a result of implementing the new standards. b. Stock-based compensation Effective October 1, 2002, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments and in accordance with the recommendations has applied them only to awards granted on or after the date of the adoption. The new standard requires that all stock based awards made to non-employees be measured and recognized using the fair-value based method. Options granted to employees and shares issued to employees under the Employee Stock Purchase Plan (ESPP See Employee Stock Purchase Plan. ) may be accounted for using either the fair-value based method or other common practice. As such, the Company has continued the use of the settlement method of accounting for stock-based compensation awards granted to employees. Accordingly, no compensation expense is recognized for options granted and shares issued to employees under the ESPP. Any consideration paid by employees for the purchase of shares is credited to share capital. During the twelve month period ended September 30, 2003, the Company issued 23,688 shares under the ESPP, but did not grant any options. c. Disclosure of Guarantees Effective this year, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants Accounting Guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. 14, Disclosure of Guarantees. This guideline requires a guarantor guarantor n. a person or entity that agrees to be responsible for another's debt or performance under a contract, if the other fails to pay or perform. (See: guarantee) GUARANTOR, contracts. He who makes a guaranty. 2. to disclose in its notes to the consolidated financial statements significant information about guarantees it has provided. Under this guideline, a guarantee is defined as a contract or 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 agreement, which requires the Company to make payments to a third party contingent on Adj. 1. contingent on - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent upon, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent future events. The disclosures described in Note 9 are required even when the likelihood of the guarantor having to make any payment under the guarantee is remote. d. Hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. Relationship Effective August 1, 2003, the Company early adopted the Canadian Institute of Chartered Accountants Accounting Guideline 13, Hedging Relationships. Accordingly, the Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. to specific firm contractually con·trac·tu·al adj. Of, relating to, or having the nature of a contract. con·trac  tu·al·ly adv.Adv. 1. related commitments on projects. The Company also formally assesses, both at the hedge's inception INCEPTION. The commencement; the beginning. In making a will, for example, the writing is its inception. 3 Co. 31 b; Plowd. 343. Vide Consummation; Progression. and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. 3. EARNINGS PER SHARE 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 is now calculated based on the weighted average number of common shares outstanding during the period plus the effects of dilutive potential common shares outstanding during the period. This method requires that the dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of outstanding options be calculated using the treasury stock method, as if all dilutive options had been exercised at the later of the beginning of the reporting period or date of issuance, and that the funds obtained thereby were used to purchase common shares of the Company at the average trading price Trading price The price at which a security is currently selling. of the common shares during the period. The diluted weighted average number of shares has been calculated as follows:
Three months ended Twelve months ended
September 30 September 30
2003 2002 2003 2002
---------------------------------------------------------------------
Weighted average number
of shares - basic 8,159,519 8,023,873 8,047,748 8,320,341
Additions to reflect
the dilutive effect
of employee stock
options 295,693 185,578 342,074 118,380
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Weighted number of
shares - diluted 8,455,212 8,209,451 8,389,822 8,438,721
---------------------------------------------------------------------
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. No shares were anti-dilutive for the three-month period ended September 30, 2003. In the twelve month period ended September 30, 2003, 45,600 stock options were excluded from the above computation of diluted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. because they were anti-dilutive (fourth quarter 2002: 231,055 and year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. 2002: 356,680). 4. ACCOUNTING ESTIMATES For the period ended September 30, 2003 and with the exception of the additional provision related to the eServices business referred to in Note 8, there have been no material changes in estimates of amounts reported in prior interim periods or of amounts related to prior fiscal years. 5. SEASONALITY The Company's revenues and earnings have historically been subject to some quarterly seasonality due to the timing of vacation VACATION. That period of time between the end of one term and beginning of another. During vacation, rules and orders are made in such cases as are urgent, by a judge at his chambers. periods and statutory holidays. 6. SEGMENTED INFORMATION Operating segments are identified as components of an enterprise about which separate discrete A component or device that is separate and distinct and treated as a singular unit. 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 September 30, 2003
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Business
and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenues $12,059 $22,154 $- $34,213
Earnings before interest
and income taxes 1,556 888 (405) 2,039
Interest income 124
Income taxes 799
---------------------------------------------------------------------
Earnings from
continuing operations 1,364
Discontinued operation -
---------------------------------------------------------------------
Net earnings $1,364
---------------------------------------------------------------------
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Total assets
other than cash $15,685 $23,097 $100 $38,882
Cash 25,185
---------------------------------------------------------------------
Total assets $64,067
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Three months ended September 30, 2002
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Business
and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue $12,164 $22,024 $- $34,188
Earnings before interest
and income taxes 1,422 637 (455) 1,604
Interest income 59
Income taxes 500
---------------------------------------------------------------------
Net earnings $1,163
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Total assets
other than cash $21,028 $24,311 $200 $45,539
Cash 9,488
---------------------------------------------------------------------
Total assets $55,027
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Year ended September 30, 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Business
and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue $50,398 $90,642 $- $141,040
Earnings before interest
and income taxes 6,361 3,630 (1,573) 8,418
Interest income 364
Income taxes 3,454
---------------------------------------------------------------------
Earnings from
continuing operations 5,328
Discontinued operation 480
Net earnings $4,848
---------------------------------------------------------------------
---------------------------------------------------------------------
Total assets
other than cash $15,685 $23,097 $100 $38,882
Cash 25,185
---------------------------------------------------------------------
Total assets $64,067
---------------------------------------------------------------------
---------------------------------------------------------------------
Year ended September 30, 2002
---------------------------------------------------------------------
---------------------------------------------------------------------
Business
and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue $46,373 $85,503 $- $131,876
Earnings before interest
and income taxes 4,941 1,957 (1,539) 5,359
Interest income 202
Income taxes 2,142
---------------------------------------------------------------------
Net earnings $3,419
---------------------------------------------------------------------
---------------------------------------------------------------------
Total assets
other than cash $21,028 $24,311 $200 $45,539
Cash 9,488
---------------------------------------------------------------------
Total assets $55,027
---------------------------------------------------------------------
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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. The Company is party to several claims aggregating to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $450, 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. 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the excess space amount to approximately $960 per year. During the second quarter, the Company revised its estimate of the provision for future costs relating to the discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: e-business operation and recorded an additional non-recurring charge related to the leased premises of $750 ($480 after tax). 9. GUARANTEES In the normal course of business, the Company enters into agreements that may provide for indemnification 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 warranties, n.pl the details of a contract; considered less important than the conditions. Whereas the penalty for breach of conditions is the termination of the contract, the penalty for breach of warranties is payment of damages to the innocent party. , 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 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. SHARE REPURCHASE Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. During the fourth quarter of 2003, the Company acquired 2,000 of its outstanding common shares at an average price of $8.00 per share for a total of $16 including related expenses, through the Normal Course Issuer Bid initiated in May 2003. On a year to date basis for 2003, the Company acquired 316,300 of its outstanding shares at an average price of $6.03 per share for a total of $1,918 including related expenses through Normal Course Issuer Bids initiated in May 2002 and May 2003 each for a period of one year. The excess of the purchase price over the average stated capital stated capital See legal capital. of the shares has been charged to retained earnings. During 2002, the Company acquired 1,786,956 (or 18.3%) of its outstanding common shares at a price of $2.80 per share, for a total of $5,280 including related expenses, through a Substantial Issuer Bid procedure known as a Dutch Auction Dutch Auction An auction where the price on an item is lowered until it gets its first bid, and then the item is sold at that price. Notes: The U.S. Treasury (and other countries) uses a Dutch auction when it sells securities. and acquired 79,500 at an average price of $3.85 for a total of $306 through a Normal Course Issuer Bid initiated in May 2002. The excess of the purchase price over the average stated capital of the shares has been charged to retained earnings. Management Discussion and Analysis (MD&A) of the fourth fiscal quarter: RESULTS OF OPERATIONS: FOURTH QUARTER 2003 Revenues: For the fourth quarter of 2003, revenues were $34.2 million, which is comparable to the $34.2 million reported in the fourth quarter of 2002. The Business and Technology Services segment reported a slight increase with revenues of $22.1 million compared to $22.0 million for the prior year. Continued delays in Federal program initiatives and budget reallocations resulted in minimal growth during this quarter. Systems Engineering's revenues were $12.1 million in the quarter, a slight decrease compared to the $12.2 million recorded in the fourth quarter of last year. The Company booked $21 million in new business this quarter, resulting in an order backlog of $189 million. $73 million of this backlog is expected to be earned as revenue over the course of fiscal 2004. Gross margin: Gross margin was 18.1% in the fourth quarter of 2003 compared to 18.0% in the fourth quarter a year ago. Gross margins are similar to the same quarter last year but can vary significantly based on the overall sales mix sales mix See product mix. of our services and the level of non-labour flow-through on projects. Gross margin was 23.6% in Systems Engineering compared to 23.5% in the fourth quarter of 2002 and gross margin in Business and Technology Services was 15.1% compared to 14.9% in the fourth quarter of 2002. 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 $3.1 million or 9.0% of revenues in the fourth quarter of 2003 which is less than the $3.4 million or 9.8% of revenues reported in the fourth quarter of 2002. Operating expenses continue to remain stable and the Company's strong back office continues to have the capacity to absorb absorb To offset sell orders or a new security offering with buy orders. increased activity without equivalent increased costs. Income taxes: The provision for income taxes for the fourth quarter of 2003 was $0.8 million compared to $0.5 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 of earnings before tax. The tax expense in the fourth quarter of 2002, as a percentage of earnings before taxes and amortization of goodwill, reflects the impact of an increase in the effective tax rates applied to the existing temporary differences such as loss carry-forwards and R&D expenditures. Net earnings: As a result of the foregoing, the Company recorded net earnings of $1.4 million or $0.17 per share basic and $0.16 per share diluted in the fourth quarter of 2003, compared to $1.2 million or $0.14 per share basic and diluted in the same quarter of the prior year. TWELVE-MONTH PERIOD ENDING SEPTEMBER 30, 2003 Revenues: During the twelve months of this year, revenues were $141.0 million compared to $131.9 million for the twelve months of 2002, representing an increase of 7%. Revenues in the Business and Technology Services segment increased 6% to $90.6 million from $85.5 million and revenues in the Systems Engineering segment increased 8.7% to $50.4 million from $46.4 million. This increase is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to increased demand for our Business and Technology services with existing customers during the first two quarters of 2003, higher non-labour flow-through on projects coupled with high utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be rates in our Systems Engineering Division and the impact of new contracts awarded during the past 12 months. Gross profit: Gross margin was 18.0% during the twelve months of 2003, compared to 17.3% in the equivalent period last year with improvements generated from both business segments. Management expects that 2004 will continue to produce a competitive marketplace, which will put pressure on gross margins. However, with a healthy backlog and continuation of our cost control efforts, management's objective is to maintain margins at existing levels. Operating expenses: Selling, marketing and general and administration, totaled $13.0 million or 9.2% of revenues in the twelve months of 2003. This compares to $12.9 million or 9.8% of revenues for the same period in 2002. The Company's operating costs are stable and should not increase proportionately pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. to sales growth. Income taxes: The provision for income taxes for the twelve-month period ending September 30, 2003 was $3.5 million, compared to $2.1 million a year ago. The income tax expense for fiscal 2002 was impacted by an increase in the effective income tax rate applied to the valuation of future income tax assets. Although the Company is reporting a current provision for income taxes of $1.3 million, a significant portion of the income taxes will be recovered through the utilization of investment tax credits. The Company has utilized substantially all of its loss carry-forwards and R&D expenditures for purposes of provincial Provincial has several meanings and may refer to:
Earnings from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the : As a result of the foregoing, the Company recorded earnings from continuing operations of $5.3 million or $0.66 per share basic and $0.64 per share diluted for the twelve months of 2003, compared to $3.4 million or $0.41 per share basic and diluted in the same period of the prior year. The improvement is attributable to the Company's increased revenue base and improved margins and its ability to maintain a similar level of operating expenses as in the prior year. Loss on disposal of discontinued operation discontinued operation A segment of a business that has been abandoned or sold or for which plans for one or another of these actions have been approved. See also continuing operations. : As indicated in Note 8 of these interim financial statements, Calian has a significant commitment with regards to premises leased during its fiscal year 2000 in anticipation of the e-business operation expansion and growth. As a result of the e-business operation being discontinued, the Company no longer requires this excess space. This lease commitment extends to April 2010. The space is currently sublet to a third party until May 2006. During the second quarter, the sub-tenant SUB-TENANT. The same as under-tenant. See Under-leaser; Under-tenant, and 1 Bell's Com. 76. of this facility approached the Company and requested a review of the current sub-lease agreement. Calian and the sub-tenant were not able to agree on modifications that were acceptable to both parties. To date, the sub-tenant has fulfilled ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. its sub-lease obligations and has indicated it will continue to do so. At that time, management believed it was prudent to increase its existing provision related to the exit of the e-business operation business and therefore recorded an additional loss on disposal of the e-business operation of $750 ($480 after tax) or $0.06 per share relating to the leased premises. This adjustment brings the total provision available for future real estate costs associated with the e-business discontinued operation to approximately $1.1 million. Net earnings: As a result of the foregoing, the Company recorded net earnings of $4.8 million or $0.60 per share basic and $0.58 per share diluted for the twelve months of 2003, compared to $3.4 million or $0.41 per share basic and diluted in the same period of the prior year. FINANCIAL CONDITION AND CASHFLOWS: 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's cash position at the end of the quarter was $25.2 million, compared with $9.5 million at September 30, 2002. During the fourth quarter of 2003, cash outflow from operating activities, including changes in working capital was $1.2 million, as compared to a cash outflow of $1.9 million in the fourth quarter a year ago. 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 of its various projects. OUTLOOK The Company is operating in an increasingly competitive environment. The sustained downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. in the satellite industry and delays in the funding of new Federal programs compounded by increased delays in the procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. cycle of the Federal Government is resulting in increased competitive pressures and delays in the awarding of new contracts. However, the Company's strong backlog is expected to provide a solid base of revenue for the next year and this stable business environment will be conducive con·du·cive adj. Tending to cause or bring about; contributive: working conditions not conducive to productivity. See Synonyms at favorable. to achieving controlled profitable growth through strategically focused business development activities. To ensure reasonable 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. growth after considering the above noted challenges, the Company will leverage its excellent reputation for providing the highest quality service in its areas of expertise and focus its marketing activities in various government related communications, defence and IT programs. GUIDANCE Based on the information cited above about the current market conditions and demand, the Company expects 2004 revenues in the range of $165 million to $175 million and achieve earnings per share in the range of $0.75 to $0.85, excluding the impact of potential acquisitions. 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 fourth quarter of 2003 and 2002, and with the Management Discussion and Analysis in the 2002 annual report, including the section on risks and opportunities. |
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