Calian Technology Reports Third Quarter Results: Record Quarterly Earnings.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. -- 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 third quarter ended June June: see month. 30, 2004. Revenues for the quarter were $45.4 million, an increase of over 33% from the $34.2 million reported in the same quarter of the previous year. Net earnings were $3.4 million or $0.41 per share basic and $0.40 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. , more than double the $1.3 million or $0.16 per share basic and diluted in the same quarter last year. "We were able to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution superbly on all of our major projects this quarter," 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. . "Again this quarter we renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. several long standing contracts, which has enabled us to maintain our 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 a healthy level of $250 million. Securing a significant portion of our existing 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. business this year will allow us to focus our attention on new business next year. "As a result of our recent achievements and expected strong performance for the balance of the year, we expect 2004 revenues to be in the range of $170 million to $174 million and net earnings per share in the range of $1.20 to $1.25," continued Basler. "Results for 2004 are significantly higher than 2003 due in part to progress made on contracts awarded in the surveillance and security market in 2004. These contracts will be completed this fiscal year and while we believe that market potential remains strong, we presently do not have visibility into the timing, magnitude magnitude, in astronomy, measure of the brightness of a star or other celestial object. The stars cataloged by Ptolemy (2d cent. A.D.), all visible with the unaided eye, were ranked on a brightness scale such that the brightest stars were of 1st magnitude and the and duration of potential 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. contracts in this area." "During the quarter Calian repurchased 94,900 shares representing 1.1% of our outstanding shares for a total of $1.2 million. We believe this continues to be a good investment on behalf of the shareholders of Calian," 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 , Chief Executive Officer. 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 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 placements, recruitment recruitment /re·cruit·ment/ (re-krldbomact´ment) 1. the gradual increase to a maximum in a reflex when a stimulus of unaltered intensity is prolonged. 2. 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)
(Unaudited)
Three months ended Nine months ended
June 30 June 30
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2004 2003 2004 2003
-------------------------------------------------------------------
Revenues $45,372 $34,188 $131,961 $106,827
Cost of revenues 35,361 27,893 105,787 87,628
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Gross profit 10,011 6,295 26,174 19,199
Selling and marketing 1,176 1,079 3,430 3,366
General and
administration 2,486 2,140 7,170 6,512
Facilities 699 696 2,058 2,069
Amortization of
capital assets 292 287 844 873
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Earnings before interest
and income taxes 5,358 2,093 12,672 6,379
Interest income, net 99 106 332 240
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Earnings before
income taxes 5,457 2,199 13,004 6,619
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Income taxes - current 1,307 268 2,995 970
Income taxes - future 707 645 1,680 1,685
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2,014 913 4,675 2,655
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Earnings from
continuing operations 3,443 1,286 8,329 3,964
Loss on disposal of
discontinued operation
(net of income taxes)
(Note 8) - - - 480
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NET EARNINGS 3,443 1,286 8,329 3,484
Retained earnings,
beginning of period 17,253 11,830 13,202 11,057
Excess of purchase
price over stated
capital on repurchase
of shares (Note 10) (1,044) (536) (1,044) (1,317)
Dividend (509) (321) (1,344) (965)
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Retained earnings,
end of period $19,143 $12,259 $19,143 $12,259
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Earnings per share
from continuing
operations: (Note 3)
Basic $0.41 $0.16 $0.99 $0.49
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Diluted $0.40 $0.16 $0.97 $0.48
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Net earnings per share:
(Note 3)
Basic $0.41 $0.16 $0.99 $0.43
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Diluted $0.40 $0.16 $0.97 $0.42
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Weighted average number
of shares: (Note 3)
Basic 8,460,475 7,999,225 8,390,819 8,010,491
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Diluted 8,633,845 8,283,895 8,539,237 8,340,923
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CALIAN TECHNOLOGY LTD.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30, 2004 September 30, 2003
(Unaudited)
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $26,478 $25,185
Accounts receivable 27,144 20,519
Work in process 4,147 4,759
Prepaid expenses and other 422 486
Future income taxes 2,420 3,625
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60,611 54,574
INVESTMENT TAX CREDITS RECOVERABLE 238 866
FUTURE INCOME TAXES 797 1,271
CAPITAL ASSETS 3,934 4,110
GOODWILL 3,246 3,246
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$68,826 $64,067
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
liabilities $16,598 $16,867
Unearned contract revenue 16,351 18,045
Current portion of long-term debt 81 92
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33,030 35,004
LONG-TERM DEBT 30 89
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33,060 35,093
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CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY
Share capital (Note 10) 16,623 15,772
Retained earnings 19,143 13,202
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35,766 28,974
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$68,826 $64,067
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CALIAN TECHNOLOGY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
Three months ended Nine months ended
June 30 June 30
-------------------------------------------------------------------
2004 2003 2004 2003
-------------------------------------------------------------------
CASH FLOWS FROM (USED IN)
OPERATING ACTIVITIES
Net earnings $3,443 $1,286 $8,329 $3,484
Items not affecting
cash:
Deferred lease
inducements (2) (2) (7) (7)
Amortization 292 287 844 873
Investment tax
credits 239 157 628 660
Future income taxes 706 645 1,679 1,415
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4,678 2,373 11,473 6,425
Change in non-cash
working capital
Accounts
receivable (7,118) 1,388 (6,625) 9,297
Work in process 3,562 (665) 612 (1,945)
Prepaid expenses
and other 73 163 64 425
Accounts payable
and accrued
liabilities 278 (197) (269) 1,963
Unearned contract
revenue (2,395) 6,443 (1,694) 3,713
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(922) 9,505 3,561 19,878
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CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES
Repayment of debt (22) (40) (63) (118)
Issuance of
common shares 66 761 1,039 1,137
Repurchase of common
shares, including
cost associated with
repurchase
(Note 10) (1,232) (739) (1,232) (1,902)
Dividend (509) (321) (1,344) (965)
-------------------------------------------------------------------
(1,697) (339) (1,600) (1,848)
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CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES
Acquisition of
capital assets (332) (404) (668) (731)
-------------------------------------------------------------------
NET CASH INFLOW
(OUTFLOW) (2,951) 8,762 1,293 17,299
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CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 29,429 18,025 25,185 9,488
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $26,478 $26,787 $26,478 $26,787
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CALIAN TECHNOLOGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the periods ended June 30, 2004 and 2003
(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 for the year ended
September 30, 2003, 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
Stock-based compensation
Effective October 1, 2003, the Company early adopted the amended
recommendations of the Canadian Institute of Chartered Accountants
Handbook Section 3870, Stock-based Compensation and Other Stock-based
Payments. The amended standard requires that all stock based awards
made to employees be measured and recognized using the fair-value
based method. As a result, during the nine-month period ending June
30, 2004, the Company recorded a compensation expense of $31 relating
to its Employee Share Purchase Plan.
3. EARNINGS PER SHARE
Diluted earnings per share is 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. The dilutive effect of outstanding options is 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 of
the common shares during the period.
The diluted weighted average number of shares has been calculated as
follows:
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Three Months ended Nine months ended
June 30 June 30
2004 2003 2004 2003
---------------------------------------------------------------------
Weighted average number
of shares - basic 8,460,475 7,999,225 8,390,819 8,010,491
Additions to reflect
the dilutive effect
of employee stock
options 173,370 284,670 148,418 330,432
---------------------------------------------------------------------
Weighted number of
shares - diluted 8,633,845 8,283,895 8,539,237 8,340,923
---------------------------------------------------------------------
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 . No shares were anti-dilutive for the three and nine-month periods ended June 30, 2004 (2003: nil - 50,734). 4. ACCOUNTING ESTIMATES For the nine-month period ended June 30, 2004 and the nine-month period ended June 30, 2003, there have been no material changes in estimates of amounts reported in prior interim periods or of amounts related to prior fiscal years, with the exception of the additional provision related to the eServices business referred to in Note 8. 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 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 June 30, 2004
---------------------------------------------------------------------
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Business and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenues $24,913 $20,459 $45,372
Earnings before
interest and
income taxes 5,234 531 (407) 5,358
Interest income 99
Income taxes 2,014
---------------------------------------------------------------------
Net earnings $3,443
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Total assets other
than cash $22,322 $19,926 $100 $42,348
Cash 26,478
---------------------------------------------------------------------
Total assets $68,826
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Three months ended June 30, 2003
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Business and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue $12,738 $21,450 $34,188
Earnings before
interest and
income taxes 1,690 789 (386) 2,093
Interest income 106
Income taxes 913
---------------------------------------------------------------------
Net earnings $1,286
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Total assets other
than cash $15,678 $19,766 $100 $35,544
Cash 26,787
---------------------------------------------------------------------
Total assets $62,331
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Nine months ended June 30, 2004
---------------------------------------------------------------------
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Business and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue $67,622 $64,339 $131,961
Earnings before
interest and
income taxes 11,674 2,209 (1,211) 12,672
Interest income 332
Income taxes 4,675
---------------------------------------------------------------------
Net earnings $8,329
---------------------------------------------------------------------
---------------------------------------------------------------------
Total assets other
than cash $22,322 $19,926 $100 $42,348
Cash 26,478
---------------------------------------------------------------------
Total assets $68,826
---------------------------------------------------------------------
---------------------------------------------------------------------
Nine months ended June 30, 2003
---------------------------------------------------------------------
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Business and
Systems Technology
Engineering Services Corporate Total
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue $38,339 $68,488 $106,827
Earnings before
interest and
income taxes 4,805 2,742 (1,168) 6,379
Interest income 240
Income taxes 2,655
---------------------------------------------------------------------
Earnings from
continuing operations 3,964
Discontinued operation 480
---------------------------------------------------------------------
Net earnings $3,484
---------------------------------------------------------------------
---------------------------------------------------------------------
Total assets other
than cash $15,678 $19,766 $100 $35,544
cash 26,787
---------------------------------------------------------------------
Total Assets $62,331
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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. $160, 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 $940 per year. During the second quarter ended March 31, 2003, 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: eServices business and recorded an additional non-recurring charge related to the leased premises of $750 ($480 after tax). This adjustment resulted in a total provision available for future costs associated with the eServices 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. to approximately $1.1 million. 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 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, 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. 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 three and nine-month periods ending June 30, 2004, the Company acquired 94,900 (or 1.1%) of its outstanding common shares at an average price of $12.95 per share for a total of $1,232 including related expenses, through both the Normal Course Issue Bid initiated in May 2003 and the Normal Course Issuer Bid initiated in May 2004 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 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 quarter ending June 30, 2003, the Company acquired 108,500 of its outstanding common shares at an average price of $6.77 per share for a total of $739 including related expenses, through both the Normal Course Issuer Bid initiated in May 2002 and the Normal Course Issue Bid initiated in May 2003. During the nine-month period ending June 30, 2003, the company acquired 314,300 (or 3.9%) of its outstanding shares at an average price of $6.02 per share for a total of $1,902. The excess of the purchase price over the average stated capital of the shares has been charged to retained earnings. Management Discussion and Analysis - Third Quarter 2004: RESULTS OF OPERATIONS: THIRD QUARTER 2004 Revenues: For the third quarter of 2004, revenues were $45.4 million, representing an increase of 33% over the $34.2 million reported in the third quarter of 2003. Systems Engineering's revenues were $24.9 million in the quarter, which is almost double the $12.7 million recorded in the third quarter of last year. This increase is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to increased activities associated with certain large contracts awarded during 2003 and 2004. The Business and Technology Services segment reported a 4.6% decrease with revenues of $20.5 million compared to $21.5 million for the same quarter of last year. Continued delays in Federal program initiatives and budget reallocations continue to affect the division's ability to expand its service offerings to new customers within the federal government. We expect the impediments IMPEDIMENTS, contracts. Legal objections to the making of a contract. Impediments which relate to the person are those of minority, want of reason, coverture, and the like; they are sometimes called disabilities. Vide Incapacity. 2. to continue over the next several quarters. The Company booked $24 million in new business this quarter resulting in an order backlog in excess of $250 million. $32 million of this backlog is expected to be earned as revenue over the last quarter of 2004. Gross margin: Gross margin was 22.1% in the third quarter of 2004 compared to 18.4% in the third quarter a year ago. Gross margins improved over the same quarter last year as a result of SED's revenues representing a greater portion of total revenues. Gross margin in Systems Engineering was 27.9% compared to 24.1% in the third quarter of 2003. Margins are significantly higher than in the previous year as a result of higher labour 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, excellent project execution and economies of scale. Gross margin in Business and Technology Services was 15.0% similar to the 15.1% reported in the third quarter of 2003. 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 $3.7 million or 8% of revenues in the third quarter of 2004 compared to the $3.2 million or 9% of revenues reported in the third quarter of 2003. The increase is mainly attributable to incentives directly related to the higher level of profitability. Income taxes: The provision for income taxes for the third quarter of 2004 was $2.0 million compared to $0.9 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. Net earnings: As a result of the foregoing, the Company recorded net earnings of $3.4 million or $0.41 per share basic and $0.40 per share diluted in the third quarter of 2004, compared to $1.3 million or $0.16 per share basic and diluted in the same quarter of the prior year. NINE-MONTH PERIOD ENDING JUNE 30, 2004 Revenues: During the first nine months of this year, revenues were $132.0 million compared to $106.8 million for the first nine months of fiscal 2003, representing an increase of 24%. Revenues in the Business and Technology Services segment decreased 6% to $64.3 million from 68.5 million and revenues in the Systems Engineering segment increased by 76% to $67.6 million from $38.3 million as a result of increased activities associated with certain large contracts awarded during 2003 and 2004. Gross Margin: Gross margin was 19.8% during the first nine months of 2004, compared to 18.0% in the equivalent period of 2003, Gross margins improved over the same period last year as a result of SED's revenues representing a greater proportion of the total revenues. Margins for the balance of the year are expected to be in line with current year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. levels. However, actual margins achieved will be dependent on the overall revenue mix. Operating expenses: Selling, marketing and general and administration, totaled $10.6 million or 8% of revenues in the first nine months of 2004. This compares to $9.9 million or 9% of revenues for the same period in 2003. The decrease as a % of revenues is largely attributable to the increased levels of revenues for 2004. The Company's operating costs are expected to remain relatively stable 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 regardless of the level of revenues. Income Taxes: The provision for income taxes for the nine-month period ending June 30, 2004 was $4.7 million, compared to $2.7 million a year ago. The income tax expense for the first nine months of 2004 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 $3 million, a portion of the income taxes will be recovered through the utilization of investment tax credits. The Company utilized substantially all of its loss carry-forwards and R&D expenditures for purposes of provincial Provincial has several meanings and may refer to:
Net Earnings before discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. : As a result of the foregoing, the Company recorded net earnings before discontinued operation of $8.3 million or $0.99 per share basic and $0.97 per share diluted for the first nine months of fiscal 2004, compared to $4.0 million or $0.49 per share basic and 0.48 per share diluted in the same period of the prior year. The improvement is attributable to the Company's increased revenue base, improved margins while continuing to maintain a similar level of operating expenses as in the prior year. Loss on disposal of the eServices business: During the second quarter ending March 31, 2003, the Company recorded an additional loss on disposal of the eServices business of $0.8 ($0.5 after tax) or $0.06 per share relating to the leased premises. This adjustment brought the total provision available for future costs associated with the eServices discontinued operation to approximately $1.1 million. Net Earnings: As a result of the foregoing, the Company recorded net earnings of $8.3 million or $0.99 per share basic and $0.97 per share diluted for the first nine months of fiscal 2004, compared to $3.5 million or $0.43 per share basic and $0.42 per share 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 future. The Company's cash position at the end of the quarter was $26.5 million, compared with $26.8 million at June 30, 2003. During the nine-month period of this year, cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. from operating activities, including changes in working capital was $3.6 million compared to $19.9 million in prior year. 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 The Systems Engineering Division has been working within a depressed Depressed A description of a market, security, or product that is experiencing weak demand and lowering prices. Notes: A depressed market, security, or product implies that prices and volume are low. There are many reasons for a depressed market, security, or product. satellite sector for the last few years and 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 is expected in the near term. However, the division has been able to increase its business in other adjacent markets such as surveillance and security, which has provided a substantial increase in revenue and profitability for 2004, significantly exceeding historical levels. We expect continued strength in the surveillance and security markets and we are confident that based on sustained strong performance, this division will keep its status as a preferred supplier to existing customers and play a role in their future pursuits. The strengthening of the Canadian dollar 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 may impact the division's competitiveness when bidding against foreign competition on projects denominated in US dollars. The Business and Technology Services Division continues to notice delays in new program funding and a lengthened length·en tr. & intr.v. length·ened, length·en·ing, length·ens To make or become longer. length  en·er n. procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. cycle within
the federal government. With recent changes in leadership within the
federal government it is expected that this trend will continue over the
next several quarters. This will constrain con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. the division's growth prospects over the 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. . However, the division's revenue base is stable as a significant portion is derived from long-standing long-stand·ing adj. Of long duration or existence: a long-standing friendship. long-standing Adjective existing for a long time contracts, a significant portion of which has been recently renewed. The Company's strong backlog is expected to provide a solid base of revenue and earnings for the balance of 2004 and into 2005. To ensure continued long-term growth, the Company will continue to leverage its excellent reputation for providing the highest quality service in its areas of expertise and focus its marketing and business development activities in adjacent markets. The company's ability to maintain current revenue and profitability levels is dependant upon Adj. 1. dependant upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, contingent upon, dependant on, dependent on, dependent upon, depending on, contingent the receipt of new security and surveillance orders of the magnitude and duration of those received in 2004. While we believe that market potential remains strong, as a third-tier supplier, we presently do not have visibility into the timing, magnitude and duration of potential follow-on contracts in this area. GUIDANCE As a result of our recent achievements and expected strong performance for the balance of the year and based on the above information related to the current market conditions and demand, the Company expects 2004 revenues to be in the range of $170 million to $174 million and net earnings per share in the range of $1.20 to $1.25. 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 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 third quarter of 2004 and 2003, and with the Management Discussion and Analysis in the 2003 annual report, including the section on risks and opportunities. |
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