CryptoLogic Delivers Record Revenue & Strong Earnings In 2003.Business Editors/High-Tech Writers TORONTO--(BUSINESS WIRE)--Feb. 26, 2004 ALL DOLLAR AMOUNTS IN US$ Fourth Quarter Revenue up 53%, Earnings up 38%; 2003 Performance Reflects Focused Execution of Global and Product Growth Strategy CryptoLogic Inc CryptoLogic Inc. is a Toronto-based online gambling software supplier, one of the four largest in the industry along with Microgaming, Playtech, and Real Time Gaming. CryptoLogic was founded by brothers Andrew and Mark Rivkin in 1995 from the basement of their parent's house. ., a leading software developer to the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the gaming and e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. industries, announced today its financial results for the fourth quarter and year ended December December: see month. 31, 2003. Record revenue and solid profitability in 2003 highlight the increasing strength and growth momentum of the company's business. "For CryptoLogic cryp·tol·o·gy n. The study of cryptanalysis or cryptography. cryp  to·log , 2003 has been a year of strong performance,
delivering on our objectives and strengthening market leadership,"
said Lewis Rose, CryptoLogic's President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "By
diversifying both our products and markets, CryptoLogic has delivered
record revenue and strong earnings for both the fourth quarter and the
full year. It's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have an excellent foundation for 2004, as we continue to invest in our business and build for 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. sustainable growth."
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Financial Highlights Three months Years
ended ended
(in millions of US dollars, December 31, December 31,
except per share data) 2003 2002 2003 2002
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Revenue $13.5 $8.9 $44.2 $34.4
Earnings (loss) $3.0 $2.2 $9.4 $(2.1)
Earnings (loss) per diluted share $0.23 $0.18 $0.75 $(0.17)
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Highlights included: -- Fourth quarter earnings grew to $0.23 per 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. share, ahead of analysts' average consensus of $0.20 per diluted share and the 2002 fourth quarter of $0.18. Fiscal 2003 full year earnings were also strong at $0.75 per diluted share on a 28% increase in revenue to $44.2 million; -- Consistent cash generation led to the declaration of a quarterly dividend of $0.03 per share; -- Re-negotiated and extended multi-year agreements with major existing UK licensees - William Hill The name William Hill may refer to the following: People
Littlewoods is the name of a former retail and gambling empire founded in Liverpool, England by Sir John Moores. Gaming - for both online casino Online casinos, also known as virtual casinos or internet casinos, are online versions of traditional ("brick and mortar") casinos. Online casinos enable gamblers to play and wager on casino games through the Internet. and poker poker, card game, believed to have originated in Asia and first played in the United States in the 19th cent. A traditional cutthroat gambling game at first, it is now also an internationally popular social pastime. solutions developed by CryptoLogic; -- Began trading on the London Stock Exchange's Main Market in September 2003, in line with the company's global strategy and commitment to the highest standards and transparency (1) The quality of being able to see through a material. The terms transparency and translucency are often used synonymously; however, transparent would technically mean "seeing through clear glass," while translucent would mean "seeing through frosted glass." See alpha blending. in the industry; -- Continued global expansion, with licensees' revenue from international markets for the year exceeding 55%, up from about 40% in fiscal 2002; -- New poker and bingo bingo Game of chance played with cards having a grid of numbered squares corresponding to numbered balls drawn at random. When a number on the card is drawn, the players cover that number (should they have it); the game is won by covering a certain number of squares in a row products contributed over 10% of total revenue in fiscal 2003, up from under 1% in 2002; -- Granted a license and received software certification in Alderney. This extends CryptoLogic's leadership as one of the world's few gaming software providers that is government-approved to the strictest regulatory standards in multiple 'tier-one' jurisdictions; and -- Signed Betfair - the world's largest betting exchange A betting exchange is a peer-to-peer gambling website acting as a broker between parties for the placement of bets. The concept is similar to that of a stock exchange or a futures exchange, where in this case the commodity being traded is a bet, rather than a stock or futures - as the newest online poker Online poker is the game of poker played over the Internet. It has been partly responsible for a dramatic increase in the number of poker players worldwide. In 2005, revenues from online poker were estimated at US$ 200 million per month. licensee licensee n. a person given a license by government or under private agreement. (See: license, licensor) LICENSEE. One to whom a license has been given. 1 M. Q. & S. 699 n. subsequent to year-end. Betfair's poker site is scheduled for launch later in 2004. Strong 2003 Financial Performance (All financial figures are expressed in U.S. dollars) In what is typically one of the strongest quarters of the year, CryptoLogic posted record revenue and solid profitability for the fourth quarter ended December 31, 2003. Revenue rose 53% to $13.5 million, compared with $8.9 million in last year's fourth quarter. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (1) for the quarter rose 56% to $3.8 million, compared with $2.4 million in 2002. EBITDA(1) margin for the quarter remained strong at 28% as a percentage of revenue, up from 27% last year. Earnings for the quarter rose 38% to $3.0 million ($0.23 per diluted share), compared with $2.2 million ($0.18 per diluted share) last year. Fourth quarter results reflected the growing businesses of the company's licensees, increasing contribution from new customers, and incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. revenue from new games. Many factors contributed to positive gains. These included greater international penetration from UK and European-oriented customers, expanded choice and ease of payment options, growing traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. of poker and bingo, the favourable impact of new casino games Games available in most casinos are commonly called casino games. In a casino game, the players gamble casino chips on various possible random outcomes or combinations of outcomes. Casino games are available in online casinos, where permitted by law. , and successful marketing initiatives. Revenue for the year ended December 31, 2003 also set a new historic high increasing by 28% to $44.2 million, compared with $34.4 million in fiscal 2002. EBITDA(1) for fiscal 2003 increased 33% to $11.5 million, compared with $8.6 million before the non-recurring special charge in 2002. This translated into EBITDA(1) margin for the year rising to 26%, compared with 25% last year. Earnings for the full year improved 22% to $9.4 million ($0.75 per diluted share), versus $7.7 million ($0.60 per diluted share) before the special charge in 2002. After the special charge, CryptoLogic had a net loss in 2002 of $2.1 million ($0.17 per diluted share). CryptoLogic has adopted the amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. recommendations of the CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) with respect to accounting for stock-based compensation and other stock-based payments. For options granted on or after January 1, 2003, the company is required to expense the fair value of the options grant to employees over the vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period of the options. As a result, operating costs operating costs npl → gastos mpl operacionales for the fourth quarter and year ended December 31, 2003 reflected an option expense of $0.15 million and $0.4 million respectively. This translated into an earnings impact of approximately $0.01 per diluted share in the fourth quarter or $0.03 for the full year. Previous quarter comparisons have been restated to reflect the option expense. Strong Financial Position CryptoLogic continued to add to its balance sheet strength. At December 31, 2003, the company had no debt, and total cash grew to $67.3 million or a cash value of $5.34 per diluted share (comprising cash and cash equivalents, short term investments, and including security deposits of $6.6 million). The company's working capital increased to $44.7 million or $3.55 per diluted share. Operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. for the fourth quarter of 2003 was $7.7 million, up from $3.2 million in 2002. Operating cash flow for the 2003 year rose to $38.7 million from $9.4 million in 2002. This increase was due to $11.4 million generated from earnings and $27.3 million due to changes in working capital. Working capital changes were attributed primarily to lower security deposits pledged to payment processors, increased tax provision resulting from higher earnings, extended timing of licensee payables Payables Related: Accounts payable , a growing Jackpot accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. and increased chargeback Chargeback The charge a credit card merchant pays to a customer after the customer successfully disputes an item on his or her credit card statement. Notes: Customers dispute charges to their credit card usually when goods or services are not delivered within the 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. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc higher player deposits. Quarterly Dividend Policy In 2003, given the company's track record of cash generation, CryptoLogic's Board of Directors approved a regular quarterly dividend of $0.03 per share. The inaugural quarterly dividend was paid on November 30, 2003, and the Board has approved a quarterly dividend of $0.03 per share, payable on March 15, 2004 to shareholders of record as at March 8, 2004. CryptoLogic is one of the few software companies with a regular dividend policy - a sign of its financial flexibility and strength. Global Market Expansion CryptoLogic's global market focus - in Europe and the UK in particular - is driving increased growth in markets that are embracing online gaming See gaming. . Both new and existing licensees are adding favourably to the company's geographic diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. , with licensees' international revenue now exceeding 55% of total revenue, up from about 40% in 2002. In 2003, CryptoLogic experienced considerable success in the UK by reinforcing its market leadership and relationship with the best-known gaming companies in that region. As a result, licensees' revenue from the UK reached 30% of total revenue in 2003. Two of the company's major UK customers have re-negotiated and extended their multi-year contracts - William Hill plc and Littlewoods Gaming - for both casino casino or cassino (both: kəsē`nō). 1 Card game played with a full deck by two to four players. Its origins are obscure though it probably traces back to the Italian game of Scopa. and online poker through CryptoLogic's subsidiary, WagerLogic. In addition, ukbetting, the largest independent sports content provider in the UK, became a new customer for both the casino and poker offerings. Shortly after the year-end, Betfair, the world's largest online betting exchange, also signed an agreement for WagerLogic's proven player-to-player poker solution. Betfair has revolutionized the global and UK online sports wagering wa·ger n. 1. a. An agreement under which each bettor pledges a certain amount to the other depending on the outcome of an unsettled matter. b. A matter bet on; a gamble. 2. industries, and matches well in excess of Pounds Sterling 50 million in bets per week on a wide range of sports, entertainment and financial markets. London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. Listing The UK is recognized as the global centre for interactive gaming, supported by the British government's efforts to create a world-class regulated and licensed environment. CryptoLogic's listing on London's Main Board underscores its exceptional UK customer base and London-based operations. The listing is also in keeping with CryptoLogic's commitment to the highest level of transparency and compliance, raises visibility and profile in this high-growth region, and provides access to a broader global investor base in a gaming-friendly jurisdiction. Product Diversification In an increasingly competitive and sophisticated global market, strategic development and product diversification are essential to build player loyalty, capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. lucrative new game segments, and drive incremental business for existing licensees, which remain an area of significant opportunity. CryptoLogic has experienced progressive growth in its poker and bingo offerings, which together accounted for more than 10% of 2003 revenue, up from less than 1% in 2002. The introduction of a new series of online slot and casino games - including a potential million dollar progressive jackpot A progressive jackpot is a jackpot (highest payoff) for a gaming machine (usually a slot machine or video poker machine) where the value of the jackpot increases a small amount for every game played. - and the recent release of integrated slots with bingo are increasing player traffic and revenue. As well, CryptoLogic continued to enhance payment options, call centre support, and fraud control measures. Regulatory Leadership CryptoLogic is at the regulatory forefront as one of the few gaming software companies in the world that complies with the most exacting requirements for online gaming. This is evidenced by the company's software certification in Alderney, which enabled The Ritz Ritz elegant and luxurious hotel opened in Paris in 1898 by César Ritz; hence, ‘ritzy, putting on the ritz.’ [Fr. Hist.: Wentworth, 429] See : Luxury Club London Online, another prominent UK customer, to set up its online casino in this world-leading regulated jurisdiction as announced in January 2004. Outlook The positive momentum has continued in early 2004. Revenue in the traditionally strong first quarter is forecast to range from $13.6-$14.0 million, with earnings of $3.1-$3.3 million or $0.23-$0.24 per diluted share. CryptoLogic generated strong 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. in 2003, partly as a result of a difficult 2002, which was affected by industry challenges and internal change. This positive performance demonstrates that the company has fortified fortified (fôrt  ´fīd),adj containing additives more potent than the principal ingredient. its core business and continues its forward momentum. Management is mindful mind·ful adj. Attentive; heedful: always mindful of family responsibilities. See Synonyms at careful. mind that while online gaming continues to grow rapidly, regulatory uncertainty remains and heightened competition is creating margin pressures. CryptoLogic is and will continue to invest in its business in 2004, which will increase costs and is intended to drive the company's long-term growth. CryptoLogic's management team remains focused on the stated strategy of continued diversification of its products and markets to enhance the company's global market leadership, and build on the results of 2003. 2003 Fourth Quarter and Year End Analyst Call A conference call is scheduled for 8:30 a.m. (EST EST electroshock therapy. EST abbr. electroshock therapy ) (1:30 p.m. GMT (Greenwich Mean Time) See UTC. GMT - Universal Time 1 ) on Thursday, February 26, 2004. Interested parties should call either 416-695-5259, 1-877-888-4210 (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. ) or international toll free number at (Country Code) 800-4222-8835. Instant replay will be available until Thursday, March 4, 2004 by calling 416-695-5275 or 1-866-518-1010. About CryptoLogic (www.cryptologic.com) Focused on integrity and innovation, CryptoLogic Inc. is a leading software development company serving the global Internet gaming market. The company's proprietary technologies enable secure, high-speed financial transactions over the Internet. CryptoLogic continues to develop state-of-the-art Internet software applications for both the electronic commerce and Internet gaming industries. WagerLogic Ltd., a wholly-owned subsidiary of CryptoLogic, is responsible for the licensing of its gaming software and services to customers worldwide. For more information on WagerLogic, visit www.wagerlogic.com. CryptoLogic's common shares trade on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. (symbol: CRY), on the Nasdaq National Market (symbol: CRYP CRYP Cheyenne River Youth Project (Eagle Butte, SD) ), and on the London Stock Exchange (symbol: CRP C-reactive protein (CRP) A protein present in blood serum in various abnormal states, like inflammation. Mentioned in: Pelvic Inflammatory Disease CRP, n.pr See C-reactive protein. ). (1) Management believes that EBITDA (earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) and does not have a standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. meaning. Therefore, EBITDA may not be comparable to similar measures presented by other companies. CRYPTOLOGIC FORWARD LOOKING STATEMENT 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 : Statements in this press release which are not historical are 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. made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, risks associated with the Company's financial condition and prospects, legal risks associated with Internet gaming and risks of governmental legislation and regulation, risks associated with market acceptance and technological changes, risks associated with dependence on licensees and key licensees, risks relating to international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , risks associated with competition and other risks detailed in the Company's filings with securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities . These risks may cause results to differ materially from those projected in the forward-looking statements.
CRYPTOLOGIC INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
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As at As at
December 31, December 31,
2003 2002
(unaudited) (audited)
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ASSETS
Current assets:
Cash and cash equivalents $44,010 $13,660
Security deposits 6,550 15,740
Short term investments 16,747 10,857
Accounts receivable and other 2,389 1,660
Prepaid expenses 1,163 917
Income taxes recoverable -- 583
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70,859 43,417
User funds on deposit 9,394 3,829
Investment -- 680
Capital assets 3,915 2,713
Intangible assets 122 226
Goodwill 1,776 1,665
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$86,066 $52,530
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $25,063 $7,605
Income taxes payable 1,063 --
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26,126 7,605
User funds held on deposit 9,394 3,829
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35,520 11,434
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Shareholders' equity:
Capital stock 11,350 10,720
Stock options 438 --
Retained earnings 38,758 30,376
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50,546 41,096
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$86,066 $52,530
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CRYPTOLOGIC INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In thousands of U.S. dollars)
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For the three For the years
months ended ended
December 31, December 31,
2003 2002 2003 2002
(unaudited)(unaudited)(unaudited) (audited)
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Retained earnings,
beginning of period $36,450 $28,312 $30,376 $52,369
Earnings (loss) 3,033 2,191 9,441 (2,129)
Excess of purchase price
of treasury shares over
stated value -- (127) -- (19,864)
Dividends paid (369) -- (369) --
Registration costs (356) -- (690) --
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Retained earnings, end of
period $38,758 $30,376 $38,758 $30,376
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CRYPTOLOGIC INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of U.S. dollars, except per share information)
--------------------------------------------------------------------
For the three For the years
months ended ended
December 31, December 31,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (audited)
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Revenue $13,540 $8,869 $44,211 $34,427
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Expenses
Operating costs 8,371 4,858 27,204 19,439
General and
administrative 1,296 1,513 5,161 5,914
Finance 91 107 350 465
Amortization 474 268 1,533 986
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10,232 6,746 34,248 26,804
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Income from operations 3,308 2,123 9,963 7,623
Interest income 160 182 691 672
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Income before undernoted 3,468 2,305 10,654 8,295
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Special charge -- -- -- (10,506)
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Earnings (loss)
before taxes 3,468 2,305 10,654 (2,211)
Income taxes 435 114 1,213 (82)
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Earnings (loss) $3,033 $2,191 $9,441 $(2,129)
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Earnings (loss) per share
Basic
Before tax effected
special charge $0.25 $0.18 $0.77 $0.63
Earnings (loss) $0.25 $0.18 $0.77 $(0.17)
Diluted
Before tax affected
special charge $0.23 $0.18 $0.75 $0.60
Earnings (loss) $0.23 $0.18 $0.75 $(0.17)
Weighted average number of
shares ('000s)
Basic 12,280 12,211 12,245 12,257
Diluted 12,972 12,211 12,604 12,879
CRYPTOLOGIC INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
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For the three For the years
months ended ended
December 31, December 31,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (audited)
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Cash provided by (used in):
Operating activities:
Earnings (loss) $3,033 $2,191 $9,441 $(2,129)
Adjustments to reconcile
earnings to cash provided
by (used in) operating
activities:
Amortization 474 268 1,533 986
Write-down of
investments -- -- -- 7,145
Gain on sale of
investment -- -- (31) --
Stock options 148 -- 438 --
Changes in operating
assets and liabilities:
Security deposits (1,000) -- 9,190 1,060
Accounts receivable
and other (2,016) 138 (729) (612)
Prepaid expenses 57 (148) (246) (356)
Income taxes 243 102 1,646 (175)
Accounts payable and
accrued liabilities 6,770 600 17,458 3,512
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7,709 3,151 38,700 9,431
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Financing activities:
Issue of capital stock 360 -- 630 2,401
Registration costs (356) -- (690) --
Dividends paid (369) -- (369) --
Repurchase of common
shares -- (140) -- (20,265)
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(365) (140) (429) (17,864)
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Investing activities:
Purchase of capital
assets, net of disposals (349) (122) (2,618) (636)
Purchase of domain names (5) (3) (13) (3)
Investment in subsidiary (111) (625) (111) (625)
Short term investments (3,657) (10,857) (5,890) (10,857)
Investments -- -- -- (6,401)
Sale of investment -- -- 711 1,056
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(4,122) (11,607) (7,921) (17,466)
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Increase (decrease) in
cash and cash
equivalents 3,222 (8,596) 30,350 (25,899)
Cash and cash equivalents,
beginning of period 40,788 22,256 13,660 39,559
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Cash and cash equivalents,
end of period $44,010 $13,660 $44,010 $13,660
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NOTES TO 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 As at December 31, 2003 (All figures are in U.S. dollars, except per share disclosure and where otherwise indicated) (Unaudited) These consolidated financial statements of CryptoLogic Inc. (the "Company") 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 using the same accounting policies as were used for the consolidated financial statements for the year ended December 31, 2002. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2002, as set out in the 2002 Annual Report. 1. Stock Option Plan The Company has adopted the amended 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. with respect to accounting for stock-based compensation and other stock-based payments. In accordance with these guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. , the Company will expense the estimated fair value of employee options granted in the 2003 and subsequent fiscal years over the option vesting period. The fair value of the options granted in 2003 was calculated using the Black-Scholes option pricing model option pricing model A mathematical formula for determining the price at which an option should trade. The model expresses the value of an option as a function of the value of the underlying asset, length of time until maturity, exercise price, yields on using the following weighted assumptions:
2003
-----
Dividend yield 0.75%
Risk-free rate 2.75%
Expected volatility 50.0%
Expected life of options in years 5.0
Included in operating costs for 2003 is the cost of stock options of $148,000 in Q4 and $438,000 for the year. Consideration paid by employees on the exercise of stock options is recorded as share capital. The impact of expensing stock options on earnings in 2003 is as follows:
Three months ending Year ending
December 31, 2003 December 31, 2003
------------------------------------------
('000) ('000)
Stock options expense $148 $438
Stock options expense (per share):
Basic $0.01 $0.03
Diluted $0.01 $0.03
Previous 2003 quarter comparisons have been restated to reflect
this stock option expense, as follows:
Quarter ending Year ending
----------------------------------------------
Mar. 31, Jun. 30, Sept. 30, Dec. 31, Dec. 31,
2003 2003 2003 2003 2003
('000) ('000) ('000) ('000) ('000)
----------------------------------------------
Earnings - before
option expense $1,831 $2,583 $2,284 $3,181 $9,879
Stock options expense 58 105 127 148 438
Earnings 1,773 2,479 2,157 3,033 9,441
Earnings per share -
before option expense
Basic $0.15 $0.21 $0.19 $0.26 $0.81
Diluted $0.15 $0.21 $0.18 $0.25 $0.78
Earnings per share
Basic $0.15 $0.20 $0.18 $0.25 $0.77
Diluted $0.15 $0.20 $0.17 $0.23 $0.75
1. Stock Option Plan (continued) For the year ended December 31, 2002, no compensation cost was recorded on the grant of stock options during that year. In accordance with the transitional provisions of the 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. , additional pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma disclosure is presented as if the fair value method of accounting had been used to account for stock options. The fair value of the options granted was made using the Black-Scholes option pricing model using the following weighted assumptions:
2002
----
Dividend yield 0%
Risk-free rate 2.0%
Expected volatility 100.0%
Expected life of options in years 5.0
Had compensation expense been determined based on the fair value of the employee stock option awards for 2002 at the grant dates in accordance with the new recommendations, the Company's earnings and earnings per share would have been changed to the following pro forma amounts:
Three months Year
ending ending
December 31, 2003 December 31, 2003
As reported Pro forma As reported Pro forma
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('000) ('000) ('000) ('000)
Earnings (loss) $3,033 $2,849 $9,441 $8,706
Earnings (loss) per share
Basic $0.25 $0.23 $0.77 $0.71
Diluted $0.23 $0.22 $0.75 $0.68
Three months Year
ending ending
December 31, 2002 December 31, 2002
As reported Pro forma As reported Pro forma
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('000) ('000) ('000) ('000)
Earnings (loss) $2,191 $2,013 $(2,219) $(2,520)
Earnings (loss) per share
Basic $0.18 $0.17 $(0.17) $(0.21)
Diluted $0.18 $0.17 $(0.17) $(0.21)
2. Capital Stock
Authorized:
Unlimited common shares
Issued and Outstanding:
Series F
Common Shares Warrants Total
Stated Stated Stated
Issued Value Issued Value Value
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('000) ('000) ('000)
Balance, December 31, 2001 13,137 $8,448 30 $272 $8,720
Repurchase of shares (1,281) (401) -- -- (401)
Exercise of stock options 350 2,401 -- -- 2,401
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Balance, December 31, 2002 12,206 $10,448 30 $272 $10,720
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Balance, December 31, 2002 12,206 $10,448 30 $272 $10,720
Exercise of stock options 94 630 -- -- 630
--------------------------------------------------------------------
Balance, December 31, 2003 12,300 $11,078 30 $272 $11,350
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3. Special Charge - 2002 During the second quarter of FY 2002, the Company took a one-time special charge of $10.5 million ($9.9 million on an after tax basis). This charge was comprised of a 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. of investments that were deemed permanently impaired, including the 100% write-down of the Company's investment in SCG SCG Serbia and Montenegro SCG Srbija I Crna Gora (Servian: Serbia and Montenegro) SCG Sydney Cricket Ground SCG Service Canadien des Glaces (Canadian Ice Service) SCG superior cervical ganglion Enterprises Limited, a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Sports.com, as well as costs associated with consolidation of the Company's players' support operations, executive management reorganization, and estimated settlement and legal costs. 4. Comparative Figures Certain of the prior years' figures have been reclassified for consistency with the current presentation. |
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