Sierra Systems Reports Fourth Quarter Fiscal 2002 Results.Business Editors & High Tech Writers VANCOUVER Vancouver, city, Canada Vancouver, city (1991 pop. 471,844), SW British Columbia, Canada, on Burrard Inlet of the Strait of Georgia, opposite Vancouver Island and just N of the Wash. border. , British Columbia--(BUSINESS WIRE)--Dec. 5, 2002 Grant Gisel, 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. of Sierra Systems Sierra Systems Group Inc. ("Sierra Systems") is a private information technology and business consulting corporation headquartered in Vancouver, BC, Canada. The company provides services to both the public and private sectors. Group Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :SSG SSG abbr. staff sergeant ), commented on the company's fiscal 2002 and fourth quarter results. "While the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. economy has been under strain, Sierra Systems produced an enviable en·vi·a·ble adj. So desirable as to arouse envy: "the enviable English quality of being able to be mute without unrest" Henry James. result in fiscal 2002 relative to the rest of our industry. Revenue grew over 2% and earnings per share were $0.18. Our sales pipeline strengthened continuously throughout the year. This provides considerable encouragement for our fiscal 2003. Revenue and earnings from operations in Q4 were more positive, up 4% and 276% compared to the same period last year." Amounts in tables are in thousands of Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents except earnings per share.
3 Months Ended Sept 30
2002 2001
-----------------------
Revenue 31,931 30,706
Net Earnings for the Period 836 157
Basic and Diluted Earnings Per Share $ 0.09 $ 0.02
Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Fourth Quarter Fiscal 2002 Results Fourth quarter revenue and services revenue were both 4% higher than the same period last year. 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 was consistent at 70%, although available hours were 4% higher, a result of the INSI INSI Initial Nuclear Safety Inspection acquisition. Compensation costs were 5% higher than last year. Half of this increase arose from salary costs. Annual salary increases made in January January: see month. were very modest this year at 1%, and the addition of 61 billable employees from the INSI acquisition on June June: see month. 1 was offset in part by a reduction of headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. in the U.S. A further third of the overall increase in compensation costs arose from the increased use of external consultants in the quarter, a 10% increase. Benefit costs were higher in the quarter, a result of the refinement of the accounting of 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. government benefits to more accurately allocate To reserve a resource such as memory or disk. See memory allocation. the cost of these benefits over the year. The ratio of compensation costs to services revenue was consistent at 74%. Other costs were reduced by 6% with cost savings arising in the quarter from lower travel and 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. . The ratio of other costs to services revenue also dropped to 7% from 8%. The gross margin percentage was stable at 18% leading to an increase in gross profit of 4%. General and administration costs declined by 5%. There was a reduction in the provision for doubtful accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying of $0.4 million, a result of collections in the quarter of accounts previously provided for. This was offset in part by an increase in office and administrative salaries. Advisor costs associated with the Special Committee of the Board formed in October October: see month. were $0.1 million in this quarter. A further $0.1 million will be expensed in quarter one of fiscal 2003 in relation to these costs. There was a material foreign exchange gain of $0.7 million or $0.07 earnings per share. On a sequential One after the other in some consecutive order such as by name or number. quarterly basis, services revenue declined by 4%, a result of the timing of summer vacations 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. , consistent with the drop in utilization rate from 72% to 70%. The average billable headcount during the quarter increased by 4% due to the full quarter effect of the INSI acquisition. Compensation costs decreased by 3%, and so the ratio of compensation costs to services revenue remained consistent at 74%. The primary variance The discrepancy between what a party to a lawsuit alleges will be proved in pleadings and what the party actually proves at trial. In Zoning law, an official permit to use property in a manner that departs from the way in which other property in the same locality was 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. pay with a $1 million swing in this expense to a relief of the cost base in the quarter. The increased salary costs from the higher average headcount was offset by a reduction in the use of external consultants. Expenditures on other costs decreased 6% or $0.1 million. General and administration costs increased 3%, with the increases in office salaries and advisor costs being offset by a $0.3 million release of accounts receivable provision. Amounts in tables are in thousands of Canadian dollars except earnings per share.
Fiscal 2002 12 Months Ended Sept 30
2002 2001
---------------------------
Revenue 129,952 127,329
Net Earnings for the Year 1,688 1,535
Basic and Diluted Earnings Per Share $ 0.18 $ 0.17
Services revenue for fiscal 2002 increased 2% compared to the prior year. The average headcount was level, with the timing of attrition Attrition The reduction in staff and employees in a company through normal means, such as retirement and resignation. This is natural in any business and industry. Notes: in the U.S. offsetting the increases arising from acquisitions. The Company acquired Transformation Solutions Inc. on November November: see month. 1, 2001 and INSI strategic technologies inc. on June 1, 2002. Utilization was lower for the year at 72% compared to 74% in fiscal 2001. The increase in revenue was therefore driven off our external consultants and improved effective realized rates. The ratio of compensation costs to services revenue increased to 75% from 72%. Compensation costs increased 6% or $5.3 million. The increase arose in salaries (44% of the increase) and external consultants (54% of the increase). Salaries increased by 3%, base salaries by 1%. The remainder of the increase was the effect of U.S. dollar foreign exchange rate, variable compensation programs and severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs. Benefits did not increase by a corresponding percentage due to the refined allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of benefit costs over the calendar year implemented in January 2002. Other costs were 7% of services revenue down from 9%. Spending dropped by $1.5 million or 14%. The principal decline was in education, which was lower by a third representing more than half of the reduction in spending. In fiscal 2001, the Company spent considerable dollars on the PeopleSoft (PeopleSoft, Inc., Pleasanton, CA, www.peoplesoft.com) A software company that specialized in enterprise-wide applications for client/server environments. Initially specializing in human resources, its package offerings covered the gamut including financial, distribution, manufacturing certification process. This was not required in fiscal 2002. The remainder of the decrease was in advertising and promotion costs and recruitment. General and administration costs as a percentage of services revenue were 13% compared to 14% last year. Spending dropped by $0.7 million or 4%. Significant declines in legal and accounting of $0.8 million were further augmented by a net gain from the reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of the provision for doubtful accounts of $0.3 million. These were offset in part by increases in license and maintenance fees of $0.4 million. Interest is lower due to lower average cash balances and interest rates. There was a lower foreign exchange gain of $0.2 million, with an earnings per share effect of $0.02. The effective tax rate is 51% due to non-deductible expenses and an adverse foreign tax differential. Outlook As stated in October, Sierra Systems expects base revenue for its 2003 fiscal year to exceed $140 million and net earnings per share to exceed that of fiscal 2002. This guidance is based on information known today about market conditions and demand for its services and excludes the impact of any acquisitions or a win of a large contract contributing more than $6 million per year in revenue. In addition, Sierra Systems reiterates its guidance for quarter one of fiscal 2003. Revenues are expected to be between $36.5 million and $37.5 million and earnings per share between $0.06 and $0.10. About Sierra Systems Sierra Systems Group Inc. (TSX:SSG) is one of North America's original business consulting and technology services organizations. For over 36 years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time Company has cultivated cultivated, n in herbal medicine, used to describe plants that are commercially farmed rather than collected from the wild. lasting associations with clients by integrating technical experience with industry knowledge for innovative, sustainable results. Sierra Systems has built industry-leading practices in health, justice, electronic government, enterprise solutions, financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. and insurance, utilities and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , and established regional market expertise in its 14 strategic locations. Reach Sierra Systems at www.SierraSystems.com. There will be a conference call on December December: see month. 5, 2002, at 1:30 p.m. Pacific (4:30 p.m. Eastern) time. People wishing to participate should call 1.800.482.2225 and enter the passcode #2655579 ten minutes prior to the scheduled time In rallying, the Scheduled Time of any crew is the time, calculated at the beginning of the event, that they should arrive at any given control. It is different from Due Time in that Due Time is dynamic, ie it can change throughout the event as competitors drop time; whereas . A digital playback Playback could mean:
The statements that are not historical facts contained in this release 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. that involve risks and uncertainties. Sierra (company, games) Sierra - (Or "Sierra On-Line") A computer game developer founded in the early 1980s by Ken and Roberta Willams in the small mountain town of Oakhurst California. Sierra was named after the local mountian range, 15 miles from the famous Yosemite National Park. Systems' actual results could differ materially from those expressed 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 such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, technological shifts, employee retention, fixed price contract delivery, competition, general economic conditions, foreign exchange and other risks detailed in the Company's Annual Report and other filings with Canadian 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 .
SIERRA SYSTEMS GROUP INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars)
(audited)
Sept 30 Sept 30
2002 2001
------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 10,803 $ 16,728
Accounts receivable, including
unbilled work in progress 33,982 28,092
Current portion of long-term accounts
receivable 1,558 2,920
Income taxes recoverable 890 695
Prepaid expenses 2,306 1,148
Future income taxes - 472
------------------------------
49,539 50,055
Long-term accounts receivable - 851
Property and equipment 10,265 10,959
Future income taxes 3,646 2,406
Goodwill 19,312 11,406
------------------------------
$ 82,762 $ 75,677
------------------------------
------------------------------
LIABILITIES
Current liabilities
Bank indebtedness $ 4,488 $ -
Accounts payable and accrued
liabilities 12,770 11,928
Deferred revenue 2,465 1,354
Current portion of project
financing 995 2,920
Current portion of capital
lease obligation 136 -
Future income taxes 465 -
------------------------------
21,319 16,202
Capital lease obligation 54 -
Project financing - 851
------------------------------
21,373 17,053
SHAREHOLDERS' EQUITY
Capital stock (note 4) 41,147 40,070
Retained earnings 20,242 18,554
------------------------------
61,389 58,624
------------------------------
$ 82,762 $ 75,677
------------------------------
------------------------------
SIERRA SYSTEMS GROUP INC.
CONSOLIDATED STATEMENTS of RETAINED EARNINGS
(in thousands of Canadian dollars)
Three months ended Year ended
September 30 September 30
(unaudited)
2002 2001 2002 2001
----------------------------------------
Retained earnings -
Beginning of period $ 19,406 $ 18,397 $ 18,554 $ 17,019
Net earnings for the period 836 157 1,688 1,535
----------------------------------------
Retained earnings - End
of period $ 20,242 $ 18,554 $ 20,242 $ 18,554
----------------------------------------
SIERRA SYSTEMS GROUP INC.
CONSOLIDATED STATEMENTS of EARNINGS
(in thousands of Canadian dollars except per share and share figures)
Three months ended Year ended
Sept 30 Sept 30
(unaudited)
2002 2001 2002 2001
---------------------------------------
Revenue
Services $ 31,864 $ 30,687 $ 128,589 $ 126,069
Product sales 67 19 1,363 1,260
---------------------------------------
31,931 30,706 129,952 127,329
---------------------------------------
Cost of sales
Compensation 23,730 22,630 96,497 91,198
Other costs 2,272 2,415 9,368 10,848
Product costs 7 (10) 1,174 1,065
---------------------------------------
26,009 25,035 107,039 103,111
---------------------------------------
Gross profit 5,922 5,671 22,913 24,218
General and administration 4,374 4,585 16,639 17,312
Amortization of property
and equipment 1,036 950 3,206 3,146
---------------------------------------
Earnings from operations 512 136 3,068 3,760
---------------------------------------
Other income
Foreign exchange gain 684 396 174 530
Interest 8 226 193 814
---------------------------------------
692 622 367 1,344
---------------------------------------
Earnings before income taxes
and goodwill amortization 1,204 758 3,435 5,104
Provision for income taxes 368 333 1,747 2,498
---------------------------------------
Earnings before goodwill
amortization 836 425 1,688 2,606
Goodwill amortization (note 1) - 268 - 1,071
---------------------------------------
Net earnings for the
period $ 836 $ 157 $ 1,688 $ 1,535
---------------------------------------
---------------------------------------
Earnings per share before
goodwill amortization $ 0.09 $ 0.05 $ 0.18 $ 0.28
---------------------------------------
---------------------------------------
Earnings per share after
goodwill amortization $ 0.09 $ 0.02 $ 0.18 $ 0.17
---------------------------------------
---------------------------------------
Diluted earnings per
share $ 0.09 $ 0.02 $ 0.18 $ 0.17
---------------------------------------
---------------------------------------
Weighted average number
of common shares
outstanding 9,322,073 9,179,803 9,237,964 9,192,908
---------------------------------------
---------------------------------------
SIERRA SYSTEMS GROUP INC.
CONSOLIDATED STATEMENTS of CASH FLOWS
(in thousands of Canadian dollars)
Three months ended Year ended
Sept 30 Sept 30
(unaudited)
2002 2001 2002 2001
--------------------------------------
Cash provided from (used for)
Operating activities
Net earnings for the period $ 836 $ 157 $ 1,688 $ 1,535
Items not affecting cash -
Amortization of property
and equipment 1,036 950 3,206 3,146
Amortization of goodwill - 268 - 1,071
Future income taxes (857) (194) (715) (461)
Net change in non-cash
operating working capital (5,550) (322) (3,767) 1,714
Net change in long-term
accounts receivable 592 589 2,213 1,800
--------------------------------------
(3,943) 1,448 2,625 8,805
Financing activities
Project financing (718) (588) (2,777) (1,800)
Shares purchased for
long-term incentive plan - - (193) (340)
Shares issued 82 68 270 365
Repayment of capital
lease obligation (40) - (52) -
--------------------------------------
(676) (520) (2,752) (1,775)
Investing activities
Purchase of property and
equipment (515) (965) (2,214) (5,197)
Business acquisitions (note 2) - - (8,072) -
--------------------------------------
(515) (965) (10,286) (5,197)
(Decrease) increase in cash (5,134) (37) (10,413) 1,833
Cash - beginning of period 11,449 16,765 16,728 14,895
--------------------------------------
Cash - end of period $ 6,315 $ 16,728 $ 6,315 $ 16,728
--------------------------------------
--------------------------------------
Represented by:
Cash and cash equivalents $ 10,803 $ 16,728
Bank indebtedness (4,488) -
------------------
$ 6,315 $ 16,728
Notes to Interim Consolidated Financial Statements
(unaudited)
(Amounts in tables are in thousands of Canadian dollars except per
share figures)
1. Summary of significant accounting policies
General
These interim Consolidated Financial Statements and notes should
be read in conjunction with the Company's annual Consolidated
Financial Statements for the year ended September 30, 2001.
These interim Consolidated Financial Statements have been prepared
in accordance with Canadian generally accepted accounting principles,
using the same accounting policies as outlined in Note 1 to the
Consolidated Financial Statements for the year ended September 30,
2001, except as noted below. Certain comparative figures in the
Consolidated Financial Statements have been reclassified to conform to
the current period presentation.
Goodwill
On October 1, 2001, the Company adopted the new recommendations of
the CICA Accounting Handbook Section 1581 "Business Combinations" and
Section 3062 "Goodwill and Other Intangibles", relating to the
accounting treatment of business combinations and goodwill. Under the
revised recommendations, all business combinations are accounted for
using the purchase method, and goodwill is no longer amortized to
earnings but assessed for impairment on an annual basis.
In accordance with Section 3062, the Company performs an annual
impairment test of its goodwill based on:
(a) the market capitalization of the Company, and
(b) an analysis of valuation metrics of comparable
companies. The Company has determined that no goodwill impairment
charge is required.
In fiscal 2002, the effect of non-amortization of goodwill
increased consolidated net earnings by approximately $1,287,000.
Earnings per share
Effective October 1, 2001, the Company adopted the new
recommendations of Section 3500 "Earnings Per Share" of the CICA
Accounting Handbook, relating to the method of calculation,
presentation, and disclosure of earnings per share. These new
recommendations were applied retroactively. The application of these
new recommendations has had no impact on the amounts previously
disclosed for earnings per share.
2. Business acquisitions
INSI strategic technologies inc. ("INSI")
On June 1, 2002, the Company acquired all the outstanding shares
of INSI, a Winnipeg-based company specializing in the provision of
systems integration services. The aggregate purchase price of the
acquisition was $7,872,000, of which $6,861,000 was assigned to
goodwill. None of the amount recorded as goodwill is deductible for
tax purposes. The acquisition was accounted for using the purchase
method and, accordingly, the purchase price was allocated to the
assets acquired and the liabilities assumed based on their fair values
at June 1, 2002 as follows:
Net assets at fair values
Working capital $ 897
Property and equipment 220
Goodwill 6,861
Long-term liabilities (106)
--------
Cost of acquisition $ 7,872
--------
Consideration
Cash $ 6,872
Common shares 1,000
--------
$ 7,872
--------
Transformation Solutions Inc. ("TSI")
On November 1, 2001, the Company acquired all of the outstanding
shares of TSI, a management consulting company. The cost of the
acquisition was $1,200,000, of which $1,045,000 was assigned to
goodwill. None of the amount assigned to goodwill is deductible for
tax purposes. The acquisition was accounted for using the purchase
method and, accordingly, the purchase price was allocated to the
assets acquired based on their fair values at November 1, 2001 as
follows:
Net assets at fair values
Working capital $ 76
Property and equipment 79
Goodwill 1,045
--------
Cost of acquisition $ 1,200
--------
Consideration
Cash $ 1,200
--------
3. Supplementary cash flow information
Interest and income taxes Three months ended Year ended
September 30 September 30
2002 2001 2002 2001
---------------------------------------------------------------------
Interest paid $ 61 $ 56 $ 166 $ 350
Interest received $ 182 $ 61 $ 362 $ 891
Income taxes paid $ 1,572 $ 673 $ 2,937 $ 3,569
Income taxes refunded $ 897 $ 1,696 $ 897 $ 2,013
Non-cash financing
activities
Shares issued for business
acquisitions - - $ 1,000 -
Retraction of shares held in
escrow $ 191
Non-cash investing activities
Assets acquired under capital
leases - - $ 182 -
Reduction in purchase price of
acquisition - - $ 191
4. Capital stock
a) Capital stock
Issued As at September 30, 2002 As at September 30, 2001
--------------------------------------------------
Common shares 9,324,827 9,182,520
Amount $ 41,147 $ 40,070
b) Options
Three months ended Year ended
September 30, 2002 September 30, 2002
--------------------------------------
Balance - beginning of period 927,587 851,077
Options granted in period 148,000 263,900
Options exercised in period (1,000) (1,000)
Options cancelled in period (31,630) (70,020)
--------------------------------------
Balance - end of period 1,043,957 1,043,957
5. Business segment information
The Company operates in one business segment - providing IT
services. The Company operates primarily in Canada and the United
States. Geographical information is based upon the country in which
the Company's operations are located.
Revenue Canada U.S. Total
---------------------------------
For the three months ended
September 30, 2002 $ 21,266 $ 10,665 $ 31,931
For the three months ended
September 30, 2001 $ 18,530 $ 12,176 $ 30,706
For the year ended
September 30, 2002 $ 83,355 $ 46,597 $ 129,952
For the year ended
September 30, 2001 $ 81,120 $ 46,209 $ 127,329
Property, equipment and goodwill
As at September 30, 2002 $ 27,144 $ 2,433 $ 29,577
As at September 30, 2001 $ 19,298 $ 3,067 $ 22,365
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