Geac announces third quarter results for fiscal year 2005 Earnings
from Operations Increased 17.6% in Q3 FY 2005 Over Q3 FY 2004
MARKHAM, ON and SOUTHBOROUGH, MA, March 8 /PRNewswire-FirstCall/ --
Geac Computer Corporation Limited (TSX: GAC and NASDAQ: GEAC), a
global enterprise software company dedicated to addressing the
needs of CFOs, today announced its third quarter financial results
for the three and nine months ended January 31, 2005. Third Quarter
Financial Highlights
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US$ thousands Q3 FY2005 Q2 FY2005 Q3 FY2004
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Software Revenue $ 18,211 $ 15,064 $ 18,672
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Support & Services Revenue $ 90,596 $ 88,890 $ 89,591
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Hardware Revenue $ 5,083 $ 2,476 $ 7,912
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Total Revenue $ 113,890 $ 106,430 $ 116,175
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Net Earnings $ 29,670 $ 15,204 $ 13,755
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Diluted Net Earnings Per Share (not in thousands) $ 0.34 $ 0.17 $
0.16
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Geac reported total revenue in the third quarter of fiscal year
(FY) 2005 of $113.9 million, a decrease of $2.3 million compared to
$116.2 million in total revenue in the third quarter of FY 2004.
The decrease was due to a decline in Geac's low-margin hardware
revenue of $2.8 million. Software license revenue was $18.2 million
in the third quarter, down $0.5 million from a year ago, but up
$3.1 million from the second quarter of FY 2005. The Company's net
earnings were $29.7 million during the third quarter of FY 2005, or
$0.34 per diluted share, compared with $13.8 million, or $0.16 per
diluted share, in the third quarter of last year. Net earnings were
positively impacted by the non-recurring tax benefit in the third
quarter of FY 2005, however earnings from operations before income
taxes contributed $0.25 to the $0.34 earnings per diluted share in
the third quarter of FY 2005. Geac's gross profit increased to
62.4% of revenue in the third quarter of FY 2005 from 60.4% in the
third quarter of FY 2004. Gross profit increased to 63.6% of
revenue for the nine months ended January 31, 2005 from 59.9% for
the nine months ended January 31, 2004. Our continued focus on
operating expense management resulted in an increase in earnings
from operations of 17.6% over the third quarter of last year.
However, gross margin has declined from 63.6% in the second quarter
of FY 2005 to 62.4% in the third quarter of FY 2005. As stated in
the second quarter announcement, Geac management remains uncertain
about whether it can maintain this level of gross profit in future
quarters. "Important to the quarter was the Company's continued
focus on successfully strengthening customer retention by
delivering increased value through support activities," said
Charles S. Jones, Chief Executive Officer of Geac. Helped by an
increase in maintenance revenue in Geac Performance Management and
continued success in our Value for Maintenance Program, we saw a
continued retention rate in excess of 90% of our support revenue
for the quarter and only a 3.8% decrease in our year over year
current deferred revenue for maintenance which is substantially
lower than our historic maintenance attrition rate. Of equal
importance was our drive to increase our software license revenue
in the third quarter over the second quarter of this year. Although
software license revenue is relatively flat year over year, it
increased by 20.9% in the third quarter over the second quarter of
this year. Contributing to this increase was MPC license revenue,
which increased 45.9%, and System21 license revenue, which
increased 59.2%, over the second quarter of FY 2005," said Charles
S. Jones, Chief Executive Officer of Geac. Operating expenses were
$49.5 million in the third quarter of FY 2005, a decrease of 4.5%
from $51.9 million in the third quarter of FY 2004. For the nine
months ended January 31, 2005, operating expenses decreased 2.5% to
$145.6 million from $149.3 million for the same period a year ago.
Reductions in product development costs and general and
administrative expenses contributed to the overall reduction in
operating expenses. "For the fifth consecutive quarter, Geac has
been able to increase its cash position through rigorous cost
controls, consistent cash collection procedures, ongoing
maintenance renewals and the continued generation of cash
throughout its many businesses," said Donna de Winter, Chief
Financial Officer of Geac. "The Company increased its cash position
to $168.5 million at the end of the third quarter of FY 2005 from
$51.0 million a year ago and $121.8 million at the end of the
second quarter of FY 2005. This strong cash position contributes
significantly to Geac's flexibility to execute a transformational
acquisition as we look for opportunities to grow our revenue,
increase our customer base and expand our product footprint through
development and acquisition." Customers --------- In the third
quarter, Geac closed approximately 470 deals in the Enterprise
Applications Systems (EAS) segment of its business. Twenty-eight of
these deals each exceeded $150,000 - a 33% increase over Q2 FY 2005
-- and the average deal size within this group was more than
$350,000, also a significant increase over the previous quarter, in
which the deals in excess of $150,000 averaged $265,000. "We
continue to execute positive change across our sales force as we
train and attract salespeople to succeed in an increasingly
competitive and consolidating software market - one which
accommodates fewer and larger players every quarter. We see in our
customer relationships an increasing convergence of software
products with the provision of professional services. Geac's
software sales as a percentage of total revenue remained at
approximately 16.0% quarter-over-quarter," Mr. Jones continued.
"Our sales efforts have required a transition period and an
increased expenditure in sales and marketing. Geac attracted 52 new
customers in its EAS division in the third quarter, compared to
only 11 new customers in the second quarter of FY 2005; the Company
has increased its win rate with larger organizations - including an
impressive second sale in the third quarter into a global Fortune
10 Company, among others; and we have seen continued success with
our focused vertical selling efforts into the government and
financial services sectors." Geac Performance Management -
Significant sales included: AARP, for MPC; Callaway Golf, for MPC;
Department of Finance, Australia (DOFA), for MPC, sold in
partnership with Beacon Government Solutions; Lawrence Livermore
National Laboratories, for Expense Management; Sargent & Lundy,
for Expense Management; a leading telecommunications company, for
MPC; a worldwide manufacturer of consumer products, for Expense
Management, ASP; a U.S. foodservice industry distributor, for MPC;
and a significant European government agency, for MPC. Reinforcing
Geac's strategy to integrate performance management solutions into
its existing product lines and to sell into its established
customer base, among the major deals of the quarter, the Company
sold Geac Performance Management to three existing Enterprise
Server customers: a major New England city government, a western
U.S. automobile club and a large, Texas-based oil and gas company.
By adding MPC budgeting, planning and forecasting to their back
office solutions, Geac is helping customers extend these solutions
across their financial value chain, drive performance and extract
more value from their existing technology investments. Vertical
Market Focus To advance its position in the performance management
marketplace, Geac is undertaking several industry-specific
campaigns that will capitalize on the Company's collective
expertise and established customer base and partnerships in the
Financial Services and Government sectors. As institutional
investors continue to compete with traditional banking markets, the
competitive landscape in the banking industry at the same time
broadens and intensifies. Banks are looking for ways to integrate
multiple back office silos and front office applications to
increase efficiency, regulatory compliance, financial clarity and
profitability. Geac Performance Management extends beyond access,
reconciliation and reporting of data to more strategic budgeting,
analysis and forecasting to help its banking customers meet their
shareholder and client needs in this increasingly competitive
landscape. Currently, Geac has more than 100 banks among its
sizeable services customer base. Notably, 14 of our banking
customers belong to the top twenty- five banks in the world, ranked
by assets. Since the last quarter of FY 2004, Geac has successfully
sold Geac Performance Management software into four Geac enterprise
customers in the banking industry, including, Fortis, a European
top 20 banking, insurance and investments group -- and long-time
SmartStream user -- which committed to Geac Performance Management
as part of its move towards a more uniform global approach to
budgeting that Fortis expects will yield significant improvements
in quality, speed and transparency. In addition, Geac continues to
augment its staff resources with banking industry expertise, and is
supplementing its market outreach through its partnership with
IPS-Sendero, a global corporate performance management firm that
serves the financial services industry exclusively. The third
quarter also saw the completion of a sale to one of the world's
largest banks. The other sector Geac is targeting initially in its
vertical industry campaign is government at the local, state and
federal levels. Under increasing pressure to do more with less, the
government vertical is now examining closely technology advantages
deployed in the private sector to increase efficiency,
accountability and productivity. Since the start of Geac's 2004
fiscal year, Geac has completed approximately 180 separate deals
with nearly 100 different government entities worldwide. In the
Geac Performance Management business, some of those deals have
included the State of Alaska, the City of Charlotte (NC) and a
major New England city government. In the UK during this period,
Geac MPC sales to London Borough of Bromley, Luton Borough Council
and The Learning & Skills Council demonstrate the market
traction Geac is gaining. As in banking, Geac is forging
partnerships to help it penetrate the government market, such as
one with NRJ Consulting, a local government reseller of Geac MPC in
the UK, which was instrumental in Geac's recent win at London
Borough of Bromley. Concluding Remarks Mr. Jones concluded, "The
enterprise software market continues to be challenging as major
software vendors consolidate and customers manage their IT budgets
frugally. In this competitive environment, we are pleased to have
closed so many new deals, to have held maintenance attrition rates
in the single digits, to have maintained aggressive cost control
measures, to have shown an increase in our earnings from operations
and to have built an actionably strong cash position. With a
continued focus on top-line revenue growth, we are in a solid
position to move forward with our internal development and
acquisition planning to deliver expanded product suites to existing
and new customers." To understand better this press release and for
more in-depth analysis of these financial results, please see our
Management Discussion and Analysis, which will be filed today with
the Canadian Securities Administrators at http://www.sedar.com/ and
the United States Securities and Exchange Commission at
http://www.sec.gov/. It will also be posted on our website at
http://www.geac.com/ later today. Earnings Call Management will
discuss the results announced on a conference call scheduled for
later today, Tuesday, March 8, 2005, at 5:15 p.m. Eastern Time.
Listeners may access the conference call at 416.405.9310 /
877.211.7911, or via webcast at http://www.investors.geac.com/. A
replay of the conference call will be available from March 8, 2005
at approximately 9:00 p.m. Eastern Time until March 17, 2005 at
11:59 p.m. Eastern Time. The replay can be accessed at 416.695.5800
or 1.800.408.3053. The pass code for the replay is 3140943 followed
by the number sign. The conference call will be broadcast over
Geac's web site at http://www.investors.geac.com/. Attendees will
need to log in at least 15 minutes prior to the call. About Geac
Geac (TSX: GAC, NASDAQ: GEAC) is a global enterprise software
company that addresses the needs of the Chief Financial Officer.
Geac's best-in-class technology products and services help
organizations do more with less in an increasingly competitive
environment, amidst growing regulatory pressure, and in response to
other business issues confronting the CFO. Further information is
available at http://www.geac.com/ or through email at . Geac trades
on the Toronto Stock Exchange under the symbol "GAC" and on the
NASDAQ National Market under the symbol "GEAC" and had 86,042,840
common shares issued and outstanding at January 31, 2005. This
press release contains forward-looking statements of Geac's
intentions, beliefs, expectations and predictions for the future.
These forward-looking statements often include use of the future
tense with words such as "will," "may," "intends," "anticipates,"
"expects" and similar conditional or forward-looking words and
phrases. These forward-looking statements are neither promises nor
guarantees. They are only predictions that are subject to risks and
uncertainties, and they may differ materially from actual future
events or results. Geac disclaims any obligation to update any such
forward-looking statements after the date of this release. Among
the risks and uncertainties that could cause a material difference
between these forward-looking statements and actual events include,
among other things: our ability to increase revenues from new
license sales, cross-sell into our existing customer base and
reduce customer attrition; whether we can identify and acquire
synergistic businesses and, if so, whether we can successfully
integrate them into our existing operations; whether we are able to
deliver products and services within required time frames and
budgets to meet increasingly competitive customer demands and
performance guarantees; risks inherent in fluctuating international
currency exchange rates in light of our global operations and the
unpredictable effect of geopolitical world and local events;
whether we are successful in our continued efforts to manage
expenses effectively and maintain profitability; our ability to
achieve revenue from products and services that are under
development; the uncertain effect of the competitive environment in
which we operate and resulting pricing pressures; and whether the
anticipated effects and results of our new product offerings and
successful product implementation will be realized. These and other
potential risks and uncertainties that relate to Geac's business
and operations are summarized in more detail from time to time in
our filings with the United States Securities and Exchange
Commission and with the Canadian Securities Administrators,
including Geac's most recent quarterly reports available through
the website maintained by the SEC at http://www.sec.gov/ and
through the website maintained by the Canadian Securities
Administrators and the Canadian Depository for Securities Limited
at http://www.sedar.com/. Geac is a registered trademark of Geac
Computer Corporation Limited. All other marks are trademarks of
their respective owners. Geac's financial statements and the
financial information included in this press release have been
prepared in accordance with Canadian generally accepted accounting
principles. In addition, the financial statements and the financial
information included in this press release, as well as this press
release itself, have been reviewed and approved by both the Audit
Committee and the Board of Directors of the Company. Geac Computer
Corporation Limited Consolidated Balance Sheets (Unaudited)
(amounts in thousands of U.S. dollars) January 31, April 30, 2005
2004 ------------ ------------ As revised Assets (see note 2)
Current assets: Cash and cash equivalents $ 168,491 $ 86,050
Restricted cash 6 95 Short-term investments - 26,500 Accounts
receivable and other receivables 47,394 49,300 Unbilled receivables
8,656 6,537 Future income taxes 9,125 15,247 Inventory 531 624
Prepaid expenses and other assets 11,467 10,165 ------------
------------ Total current assets 245,670 194,518 Restricted cash
2,499 1,781 Future income taxes 20,674 21,741 Property, plant and
equipment 22,231 23,843 Intangible assets 26,130 32,628 Goodwill
(note 5) 123,311 128,366 Other assets 3,155 4,026 ------------
------------ Total assets $ 443,670 $ 406,903 ------------
------------ ------------ ------------ Liabilities &
Shareholders' Equity Current liabilities: Accounts payable and
accrued liabilities $ 71,723 $ 79,664 Income taxes payable 22,279
34,538 Current portion of long-term debt 420 391 Deferred revenue
106,130 117,927 ------------ ------------ Total current liabilities
200,552 232,520 Deferred revenue 1,929 2,256 Employee future
benefits 25,824 23,994 Asset retirement obligations (note 4) 1,709
1,648 Accrued restructuring (note 8) 2,494 5,864 Long-term debt
4,750 4,550 ------------ ------------ Total liabilities 237,258
270,832 Shareholders' Equity Common shares; no par value; unlimited
shares authorized; issued and outstanding as at January 31, 2005 -
86,042,840 (April 30, 2004 - 85,174,785) 129,400 124,019 Common
stock options 12 44 Contributed surplus 4,229 2,368 Retained
earnings 92,903 34,517 Cumulative foreign exchange translation
adjustment (20,132) (24,877) ------------ ------------ Total
shareholders' equity 206,412 136,071 ------------ ------------ $
443,670 $ 406,903 ------------ ------------ ------------
------------ Commitments and contingencies (note 9) Geac Computer
Corporation Limited Consolidated Statements of Earnings (Unaudited)
(amounts in thousands of U.S. dollars, except share and per share
data) Three months ended Nine months ended January 31, January 31,
--------------------- --------------------- 2005 2004 2005 2004
---------- ---------- ---------- ---------- (Revised-see
(Revised-see notes 3 & 4) notes 3 & 4) Revenue: Software $
18,211 $ 18,672 $ 48,770 $ 46,803 Support and services 90,596
89,591 268,956 261,502 Hardware 5,083 7,912 9,462 20,862 ----------
---------- ---------- ---------- Total revenue 113,890 116,175
327,188 329,167 Cost of revenue: Costs of software 2,278 1,356
6,088 5,492 Costs of support and services 36,447 37,884 105,450
108,718 Costs of hardware 4,115 6,751 7,528 17,844 ----------
---------- ---------- ---------- Total cost of revenue 42,840
45,991 119,066 132,054 ---------- ---------- ---------- ----------
Gross profit 71,050 70,184 208,122 197,113 Operating expenses:
Sales and marketing 20,116 19,017 56,349 55,241 Product development
14,456 15,659 42,755 44,410 General and administrative 13,395
15,840 41,409 48,006 Net restructuring and other unusual items
(note 8) (735) (947) (1,755) (3,754) Amortization of intangible
assets 2,312 2,332 6,848 5,363 ---------- ---------- ----------
---------- Total costs and expenses 49,544 51,901 145,606 149,266
Earnings from operations 21,506 18,283 62,516 47,847 Interest
income 877 313 2,052 899 Interest expense (423) (418) (1,179) (842)
Other income (expense), net 270 (1,006) 482 (1,764) ----------
---------- ---------- ---------- Earnings from operations before
income taxes 22,230 17,172 63,871 46,140 Income taxes (note 10)
7,440 (3,417) (5,485) (12,754) ---------- ---------- ----------
---------- Net earnings for the period $ 29,670 $ 13,755 $ 58,386 $
33,386 ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- Basic net earnings per share $
0.35 $ 0.16 $ 0.68 $ 0.39 ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- Diluted net
earnings per share $ 0.34 $ 0.16 $ 0.67 $ 0.39 ----------
---------- ---------- ---------- ---------- ---------- ----------
---------- Weighted average number of common shares used in
computing basic net earnings per share ('000s) 85,684 84,830 85,318
84,523 ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- Weighted average number of common
shares used in computing diluted net earnings per share ('000s)
87,874 86,389 87,462 85,763 ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- Geac
Computer Corporation Limited Consolidated Statement of
Shareholders' Equity (Unaudited) (amounts in thousands of U.S.
dollars, except share data) Share capital -----------------------
Cumulative foreign exchange Total Common Common Contri- Retained
trans- share- shares stock buted earnings/ lation holders' ('000s)
Amount options surplus (deficit) adjustment equity ------- -------
------- ------- ---------- ----------- -------- Balance - April 30,
2003 84,136 $120,976 $163 $ - $(22,649) $(22,320) $ 76,170 Issuance
of common stock for cash 763 1,675 - - - - 1,675 Stock-based
compensation (note 3) - - - 1,398 - - 1,398 Employee stock purchase
plan - 17 - (17) - - - Net earnings - - - - 33,386 - 33,386 Foreign
exchange translation adjustment - - - - - (1,636) (1,636) -------
------- ------- ------- ---------- ----------- -------- Balance -
January 31, 2004 84,899 122,668 163 1,381 10,737 (23,956) 110,993
Issuance of common stock for cash 276 1,232 - - - - 1,232 Exercise
of stock options granted in connection with acquisition of
Extensity - 119 (119) - - - - Stock-based compensation (note 3) - -
- 987 - - 987 Net earnings - - - - 23,780 - 23,780 Foreign exchange
translation adjustment - - - - - (921) (921) ------- -------
------- ------- ---------- ----------- -------- Balance - April 30,
2004 85,175 124,019 44 2,368 34,517 (24,877) 136,071 Issuance of
common stock for cash 868 4,039 - - - - 4,039 Exercise of stock
options granted in connection with acquisition of Extensity - 32
(32) - - - - Stock-based compensation (note 3) - - - 3,171 - -
3,171 Exercise of stock options - 826 - (826) - - - Employee stock
purchase plan - 484 - (484) - - - Net earnings - - - - 58,386 -
58,386 Foreign exchange translation adjustment - - - - - 4,745
4,745 ------- ------- ------- ------- ---------- -----------
-------- Balance - January 31, 2005 86,043 $129,400 $ 12 $4,229 $
92,903 $(20,132) $206,412 ------- ------- ------- -------
---------- ----------- -------- ------- ------- ------- -------
---------- ----------- -------- See accompanying notes Geac
Computer Corporation Limited Consolidated Statements of Cash Flows
(Unaudited) (amounts in thousands of U.S. dollars) Three months
ended Nine months ended January 31, January 31,
--------------------- --------------------- 2005 2004 2005 2004
---------- ---------- ---------- ---------- (Revised- (Revised- see
notes see notes 2, 3 & 4) 2, 3, & 4) Cash flows from
operating activities Net earnings for the period $ 29,670 $ 13,755
$ 58,386 $ 33,386 Adjustments to reconcile net earnings to net cash
provided by operating activities: Amortization of intangible assets
2,312 2,332 6,848 5,363 Amortization of property, plant and
equipment 1,381 1,913 4,723 5,454 Amortization of deferred
financing costs 236 237 707 372 Stock-based compensation 1,412 876
3,532 1,481 Employee future benefits 825 709 2,095 1,216 Future
income tax expense 4,037 14 13,631 6,444 Accrued liabilities and
other provisions (735) (773) (1,763) (3,998) Other 46 (268) 45
(285) Changes in operating assets and liabilities: Accounts
receivable and other and unbilled receivables (9,387) (3,350) 2,681
6,754 Inventory 82 184 106 258 Prepaid expenses and other assets
(609) (377) (739) 2,796 Accounts payable and accrued liabilities
7,120 (2,113) (5,050) (14,088) Accrued restructuring (2,344)
(1,438) (9,411) 472 Asset retirement obligations (400) - (183) -
Income taxes payable (12,508) 2,577 (12,278) 4,293 Deferred revenue
21,716 16,331 (15,697) (21,878) Other 196 155 478 (4) ----------
---------- ---------- ---------- Net cash provided by operating
activities 43,050 30,764 48,111 28,036 ---------- ----------
---------- ---------- Cash flows from investing activities
Acquisition of Comshare less cash acquired - (129) - (39,148)
Proceeds from divestiture of operations less cash divested - 339 -
339 Purchases of investments - (30,703) (4,525) (64,203) Sales of
investments - 16,703 31,025 56,203 Additions to property, plant and
equipment (765) (1,513) (2,379) (3,027) Disposals of property,
plant and equipment (119) (72) 36 10 Change in restricted cash 51
403 (435) 805 ---------- ---------- ---------- ---------- Net cash
(used in) provided by investing activities (833) (14,972) 23,722
(49,021) ---------- ---------- ---------- ---------- Cash flows
from financing activities Disposals of other assets 138 - 138 -
Deferred financing costs - (24) - (2,828) Issue of common shares
1,914 279 4,039 1,675 Issuance of long-term debt 48 918 135 918
Repayment of long-term debt (111) (263) (338) (649) ----------
---------- ---------- ---------- Net cash provided by (used in)
financing activities 1,989 910 3,974 (884) ---------- ----------
---------- ---------- Effect of exchange rate changes on cash and
cash equivalents 2,472 1,377 6,634 3,002 ---------- ----------
---------- ---------- Cash and cash equivalents Net increase
(decrease) in cash and cash equivalents 46,678 18,079 82,441
(18,867) Cash and cash equivalents - Beginning of period 121,813
32,873 86,050 69,819 ---------- ---------- ---------- ----------
Cash and cash equivalents - End of period $ 168,491 $ 50,952 $
168,491 $ 50,952 ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- See accompanying notes
Geac Computer Corporation Limited Notes to the Consolidated
Financial Statements (Unaudited) (amounts in thousands of U.S.
dollars, except share and per share data unless otherwise noted) 1.
Basis of presentation The accompanying unaudited consolidated
financial statements have been prepared in United States ("U.S.")
dollars and in accordance with Canadian generally accepted
accounting principles ("GAAP") for interim financial statements.
Accordingly, these unaudited financial statements do not include
certain disclosures normally included in annual financial
statements prepared in accordance with such principles. These
unaudited financial statements were prepared using the same
accounting policies as outlined in note 2 to the annual financial
statements for the year ended April 30, 2004, and should be read in
conjunction with the audited consolidated financial statements and
notes included in the Company's Annual Report for the year ended
April 30, 2004. The preparation of these unaudited consolidated
financial statements requires management to make estimates and
assumptions that affect the amounts reported in the consolidated
financial statements and the accompanying notes. In the opinion of
management, these unaudited consolidated financial statements
reflect all adjustments (which include only normal, recurring
adjustments) necessary to state fairly the results for the periods
presented. Actual results could differ from these estimates and the
operating results for the interim periods presented are not
necessarily indicative of the results expected for the full year.
2. Reclassification of investments The Company has adjusted its
consolidated balance sheet as at April 30, 2004, and its
consolidated statements of cash flows for the nine months ended
January 31, 2005 and the three and nine months ended January 31,
2004. In February 2005, it was determined that the Company's
previously issued consolidated balance sheet as at April 30, 2004
required an adjustment to reclassify $26,500 of auction rate
securities from cash and cash equivalents to short-term
investments. The auction rate securities were classified as cash
and cash equivalents as a result of the Company's intent to
liquidate them within a 60-day period, however, the original
maturities of the securities exceeded 90 days. The adjustments to
the Company's consolidated balance sheet as at April 30, 2004
resulted in a decrease of cash and cash equivalents of $26,500 and
an increase in short-term investments of $26,500. In addition,
adjustments to the Company's consolidated statement of cash flows
resulted in a decrease of $14,000 in cash from investing activities
for the three months ended January 31, 2004 as a result of net
purchases of the auction rate securities. For the nine months ended
January 31, 2005, cash flows from investing activities increased by
$26,500 as a result of net sales of the auction rate securities
which occurred in the first quarter of fiscal 2005, and for the
nine months ended January 31, 2004, cash from investing activities
decreased by $8,000 as a result of net purchases of these
securities. The ending balance for cash and cash equivalents for
the three and nine months ended January 31, 2004 was reduced by
$28,000 as a result of the reclassification from cash and cash
equivalents to short-term investments. These reclassifications had
no impact on the Company's results of operations, net cash provided
by operating activities, or total current assets. As of August 1,
2004 the Company no longer held any auction rate securities and
ceased investing in these securities given that interest rates
increased on traditional investment vehicles. Accounting policy for
short-term investments Short-term investments consist of auction
rate securities with remaining time to maturity greater than 90
days that are available for sale. The investments are classified in
the balance sheet as current assets because they can be readily
converted into cash or into securities with a shorter remaining
time to maturity and because the Company is not committed to
holding the investments until maturity. The Company determines the
appropriate classification of its investments at the time of
purchase and re-evaluates such designations as of each balance
sheet date. Short-term investments are stated at amounts that
approximate fair market value, based on quoted market prices. 3.
Stock-based compensation Effective May 1, 2003, the Company adopted
the revised recommendations of CICA Handbook Section 3870,
"Stock-Based Compensation and other Stock-Based Payments" ("Section
3870"), which requires that a fair value method of accounting be
applied to all stock-based compensation payments to employees. In
accordance with the transitional provisions of Section 3870, the
Company has prospectively applied the fair value method of
accounting for stock option awards granted and for shares issued
under its Employee Stock Purchase Plan ("ESPP") on or after May 1,
2003, and accordingly, has recorded compensation expense. Prior to
May 1, 2003, the Company accounted for its employee stock options
and shares issued under the ESPP using the settlement method and no
compensation expense was recognized. Since the revised
recommendations were adopted in the fourth quarter of fiscal 2004,
the consolidated statements of earnings for the three and nine
months ended January 31, 2004 have been restated for comparative
purposes to include the charges that would have been included had
the Company adopted the provisions at the beginning of fiscal 2004.
The effect of the change in policy and reclassification on results
for the three months ended January 31, 2004 is an increase in cost
of sales for services of $128, an increase in sales and marketing
expense of $334, an increase in product development expense of $98,
an increase in general and administrative expense of $315, and a
decrease in income tax expense of $238. For the nine months January
31, 2004 the impact is an increase in cost of sales for services of
$213, an increase in sales and marketing expense of $569, an
increase in product development expense of $183, an increase in
general and administrative expense of $516, and a decrease in
income tax expense of $403. For awards granted during the year
ended April 30, 2003, the standard requires the disclosure of pro
forma net earnings and earnings per share information as if the
Company had accounted for employee stock options under the fair
value method. The pro forma effect of awards granted and shares
issued prior to May 1, 2002 has not been included in the pro forma
net earnings and earnings per share information. The pro forma
disclosure relating to options granted during the year ended April
30, 2003 is as follows: Three months ended Nine months ended
January 31, January 31, --------------------- ---------------------
2005 2004 2005 2004 ---------- ---------- ---------- ---------- Net
earnings - as reported $ 29,670 $ 13,755 $ 58,386 $ 33,386 Pro
forma stock-based compensation expense, net of tax (77) (835) (329)
(1,728) ---------- ---------- ---------- ---------- Net earnings -
pro forma $ 29,593 $ 12,920 $ 58,057 $ 31,658 ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Basic net earnings per share - as reported $ 0.35 $ 0.16 $ 0.68 $
0.39 Pro forma stock-based compensation expense per share - (0.01)
- (0.02) ---------- ---------- ---------- ---------- Basic net
earnings per share - pro forma $ 0.35 $ 0.15 $ 0.68 $ 0.37
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- Diluted net earnings per share - as reported
$ 0.34 $ 0.16 $ 0.67 $ 0.39 Pro forma stock-based compensation
expense per share - (0.01) - (0.02) ---------- ----------
---------- ---------- Diluted net earnings per share - pro forma $
0.34 $ 0.15 $ 0.67 $ 0.37 ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- The
estimated fair value of the stock options is amortized to expense
over the vesting period, on a straight-line basis, and was
determined using the Black-Scholes pricing model with the following
weighted average assumptions: Assumptions - Stock Options Weighted
average risk-free interest rate 4.20% Weighted average expected
life (in years) 7.0 Weighted average volatility in the market price
of common shares 71.71% Weighted average dividend yield Nil
Weighted average grant date fair value of options issued $3.16
During the nine months ended January 31, 2005, the Company issued
common stock to employees who participated in the new 2003 Employee
Stock Purchase Plan ("2003 ESPP"). Under the 2003 ESPP, employees
resident in Canada, the United States, the United Kingdom, France
and Australia are entitled to participate with residents of
additional countries to be added over time. The estimated fair
value of common shares issued under the 2003 ESPP was determined
using the Black-Scholes pricing model with the following weighted
average assumptions: Assumptions - ESPP Three months ended Nine
months ended January 31, January 31, ---------------------
--------------------- 2005 2004 2005 2004 ---------- ----------
---------- ---------- Weighted average risk-free interest rate
2.21% 2.70% 2.21% 2.94% Weighted average expected life (in months)
6 3 6 3 Weighted average volatility in the market price of common
shares 37.44% 35.90% 37.44% 32.91% Weighted average dividend yield
Nil Nil Nil Nil Weighted average grant date fair values of awards
or shares issued $2.32 $1.38 $2.52 $1.00 During the three and nine
months ended January 31, 2005, the Company expensed $1,051 and
$2,687, respectively, relating to the fair value of options
granted. For the three and nine months ended January 31, 2004, the
Company expensed $787 and $1,381, respectively relating to the fair
value of options granted. Compensation expense relating to the fair
value of shares issued under the 2003 ESPP was $224 and $484 for
the three and nine months ended January 31, 2005, respectively, and
$6 and $17 for the three and nine months ended January 31, 2004,
respectively. Contributed surplus was credited $3,171 during the
nine months ended January 31, 2005 and $1,398 during the nine
months ended January 31, 2004. These amounts will be credited to
share capital along with the proceeds received on exercise of these
awards. The Company also maintains a Directors' deferred share unit
plan ("DSU"). Under the plan, the Human Resources and Compensation
Committee of the Board, or its designee, may grant deferred share
units to members of the Company's Board of Directors relating to
compensation for the services rendered to the Company as a member
of the Board. As determined by the Company, units issued under the
plan may be payable in cash or common stock. For the three and nine
months ended January 31, 2005, the Company expensed $137 and $361,
respectively, through general and administrative expense relating
to the DSUs. Accrued liabilities were credited $361 for these
awards for the nine months ended January 31, 2005, and will
continue to be adjusted each quarter based on the market value of
the units, which have vested under the plan. 4. Asset retirement
obligations The Company has obligations with respect to the
retirement of leasehold improvements at maturity of facility leases
and the restoration of facilities back to their original condition
at the end of the lease term. For its year ended April 30, 2004,
the Company early adopted the provisions of CICA Handbook Section
3110, "Asset Retirement Obligations" ("Section 3110"). Section 3110
requires that the effect of initially applying the Section be
treated as a change in accounting policy. Accordingly, the
financial statements of prior periods presented for comparative
purposes are restated retroactively. The adoption of Section 3110
results in a charge in the consolidated statement of earnings of
$46 and $128 for the three and nine months ended January 31, 2004,
respectively. The following table details the changes in the
Company's leasehold retirement liability for the nine months ended
January 31, 2005: Asset retirement obligations balance, April 30,
2004 $ 1,648 Additions to the obligations 60 Accretion charges 23
Foreign exchange impact 17 ----------- Asset retirement obligations
balance, July 31, 2004 1,748 Additions to the obligations 321
Accretion charges 33 Amounts released due to settlements (96)
Foreign exchange impact 83 ----------- Asset retirement obligations
balance, October 31, 2004 2,089 Additions to the obligations 13
Accretion charges 23 Amounts released due to settlements (469)
Foreign exchange impact 53 ----------- Asset retirement obligations
balance, January 31, 2005 $ 1,709 ----------- ----------- 5.
Goodwill Changes in the carrying amount of goodwill for the nine
months ended January 31, 2005 are as follows: Goodwill balance,
April 30, 2004 $ 128,366 Goodwill adjustment related to acquisition
amounts (495) Foreign exchange impact 689 ----------- Goodwill
balance, July 31, 2004 128,560 Goodwill adjustment related to
acquisition amounts (6,728) Foreign exchange impact 1,211
----------- Goodwill balance, October 31, 2004 123,043 Goodwill
adjustment related to acquisition amounts (306) Foreign exchange
impact 574 ----------- Goodwill balance, January 31, 2005 $ 123,311
----------- ----------- During the three months ended July 31, 2004
the Company released $495 related to Comshare premises and
severance reserves set-up at acquisition that were no longer
required. During the three months ended October 31, 2004 the
Company reduced goodwill by $5,740 related to an increase in future
tax assets and $663 related to the reversal of Comshare tax related
reserves that are no longer necessary. Additionally, the Company
released $542 in reserves that were deemed to be no longer
required, and reversed $217 in future tax assets, relating to
premises reserves in connection with the Extensity acquisition.
During the three months ended January 31, 2005, the Company sublet
two facilities, one of which was assumed with the acquisition of
Extensity and one that was assumed with the Comshare acquisition.
As a result of these sublease agreements, the Company released the
premises reserves which had been set-up at acquisition and were
deemed to be no longer required. This reduced goodwill by $306. 6.
Credit facility On September 9, 2003 the Company and certain of its
subsidiaries entered into a Loan, Guaranty and Security Agreement
(the "Loan Agreement") with Wells Fargo Foothill, Inc., pursuant to
which the Company and certain of its subsidiaries obtained a
three-year revolving credit facility (the "Facility") with a
$50,000 revolving line of credit, including a $5,000 letter of
credit sub-facility. The interest rate payable on advances under
the Facility is, at the Company's option, the prime rate plus 0.50%
or LIBOR plus 3.00%. The Facility is collateralized by
substantially all of the assets of the Company and certain of its
United States and Canadian subsidiaries and guaranteed by certain
of its United States, Canadian, United Kingdom and Hungarian
subsidiaries. The Facility is available for the working capital
needs and other general corporate purposes of the Company and its
subsidiaries that are parties to the Loan Agreement. As of January
31, 2005, $2,185 of the letter of credit sub-facility has been
utilized, and the remaining $47,815 revolving line of credit is
available and has not been drawn on. The financing costs of $2,828
incurred to close the transaction were recorded as other assets in
the second quarter of fiscal 2004 and are being amortized to
interest expense on a straight-line basis over the term of the
Facility. Amortization related to these financing costs was $236
and $707 the three and nine months ended January 31, 2005,
respectively. For the three months and nine months ended January
31, 2004, amortization related to these financing costs were $237
and $372 respectively. 7. Employee future benefits The Company
recorded employee future benefit expenses as follows: Three months
ended Nine months ended January 31, January 31,
--------------------- --------------------- 2005 2004 2005 2004
---------- ---------- ---------- ---------- Defined contribution
pension plans $ 595 $ 709 $ 1,420 $ 1,216 Defined benefit pension
plan 230 - 675 - ---------- ---------- ---------- ---------- $ 825
$ 709 $ 2,095 $ 1,216 ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- 8. Net restructuring
and other unusual items The reversal in net restructuring and other
unusual items was $735 and $1,755 for the three and nine months
ended January 31, 2005 respectively. For the three and nine months
ended January 31, 2004, the reversal in net restructuring and other
unusual items was $947 and $3,754 respectively. For the three
months ended January 31, 2005, the net restructuring and other
unusual items credit balance of $735 was comprised of releases
related to previously accrued lease termination costs and other
prior acquisition related reserves that are no longer required. For
the three months ended January 31, 2004, the Company recorded a net
reversal of $947 in net restructuring and other unusual items,
which included a reversal of $1,598 of accrued liabilities and
other provisions recorded in prior years which were no longer
required, partially offset by a charge of approximately $69 for
severance related to the restructuring of the Company's business in
North America and a charge of $825 resulting from adjustments to a
lease obligation assumed in the JBA acquisition. In addition, a
pre-tax gain of $243 on the sale of the assets of the NTC Northern
Ontario business was recorded in the third quarter of fiscal 2004.
For the nine months ended January 31, 2005, the Company recorded a
reversal of $1,755, as several restructuring accruals relating to
severance amounts, lease termination costs and other prior
acquisition related reserves were released to adjust the accruals
to match the current estimates of the amounts required. For the
nine months ended January 31, 2004 the Company recorded a net
reversal of $3,754 in net restructuring and other unusual items,
which included a reversal of $4,823 of accrued liabilities and
other provisions recorded in prior years which were no longer
required, partially offset by a charge of $487 for severance
related to the restructuring of the Company's business in North
America and a charge of $825 resulting from adjustments to a lease
obligation assumed in the JBA acquisition. In addition, a pre-tax
gain of $243 on the sale of the assets of the NTC Northern Ontario
business was recorded in the third quarter of fiscal 2004.
Restructuring accrual Activity related to the Company's
restructuring plans, business rationalization, and integration
actions, was as follows: Premises Workforce restructuring
reductions Total ---------- ---------- ---------- ----------
---------- ---------- April 30, 2003 provision balance $ 17,658 $
5,625 $ 23,283 Fiscal year 2004 provision additions 3,101 5,990
9,091 Fiscal year 2004 cash payments (4,860) (8,661) (13,521)
Fiscal year 2004 provision release (3,699) (1,738) (5,437)
---------- ---------- ---------- April 30, 2004 provision balance
12,200 1,216 13,416 First quarter 2005 provision additions 400 865
1,265 First quarter 2005 cash payments (1,467) (1,064) (2,531)
First quarter 2005 provision release (963) (173) (1,136) ----------
---------- ---------- July 31, 2004 provision balance 10,170 844
11,014 Second quarter 2005 provision additions - 931 931 Second
quarter 2005 cash payments (1,038) (1,108) (2,146) Second quarter
2005 provision release (1,194) (35) (1,229) ---------- ----------
---------- October 31, 2004 provision balance 7,938 632 8,570 Third
quarter 2005 provision additions 135 517 652 Third quarter 2005
cash payments (1,816) (263) (2,079) Third quarter 2005 provision
release (640) (19) (659) ---------- ---------- ---------- January
31, 2005 provision balance $ 5,617 $ 867 6,484 ----------
---------- ---------- ---------- Less: Current portion included in
accounts payable and accrued liabilities (3,990) ----------
Long-term portion of restructuring accrual $ 2,494 ----------
---------- During the quarter ended January 31, 2005, the Company
accrued $517 in severance costs related to the rationalization of
the Company's European business locations. For the nine months
ended January 31, 2005, the Company accrued a total of $2,313 in
severance and $535 in lease termination costs that related to the
rationalization of the Company's North American and European
business locations. As at January 31, 2005, the Company has a
balance of $5,617 related to accrued premises restructuring cost.
Of this amount, approximately $575 is related to the acquisition of
Comshare and a balance of $2,388 remains related to the acquisition
of Extensity. The Company anticipates that the remainder of these
balances will be utilized through fiscal 2009. As at January 31,
2005, a balance of $867 is remaining for severance, of which the
remainder will substantially be paid by the end of the fourth
quarter of 2005, and will include employees from the support and
services, development and sales and marketing areas. 9. Commitments
and contingencies Customer indemnifications The Company has entered
into license agreements with customers that include limited
intellectual property indemnification clauses. The Company
generally agrees to indemnify its customers against legal claims
that its software products infringe certain third-party
intellectual property rights. In the event of such a claim, the
Company is generally obligated to defend its customer against the
claim and either to settle the claim at the Company's expense or
pay damages that the customer is legally required to pay to the
third-party claimant. The Company has not made any significant
indemnification payments and has not accrued any amounts in
relation to these indemnification clauses. Litigation, Assessments
and Claims Activity related to the Company's legal accruals was as
follows: April 30, 2003 provision balance $ 3,844 Fiscal year 2004
provision additions 3,587 Fiscal year 2004 cash payments (3,125)
Fiscal year 2004 provision release (109) ---------- April 30, 2004
provision balance 4,197 First quarter 2005 provision additions 284
First quarter 2005 cash payments (2,067) ---------- July 31, 2004
provision balance 2,414 Second quarter 2005 provision additions 162
Second quarter 2005 cash payments (2,072) Second quarter 2005
provision release (58) ---------- October 31, 2004 provision
balance 446 Third quarter 2005 provision additions 11 Third quarter
2005 cash payments (457) ---------- January 31, 2005 provision
balance $ - ---------- ---------- Extensity, a company acquired by
Geac in March 2003, is subject to a class action suit, which
alleges that Extensity, certain of its former officers and
directors, and the underwriters of its initial public offering in
January 2000 violated U.S. securities laws by not adequately
disclosing the compensation paid to such underwriters. The class
action suit has been consolidated with a number of similar class
action suits brought against other issuers and underwriters
involved in initial public offerings. The plaintiffs seek an
unspecified amount of damages. The plaintiffs and issuer parties
have entered into a settlement agreement to settle all claims,
which will be funded by the issuers' insurers. On February 15,
2005, the Court issued an opinion granting preliminary approval of
the settlement. In addition, from time to time, Geac is subject to
other legal proceedings, assessments and claims in the ordinary
course of business. At this time, in the opinion of management,
none of these matters is reasonably expected to result in a
material adverse effect on Geac's financial position. 10. Income
taxes During the quarter ended January 31, 2005, the Company
realized a benefit from income taxes of $7,440. The total benefit
was comprised of a $13,870 release as a result of income tax
provisions established in prior periods that were deemed to be no
longer required, offset by $6,430 of income tax expense. The
$13,870 net release was comprised of the net release of income tax
provisions established in prior periods in the aggregate amount of
$22,060, offset by the establishment of $8,190 in new income tax
provisions. 11. Segmented information The Company reports segmented
information according to CICA 1701, "Segment Disclosures." This
standard requires segmentation based on the way management
organizes segments for monitoring performance. The Company operates
the following business segments, which have been segregated based
on product offerings, reflecting the way that management organizes
the segments within the business for making operating decisions and
assessing performance. Enterprise Applications Systems (EAS) offer
software solutions, which include cross-industry enterprise
business applications for financial administration and human
resource functions, and enterprise resource planning applications
for manufacturing, distribution, and supply chain management.
Industry-Specific Applications (ISA) products include applications
for the real estate, construction, banking, hospitality and
publishing marketplaces, as well as a range of applications for
libraries and public safety administration. There are no
significant inter-segment revenues. Segment assets consist of
working capital items, excluding cash and cash equivalents. Cash
and cash equivalents are considered to be corporate assets.
Property, plant and equipment are typically shared by operating
segments and those assets are managed by geographic region, rather
than through the operating segments. For the nine months ended
January 31, 2005, included in segment contribution are additional
corporate expenses, which have been reallocated to the Company's
segments to provide a more accurate portrayal of segment
contribution. The additional corporate expenses of $672 and $148
have been allocated to the EAS business and ISA business,
respectively. During the year ended April 30, 2004, the Company
determined that given the nature of the products offered in its
local government product line, the inclusion of the local
government business in the EAS segment was no longer appropriate.
As a result, the local government business has been reclassified
from EAS to ISA. For comparison purposes, the Company has
reclassified revenue, contribution margin and segment assets
relating to this business in its comparatives. The impact on
revenue for the three and nine months ended January 31, 2004 was a
reclassification of approximately $3,213 and $9,383 respectively
from the EAS to the ISA business. For the three and nine months
ended January 31, 2004, segmented contribution for the ISA business
was reduced by $13 and was increased by $958 on a net basis as a
result of the local government reclassification and to reclassify
costs that were determined to be related to the ISA business.
Additionally, expenses of $358 and $499 for the three and nine
months ended January 31, 2004, respectively, were reclassified to
Corporate expenses from the EAS business to more accurately portray
segment contribution. Three months ended Nine months ended January
31, 2005 January 31, 2005 -----------------------------
----------------------------- EAS ISA Total EAS ISA Total ---------
--------- --------- --------- --------- --------- Revenue: Software
$ 15,927 $ 2,284 $ 18,211 $ 41,402 $ 7,368 $ 48,770 Support and
services 70,837 19,759 90,596 209,379 59,577 268,956 Hardware 4,076
1,007 5,083 7,261 2,201 9,462 --------- --------- ---------
--------- --------- --------- Total revenue $ 90,840 $ 23,050
$113,890 $258,042 $ 69,146 $327,188 --------- --------- ---------
--------- --------- --------- --------- --------- ---------
--------- --------- --------- Segment contribution $ 23,684 $ 3,571
$ 27,255 $ 68,881 $ 11,151 $ 80,032 Three months ended Nine months
ended January 31, 2004 January 31, 2004
----------------------------- ----------------------------- EAS ISA
Total EAS ISA Total --------- --------- --------- ---------
--------- --------- Revenue: Software $ 16,265 $ 2,407 $ 18,672 $
39,450 $ 7,353 $ 46,803 Support and services 69,838 19,753 89,591
201,310 60,192 261,502 Hardware 7,090 822 7,912 17,974 2,888 20,862
--------- --------- --------- --------- --------- --------- Total
revenue $ 93,193 $ 22,982 $116,175 $258,734 $ 70,433 $329,167
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- Segment
contribution $ 20,484 $ 3,415 $ 23,899 $ 53,306 $ 6,607 $ 59,913
Reconciliation of segment contribution to earnings from operations
before income taxes: Three months ended Nine months ended January
31, January 31, --------------------- --------------------- 2005
2004 2005 2004 ---------- ---------- ---------- ---------- Segment
contribution $ 27,255 $ 23,899 $ 80,032 $ 59,913 Corporate expenses
(4,172) (4,231) (12,423) (10,457) Amortization of intangible assets
(2,312) (2,332) (6,848) (5,363) Interest income, net 454 (105) 873
57 Other income (expense), net 270 (1,006) 482 (1,764) Net
restructuring and other unusual items 735 947 1,755 3,754
---------- ---------- ---------- ---------- Earnings from
operations before income taxes $ 22,230 $ 17,172 $ 63,871 $ 46,140
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- Geographical information: Three months ended
Nine months ended January 31, January 31, ---------------------
--------------------- 2005 2004 2005 2004 ---------- ----------
---------- ---------- Revenue by geographic location: Americas $
54,268 $ 56,127 $ 165,264 $ 166,875 Europe 51,630 51,995 136,588
137,691 Asia 7,992 8,053 25,336 24,601 ---------- ----------
---------- ---------- Total revenue $ 113,890 $ 116,175 $ 327,188 $
329,167 ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- 12. United States generally
accepted accounting principles The consolidated financial
statements of the Company have been prepared in accordance with
Canadian GAAP; however the Company's accounting policies, as
reflected in these consolidated financial statements, do not
materially differ from U.S. GAAP except as follows: Three months
ended Nine months ended January 31, January 31,
--------------------- --------------------- 2005 2004 2005 2004
---------- ---------- ---------- ---------- Net earnings under
Canadian GAAP as reported $ 29,670 $ 13,755 $ 58,386 $ 33,386
Adjustments: Stock-based compensation(a) (14) (32) (40) (177) Write
off and amortization of intellectual property capitalized under
Canadian GAAP in connection with the Comshare acquisition(b) 75 75
225 (1,383) Asset retirement obligation(c) - 46 - 126 Income
taxes(d) (30) (30) (90) (40) ---------- ---------- ----------
---------- Net earnings under U.S. GAAP 29,701 13,814 58,481 31,912
Other comprehensive income: Foreign currency translation adjustment
1,583 (64) 4,591 (1,883) ---------- ---------- ----------
---------- Comprehensive income under U.S. GAAP $ 31,284 $ 13,750 $
63,072 $ 30,029 ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- Net earnings per share
under U.S. GAAP: Basic net earnings per common share $ 0.35 $ 0.16
$ 0.69 $ 0.38 ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- Diluted net earnings
per common share $ 0.34 $ 0.16 $ 0.67 $ 0.37 ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Weighted average number of common shares used in computing basic
net earnings per share ('000s) 85,684 84,830 85,318 84,523
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- Weighted average number of common shares used
in computing diluted net earnings per share ('000s) 87,874 86,389
87,462 85,763 ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- a) Stock-based
compensation Accounting for stock options The Company has
prospectively adopted the new Canadian GAAP recommendations, which
require that a fair value method of accounting be applied to all
stock-based compensation awards granted to employees granted on or
after May 1, 2003. For U.S. GAAP reporting, the Company also
adopted the fair value method of accounting prospectively for all
awards granted on or after May 1, 2003. Therefore, there is no GAAP
difference for stock-based compensation and awards granted in
fiscal year 2004, and thereafter. In fiscal year 2003, the Company
did not expense any compensation cost under Canadian GAAP. For U.S.
GAAP, the Company elected to measure compensation cost based on the
difference, if any, on the date of the grant, between the market
value of the Company's shares and the exercise price (referred to
as the "intrinsic value method") over the vesting period. As a
result, the Company has recorded stock compensation charges under
U.S. GAAP for fiscal years 2003 and 2004, and will have additional
charges in 2005, 2006 and 2007 for stock-based compensation and
awards granted in fiscal year 2003. Prior to fiscal year 2003, the
Company expensed stock-based compensation under U.S. GAAP as a
result of the issuance of stock options with an exercise price
below market value. Pro forma disclosures For awards granted prior
to May 1, 2003, U.S. GAAP requires the disclosure of pro forma net
earnings and earnings per share information for all outstanding
awards as if the Company had accounted for employee stock options
under the fair value method. The following table presents net
earnings and earnings per share information following U.S. GAAP for
purposes of pro forma disclosures: Three months ended Nine months
ended January 31, January 31, ---------------------
--------------------- 2005 2004 2005 2004 ---------- ----------
---------- ---------- Net earnings under U.S. GAAP - as reported
above $ 29,701 $ 13,814 $ 58,481 $ 31,912 Pro forma stock-based
compensation expense, net of tax (201) (935) (771) (3,009)
---------- ---------- ---------- ---------- Net earnings - pro
forma $ 29,500 $ 12,879 $ 57,710 $ 28,903 ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Basic net earnings per share under U.S. GAAP - as reported above $
0.35 $ 0.16 $ 0.69 $ 0.38 Pro forma stock-based compensation
expense per share - (0.01) (0.01) (0.04) ---------- ----------
---------- ---------- Basic net earnings per share - pro forma $
0.35 $ 0.15 $ 0.68 $ 0.34 ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- Diluted net
earnings per share under U.S. GAAP - as reported above $ 0.34 $
0.16 $ 0.67 $ 0.37 Pro forma stock-based compensation expense per
share - (0.01) (0.01) (0.03) ---------- ---------- ----------
---------- Diluted net earnings per share - pro forma $ 0.34 $ 0.15
$ 0.66 $ 0.34 ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- Fair values The fair
values of awards granted were estimated using the Black-Scholes
option-pricing model. The Black-Scholes model was developed to
estimate the fair value of traded options and awards, which have no
vesting restrictions, and are fully transferable. The Black-Scholes
model requires the input of highly subjective assumptions including
the expected stock price volatility and expected time until
exercise. Because the Company's employee stock options and stock
awards have characteristics significantly different from those of
traded options and awards, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, existing models, including the Black-Scholes
model, do not necessarily provide a reliable single measure of the
fair value of its employee stock options and stock awards. b)
Intangible assets In connection with the acquisition of Comshare on
August 6, 2003, in-process research and development was acquired
and capitalized under Canadian GAAP. Under U.S. GAAP, such
in-process research and development is charged to expense at the
acquisition date. As a result, under U.S. GAAP, the carrying value
of the Company's intangible assets on the consolidated balance
sheet would be $24,961 (April 30, 2004 - $31,320) and the value of
the Company's long-term future income tax assets would be $21,097
(April 30, 2004 - $22,264). c) Asset retirement obligation Under
U.S. GAAP, the Company adopted a new accounting standard dealing
with accounting for asset retirement obligations during the year
ended April 30, 2004. This new accounting standard addresses the
financial accounting and reporting for legal obligations associated
with the retirement of tangible long-lived assets and associated
retirement costs and is relatively consistent with Canadian
requirements, which the Company adopted under Canadian GAAP (see
note 4). The main difference between the two standards is the
method of adoption. U.S. GAAP requires that the adoption be treated
as a cumulative effect of an accounting change in fiscal 2004,
whereas Canadian GAAP allows the financial statements of prior
periods to be restated retroactively. The adoption of the standard
for U.S. GAAP resulted in the cumulative effect of an accounting
change of $736 being charged against earnings during the year
ending April 30, 2004 and the reversal of charges under Canadian
GAAP of $46 and $126 charged against earnings for the three and
nine months ended January 31, 2005, respectively. d) Income taxes
Included in "Income taxes" is the tax effect of the adjustments
related to intangible assets. e) Goodwill Although the new Canadian
GAAP section for Income Taxes is substantially harmonized with U.S.
GAAP, it was applied prospectively and goodwill was not adjusted,
resulting in differing carrying values of goodwill under Canadian
and U.S. GAAP. Under U.S. GAAP, the carrying value of goodwill on
the consolidated balance sheet would be $106,027 (April 30, 2004 -
$111,235). f) Related party transactions Accounts receivable and
other receivables as at January 31, 2005 and April 30, 2004
included $254 for a loan due from a former officer of the Company
in connection with a compensatory arrangement relating to his
employment with the Company. The proceeds from the loan were used
by the former officer to purchase 250,625 common shares of the
Company, which are currently held as collateral. Under Canadian
GAAP, the loan is classified as an other receivable. However, under
U.S. GAAP, the loan is classified as a reduction of shareholders'
equity. As a result, in accordance with U.S. GAAP, current and
total assets and shareholders' equity would be reduced by $254. 13.
Recent accounting pronouncements Canadian GAAP Financial
Instruments, Comprehensive Income, Hedges On January 27, 2005, the
Accounting Standards Board issued Canadian Institute of Chartered
Accountants ("CICA") handbook section 1530 Comprehensive Income
("Section 1530"), handbook Section 3855 Financial Instruments -
Recognition and Measurement ("Section 3855") and handbook section
3865 Hedges ("Section 3865"). Section 3855 expands on CICA handbook
section 3860 Financial Instruments- Disclosure and Presentation by
prescribing when a financial instrument is to be recognized on the
balance sheet and at what amount. It also specifies how instrument
gains and losses are to be presented. Section 3865, Hedges, is
optional. It provides alternative treatments to Section 3855 for
entities that choose to designate qualifying transactions as hedges
for accounting purposes and specifies how hedge accounting is
applied and what disclosures are necessary when it is applied.
Section 1530 introduced a new requirement to temporarily present
certain gains and losses outside net income in a new component of
shareholders' equity entitled Comprehensive Income. These standards
are substantially harmonized with U.S. GAAP and are effective for
the Company beginning May 1, 2007. The Company is currently
evaluating the impact of these standards on its consolidated
financial position, results of operations and cash flows. U.S. GAAP
Share-Based Payment In December 2004, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 123 (revised 2004), "Share-Based Payment"
("SFAS 123R"), which replaces SFAS No. 123, "Accounting for
Stock-Based Compensation," ("SFAS 123") and supercedes APB Opinion
No. 25, "Accounting for Stock Issued to Employees". SFAS 123R
requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the financial
statements based on their fair values beginning with the first
interim or annual period after June 15, 2005, with early adoption
encouraged. The pro forma disclosures previously permitted under
SFAS 123 no longer will be an alternative to financial statement
recognition. The Company adopted the fair value method of
accounting for all stock-based compensation awards to both
employees and non-employees granted on or after May 1, 2003. All
stock-based compensation related to awards granted prior to April
30, 2003 is included in the pro forma disclosures above. Under SFAS
123R, the Company must utilize one of the transition methods
required by the standard to record the fair value of stock-based
compensation related to these awards. The transition methods
include prospective and retroactive adoption options. Under the
retroactive option, prior periods may be restated either as of the
beginning of the year of adoption or for all periods presented. The
prospective method requires that compensation expense be recorded
for all unvested stock options and restricted stock at the
beginning of the first quarter of adoption of SFAS 123R, while the
retroactive methods would record compensation expense for all
unvested stock options and restricted stock beginning with the
first period restated. The provision of SFAS 123R are required to
be adopted by the Company in the second quarter of fiscal 2006,
beginning August 1, 2005 utilizing one of the two methods of
adoption provided by the standard. The Company is currently
evaluating the requirements of SFAS 123R and expects that the
adoption of SFAS 123R will have a material impact on its
consolidated results of operations and earnings per share.
Exchanges of Nonmonetary Assets In December 2004, the FASB issued
SFAS No. 153, "Exchanges of Nonmonetary Assets--An Amendment of
Accounting Principles Board Opinion No. 29, Accounting for
Nonmonetary Transactions" ("SFAS 153"). SFAS 153 eliminates the
exception from fair value measurement for nonmonetary exchanges of
similar productive assets in paragraph 21(b) of APB Opinion No. 29,
"Accounting for Nonmonetary Transactions," and replaces it with an
exception for exchanges that do not have commercial substance. SFAS
153 specifies that a nonmonetary exchange has commercial substance
if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is effective
for fiscal periods beginning after June 15, 2005 and is required to
be adopted by the Company in the second quarter of fiscal 2006,
beginning on August 1, 2005. The Company does not believe adoption
of Statement 153 will have a material effect on its consolidated
financial position, results of operations or cash flows. 14.
Reclassification of comparative figures Certain prior year's
comparative figures in the accompanying interim financial
statements have been reclassified to conform to the current year's
presentation. DATASOURCE: Geac Computer Corporation Limited
CONTACT: Financial Contact: Donna de Winter, Chief Financial
Officer, Geac, (905) 475-0525 ext. 3204, ; Investor and Media
Contact: Alys Scott, Vice President, Corporate Communications,
Geac, (508) 871-5064,
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