DataMirror Corporation
CONSOLIDATED BALANCE SHEETS
(Thousands of CDN$ - unaudited)
| | October 31, | | January 31, |
| | 2004 | | 2004 |
| | | | (restated - |
| | | | Note 2) |
| ASSETS | | | |
| CURRENT ASSETS | | | |
| Cash and cash equivalents | $ 6,020 | | $ 9,286 |
| Short-term investments | 50,125 | | 32,720 |
| Accounts receivable | 8,327 | | 11,797 |
| Prepaid expenses | 1,832 | | 1,803 |
| Future income taxes | 2,820 | | 2,540 |
| | 69,124 | | 58,146 |
| CAPITAL ASSETS | 3,596 | | 3,845 |
| INVESTMENT TAX CREDITS RECOVERABLE | 0 | | 1,019 |
| INVESTMENT | 0 | | 12,185 |
| INTANGIBLES | 3,611 | | 5,853 |
| GOODWILL | 5,175 | | 5,175 |
| | $81,506 | | $86,223 |
| | | | |
| LIABILITIES | | | |
| CURRENT LIABILITIES | | | |
| Accounts payable and accrued liabilities | $ 3,292 | | $ 5,544 |
| Deferred revenue | 19,012 | | 18,839 |
| Income taxes payable | 725 | | 1,785 |
| Current portion of capital lease obligations | 0 | | 32 |
| | 23,029 | | 26,200 |
| FUTURE INCOME TAXES | 286 | | 1,076 |
| | 23,315 | | 27,276 |
| | | | |
| SHAREHOLDERS' EQUITY | | | |
| Share capital | | | |
| Common shares (October 31, 2004 - 10,772,490 | | | |
| January 31, 2004 - 11,364,952) | 61,549 | | 64,625 |
| Deficit | (3,971) | | (5,978) |
| Contributed surplus | 1,111 | | 798 |
| Cumulative translation adjustment | (498) | | (498) |
| | 58,191 | | 58,947 |
| | $81,506 | | $86,223 |
See accompanying notes
On behalf of the board:
Nigel Stokes Donald Lenz
Director Director
| DataMirror 2005 Quarterly Report | 10 | |
DataMirror Corporation
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of CDN$, except per share data - unaudited)
| | | Three Months Ended | | Nine months Ended |
| | | October 31, | | October 31, |
| | | 2004 | | 2003 | | 2004 | | 2003 |
| REVENUE | | | | | | | | |
| Licence | $ | 5,476 | $ | 8,474 | $15,901 | $20,424 |
| Maintenance | | 6,465 | | 6,258 | | 19,945 | 19,094 |
| Services | | 1,135 | | 1,345 | | 3,656 | | 4,119 |
| | | 13,076 | | 16,077 | | 39,502 | | 43,637 |
| COST OF REVENUE | | | | | | | | |
| Licence | | 59 | | 59 | | 187 | | 166 |
| Maintenance and services | | 2,645 | | 2,960 | | 8,847 | | 8,348 |
| | | 2,704 | | 3,019 | | 9,034 | | 8,514 |
| GROSS MARGIN | | 10,372 | | 13,058 | | 30,468 | | 35,123 |
| OPERATING EXPENSES | | | | | | | | |
| Selling and marketing | | 4,609 | | 5,412 | | 15,435 | 14,835 |
| Research and development | | 2,564 | | 2,372 | | 7,861 | | 7,268 |
| General and administration | | 2,089 | | 1,953 | | 6,281 | | 5,796 |
| Stock-based compensation | | 98 | | 157 | | 313 | | 321 |
| Amortization of intangibles | | 710 | | 768 | | 2,242 | | 2,304 |
| | | 10,070 | | 10,662 | | 32,132 | | 30,524 |
| OPERATING INCOME (LOSS) | | 302 | | 2,396 | | (1,664) | | 4,599 |
| INVESTMENT INCOME, NET | | 286 | | 243 | | 745 | | 846 |
| GAIN ON SALE OF INVESTMENT IN IDION | | 0 | | 0 | | 7,611 | | 0 |
| OTHER INCOME | | 0 | | 0 | | 0 | | 279 |
| INCOME BEFORE INCOME TAXES | | 588 | | 2,639 | | 6,692 | | 5,724 |
| INCOME TAX EXPENSE | | 280 | | 925 | | 1,157 | | 1,893 |
| NET INCOME | $ | 308 | $ | 1,714 | $ | 5,535 | $ | 3,831 |
| | | | | | | | | |
| EARNINGS PER SHARE | | | | | | | | |
| Basic | $ | 0.03 | $ | 0.15 | $ | 0.50 | $ | 0.34 |
| Diluted | $ | 0.03 | $ | 0.15 | $ | 0.49 | $ | 0.33 |
| | | | | | | | | |
| WEIGHTED AVERAGE NUMBER OF | | | | | | | | |
| SHARES OUTSTANDING (000'S) | | | | | | | | |
| Basic | 10,917 | 11,319 | | 11,159 | 11,393 |
| Diluted | 10,980 | 11,560 | | 11,349 | 11,609 |
See accompanying notes
DataMirror Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of CDN$ - unaudited)
| | Three Months Ended | | Nine months Ended |
| | October 31, | | October 31, |
| | 2004 | | 2003 | | 2004 | | 2003 |
| CASH PROVIDED BY (USED IN) | | | | | | | |
| OPERATING ACTIVITIES | | | | | | | |
| Net income | $ 308 | $ | 1,714 | $ | 5,535 | $ | 3,831 |
| Add (deduct) items not affecting cash: | | | | | | | |
| Amortization of capital assets | 296 | | 345 | | 894 | | 1,025 |
| Amortization of intangibles | 710 | | 768 | | 2,242 | | 2,304 |
| Stock-based compensation | 98 | | 157 | | 313 | | 321 |
| Gain on investment in Idion | 0 | | 0 | | (7,611) | | 0 |
| Other income | 0 | | 0 | | 0 | | (279) |
| Future income taxes | (602) | | (145) | | (1,070) | | (497) |
| Investment tax credit | 188 | | 7 | | 1,019 | | 448 |
| Non-cash operating expense | 0 | | 0 | | 0 | | 32 |
| | 998 | | 2,846 | | 1,322 | | 7,185 |
| Changes in non-cash working capital balances | 689 | | (1,711) | | 303 | | (1,307) |
| | 1,687 | | 1,135 | | 1,625 | | 5,878 |
| INVESTING ACTIVITIES | | | | | | | |
| Capital asset additions | (257) | | (276) | | (645) | | (798) |
| Purchase of short-term investments | (50,125) | | (32,720) | | (50,125) | | (32,720) |
| Sale of short-term investments | 0 | | 0 | | 32,720 | | 25,802 |
| Sale of investment in Idion | 0 | | 0 | | 19,891 | | 0 |
| Investment in Idion | 0 | | (2,036) | | (96) | | (2,085) |
| Acquisition of technology | 0 | | 0 | | 0 | | (30) |
| Other income | 0 | | 0 | | 0 | | 279 |
| | (50,382) | | (35,032) | | 1,745 | | (9,552) |
| FINANCING ACTIVITIES | | | | | | | |
| Capital lease payments | 0 | | (16) | | (32) | | (80) |
| Issuance of share capital | 109 | | 556 | | 787 | | 936 |
| Repurchase of share capital | (2,223) | | (1,525) | | (7,391) | | (3,744) |
| | (2,114) | | (985) | | (6,636) | | (2,888) |
| DECREASE IN CASH AND CASH EQUIVALENTS | (50,809) | | (34,882) | | (3,266) | | (6,562) |
| CASH AND CASH EQUIVALENTS | | | | | | | |
| Beginning of period | 56,829 | | 41,345 | | 9,286 | | 13,025 |
| End of period | $ 6,020 | $ | 6,463 | $ | 6,020 | $ | 6,463 |
See accompanying notes
| DataMirror 2005 Quarterly Report | 12 | |
DataMirror Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and nine months ended October 31, 2004
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles, consistent with those used and described in the Company's audited consolidated financial statements and notes for the year ended January 31, 2004. These unaudited condensed notes to the interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report for the year ended January 31, 2004.
2. NEW ACCOUNTING PRONOUNCEMENTS
In November 2003, the Canadian Institute of Chartered Accountants ("CICA") made changes to Section 3870, "Stock-based Compensation and Other Stock-based Payments", of the CICA handbook requiring equity instruments awarded to employees to be measured and expensed using the fair value method. The main impact for the Company will be to record compensation expense relating to the award of stock options to employees that the Company had previously chosen to disclose.
The Company has adopted these changes effective February 1, 2004, on a retroactive basis with restatement of prior periods. This change resulted in a decrease to net income of $157,000 for the three months and $321,000 for the nine months ended October 31, 2003, an increase to deficit and contributed surplus of $286,000 as at January 31, 2003, and an increase to deficit and contributed surplus of $798,000 as at January 31, 2004.
3. INVESTMENT
Investments are comprised of the Company's investment in Idion Technology Holdings Limited ("Idion"), a South African company listed on the Johannesburg Stock Exchange.
On March 18, 2002, the Company announced its intention to make a take-over bid for all of the shares of Idion in a cash bid valued at $9,800,000. On April 18, 2002, the bid was increased to $18,900,000, and subsequently, on May 8, 2002, the bid was further increased to $30,400,000. On July 4, 2002, the Company closed its bid to acquire Idion, having not been successful in completing the take-over.
The investment in Idion had been accounted for at cost, as the Company did not have significant influence over the affairs of Idion and was not able to obtain adequate financial information from Idion to enable it to account for its investment using the equity method.
On May 14, 2004, the Company was successful in selling its investment in Idion for total net proceeds of approximately $19,891,000, resulting in a gain of $7,611,000.
4. SEGMENTED INFORMATION
The Company operates in only one industry, that being the business of developing and marketing computer software products. The Company has two reportable segments, North America, which includes the Company's Asia Pacific operations, and Europe, based on the geographic location of its operations. The accounting policies followed by these segments are the same as those described in the summary of significant accounting policies in the Company's audited consolidated financial statements for the year ended January 31, 2004. The Company accounts for inter-segment sales at fair value.
The Company's reportable segments are strategic business units. They are managed separately because each reportable segment operates in different economic marketplaces and therefore requires different investing and marketing strategies. The Company evaluates segment performance based on profit or loss from operations before investment income and income taxes.
DataMirror Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and nine months ended October 31, 2004
(unaudited)
The following table presents certain information with respect to the reportable segments described above:
| Three months ended October 31, | | 2004 | | 2003 |
| | | | | |
| REVENUE | | | | |
| North American customers | $ | 8,681 | $ | 10,823 |
| Inter-segment | | 1,098 | | 1,388 |
| | | 9,779 | | 12,211 |
| European customers | | 4,395 | | 5,254 |
| Elimination of inter-segment revenue | | (1,098) | | (1,388) |
| | $ | 13,076 | $ | 16,077 |
| | | | | |
| OPERATING INCOME (LOSS) | | | | |
| North America | $ | (152) | $ | 1,564 |
| Europe | | 454 | | 832 |
| | $ | 302 | $ | 2,396 |
| | | | | |
| AMORTIZATION | | | | |
| North America | $ | 956 | $ | 1,065 |
| Europe | | 50 | | 48 |
| | $ | 1,006 | $ | 1,113 |
| | | | | |
| CAPITAL ASSET ADDITIONS | | | | |
| North America | $ | 255 | $ | 272 |
| Europe | | 2 | | 4 |
| | $ | 257 | $ | 276 |
| | | | | |
| | | | | |
| | | | | |
| Nine months ended October 31, | | 2004 | | 2003 |
| | | | | |
| REVENUE | | | | |
| North American customers | $ | 26,030 | $ | 29,574 |
| Inter-segment | | 3,199 | | 3,565 |
| | | 29,229 | | 33,139 |
| European customers | | 13,472 | | 14,063 |
| Elimination of inter-segment revenue | | (3,199) | | (3,565) |
| | $ | 39,502 | $ | 43,637 |
| | | | | |
| OPERATING INCOME (LOSS) | | | | |
| North America | $ | (2,250) | $ | 2,902 |
| Europe | | 586 | | 1,697 |
| | $ | (1,664) | $ | 4,599 |
| | | | | |
| AMORTIZATION | | | | |
| North America | $ | 2,976 | $ | 3,113 |
| Europe | | 160 | | 216 |
| | $ | 3,136 | $ | 3,329 |
| | | | | |
| CAPITAL ASSET ADDITIONS | | | | |
| North America | $ | 607 | $ | 756 |
| Europe | | 38 | | 42 |
| | $ | 645 | $ | 798 |
| DataMirror 2005 Quarterly Report | 14 | |
DataMirror Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and nine months ended October 31, 2004
(unaudited)
| As at October 31, | 2004 | | 2003 |
| | | | |
| IDENTIFIABLE ASSETS | | | |
| North America | $63,223 | | $61,632 |
| Europe | 9,497 | | 8,396 |
| | 72,720 | | 70,028 |
| Intangibles | 3,611 | | 5,082 |
| Goodwill | 5,175 | | 3,118 |
| | $81,506 | | $78,228 |
Summaries of revenue, segmented according to the customers' country of residence, and of capital and intangible assets, segmented according to the country in which the assets are located, are as follows:
| Three months ended October 31, | | 2004 | | 2003 |
| | | | | |
| REVENUE | | | | |
| Canada | $ | 722 | $ | 684 |
| United States | | 7,275 | | 9,368 |
| United Kingdom | | 2,073 | | 2,691 |
| Germany | | 1,108 | | 1,381 |
| Other | | 1,898 | | 1,953 |
| | $ | 13,076 | $ | 16,077 |
| | | | | |
| As at October 31, | | 2004 | | 2003 |
| | | | | |
| CAPITAL ASSETS, INTANGIBLE ASSETS, AND GOODWILL | | | | |
| Canada | $ | 9,206 | $ | 8,593 |
| Germany | | 2,712 | | 2,680 |
| Other | | 464 | | 631 |
| | $ | 12,382 | $ | 11,904 |
| | | | | |
| Nine months ended October 31, | | 2004 | | 2003 |
| | | | | |
| REVENUE | | | | |
| Canada | $ | 2,718 | $ | 3,570 |
| United States | 21,163 | | 23,501 |
| United Kingdom | | 6,541 | | 7,079 |
| Germany | | 3,054 | | 3,668 |
| Other | | 6,026 | | 5,819 |
| | $ | 39,502 | $ | 43,637 |
DataMirror (Nasdaq: DMCX; TSX: DMC ), a leading provider of information integration software solutions, improves the integrity and reliability of information across all of the systems that create and store data. DataMirror's flexible and affordable integration solutions allow customers to easily and continuously detect, translate and communicate all information changes throughout the enterprise. DataMirror helps customers make better decisions by giving their employees the continuous, accurate information they need.
Over 1,900 companies have gained tangible business benefits from DataMirror software, including Debenhams, FedEx Ground, First American Bank, OshKosh B'Gosh, Priority Health, Tiffany & Co., and Union Pacific Railroad. DataMirror is headquartered in Markham, Canada, and has offices around the globe. For more information, visit www.datamirror.com.
North America 1 800 362 5955
UK + 44 (0) 20 7633 5200
France + 33 (0) 1 72 75 73 40
Germany + 49 6151 8275 0
Hong Kong + 852 2111 5516
www.datamirror.com
