Exhibit 99.2
(GEAC LOGO)
GEAC ANNOUNCES FISCAL YEAR 2004 THIRD QUARTER RESULTS
THIRD QUARTER EARNINGS OF $0.17 PER SHARE
SOFTWARE LICENSE REVENUE RISES APPROXIMATELY 50% PERCENT YEAR OVER YEAR
REVENUE INCREASES BY NEARLY $14 MILLION OVER SAME QUARTER LAST YEAR
MARKHAM, ONTARIO - March 4, 2004 - Geac Computer Corporation Limited (TSX: GAC
and NASDAQ: GEAC), a global enterprise software company for Business Performance
Management, today announced its third quarter financial results for the quarter
ending January 31, 2004.
THIRD QUARTER FINANCIAL REVIEW
All references to dollars are to U.S. dollars unless otherwise noted.
Geac reported revenue in the third quarter of fiscal year 2004 of $116.2
million, an increase of $13.6 million compared to $102.6 million in revenue in
the third quarter of fiscal year 2003, and an increase of $4.7 million compared
to $111.5 million in the second quarter of this year. The Company's net income
was $14.4 million, or $0.17 per diluted share, compared with net income of $12.0
million, or $0.15 per diluted share in the third quarter of last year. Net
income in the third quarter of fiscal year 2004 increased by $3.7 million from
$10.7 million, or $0.13 per diluted share, in the second quarter of this year.
The gross profit margin increased to 60.5% of revenue from 59.2% in the third
quarter of fiscal year 2003.
"With evidence of organic growth in three existing product lines and with
initial sales of the Performance Management products acquired in the Comshare
and Extensity transactions into our existing Geac customer base, Geac has
surpassed its short-term goal of increasing license sales year over year with a
substantial increase in new licenses sales of nearly 50% to $18.7 million. In
this quarter, license sales accounted for 16.1% of total revenue," said Charles
S. Jones, President and CEO of Geac. "We have remained diligently focused on
integrating and selling our newest product lines, on streamlining costs
throughout the organization and on delivering competitive products to our
customers through pricing and deployment alternatives. These efforts and the
commitment and ability of the management team to execute have resulted in the
best net income for Geac that we have achieved in our last nine consecutive
quarters."
With the completion of the Comshare and Extensity acquisitions, operating
expenses were $51.1 million in the third quarter of fiscal year 2004, compared
to $42.5 million in the third quarter of 2003. While this represents a 20.3%
increase in operating costs year over year,
operating costs as a percentage of revenue increased by only 2.6% in the third
quarter of fiscal year 2004 as compared to the same period in 2003. The Company
remains committed to maintaining cost control initiatives and to identifying
avenues of efficiency maximization throughout the organization. Personnel
related costs constitute the largest portion of our operations costs, and as
such we strive to identify areas of duplication or redundancy on an ongoing
basis. Although the acquisitions of Comshare and Extensity had the effect of
increasing headcount by 367 positions, consolidated headcount has actually
decreased by a net total of 109, from 2,506 at the end of the third quarter of
fiscal year 2003 to 2,397 at the end of the current period. Third quarter
analysis resulted in a 4.2% reduction of headcount from the second quarter of
fiscal year 2004.
"Geac's cash position was $79.0 million at January 31, 2004 and today is in
excess of $97.5 million. Operating activities and fiscal responsibility continue
to strengthen our cash position, which enables us to pursue strategic new
product investment opportunities and potential acquisitions," said Donna de
Winter, Chief Financial Officer of Geac. "Sustained profitability and continued
cost management have generated expanded interest from investors not only in
Canada, but also in the United States. We were pleased that Geac's listing on
NASDAQ should afford easier access to interested U.S. investors and increased
visibility with Geac's large number of U.S. customers."
ORGANIC GROWTH
Geac's reinvention efforts continue with three of its product lines
demonstrating organic growth with new license revenue.
SYSTEM21/AURORA - Including approximately $1 million in revenue being
realized this quarter from a single contract, license sales in the
third quarter for this product line have increased by 63.0% year over
year and 45.6% from the second quarter of this year. Revenue in this
period represents the highest revenue for the System 21 Division since
the third quarter of fiscal year 2002. Geac currently has 23
implementation projects worldwide for Geac System21 Aurora, its
next-generation enterprise resource planning (ERP) system with
real-time business process management capabilities, launched last
April.
Commenting on the success of System 21 Aurora, Mr. Jones stated, "This
business has made great strides since our difficult acquisition of JBA
five years ago. We were able to rationalize the business in line with
revenue. By altering our strategy and competitive position, with key
investments and developments in this product line, our management team
has enabled our System 21 customers to extend the life of their
existing systems by offering them expanded functionality and the
ability to integrate with the rest of their enterprise framework. The
latest enhancements to this product line have also laid the groundwork
for the seamless integration of Geac's full Performance Management
family."
GEAC LIBRARY SOLUTIONS - Geac Library Solutions Division continued to
grow its revenue from Vubis Smart, its next generation library
information management system, in the third quarter. Its largest
transaction during the quarter was a $500,000 contract for Vubis
Smart(R) library automation software with the Vrije Universiteit
Amsterdam. Other transactions and upgrades during the quarter, most of
which involved Vubis Smart, spanned six countries in Europe and North
America.
GEAC LOCAL GOVERNMENT - License revenue for Local Government increased
22.2% over the same quarter last year. With installations in nearly 100
local government authorities across Australia and New Zealand, Geac's
land information system product, called Pathway PPR - People, Property
and Regulatory System, continues to win new accounts. During the
quarter, Geac Local Government secured new contracts with the City of
Swan in Western Australia, the City of Rockdale in New South Wales, the
City of Campbelltown in New South Wales, the City of Unley in South
Australia, the Livingstone Shire Council in Queensland, and the
Horowhenua District Council in New Zealand. Pathway PPR assists local
governments to automate property administration, rates and billing,
building and development applications, customer service, e-commerce,
income receipting and licensing.
PERFORMANCE MANAGEMENT
During the third quarter, Geac closed several significant Geac Performance
Management sales, encompassing planning and expense management applications,
with new and existing Geac customers. Of note, Geac concluded a $425,000 sale of
its Geac Expense Reports solution to a global manufacturer, and a $300,000 sale
of its MPC budgeting and planning application to a U.S. company. We anticipate
increasing sales of our Performance Management products to other EAS platform
customers and certain ISA customers. These transactions underscore a component
of the Company's acquisition strategy - increasing sales by leveraging our
extensive existing customer base and extending new functionality for our
customers with new product offerings that create value.
Revenue from the businesses acquired in the Comshare and Extensity transactions
contributed $15.9 million to year-over-year revenue.
The Company's partnership with Microsoft was also valuable in propelling the
success of Geac Performance Management. Working together, in the third quarter,
Geac and Microsoft jointly closed business representing more than $500,000 in
software license revenue to Geac. The companies executed an extremely successful
and well-attended Webcast with CFO Magazine in January, which generated
approximately 40 opportunities. Geac continues to follow up with target leads in
this quarter. In addition, the companies ran joint sales prospecting events in
Houston, Los Angeles and Detroit in the quarter. In March, Microsoft and Geac
will host a joint executive briefing in Redmond, Washington for 50 tier-one
prospects, during which both companies will discuss corporate security,
compliance and best practices as they relate to the Performance Management
vision.
With a focus on customer loyalty and retention, in this quarter, Geac
experimented with a limited number of high-value customers by offering a focused
multi-year value-based maintenance program for certain renewing E&M customers
(formerly Dun & Bradstreet). This customized program was designed to support
more directly specific customer maintenance requirements and to enable Geac to
sell additional license and support offerings. The Company submitted proposed
agreements to approximately 50 customers and has seen a 50% favorable response
so far. In the nine-month period ending January 31, 2004, overall attrition
within the enterprise group in North America was 11.0%, an improvement from the
13.0% for the same period in the prior year. Based upon the success of this
limited program to date, the Company will continue to offer this to other E&M
customers upon maintenance renewal and to expand the offering to other key
customer groups.
THIN CLIENT
The planned launch early in fiscal year 2005 of Geac's thin-client solution for
Performance Management is expected to add additional momentum to the
increasingly popular hosted version of Geac Expense Reports (formerly
Extensity). With the thin-client solution, authorized employees can use any
Web-enabled device to submit and approve expense reports. The final development,
quality assurance testing and initial deployment of the new product internally
at Geac, will take place over the next three months, paving the way for early
adopter deployments in the first quarter of fiscal year 2005.
HOSTING
Geac is experiencing growth in users and strong interest in its hosted product
offerings. Despite the negative influence that the hosted services model has on
short-term revenue, Geac experienced an increase in overall revenue in the
quarter of $13.6 million year over year.
Geac currently provides hosting solutions in Europe, America and Australia
across a range of its product lines. At the end of January, Anael signed a large
four-year software and support contract with a leading temporary staffing and
recruitment firm for a comprehensive ASP solution, encompassing Anael Payroll,
Anael HR and Anael Voyageur embedded with the Geac time and expense application.
Geac is considering the expansion of hosted offerings across additional product
lines.
"Geac will continue to invest in the new technologies and models that enable our
customers to realize the greatest benefit from our solutions with the least
impact on their own environment. By bringing new delivery options to the market,
we have expanded our product footprint with existing customers and attracted new
customers with ease-of-use, effective ROI these solutions offer and competitive
pricing on each delivery model," said Timothy Wright, Chief Technology and
Information Officer. "We believe there are market opportunities to take our
Performance Management products to certain ISA markets. Geac will also be
releasing new business process/Sarbanes- Oxley tools early in the new fiscal
year to extend the Performance Management family."
CUSTOMERS
In the third quarter, Geac closed more than 200 sales worldwide across its
Enterprise Applications businesses. Nine deals each exceeded $200,000 in
software license or hosting revenue and included:
- Geac Performance Management - a global pharmaceutical
manufacturer; a marquee sportswear brand; and a
multi-billion-dollar publicly traded global company
- EnterpriseServer - a leading New York hospital and a global
aerospace company
- Comshare - a global financial services company
- SmartStream - a natural gas utility
- Anael - an employment services firm
- Libraries - the Vrije Universiteit Amsterdam
CONCLUDING REMARKS
"We are tremendously pleased with this quarter and with the ongoing commitment
of our most important constituencies. Validating our course, approximately 30%
of all employees eligible for the Geac Stock Purchase Plan introduced this
quarter have chosen to participate. Among a range of success metrics, I find the
endorsement by our employees, many of whom interact with customers each day,
particularly meaningful," said Mr. Jones. "However strong we feel our third
quarter results may be, we still realize that market conditions continue to be
intensely challenging for Geac. In this quarter, we benefited from many parts of
our diverse business performing well at the same time. In light of the higher
degree of uncertainty associated with new license sales, as we continue to be
successful in generally increasing new license revenue, there will likely be
greater volatility in revenues from quarter to quarter. We will remain focused
on cost control and on our commitment to the long-term success of our
shareholders, customers and employees."
REVENUE SEGMENTATION BY GEOGRAPHY
(Unaudited)
(In millions of U.S. dollars)
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31 JANUARY 31
2004 2003 2004 2003
Americas $ 56 52 $167 162
Europe 52 43 138 122
Asia 8 7 24 22
---- --- ---- ---
Total $116 102 $329 306
EARNINGS CALL
Management will discuss today's results on a conference call scheduled for March
4, 2004 at 5:30 p.m. EDT.
The conference call can also be accessed by dialing 416.405.9310 (local area) or
877.211.7911 (toll-free). A recording of the teleconference will be archived on
Geac's web site at www.investors.geac.com. The telephone numbers to call for
instant replay are 416.695.5800 or 800.408.3053. The pass code for the instant
replay is 3006340. This instant replay will be available until 11:59 p.m. March
11, 2004. The conference call will be broadcast over Geac's web site at
www.investors.geac.com. Attendees will need to log in at least fifteen minutes
prior to the call.
ABOUT GEAC
Geac (TSX: GAC, NASDAQ: GEAC) is a global enterprise software company for
Business Performance Management, providing customers worldwide with the core
financial and operational solutions and services to improve their business
performance in real time. Further information is available at
http://www.geac.com or through email at info@geac.com.
Geac trades on the Toronto Stock Exchange under the symbol "GAC" and on the
NASDAQ under the symbol "GEAC" and had 84,898,780 common shares issued and
outstanding at January 31, 2004.
THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE BASED ON CURRENT
EXPECTATIONS, INCLUDING STATEMENTS REGARDING THE ANTICIPATED BENEFITS TO GEAC
AND ITS CUSTOMERS OF THE ACQUISITIONS OF EXTENSITY AND COMSHARE, THE EFFECT OF
THOSE MERGERS ON GEAC'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND THE
SUCCESS OF GEAC IN SELLING NEWLY DEVELOPED SOFTWARE TO NEW AND EXISTING
CUSTOMERS. THESE FORWARD-LOOKING STATEMENTS ENTAIL VARIOUS RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
REFLECTED IN THESE FORWARD-LOOKING STATEMENTS. THESE RISKS AND UNCERTAINTIES ARE
SUBSTANTIALLY UNCHANGED FROM THOSE PRESENTED UNDER THE "RISK FACTORS" HEADING IN
THE "KEY INFORMATION" SECTION OF OUR ANNUAL REPORT ON FORM 20-F, NO. 333-103019,
FOR THE YEAR ENDED APRIL 30, 2003 FILED ON OCTOBER 31, 2003 WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION, AND AVAILABLE THROUGH THE WEBSITE
MAINTAINED BY THE COMMISSION AT WWW.SEC.GOV, AND FILED ON NOVEMBER 3, 2003 WITH
THE CANADIAN SECURITIES ADMINISTRATORS, AND AVAILABLE THROUGH THE WEBSITE
MAINTAINED BY THE CANADIAN SECURITIES ADMINISTRATORS AND THE CANADIAN DEPOSITORY
FOR SECURITIES AT WWW.SEDAR.COM, WHICH RISKS AND UNCERTAINTIES ARE INCORPORATED
BY REFERENCE HEREIN.
FOR MORE INFORMATION, PLEASE CONTACT:
FINANCIAL CONTACT:
Donna de Winter
Chief Financial Officer
Geac
905.475.0525 ext. 3204
donna.dewinter@geac.com
MEDIA AND INVESTOR CONTACTS:
Alys Scott
Vice President, Corporate Communications
Geac
905.940.3751
alys.scott@geac.com
Melody Firth
Investor Relations
Geac
905.475.0525 ext. 3325
melody.firth@geac.com
Geac Computer Corporation Limited
CONSOLIDATED BALANCE SHEETS
(In accordance with Canadian GAAP)
(In thousands of U.S. dollars)
UNAUDITED
JANUARY 31, 2004 April 30, 2003
---------------- --------------
ASSETS
Current assets
Cash and cash equivalents $ 78,952 $ 89,819
Restricted cash and cash equivalents 146 --
Accounts receivable and other 63,821 54,721
Unbilled receivables 7,639 6,901
Future income taxes 23,201 16,238
Inventory 585 787
Prepaids and other assets 12,738 11,898
--------- ---------
187,082 180,364
Restricted cash and cash equivalents 1,653 2,395
Future income taxes 11,752 23,008
Property, plant and equipment 25,825 25,649
Intangible assets 35,021 11,172
Goodwill 122,533 89,386
Other assets (notes 7 and 8) 4,743 --
--------- ---------
$ 388,609 $ 331,974
========= =========
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 116,220 $ 94,979
Income taxes payable 38,042 31,114
Current portion of long-term debt 458 733
Deferred revenue 111,220 119,937
--------- ---------
265,940 246,763
Deferred revenue 3,420 2,690
Long-term debt 7,715 5,616
--------- ---------
277,075 255,069
--------- ---------
SHAREHOLDERS' EQUITY
Share capital (note 3) 122,651 120,976
Options 163 163
Deficit 12,676 (21,914)
Cumulative foreign exchange translation adjustment (23,956) (22,320)
--------- ---------
111,534 76,905
--------- ---------
$ 388,609 $ 331,974
========= =========
See accompanying notes to the interim consolidated financial statements. These
interim consolidated financial statements should be read in conjunction with the
annual audited consolidated financial statements.
Geac Computer Corporation Limited
CONSOLIDATED STATEMENTS OF OPERATIONS
(In accordance with Canadian GAAP)
(Unaudited)
Three months ended Nine months ended
(In thousands of U.S. dollars, except January 31 January 31
share and per share data) 2004 2003 2004 2003
--------- ------ --------- ------
REVENUES
Software $ 18,672 12,458 $ 46,803 33,441
Support and services 89,591 81,394 261,502 247,259
Hardware 7,912 8,736 20,862 25,189
--------- ------ --------- ------
Total revenues 116,175 102,588 329,167 305,889
--------- ------ --------- ------
COST OF REVENUES
Software 1,355 1,649 5,492 4,631
Support and services 37,757 32,678 108,505 103,012
Hardware 6,751 7,536 17,844 21,614
--------- ------ --------- ------
Total cost of revenues 45,863 41,863 131,841 129,257
--------- ------ --------- ------
GROSS PROFIT 70,312 60,725 197,326 176,632
--------- ------ --------- ------
OPERATING EXPENSES
Sales and marketing 18,683 13,556 54,672 42,096
Product development 15,561 13,330 44,227 38,971
General and administrative 15,479 15,360 47,363 43,474
Net restructuring and other unusual items (note 5) (948) 0 (3,754) (733)
Amortization of intangible assets 2,333 248 5,363 530
--------- ------ --------- ------
51,108 42,494 147,871 124,338
--------- ------ --------- ------
INCOME FROM OPERATIONS 19,204 18,231 49,455 52,294
--------- ------ --------- ------
Interest income 313 343 899 931
Interest expense (418) (114) (842) (368)
Other (expense) income, net (1,007) 743 (1,764) 2,274
--------- ------ --------- ------
(1,112) 972 (1,707) 2,837
--------- ------ --------- ------
INCOME FROM OPERATIONS BEFORE INCOME TAXES 18,092 19,203 47,748 55,131
--------- ------ --------- ------
INCOME TAXES 3,655 7,190 13,158 20,995
--------- ------ --------- ------
NET INCOME FOR THE PERIOD $ 14,437 12,013 $ 34,590 34,136
========= ====== ========= ======
BASIC NET INCOME PER SHARE $ 0.17 0.15 $ 0.41 0.43
DILUTED NET INCOME PER SHARE $ 0.17 0.15 $ 0.40 0.42
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
('000s)
Basic 84,830 80,184 84,523 78,945
Diluted 86,389 81,662 85,763 80,793
See accompanying notes to the interim consolidated financial statements. These
interim consolidated financial statements should be read in conjunction with the
annual audited consolidated financial statements
Geac Computer Corporation Limited
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In accordance with Canadian GAAP)
(In thousands of U.S. dollars, except share data)
SHARE CAPITAL PURCHASE RETAINED CUMULATIVE TOTAL
WARRANTS EARNINGS FOREIGN SHAREHOLDERS'
(DEFICIT) EXCHANGE EQUITY
TRANSLATION
ADJUSTMENT
---------------------------------
SHARES AMOUNT OPTIONS
('000S) $ $ $ $ $ $
------ ------- ------- -------- --------- ----------- -------------
BALANCE -
APRIL 30, 2002 78,145 110,987 -- 1,139 (53,944) (24,055) 34,127
Issued for cash 58 129 -- -- -- -- 129
Exercise of purchase
warrants 5,000 9,860 -- (1,139) -- -- 8,721
Issued in exchange for
shares of acquired
company 933 -- -- -- -- -- --
Option value resulting
from acquisition -- -- 163 -- -- -- 163
Net income -- -- -- -- 32,030 -- 32,030
Foreign exchange
translation adjustment -- -- -- -- -- 1,735 1,735
------ ------- --- ---- ------ ------- -------
BALANCE -
APRIL 30, 2003 84,136 120,976 163 -- (21,914) (22,320) 76,905
Issued for cash 763 1,675 -- -- -- -- 1,675
Net income for the period -- -- -- -- 34,590 -- 34,590
Foreign exchange
translation adjustment -- -- -- -- -- (1,636) (1,636)
------ ------- --- ---- ------ ------- -------
UNAUDITED BALANCE -
JANUARY 31, 2004 84,899 122,651 163 -- 12,676 (23,956) 111,534
====== ======= === ==== ====== ======= =======
See accompanying notes to the interim consolidated financial statements. These
interim consolidated financial statements should be read in conjunction with the
annual audited consolidated financial statements.
Geac Computer Corporation Limited
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In accordance with Canadian GAAP)
(Unaudited)
(In thousands of U.S. dollars)
Three months ended Nine months ended
January 31 January 31
2004 2003 2004 2003
-------- ------ -------- --------
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net income for the period $ 14,437 12,013 $ 34,590 $ 34,136
Adjusted for items not involving cash:
Amortization of intangible assets 2,333 248 5,363 530
Amortization of property, plant and 1,913 2,481 5,454 8,563
equipment
Amortization of other assets 237 -- 372 --
Reversal of accrued liabilities and other
provisions (774) -- (3,998) (733)
Gain on divestiture of operations (243) -- (243) --
Future income tax expense 252 6,726 6,847 17,406
Other (25) 387 (42) (438)
-------- ------ -------- --------
CASH PROVIDED BY OPERATING ACTIVITIES BEFORE CHANGES 18,130 21,855 48,343 59,464
IN NON-CASH WORKING CAPITAL AND DEFERRED REVENUE
Change in non-cash working capital excluding (3,650) (7,358) 1,699 (34,513)
deferred revenue
Change in deferred revenue 16,331 23,356 (21,878) (13,973)
-------- ------ -------- --------
CASH PROVIDED BY OPERATING ACTIVITIES 30,811 37,853 28,164 10,978
-------- ------ -------- --------
INVESTING ACTIVITIES
Acquisition less cash acquired (129) -- (39,148) (2,362)
Proceeds from divestiture of operations less
cash divested 339 -- 339 --
Net additions to property, plant and equipment (1,632) (376) (3,144) (1,169)
Additions to other assets (24) -- (2,828) --
Change in restricted cash and cash equivalents 403 1,398 805 2,321
-------- ------ -------- --------
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (1,043) 1,022 (43,976) (1,210)
-------- ------ -------- --------
FINANCING ACTIVITIES
Issue of common shares 279 7,803 1,675 8,807
Issuance (repayment) of long-term debt 655 (354) 269 (2,132)
-------- ------ -------- --------
CASH PROVIDED BY FINANCING ACTIVITIES 934 7,449 1,944 6,675
-------- ------ -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS 1,377 1,627 3,001 2,269
-------- ------ -------- --------
CASH AND CASH EQUIVALENTS
Net decrease in cash and cash equivalents 32,079 47,951 (10,867) 18,712
Cash and cash equivalents - beginning of the 46,873 44,399 89,819 73,638
period
CASH AND CASH EQUIVALENTS - END OF THE PERIOD $ 78,952 $ 92,350 $ 78,952 $ 92,350
======== ======== ======== ========
See accompanying notes to the interim consolidated financial statements. These
interim consolidated financial statements should be read in conjunction with the
annual audited consolidated financial statements.
GEAC COMPUTER CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In accordance with Canadian GAAP)
(Unaudited)
Unless otherwise stated, amounts are in thousands of U.S. dollars except share
data and per share amounts.
1. SIGNIFICANT ACCOUNTING POLICIES
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 2 to the consolidated financial
statements for the year ended April 30, 2003 except as noted below. These
interim consolidated financial statements do not conform in all respects with
disclosures required for annual financial statements and should be read in
conjunction with the consolidated financial statements for the year ended April
30, 2003 in the 2003 Annual Report.
The financial statements of the Company have historically been reported in
Canadian dollars. Effective May 1, 2003 the Company adopted the U.S. dollar as
its reporting currency as U.S. dollar denominated operations represent an
increasingly significant portion of the Company's operations. Comparative
financial information has been recast as if the U.S. dollar reporting currency
had always been used, and financial statements have been reported in U.S.
dollars for all periods presented.
Effective May 1, 2003 the Company changed its policy with respect to the
classification of reimbursements received for out-of-pocket expenses to classify
these amounts as revenue. In previous years these reimbursements had been
characterized as a reduction of expenses incurred. The change has been applied
retroactively and comparative figures restated. In addition, effective May 1,
2003 the Company has reclassified certain "bug-fixing" expenses that had been
characterized as support costs in certain product lines as product development
expenses across all product lines. In the Consolidated Statement of Operations
for the quarter ended January 31, 2004 results for the comparable period ended
January 31, 2003 have been restated to conform with the current year's
presentation. The net effect of the change in policy and reclassification on
results for the 3 months ended January 31, 2003 was to increase support and
services revenue by $801 (9 months ended January 31, 2003 - $2,356), to reduce
support and services costs by $1,470 (9 months ended January 31, 2003 - $3,479),
and to increase product development expenses by $2,271 (9 months ended January
31, 2003 - $5,835). There was no impact on net income for the 3 or 9 months
ended January 31, 2003.
2. STOCK-BASED COMPENSATION
The Company has two stock-based compensation plans, which are described in note
13 to the consolidated financial statements in the 2003 Annual Report. During
the third quarter of fiscal 2004, the Company issued 0.3 million stock options
in total to employees at a weighted average exercise price of $5.41. These
options vest over a period of 4 years. They were all granted at an exercise
price the same as or above the market value of the shares at the date of grant.
The weighted average estimated fair value at the date of grant for employee
options granted for the quarter ended January 31, 2004 was $3.87 per share. If
the Company had adopted the fair value method, the total amount of compensation
expense in the third quarter of fiscal year 2004 for stock options granted since
fiscal 2003 would have been approximately $829 (2003 - $88) after tax and $1,711
in the first 9 months of fiscal 2004 (2003 - $173) after tax. The fair value of
each share issued was estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions at the measurement date:
Risk-free interest rate: 3.97% - 4.35%
Expected life: 7 years
Estimated volatility in the market price of the common shares: 71.59% - 73.22%
Dividend yield: Nil
The weighted average estimated fair value at the date of grant for shares issued
under the Employee Stock Purchase Plan (ESPP) for the quarter ended January 31,
2004 was $1.38 per share. If the Company had adopted the fair value method, the
total amount of compensation expense for shares issued under ESPP for the third
quarter of fiscal year 2004 would have been approximately $6 (2003 - $9) and $17
for the first 9 months of fiscal 2004 (2003 - $31). The fair value of each share
issued was estimated on the date of grant using the Black-Scholes option-pricing
model with the following assumptions at the measurement date:
Risk-free interest rate: 2.70% - 3.17%
Expected life: 3 months
Estimated volatility in the market price of the common shares: 31.49% - 35.94%
Dividend yield: Nil
GEAC COMPUTER CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In accordance with Canadian GAAP)
(Unaudited)
Unless otherwise stated, amounts are in thousands of U.S. dollars except share
data and per share amounts.
Had the Company recorded compensation expense based on the fair value of the
options at the grant date and shares issued under ESPP, results would have been
as follows:
Three months ended Nine months ended
January 31 January 31
2004 2003 2004 2003
---------- ------ ---------- ------
NET INCOME - AS REPORTED $ 14,437 12,013 $ 34,590 34,136
Pro forma stock-based compensation expense 835 97 1,728 204
---------- ------ ---------- ------
NET INCOME - PRO FORMA $ 13,602 11,916 $ 32,862 33,932
========== ====== ========== ======
BASIC NET INCOME PER SHARE - AS REPORTED $ 0.17 0.15 $ 0.41 0.43
Pro forma stock-based compensation expense per share 0.01 -- 0.02 --
---------- ------ ---------- ------
BASIC NET INCOME PER SHARE - PRO FORMA $ 0.16 0.15 $ 0.39 0.43
========== ==== ========== ====
DILUTED NET INCOME PER SHARE - AS REPORTED $ 0.17 0.15 $ 0.40 0.42
Pro forma stock-based compensation expense per share 0.01 -- 0.02 --
---------- ------ ---------- ------
DILUTED NET INCOME PER SHARE - PRO FORMA $ 0.16 0.15 $ 0.38 0.42
========== ==== ========== ====
For the purpose of pro forma disclosure, the estimated fair value of the options
is amortized to expense over their vesting period on a straight-line basis. The
pro forma disclosure excludes the effect of options granted before the adoption
of CICA 3870.
3. SHARE CAPITAL
The number of shares outstanding as of January 31, 2004 was 84,898,780 (April
30, 2003 - 84,136,490).
4. SEGMENTED INFORMATION
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) offers 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, hospitality, property management and construction 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.
GEAC COMPUTER CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In accordance with Canadian GAAP)
(Unaudited)
Unless otherwise stated, amounts are in thousands of U.S. dollars except share
data and per share amounts.
THREE MONTHS ENDED JANUARY 31, 2004 NINE MONTHS ENDED JANUARY 31, 2004
------------------------------------ ------------------------------------
EAS ISA TOTAL EAS ISA TOTAL
-------- ----- ------ -------- ----- ------
Revenues
Software $ 16,946 1,726 18,672 $ 40,920 5,883 46,803
Support and services 72,277 17,314 89,591 209,125 52,377 261,502
Hardware 7,184 728 7,912 18,073 2,789 20,862
-------- ----- ------ -------- ----- ------
Total revenues 96,407 19,768 116,175 268,118 61,049 329,167
-------- ----- ------ -------- ----- ------
Segment contribution $ 20,316 3,926 24,242 $ 53,029 7,652 60,681
======== ===== ====== ======== ===== ======
Three months ended Nine months ended
------------------------------------ ------------------------------------
January 31, 2003 January 31, 2003
------------------------------------ ------------------------------------
EAS ISA Total EAS ISA Total
-------- ------ ------- -------- ------ -------
Revenues
Software $ 9,851 2,607 12,458 $ 26,492 6,949 33,441
Support and services 62,844 18,550 81,394 186,765 60,494 247,259
Hardware 7,504 1,232 8,736 21,304 3,885 25,189
-------- ------ ------- -------- ------ -------
Total revenues 80,199 22,389 102,588 234,561 71,328 305,889
-------- ------ ------- -------- ------ -------
Segment contribution $ 19,104 795 19,899 $ 50,941 5,307 56,248
======== ====== ======= ======== ====== =======
RECONCILIATION OF SEGMENT CONTRIBUTION TO INCOME FROM OPERATIONS BEFORE INCOME
TAXES
Three months ended Nine months ended
----------------------- -----------------------
January 31 January 31
----------------------- -----------------------
2004 2003 2004 2003
-------- ------ -------- ------
Segment contribution $ 24,242 19,899 $ 60,681 56,248
Corporate expenses - net of recharges (3,629) (1,257) (9,575) (3,170)
Amortization of intangible assets (2,333) (248) (5,363) (530)
Interest income (expense), net (105) 229 57 563
Net restructuring and other unusual items 948 -- 3,754 733
Foreign exchange (1,031) 580 (1,806) 1,287
-------- ------ -------- ------
Income from operations before income taxes $ 18,092 19,203 $ 47,748 55,131
======== ====== ======== ======
GEAC COMPUTER CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In accordance with Canadian GAAP)
(Unaudited)
Unless otherwise stated, amounts are in thousands of U.S. dollars except share
data and per share amounts.
5. NET RESTRUCTURING AND OTHER UNUSUAL ITEMS
During the 9 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.
6. LITIGATION
In May, 2001 Cels Enterprises, Inc. (Cels) filed a complaint in the United
States District Court for the Central District of California against Geac, Geac
Enterprise Solutions (GES) and JBA International, Inc. (JBA). GES is JBA's
successor in interest as a result of Geac's acquisition of JBA Holdings plc in
1999. The complaint alleged that JBA software supplied to Cels was experimental
and did not work. The software product in question, which was part of JBA's
product offering prior to the acquisition, is no longer sold by Geac. Cels
claimed damages of $28,300. In August, 2003 the jury returned a verdict against
GES awarding Cels approximately $1,800 in compensatory damages and $2,300 in
punitive damages, and judgment was entered. GES has appealed the award of
punitive damages, and Cels has appealed the Court's denial of its motion seeking
approximately $1,000 in attorneys' fees and, in the alternative, is seeking to
appeal the verdict. At April 30, 2003 Geac had accrued $2,000 in respect of the
Cels claim. Geac increased the amount of this reserve to $4,100 at July 31,
2003.
Extensity, a subsidiary 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 memorandum of
understanding to settle all claims, which would be funded by the issuers'
insurers. The settlement is subject to a number of conditions, including
approval by the proposed settling parties and the Court.
In addition, Geac is subject to various other legal proceedings and claims in
the ordinary course of business, arising out of disputes over contracts, alleged
torts, intellectual property, real estate and employee relations, among other
things. In the opinion of management, resolution of these matters is not
reasonably expected to have a material adverse effect on Geac's financial
position, results of operations or cash flows. A negative outcome far in excess
of amounts currently accrued with respect to such matters may materially affect
our future financial position, results of operations or cash flows.
7. CREDIT FACILITY
On September 9, 2003 Geac 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 and a $5,000 letter of credit sub-facility. The
interest rate payable on advances under the Facility is, at Geac's option, the
prime rate plus 0.50% or LIBOR plus 3.00%. The Facility is collateralized by
substantially all of the assets of Geac 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 Geac and its
subsidiaries that are parties to the Loan Agreement. As of January 31, 2004, the
$50,000 revolving line of credit is available and has not been drawn on and
$1,815 of the letter of credit sub-facility has been utilized.
The financing costs of approximately $2,800 incurred to close the transaction
were recorded as other assets in the second quarter of fiscal 2004 and amortized
to expense on a straight line basis over the term of the Facility.
GEAC COMPUTER CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In accordance with Canadian GAAP)
(Unaudited)
Unless otherwise stated, amounts are in thousands of U.S. dollars except share
data and per share amounts.
8. ACQUISITION
On August 6, 2003 the Company acquired Comshare, Incorporated (Comshare), a
provider of corporate performance management software, based in Michigan, by way
of a cash tender offer for all outstanding shares of Comshare at a price of
$4.60 per share. The acquisition was accounted for by the purchase method with
the results of operations of the business included in the consolidated financial
statements from the date of acquisition.
The total purchase price was approximately $55,772, consisting of $53,807 of
cash and $1,965 of acquisition costs. The acquired net assets included, at fair
value: $16,625 of cash; $10,411 of other current assets; $909 of office and
computer equipment; $4,216 of other assets; $28,491 of acquired intangible
assets, including $21,736 of acquired software, and $6,755 of customer
agreements; $12,876 of current liabilities; and $24,980 of other liabilities.
The Company recorded $5,889 of future income tax assets and $4,481 of future
income tax liabilities as a component of the transaction. The difference between
the purchase price and the fair value of all identifiable assets and liabilities
acquired was $31,568 and is accounted for as goodwill.
The additions to reserves of approximately $3,125 for workforce reductions
related to employees of Comshare in the development, support and services, sales
and marketing, and administrative areas, and $1,867 for premises restructuring
were recorded at acquisition. As at January 31, 2004 there was a charge of
$2,870 against the provision for workforce reductions and $27 against the
premises restructuring reserve. In addition, a release of $125 of excess
provision for premises restructuring was recorded as an adjustment to goodwill
in the third quarter of fiscal 2004.
The purchase price allocation for this acquisition has been based on available
information at the time of preparation of these interim consolidated financial
statements. To the extent that these amounts prove to be excessive or
inadequate, they will be adjusted up to the end of the current year by an
adjustment to goodwill.
9. COMPARATIVE FIGURES
Certain prior year's comparative figures in the financial statements have been
reclassified to conform to the current year's presentation.