MARKHAM, ON, and WALTHAM, MA, Dec. 7 /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 second quarter financial results for the
quarter ended October 31, 2005. Note to readers: As a result of the
sale of the Interealty business on October 1, 2005, the results of
the operations of Interealty have been reflected as discontinued
operations and have not been included in Geac's results of
continuing operations for the second quarter of fiscal year (FY)
2006 and comparative periods. Geac's net earnings for the second
quarter of FY 2006, which include net earnings from discontinued
operations, were $33.2 million, or $0.37 per diluted share. All
references to dollars are to U.S. dollars unless otherwise noted.
Second Quarter Financial and Other Highlights - Signed definitive
agreement with Golden Gate Capital for the sale of the Company for
approximately $1.0 billion, or $11.10 per share in cash. - Software
license revenue increased 26.1% over Q2 FY 2005, and a 46.2%
improvement over Q1 FY 2006. - 24.1% of software license revenue in
Q2 FY 2006 came from the sale of new internally developed Geac
products. - Gross profit margin improved to 66.2% in Q2 FY 2006
from 62.4% in Q1 FY 2006 and from 65.2% in Q2 FY 2005. - EPS of
$0.37 per diluted share, a 117.6% increase over same quarter last
year (including the gain on sale of and net earnings from the
Interealty business). - $226.5 million in cash on the balance sheet
as of October 31, 2005. - Number of contracts closed increased from
315 in Q1 FY 2006 to 340 in Q2 FY 2006 in the Enterprise
Applications Systems (EAS) business segment. - Increased average
deal size of deals in excess of $150,000 to $294,000 from $284,000
in Q1 FY 2006 and from $266,000 in Q2 FY 2005. - Sold Interealty
business, a non-strategic business unit, for approximately $36.3
million in cash.
-------------------------------------------------------------------------
US$ thousands Q2 FY 2006 Q2 FY 2005
-------------------------------------------------------------------------
Software License Revenue 18,866 14,962
-------------------------------------------------------------------------
Support & Professional Services Revenue 81,810 83,036
-------------------------------------------------------------------------
Hardware Revenue 2,511 2,476
-------------------------------------------------------------------------
Total Revenue 103,187 100,474
-------------------------------------------------------------------------
Net Earnings 33,186 15,204
-------------------------------------------------------------------------
Net Earnings per Diluted Share (not in thousands): Continuing
Operations $ 0.12 $ 0.17
-------------------------------------------------------------------------
Discontinued Operations $ 0.25 $ -
-------------------------------------------------------------------------
Total Diluted EPS $ 0.37 $ 0.17
-------------------------------------------------------------------------
Geac reported revenue in the second quarter of FY 2006 of $103.2
million, an increase of $2.7 million compared to $100.5 million in
revenue in the second quarter of FY 2005. Software license revenue
totaled $18.9 million in the second quarter, a 26.1% increase over
the same quarter last year when software license revenue totaled
$15.0 million, and a 46.2% increase over license revenue in the
first quarter of FY 2006, when software license revenue was $13.0
million. The Company's net earnings from continuing and
discontinued operations were $33.2 million during the second
quarter of FY 2006, or $0.37 per diluted share, compared with $15.2
million, or $0.17 per diluted share in the second quarter of FY
2005, a net earnings increase of 118.3% and a diluted EPS increase
of 117.6%. This was comprised of $22.1 million, or $0.25 per
diluted share, from discontinued operations (net of taxes), and
$11.1 million, or $0.12 per diluted share, from continuing
operations. In the second quarter of FY 2006, the gross profit
margin increased to 66.2% of revenue from 65.2% in the second
quarter of last year. In the second quarter, Geac sold its
Interealty business for $36.3 million, resulting in a $21.3 million
after-tax gain in the second quarter of FY 2006. The sale of
Interealty is an example of Geac's ability to turn around
challenged businesses and achieve value for non-strategic assets.
Charles S. Jones, President and Chief Executive Officer said, "In
the second quarter, we were most pleased to see particularly strong
increases in our software license revenue with notable
contributions from nearly all of our ERP and Performance Management
product lines, which benefited not only from an increased number of
deals, but also from an increase in the average size of contracts
in excess of $150,000. New customers were responsible for
approximately 24.2% of our software license sales in the quarter.
Of equal importance, organic growth trends in some areas of our
business continue, as internally developed new products designed to
extend the value of existing solutions contributed 24% to our
overall software license revenue in the second quarter. Among the
larger contracts closed in the second quarter, we were able to
finalize one transaction in excess of $1 million, representing some
of the spillover to which we referred in the first quarter results
discussion in September." Mr. Jones continued, "Overall, our
business continues to perform well in what has proven to be an
increasingly competitive software market environment. We are
extremely enthusiastic about the agreement we announced last month
regarding the sale of Geac to Golden Gate Capital for approximately
$1 billion pursuant to a plan of arrangement. This is expected to
provide our many product families with the advantage of size and
scale as our industry continues to consolidate. We believe Golden
Gate's product integration strategy, commitment to support our
existing product lines and available resources will provide a
long-term future for our business and will benefit our customers
and employees." Operating expenses were $53.0 million in the second
quarter of FY 2006, compared to $46.0 million the second quarter of
FY 2005. Operating expenses were impacted most dramatically by an
increase in net restructuring and other unusual items related to
non-routine events in the second quarter. These included $2.5
million in proxy contest expenses and $1.7 million in write-offs
related to the termination of the Wells Fargo Foothill credit
facility. In addition, general and administrative costs increased
in the quarter as compared to last year due to increased expenses
of an aggregate $3.1 million related to stock-based compensation,
Sarbanes-Oxley compliance and the pursuit of acquisitions. "Unusual
items and G&A expenses in the second quarter had a demonstrable
impact on net earnings. Without the costs associated with our
recent acquisition activity of approximately $1.5 million, the
proxy contest of approximately $2.5 million and certain write-offs
with respect to our previous credit facility of approximately $1.7
million, Geac's earnings from continuing operations would have been
$21.0 million, a notable 7.7% increase over the same quarter of our
last fiscal year," said Donna de Winter, Chief Financial Officer.
"We continue to build a very strong cash position. At the end of
the second quarter of FY 2006 cash on Geac's balance sheet was
$226.5 million, an 86.0% increase in the cash position of $121.8
million at the close of the second quarter of FY 2005." Customers
In the second quarter of FY 2006, Geac closed approximately 340
deals in the Enterprise Applications Systems (EAS) segment of the
business. Thirty-six of these deals each exceeded $150,000,
compared to 19 in excess of $150,000 in the first quarter of FY
2006, and the average deal size within this group was more than
$294,000, up from the average deal size of $284,000 in first
quarter of FY 2006. Contract metrics in the second quarter of FY
2006 were also strong compared to the same quarter last year, in
which 21 deals exceeded $150,000 and the average deal size was
approximately $266,000. Of the 340 contracts closed in the EAS
segment in the second quarter of FY 2006, approximately 50
contracts were with net new customers, reflecting an increase in
the number of new customers as a percentage of total contracts over
the previous quarter. Among the significant EAS deals entered into
during the second quarter, Geac signed contracts with the following
companies: MPC CCH, a Wolters Kluwer business and a leading
provider of tax and accounting information, software, and services;
Fiserv, the largest provider of information management solutions to
the U.S. financial industry and parent company of Geac partner
IPS-Sendero; PTT Exploration and Production Public Company Limited,
an energy company in Thailand; VF Corporation, whose principal
brands include Wrangler(R), Lee(R), The North Face(R), Nautica(R),
and Vanity Fair(R), and who is a leader in branded apparel; and
Worldspan, a leader in travel technology services for travel
suppliers, travel agencies, e-commerce sites, and corporations
worldwide. System21 Sandvik AB, the world's leading supplier of
drilling, excavation, crushing and screening machinery, equipment,
and tools for the mining and construction industries; Stearns Inc.,
the world's leading supplier of personal flotation devices; and
Westcoast Ltd., distributor of computer products for consumers and
professionals. RunTime Esprit, an international clothing designer
and manufacturer; and WE Netherlands B.V., a fashion chain.
Enterprise Server and Expense Management Gloucestershire NHS Health
Community, provider of a comprehensive range of acute, mental
health, and community services, along with primary care services to
the population of Gloucestershire and parts of neighbouring
counties; ICT Service Cooperatie Politie, Justitie en Veiligheid,
the Dutch police; and Worldspan. Concluding Remarks "I am grateful
for the continuing efforts of our employees worldwide, the support
of our loyal customers and the ongoing, steadfast commitment of our
shareholders during the dynamic five-years that I have been with
Geac as its Chairman and then President and Chief Executive
Officer. In the past five years, our employees, customers and
shareholders have all contributed immensely to the long-term
success of this business, and we have the track record and metrics
to show it. Validating the success of our many growth initiatives,
Geac's share price, in US dollar terms, has increased by nearly
276.8% over the past five years. The transformation of Geac has
resulted in increased opportunity for our employees and enhanced
functionality and support for our customers, which in turn
generated the opportunity for a particularly strong return for our
shareholders with the prospect of the Golden Gate acquisition in
the coming months. We continue to work with Golden Gate Capital
toward closing the transaction on or before March 16, 2006. We have
satisfied the condition precedent included in the debt financing
commitment letters and referenced in the Arrangement Agreement
relating to our adjusted EBITDA for the twelve-month period ended
October 31, 2005. We expect to complete the submission of all
required regulatory filings shortly, and to provide shareholders on
or about December 16, 2005 with a Management Information Circular
with respect to the Special Meeting of the shareholders to consider
approval of the plan of arrangement scheduled to be held on January
19, 2006," concluded Mr. Jones. For a more in-depth analysis of
these financial results and other matters discussed in this Press
Release, 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/. This document will be posted on
our website at http://www.geac.com/ later today. Earnings Call
Charles S. Jones, President and CEO of Geac, will provide a brief
overview of the results and respond to questions on a conference
call scheduled for 9:00 a.m. Eastern Time on December 8, 2005.
Listeners can access the conference call at 416.340.2216 /
866.898.9626, or via webcast at http://www.investors.geac.com/.
Attendees should consider logging in at least 15 minutes prior to
the call. A replay of the conference call will be available from
December 8, 2005 at 10:00 a.m. Eastern Time until January 8, 2006,
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
3169939 followed by the number sign. 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 e-mail at . This press release may
contain 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 undertakes no obligation to update or
revise the information contained herein. Important factors 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 are successful in consummating the transaction with
Golden Gate or successfully mitigate the adverse impact to Geac's
business if the transaction fails to close; whether we are able to
deliver products and services within required time frames and
budgets to meet increasingly competitive customer demands and
performance guaranties; 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. Please
refer to 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/ for more information on risk factors that
could cause actual results to differ. Geac is a registered
trademark of Geac Computer Corporation Limited. All other marks are
trademarks of their respective owners. Geac Computer Corporation
Limited Consolidated Balance Sheets As at October 31, 2005 and
April 30, 2005 (Unaudited) (amounts in thousands of U.S. dollars)
October April 31, 2005 30, 2005 ---------- ---------- Assets
(revised - see note 2) Current assets: Cash and cash equivalents $
226,453 $ 188,134 Restricted cash 2,516 4,808 Accounts receivable
and other receivables 37,367 46,922 Unbilled receivables 8,399
8,186 Future income taxes 7,350 8,292 Prepaid expenses and other
assets 5,332 7,986 Current assets related to discontinued
operations (note 9) 376 2,097 ---------- ---------- Total current
assets 287,793 266,425 Restricted cash 2,800 3,039 Future income
taxes 20,179 33,529 Property, plant and equipment 20,170 20,882
Intangible assets 19,238 23,841 Goodwill (note 4) 109,255 110,142
Other assets 6,107 6,045 Long-term assets related to discontinued
operations (note 9) - 2,263 ---------- ---------- Total assets $
465,542 $ 466,166 ---------- ---------- ---------- ----------
Liabilities & Shareholders' Equity Current liabilities:
Accounts payable and accrued liabilities $ 59,118 $ 71,528 Income
taxes payable 26,102 22,997 Current portion of long-term debt 409
424 Deferred revenue 80,465 110,493 Current liabilities related to
discontinued operations (note 9) 376 3,957 ---------- ----------
Total current liabilities 166,470 209,399 Deferred revenue 1,804
2,058 Employee future benefits 22,490 26,334 Asset retirement
obligations (note 6) 1,221 1,678 Accrued restructuring (note 7) 898
1,769 Long-term debt 4,163 4,630 ---------- ---------- Total
liabilities 197,046 245,868 Shareholders' Equity Common shares; no
par value; unlimited shares authorized; issued and outstanding as
at October 31, 2005 - 87,317,871 (April 30, 2005 - 86,377,012)
137,827 131,445 Common shares purchased as at October 31, 2005 -
1,390,112 (April 30, 2005 - 816,598) (note 10) (11,775) (6,979)
Common stock options 12 12 Contributed surplus 12,025 6,353
Retained earnings 156,017 111,541 Cumulative foreign exchange
translation adjustment (25,610) (22,074) ---------- ----------
Total shareholders' equity 268,496 220,298 ---------- ----------
Total liabilities and shareholders' equity $ 465,542 $ 466,166
---------- ---------- ---------- ---------- Commitments and
contingencies (note 12) See accompanying notes 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 Six months ended October 31 October 31
---------------------- ---------------------- 2005 2004 2005 2004
---------- ---------- ---------- ---------- Revenue: (revised -
(revised - see note 2) see note 2) Software $ 18,866 $ 14,962 $
31,771 $ 30,363 Support and services 81,810 83,036 162,399 166,732
Hardware 2,511 2,476 6,293 4,379 ---------- ---------- ----------
---------- Total revenue 103,187 100,474 200,463 201,474 Cost of
revenue: Costs of software 2,221 1,929 4,103 3,405 Costs of support
and services 30,810 31,130 62,003 61,826 Costs of hardware 1,881
1,877 5,357 3,413 ---------- ---------- ---------- ---------- Total
cost of revenue 34,912 34,936 71,463 68,644 ---------- ----------
---------- ---------- Gross profit 68,275 65,538 129,000 132,830
Operating expenses: Sales and marketing 18,003 17,201 36,932 35,040
Research and development 12,982 13,371 27,330 27,275 General and
administrative 15,722 13,522 26,610 27,602 Net restructuring and
other unusual items (note 7) 4,202 (367) 4,169 (1,020) Amortization
of intangible assets 2,050 2,290 4,344 4,536 ---------- ----------
---------- ---------- Total operating expenses 52,959 46,017 99,385
93,433 Earnings from continuing operations 15,316 19,521 29,615
39,397 Interest income 1,888 674 3,436 1,176 Interest expense (190)
(368) (564) (756) Other income, net 26 722 605 244 ----------
---------- ---------- ---------- Earnings from continuing
operations before income taxes 17,040 20,549 33,092 40,061 Income
taxes 5,935 5,982 11,820 12,433 ---------- ---------- ----------
---------- Net earnings from continuing operations 11,105 14,567
21,272 27,628 Discontinued operations, net of income taxes (note 9)
22,081 637 23,204 1,088 ---------- ---------- ---------- ----------
Net earnings $ 33,186 $ 15,204 $ 44,476 $ 28,716 ----------
---------- ---------- ---------- ---------- ---------- ----------
---------- Net earnings per share basic (note 11): Continuing
operations $ 0.13 $ 0.17 $ 0.25 $ 0.32 ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Discontinued operations $ 0.26 $ 0.01 $ 0.27 $ 0.02 ----------
---------- ---------- ---------- ---------- ---------- ----------
---------- Net earnings per share $ 0.39 $ 0.18 $ 0.52 $ 0.34
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- Net earnings per share diluted (note 11):
Continuing operations $ 0.12 $ 0.17 $ 0.24 $ 0.32 ----------
---------- ---------- ---------- ---------- ---------- ----------
---------- Discontinued operations $ 0.25 $ - $ 0.26 $ 0.01
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- Net earnings per share $ 0.37 $ 0.17 $ 0.50 $
0.33 ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- Geac Computer Corporation Limited
Consolidated Statement of Shareholders' Equity For the six months
ended October 31, 2005 and the year ended April 30, 2005
(Unaudited) (in thousands of U.S. dollars, except share date) Share
capital ------------------------------------------------------
Common Common Shares Common Shares Purchased Stock ('000s) Amount
('000s) Amount Options ---------- ---------- ---------- ----------
---------- Balance - April 30, 2004 85,175 $ 124,019 - $ - $ 44
Issuance of common stock for cash 443 2,125 - - - Exercise of stock
options granted in connection with acquisition of Extensity - 28 -
- (28) Stock based compensation (note 10) - - - - - Exercise of
stock option - 320 - - - Employee stock purchase plan (note 10) -
260 - - - Net earnings - - - - - Foreign exchange translation
adjustment - - - - - ---------- ---------- ---------- ----------
---------- Balance - October 31, 2004 85,618 126,752 - - 16
Issuance of common stock for cash 759 3,642 - - - Exercise of stock
options granted in connection with acquisition of Extensity - 4 - -
(4) Stock based compensation (note 10) - - - - - Exercise of stock
options - 823 - - - Employee stock purchase plan (note 10) - 224 -
- - Restricted share unit plan (note 10) - - - - - Stock-based
compensation expense - - - - - Purchase of common shares for cash -
- 817 (6,979) - Net earnings - - - - - Foreign exchange translation
adjustment - - - - - ---------- ---------- ---------- ----------
---------- Balance - April 30, 2005 86,377 131,445 817 (6,979) 12
Issuance of common stock for cash 941 5,030 - - - Stock based
compensation (note 10) - - - - - Exercise of stock options - 1,109
- - - Employee stock purchase plan (note 10) - 243 - - - Tax impact
of exercise of stock options - - - - - Restricted share unit plan
(note 10) Stock-based compensation expense - - - - - Purchase of
common shares for cash - - 573 (4,796) - Net earnings - - - - -
Foreign exchange translation adjustment - - - - - ----------
---------- ---------- ---------- ---------- Balance - October 31,
2005 87,318 $ 137,827 1,390 $ (11,775) $ 12 ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- Cumulative Foreign Total Exchange Share-
Contributed Retained Translation holders' Surplus Earnings
Adjustment Equity ---------- ---------- ---------- ----------
Balance - April 30, 2004 $ 2,368 $ 34,517 $ (24,877) $ 136,071
Issuance of common stock for cash - - - 2,125 Exercise of stock
options granted in connection with acquisition of Extensity - - - -
Stock based compensation (note 10) 1,896 - - 1,896 Exercise of
stock option (320) - - - Employee stock purchase plan (note 10)
(260) - - - Net earnings - 28,716 - 28,716 Foreign exchange
translation adjustment - - 3,126 3,126 ---------- ----------
---------- ---------- Balance - October 31, 2004 3,684 63,233
(21,751) 171,934 Issuance of common stock for cash - - - 3,642
Exercise of stock options granted in connection with acquisition of
Extensity - - - - Stock based compensation (note 10) 2,222 - -
2,222 Exercise of stock options (823) - - - Employee stock purchase
plan (note 10) (224) - - - Restricted share unit plan (note 10) - -
- - Stock-based compensation expense 1,494 - - 1,494 Purchase of
common shares for cash - - - (6,979) Net earnings - 48,308 - 48,308
Foreign exchange translation adjustment - - (323) (323) ----------
---------- ---------- ---------- Balance - April 30, 2005 6,353
111,541 (22,074) 220,298 Issuance of common stock for cash - - -
5,030 Stock based compensation (note 10) 2,123 - - 2,123 Exercise
of stock options (1,109) - - - Employee stock purchase plan (note
10) (243) - - - Tax impact of exercise of stock options 1,261 - -
1,261 Restricted share unit plan (note 10) Stock-based compensation
expense 3,640 - - 3,640 Purchase of common shares for cash - - -
(4,796) Net earnings - 44,476 - 44,476 Foreign exchange translation
adjustment - - (3,536) (3,536) ---------- ---------- ----------
---------- Balance - October 31, 2005 $ 12,025 $ 156,017 $ (25,610)
$ 268,496 ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- Three months ended Six months
ended October 31 October 31 -----------------------
----------------------- 2005 2004 2005 2004 ----------- -----------
----------- ----------- Cash flows from (revised - (revised -
operating activities see note 2) see note 2) Net earnings for the
period $ 33,186 $ 15,204 $ 44,476 $ 28,716 Net earnings for the
period from discontinued operations 22,081 637 23,204 1,088
----------- ----------- ----------- ----------- Net earnings for
the period from continuing operations 11,105 14,567 21,272 27,628
Less: Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation 987 1,367 2,032 2,782
Amortization of intangible assets 2,050 2,290 4,344 4,536
Amortization of deferred financing costs 87 235 323 471 Stock-based
compensation 2,841 1,018 5,747 2,120 Employee future benefits 232
220 470 445 Future income tax expense 4,477 4,507 7,994 9,101
Accrued liabilities and interest write off 1,042 (366) 1,009
(1,027) Other (51) (59) (98) (54) Changes in operating assets and
liabilities (note 3) (21,821) (21,612) (34,839) (41,648)
----------- ----------- ----------- ----------- Net cash provided
by operating activities from continuing operations 949 2,167 8,254
4,354 Net cash provided by operating activities from discontinued
operations 834 785 1,525 794 ----------- ----------- -----------
----------- Net cash provided by operating activities 1,783 2,952
9,779 5,148 Cash flows from investing activities Proceeds from
divestiture of Interealty, net of cash divested 36,292 - 36,292 -
Purchases of investments - - - (4,525) Sales of investments - - -
31,025 Additions to property, plant and equipment (1,203) (573)
(2,151) (937) Disposals of property, plant and equipment 9 7 27 152
Change in restricted cash (2,254) (12) 2,334 (486) -----------
----------- ----------- ----------- Net cash provided by (used in)
investing activities from continuing operations 32,844 (578) 36,502
25,229 Net cash used in investing activities from discontinued
operations (495) (348) (609) (674) ----------- -----------
----------- ----------- Net cash provided by (used in) investing
activities 32,349 (926) 35,893 24,555 Cash flows from financing
activities Additions of other assets (1,974) - (1,974) - Issue of
common shares 2,170 666 5,030 2,125 Purchase of common shares - -
(4,796) - Repayment of long-term debt (106) (117) (212) (227)
----------- ----------- ----------- ----------- Net cash provided
by (used in) financing activities from continuing operations 90 549
(1,952) 1,898 Effect of exchange rate changes on cash and cash
equivalents 107 3,176 (5,401) 4,162 ----------- -----------
----------- ----------- Cash and cash equivalents Net increase in
cash and cash equivalents 34,329 5,751 38,319 35,763 Cash and cash
equivalents - beginning of period 192,124 116,062 188,134 86,050
----------- ----------- ----------- ----------- Cash and cash
equivalents - end of period $ 226,453 $ 121,813 $ 226,453 $ 121,813
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- 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 ("Canadian 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, 2005, 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, 2005. 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. Revisions to comparative figures Discontinued operations On
October 1, 2005, the Company sold substantially all the assets of
its Interealty business, the business within Geac that provides
Web-based MLS systems to realtors in North America, to First
American Corporation. The assets and liabilities and the results of
operations and cash flows for Interealty have been reported
separately as discontinued operations in the consolidated balance
sheet and the consolidated statements of earnings and cash flows.
Comparative figures for the three and six months ended October 31,
2004 have been reclassified in order to conform to this
presentation. Reclassification of investments The Company has
adjusted its consolidated statements of cash flows for the six
months ended October 31, 2004. In February 2005, the Company
determined that its 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 an increase of $26,500 in cash from investing
activities for the three months ended July 31, 2004 as a result of
net sales of the auction rate securities. These reclassifications
had no impact on the Company's results of operations. 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. 3. Changes in
operating assets and liabilities from continuing operations Changes
in operating assets and liabilities were as follows: Three months
ended Six months ended October 31 October 31
----------------------- ----------------------- 2005 2004 2005 2004
----------- ----------- ----------- ----------- Changes in
operating (revised - (revised - assets and liabilities: see note 2)
see note 2) Accounts receivable and other receivables $ (1,831) $
3,791 $ 5,919 $ 12,496 Prepaid expenses and other assets 858 165
2,829 306 Accounts payable and accrued liabilities 5,050 1,628
(10,828) (10,229) Accrued restructuring (261) (4,480) (872) (7,569)
Employee future benefits (374) (571) (2,379) (406) Asset retirement
obligation (27) 131 (292) 160 Income taxes payable (3,617) (479)
(2,482) 230 Deferred revenue (21,290) (21,912) (26,464) (36,773)
Other (329) 115 (270) 137 ----------- ----------- -----------
----------- Total changes in operating assets and liabilities $
(21,821) $ (21,612) $ (34,839) $ (41,648) ----------- -----------
----------- ----------- 4. Goodwill The change in the carrying
amount of goodwill is as follows: Goodwill balance, April 30, 2005
$ 110,142 Foreign exchange impact (1,197) ----------- Goodwill
balance, July 31, 2005 108,945 Foreign exchange impact 310
----------- Goodwill balance, October 31, 2005 $ 109,255
----------- ----------- 5. Employee future benefits The Company
recorded employee future benefit expenses as follows: Three months
ended Six months ended October 31 October 31
----------------------- ----------------------- 2005 2004 2005 2004
----------- ----------- ----------- ----------- Defined
contribution pension plans $ 441 $ 508 $ 911 $ 1,158 Defined
benefit pension plan 232 220 470 445 ----------- -----------
----------- ----------- $ 673 $ 728 $ 1,381 $ 1,603 -----------
----------- ----------- ----------- ----------- -----------
----------- ----------- 6. 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. The following table details the changes in the Company's
leasehold retirement liability for the six months ended October 31,
2005: Asset retirement obligations balance, April 30, 2005 $ 1,678
Additions to the obligations 23 Accretion charges 24 Payments (265)
Amounts released due to settlements (88) Foreign exchange impact
(101) ----------- Asset retirement obligations balance, July 31,
2005 1,271 Additions to the obligations 98 Accretion charges 22
Payments (27) Amounts released due to settlements (79) Foreign
exchange impact (64) ----------- Asset retirement obligations
balance, October 31, 2005 $ 1,221 ----------- ----------- 7. Net
restructuring and other unusual items The expense (recovery) in net
restructuring and other unusual items was comprised of the
following: Three months ended Six months ended October 31, October
31, ----------------------- ----------------------- 2005 2004 2005
2004 ----------- ----------- ----------- ----------- Unusual items
$ 4,202 $ - $ 4,169 $ - Restructuring reversals - (367) - (1,020)
----------- ----------- ----------- ----------- Net restructuring
and other unusual items $ 4,202 $ (367) $ 4,169 $ (1,020)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- Unusual items For the three
months ended October 31, 2005, the Company recorded $4,202 in
unusual items. Of this amount, $1,692 relates to the costs
associated with the termination of the Loan Agreement with Wells
Fargo Foothill, Inc. (see note 8). The remaining balance of $2,510
are associated with the proxy contest relating to the election of
the Board of Directors. For the six months ended October 31, 2005,
the unusual items balance of $4,169 was substantially comprised of
the aforementioned items. Restructuring expense For the three
months ended October 31, 2004, the net restructuring credit balance
of $367 was comprised of the release of previously accrued lease
termination costs that are no longer required. For the six months
ended October 31, 2004, the Company recorded a reversal of $1,020,
as several smaller restructuring accruals relating to severance
amounts and lease termination costs were released to adjust the
accruals to match the current estimates of the amounts required.
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, 2005 provision balance $ 4,265 $ 538 $ 4,803 Additions to
provision - 248 248 Costs charged against provisions (648) (362)
(1,010) Provision release - (13) (13) Foreign exchange impact (38)
(8) (46) ------------- ------------- ------------- July 31, 2005
provision balance 3,579 403 3,982 Additions to provision - 206 206
Costs charged against provisions (570) (477) (1,047) Foreign
exchange impact (7) 3 (4) ------------- ------------- -------------
October 31, 2005 provision balance $ 3,002 $ 135 3,137
------------- ------------- ------------- ------------- Less:
Current portion 2,239 -------------- Long-term portion of
restructuring accrual $ 898 ------------- ------------- During the
three and six months ended October 31, 2005, the Company accrued
$206 and $454, respectively, in severance related to the
rationalization of the Company's North American business locations.
Additionally, during the six months ended October 31, 2005 a
severance accrual of $13 was released through operations to adjust
the accrual to match the current estimates of the amounts required.
As at October 31, 2005, a balance of $135 is remaining for
severance, of which the remainder will substantially be paid by the
third quarter of fiscal 2007 and will include severance relating to
employees from the support and services, development and sales and
marketing areas. The remaining balance for accrued premises
restructuring was $3,002 as at October 31, 2005. Of this balance,
the Company has a restructuring liability of approximately $196
related to the acquisition of Comshare. This remaining balance
relates to lease termination costs and will be utilized through the
first quarter of fiscal 2008. Additionally, a balance of $1,202
remains related to the acquisition of Extensity and is expected to
be utilized through the second quarter of fiscal 2007. The
remaining balance relates to the rationalization of the Company's
North American and European business locations. The Company
anticipates that the remainder of the balance will be utilized
through fiscal 2025. 8. Credit facility On August 11, 2005 the
Company and certain of its subsidiaries entered into a Credit
Agreement (the "Credit Agreement") with a banking syndicate led by
Bank of America, N.A., pursuant to which the Company and certain of
its subsidiaries obtained a five-year, $150 million revolving
credit facility (the "new Facility"). The annual interest rate
payable on advances under the Facility is, at the Company's option,
the prime rate plus 25 to 75 basis points, or LIBOR plus 125 to 175
basis points. The fee paid on the unused portion of the new
Facility will range between 30 and 45 basis points. The new
Facility replaces the Company's previous $50 million, fully-
secured credit facility with Wells Fargo Foothill, Inc. (the "prior
Facility"). The new Facility is secured only by the common stock of
certain of the Company's material subsidiaries and is available for
working capital needs, acquisitions, and other general corporate
purposes of the Company. As of October 31, 2005, none of the new
Facility has been utilized. A balance of $150 million was available
to the Company. Financing costs of $1,960 incurred to close the
transaction were recorded as other assets in the second quarter of
fiscal 2006 and are being amortized to interest expense on a
straight-line basis over the term of the new Facility. Amortization
costs related to this financing was $87 in the quarter ended
October 31, 2005. As of October 31, 2005, the remaining unamortized
financing costs were $1,873. For the six months ended October 31,
2005, interest expense included the amortization of financing costs
of $236 related to the prior Facility and $87 related to the
Company's new Facility. For the three and six months ended October
31, 2004, amortization related to the financing costs on the prior
Facility was $235 and $471, respectively. Upon termination of the
prior Facility on August 11, 2005, the Company expensed to unusual
items the remaining unamortized financing costs of $1,042, the
termination penalty of $541 and closing costs of $109. The Company
is subject to various customary financial covenants under the new
Facility. The Company was in compliance with all such covenants as
at October 31, 2005. 9. Discontinued operations On October 1, 2005,
the Company completed the sale of substantially all the assets of
its Interealty business, the business within Geac that provides
Web-based MLS systems to realtors in North America, to First
American Corporation. The total consideration received was $36,293.
The Company recorded a pre-tax gain of $33,704 ($21,270 net of
income tax), recorded in discontinued operations on the
consolidated statement of earnings. The assets and liabilities and
the results of operations and cash flows for Interealty have been
reported separately as discontinued operations in the consolidated
balance sheet and the consolidated statements of earnings and cash
flows. Comparative figures for the three and six months ended
October 31, 2004 have been reclassified in order to conform to this
presentation. The Interealty business was included in the Company's
Industry Specific Applications segment for its segmented reporting.
The results of discontinued operations presented in the
consolidated statements of operations were as follows: Three months
ended Six months ended October 31, October 31, -------------------
------------------- 2005 2004 2005 2004 --------- ---------
--------- --------- Revenue $ 4,564 $ 5,956 $ 11,010 $ 11,824 Cost
of revenue 2,274 3,819 5,562 7,582 --------- --------- ---------
--------- Gross profit $ 2,290 $ 2,137 $ 5,448 $ 4,242 ---------
--------- --------- --------- --------- --------- ---------
--------- Earnings from discontinued operations before income tax
expense $ 1,237 $ 909 $ 2,964 $ 1,579 Income tax expense 426 272
1,030 491 --------- --------- --------- --------- Net earnings from
discontinued operations 811 637 1,934 1,088 Gain on divestiture,
net of tax expense of $12,434 21,270 - 21,270 - --------- ---------
--------- --------- Discontinued operations, net of income taxes $
22,081 $ 637 $ 23,204 $ 1,088 --------- --------- ---------
--------- --------- --------- --------- --------- The consolidated
balance sheets as at October 31, 2005 and April 30, 2005 include
Interealty balances. A summary of the assets and liabilities
related to the Interealty business is as follows: October April 31,
2005 30, 2005 --------- --------- Current assets related to
discontinued operations Cash $ 376 $ 108 Prepaid expenses and other
assets - 244 Accounts receivable and other receivables - 1,745
--------- --------- Total current assets related to discontinued
operations $ 376 $ 2,097 --------- --------- --------- ---------
Long-term assets related to discontinued operations Property,
plant, and equipment $ - $ 1,123 Other non-current assets - 111
Future income taxes - 1,029 --------- --------- Total long-term
assets related to discontinued operations $ - $ 2,263 ---------
--------- --------- --------- Current liabilities related to
discontinued operations Accounts payable and accrued liabilities $
376 $ 1,845 Deferred revenue - 2,112 --------- --------- Total
current liabilities related to discontinued operations $ 376 $
3,957 --------- --------- --------- --------- 10. Stock-based
compensation The Company uses the fair value method of accounting
to account for all stock-based compensation payments to employees
granted subsequent to April 30, 2003. Prior to May 1, 2003, the
Company accounted for its employee stock options and shares issued
under the Employee Stock Purchase Plan ("ESPP") using the
settlement method and no compensation expense was recognized. For
awards granted during the year ended April 30, 2003, pro forma net
earnings and earnings per share information is provided 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 fiscal 2003 is as
follows: Three months ended Six months ended October 31 October 31
----------------------- ----------------------- 2005 2004 2005 2004
----------- ----------- ----------- ----------- Net earnings - as
reported $ 33,186 $ 15,204 $ 44,476 $ 28,716 Pro forma stock-based
compensation expense, net of income taxes (76) (70) (147) (252)
----------- ----------- ----------- ----------- Net earnings - pro
forma $ 33,110 $ 15,134 $ 44,329 $ 28,464 ----------- -----------
----------- ----------- ----------- ----------- -----------
----------- Basic net earnings per common share - as reported $
0.39 $ 0.18 $ 0.52 $ 0.34 Pro forma stock-based compensation
expense per common share - - - - ----------- -----------
----------- ----------- Basic net earnings per common share - pro
forma $ 0.39 $ 0.17 $ 0.52 $ 0.34 ----------- -----------
----------- ----------- ----------- ----------- -----------
----------- Diluted net earnings per common share - as reported $
0.37 $ 0.17 $ 0.50 $ 0.33 Pro forma stock-based compensation
expense per common share - - - - ----------- -----------
----------- ----------- Diluted net earnings per common share - pro
forma $ 0.37 $ 0.17 $ 0.50 $ 0.33 ----------- -----------
----------- ----------- ----------- ----------- -----------
----------- The assumptions used to calculate pro forma stock-based
compensation were as follows: Assumptions - Stock Options Weighted
average risk-free interest rate 4.54% Weighted average expected
life (in years) 6.6 Weighted average volatility in the market price
of common shares 75.81% Weighted average dividend yield 0.00%
Weighted average grant date fair values of options issued $ 2.09
For the quarters ended October 31, 2005 and 2004, the Company
expensed $979 and $986, respectively, relating to the fair value of
stock options granted in fiscal 2004 and 2005. For the quarter
ended October 31, 2005, the Company expensed $119 relating to the
fair value of shares issued under the ESPP. No amount was expensed
relating to the fair value of shares issued under the ESPP for the
quarter ended October 31, 2004. For the six months ended October
31, 2005 and 2004, the Company expensed $1,901 and $1,636,
respectively, relating to the fair value of stock options granted
in fiscal 2004 and 2005 and $222 and $260, respectively, relating
to the fair value of shares issued under the ESPP. Contributed
surplus was credited $1,098 and $986 for these awards for the
quarters ended October 31, 2005 and 2004, respectively. For the six
months ended October 31, 2005 and 2004, contributed surplus was
credited $2,123 and $1,896, respectively, for these awards. The
remaining balance in contributed surplus will be reduced as the
stock options are forfeited or exercised. Contributed surplus was
reduced by $119 and $260 for the quarters ended October 31, 2005
and 2004, respectively, relating to shares issued under the ESPP.
For the six months ended October 31, 2005 and 2004, contributed
surplus was reduced by $243 and $260, respectively, relating to
shares issued under the ESPP. The estimated fair values of the
stock options and shares issued under the ESPP are amortized to
earnings over the vesting period on a straight- line basis and were
determined using the Black Scholes option pricing model with the
following weighted average assumptions: Three Six months months
ended ended October October 31, 2004 31, 2004 --------- ---------
Assumptions - Stock Options Weighted average risk free interest
rate 4.28% 4.33% Weighted average expected life (in years) 7.0 7.0
Weighted average volatility in the market price of common shares
65.14% 66.12% Weighted average dividend yield 0.00% 0.00% Weighted
average grant date fair values of options issued $4.38 $4.45 No
options were granted during the three and six months ended October
31, 2005. Three months ended Six months ended October 31, October
31, --------- ------------------- Assumptions - ESPP 2005 2005 2004
------------------ --------- --------- --------- Weighted average
risk free interest rate 2.88% 2.84% 2.21% Weighted average expected
life (in months) 6.0 6.0 6.0 Weighted average volatility in the
market price of common shares 29.01% 23.11% 37.44% Weighted average
dividend yield 0.00% 0.00% 0.00% Weighted average grant date fair
values of awards or shares issued $3.14 $2.73 $2.69 Directors'
deferred share unit plan 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 as compensation for the services rendered to the Company
as a Board member. As determined by the Company, units issued under
the plan may be payable in cash or common stock. For the three and
six months ended October 31, 2005, the Company had a recovery of
$138 and $12, respectively, in general and administrative expense
relating to the revaluation of the DSUs. For the three and six
months ended October 31, 2004, the Company expensed $32 and $224,
respectively, to general and administrative expense relating to the
DSUs. Accrued liabilities as at October 31, 2005 were debited $138
for these awards, and are adjusted each quarter based on the market
value of the units which have vested under the plan. Restricted
share unit plan In September 2004, the Board of Directors
authorized a restricted share unit ("RSU") plan. Under the RSU
plan, the Human Resources and Compensation Committee of the Board,
or its designee, may grant restricted share units to employees of
the Company as a bonus or similar payment in respect of services
rendered to the Company. Units issued under the RSU plan are
currently subject to vesting conditions as follows: 20% vest one
year subsequent to the grant date, 30% vest two years subsequent to
the grant date, and 50% vest three years subsequent to the grant
date. Each vested restricted share unit gives the employee the
right to receive one share of the Company's common stock. No
additional RSUs were granted during the quarter ended October 31,
2005. As at October 31, 2005, 1,332,250 units were outstanding
under the RSU plan. The common shares for which restricted share
units may be exchanged are purchased on the open market by a
trustee appointed and funded by the Company. As no common shares
will be issued by the Company pursuant to the plan, the plan is
non-dilutive to existing shareholders. Compensation expense related
to the Company's restricted share unit plan was $1,881 and $3,640,
for the three and six months ended October 31, 2005, respectively.
As of May 5, 2005, all of the common shares required for issuance
under the RSU plan were funded through open market purchases of the
Company's shares and are held in trust for the benefit of the RSU
plan participants. 11. Earnings per share The shares used in the
computation of the company's basic and diluted net earnings per
common share were as follows: Three months ended Six months ended
October 31 October 31 -----------------------
----------------------- 2005 2004 2005 2004 ----------- -----------
----------- ----------- Weighted average number of common shares
used in computing basic net earnings per share ('000s) 85,574
85,521 85,300 85,251 ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average number of common shares used in computing diluted
net earnings per share ('000s) 89,424 87,398 89,191 87,372
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- 12. 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 Activity
related to the Company's legal accruals was as follows: April 30,
2005 provision balance $ 96 Foreign exchange impact (8) ---------
July 31, 2005 provision balance 88 Foreign exchange impact -
--------- October 31, 2005 provision balance $ 88 ---------
--------- Extensity, a subsidiary acquired by Geac in March 2003,
is subject to a class action lawsuit, 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 lawsuit has been
consolidated with a number of similar class action lawsuits 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. The settlement is still subject to approval by
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. However, a
materially adverse outcome with respect to such matters may affect
our future financial position, results of operations or cash flows.
13. 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 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. Three months
ended Six months ended October 31, 2005 October 31, 2005
----------------------------- ----------------------------- EAS ISA
Total EAS ISA Total --------- --------- --------- ---------
--------- --------- Revenue: Software $ 16,328 $ 2,538 $ 18,866 $
27,445 $ 4,326 $ 31,771 Support and services 68,594 13,216 81,810
136,141 26,258 162,399 Hardware 1,859 652 2,511 5,200 1,093 6,293
--------- --------- --------- --------- --------- --------- Total
revenue $ 86,781 $ 16,406 $103,187 $168,786 $ 31,677 $200,463
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- Segment
contribution $ 23,292 $ 3,352 $ 26,644 $ 38,909 $ 2,539 $ 41,448
Three months ended Six months ended October 31, 2004 October 31,
2004 ----------------------------- -----------------------------
(revised - see note 2) (revised - see note 2) EAS ISA Total EAS ISA
Total --------- --------- --------- --------- --------- ---------
Revenue: Software $ 12,167 $ 2,795 $ 14,962 $ 25,475 $ 4,888 $
30,363 Support and services 68,846 14,190 83,036 138,542 28,190
166,732 Hardware 1,749 727 2,476 3,185 1,194 4,379 ---------
--------- --------- --------- --------- --------- Total revenue $
82,762 $ 17,712 $100,474 $167,202 $ 34,272 $201,474 ---------
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- Segment
contribution $ 22,129 $ 3,607 $ 25,736 $ 45,051 $ 6,113 $ 51,164
For the three and six months ended October 31, 2004, certain
general and administrative expenses have been reclassified from
corporate expenses to EAS segment expenses to provide a more
accurate portrayal of segment contribution. In addition, the ISA
balances exclude the results of Interealty. The reconciliation of
segment contribution to earnings from continuing operations before
income taxes is as follows: Three months ended Six months ended
October 31 October 31 -----------------------
----------------------- 2005 2004 2005 2004 ----------- -----------
----------- ----------- (revised - (revised - see note 2) see note
2) Segment contribution $ 26,644 $ 25,736 $ 41,448 $ 51,164
Corporate expenses (5,076) (4,292) (3,320) (8,251) Amortization of
intangible assets (2,050) (2,290) (4,344) (4,536) Interest income,
net 1,698 306 2,872 420 Other income, net 26 722 605 244 Net
restructuring and other unusual items (4,202) 367 (4,169) 1,020
----------- ----------- ----------- ----------- Earnings from
continuing operations before income taxes $ 17,040 $ 20,549 $
33,092 $ 40,061 ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- Geographical
information: Three months ended Six months ended October 31 October
31 ----------------------- ----------------------- 2005 2004 2005
2004 ----------- ----------- ----------- ----------- (revised -
(revised - see note 2) see note 2) Revenue by geographic location:
Americas $ 50,856 $ 47,866 $ 96,642 $ 96,862 Europe 44,720 43,609
88,518 87,238 Asia 7,611 8,999 15,303 17,344 -----------
----------- ----------- ----------- Total revenue $103,187 $100,474
$200,463 $201,474 ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- 14. 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 Six months ended October 31 October 31
----------------------- ----------------------- 2005 2004 2005 2004
----------- ----------- ----------- ----------- (revised - (revised
- see note 2) see note 2) Net earnings from continuing operations
under Canadian GAAP - as reported $ 11,105 $ 14,567 $ 21,272 $
27,628 Adjustments: Stock-based compensation (a) - (14) - (26)
Write off and amortization of intellectual property capitalized
under Canadian GAAP in connection with the Comshare acquisition (b)
75 75 150 150 Income taxes (c) (30) (30) (60) (60) -----------
----------- ----------- ----------- Net earnings from continuing
operations under U.S. GAAP 11,150 14,598 21,362 27,692 Discontinued
operations, net of income taxes 22,081 637 23,204 1,088 -----------
----------- ----------- ----------- Net earnings under U.S. GAAP
33,231 15,235 44,566 28,780 Other comprehensive income: Foreign
currency translation adjustment (78) 2,530 (3,421) 3,008
----------- ----------- ----------- ----------- Comprehensive
income under U.S. GAAP $ 33,153 $ 17,765 $ 41,145 $ 31,788
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- Net earnings per share from
continuing operations under U.S. GAAP: Basic net earnings per
common share $ 0.13 $ 0.17 $ 0.25 $ 0.32 ----------- -----------
----------- ----------- ----------- ----------- -----------
----------- Diluted net earnings per common share $ 0.12 $ 0.17 $
0.24 $ 0.32 ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- Net earnings per
share from discontinued operations under U.S. GAAP: Basic net
earnings per common share $ 0.26 $ 0.01 $ 0.27 $ 0.02 -----------
----------- ----------- ----------- ----------- -----------
----------- ----------- Diluted net earnings per common share $
0.25 $ - $ 0.26 $ 0.01 ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- Net
earnings per share under U.S. GAAP: Basic net earnings per common
share $ 0.39 $ 0.18 $ 0.52 $ 0.34 ----------- -----------
----------- ----------- ----------- ----------- -----------
----------- Diluted net earnings per common share $ 0.37 $ 0.17 $
0.50 $ 0.33 ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- Weighted average
number of common shares used in computing basic net earnings per
share ('000s) 85,574 85,521 85,300 85,251 ----------- -----------
----------- ----------- ----------- ----------- -----------
----------- Weighted average number of common shares used in
computing diluted net earnings per share ('000s) 89,424 87,398
89,191 87,372 ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- Stock-based
compensation a) Accounting for stock options In fiscal 2004, the
Company 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 on or after May 1, 2003 to both employees and
non-employees. The Canadian GAAP recommendations are substantially
harmonized with the existing U.S. GAAP rules, which have also been
adopted by the Company prospectively for all awards granted on or
after May 1, 2003. Therefore, no GAAP difference exists for stock
based compensation and awards granted in fiscal 2004 and
thereafter. In fiscal 2003 and prior periods, the Company did not
recognize any stock-based compensation cost under Canadian GAAP.
For U.S. GAAP, the Company elected to measure stock-based
compensation cost based on the difference, if any, on the date of
the grant, between the market value of the shares and the exercise
price (referred to as the "intrinsic value method") over the
vesting period. 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 Six months
ended October 31 October 31 -----------------------
----------------------- 2005 2004 2005 2004 ----------- -----------
----------- ----------- Net earnings under U.S. GAAP - as reported
above $ 33,231 $ 15,235 $ 44,566 $ 28,780 Pro forma stock-based
compensation expense, net of tax (234) (218) (476) (570)
----------- ----------- ----------- ----------- Net earnings - pro
forma $ 32,997 $ 15,017 $ 44,090 $ 28,210 ----------- -----------
----------- ----------- ----------- ----------- -----------
----------- Basic net earnings per common share under U.S. GAAP -
as reported above $ 0.39 $ 0.18 $ 0.52 $ 0.34 Pro forma stock-based
compensation expense per common share - - - (0.01) -----------
----------- ----------- ----------- Basic net earnings per common
share - pro forma $ 0.39 $ 0.18 $ 0.52 $ 0.33 -----------
----------- ----------- ----------- ----------- -----------
----------- ----------- Diluted net earnings per share under U.S.
GAAP - as reported above $ 0.37 $ 0.17 $ 0.50 $ 0.33 Pro forma
stock-based compensation expense per common share - - (0.01) (0.01)
----------- ----------- ----------- ----------- Diluted net
earnings per common share - pro forma $ 0.37 $ 0.17 $ 0.49 $ 0.32
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- 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-process research and development In
connection with the acquisition of Comshare, 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 $18,380 (April 30, 2005 -
$22,833) and the value of the Company's long-term future income tax
assets would be $20,512 (April 30, 2005 - $34,961). Goodwill
Although the new Canadian GAAP section for Income Taxes is
substantially harmonized with U.S. GAAP, it was applied
retroactively 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 $92,062 (April 30, 2005 - $92,835). c)
Income taxes Included in "Income taxes" is the income tax effect of
the adjustment related to amortization of in-process research and
development. 15. 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 supersedes 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. In April 2005, the Securities
and Exchange Commission (the "SEC") postponed the effective date of
SFAS 123R until the issuer's first fiscal year beginning after June
15, 2005. Under the current rules, the Company will be required to
adopt SFAS 123R in the first quarter of fiscal 2007, beginning May
1, 2006. 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. In March 2005, the SEC issued Staff
Accounting Bulletin No. 107 ("SAB 107") regarding the SEC's
interpretation of SFAS 123R and the valuation of share-based
payments for public companies. The Company is evaluating the
requirements of SFAS 123R and SAB 107 and expects that the adoption
of SFAS 123R on May 1, 2006 will not have a material impact on its
consolidated results of operations and earnings per share. The
Company has not yet determined the method of adoption or the effect
of adopting SFAS 123R, and it has not determined whether the
adoption will result in amounts that are similar to the current pro
forma disclosures under SFAS 123. Exchanges of Non-monetary Assets
In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Non-monetary Assets - An Amendment of Accounting Principles Board
Opinion No. 29, Accounting for Non-monetary Transactions" ("SFAS
153"). SFAS 153 eliminates the exception from fair value
measurement for non-monetary exchanges of similar productive assets
in paragraph 21(b) of APB Opinion No. 29, "Accounting for
Non-monetary Transactions," and replaces it with an exception for
exchanges that do not have commercial substance. SFAS 153 specifies
that a non-monetary 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 was adopted by the Company in the
second quarter of fiscal 2006, beginning on August 1, 2005. The
adoption of Statement 153 had no effect on its consolidated
financial position, results of operations or cash flows. Accounting
Changes and Error Corrections On June 7, 2005, the FASB issued
Statement No. 154, Accounting Changes and Error Corrections, a
replacement of APB Opinion No. 20, Accounting Changes, and
Statement No. 3, Reporting Accounting Changes in Interim Financial
Statements. Statement 154 changes the requirements for the
accounting for and reporting of a change in accounting principle.
Previously, most voluntary changes in accounting principles
required recognition of a cumulative effect adjustment within net
income of the period of the change. Statement 154 requires
retrospective application to prior periods' financial statements,
unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. Statement 154 is
effective for accounting changes made in fiscal years beginning
after December 15, 2005; however, the Statement does not change the
transition provisions of any existing accounting pronouncements. We
do not believe adoption of Statement 154 will have a material
effect on our consolidated financial position, results of
operations or cash flows. Amortization Period for Leasehold
Improvements On June 29, 2005, the FASB ratified the EITF's Issue
No. 05-06, Determining the Amortization Period for Leasehold
Improvements. Issue 05-06 provides that the amortization period
used for leasehold improvements acquired in a business combination
or purchased after the inception of a lease be the shorter of (a)
the useful life of the assets or (b) a term that includes required
lease periods and renewals that are reasonably assured upon the
acquisition or the purchase. The provisions of Issue 05-06 are
effective on a prospective basis for leasehold improvements
purchased or acquired in reporting periods beginning after board
ratification (June 29, 2005). We do not believe the adoption of
Issue 05-06 will have a material effect on our consolidated
financial position, results of operations or cash flows. 16.
Subsequent event On November 7, 2005, the Company announced that it
reached a definitive agreement ("the Agreement") with Golden Gate
Capital, for Golden Gate Capital to acquire Geac in an all-cash
transaction valued at $11.10 per share, or approximately $1.0
billion, pursuant to a plan of arrangement. Both parties anticipate
closing the transaction in the first calendar quarter of 2006. The
closing is subject to certain customary closing conditions,
including receipt of required regulatory approvals and Geac
shareholder and court approval of the plan of arrangement. Under
terms specified in the Agreement, Geac or Golden Gate Capital may
terminate the Agreement, and as a result either Geac or Golden Gate
Capital will be required to pay a $25 million termination fee to
the other party. Either Geac or Golden Gate Capital may terminate
the Agreement if the acquisition has not closed by March 16, 2006,
as long as the terminating party has not caused the delay in
closing by not complying with a term of the Agreement. 17.
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, (781) 672-5980,
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