Geac Computer Corporation Limited.

Geac Announces Fiscal Year 2006 Second Quarter Results

Markham, Canada and Waltham, Massachusetts (ots/PRNewswire) - 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 www.sedar.com and the United States Securities and Exchange Commission at 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 info@geac.com. 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 www.sec.gov and through the website maintained by the Canadian Securities Administrators and the Canadian Depository for Securities Limited at 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 ---------- ---------- ---------- ---------- <emnd_table> 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. ots Originaltext: Geac Computer Corporation Limited. Im Internet recherchierbar: http://www.presseportal.ch

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