LGS Group Announces Third Quarter Results
FEBRUARY 14, 2000
MONTREAL, QUEBEC--For the third quarter ended December 31, 1999,
LGS Group (LGSA at NASDAQ) announces revenue of $57.0 million,
compared to $59.5 million in the corresponding quarter in 1998.
The quarter shows a net loss of $1.6 million, or 13 cents per
share, compared to net earnings of $2.4 million, or 19 cents per
share, in the third quarter ended December 31, 1998.
For the first nine months of the fiscal year, the company's
revenue reached $175.6 million, compared to $160.0 million during
the first three quarters of the previous year, an increase of 10
%. Net earnings were $1.3 million, or 10 cents per share,
compared to $6.3 million, or 56 cents per share, a year earlier.
LGS Group President Raymond Lafontaine said "the slowdown
experienced in our sector as we approached the Y2K transition led
us to reduce our costs. We decided to let go several employees
whose skills no longer corresponded to our market's needs, and
this entailed the payment of severance packages during the
quarter. This difficult decision, however, will allow us to pick
up the pace more quickly on the road to profitability in the
coming months. Moreover, with the winding down of new millennium
work, we expect activities to resume strongly, which should
translate into an upturn in our revenue in the first few months of
our next fiscal year."
LGS Group Senior Executive Vice President Andre Gauthier drew
attention to the investments made by LGS in its internal systems,
and in the training related to alliances with partners Microsoft,
and Siebel in the area of customer relationship management (CRM).
"These investments, now largely completed make us more competitive
and allow us to establish a strong foothold in the market in
promising sectors such as e-commerce and customer relationship
management," he said. "In these fields, we are also investing in
the development of business solutions that are unique to LGS and
this will allow us to position ourselves well in these very
promising markets," added Mr. Gauthier.
Moreover, in the third quarter, LGS Group revenue was higher
compared to the second quarter of the current fiscal year,
increasing from $55 million to $57.0 million. The company's
European activities, which from now on include revenue from
BlueChip Informatica in Italy, continue to be profitable. In the
United States, the company was awarded a schedule contract by
Washington's General Services Administration (GSA) and can now
submit tenders to provide IT services to any American federal
government agency. And finally, LGS shares are now listed on the
Toronto Stock Exchange, yet another positive development during
the past quarter, thanks mainly to an increasing volume of
transactions on the stock.
LGS Group Inc. (LGSA at NASDAQ, LGS.A at TSE) is one of Canada's
largest information technology consulting firms specializing in
management and systems integration. With annual sales of $230
million in the financial year ended March 31, 1999, LGS currently
employs more than 2,000 professionals in 20 offices in Canada, the
United States and Europe. The company is active in most areas of
the private and public sectors.
This release may contain forward-looking statements that involve
risks and uncertainties which might cause the actual results to
differ materially from those projected. Potential risks and
uncertainties include the ability to procure, properly price,
retain, and successfully complete projects, the availability of
technical personnel, and competition. These risks and
uncertainties are discussed under the heading "Risk Management" in
the Company's Annual Report.
/T/
LGS GROUP INC.
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31
(in thousands of canadian dollars)
-----------------------------------------------------------------------
1999 1998
-----------------------------------------------------------------------
ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents 13,345 25,408
Accounts receivable 54,057 62,478
Work in process 12,369 8,621
Inventories 2,038 2,002
Income taxes 4,230 227
Prepaid expenses 1,522 1,505
-----------------------------------------------------------------------
87,561 100,241
CAPITAL ASSETS 18,779 10,904
DEFERRED DEVELOPMENT COSTS 1,314 2,113
OTHER ASSETS 17,879 13,880
-----------------------------------------------------------------------
125,533 127,138
-----------------------------------------------------------------------
-----------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness 3,468 778
Accounts payable and accrued liabilities 27,727 33,474
Income Taxes 1,010 4,174
Advances and deferred revenues 9,620 12,579
Current portion of long-term debt 3,126 1,496
-----------------------------------------------------------------------
44,951 52,501
LONG-TERM DEBT 3,746 1,808
OTHER LIABILITIES 3,457 2,519
-----------------------------------------------------------------------
52,154 56,828
-----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
CAPITAL STOCK 59,409 59,716
RETAINED EARNINGS 14,698 10,633
CUMULATIVE TRANSLATION ADJUSTMENT (728) (39)
-----------------------------------------------------------------------
73,379 70,310
-----------------------------------------------------------------------
125,533 127,138
-----------------------------------------------------------------------
-----------------------------------------------------------------------
LGS GROUP INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
NINE MONTHS ENDED DECEMBER 31
(in thousands of canadian dollars)
-----------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------
(unaudited)
BALANCE - BEGINNING OF PERIOD 13,670 6,449 2,960
Net earnings for the period 1,317 6,334 2,214
-----------------------------------------------------------------------
14,987 12,783 5,174
Class A subordinate shares issue
costs (net of future income
taxes of $903,000) - (2 150) (13)
Premium on redemption of Class
A subordinate shares (289)
-----------------------------------------------------------------------
BALANCE - END OF PERIOD 14,698 10,633 5,161
-----------------------------------------------------------------------
-----------------------------------------------------------------------
LGS GROUP INC.
CONSOLIDATED STATEMENTS OF EARNINGS
NINE MONTHS ENDED DECEMBER 31
(in thousands of canadian dollars, except per share amounts)
-----------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------
(unaudited)
REVENUE 175,630 160,026 90,828
-----------------------------------------------------------------------
EXPENSES
Operating and administrative 167,964 145,517 84,449
Amortization 4,436 3,455 1,821
Interest on long-term debt 220 63 65
Other interest (436) (726) 164
-----------------------------------------------------------------------
172,184 148,309 86,499
-----------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND
GOODWILL CHARGES 3,446 11,717 4,329
PROVISION FOR INCOME TAXES 1,509 5,200 2,033
-----------------------------------------------------------------------
EARNINGS BEFORE GOODWILL CHARGES 1,937 6,517 2,296
GOODWILL - Net of applicable income
taxes of $189,200; $69,300 in 1998;
$44,600 in 1997 620 183 82
-----------------------------------------------------------------------
NET EARNINGS FOR THE PERIOD 1,317 6,334 2,214
-----------------------------------------------------------------------
-----------------------------------------------------------------------
EARNINGS BEFORE GOODWILL PER SHARE:
BASIC $0.15 $0.57 $0.24
-----------------------------------------------------------------------
-----------------------------------------------------------------------
FULLY DILUTED $0.15 $0.50 $0.23
-----------------------------------------------------------------------
-----------------------------------------------------------------------
NET EARNINGS PER SHARE:
BASIC $0.10 $0.56 $0.23
-----------------------------------------------------------------------
-----------------------------------------------------------------------
FULLY DILUTED $0.10 $0.49 $0.23
-----------------------------------------------------------------------
-----------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
OUTSTANDING CLASS A AND B
SHARES 12,804,085 11,403,704 9,624,823
-----------------------------------------------------------------------
-----------------------------------------------------------------------
LGS GROUP INC.
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED DECEMBER 31
(in thousands of canadian dollars, except per share amounts)
-----------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------
(unaudited)
REVENUE 57,010 59,470 34,606
EXPENSES
Operating and administrative 58,209 53,899 32,014
Amortization 1,559 1,436 756
Interest on long-term debt 104 13 22
Other interest (145) (358) 77
-----------------------------------------------------------------------
59,727 54,990 32,869
-----------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND GOODWILL CHARGES (2,717) 4,480 1,737
PROVISION FOR INCOME TAXES (1,298) 1,977 790
-----------------------------------------------------------------------
EARNINGS (LOSS) BEFORE GOODWILL
CHARGES (1,419) 2,503 947
GOODWILL - Net of applicable income
taxes of $62,300; $35,000 in 1998;
$14,800 in 1997 206 93 28
-----------------------------------------------------------------------
NET EARNINGS (LOSS) FOR THE PERIOD (1,625) 2,410 919
-----------------------------------------------------------------------
-----------------------------------------------------------------------
EARNINGS (LOSS) BEFORE GOODWILL
PER SHARE:
BASIC -$0.11 $0.20 $0.10
-----------------------------------------------------------------------
-----------------------------------------------------------------------
FULLY DILUTED -$0.10 $0.18 $0.10
-----------------------------------------------------------------------
NET EARNINGS (LOSS) PER SHARE:
BASIC -$0.13 $0.19 $0.10
-----------------------------------------------------------------------
-----------------------------------------------------------------------
FULLY DILUTED -$0.12 $0.17 $0.10
-----------------------------------------------------------------------
-----------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
OUTSTANDING CLASS A AND B
SHARES 12,780,109 12,477,296 9,624,823
-----------------------------------------------------------------------
-----------------------------------------------------------------------
LGS GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31
(in thousands of canadian dollars)
-----------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings 1,317 6,334 2,214
Adjustments for:
Amortization 5,245 3,707 1,947
Pension plan 567 339 339
Future income taxes (645) (159) 546
Changes in non-cash working capital
components (7,468) (8,491) (5,078)
-----------------------------------------------------------------------
(984) 1,730 (32)
-----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank indebtedness 3,044 (3,031) (1,844)
Repayment on long-term debt (1,839) (1,683) (500)
Long-term debt - - -
Redemption of Class A subordinate
shares (712) - -
Net proceeds on issue of shares 27 37,065 5,276
Lease inducement 457 - -
-----------------------------------------------------------------------
977 32,351 2,932
-----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of capital assets (8,429) (4,129) (2,014)
Deferred development costs - - (2,865)
Acquisition of a subsidiary (2,249) (6,251) -
Investments (3,950) -
-----------------------------------------------------------------------
(10,678) (14,330) (4,879)
-----------------------------------------------------------------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS (10,685) 19,751 (1,979)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 24,030 1,708 3,194
-----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END
OF PERIOD 13,345 21,459 1,215
-----------------------------------------------------------------------
-----------------------------------------------------------------------
LGS Group Inc.
Consolidated statements of earnings - Additional information
Three months ended December 31
(UNAUDITED)
(in thousands of Canadian dollars)
Systems Integration
& other E-Commerce
1999 North America Europe Unit TOTAL
Revenue 39,570 11,314 6,126 57,010
Operating and Administrative
expenses 39,034 10,814 7,109 56,957
Amortization 1,128 301 130 1,559
---------------------------------------------------------------------
Operating Income (592) 199 (1,113) (1,506)
Severance Costs (1,000) - - (1,000)
Interest (net) 48 (7) 41
Foreign Exchange loss (118) (134) - (252)
---------------------------------------------------------------------
Earnings (loss) before taxes
and goodwill charges (1,662) 58 (1,113) (2,717)
Provision for Income taxes 778 (11) 531 1,298
---------------------------------------------------------------------
Earnings (loss) before
goodwill charges (884) 47 (582) (1,419)
Goodwill net of taxes (28) (28) (150) (206)
---------------------------------------------------------------------
Net earnings (loss) for the
period (912) 19 (732) (1,625)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net earnings per share: (0.07) 0.00 (0.06) (0.13)
Weighted average outstanding
shares 12,780
---------------------------------------------------------------------
---------------------------------------------------------------------
Systems Integration
& other E-Commerce
1998 North America Europe Unit TOTAL
Revenue 46,962 12,508 - 59,470
Operating and Administrative
expenses 41,771 12,096 - 53,867
Amortization 930 506 - 1,436
---------------------------------------------------------------------
Operating Income 4,261 (94) - 4,167
Interest (net) 355 (10) 345
Foreign Exchange loss 2 (34) - (32)
---------------------------------------------------------------------
Earnings (loss) before taxes
and goodwill charges 4,618 (138) - 4,480
Provision for Income taxes (2,056) 79 - (1,977)
Earnings (loss) before
goodwill charges 2,562 (59) - 2,503
Goodwill net of taxes (81) (12) - (93)
---------------------------------------------------------------------
Net earnings for the period 2,481 (71) - 2,410
---------------------------------------------------------------------
---------------------------------------------------------------------
Net earnings per share: 0.20 (0.01) - 0.19
Weighted average outstanding
shares 12,477
Groupe LGS Inc.
Consolidated statements of earnings - Additional information
Nine months ended December 31,
(UNAUDITED)
(in thousands of Canadian dollars)
Systems Integration
& other E-Commerce
1999 North America Europe Unit TOTAL
Revenue 126,721 31,628 17,281 175,630
Operating and Administrative
expenses 118,198 29,503 18,701 166,402
Amortization 3,193 897 346 4,436
---------------------------------------------------------------------
Operating Income 5,330 1,228 (1,766) 4,792
Severance Costs (1,000) - - (1,000)
Interest (net) 242 (26) 216
Foreign Exchange loss (147) (415) (562)
---------------------------------------------------------------------
Earnings before taxes and
goodwill charges 4,425 787 (1,766) 3,446
0 (2,132) (221) 844 (1,509)
---------------------------------------------------------------------
Earnings before goodwill
charges 2,293 566 (922) 1,937
0 (83) (86) (451) (620)
---------------------------------------------------------------------
Net earnings (loss) for the
period 2,210 480 (1,373) 1,317
---------------------------------------------------------------------
---------------------------------------------------------------------
Net earnings per share: 0.17 0.04 (0.11) 0.10
Weighted average outstanding
shares 12,804
---------------------------------------------------------------------
---------------------------------------------------------------------
Systems Integration
& other E-Commerce
1998 North America Europe Unit TOTAL
Revenue 131,412 28,614 - 160,026
Operating and Administrative
expenses 117,936 27,323 - 145,259
Amortization 2,262 1,193 - 3,455
---------------------------------------------------------------------
Operating Income 11,214 98 - 11,312
Severance Costs - - - -
Interest (net) 705 (42) 663
Foreign Exchange loss 2 (260) (258)
---------------------------------------------------------------------
Earnings before taxes and
goodwill charges 11,921 (204) - 11,717
Provision for Income taxes (5,308) 108 - (5,200)
---------------------------------------------------------------------
Earnings before goodwill
charges 6,613 (96) - 6,517
0 (147) (36) - (183)
---------------------------------------------------------------------
Net earnings for the period 6,466 (132) - 6,334
---------------------------------------------------------------------
---------------------------------------------------------------------
Net earnings per share: 0.57 (0.01) - 0.56
Weighted average outstanding
shares 11,404 |
