ACD Systems International Inc.
TSX : ASA

ACD Systems International Inc.

November 10, 2006 17:00 ET

ACD Systems Reports Fiscal 2007 Second Quarter Results

VICTORIA, BRITISH COLUMBIA--(CCNMatthews - Nov. 10, 2006) - ACD Systems International Inc. (TSX:ASA), makers of ACDSee® photo management software and Canvas™ technical illustration software, today reported its Q2 2007 results. The financial figures in this release are reported in Canadian dollars in accordance with Canadian generally accepted accounting principles.



Summary of Financial Results (unaudited)
(millions of Canadian dollars except per share data)

Three months ended
September 30
2006 2005
------------------------
Sales $ 3.1 $ 4.5
Net loss (5.5) (1.9)
Number of shares-basic and diluted (millions) 21.1 22.8
Loss per share, basic and diluted $ (0.26) $ (0.08)

Six months ended
September 30
2006 2005
------------------------
Sales $ 6.8 $ 8.6
Net loss (7.0) (2.8)
Number of shares-basic and diluted (millions) 21.1 23.1
Loss per share, basic and diluted $ (0.33) $ (0.12)


Summary of Q2 FY2006 Accomplishments

- ACD launched ACDSee 9.0 Photo Manager and ACDSee Photo Editor

Financial Highlights

Sales for the quarter ended September 30, 2006 were $3.1 million compared to $4.5 million in same quarter in the prior year. Year-to-date sales were $6.8 million compared to $8.6 million in the six-month period ended September 30, 2005.

Digital imaging software sales during the second quarter, ended September 30, 2006 were $2.8 million versus $3.3 million in the same quarter of the prior year. In the six month period ended September 30, 2006 digital imaging sales were $5.8 million, a decrease from $6.3 million in the same period in the prior year. This decline was primarily due to increased competition in the distribution of free and name-brand digital image management and editing applications and lower than normal site traffic and conversion The Company's digital imaging software segment derives the majority of its revenues in U.S. dollars and Euros. Both the U.S. dollar and the Euro have weakened compared to the prior year, which resulted in a $0.4 million decrease in sales for the six months ended September 30, 2006 compared to the prior half year and a decrease of $0.15 million in sales for the quarter ended September 30, 2006 compared to the prior year.

Technical drawing software sales decreased from $1.2 million in the quarter ended September 30, 2005 to $0.3 million for the three months ended September 30, 2006. In the six month period ended September 30, 2006, technical drawing software sales decreased from $2.3 million in the prior year period to $1.0 million in the current six month period. These decreases were the result of Canvas X being released in the first quarter of the prior year on a two year development cycle. The decrease was exacerbated by uncertainty regarding the release timing of the next version of Canvas. The Company derives the majority of its technical drawing software revenue in U.S. dollars. The weakening U.S. dollar resulted in a $0.04 million reduction in revenue quarter over quarter and a $0.1 million reduction in revenue year over year to date.

Restructuring costs in the second quarter of $0.18 million, and $0.33 million year to date, consisted of employee wages, severance and associated costs related to the restructuring of operations carried out during the second quarter of fiscal 2007.

Operating expenses, excluding amortization, foreign currency gains and losses, restructuring costs, intangible asset impairment charges and investment tax credit allowances charged to R&D, for the three months ended September 30, 2006 were $3.9 million compared to $5.0 million for the same quarter in the prior year and for the six months ended September 30, 2006 were $8.1 million compared to $9.6 million for the same period in the prior year. The decrease in operating expenses is primarily due to lower sales, marketing and customer service expenses, an outcome of the restructure which took place early in the second quarter of the current year.

In the second quarter of 2007, the Company reviewed the recoverability of its intangible assets as circumstances arose which indicated that the carrying amount of the assets may not be recoverable. The technical drawing reporting unit, which holds the majority of intangible assets, has suffered operating losses and negative quarterly cash flows from poor market conditions throughout fiscal 2005, 2006 and the first six months of fiscal 2007. As a result, the Company concluded the fair value of these long-lived assets was less than their carrying value and wrote the intangible assets down to nil; representing their estimated fair value. The impairment recorded was a loss of $2.8 million.

The Company also determined that criteria for the recognition of future income tax assets will not be met at the end of the current fiscal year. Accordingly, a valuation allowance of $0.8 million has been applied against all the remaining future income tax assets and investment tax credits of the Company during the three months ended September 30, 2006.

Net loss for the current quarter was $5.5 million compared to a net loss of $1.9 million in the second quarter of the previous fiscal year. Net loss for the six months ended September 30, 2006 was $7.0 million compared to a net loss of $2.8 million for the six months ended September 30, 2005. Excluding the intangible asset impairment loss, restructuring costs and the net effect of the write down of future income taxes and investment tax credits, the net loss for the current quarter was $1.8 million and for the current six months was $3.3 million.

Total assets at September 30, 2006 were $14.0 million, a decrease of $10.9 million, compared to $24.9 million at March 31, 2006. The write down of future income tax assets and intangible assets accounts for $8.2 million of this decrease. The Company's cash position was $10.5 million at September 30, 2006 compared to $12.7 million at March 31, 2006. Working capital at September 30, 2006 decreased by $3.0 million from March 31, 2006 due to reduced cash, accounts receivable and future income tax assets.

ACD Systems will conduct a teleconference on November 14, 2006 at 10:30 a.m. Eastern Standard Time. To participate in the conference call, please use the phone numbers listed below.



Date: November 14, 2006
Time: 10:30 am EST (7:30 am PST)
Dial In Numbers:
Toll Free (North America): 866-585-6398
International: 416-849-9626


Members of the news media, investors and the general public are invited to access a live broadcast of the conference call via the Investor Relations page of ACD Systems Web site at:

http://www.acdcorporate.com/english/Investors/financial.htm

The event will be archived and available for replay through 11/14/2007.

Further details with respect to ACD Systems' year-end results, including the complete financial statements, will be available for download at http://www.sedar.com/.

About ACD Systems

Headquartered in British Columbia since 1993, ACD Systems International Inc. (TSX:ASA) is one of the world's leading developers and marketers of digital imaging software, including the renowned ACDSee image management tool and Canvas, an advanced cross-platform technical illustration and graphics program. ACD has delivered value to a global marketplace through Internet distribution and through partnerships with manufacturers and developers. ACD has millions of consumer and business users, and over 33,000 corporate customers including many Fortune 500 companies. For further details, please visit us at our corporate web site: http://www.acdcorporate.com/.

Certain statements contained in this press release including words such as "looks forward", "anticipate", "could", "should", "expect", believe", "will" and similar expressions and statements relating to matters that are not historical facts are forward-looking statements. Such forward-looking statements involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.


Contact Information

  • ACD Systems International Inc. - Investors
    Doug Vandekerkhove
    Corporate Affairs
    (250) 544-6700
    Email: ir@acdsee.com
    or
    ACD Systems International Inc. - Media
    James Latham
    Vice President Marketing
    (250) 544-6700
    Email: pr@acdsee.com
    Website: www.acdsee.com