Logibec Groupe Informatique Ltd.
TSX : LGI

Logibec Groupe Informatique Ltd.

August 10, 2005 18:42 ET

Logibec Announces a 55% Increase in Third Quarter Net Earnings

MONTREAL, QUEBEC--(CCNMatthews - Aug. 10, 2005) - Logibec Groupe Informatique Ltd. (TSX:LGI) announced today the results of its third quarter ended June 30, 2005. All monetary amounts are expressed in Canadian dollars.

HIGHLIGHTS



- Net earnings of $1.1 million, up 55%, or $0.15 per share for the
quarter, compared to $0.11 per share for the same period in fiscal
2004, despite an increase of 8% in the number of shares
outstanding.

- Cumulative net earnings of $3.4 million for the nine months ended
June 30, 2005, or $0.49 per share, representing an increase of 52%
compared to $2.3 million or $0.34 per share for the same period in
fiscal 2004.

- Acquisition of 100% of the common shares of MDI Technologies, Inc.
following the successful completion of a takeover bid for the
company on June 20, 2005 and the subsequent merger that required
the remaining shareholders to tender their shares.

- Issuance of 1.3 million common shares via private placement for
consideration of $12.6 million, net of commissions.

- Recurring revenues up 7% to $5.1 million compared to $4.8 million
for the same period in the previous fiscal year.

- Revenues for the third quarter 2005 up 2% to $7.3 million compared
to $7.2 million for the same period in the previous fiscal year.

- Cumulative revenue up 4% to $22.4 million for the nine-month period
ended June 30, 2005 compared to $21.7 million for the same period
in the previous fiscal year.


OPERATING RESULTS

REVENUE

Revenues for the third quarter of fiscal 2005 stood at $7.3 million, an increase of 2% compared to $7.2 million for the same period in the prior fiscal year. This increase is primarily due to a $0.3 million, or 7%, increase in recurring revenue. Growth in recurring revenue was derived from an increase in annual right of use revenue as well as from the contribution of MDI's recurring revenues for the 10-day period between June 21 and 30, 2005.

Non-recurring revenue decreased by $0.2 million compared to the third quarter of the previous fiscal year. This decrease is explained on the one hand by a $0.1 million decrease in revenue from the sale of equipment as a result of several customers postponing their purchase decisions to the quarter ending September 30, 2005 and on the other hand by a $0.1 million decrease in professional services revenue as a result of fewer special projects related to our payroll solution.

Revenue for the nine-month period ending June 30, 2005 increased by $0.8 million, or 4% compared to the same period last year, to stand at $22.4 million. This increase is primarily due to an increase of $1.4 million or 9% in recurring revenue, and a decrease of $0.6 million or 8% in non-recurring revenue, primarily sales of equipment and of third party products.

Management continues to be satisfied with the increase in recurring revenue, given the changes in the structure of the healthcare sector in Quebec, namely the regionalization of healthcare services and the merging of healthcare facilities in Quebec and Canada as a whole. During the year, the Company responded to an unusually large number of requests for services resulting from the higher profile of the newly-formed regional agencies, as well as the planning, organizing and rationalization activities of the new healthcare organizations. These changes resulted in an extremely high level of activity throughout the year for our business development teams as well as our product development people in this area.

In our opinion this situation will continue for several quarters and will provide us with opportunities to increase our market share in this sector. We expect, however, to face increased pricing pressure as a result of these changes. We believe that the net effect of these changes will be an increased demand for highly integrated and high-performance software solutions, and a higher level of after-sale service. We view this as an opportunity to distinguish ourselves in a positive way from our competitors. Furthermore, the MDI acquisition and the geographical diversification of our revenue base that results will decrease the business risk currently present in the Quebec healthcare market.

OPERATING INCOME

Operating income before depreciation, amortization, income from temporary investments, financial expenses and taxes for the quarter ended June 30, 2005 was $2.8 million, representing an increase of $0.3 million or 11% over the same period last year.

For the nine-month period ended June 30, 2005, operating income before depreciation, amortization, income from temporary investments, financial expenses and taxes was $8.6 million or 38% of total revenues. This represents an increase of $1.4 million or 19% compared to the same period last year.

OPERATING EXPENSES
Operating expenses for the quarter were $4.5 million, a decrease of 3% compared to the same period in the prior fiscal year. The decrease is a result of a significant decrease in selling, general and administrative expenses, combined with an increase in service costs.

Service costs stood at $3.6 million up 5% for the period due to annual salary increases, a larger proportion of software development costs being expensed rather than capitalized.

Selling, general, and administrative expenses stood at $0.9 million or 13% of revenue for the quarter compared to $1.2 million or 17% of revenues for the same period last year. Such expenses included a charge of $69,762 related to the granting of 134,000 stock options on April 1, 2005, to three officers of the Company. The calculation of this charge is detailed in note 6 of the consolidated financial statements for the nine months ended June 30, 2005. The significant decrease in selling, general and administrative expenses is primarily due to a decrease in provisions for incentive compensation and to the reclassification to service costs of the royalties payable to Centre Hospitalier de l'Universite de Montreal.

DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND OTHER LONG-TERM ASSETS

Depreciation and amortization of property, plant, and equipment, intangible assets and other long-term assets for the quarter ended June 30, 2005 decreased to $1.1 million or 17% compared to the same period last year. Depreciation of property, plant and equipment decreased by $0.1 million for the quarter following the renewal of the Company's leases in the Cite du Multimedia complex until 2012 and the depreciation of leasehold improvements over a longer period. Amortization of intangible and other long-term assets also decreased by $0.1 million and stood at $0.8 million. During the fiscal year 2004, the Company accelerated the amortization of certain software packages that had been capitalized as intangible assets. The result was a lower amount of intangible assets on the balance sheet at the beginning of fiscal year 2005 than fiscal year 2004 and, consequentially, lower amortization charges for fiscal 2005.

FINANCIAL EXPENSES

Financing expenses were $0.2 million for the quarter, representing an increase of 9% compared to financing expenses for the same period last year. Financial expenses are mainly comprised of interest costs related to the credit facilities obtained to finance the takeover bid for MDI and the subsequent merger.

NET EARNINGS

Net earnings for the third quarter ended June 30, 2005 increased by 55% to $1.1 million or $0.15 per share ($0.14 per fully-diluted share). This compares to $0.7 million or $0.11 per share ($0.10 per fully-diluted share), for the same period in the prior year.

Net earnings for the nine-month period ended June 30, 2005 increased by 52% compared to the same period last year, and stood at $3.4 million or $0.49 per share ($0.46 per fully-diluted share). This compares favorably to net earnings of $2.3 million or $0.34 per share ($0.32 per fully-diluted share) for this same period in fiscal 2004 and surpasses net earnings for the entire 2004 fiscal year which stood at $3.0 million or $0.45 per share ($0.42 per fully-diluted share).

LIQUIDITY AND SOURCES OF FINANCING

OPERATING ACTIVITIES

For the quarter ended June 30, 2005, operating activities generated cash flows of $9.1 million compared to $6.8 million for the same quarter in the prior fiscal year. This increase is mainly generated by changes in non-cash working capital items, namely an increase in the number of customers who paid their annual rights of use in advance and a lesser decrease in accounts payable and accrued liabilities.

INVESTING ACTIVITIES

The main investing activity of the third quarter was the MDI acquisition, a TSX Venture listed company based in St. Louis, Missouri.

On April 29, 2005, the Company launched, through its wholly-owned subsidiary LGI Acquisition, Inc. ("LGIA"), an unsolicited all-cash offer for all of MDI's common shares (the "Shares") at a price of US$2.40 per Share. Logibec owned 1,137,200 Shares when it launched the takeover bid, 771,200 of which were purchased during the third quarter.

On May 26, 2005, the Company entered into an agreement with MDI's principal officers which allowed the Company to increase its offer to US$2.60 per share upon the condition that the officers tender their Shares to the takeover bid, that they provide consulting services to the Company until December 31, 2005, and that they forego the severance payments that were provided for in their employment contracts.

Upon expiry of the takeover bid on June 13, 2005, a total of 10.1 million Shares had been deposited pursuant to the offer, representing 84% of the outstanding Shares. With the deposited Shares, Logibec owned (directly and indirectly) 94% of the Shares allowing the Company to consolidate MDI's operations as of June 21, 2005 the day following the payment of the shares. Subsequently, the Company effected a short-form merger of LGIA and MDI on June 30, 2005.

The portion of the purchase price for MDI that was paid as of June 30, 2005, was $35.8 million. This amount includes $710,842 that was disbursed during the quarter ended March 31, 2005 and $423,760 in acquisition-related fees.

Finally, the Company invested $0.8 million in intangible and other long-term assets. Intangible assets added during the quarter were mainly capitalized software development costs in the amount of $0.4 million. Other long-term assets added during the quarter were comprised of fees in the amount of $0.3 million incurred in setting up the Company's credit facilities.

FINANCING ACTIVITIES

The third quarter ended June 30, 2005 was an active quarter with regard to financing activities. First, to launch its takeover bid for MDI, the Company entered into a banking agreement with two Canadian charter banks. The agreement provides the Company with two loans totalling $28.3 million. The first loan, a revolving reducing term loan in the amount of $18.3 million, is repayable over four years and bears interest at a variable rate base on the banks' prime rate. The second loan is termed a special credit facility and is in the amount of $10.0 million, is repayable in three installments between the time of its disbursement and April 30, 2006 and bears interest at a variable rate based on the banks' prime rate.

On June 14, 2005, following the successful completion of the MDI takeover bid, the Company accepted a bought deal proposal for the issuance of 1.3 million common shares, at a price of $10.50 each, via private placement. Total net proceeds for the placement amounted to $12.6 million. The placement closed on June 29, 2005 and allowed the Company to completely reimburse the special credit facility of $10.0 million and to make a $2.5 million payment against its revolving reducing term loan.

Both loans are revolving in nature and thus amounts repaid over and above regularly-scheduled payments, remain available for drawdown by the Company up to the reducing credit limit. As of the date of this report, an amount of $6.0 million was available for drawdown under the revolving reducing term loan and an amount of $6.7 million was available under the special credit facility.

Subsequent to the end of the third quarter, the Company reimbursed an additional amount of $3.9 million under its revolving reducing term loan, leaving the amount outstanding under the loan at $11.9 million as of the date of this report.

During the third quarter, the Company repaid the final amount owing on the balance of purchase price for the December 2002 acquisition of the Centre Hospitalier de l'Universite de Montreal's IT operations. The payment amounted to $2.0 million and included $0.2 million in interest charges.

During the third quarter, the Company's board of directors granted 134,000 stock options to three officers. The options have a strike price of $9.84 per share. In addition, the Company issued 19,000 common shares for total cash consideration of $49,500 following the exercise of 12,000 stock options and 7,000 stock options at exercise prices of $2.50 and $3.50 per share, respectively.

On June 30, 2005, the Company had cash on hand of $3.9 million in addition to the liquidity available under the credit facilities. Management believes the Company has sufficient liquidity to fund its business growth.

ABOUT LOGIBEC

LOGIBEC is among the ten largest Canadian companies specializing in the development, marketing, implementation and support of information systems for the health and social services sector. Over 400 health organizations use our products and services delivered by an experienced team of employees that numbered over 200 as of March 31, 2005. The Company has its head office in Montreal as well as offices in Quebec City and Edmonton.

This news release contains forward-looking statements reflecting Logibec Groupe Informatique Ltd. objectives, estimates and expectations. Such statements may be marked by the use of verbs such as "believe", "anticipate", "estimate" and "expect" as well as the use of the future or conditional tense. By their very nature, such statements involve risks and uncertainty. Actual results may differ significantly from the Company's forecasts or expectations.



LOGIBEC GROUPE INFORMATIQUE LTD.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(unaudited)
---------------------------------------------------------------------
Three Months Ended Nine Months Ended
June 30 June 30
----------------------------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------------------------
----------------------------------------------------------------------
$ $ $ $

Revenue 7,292,692 7,151,378 22,425,172 21,654,468
----------------------------------------------------------------------

Operating expenses
Service costs 3,590,656 3,427,178 10,329,109 10,497,972
Selling and
administrative
expenses 877,257 1,235,151 3,424,004 3,937,932
Stock-based
compensation 69,762 - 69,762 -
----------------------------------------------------------------------
4,537,675 4,662,329 13,822,875 14,435,904
----------------------------------------------------------------------

Earnings before
the following items 2,755,017 2,489,049 8,602,297 7,218,564

Depreciation of
property, plant
and equipment 230,096 321,719 656,664 746,521
Amortization of
intangible assets
and other long-term
assets 839,819 969,749 2,769,389 2,571,260
Gain on disposal
of temporary investment - - - (115,115)
Income on temporary
investment (12,851) (20,991) (39,734) (67,206)
Financial expenses 155,859 142,968 335,849 610,431
----------------------------------------------------------------------
Earnings before
income taxes 1,542,094 1,075,604 4,880,129 3,472,673

Income taxes 442,999 366,585 1,444,499 1,208,130
----------------------------------------------------------------------
Net earnings 1,099,095 709,019 3,435,630 2,264,543

Retained earnings,
beginning of period 7,256,736 3,712,819 5,148,891 2,157,295
Premium on redemption
of common shares - - (228,690) -

----------------------------------------------------------------------
Retained earnings,
end of period 8,355,831 4,421,838 8,355,831 4,421,838
----------------------------------------------------------------------
----------------------------------------------------------------------

Net earnings per share
Basic 0.15 0.11 0.49 0.34
Diluted 0.14 0.10 0.46 0.32
----------------------------------------------------------------------

Weighted average
number of
common shares
outstanding
Basic 7,219,445 6,674,124 7,045,386 6,648,942
Diluted 7,644,664 7,115,969 7,429,020 7,050,428
----------------------------------------------------------------------



LOGIBEC GROUPE INFORMATIQUE LTD.
CONSOLIDATED BALANCE SHEETS
----------------------------------------------------------------------
----------------------------------------------------------------------
June 30, September 30,
2005 2004
----------------------------------------------------------------------
$ $
(unaudited) (audited)
Assets
Current assets
Cash and cash equivalents 3,898,696 6,565,935
Accounts receivable 9,740,593 3,661,594
Income tax credits receivable 1,984,598 1,130,530
Income tax receivable 1,332,027 164,987
Advance - 341,676
Prepaid expenses and other current assets 454,831 362,027
----------------------------------------------------------------------
17,410,745 12,226,749

Property, plant and equipment 4,887,167 4,547,489
Goodwill 39,847,384 6,958,145
Intangible assets and other
long-term assets 13,371,902 14,419,652
----------------------------------------------------------------------
75,517,198 38,152,035
----------------------------------------------------------------------
----------------------------------------------------------------------

Liabilities
Current liabilities
Accounts payable and accrued liabilities 7,939,251 5,220,402
Due to a related party 64,675 -
Income taxes 1,450,785 -
Future income taxes 60,000 60,000
Current portion of long-term debt 4,572,065 1,786,766
----------------------------------------------------------------------
Current liabilities, excluding
deferred revenue 14,086,776 7,067,168

Deferred revenue 11,911,598 7,076,728
----------------------------------------------------------------------
25,998,374 14,143,896

Long-term debt 11,216,196 2,841,162
Future income taxes 3,456,437 3,557,626
----------------------------------------------------------------------
40,671,007 20,542,684
----------------------------------------------------------------------

Commitments (Note 17)

Shareholders' equity
Share capital 26,162,653 11,305,023
Warrants 615,837 1,155,437
Contributed surplus 69,762 -
Currency translation adjustment (357,892) -
Retained earnings 8,355,831 5,148,891
----------------------------------------------------------------------
----------------------------------------------------------------------
34,846,191 17,609,351
----------------------------------------------------------------------
----------------------------------------------------------------------
75,517,198 38,152,035
----------------------------------------------------------------------
----------------------------------------------------------------------



LOGIBEC GROUPE INFORMATIQUE LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
----------------------------------------------------------------------
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
June 30 June 30
----------------------------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------------------------
----------------------------------------------------------------------
$ $ $ $

Operating activities
Net earnings 1,099,095 709,019 3,435,630 1,555,524
Adjustments for:
Amortization of
property, plant
and equipment 230,096 321,719 656,664 424,802
Amortization of
intangible assets
and other long-term
assets 839,819 969,749 2,769,389 1,601,511
Stock-based
compensation 69,762 - 69,762 -
Loss on disposal
of assets - - - 68,890
Future income taxes (232,512) - (232,512) 811,413
----------------------------------------------------------------------
2,006,260 2,000,487 6,698,933 4,462,140

Changes in non-cash
working capital items 7,064,240 4,821,978 145,489 (996,422)
----------------------------------------------------------------------
9,070,500 6,822,465 6,844,422 3,465,718
----------------------------------------------------------------------

Investing activities
Acquisition of
minority interest - - - (75,000)
Business acquisition (32,394,741) - (33,105,583) -
Decrease (increase)
in advance 64,675 (29,822) 406,351 66,978
Disposal of property,
plant and equipment - - - 61,110
Acquisition of
property, plant
and equipment (58,337) (597,035) (315,383) (2,675,025)
Acquisition of
intangible assets
and other long-term
assets, net of
investment tax
credits (765,050) (672,119) (1,721,639) (1,625,809)
----------------------------------------------------------------------
(33,153,453)(1,298,976)(34,736,254) (4,247,746)
----------------------------------------------------------------------

Financing activities
Increase in
long-term debt 28,288,261 - 28,288,261 -
Repayment of
long-term debt (14,376,770) (494,410)(17,127,928) (5,324,242)
Redemption of shares - - (299,115) -
Issuance of
share capital 12,688,455 - 14,388,455 1,050,000
----------------------------------------------------------------------
26,599,946 (494,410) 25,249,673 (4,274,242)
----------------------------------------------------------------------

Effect of exchange
rate changes on cash
denominated in
foreign currency (25,080) - (25,080) -

Increase in cash
and cash equivalents 2,491,913 5,029,079 (2,667,239) (5,056,270)
Cash and cash
equivalents,
beginning of year 1,406,783 2,065,924 6,565,935 7,122,194
----------------------------------------------------------------------
Cash and cash
equivalents,
end of year 3,898,696 7,095,003 3,898,696 2,065,924
----------------------------------------------------------------------
----------------------------------------------------------------------

Additional information
Interest paid 185,346 65,267 244,032 877,276
Income taxes
paid (recovered) (53,532) 17,915 (46,468) 47,513
----------------------------------------------------------------------
----------------------------------------------------------------------


The TSX Venture accepts no responsibility for the truth or accuracy of this press release.

Contact Information

  • Logibec Groupe Informatique Ltd.
    Claude Roy
    President and Chief Executive Officer
    (514) 766-0134
    claude_roy@logibec.com
    or
    Logibec Groupe Informatique Ltd.
    Marc P. Brunet
    Chief Financial Officer
    (514) 762-3833
    marc_brunet@logibec.com