Rand A Technology Corporation
TSX : RND

Rand A Technology Corporation

November 03, 2005 16:05 ET

RAND Worldwide'R' Announces Financial Results for the Third Quarter of 2005

MISSISSAUGA, ONTARIO--(CCNMatthews - Nov. 3, 2005) - RAND A Technology Corporation (TSX:RND), operating as RAND Worldwide® ("RAND" or the "Company"), a global leader in providing technology solutions to organizations with engineering design and information technology requirements, today announced its financial results for the three- and nine-month periods ended September 30, 2005.

2005 Third Quarter Highlights

- Revenue was $23.8 million, an increase of 8% compared to Q3'04

- IMAGINiT revenue was $16.5 million, an increase of 57% compared to Q3'04

- Improvement in gross profit margin to 55.5%, from 47.5% in Q3'04

- Earnings before interest, taxes, depreciation and amortization (EBITDA) was $0.5 million, compared to negative EBITDA of $1.8 million in Q3'04

- Net income from continuing operations was $11,000, or $0.00 per share, compared to a net loss from continuing operations of $7.9 million, or ($0.47) per share in Q3'04

"We are very pleased with our continuing improved results for the quarter and the nine months and the continued positive movement of our sales and services strategy. The third quarter results were driven by the continued growth of our IMAGINiT division which is being propelled by strong end-user demand for its core Autodesk products, a steady pipeline of opportunities in the AEC market and the addition of SageCAD, now IMAGINiT Northeast, acquired in Q1 of this year," said Frank Baldesarra, President and CEO of RAND Worldwide. "Both software and services revenue grew significantly during the quarter and we continue to invest in the IMAGINiT operations with our latest acquisition being the purchase of certain assets of Continental Imaging Products which expands our presence in Alberta and provides us with an established platform to pursue opportunities in the oil and gas industry."

"Our PLM, or Dassault-related division, continue to focus on sales of higher margin software and services products. We are building a solid base of customers in this division and will look to expand those relationships in future quarters by working to introduce our broad base of services to those clients," added Mr. Baldesarra. "With the majority of our total revenue now generated in North America we will continue to seek organic and acquisitive opportunities to expand our presence in this market while also maintaining an eye to further develop our operations overseas, primarily in rapidly growing Asia Pacific region."
Financial Review

Following the previously announced 2004 year end sale of its five European subsidiaries to Dassault Systemes ("Dassault") that resulted in the elimination of 100% of the Company's debt, combined with the closure and exit of unprofitable operations in France, Italy, Ireland Shared Services and Poland, the Company has established a core business with profitable continuing operations as reflected below:



(in thousands, except
per share data) Three Months Ended Nine Months Ended
(CDN$, unaudited) 09/30/05 09/30/04 09/30/05 09/30/04
-------- -------- -------- --------

Revenue $ 23,828 22,067 $ 73,276 73,370
Gross Profit (%) 55.5% 47.5% 55.4% 51.7%
EBITDA(1) $ 475 (1,774)$ 2,671 (6,293)
Net Income (Loss) from
Continuing Operations $ 11 (7,853)$ 991 (3,105)
Net Gain (Loss) from
Discontinued Operations $ 0 (5,140)$ (590) (12,821)
Net Earnings (Loss) $ 11 (12,993)$ 401 (15,926)
Earnings (Loss) Per Share,
Continuing Operations $ 0.00 (0.47)$ 0.06 (0.19)
Earnings (Loss) Per Share,
Fully Diluted $ 0.00 (0.78)$ 0.02 (0.96)
Weighted Avg. No. Common
Shares - Basic 17,771 16,599 17,129 16,592


Total revenue in the third quarter was $23.8 million, an increase of 8% compared to the same period in 2004. RAND generates approximately 70% of its revenue in U.S. dollars and as a result, the year-over-year decline of the U.S. dollar relative to the Canadian dollar negatively impacted revenue by $1.3 million for the quarter.

RAND IMAGINiT accounted for $16.5 million (69.3%) of this total, while RAND PLM accounted for $7.3 million (30.7%). RAND IMAGINiT revenue consisted of: $10.9 million in software revenue; $5.5 million in services revenue; and, $149,000 in hardware revenue. RAND PLM revenue consisted of: $1.8 million in software; $5.4 million in services; and, $122,000 in hardware.

RAND's gross profit margin grew in Q3'05 to 55.5%, compared with 47.5% for the same period last year. This improvement in gross margin is a result of enhancing the revenue mix with an increase in higher margin software and services, and a reduction of low margin hardware sales, as well as improved productivity in the overall services business.

Operating expenses were $12.8 million, or 54% of revenue, in Q3'05, compared to $12.3 million, or 56% of revenue in Q3'04. Expenses remained relatively steady primarily due to ongoing efforts to contain costs. The Company recorded EBITDA of $0.5 million in the third quarter of 2005, versus an EBITDA loss of ($1.8) million in the third quarter of 2004. EBITDA increased year-over-year due to a greater percentage of revenue being generated from higher margin products and services as well as ongoing efforts to minimize costs.

Net income from continuing operations was breakeven at $11,000, or $0.00 per share, compared to a net loss from continuing operations of $7.9 million, or ($0.47) per share in the same period last year. The net loss in the third quarter of 2004 included a one-time $5.5 million restructuring charge related to the closing of several unprofitable business locations in Europe.

RAND maintains a strong balance sheet from which to pursue its growth initiatives. At September 30, 2005, the Company had cash and short-term investments totaling $15.1 million, compared with $6.4 million at September 30, 2004 and $8.4 million at December 31, 2004. During the third quarter RAND completed an equity private placement of 3,000,000 common shares at $2.75 per share, generating net proceeds of $7.7 million to the Company. The funds will be used to support RAND's organic and acquisitive growth initiatives. To further strengthen its balance sheet, during the quarter RAND established a new global banking relationship and a $5.0 million credit facility with HSBC Group ("HSBC"). To date, RAND has not drawn on this credit facility and the Company remains debt-free.

"The third quarter saw the achievement of two important financial milestones related to strengthening our financial position to support our growth activities," said Kriss Bush, Chief Financial Officer of RAND Worldwide. "With our private placement we raised $7.7 million, engaged a syndicate of four investment dealers, expanded our base of institutional investors and helped to increase the liquidity of our shares. Meanwhile, establishing a credit facility with HSBC is a strong testament to the positive strides we have made over the past year to improve our financial situation and to position our business for accelerated growth. A global bank like HSBC is ideal for RAND as we now have operations in 14 countries and we will continue to prudently pursue opportunities to further expand the geographical reach for our products and services."



EBITDA Reconciliation to Net Income
(in thousands) Three Months Ended Nine Months Ended
(CDN$, unaudited) 09/30/05 09/30/04 09/30/05 09/30/04
-------- -------- -------- --------

EBITDA(1) $ 475 (1,774) $ 2,671 (6,293)
Depreciation of property,
plant & equipment $ (340) (109) $(1,033) (885)
Amortization of intangible
assets $ (32) (48) $ (92) (210)
Interest income (expense) $ 4 (11) $ 187 (402)
Other expenses $ 0 (5,857) $ (475) (8,626)
Net gain on disposal $ 0 0 $ 0 13,281
Recovery of (Provision for)
Income Taxes $ (96) (54) $ (267) 30
Net Gain (Loss) from
Discontinued Operations $ 0 (5,140) $ (590) (12,821)
Net Earnings (Loss) $ 11 (12,993) $ 401 (15,926)

(1) EBITDA is not a recognized measure under Canadian generally
accepted accounting principles (GAAP). Management believes that,
in addition to net income (loss), EBITDA is a useful supplemental
measure as it is used by certain investors as one measure of the
Company's financial performance. Investors should be cautioned,
however, that EBITDA should not be construed as an alternative to
net income (loss) determined in accordance with GAAP as an
indicator of the Company's performance or to cash flows from
operating, investing and financing activities as a measure of
liquidity and cash flows. The Company's method of calculating
EBITDA may differ from other companies and, accordingly, EBITDA
may not be comparable to measures used by other companies.


About RAND Worldwide

RAND Worldwide, operating as RAND and RAND IMAGINiT, is one of the world's leading providers of professional services and technology to the engineering community and companies looking to improve their competitiveness, productivity and profitability by enhancing key aspects of their Product Lifecycle Management (PLM) and Architecture, Engineering and Construction (AEC) capabilities, including planning, development, and management. As a leading technology independent systems integrator in the world, RAND Worldwide employs 396 people in over 70 sales and client service centers around the world. The Company's corporate head office in Mississauga, Ontario, Canada can be reached at 905-625-2000 or through the Internet at www.RAND.com.

The contents of this News Release has been reviewed and approved by the Audit Committee and the Board of Directors. All currencies are stated in Canadian dollars.

FORWARD-LOOKING STATEMENTS

This news release may contain forward-looking statements based on management's current projections, beliefs and opinions at the date of this news release. Actual results could differ materially from those anticipated in these statements, due to risks and uncertainties which affect the Company's business and operations. Reference should be made to the Company's Annual Information Form and other continuous disclosure documents filed from time to time with Canadian securities regulatory authorities, for a detailed description of such risks and uncertainties. RAND Worldwide undertakes no responsibility to update forward-looking statements if circumstances or management's projections, beliefs or opinions change.



Consolidated Balance Sheets
Rand A Technology Corporation


(in thousands of dollars) 9/30/05 12/31/04
---------------------------------------------------------------------

ASSETS
CURRENT ASSETS
Cash and short-term investments $ 15,138 $ 8,356
Accounts receivable, net 12,224 11,229
Accounts receivable - other 1,590 7,103
Inventory 588 666
Prepaid expenses and deposits 2,203 2,091
Current assets held for disposal other
than by sale 162 3,381
---------------------------------------------------------------------
Total Current Assets 31,905 32,826
---------------------------------------------------------------------
Property, plant & equipment, net 3,593 3,982
Other assets, net 7,650 5,643
Long-term assets held for disposal other
than by sale - 56
---------------------------------------------------------------------
TOTAL ASSETS $ 43,148 $ 42,507
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---------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,106 $ 7,903
Accrued liabilities 7,972 10,093
Deferred revenue 2,802 2,948
Income taxes payable 225 725
Current portion of capital lease 191 108
Due to ENGINEERING.com, net 3 161
Current liabilities held for disposal other
than by sale 766 4,429
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Total Current Liabilities 19,065 26,367
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Obligations under capital lease 108 318
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TOTAL LIABILITIES $ 19,173 $ 26,685
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---------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Share capital $ 62,357 $ 54,180
Contributed surplus 1,389 1,145
Deficit (45,306) (45,707)
Cumulative translation adjustment 5,535 6,204
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TOTAL SHAREHOLDERS' EQUITY 23,975 15,822
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TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 43,148 $ 42,507
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The accompanying notes are an integral part of this consolidated
balance sheet.



Consolidated Statements of Operations
Rand A Technology Corporation

(in thousands of dollars, Three Three Nine Nine
except earnings per share Months Months Months Months
and weighted average Ended Ended Ended Ended
share data) 09/30/05 09/30/04 09/30/05 09/30/04
---------------------------------------------------------------------
REVENUE $ 23,828 $ 22,067 $ 73,276 $ 73,370
COST OF SALES 10,603 11,586 32,669 35,468
---------------------------------------------------------------------
GROSS PROFIT 13,225 10,481 40,607 37,902
---------------------------------------------------------------------
EXPENSES
---------------------------------------------------------------------
Salaries and commissions 8,688 7,253 25,864 26,939
Operating expenses 3,711 4,112 11,160 14,157
Foreign exchange loss (gain) 48 (57) (59) (183)
Research and development 303 947 971 3,282
---------------------------------------------------------------------
12,750 12,255 37,936 44,195
---------------------------------------------------------------------
Earnings (loss) before
interest, income taxes,
depreciation and
amortization - EBITDA 475 (1,774) 2,671 (6,293)
---------------------------------------------------------------------
Depreciation of property,
plant & equipment 340 109 1,033 885
Amortization of intangible
assets 32 48 92 210
Interest expense (income) (4) 11 (187) 402
---------------------------------------------------------------------
368 168 938 1,497
---------------------------------------------------------------------
Earnings (loss) before income
taxes and other expenses 107 (1,942) 1,733 (7,790)
Other expenses - 5,857 475 8,626
Net gain (loss) on disposition - - - 13,281
---------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 107 (7,799) 1,258 (3,135)
Provision for (recovery of)
income taxes 96 54 267 (30)
---------------------------------------------------------------------
EARNINGS FROM CONTINUING
OPERATIONS 11 (7,853) 991 (3,105)
---------------------------------------------------------------------
DISCONTINUED OPERATIONS
Net loss from discontinued
operations net of income
taxes - Disposition by sale - (2,924) - (6,027)
Net loss from discontinued
operations net of income
taxes - Disposition other
than by sale - (2,216) (590) (6,794)
---------------------------------------------------------------------
NET EARNINGS (LOSS) $ 11 $ (12,993) $ 401 $ (15,926)
---------------------------------------------------------------------
Net earnings (loss) per
Common Share - Basic
Continuing operations $ 0.00 $ (0.47) $ 0.06 $ (0.19)
Discontinued Operations -
Disposition by sale $ 0.00 $ (0.18) $ 0.00 $ (0.36)
Discontinued Operations -
Disposition other than
by sale $ 0.00 $ (0.13) $ (0.04)$ (0.41)
---------------------------------------------------------------------
Net earnings (loss) per
Common Share - Basic $ 0.00 $ (0.78) $ 0.02 $ (0.96)
---------------------------------------------------------------------
Fully diluted earnings
(loss) per Common Share $ 0.00 $ (0.78) $ 0.02 $ (0.96)
---------------------------------------------------------------------
Weighted Average Number
of Common Shares - Basic 17,771 16,599 17,129 16,592
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NOTE: Certain prior year figures have been reclassified to conform to
the current year basis of presentation.


Consolidated Statements of Deficit
Rand A Technology Corporation

For the three months ended September 30:
(in thousands of dollars) 2005 2004
---------------------------------------------------------------------
DEFICIT, beginning of period $ (45,317) $ (72,481)
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Earnings (loss) for the period 11 (12,993)
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DEFICIT, end of period $ (45,306) $ (85,474)
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---------------------------------------------------------------------
The accompanying notes are an integral part of this consolidated
statement.



Consolidated Cash Flow Statements
Rand A Technology Corporation

Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
(in thousands of dollars) 09/30/05 09/30/04 09/30/05 09/30/04
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CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Continuing Operations
Net earnings $ 11 $ (7,853) $ 991 $ (3,105)
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Add - Items not
affecting cash
Depreciation and
amortization 372 157 1,125 1,095
Restructuring and other
asset writedowns - 12 - 12
Equity in losses of
ENGINEERING.com, net of
dilution gain - 132 48 498
Employee stock options 122 126 242 334
Net loss (gain)
on disposition - - - (13,281)
Changes in operating
assets and liabilities
other than cash (1,631) 11,058 607 20,318
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CASH USED IN OPERATING
ACTIVITIES (1,126) 3,632 3,013 5,871
---------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of share
capital 7,579 - 7,579 8
Repayment under
capital lease (49) (49) (150) (96)
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CASH USED IN FINANCING
ACTIVITIES 7,530 (49) 7,429 (88)
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INVESTING ACTIVITIES
Acquisition - - (378) -
Sale of Austrian subsidiary - - - (770)
Additions to other assets (13) (597) (63) (849)
Additions to property,
plant & equipment (42) (557) (572) (987)
---------------------------------------------------------------------
CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (55) (1,154) (1,013) (2,606)
---------------------------------------------------------------------
CUMULATIVE TRANSLATION
EFFECTS 110 1,027 (714) 1,381
---------------------------------------------------------------------
CASH PROVIDED BY (USED IN)
CONTINUING OPERATIONS 6,459 3,456 8,715 4,558
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CASH PROVIDED BY DISCONTINUED
OPERATIONS HELD FOR DISPOSAL
BY SALE - 2,037 - 223
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CASH PROVIDED BY (USED IN)
DISCONTINUED OPERATIONS HELD
FOR DISPOSAL OTHER THAN BY SALE (30) (6,905) (1,934) (12,745)
---------------------------------------------------------------------
CASH HELD BY DISCONTINUED
OPERATIONS 1 991 1 991
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INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS 6,430 (421) 6,782 (6,973)
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CASH AND SHORT-TERM INVESTMENTS,
BEGINNING OF PERIOD 8,708 6,868 8,356 13,420
---------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS,
END OF PERIOD $ 15,138 $ 6,447 $ 15,138 $ 6,447
---------------------------------------------------------------------
The accompanying notes are an integral part of this consolidated
statement.



Contact Information

  • RAND Worldwide
    Kriss Bush
    Chief Financial Officer
    (905) 625-2000
    (905) 625-8535 (FAX)
    or
    The Equicom Group Inc.
    Dave Mason
    Investor Relations
    (416) 815-0700 ext. 237