Rand A Technology Corporation
TSX : RND

Rand A Technology Corporation

August 04, 2005 16:44 ET

Rand Worldwide'R' Announces Profitable Growth for the Second Quarter of 2005

MISSISSAUGA, ONTARIO--(CCNMatthews - Aug. 4, 2005) -

Revenue, EBITDA and Net Income increase on a sequential quarterly basis

Rand A Technology Corporation (TSX:RND), operating as RAND Worldwide® ("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 second quarter ended June 30, 2005.

2005 Second Quarter Highlights

- Revenue of $25.0 million, up 5.9% compared to Q2'04 and 2% from Q1'05

- Services revenue of $12.8 million, an increase of 19.8% compared to Q2'04

- Improvement in gross profit margin to 56.8%, from 54.7% in Q2'04 and 53.9% in Q1'05

- Reduction in operating costs for Q2'05 of 21.5%, compared to Q2'04

- Earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.3 million, compared to negative EBITDA of $3.5 million in Q2'04 and positive EBITDA of $0.9 million in Q1'05

- Net income from continuing operations of $0.03 per share, representing the second straight quarter of profitability in 2005

"Improved results for the quarter were primarily driven by strength in our Imaginit division, which continues to benefit from strong end-user demand for Autodesk's suite of applications. In addition, we acquired Sage CAD in Q1'05 which gives us a presence in the Northeastern U.S. and in turn, now enables us to deploy Autodesk solutions across the U.S," said Frank Baldessara, President and CEO of RAND Worldwide.

"In our Dassault-related division we continue to generate new business from our growing installed customer base and are developing additional opportunities in the small and medium-size business market. We will continue to explore acquisition opportunities to help accelerate our future growth in focused areas."

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 Six Months Ended
(CDN$, unaudited) 06/30/05 06/30/04 06/30/05 06/30/04
---------------------------------------------

Revenue $ 24,948 $ 23,565 $ 49,448 $ 51,303
Gross Profit (%) 56.8% 54.7% 55.4% 53.4%
EBITDA(1) $ 1,270 $ (3,548) $ 2,196 $ (4,519)
Net Income (Loss) from
Continuing Operations $ 484 $ 8,325 $ 980 $ 4,748
Net Gain (Loss) from
Discontinued Operations $ 2,032 $ (3,802) $ (590) $ (7,681)
Net Earnings (Loss) $ 2,516 $ 4,523 $ 390 $ (2,933)
Earnings per Share,
Continuing Operations $ 0.03 $ 0.50 $ 0.06 $ 0.29
Earnings per Share,
Fully Diluted $ 0.14 $ 0.27 $ 0.02 $ (0.18)
Weighted Avg No. Common
Shares - Basic 16,999 16,590 16,732 16,590


RAND Worldwide's gross profit margin grew in Q2'05 to 56.8%, compared with 54.7% for the same period last year and 53.9% in Q1'05. This is a result of enhancing the revenue mix with an increase in higher margin services and a reduction of low margin hardware sales, as well as improved productivity in the overall services business.

Operating expenses declined in Q2'05 to $12.9 million, down 21.5% from $16.4 million in Q2'04, as a result of continued cost cutting initiatives. The Company recorded EBITDA of $1.3 million in the second quarter of 2005, versus an EBITDA loss of ($3.5) million in the second quarter of 2004.

Net income from continuing operations was $0.5 million, or $0.03 per share, compared to $8.3 million, or $0.50 per share in Q2'04, which is inclusive of a $13.2 million gain on the partial sale of RAND North America to Dassault. Without this one-time gain, the Company would have reported a Q2'04 net loss of ($5.0) million, or ($0.30) per share. The year-over-year improvement in net income is primarily a result of an increase in revenue, a more favorable revenue mix with a higher proportion of revenues coming from software and services, and a significant reduction in operating expenses.

At June 30, 2005, the Company had cash and short-term investments totaling $8.7 million, compared with $6.9 million at June 30, 2004 and $8.4 million at December 31, 2004. RAND is debt-free as of Q2'05, compared to debt of $38.9 million at Q2'04.

In Q2'05, the Company finalized the closure of its business units in France and Italy. As a result, the Q2'05 gain related to these closures totals $2.0 million and is broken down as follows: France $0.5 million and Italy $1.5 million. This $2.0 million gain is reflected on the income statement as net gain from discontinued operations net of income taxes (Other than Sale). Rand Worldwide is also finalizing the closure of the Ireland Shared Services operations and its operations in Poland. In Q1'05 the net loss from discontinued operations was ($2.6) million, resulting in a net loss of ($0.6) million for the six month period ended June 30, 2005. The Company does not expect any further losses from these operations in 2005.

"We have built a balanced business model that generates revenue from diverse product and service offerings and a broad base of global customers operating in several manufacturing and architectural-oriented vertical markets," said Kriss Bush, Chief Financial Officer of RAND Worldwide. "In this environment, we have taken important steps toward establishing a culture of discipline required to drive sustainable organic revenue growth and we believe we are well positioned to do so by leveraging the expanding market opportunity in both the Product Lifecycle Management (PLM) and Architecture, Engineering and Construction (AEC) markets."



EBITDA Reconciliation to Net Income

(in thousands Three Months Ended Six Months Ended
(CDN$, unaudited) 06/30/05 06/30/04 06/30/05 06/30/04
---------------------------------------------

EBITDA(1) $ 1,270 $ (3,548) $ 2,19 $ (4,519)
Depreciation of property,
plant & equipment $ (433) $ (384) $ (693) $ (776)
Amortization of intangible
assets $ (30) $ (82) $ (60) $ (162)
Interest income (expense) $ 13 $ (131) $ 183 $ (391)
Other expenses $ (427) $ (886) $ (475) $ (2,769)
Net gain on disposal $ 0 $ 13,281 $ 0 $ 13,281
Recovery of (Provision for)
Income Taxes $ 91 $ 75 $ (171) $ 84
Net Gain (Loss) from
Discontinued Operations $ 2,032 $ (3,802) $ (590) $ (7,681)
Net Earnings (Loss) $ 2,516 $ 4,523 $ 390 $ (2,933)


(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 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 381 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

As at As at
(in thousands of dollars) 6/30/05 12/31/04
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ASSETS

CURRENT ASSETS
Cash and short-term investments $ 8,708 $ 8,356
Accounts receivable, net 11,617 11,229
Accounts receivable - other 1,951 7,103
Inventory 753 666
Prepaid expenses and deposits 2,517 2,091
Current assets held for disposal
other than by sale 166 3,381
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Total Current Assets 25,712 32,826
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Property, plant & equipment, net 4,015 3,982

Other assets, net 7,970 5,643
Long-term assets held for
disposal other than by sale - 56
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TOTAL ASSETS $ 37,697 $ 42,507
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---------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable $ 8,289 $ 7,903
Accrued liabilities 7,816 10,093
Deferred revenue 2,900 2,948
Income taxes payable 998 725
Current portion of captial lease 217 108
Due to ENGINEERING.com - 161
Current liabilities held for
disposal other than by sale 774 4,429
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Total Current Liabilities 20,994 26,367
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Obligations under capital lease 125 318
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TOTAL LIABILITIES $ 21,119 $ 26,685
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SHAREHOLDERS' EQUITY
Share capital $ 54,780 $ 54,180
Contributed surplus 1,265 1,145
Deficit (45,317) (45,707)
Cumulative translation adjustment 5,850 6,204
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TOTAL SHAREHOLDERS' EQUITY 16,578 15,822
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TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 37,697 $ 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 Six Six
except earnings per share Months Months Months Months
and weighted average Ended Ended Ended Ended
share data) 06/30/05 06/30/04 06/30/05 06/30/04
---------------------------------------------------------------------
REVENUE $ 24,948 $ 23,565 $ 49,448 $ 51,303
COST OF SALES 10,768 10,668 22,066 23,882
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GROSS PROFIT 14,180 12,897 27,382 27,421
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EXPENSES
---------------------------------------------------------------------
Salaries and commissions 8,699 10,072 17,056 19,686
Operating expenses 3,897 5,085 7,569 10,045
Foreign exchange loss (gain) (40) 91 (107) (126)
Research and development 354 1,197 668 2,335
---------------------------------------------------------------------
12,910 16,445 25,186 31,940
---------------------------------------------------------------------
Earnings (loss) before
interest, income taxes,
depreciation and
amortization - EBITDA 1,270 (3,548) 2,196 (4,519)
---------------------------------------------------------------------
Depreciation of property,
plant & equipment 433 384 693 776
Amortization of intangible
assets 30 82 60 162
Interest expense (income) (13) 131 (183) 391
---------------------------------------------------------------------
450 597 570 1,329
---------------------------------------------------------------------
Earnings (loss) before income
taxes and other expenses 820 (4,145) 1,626 (5,848)
Other expenses 427 886 475 2,769
Net gain on disposition - 13,281 - 13,281
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EARNINGS BEFORE INCOME TAXES 393 8,250 1,151 4,664
Provision for (recovery of)
income taxes (91) (75) 171 (84)
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EARNINGS FROM CONTINUING
OPERATIONS 484 8,325 980 4,748
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DISCONTINUED OPERATIONS
Loss from discontinued
operations net of income
taxes - Disposition by sale - (1,525) - (3,103)
Gain (loss) from discontinued
operations net of income
taxes - Disposition other
than by sale 2,032 (2,277) (590) (4,578)
---------------------------------------------------------------------
NET EARNINGS (LOSS) $ 2,516 $ 4,523 $ 390 $ (2,933)
---------------------------------------------------------------------
Net earnings (loss) per
Common Share - Basic
Continuing operations $ 0.03 $ 0.50 $ 0.06 $ 0.29
Discontinued Operations -
Disposition by sale $ - $ (0.09) $ - $ (0.19)
Discontintued Operations -
Disposition other
than by sale $ 0.12 $ (0.14) $ (0.04) $ (0.28)
---------------------------------------------------------------------
Net earnings (loss) per
Common Share - Basic $ 0.15 $ 0.27 $ 0.02 $ (0.18)
---------------------------------------------------------------------
Fully diluted earnings
(loss) per Common Share $ 0.14 $ 0.27 $ 0.02 $ (0.18)
---------------------------------------------------------------------
Weighted Average Number
of Common Shares - Basic $ 16,999 $ 16,590 $ 16,732 $ 16,590
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NOTE: Certain prior year figures have been reclassified to conform to
the current year basis of presentation for discontinued operations


Consolidated Statements of Deficit

Rand A Technology Corporation

For the three months ended June 30:


(in thousands of dollars) 2005 2004
---------------------------------------------------------------------
DEFICIT, beginning of period $ (47,833) $ (77,004)
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Earnings - for the period $ 2,516 $ 4,523
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DEFICIT, end of period $ (45,317) $ (72,481)
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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 Six Six
Months Months Months Months
Ended Ended Ended Ended
(in thousands of dollars) 06/30/05 06/30/04 06/30/05 06/30/04
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CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Continuing Operations
Net earnings $ 484 $ 8,325 $ 980 $ 4,748
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Add - Items not affecting cash
Depreciation and amortization 464 466 754 937
Equity in losses of
ENGINEERING.com, net of
dilution gain - 179 48 366
Employee stock options 23 111 120 208
Net gain on disposition of
assets - (13,281) - (13,281)
Changes in operating assets
and liabilities other
than cash (19,864) (935) (17,161) 2,816
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CASH USED IN OPERATING
ACTIVITIES (18,893) (5,135) (15,259) (4,206)
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FINANCING ACTIVITIES
Issuance of share capital - 8 - 8
Repayment of long-term debt (37) (37) (101) (47)
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CASH USED IN FINANCING
ACTIVITIES (37) (29) (101) (39)
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INVESTING ACTIVITIES
Acquisition - - (378) -
Sale of Austrian subsidiary - - - (770)
Additions to other assets (36) 39 (50) (252)
Additions to property, plant
& equipment (102) (480) (530) (430)
Other receivable - 963 - 963
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CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (138) 522 (958) (489)
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CUMULATIVE TRANSLATION EFFECTS (914) 209 (824) 349
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CASH USED IN CONTINUING
OPERATIONS (19,982) (4,433) (17,142) (4,385)
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CASH USED IN DISCONTINUED
OPERATIONS HELD FOR
DISPOSAL BY SALE - (86) - (1,814)
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CASH USED IN DISCONTINUED
OPERATIONS HELD FOR DISPOSAL
OTHER THAN BY SALE 19,397 (1,872) 17,494 (5,840)
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CASH HELD BY DISCONTINUED
OPERATIONS - - - 2,870
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INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS (585) (6,931) 352 (9,169)
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CASH AND SHORT-TERM
INVESTMENTS, BEGINNING
OF PERIOD 9,293 10,642 8,356 13,420
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CASH AND SHORT-TERM
INVESTMENTS, END OF PERIOD $ 8,708 $ 4,251 $ 8,708 $ 4,251
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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