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FOR IMMEDIATE RELEASE Ref. #NRE2006-14
MONTREAL, August 15, 2006—TECSYS Inc. (TSX: TCS), an industry-leading supply chain management software company, announced today its financial results. As previously announced on June 30th, 2006, due to an interpretation of the method and timing of revenue recognition required by Statement of Position 97-2 “Software Revenue Recognition”, and after having consulted with its auditors, TECSYS has determined that a restatement of prior years’ financial results is necessary, resulting in a deferral of $946,000 of license revenue into fiscal 2007. Financial results for the following periods are hereby announced:
In the restatements mentioned above, license revenue for certain contracts is recognized rateably over the initial support period, generally over a period of twelve months from the date of the agreement and shipment, compared to, as previously reported, being recognized immediately when the agreement is signed and the license is shipped. All dollar amounts are expressed in U.S. currency and reported in accordance with Canadian Generally Accepted Accounting Principles (GAAP) with a reconciliation to the United States GAAP, and are unaudited. All comparative figures have been adjusted to reflect the restated financial results. For further details, please see the financial tables at the end of this press release.
Fiscal 2006 marked a milestone for TECSYS; the Company achieved 42% revenue growth, reaching $33.8 million for the full fiscal year, the highest in the company’s history. It was also during Fiscal 2006, that the company developed the industries first pure service oriented architecture (SOA) based sales order desk, handling sales quotations, orders, and EDI processing in an environment that can be adapted for the needs of each user without programming, while offering optimum visibility and automation for the customer’s order desk. The new TECSYS product platform is designed for Application Service Provider (ASP) deployment, allowing for license or subscription sales. The software became generally available shortly after the end of the fiscal year.
Financial highlights for the full fiscal year include:
“We are pleased with the overall growth in fiscal 2006”, commented Peter Brereton, President and Co-CEO of TECSYS Inc. “Having a strong balance sheet we have invested heavily in our products which we believe is in the best interests of our clients and shareholders. Orders booked in the fourth quarter confirm this strategy. We did see a dip in revenue in Q4 and have responded with cost reductions which will be seen in future quarters. However, the heavy investments in R&D during this fiscal year were the right move and are already paying off with an increased number of new accounts. Our SOA product release further differentiates us competitively and provides the basis for an expanded ASP offering and enhanced recurring revenues which we will now be reporting each quarter. Profitability in fiscal 2006 was impacted by the strengthened Canadian dollar which has reduced income from operations by about $0.5 Million in comparison to last fiscal year. In addition, we launched TECSYS Europe Limited during Fiscal 2006 with all of the start-up costs being expensed during the fiscal year.”
Financial highlights for the fourth quarter of Fiscal 2006 include:
Other key achievements in the fourth quarter include:
More than 20 new license contracts were signed during the quarter, from a combination of base and new accounts. As at April 30th, 2006 TECSYS’ recurring revenue grew to $8.7M compared to $8.4M as at January 31st, 2006, an increase of 4% in the quarter.
Base Accounts contracts include:
New Accounts include:
Revenue in the fourth quarter of fiscal 2006 was $7.4 M compared to $7.9M in the same period of fiscal 2005. Loss from operations for the reporting quarter was $1.3M compared to $96,000 in the corresponding quarter of last year. Loss from operations was impacted by delays in decision making for a few new contracts, a significant account settlement, severance and restructuring charges to consolidate and stream line business operations.
After accounting for net interest income of $45,000, a foreign exchange loss of $159,000 and a share loss of $48,000 from a company in which TECSYS has an equity interest, net loss for the quarter was $1.4M or $0.10 per share compared to net earnings of $64,000 or $0.00 per share for the same period in the previous year.
For the twelve months ended April 30th, 2006, revenue increased 42% to $33.8M compared to $23.8M in the same period of the prior fiscal year. Loss from operations for fiscal 2006 was $1.2M compared to earnings from operations of $29,000 for the same period in the previous fiscal year. Loss from operations was impacted by the rising Canadian dollar, resulting in $491,000 reduction of income when compared to the prior year.
After accounting for net interest income of $132,000, a foreign exchange loss of $516,000 and a share loss of $67,000 from a company in which TECSYS has an equity interest, net loss for the full fiscal year was $1.6M or $0.12 per share compared to net loss of $102,000 or $0.01 per share for the same period in the previous year.
During Fiscal Year 2002, TECSYS changed its standard License Agreement to make annual support mandatory. This was to ensure that all TECSYS software in use in its clients’ businesses is well supported. This licensing approach has now been used for five consecutive fiscal years. The change to TECSYS’ licensing agreement had an unintentional impact on the methodology of recognizing license revenue as specified in Statement of Position 97-2.
During the process of preparing the 2006 year-end financial statements, TECSYS’ management in consultation with its auditors, determined that, in order for TECSYS to fully comply with software revenue recognition as specified in Statement of Position 97-2, there was a need to restate certain license revenue for fiscal years 2004 and 2005, and the first three quarters of fiscal 2006. In the restatement, license revenue is generally recognized over a period of twelve months from the date of agreement and shipment, compared to immediately recognizing license revenue when the agreement is signed and the license is shipped.
The Company has restated its financial statements for fiscal years 2004, 2005 and Q1, Q2, and Q3 of fiscal 2006. The restatement represents the difference between the revenue originally reported and recognized but now deferred and the recognition of such deferred license revenues over a twelve-month period.
Accordingly, the reported license revenues and net earnings have been restated unfavorably by $184,000 and $436,000 for fiscal 2004 and fiscal 2005 respectively. Additionally, it has adversely affected license revenues and net earnings for Q1, Q2 and Q3 of fiscal 2006 by $238,000. The deferred license revenues of $946,000 will be recognized in fiscal 2007.
The restatement has no impact on cash flow from operating activities. The impact of this restatement on the consolidated statements of operations is presented in the tables below.
As announced in the press release dated August 1, 2006, TECSYS has been granted an order by l'Autorité des marchés financiers preventing certain directors, officers and other designated insiders from trading in TECSYS securities as a consequence of missing the deadline of July 31, 2006 for filing its Fiscal 2006 annual financial statements.
The Company is still under a management cease trade order resulting from the non-deposit of its financial statements before the prescribed deadline and its inability to issue them.
TECSYS reports that, with respect to its requirements regarding the company’s default status, there has been no change in relation to the previous report filed on July 24, 2006. Furthermore, there is no actual or anticipated default of a financial statement filing requirement subsequent to that disclosed in the report filed on July 24, 2006.
| Reconciliation of Quarterly Selected Financial Data Restatement | |||||||||||||||||||
| In thousands of U.S. dollars, except per share data | |||||||||||||||||||
| Fiscal Year 2006 | Fiscal Year 2005 | Fiscal Year 2004 | |||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Total | Q1 | Q2 | Q3 | Q4 | Total | Q1 | Q2 | Q3 | Q4 | Total | |||||
| Total Revenue | |||||||||||||||||||
| As previously reported | 8,005 | 8,968 | 9,713 | 7,363 | 34,049 | 5,345 | 5,495 | 5,303 | 8,129 | 24,272 | 3,766 | 4,147 | 4,175 | 5,462 | 17,550 | ||||
| Adjustment | (204) | 193 | (227) | (238) | (170) | (150) | 154 | (270) | (436) | (474) | 90 | 139 | 61 | (184) | |||||
| As restated | 7,801 | 9,161 | 9,486 | 7,363 | 33,811 | 5,175 | 5,345 | 5,457 | 7,859 | 23,836 | 3,292 | 4,237 | 4,314 | 5,523 | 17,366 | ||||
| Net Earnings ( Loss ) | |||||||||||||||||||
| As previously reported | 225 | (166) | 5 | (1,431) | (1,367) | 136 | (316) | 180 | 334 | 334 | 10 | 24 | 20 | 361 | 415 | ||||
| Adjustment | (204) | 193 | (227) | - | (238) | (170) | (150) | 154 | (270) | (436) | (474) | 90 | 139 | 61 | (184) | ||||
| As restated | 21 | 27 | (222) | (1,431) | (1,605) | (34) | (466) | 334 | 64 | (102) | (464) | 114 | 159 | 422 | 231 | ||||
| Basic & Diluted Net Earnings (Loss) per Common Share (In U.S. dollars) | |||||||||||||||||||
| As previously reported | 0.02 | (0.02) | - | (0.10) | (0.10) | 0.01 | (0.02) | 0.01 | 0.02 | 0.02 | - | - | - | 0.03 | 0.03 | ||||
| Adjustment | (0.02) | 0.02 | (0.02) | (0.02) | (0.01) | (0.01) | 0.01 | (0.02) | (0.03) | (0.03) | 0.01 | 0.01 | - | (0.01) | |||||
| As restated | - | - | (0.02) | (0.10) | (0.12) | - | (0.03) | 0.02 | - | (0.01) | (0.03) | 0.01 | 0.01 | 0.03 | 0.02 | ||||
Restatement of Q1, Q2 and Q3 of fiscal 2006 Results
Restatement of Fiscal 2005 Results
Revenue for the full fiscal year 2005 is restated at $23.8M compared to the originally reported $24.3M, an adjustment of $436,000. Net loss for the fiscal year was restated at $102,000 compared to net earnings of $334,000 as previously reported for this period. Loss per share for the year was restated at 0.01 per share compared to earnings of $0.02 per share, an adjustment of $0.03 per share.
Restatement of Fiscal 2004 Results
Revenue for the full fiscal year 2004 is restated at $17.4M compared to the originally reported $17.6M, an adjustment of $184,000. Net earnings for the fiscal year were restated at $231,000 compared to $415,000 as previously reported for this period. Earnings per share for the year was restated at 0.02 per share compared to $0.03 per share, an adjustment of $0.01 per share.
» View the Q4 Financial Statements 
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TECSYS is a leading fast-growing supply chain management software provider that delivers powerful enterprise distribution, warehouse and transportation logistics software solutions. The company's customers include about 800 mid-size and Fortune 1000 corporations in healthcare, giftware, office products, third-party logistics, and general wholesale high-volume distribution markets. TECSYS’ shares are listed on the Toronto Stock Exchange under the ticker symbol TCS.
Solutions and general info: info@tecsys.com
Investor relations: investor@tecsys.com
TECSYS Inc.
(514) 866-0001 or (800) 922-8649
The statements in this news release relating to matters that are not historical fact are forward looking statements that are based on management's beliefs and assumptions. Such statements are not guarantees of future performance and are subject to a number of uncertainties, including but not limited to future economic conditions, the markets that TECSYS Inc. serves, the actions of competitors, major new technological trends, and other factors beyond the control of TECSYS Inc., which could cause actual results to differ materially from such statements. All names, trademarks, products, and services mentioned are registered or unregistered trademarks of their respective owners.
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