OTTAWA, May 4 /CNW/ - Corel Corporation (NASDAQ:CREL)(TSX:CRE) today
reported results for its first quarter ended February 28, 2006, consistent
with the preliminary results reported in the Company's Final Prospectus from
its Initial Public Offering dated April 25, 2006. Results from WinZip's
operations are included from January 18, 2005 under the rules of SFAS 141.
Total revenues in the first quarter of fiscal 2006 were $44.3 million, an
increase of 11% over total revenues of $40.0 million in the first quarter of
fiscal 2005. Income from operations for the 2006 first quarter was $5.7
million, compared to $4.0 million in the first quarter of 2005, an increase of
41%. The Company recorded income tax expense of $3.2 million in the quarter,
including $2.4 million related to WinZip, and interest expense of $3.9
million, resulting in a net loss of $1.6 million, or $(0.08) per pro forma
diluted share. In the first quarter of fiscal 2005, the Company recorded a tax
expense of $180,000 and interest expense of $2.0 million, resulting in a net
loss of $2.5 million, or $(0.16) per share.
Adjusted EBITDA in the first quarter of fiscal 2006 was $14.4 million, a
19% increase compared to $12.1 million in the first quarter of fiscal 2005. A
reconciliation of Cash Flow from Operations, which was $5.9 million and $9.0
million in the first quarters of fiscal years 2006 and 2005, respectively, to
Adjusted EBITDA can be found in the tables accompanying this press release.
David Dobson, CEO of Corel Corporation, said, "We are pleased with our
first quarter results that reflect the fundamental strengths of the Corel
business model. The acquisition of WinZip delivered positive results in the
quarter, contributing to the increase in revenue and operating income. During
the quarter we also signed a new OEM agreement with Lenovo, the third largest
PC manufacturer in the world. This agreement supports our goal of extending
Corel's reach into both mature and emerging markets by offering
value-conscious consumers full-featured, easy-to-use products that are highly
compatible with industry standards."
On May 2, 2006, Corel completed its initial public offering of 6,500,000
common shares at US $16.00 (CDN $18.11) per share. As part of the offering,
Corel sold 5,000,000 common shares and certain selling shareholders sold
1,500,000 common shares.
Forward-Looking Statements:
This news release includes forward-looking statements that are based on
certain assumptions and reflect our current expectations. Such forward-looking
statements involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of
results to differ materially from any future results, performance or
achievements discussed or implied by such forward-looking statements. Such
risks include competitive threats from well established software companies
that have significantly greater market share and resources than us, new
entrants that benefit from industry trends, such as the increasing importance
of Internet distribution and open source software, and from online services
companies that are increasingly seeking to provide software products at little
or no incremental cost to their customers to expand their Internet presence
and build consumer loyalty. We rely on a small number of key strategic
relationships for a significant percentage of our revenue and these
relationships can be terminated at any time. In addition, our core products
have been marketed for many years and the packaged software market in North
America and Europe is relatively mature and characterized by modest growth.
Accordingly, we must successfully complete acquisitions, penetrate new markets
or increase penetration of our installed base to achieve revenue growth. These
risks, uncertainties and other important factors are described in our
Prospectus dated April 25, 2006, filed with the Securities and Exchange
Commission pursuant to Rule 462(b) of the rules and regulations under the
Securities Act of 1933. A copy of the Prospectus can be obtained on our
website, or at www.sec.gov. Such risks are also included in our Canadian
supplemented PREP prospectus dated April 26, 2006, available for free at
http://www.sedar.com. Forward-looking statements speak only as of the date of
the document in which they are made. We disclaim any obligation or undertaking
to provide any updates or revisions to any forward-looking statement to
reflect any change in our expectations or any change in events, conditions or
circumstances on which the forward-looking statement is based.
Use of Non-GAAP Measures:
This news release includes certain non-GAAP financial measures, such as
Adjusted EBITDA. We use these non-GAAP financial measures as supplemental
indicators of our operating performance and to assist in evaluation of our
liquidity. These measures do not have any standardized meanings prescribed by
GAAP and therefore are unlikely to be comparable to the calculation of similar
measures used by other companies, and should not be viewed as alternatives to
measures of financial performance or changes in cash flows calculated in
accordance with GAAP. Reconciliations of these non-GAAP financial measures are
set out in the tables attached to this news release.
Corel has filed a Prospectus with the SEC for the offering to which this
communication relates. Before you invest, you should read the Prospectus and
other documents Corel has filed with the SEC for more complete information
about Corel and this offering. You may get these documents for free by
visiting EDGAR on the SEC website at http://www.sec.gov. In addition, the
Prospectus relating to this offering is available on Corel's website at
http://investor.corel.com/SEC.cfm.
About Corel Corporation
Corel is a leading global packaged software company with an estimated
installed base of over 40 million users. The Company provides high quality,
affordable and easy-to-use productivity, graphics and digital imaging software
and enjoys a favorable market position among value-conscious consumers and
small businesses. Its products are sold in over 75 countries through a
scalable distribution platform comprised of original equipment manufacturers
(OEMs), Corel's domestic and international websites, and a global network of
resellers and retailers. The Company's product portfolio features
well-established, globally recognized brands including CorelDRAW(R) Graphics
Suite, Corel(R) WordPerfect(R) Office, WinZip(R), Corel(R) Paint Shop(R) Pro,
and Corel Painter(TM).
(C) 2006 Corel Corporation. All rights reserved. Corel, CorelDRAW,
WordPerfect, WinZip, Paint Shop, Painter, and the Corel logo are trademarks or
registered trademarks of Corel Corporation and/or its subsidiaries. All other
product, font and company names and logos are trademarks or registered
trademarks of their respective companies.
CRELF
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Corel Corporation
Combined Consolidated Balance Sheets
(In thousands of U.S. dollars or shares)
(Unaudited)
As of As of
February 28, November 30,
2006 2005
Assets
Current assets:
Cash and cash equivalents $ 15,198 $ 20,746
Restricted cash 716 966
Accounts receivable
Trade, net 16,420 19,342
Other 482 978
Inventory 850 726
Deferred tax assets 421 592
Prepaid and other current assets 2,285 2,343
------------ ------------
Total current assets 36,372 45,693
Investments 287 334
Capital assets 3,450 3,532
Intangible assets 45,501 52,397
Goodwill 9,850 9,850
Deferred tax assets 20 284
Deferred financing and other long-term
assets 10,065 8,746
------------ ------------
Total assets $ 105,545 $ 120,836
------------ ------------
Liabilities and shareholders' deficit
Current liabilities:
Accounts payable and accrued
liabilities $ 24,585 $ 30,486
Current portion of promissory note 771 1,170
Income taxes payable 12,663 10,773
Deferred revenue 10,586 11,755
Current portion of term loans payable 9,500 15,764
------------ ------------
Total current liabilities 58,105 69,948
Promissory note 815 1,072
Deferred revenue 2,050 2,085
Term loans payable 130,591 132,965
------------ ------------
Total liabilities 191,561 206,070
------------ ------------
Commitments and contingencies
Shareholders' deficit
Share capital:
Class A Common Shares (par value:
none; authorized: unlimited; issued
and outstanding: nil, and 3,740
shares, respectively; convertible to
Class B Common Shares) - (42,229)
Class B Common Shares (par value:
none; authorized: unlimited; issued
and outstanding: nil, and 8,321
shares, respectively) - (34,184)
Preferred Shares (par value: none;
authorized: unlimited; issued and
outstanding: nil, and 3,105 shares,
respectively) - 2,600
WinZip Common Shares (par value: $1;
authorized: 50; issued and
outstanding: 20 and 20 shares,
respectively) 20 20
Corel common shares (par value: none;
authorized: unlimited; issued and
outstanding: 15,170 and nil shares,
respectively) (73,761) -
Additional paid-in capital 8,279 7,427
Accumulated other comprehensive income 37 85
Deficit (20,591) (18,953)
------------ ------------
Total shareholders' deficit (86,016) (85,234)
------------ ------------
Total liabilities and shareholders'
deficit $ 105,545 $ 120,836
------------ ------------
Corel Corporation
Combined Consolidated Statements of Operations
(In thousands of U.S. dollars or shares, except per share data)
(Unaudited)
Three months ended February 28,
2006 2005
------------ ------------
Revenues
Product $ 39,498 $ 36,082
Maintenance and services 4,789 3,906
------------ ------------
Total revenues 44,287 39,988
------------ ------------
Cost of revenues
Cost of products 5,005 4,708
Cost of maintenance and services 314 348
Amortization of intangible assets 6,627 6,199
------------ ------------
Total cost of revenues 11,946 11,255
------------ ------------
Gross margin 32,341 28,733
------------ ------------
Operating expenses
Sales and marketing 14,504 12,824
Research and development 6,181 5,671
General and administration 5,395 5,659
Restructuring 560 540
------------ ------------
Total operating expenses 26,640 24,694
------------ ------------
Income from operations 5,701 4,039
------------ ------------
Other expenses (income)
Loss on debt retirement - 3,931
Interest expense, net 3,863 1,970
Amortization of deferred financing
fees 444 300
Other non-operating (income) expense (120) 178
------------ ------------
Income (loss) before taxes 1,514 (2,340)
Income tax expense 3,152 180
------------ ------------
Net loss $ (1,638) $ (2,520)
------------ ------------
Other comprehensive income (loss)
Unrealized (loss) gain on securities (48) 214
------------ ------------
Other comprehensive income (loss) (48) 214
------------ ------------
Total comprehensive loss $ (1,686) $ (2,306)
------------ ------------
Net income (loss) per share:
Basic
Class A $ N/A $ (1.64)
Class B $ N/A $ (1.64)
WinZip common $ 105.85 $ (9.75)
Corel common $ (0.25) $ N/A
Fully diluted
Class A $ N/A $ (1.64)
Class B $ N/A $ (1.64)
WinZip common $ 92.04 $ (9.75)
Corel common $ (0.25) $ N/A
Pro-forma
Basic $ (0.08) $ (0.16)
Diluted $ (0.08) $ (0.16)
Corel Corporation
Combined Consolidated Statements of Operations
(In thousands of U.S. dollars or shares, except per share data)
(Unaudited)
Three months ended February 28,
2006 2005
---------- ----------
Income (loss) applicable to
shareholders:
Class A
Distributed earnings to class $ N/A $ 21,006
Loss allocable to class $ N/A $ (27,136)
Class B
Distributed earnings to class $ N/A $ 46,785
Loss allocable to class $ N/A $ (60,438)
WinZip Common
Distributed earnings to class $ - $ -
(Loss) income allocable to class $ 2,117 $ (195)
Corel Common
Distributed earnings to class $ - $ N/A
Loss allocable to class $ (3,755) $ N/A
Weighted average number of shares:
Shares used in basic per share
amounts
Class A N/A 3,736
Class B N/A 8,321
WinZip common 20 20
Corel common 15,167 N/A
Shares used in fully diluted per
share amounts
Class A N/A 3,736
Class B N/A 8,321
WinZip common 23 20
Corel common 15,167 N/A
Shares used in pro-forma per share
amounts
Basic 19,490 19,485
Diluted 19,490 19,485
Corel Corporation
Combined Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
(Unaudited)
Three months ended February 28,
2006 2005
----------- -----------
Cash flows from operating activities
Net loss $ (1,638) $ (2,520)
Depreciation 399 462
Amortization of deferred financing
fees 444 300
Amortization of intangible assets 6,627 6,199
Stock-based compensation 852 116
Accrued interest (613) 367
Provision for bad debts 122 166
Deferred income taxes 435 295
Unrealized foreign exchange loss on
forward exchange contracts 28 206
Loss on disposal of fixed assets - 13
Loss on early retirement of debt - 3,931
Change in operating assets and liabilities
Accounts receivable 3,295 4,477
Inventory (124) 693
Prepaids and other current assets 67 (74)
Accounts payable and accrued
liabilities (5,036) (4,525)
Taxes payable 2,272 (125)
Deferred revenue (1,204) (1,024)
----------- -----------
Cash flows provided by operating
activities 5,926 8,957
----------- -----------
Cash flows from financing activities
Proceeds from term loan - 130,000
Repayments of term loan (8,638) (64,305)
Financing fees incurred (1,763) (7,000)
Paid up capital distribution - (83,113)
Dividends - (2,135)
Other financing activities (606) 1,870
----------- -----------
Cash flows used in financing activities (11,007) (24,683)
----------- -----------
Cash flows from investing activities
Redemption of short-term investments - 9,987
Acquisition of Jasc - 185
Purchase of long lived assets, net of
proceeds (430) (299)
----------- -----------
Cash flows (used in) provided by
investing activities (430) 9,873
----------- -----------
Effect of exchange rate changes on cash
and cash equivalents (37) (9)
Decrease in cash and cash equivalents (5,548) (5,862)
Cash and cash equivalents, beginning of
period 20,746 11,557
----------- -----------
Cash and cash equivalents, end of
period $ 15,198 $ 5,695
----------- -----------
Corel Corporation
Reconciliation of Cash Flow from Operations to Adjusted EBITDA
(In thousands of U.S. dollars)
(Unaudited)
Three months ended February 28,
2006 2005
----------- -----------
Cash flow provided by operations $ 5,926 $ 8,957
Change in operating assets and
liabilities 730 578
Interest expenses 3,940 2,045
Interest income (77) (75)
Income tax expense 3,152 180
Accrued interest 613 (367)
Provision for bad debts (122) (166)
Unrealized foreign exchange losses
on forward contracts (28) (206)
Deferred income taxes (435) (295)
Loss on disposal of fixed assets - (13)
Restructuring 560 540
Reorganization costs 117 883
----------- -----------
Adjusted EBITDA $ 14,376 $ 12,061
----------- -----------
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