Financial Models Company Inc. (FMC) has announced its results of operations for the fiscal 2005 fourth quarter and year ended February 28, 2005. All results are reported in Canadian dollars.
From December 2004 to date, various offers for the purchase of all of the common and class C shares of FMC were received from Linedata Services S.A., 1066821 Ontario Inc., a company controlled by FMC’s President and Chief Executive Officer, and SS&C. During the fourth quarter and year ended February 28, 2005, FMC incurred $10.3 million and $10.6 million, respectively, of corporate transaction costs related to these offers. The $10.6 million includes a fee of $6.0 million to Linedata for terminating an acquisition agreement with FMC, with the remainder for legal, professional, investment advisory and other fees. The corporate transaction costs less related income tax had a negative effect on fourth quarter and fiscal 2005 net earnings of $9.0 million and $9.2 million, respectively.
As previously announced, SS&C has made an offer for all of FMC’s shares at $17.70 per share in cash. Certain shareholders of FMC, holding approximately 92% of FMC’s shares, have entered into lock-up agreements and agreed to tender their shares into the SS&C offer.
Revenue for the fourth quarter decreased 5.2% to $17.9 million from $18.9 million in the fourth quarter of the prior year. Fourth quarter cost of revenue and operating expenses increased $9.0 million to $25.5 million from $16.5 million as a result of the $10.3 million of corporate transaction costs discussed above, partially offset by decreased expenses of $1.3 million from continued cost control. Excluding the corporate transaction costs, fourth quarter cost of revenue and operating expenses were $15.2 million.
Fourth quarter EBITDA(1) decreased to a loss of $7.6 million from earnings of $2.3 million in the fourth quarter of the prior year. Fourth quarter adjusted EBITDA(2), which is exclusive of the corporate transaction costs, increased to earnings of $2.7 million from earnings of $2.3 million in the fourth quarter of the prior year.
Fourth quarter net loss was $7.4 million, or $0.67 loss per share, as compared to net earnings of $1.4 million, or $0.13 earnings per share, in the fourth quarter of the prior year. Fourth quarter adjusted net earnings(3), which is exclusive of the corporate transaction costs and related income tax, increased to $1.5 million, or $0.14 adjusted net earnings per share(3), from earnings of $1.4 million, or $0.13 earnings per share in the fourth quarter of the prior year.
Revenue for the year decreased 0.7% to $71.9 million from $72.4 million in the prior year. Cost of revenue and operating expenses increased $6.6 million, or 10.1%, to $71.3 million from $64.8 million as a result of $10.6 million of corporate transaction costs, partially offset by $1.4 million of investment tax credits recorded in the current year as compared to $0.4 million in the prior year and decreased expenses of $3.1 million from continued cost control. Excluding the corporate transaction costs, ongoing cost of revenue and operating expenses for the year were $60.7 million.
EBITDA(1) for the year decreased to $0.6 million from $7.6 million in the prior year. Adjusted EBITDA(2), which is exclusive of the corporate transaction costs, increased to $11.2 million from $7.6 million in the prior year.
Net loss for the year of $4.2 million, or $0.38 loss per share, compares to net earnings of $2.5, or $0.22 earnings per share, in the prior year. Adjusted net earnings(3), which is exclusive of the corporate transaction costs and related income tax, increased to $5.0 million, or $0.45 adjusted earnings per share(3), from net earnings of $2.5 million, or $0.22 earnings per share, in the prior year.
“Excluding the corporate transaction costs, we are pleased to have doubled adjusted net earnings to $5.0 million from net earnings of $2.5 million in the prior year while maintaining our investment in R&D for our next generation systems. During 2005, FMC released enhanced versions of certain of these systems and has implemented several clients in production,” said Stamos D. Katotakis, president and chief executive officer of FMC.