Consolidated Balance Sheets
(In Canadian dollars)
(Unaudited - Prepared by Management)
December 31 September 30
As at 2000 2000
Assets
Current assets:
Cash $11,843,799 $7,105,418
Accounts receivable 41,638,478 34,234,974
Prepaid expenses 2,310,253 1,732,212
55,792,530 43,072,604
Restricted cash 1,077,095 832,337
Capital assets 10,376,318 10,448,625
Goodwill and other assets 46,753,626 46,987,707
Deferred income taxes 771,024 966,715
$114,770,593 $102,307,988
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and
accrued liabilities $35,513,548 $24,247,075
Income taxes payable 1,540,035 1,190,313
Deferred revenue 1,038,848 1,044,873
Amounts collected in excess of
pass-through costs incurred 2,647,225 2,307,047
Current portion of long-term
debt 3,146,116 2,848,430
43,885,772 31,637,738
Long-term debt 6,848,351 7,983,449
Shareholders' equity:
Share capital 54,865,335 54,597,762
Retained earnings 9,487,615 8,403,367
Cummulative translation
adjustment (316,480) (314,328)
64,036,470 62,686,801
$114,770,593 $102,307,988
Consolidated Statements of Operations and Retained Earnings
(In Canadian dollars)
(Unaudited - Prepared by Management)
December 31 December 31
For the three months ended 2000 1999
Net revenue $21,776,358 $12,704,336
Operating expenses:
Salaries and benefits 12,210,069 7,804,946
General and administrative 4,044,752 2,373,245
Occupancy costs 1,087,311 457,934
17,342,132 10,636,125
Earnings before interest expense,
income taxes, depreciation and
goodwill amortization 4,434,226 2,068,211
Depreciation 710,490 379,085
Interest expense 233,243 76,446
Earnings before income taxes
and goodwill amortization 3,490,493 1,612,680
Income tax expense, excluding
the undernoted 1,575,378 703,181
Impact of tax rate changes
(Note 1) 100,000 -
Earnings before goodwill
amortization 1,815,115 909,499
Goodwill amortization, net of
income taxes of $6,000
(1999-$6,000) 730,867 262,568
Net earnings $1,084,248 $646,931
Retained earnings, beginning
of period 8,403,367 5,492,940
Retained earnings, end
of period $9,487,615 $6,139,871
Net earnings per share - basic $0.05 $0.04
Net earnings per share - fully diluted 0.05 0.04
Earnings per share before
goodwill amortization - basic 0.09 0.05
Earnings per share before goodwill
amortization - fully diluted 0.08 0.05
Please see accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(In Canadian dollars)
(Unaudited-Prepared by Management)
December 31 December 31
For the three months ended 2000 1999
Cash flows from operating activities:
Net earnings $1,084,248 $646,931
Items not involving cash:
Deferred income taxes 195,043 (44,304)
Depreciation 710,490 379,085
Goodwill amortization 736,867 268,568
Net changes in non-cash working capital balances:
Accounts receivable (7,372,957) (2,433,945)
Prepaid expenses (575,959) 103,856
Accounts payable and accrued
liabilities 11,463,274 (863,735)
Income taxes payable 307,441 (2,217,824)
Deferred revenue (5,300) -
Amounts collected in excess of
pass-through costs incurred 342,594 872,929
Other (73,019) -
Net cash provided by (used in)
operating activities 6,812,722 (3,288,439)
Cash flows from financing activities:
Long-term debt - 400,000
Long-term debt repayments (1,459,996) (441,766)
Issuance of common shares for
cash 267,573 269,500
Reduction (Increase) in restricted
cash (245,758) (225,014)
Other 19,197 -
Net cash provided by financing
activities (1,418,984) 2,720
Cash flows from investing activities:
Acquisition of subsidiaries (net of
cash acquired of nil; 1999 - nil) - (2,070,653)
Purchase of capital assets (612,198) (612,651)
Net cash used in investing
activities (612,198) (2,683,304)
Change in cash balance due to
foreign exchange (43,159) (96,768)
(Decrease)/Increase in cash 4,738,381 (6,065,791)
Cash, beginning of period 7,105,418 15,300,454
Cash, end of period $11,843,799 $9,234,663
Cash flow from operations per share:
Basic $0.13 $0.07
Fully diluted $0.12 $0.07
Supplemental cash flow information:
Interest paid $40,419 $71,127
Income taxes paid 1,026,206 1,628,067
Shares issued for non-cash
consideration 3,623,824 2,430,200
Notes to Consolidated Financial Statements
1. Income taxes:
Effective October 1, 2000, the Company was required to adopt on a retroactive
basis the new accounting standards of The Canadian Institute of Chartered
Accountants ("CICA") for income taxes. Under this accounting standard, the
Company is not required to restate its comparative figures for prior years.
Under these new standards, future tax assets and liabilities attributable to
all temporary differences are measured using the future tax rates expected
to be in effect when the items are recovered or settled. The effect of a
change in tax rates must be recognized in income at the enactment date.
Previously, future tax assets and liabilities were recorded at the tax rate
in effect in the period the temporary difference arose and were not adjusted
for subsequent tax rate changes. The Company's temporary differences are
principally in respect of deductible share issue costs which were recorded
directly in capital stock rather than as a credit to income tax expense.
There is no cumulative effect as of October 1, 2000 of this change in
accounting policy. As a result of the December 2000 announcement by the
government to introduce legislation to reduce income tax rates over the next
four years, the Company was required to revalue its future tax assets as at
December 31, 2000 to reflect the reduction in future expected tax rates.
The impact of this was to increase the Company's tax provision for the
three months ended December 31, 2000 by $100,000. Under the CICA's new
accounting standard the Company is required to record this item as an
adjustment to income tax expense, notwithstanding the fact that such amounts
were not previously reflected in income tax expense when recorded.
2. Segmented information:
The Company provides integrated marketing communication services to its
clients. While the Company has subsidiaries in Canada, the United States,
the United Kingdom and Continental Europe, it operates as a global business
and has no distinct operating segments
The tables below set out the following information:
By Customer Location By Geographic Area
December 31, 2000 Net Capital Goodwill
Revenue Assets
Canada $6,186,066 $7,552,382 $21,970,618
United States 10,317,488 697,288 16,449,966
United Kingdom and
Continental Europe 5,272,804 2,126,648 7,986,240
$21,776,358 $10,376,318 $46,406,824
December 31, 1999
Canada $3,845,186 $7,079,134 $10,245,724
United States 8,859,150 1,007,865 11,289,567
United Kingdom and
Continental Europe - - -
$12,704,336 $8,086,999 $21,535,291
The Company's external net revenue by type of service is as follows:
December 31 2000 1999
Net Revenue:
Marketing $7,668,623 $7,826,468
Design 9,389,802 4,538,385
Technology 4,717,933 339,483
$21,776,358 $12,704,336