<PAGE> 1
http://www.mitel.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8139
MITEL CORPORATION
(Exact name of registrant as specified in its charter)
CANADA NONE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 Legget Drive
P.O. Box 13089
Kanata, Ontario, Canada K2K 1X3
(Address of principal (Postal Code)
executive offices)
Registrant's telephone number, including area code: (613) 592-2122
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes (X) No ( )
The number of common shares outstanding as at October 28, 1997 was
107,657,581.
1
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MITEL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION (Unaudited)
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -
September 26, 1997 and March 28, 1997 . . . . . . . . . . . . . . . 3
Consolidated Statements of Retained Earnings -
Three months ended September 26, 1997 and September 27, 1996
Six months ended September 26, 1997 and September 27, 1996. . . . . 4
Consolidated Statements of Income -
Three months ended September 26, 1997 and September 27, 1996
Six months ended September 26, 1997 and September 27, 1996. . . . . 5
Consolidated Statements of Cash Flows -
Six months ended September 26, 1997 and September 27, 1996 . . . . .6
Notes to the Consolidated Financial Statements . . . . . . . . . . .7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . .15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . .23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . 23
2
<PAGE> 3
Mitel Corporation
(incorporated under the laws of Canada)
CONSOLIDATED BALANCE SHEETS
(in millions of Canadian dollars)
(Unaudited)
<TABLE>
<CAPTION>
Sept. 26, March 28,
1997 1997
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 119.9 $ 143.3
Accounts receivable 174.3 156.7
Inventories (Note 3) 94.3 83.1
Prepaid expenses 5.7 4.2
Investment tax credits recoverable (Note 6) 3.6 -
------- -------
397.8 387.3
Capital assets:
Fixed assets (Note 4) 186.2 183.7
Other assets (Notes 5 and 6) 30.2 13.8
------- -------
$ 614.2 $ 584.8
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 114.5 $ 124.3
Income and other taxes payable 10.3 15.7
Deferred revenue 24.8 26.2
Current portion of long-term debt 16.9 14.8
------- -------
166.5 181.0
Long-term debt 44.7 43.0
Pension liability 11.9 11.3
Deferred income taxes 10.7 10.0
------- -------
233.8 245.3
------- -------
Shareholders' equity:
Capital Stock (Note 7)
Preferred shares 37.2 37.2
Common shares 154.0 153.3
Contributed surplus 32.3 32.3
Retained earnings 154.1 114.2
Translation account (Note 8) 2.8 2.5
------- -------
380.4 339.5
------- -------
$ 614.2 $ 584.8
======= =======
</TABLE>
3
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Mitel Corporation
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(in millions of Canadian dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Retained earnings,
beginning of period $ 131.6 $ 89.3 $ 114.2 $ 79.4
Net income for the period 23.3 16.5 41.5 27.2
------- ------- ------- -------
154.9 105.8 155.7 106.6
Dividends on preferred shares
(Note 9) (0.8) (0.8) (1.6) (1.6)
------- ------- ------- -------
Retained earnings, end of period $ 154.1 $ 105.0 $ 154.1 $ 105.0
======= ======= ======= =======
</TABLE>
4
<PAGE> 5
Mitel Corporation
CONSOLIDATED STATEMENTS OF INCOME
(in millions of Canadian dollars, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Products $ 185.3 $ 150.4 $ 347.8 $ 289.4
Service 19.7 17.1 39.2 34.0
------- ------- ------- -------
205.0 167.5 387.0 323.4
------- ------- ------- -------
Cost of sales (excluding amortization):
Products 89.9 71.4 170.5 137.5
Service 12.3 11.1 23.7 21.5
------- ------- ------- -------
102.2 82.5 194.2 159.0
------- ------- ------- -------
Gross margin 102.8 85.0 192.8 164.4
------- ------- ------- -------
Expenses:
Selling and administrative 55.8 49.5 105.0 97.2
Research and development (net) 17.7 12.6 33.5 26.8
Investment tax credits related
to prior years' research
and development (Note 6) (9.5) (2.5) (16.9) (4.8)
Amortization 9.3 8.3 18.5 15.7
------- ------- ------- -------
73.3 67.9 140.1 134.9
------- ------- ------- -------
Operating income 29.5 17.1 52.7 29.5
Gain on sale of investment (Note 11) - 3.6 - 3.6
Interest:
Income 1.3 1.6 2.5 3.4
Expense (1.0) (0.5) (1.9) (1.1)
------- ------- ------- -------
Income before income taxes 29.8 21.8 53.3 35.4
Income tax expense 6.5 5.3 11.8 8.2
------- ------- ------- -------
Net income for the period $ 23.3 $ 16.5 $ 41.5 $ 27.2
======= ======= ======= =======
Net income for the period
attributable to common
shareholders after preferred
share dividends $ 22.5 $ 15.7 $ 39.9 $ 25.6
======= ======= ======= =======
Net income per common share (Note 7):
Basic $ 0.21 $ 0.15 $ 0.37 $ 0.24
======= ======= ======= =======
Fully diluted $ 0.20 $ 0.14 $ 0.36 $ 0.23
======= ======= ======= =======
</TABLE>
5
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Mitel Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of Canadian dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
Sept. 26, Sept. 27,
1997 1996
------- -------
<S> <C> <C>
CASH PROVIDED BY (USED IN)
Operating activities:
Net income for the period $ 41.5 $ 27.2
Amortization 18.5 15.7
Investment tax credits (8.6) -
(Gain) loss on sale of capital assets (0.8) (3.6)
Deferred income taxes 0.7 0.3
Other non-cash operating items 0.5 0.6
Increase in working capital (Note 13) (34.1) (20.0)
------- -------
Total 17.7 20.2
------- -------
Investing activities:
Additions to capital assets (22.7) (34.7)
Proceeds from disposal of capital assets 6.8 3.8
Acquisition (Note 10) (21.6) -
Net change in non-cash balances related
to investing activities (6.6) 1.6
------- -------
Total (44.1) (29.3)
------- -------
Financing activities:
Increase in long-term debt 15.9 11.6
Repayment of long-term debt (12.1) (6.6)
Dividends on preferred shares (1.6) (1.6)
Issue of common shares (Note 7) 0.7 2.2
Net change in non-cash balances related
to financing activities - 0.8
------- -------
Total 2.9 6.4
------- -------
Effect of currency translation on cash 0.1 0.8
------- -------
Decrease in cash and short-term investments (23.4) (1.9)
Cash and short-term investments, beginning of period 143.3 137.3
------- -------
Cash and short-term investments, end of period $ 119.9 $ 135.4
======= =======
</TABLE>
6
<PAGE 7>
Mitel Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in millions of Canadian dollars, except per share amounts)
(Unaudited)
1. In the opinion of Management, the unaudited consolidated financial
statements reflect all adjustments, which consist only of normal and recurring
adjustments, necessary to present fairly the financial position at September
26, 1997 and the results of operations and the changes in financial position
for the three and six month periods ended September 26, 1997 and September 27,
1996, in accordance with accounting principles generally accepted in Canada.
(See also Note 12).
These financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's Annual Report on Form
10-K for the year ended March 28, 1997. The Company's fiscal year-end is the
last Friday in March.
2. Due to the cyclical nature of the business, the results of operations for
the periods presented are not necessarily indicative of the results to be
expected for the full year.
3. The components of inventory are:
<TABLE>
<CAPTION>
Sept. 26, March 28,
1997 1997
------- -------
<S> <C> <C>
Raw materials $ 33.8 $ 29.4
Work-in-process 24.7 26.9
Finished goods 35.8 26.8
------- -------
$ 94.3 $ 83.1
======= =======
</TABLE>
4. Fixed assets:
<TABLE>
<CAPTION>
Sept. 26, March 28,
1997 1997
------- -------
<S> <C> <C>
Cost $ 439.7 $ 421.3
Accumulated amortization (253.5) (237.6)
------- -------
$ 186.2 $ 183.7
======= =======
</TABLE>
7
<PAGE> 8
5. Other assets:
<TABLE>
<CAPTION>
Sept. 26, March 28,
1997 1997
------- -------
<S> <C> <C>
Cost:
Patents, trademarks, and other $ 17.0 $ 10.6
Research and development 11.9 -
Goodwill 4.7 4.7
Investment tax credits recoverable 5.0 -
Assets held for resale - 5.9
------- -------
38.6 21.2
------- -------
Less accumulated amortization:
Patents, trademarks, and other 6.7 6.0
Research and development 0.2 -
Goodwill 1.5 1.4
------- -------
8.4 7.4
------- -------
$ 30.2 $ 13.8
======= =======
</TABLE>
On June 27, 1997, the Company sold the Boca Raton facility which was held as
an asset for resale at March 28, 1997. The Company realized a gain and other
income of approximately $1.8, or $0.02 per share, related to this sale.
On August 8, 1997, the Company acquired completed and in-process research and
development (R&D) in connection with the purchase of the assets and technology
business of Gandalf Technologies Inc. (See also Note 10). The R&D will be
amortized over a period of ten years.
6. Income taxes
As at September 26, 1997, the Company recognized a net Canadian ITC asset of
$8.6 related to prior years' research and development expenses.
The ITCs recognized in earnings were comprised of two components:
1) the recognition of ITCs in Fiscal 1998 for which management believes
there is sufficient evidence of expected profitability from operations in the
foreseeable future to provide reasonable assurance for accruing a future
benefit related to ITCs, amounting to $5.0, or $0.05 per share, for the second
quarter and $8.6, or $0.08 per share, year-to-date; and,
2) ITCs realized for tax purposes in the second quarter and first half of
Fiscal 1998, amounting to $4.5 (1997 - $2.5) and $8.3 (1997 - $4.8)
respectively. The benefit of recording these ITCs contributed to reducing the
impact of a higher effective income tax rate in Canada, combining to result in
an insignificant impact to net earnings.
As at March 28, 1997, the Company had tax loss carryforwards of approximately
$100.0 for which no accounting benefit was recognized and which are available
to reduce future years' income for tax purposes. These tax loss carryforwards
8
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expire as follows: 2002 - $6.0; 2003 - $16.0; 2004 - $6.9; 2005 to 2012 -
$71.1. The tax loss carryforwards relate to operations in the United States,
Germany and Hong Kong. As at March 28, 1997, the Company had Canadian
investment tax credit carryforwards of approximately $60.0 for which no
accounting benefit was recognized and which are available to reduce future
years' income taxes. These investment tax credits expire during the years
from 1998 to 2007. In addition, the Company had timing differences of
approximately $32.0 for which no accounting benefit was recognized as at March
28, 1997.
7. Capital stock:
<TABLE>
<CAPTION>
a) Sept. 26, March 28,
1997 1997
------- -------
<S> <C> <C>
Shares outstanding:
Preferred shares - R&D Series 1,616,500 1,616,500
Common shares 107,594,956 107,414,631
</TABLE>
There were no preferred shares repurchased during the six months ended
September 26, 1997.
b) A summary of the Company's stock option activity is as follows:
<TABLE>
<CAPTION>
Six Months Ended
Sept. 26, Sept. 27,
1997 1996
------- -------
<S> <C> <C>
Outstanding options:
Balance, beginning of period 3,238,638 2,902,525
Granted 1,070,500 699,000
Exercised (180,325) (190,950)
Cancelled (30,875) (25,000)
--------- ---------
Balance, end of period 4,097,938 3,385,575
========= =========
</TABLE>
Available for grant at September 26, 1997 were 73,900 (March 28, 1997 -
1,113,525) common shares. The exercise prices on stock options issued range
from $1.10 to $9.52 per share with exercise periods extending to August, 2007.
c) The net income per common share figures were calculated based on net
income after the deduction of preferred share dividends and using the weighted
monthly average number of shares outstanding during the respective periods as
follows:
9
<PAGE> 10
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding (millions) 107.5 107.2 107.5 107.2
======= ======= ======= =======
</TABLE>
8. The following table summarizes changes in the translation account:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Balance, beginning of period $ 4.5 $ 4.8 $ 2.5 $ 3.3
Increase (decrease):
Movements in exchange rates -
United Kingdom Pound Sterling (2.5) 0.6 (0.4) 1.7
Swedish Krona 0.7 0.1 0.4 0.5
Other currencies 0.1 0.1 0.3 0.1
Reduction of net investment in
subsidiaries - (0.7) - (0.7)
------- ------- ------- -------
Balance, end of period $ 2.8 $ 4.9 $ 2.8 $ 4.9
======= ======= ======= =======
</TABLE>
9. The Company has not declared or paid any dividends on its common shares.
During the second quarter, a $0.50 per share dividend was declared and paid on
the preferred shares.
10. Acquisition
On August 8, 1997, the Company acquired certain assets of Gandalf Technologies
Inc. (Gandalf) related to its technology business, (principally its remote
access business). Gandalf's remote access products and technology facilitates
high volume data and voice communications between the corporate office, local
branches, teleworkers, and agents in the field. Gandalf's operations are
based principally in Canada, the United States, and the United Kingdom. The
Company acquired the assets and technology business for cash consideration of
$21.6. The purchase agreement did not include Gandalf's service business.
This acquisition was accounted for by application of the purchase method under
which the results of operations of Gandalf were included in the Company's
accounts from the date of acquisition. The purchase price allocation was
based on fair values assigned to net assets as determined by an independent
valuation using standard valuation techniques. An amount of $15.3 was
allocated to identifiable intangible assets which include completed and in-
process research and development, trademarks, and the tradename. The
identifiable intangible assets will be amortized over ten years.
10
<PAGE> 11
The purchase transaction is summarized as follows:
<TABLE>
Net assets acquired, at approximate fair value:
<S> <C>
Current assets $ 6.6
Capital assets 16.1
-------
Total assets 22.7
Current liabilities 1.1
-------
Total net assets $ 21.6
=======
Cash consideration $ 21.6
=======
</TABLE>
11. Gain on sale of investment
On September 27, 1996, the Company sold its equity investment in Esprit
Telecom (Jersey) Ltd. (Esprit), a non-strategic holding which was carried at a
nominal cost. The gain on the sale of shares in Esprit was $3.6.
12. United States accounting principles
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada (Canadian GAAP), which, in
the case of the Company, conform in all material respects with those in the
United States (U.S. GAAP) and with the requirements of the Securities and
Exchange Commission (SEC), except as fully described in Note 21 to the
consolidated financial statements as at March 28, 1997. In addition, under
U.S. GAAP, acquired in-process R&D with no alternative future use is written-
off against net earnings upon acquisition. Under Canadian GAAP, acquired in-
process R&D is capitalized and amortized over its estimated useful life,
subject to a periodic review of its recoverability.
The following table reconciles the net income as reported on the consolidated
statements of income to the net income that would have been reported had the
financial statements been prepared in accordance with U.S. GAAP and the
requirements of the SEC:
11
<PAGE> 12
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income for the period in accordance with
Canadian GAAP $ 23.3 $ 16.5 $ 41.5 $ 27.2
Write-off of acquired
in-process R&D (2.7) - (2.7) -
Effect of deferral accounting
related to foreign
exchange contracts 0.3 - (0.3) -
Adjustment to deferred income taxes (5.0) (1.0) (1.3) (0.5)
------- ------- ------- -------
U.S. GAAP and SEC requirements:
Net income for the period $ 15.9 $ 15.5 $ 37.2 $ 26.7
======= ======= ======= =======
Net income for the period
attributable to common
shareholders after preferred
share dividends $ 15.1 $ 14.7 $ 35.6 $ 25.1
======= ======= ======= =======
Net income per common share $ 0.14 $ 0.14 $ 0.33 $ 0.23
======= ======= ======= =======
Weighted average common shares
and common share equivalents
outstanding (millions) 108.8 108.5 108.6 108.5
======= ======= ======= =======
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Six Months Ended
Sept. 26, Sept. 27,
1997 1996
------- -------
<S> <C> <C>
Cash flow information presented in conformity
in all material respects with U.S. GAAP:
Cash provided by (used in)
Operating activities - Canadian and U.S. GAAP $ 17.7 $ 20.2
------- -------
Investing activities - Canadian GAAP (44.1) (29.3)
Change in short-term investments 51.9 73.2
Additions to capital assets under capital lease 13.2 15.1
------- -------
Investing activities - U.S. GAAP 21.0 59.0
------- -------
Financing activities - Canadian GAAP 2.9 6.4
Increase in capital leases (13.2) (15.1)
------- -------
Financing activities - U.S. GAAP (10.3) (8.7)
------- -------
Effect of currency translation on cash flows 0.1 0.8
------- -------
Increase in cash 28.5 71.3
Cash position, beginning of period 55.5 52.4
------- -------
Cash position, end of period $ 84.0 $ 123.7
======= =======
</TABLE>
Balance sheet items in conformity with U.S.
GAAP and SEC requirements:
<TABLE>
<CAPTION>
Sept. 26, March 28,
1997 1997
------- -------
<S> <C> <C>
Cash $ 84.0 $ 55.5
Short-term investments 35.9 87.8
Investment tax credits recoverable 9.0 6.1
Other assets 31.0 19.4
Accounts payable and accrued liabilities 103.0 128.3
Redeemable preferred shares 34.4 34.4
Common shares 599.9 599.2
Contributed surplus 2.5 2.5
Deficit (257.3) (292.9)
</TABLE>
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128 Earnings Per Share (SFAS 128), which is effective
for annual and interim periods ending after December 15, 1997. The Company's
pro forma earnings per share giving effect to SFAS 128, would be as follows:
13
<PAGE> 14
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Pro forma basic earnings per share $ 0.14 $ 0.14 $ 0.33 $ 0.23
Pro forma diluted earnings
per share $ 0.14 $ 0.13 $ 0.32 $ 0.23
</TABLE>
In addition, the Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 130 Comprehensive Income (SFAS 130) and
No. 131 Disclosures about Segments of an Enterprise and Related Information
(SFAS 131). SFAS 130 and SFAS 131 will be effective for the Company's March
26, 1999 year end. The Company has not determined the impact, if any, of
these pronouncements on its consolidated financial statements.
13. Net change in non-cash working capital balances related to operating
activities:
<TABLE>
<CAPTION>
Six Months Ended
Sept. 26, Sept. 27,
1997 1996
------- -------
<S> <C> <C>
Accounts receivable $ (16.3) $ 10.3
Inventories (6.9) (11.4)
Accounts payable and accrued liabilities (9.8) (10.5)
Deferred revenue (1.5) (4.5)
Other 0.4 (3.9)
------- -------
$ (34.1) $ (20.0)
======= =======
</TABLE>
14. Certain of the Fiscal 1997 comparative figures have been reclassified so
as to conform to the presentation adopted in Fiscal 1998.
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(in millions of Canadian dollars, except per share amounts)
The Company achieved the highest quarterly sales and earnings performance in
its history in the three months ended September 26, 1997. Total second
quarter revenue of $205.0 was 22 percent higher than Fiscal 1997's second
quarter revenue of $167.5. By product group, Semiconductor quarterly revenue
grew by 43 percent and Business Communications Systems (BCS) quarterly revenue
was up 13 percent from the same period last year. The Semiconductor growth
rate was mainly attributable to increased shipments of integrated and hybrid
circuits. The BCS revenue growth was driven by higher sales volumes of SX-
2000(R) and SX-200(R) systems, including the recently launched SX-200 ML,
telephone sets and new convergent systems. During the first six months of
Fiscal 1998, revenue grew by 20 percent to $387.0 from $323.4 last year. The
year-to-date revenue growth rates were 30 percent for Semiconductors and 15
percent for BCS when compared to the first half of Fiscal 1997.
The Company reported record quarterly net income of $23.3, or $0.21 per share,
for the quarter ended September 26, 1997, an improvement of $6.8, or $0.06 per
share, over the second quarter of Fiscal 1997. Net income in the quarter
benefited from an accrual for investment tax credits (ITCs) amounting to $5.0,
or $0.05 per share, related to ITCs expected to be realized in the foreseeable
future. Last year's second quarter net income included a gain from the sale
of a non-strategic investment which resulted in a $3.6 gain, or $0.03 per
share. The remaining net improvement of $0.04 per share over the second
quarter of Fiscal 1997 was due to the higher sales volumes and lower expenses
as a percentage of sales resulting from recent management actions taken to
focus operations and improve the sales channels. For the six months ended
September 26, 1997, net income was $41.5, or $0.37 per share, as against net
income of $27.2, or $0.24 per share, for the six month period ended September
27, 1996.
On August 8, 1997, the Company acquired the assets and technology business of
Gandalf Technologies Inc. (Gandalf) for cash consideration of $21.6. The
technology business principally addresses the remote access market with
leading edge high volume data and voice communications products. The Gandalf
business, now a division of Mitel Corporation, was substantially integrated
into Mitel's operations at quarter-end.
Net income and cash flows for each period as determined in accordance with
United States generally accepted accounting principles are detailed in Note 12
to the consolidated financial statements included elsewhere in this Form 10-Q.
The following discussion and analysis explains trends in the Company's
financial condition and results of operations for the quarter ended September
26, 1997 compared with the same period in the previous year, and is intended
to help shareholders and other readers understand the dynamics of the
Company's business and the key factors underlying its financial results. This
discussion should be read in conjunction with the consolidated financial
statements and notes included elsewhere in this Form 10-Q, and with the
Company's audited consolidated financial statements and notes thereto for the
year ended March 28, 1997. Certain statements in this management's discussion
and analysis constitute forward-looking statements within the meaning of the
15
<PAGE> 16
U.S. Private Securities Litigation Reform Act of 1995 that are based on
current expectations, estimates and projections about the industries in which
the Company operates, management's beliefs and assumptions made by management.
Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such risks,
uncertainties and assumptions include, among others, the following: general
economic and business conditions; demographic changes; import protection and
regulation; rapid technology development and changes; timing of product
introductions; the mix of products/services; industry competition, industry
capacity and other industry trends; and the ability of the Company to attract
and retain key employees.
RESULTS OF OPERATIONS
Mitel's business is global and comprises the design, manufacture and sale of
systems, subsystems and microelectronic components to world markets in the
telephony, computer telephony integration (CTI) and communications industries.
These products and related services include voice communications systems;
networked voice and data systems and CTI applications; client server telecom
products; public switching systems; network enhancement and access products;
integrated and hybrid circuits, optoelectronic devices and custom silicon
wafers.
The Company sells its products through both direct and indirect channels of
distribution. Factors affecting the choice of distribution, among others,
include: end-customer type, the level of product complexity and integration
requirements, the stage of product introduction, geographic presence and
location of markets, and volume levels.
REVENUE
Revenue, based on the geographic location of Mitel's customers, was
distributed as follows:
<TABLE>
<CAPTION>
Six Months Six Months
Ended % of Ended % of
Sept. 26, 1997 Total Sept. 27, 1996 Total
------- ----- ------- -----
<S> <C> <C> <C> <C>
United States $ 191.8 50 % $ 151.7 47 %
Europe 109.8 28 103.2 32
Other Regions 59.6 15 42.1 13
Canada 25.8 7 26.4 8
------- --- ------- ---
$ 387.0 100 % $ 323.4 100 %
======= === ======= ===
</TABLE>
For the quarter ended September 26, 1997, the net movement in exchange rates
from Fiscal 1997 positively impacted total revenue by 1 percent ($2.1) as a
result of favorable changes in the UK pound sterling exchange rate. The year-
to-date favorable impact of net movements in exchange rates from Fiscal 1997
on Fiscal 1998 first half revenues amounted to 2 percent ($5.5).
16
<PAGE> 17
Revenue, by product group, was distributed as follows:
<TABLE>
<CAPTION>
Six Months Six Months
Ended % of Ended % of
Sept. 26, 1997 Total Sept. 27, 1996 Total
------- ----- ------- -----
<S> <C> <C> <C> <C>
Business Communications
Systems $ 251.4 65 % $ 219.0 68 %
Semiconductors 135.6 35 104.4 32
------- --- ------- ---
$ 387.0 100 % $ 323.4 100 %
======= === ======= ===
</TABLE>
Business Communications Systems
Business Communications Systems (BCS) comprise PBX equipment and peripherals,
CTI products and applications, client server telecom products, call controller
products, remote access products, and the GX5000(R). All of the Company's
service revenue relates to BCS, primarily PBX.
Compared to the first half of last year, BCS product revenue increased by 15
percent due to higher sales volumes of SX-2000 and SX-200 series systems,
including the associated pull-through of system sets; new convergence system
sales of networked voice and data products; increased shipments of call
controllers; and higher service revenue. The recent second quarter
acquisition of Gandalf did not have a significant impact on the results of
operations for the six month period ended September 26, 1997.
The U.S. indirect sales channel benefited from a strong North American economy
and the successful launch of the SX-200 ML, late in the fourth quarter of
Fiscal 1997. The SX-200 ML voice system is aimed at the fast-growing small
business, under-100 line, market in the United States and other countries.
The SX-200 ML was made available to the Company's U.S. supply houses and
dealers and selected Canadian and Caribbean telephone companies during the
first quarter of Fiscal 1998. In turn, the dealers began their launch early
in the second quarter of this fiscal year to stimulate additional sales
through the channel.
The U.S. direct sales channel benefited from both strong growth in the
installation of new systems as well as from upgrades in the existing customer
base.
With respect to call controllers, European sales increased in Fiscal 1998 as a
result of recently deregulated network access services in the UK which created
a strong demand by alternate carriers for Mitel's call controllers.
BCS sales into the Asia Pacific region continue to be adversely affected by
the ongoing effects of tight monetary policies in China and intense price
competition.
In proportion to total revenue, BCS service revenue remained steady at
approximately 10 percent of total revenue. Service revenue grew mainly due to
the new managed service business in the United Kingdom where telecom product-
related services are channeled through outsourcing companies. The program was
introduced in the second half of Fiscal 1997.
17
<PAGE> 18
On August 8, 1997 and as noted above, the Company acquired for cash
consideration of $21.6 the assets and technology business, (principally its
remote access business), of Gandalf. The acquired assets include Gandalf's
leading edge remote access products and technology, which facilitate high
volume data and voice communications between the corporate office, local
branches, teleworkers and agents in the field in a cost-effective manner.
The technology acquisition also included Gandalf's other product inventory and
rights to the Gandalf tradename and trademarks. The agreement did not include
Gandalf's service business. The acquisition complements Mitel's other
initiatives in bringing telecommunications and computers together, and the
recent purchase of the UK assets of Global Village Communications (UK) Limited
(Global Village) which occurred in January of 1997.
Semiconductors
Semiconductor revenue increased by 30 percent from the first half of last year
as a result of increased demand for the Company's integrated circuits and
thick film hybrid products, primarily in the U.S. and the Far East regions.
The increase in Mitel's semiconductor business reflects the world-wide growth
in the communications segment of the semiconductor industry and growth in the
market for application specific integrated circuits (ASICs), particularly for
medical applications. Increased demand for communications products
incorporating existing Mitel Semiconductor components by the Company's
traditional customer base, along with the introduction of new components,
including those intended for CTI/multimedia applications led to increased
sales volumes compared to the same six month period last year. The Company's
recent investments in production and testing equipment also increased
manufacturing capacity leading to a reduction in product lead times and in the
order backlog.
The Company took major steps in Fiscal 1996 to expand its production capacity
through both the acquisition of Mitel Semiconductor AB, which has a
semiconductor plant in Jarfalla, Sweden, and a major capital expansion program
at its fabrication plant in Bromont, Quebec, Canada. Both initiatives were
necessary to meet the growing demand for Mitel's integrated circuits. The most
significant part of the first phase of the Bromont expansion program, which
concerns the improvement of the volume capacity of the existing 100 mm wafer
production, was completed during the first quarter of Fiscal 1997. The second
part of the first phase, which will introduce new 0.8 micron technology, as
well as the second phase, intended to increase the plant's production capacity
by converting to 150 mm wafer production, are scheduled to be completed in the
final quarter of Fiscal 1998.
GROSS MARGIN
As a percentage of total revenue, total gross margin was 50 percent for the
respective three and six months ended September 26, 1997, 1 percentage point
lower than the respective periods in Fiscal 1997. The product gross margin
was 51 percent in both the second quarter and first half of Fiscal 1998, 2
percentage points lower than in the comparative periods of Fiscal 1997.
Product gross margin declined mainly due to pricing pressures for the BCS
products, which was partially offset by higher volumes of semiconductor
products. The service gross margin improved to 37 percent and 40 percent for
the three and six month periods ended September 26, 1997, an improvement of 2
percentage points and 3 percentage points over the respective comparative
periods. The service margin improvement was due to service call efficiencies
and better technician utilization resulting from higher system sales in North
America.
18
<PAGE> 19
OPERATING EXPENSES
Selling and Administrative
Selling and administrative (S&A) expenses in the second quarter of Fiscal 1998
were $55.8, or 27 percent of sales, compared with $49.5, and 30 percent of
sales, for the comparable period in Fiscal 1997. Year-to-date, S&A expenses
were 27 percent of sales, 3 percentage points lower than the first half of
last year.
S&A expenses decreased as a percentage of sales primarily due to spending
restraints applied to marketing programs, higher efficiencies and focus in the
sales channels, and reduced corporate overhead costs. The improvement was
partially offset by the effects of consolidating the businesses acquired from
Global Village and Gandalf. The Company acquired the business and assets of
Global Village, an ISDN solution provider based in the United Kingdom, during
the fourth quarter of Fiscal 1997. The Company acquired certain assets and
the technology business of Gandalf on August 8, 1997.
During the fourth quarter of Fiscal 1997, the Company announced plans to
restructure its BCS operations and recorded a charge of $13.0 to the Company's
operating expenses, of which $8.0 related mainly to severance costs for
operations in North America and the United Kingdom. The balance of the charge
related to a write-off of the Company's investment in its joint venture in
China. During the six month period ended September 26, 1997, restructuring
charges amounting to $5.3 were charged to the provision; actions and charges
related to the remaining provision of $2.1 will be substantially completed by
the end of Fiscal 1998.
Research and Development
R&D expenses amounted to $17.7 and $33.5, each at 9 percent of revenue, for
the three and six month periods ended September 26, 1997. This compares to
$12.6 and $26.8, or 8 percent of revenue, in the respective second quarter and
first half periods of Fiscal 1997. These amounts are exclusive of related R&D
capital asset amortization and net of Canadian federal government R&D
incentives earned.
Mitel's R&D program integrates its programs for existing products with
development work in emerging technologies including, among others, the
following: CTI; multimedia components and applications; networked voice and
data; client server telecom; remote access; new ISDN applications; and real-
time applications microelectronic components.
For the respective three and six month periods ended September 26, 1997, the
Company recorded a total of $9.5 and $16.9 for Canadian ITCs related to prior
years' R&D. The ITC accrual was comprised of two components. The first
component amounted to $4.5 in the second quarter and $8.3 year to date which
related to ITCs that are expected to be realized for tax purposes in Fiscal
1998. In the respective comparative periods of Fiscal 1997, the Company
recorded an amount of $2.5 and $4.8 under the same circumstances. The benefit
of recording these ITCs reduced the impact of a higher effective income tax
rate in Canada. These ITC's, when netted against the Canadian income tax
expense, resulted in an insignificant impact to net earnings. The second
component of the accrual amounted to $5.0 and $8.6, or $0.05 and $0.08 per
share, for the respective three and six month periods in Fiscal 1998, and
related to management's assessment that reasonable assurance exists for
19
<PAGE> 20
realizing the benefit of ITCs carried forward in the foreseeable future. The
reasonable assurance is derived from management's assessment that there is
sufficient evidence of profitability in the near future from operations in
which these carryforwards arose.
Amortization
Amortization increased in the second quarter of Fiscal 1998 to $9.3 from $8.3
for the comparable period in Fiscal 1997. For the six months ended September
26, 1997, amortization increased by $2.8 to $18.5 compared to the first half
of Fiscal 1997. The increase is due primarily to the semiconductor capacity
expansion capital program and replacements and upgrades to the Company's other
manufacturing plants
INTEREST INCOME AND EXPENSE
Interest income, net of interest expense, was $0.3 in the three month period
ended September 26, 1997 compared to $1.1 for the same period in Fiscal 1997.
Interest income decreased from the same period last year primarily due to
lower interest rates and lower cash balances available for investment. The
increase in interest expense over the same period last year resulted from an
increase in the Company's capital leases, partially offset by the repayment of
the Florida industrial and development bonds on July 3, 1997.
INCOME TAXES
Income tax expense for the second quarter and first half of Fiscal 1998 was
$6.5 and $11.8 respectively and compares to $5.3 and $8.2 for the same periods
in Fiscal 1997. Before accounting for the ITCs, income tax expense for the
second quarter and first half of Fiscal 1998 was $2.0 and $3.5 compared to
$2.8 and $3.4 in the respective periods of last year. A lower effective tax
rate through the first half of Fiscal 1998 was due to lower UK earnings,
partially offset by higher provincial income taxes in Canada. The Fiscal 1997
effective tax rate was higher due to the sale of an investment in Esprit
Telecom (Jersey) Ltd. which occurred in the second quarter of that fiscal
year.
Management periodically reviews the virtual certainty or reasonable assurance,
as applicable, of realizing the loss and ITC carryforward and timing
difference benefits in the determination of their accounting recognition.
Such review may result in the recording of the accounting benefit for these
timing differences and investment tax credit carryforwards, as the
circumstances warrant, and the recognition of loss carryforwards, as realized.
Management believes there is sufficient evidence of expected profitability
from the Company's Canadian operations in the foreseeable future to provide
reasonable assurance for accruing a future benefit related to ITCs. The
accounting for the investment tax credits is more fully described in the
Research and Development section of this management's discussion and analysis.
BACKLOG
As orders are frequently booked and shipped within the same fiscal month,
order backlog is not necessarily indicative of a sales outlook for the month,
quarter, or year. This is most true for the Company's business communication
systems although manufacturing lead times for semiconductor products are
20
<PAGE> 21
generally longer because of the nature of the production process. At
September 26, 1997, order backlog was $143.8 compared to $135.1 at March 28
1997. The increase in backlog was attributable to increased BCS bookings
offset by a lower semiconductor backlog. However recent investments in
semiconductor production capacity has shortened product lead times resulting
in higher shipments and draw-down the backlog. Most of the backlog is
scheduled for delivery in the next twelve months.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and short-term investment balances of $119.9 at September
26, 1997 compared to $143.3 at March 28, 1997. The decrease of $23.4 from the
end of Fiscal 1997 was mainly due to the acquisition of Gandalf for $21.6 on
August 8, 1997, increased working capital requirements and additions to
capital assets during the first half of Fiscal 1998 offset by cash flow
provided by operations and an increase in capital leases.
Cash flow provided by operations amounted to $17.7 during the six months ended
September 26, 1997. This compares to the first half of Fiscal 1997 when cash
provided by operations was $20.2. Since March 28, 1997, the Company's working
capital has increased by $25.0 to $231.3 primarily due to increased accounts
receivables on higher revenues and to higher inventory levels. Inventory
levels increased in order to meet future higher demand for both semiconductor
and BCS products. Other liabilities decreased due, in part, to charges against
the restructuring provision recorded in the fourth quarter of Fiscal 1997.
Income taxes decreased with the payment of Fiscal 1997 taxes in Canada and a
decrease in VAT recoverable in the UK.
Fixed asset additions were $20.1 during the first half of Fiscal 1998. The
additions were primarily related to semiconductor manufacturing capacity and
technology enhancements as well as upgrades to the Company's information
technology resources. The semiconductor capital program is comprised of two
phases as described earlier in this management's discussion and analysis.
Phase one, which was completed in the second quarter of Fiscal 1998, cost
approximately $8.6. The total cost of phase two is expected to be $40.5. At
the end of the second quarter of Fiscal 1998, approximately $34.2 was spent on
the phase two project. Management expects that Fiscal 1998 capital
expenditures will be lower than Fiscal 1997 levels of $73.9.
As at September 26, 1997, there were no assets held for resale. Land
previously held for resale with a carrying value of $1.5 was reclassified to
fixed assets during the second quarter of Fiscal 1998. Management intends to
hold the land to meet future requirements.
On June 27, 1997, the Company sold the Boca Raton facility which was
previously held as an asset for resale. The proceeds from the sale, which
amounted to $6.6, were used to retire the Florida industrial revenue and
development bonds (IRBs) of $4.1, to which the facility was pledged as
security.
Total long-term debt, net of repayments, increased by $3.8 from the end of
Fiscal 1997 due to new capital leases. The increase in capital leases was
partially offset by the repayment of the Florida industrial revenue and
development bonds on July 3, 1997.
21
<PAGE> 22
As at September 26, 1997, the Company's capitalization was comprised of 16
percent debt, 8 percent preferred equity, and 76 percent common equity. This
compares to 17 percent debt, 9 percent preferred equity and 74 percent common
equity at the end of Fiscal 1997.
In addition to cash and short-term investment balances of $119.9 as at
September 26, 1997, the Company has unused lines of credit in North America
and the UK of approximately $32.8.
Management believes the Company is in a position to meet all foreseeable
business cash requirements and debt service from its cash balances on hand,
existing financing facilities and cash flow from operations.
_________
M Mitel (design) Mitel, SX-200, SX-2000 and GX5000 are registered.
22
<PAGE> 23
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held on July 24, 1997 at the Company's
headquarters in Kanata, Ontario, Canada. At the Annual Meeting, the following
matters were presented to shareholders for approval:
Motion 1: In respect of electing seven directors to the Board;
Motion 2: In respect of appointing Ernst & Young as the Company's auditors;
The results of matters submitted to a vote of shareholders were as follows:
<TABLE>
<CAPTION>
Motion 1: Shares
<S> <C>
For 58,073,419
Vote Withheld 127,173
</TABLE>
<TABLE>
<CAPTION>
Motion 2: Shares
<S> <C>
For 57,602,978
Vote Withheld 646,207
</TABLE>
The following seven directors were elected at the 1997 Annual Meeting: Dr.
John B. Millard, Dr. Henry Simon, Mr. Jonathon I. Wener, Mr. Hubert T.
Lacroix, Mr. Peter Van Cuylenburg, Mr. Anthony L. Craig, and Mr. Donald W.
Patterson. Mr. Paul G. Vien, previously a director, did not stand for re-
election to the Board at the 1997 Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
<TABLE>
<S> <C>
Exhibit 11(a) Computation of earnings per share under Canadian
accounting principles.
Exhibit 11(b) Computation of earnings per share under United
States accounting principles.
Exhibit 27 Financial Data Schedule
</TABLE>
b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended
September 26, 1997.
23
<PAGE> 24
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MITEL CORPORATION
<TABLE>
<S> <C>
October 28, 1997 JEAN-JACQUES CARRIER
---------------- ----------------------------
Date Jean-Jacques Carrier
Vice President of Finance
and Chief Financial Officer
</TABLE>
24
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
11(a) Computation of earnings per share under
Canadian accounting principles. . . . . . . . . . . 26
11(b) Computation of earnings per share under
United States accounting principles . . . . . . . . 27
27 Financial Data Schedule
</TABLE>
25
<PAGE> 26
MITEL CORPORATION Exhibit 11(a)
COMPUTATION OF EARNINGS PER SHARE
(CANADIAN ACCOUNTING PRINCIPLES)
(in millions of Canadian dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
BASIC EPS
Net income $ 23.3 $ 16.5 $ 41.5 $ 27.2
Less: dividends on cumulative
preferred shares (0.8) (0.8) (1.6) (1.6)
------- ------- ------- -------
Adjusted net income $ 22.5 $ 15.7 $ 39.9 $ 25.6
======= ======= ======= =======
Weighted average shares
outstanding (millions) 107.5 107.2 107.5 107.2
======= ======= ======= =======
Basic EPS $ 0.21 $ 0.15 $ 0.37 $ 0.24
======= ======= ======= =======
FULLY DILUTED EPS
Adjusted net income as determined
under basic EPS $ 22.5 $ 15.7 $ 39.9 $ 25.6
Imputed interest on stock options 0.1 0.1 0.3 0.2
------- ------- ------- -------
Adjusted net income $ 22.6 $ 15.8 $ 40.2 $ 25.8
======= ======= ======= =======
Weighted average shares outstanding
as determined under
basic EPS (millions) 107.5 107.2 107.5 107.2
Weighted average shares on
conversion of stock options 4.1 3.4 4.1 3.4
------- ------- ------- -------
Adjusted weighted average shares
outstanding (millions) 111.6 110.6 111.6 110.6
======= ======= ======= =======
Fully diluted EPS $ 0.20 $ 0.14 $ 0.36 $ 0.23
======= ======= ======= =======
</TABLE>
26
<PAGE> 27
MITEL CORPORATION Exhibit 11(b)
COMPUTATION OF EARNINGS PER SHARE
(UNITED STATES ACCOUNTING PRINCIPLES)
(in millions of Canadian dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
PRIMARY EPS
Net income $ 15.9 $ 15.5 $ 37.2 $ 26.7
Less: dividends on cumulative
preferred shares (0.8) (0.8) (1.6) (1.6)
------- ------- ------- -------
Adjusted net income $ 15.1 $ 14.7 $ 35.6 $ 25.1
======= ======= ======= =======
Weighted average shares and
share equivalents (millions) 108.8 108.5 108.6 108.5
======= ======= ======= =======
Primary EPS $ 0.14 $ 0.14 $ 0.33 $ 0.23
======= ======= ======= =======
FULLY DILUTED EPS (1)
Adjusted net income as
determined under primary EPS $ 15.1 $ 14.7 $ 35.6 $ 25.1
======= ======= ======= =======
Weighted average shares (millions) 108.8 108.5 108.6 108.5
Weighted average shares on
conversion of stock options 0.3 - 0.5 -
------- ------- ------- -------
Adjusted weighted average shares and
share equivalents (millions) 109.1 108.5 109.1 108.5
======= ======= ======= =======
Fully diluted EPS $ 0.14 $ 0.14 $ 0.33 $ 0.23
======= ======= ======= =======
</TABLE>
(1) This calculation is submitted in accordance with Release No. 33-5133
under the Securities Act of 1933, as amended, even though the amounts of per
share earnings on a fully dilutive basis are not required to be stated under
the provisions of APB Opinion No. 15.
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information (prepared in accordance
with accounting principles generally accepted in Canada) extracted from the
accounting records of Mitel Corporation and included in the Consolidated
Statements of Income for the Six Months Ended September 26, 1997 and the
Consolidated Balance Sheet at September 26, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> CANADIAN DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-27-1998
<PERIOD-END> SEP-26-1997
<EXCHANGE-RATE> 1.38535<F1>
<CASH> 5,840
<SECURITIES> 114,046
<RECEIVABLES> 175,900
<ALLOWANCES> 12,347
<INVENTORY> 94,338
<CURRENT-ASSETS> 397,766
<PP&E> 439,666
<DEPRECIATION> 253,474
<TOTAL-ASSETS> 614,167
<CURRENT-LIABILITIES> 166,436
<BONDS> 44,694
0
37,180
<COMMON> 154,055
<OTHER-SE> 189,153
<TOTAL-LIABILITY-AND-EQUITY> 614,167
<SALES> 387,045
<TOTAL-REVENUES> 387,045
<CGS> 194,207
<TOTAL-COSTS> 194,207
<OTHER-EXPENSES> 140,085
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,903
<INCOME-PRETAX> 53,339
<INCOME-TAX> 11,841
<INCOME-CONTINUING> 41,498
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,498
<EPS-PRIMARY> 0.37<F2>
<EPS-DILUTED> 0.36<F3>
<FN>
<F1>The period ended foreign exchange rate of 1.38535 is used to translate the
balance sheet items from Canadian Dollars (figures above) to U.S. Dollars. The
six month moving average foreign exchange rate of 1.38535 is used to translate
the income statement items from Canadian Dollars (figures above) to U.S.
Dollars.
<F2>The figure quoted is EPS-Basic under Canadian generally accepted accounting
principles.
<F3>The figure quoted is EPS-Fully Diluted under Canadian generally accepted
accounting principles.
</FN>
</TABLE>
