Annual Report F_B Cover 2014_AUG 6.pdf - p1 (August 7, 2014 18:52:47)
DT
2014 HIGHLIGHTS
EVERTZ TECHNOLOGIES LIMITED CORPORATION OFFICES
PROFITABILITY
INNOVATION
ENDURANCE
GROWTH
CORPORATE HEAD OFFICE
Evertz Technologies Ltd.
EVERTZ TECHNOLOGIES LIMITED CORPORATION OFFICES
Evertz UK
100 Berkshire Place
Wharfedale Road
Winnersh Triangle
Berkshire, UK
RG41 5RD
T: 44-118-921-6800
F: 44-118-921-6802
Evertz Asia Ltd.
Nan Fung Tower
Room 601, 6/F
173 Des Voeux RD Central
Hong Kong
T: (852) 2850-7989
F: (852) 2850-7978
Evertz UK
100 Berkshire Place
Wharfedale Road
Winnersh Triangle
Berkshire, UK
RG41 5RD
T: 44-118-921-6800
F: 44-118-921-6802
Evertz Asia Ltd.
Nan Fung Tower
Room 601, 6/F
173 Des Voeux RD Central
Hong Kong
T: (852) 2850-7989
F: (852) 2850-7978
Burlington, ON
Phoenix, AZ
Burbank, CA
New York City, NY
5292 John Lucas Dr.
Burlington, ON
L7L 5Z9
T: (905) 335-3700
CORPORATE HEAD OFFICE
Evertz Technologies Ltd.
5292 John Lucas Dr.
Burlington, ON
L7L 5Z9
T: (905) 335-3700
Manassas
10621 Gateway Blvd., Suite 206
Manassas, VA
20110
T: (703) 330-8600
F: (703) 330-5549
Manassas
10621 Gateway Blvd., Suite 206
Manassas, VA
20110
T: (703) 330-8600
F: (703) 330-5549
Burbank
212 N. Evergreen Street
Burbank, CA
91505
T: (818) 558-3910
F: (818) 558-3906
Burbank
212 N. Evergreen Street
Burbank, CA
91505
T: (818) 558-3910
F: (818) 558-3906
2014 HIGHLIGHTS
"40 Consecutive
Profi table Quarters"
Industry Leading
Pre-Tax Profi t
Re-investment of
Sales in R&D
"$1 Billion Market Value"
Net Cash & Equivalents
Record
Annual Revenue
INNOVATION
26%
ENDURANCE
18.5%
GROWTH
$102M
$326M
Re-investment of
Sales in R&D
"$1 Billion Market Value"
Net Cash & Equivalents
Record
Annual Revenue
PROFITABILITY
"40 Consecutive
Profi table Quarters"
Industry Leading
Pre-Tax Profi t
26%
QUARTERLY DIVIDEND HISTORY
18.5%
18¢
$102M
$326M
4.5%
4.0
3.5
3.0
2.5
4.5%
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
2014*
16
14
QUARTERLY DIVIDEND HISTORY
12
10
8
6
4
2
0
18¢
16
14
12
10
8
6
4
2
0
2008
2008
2009
2010
2011
2012
2013
2.0
1.5
ANNUAL REVENUE GROWTH
2011
2010
Year ended April 30,
(in millions of dollars)
2009
¢ Per Share
¢ Per Share
Yield %
*excludes $1.40 special dividend December 2013
1.0
$326
0.5
0
2012
2013
2014*
$316
Yield %
*excludes $1.40 special dividend December 2014
ANNUAL REVENUE GROWTH
Year ended April 30,
(in millions of dollars)
$316
$293
$326
$293
2012
2013
2014
Annual Report F_B Cover 2014_AUG 6.pdf - p2 (August 7, 2014 18:52:48)
2012
2013
2014
Annual Report F_B Cover 2014_AUG 6.pdf - p2 (August 7, 2014 18:52:48)
Manassas, VA
Berkshire, UK
Beijing
Hong Kong
Shanghai
Singapore
Australia
Croatia
Germany
Dubai, U.A.E
India
Burlington, ON
Phoenix, AZ
Burbank, CA
New York City, NY
Manassas, VA
Berkshire, UK
Beijing
Hong Kong
Shanghai
Singapore
Australia
Croatia
Germany
Dubai, U.A.E
India
DT
DT
A LETTER TO FELLOW SHAREHOLDERS
Over the past several years, our industry has been in a technical transition period. Evertz has prepared for these
challenges through our long-term strategy of technology development and delivering complete end to end solutions.
Evertz has emerged as the largest pure player in the broadcast media technology sector. Through market and
engineering vision, Evertz has developed IP based infrastructure solutions to continue to be the leader in video “the
workhorse of the future” for the ensuing years ahead.
In Fiscal 2014, the global economic environment remained challenging and inconsistent, impacted by continued
uncertainty in the European market and political turmoil. Despite these challenges, Evertz succeeded in generating
record annual revenues in the year. Further, we continued to deliver industry leading profitability and significant value
to shareholders while expanding our market through growth of our product portfolio. Highlights from the year include:
• Record annual revenues of $326 million;
• Earnings before taxes of $85 million;
• Annual investment in research and development increased 14% to $60 million;
• Our dedicated staff grew to 1,341;
• Year-end net cash and cash equivalents of $102 million;
• Continued inclusion in the S&P/TSX Canadian Dividend Aristocrats Index;
• Distribution of excess cash flow through quarterly dividends totaling $0.64 per share during the year; and
• Return to shareholders of excess capital through a special dividend of $1.40 per share.
DEMAND FOR HD CONTENT, TV ANYWHERE/ANYTIME & NEXT GENERATION IP VIDEO
Today our customers’ evolving needs are driven by an unsatiated global demand for more high-definition television
channels and by an increasing consumer appetite for high quality video delivered anywhere, anytime across a broad
array of devices. Evertz solutions provide compelling advantages which enable our broadcast, cable, telco, IPTV,
satellite, content creator and new media customers to address this increasingly complex video landscape.
IP & IT BASED VIDEO TECHNOLOGY INNOVATION EXPANDS MARKET
Evertz heritage of unsurpassed video domain knowledge coupled with our
long standing commitment to the internal development of new leading edge
technologies is a unique competitive advantage. In the past year alone,
Evertz has increased our annual investment in R&D by 14% to $60 million
with over $250 million invested in the past six years. The annual investments
fueled our high paced development activities within our core product
portfolio and have funded intensive longer term R&D initiatives, such as: high
performance low latency IP networking technologies; Evertz Compression
and Media Transport Solutions; our IT based architecture; and Evertz award
winning DreamCatcher the next generation of live slow motion replay for
sports broadcast and studio production. These initiatives are enabling our
customers to migrate to IP and IT based solutions, while establishing new
benchmarks for performance and operational efficiency.
During the year, we launched and deployed Evertz EXE, the world’s largest
Software Defined Network (“SDN”) open Ethernet switching platform and
saw the adoption of Evertz state-of-the-art DreamCatcher replay by a
major sports league. We believe the EXE together with our modular open
switching platforms and DreamCatcher replay will significantly expand our
addressable market and have a long-term benefit to Evertz customers and
our shareholders.
R&D INVESTMENTS OVER 5 YEARS
$ millions
60.2
52.9
44.2
35.7
32.0
10
11
12
13
14
2014 ANNUAL REPORT
1
EVERTZ TECHNOLOGIES LIMITED
AWARDS & ACHIEVEMENTS
Recognition for Evertz leadership commitment and innovation was exemplified this past year through several awards including:
TV Technology - 2014 Best of Show Award was presented to Evertz EXE 46Tb/s
SDN Open Switching Platform at NAB 2014. TV Technology’s Best of Show Awards
are judged by a panel of engineers and industry experts on the criteria of innovation,
feature set, cost efficiency and performance in serving the industry. Evertz EXE Video/
Data Switch Fabric platform features up to 46Tb/s of switching capacity and supports
2,304 10GE ports per single chassis. The EXE is the core of Evertz revolutionary SDVN
- Software Defined Video Networking solution.
TV Technology 2014 Best of Show Award to Evertz’ VIP-10G Visualization
Solution. Evertz VIP-10G Advanced Multi-Image Display Processor offers multiviewer
functionality with up to 32 inputs and up to 2 outputs, all via 10GE. The VIP-10G is the
first multiviewer to utilize a 10Gb/s Ethernet interface and offer true IP connectivity.
Evertz was named a Platinum Member of Canada’s 50 Best Managed Companies,
which recognizes excellence in Canadian-owned and Canadian-managed
companies. Canada’s 50 Best Managed Companies identifies Canadian corporate
success through companies focused on their core vision, creating stakeholder value
and excelling in the global economy.
FOUNDATION FOR GROWTH
In this evolving broadcast and high quality video infrastructure environment, we are well positioned with exciting
opportunities, as a company built upon a long term vision of generating value through continuous investment in our
comprehensive technology portfolio, maintaining strict operating discipline and expanding the reach of our sales
channels.
We generate significant cash from operations and have built a solid balance sheet, with total assets of $401 million at
the end of fiscal 2014, including approximately $102 million in cash and cash equivalents. We view these strengths as
a competitive advantage, providing financial flexibility and allowing us to provide significant value to our shareholders
through the continued payment of dividends, while adhering to our strategy of investment into new technologies.
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EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
EVOLVING & TRANSITIONING MARKET
Our 2015 plan is to advance the market installations and gain broader adoption of the new technologies we have
invested heavily in for the past several years. Evertz will leverage its high profile key customer installations of the long
term technology initiatives of:
• High bandwidth low latency deterministic IP networking;
• Media Asset Management, IT based workflow solutions including “faster than real-time”
and virtualized applications;
• Evertz Compression & Media Transport solutions; and
• DreamCatcher - sports replay revolutionized.
These technologies and others provide superior solutions to enable our broadcast, cable, telco, satellite, content
creator and new media customers to address and implement the complex multi-screen TV Everywhere services of the
future and to cost effectively transition to evolving IP infrastructure and IT based workflows.
We are excited to enter fiscal 2015 with significant momentum, evidenced by the highest combined purchase order
backlog and monthly shipments total in the Company’s history. As one of the largest pure players in our technology
sector with video being "the workhorse of the future" and as an innovator of Software Defined Video Networks, we
believe Evertz is poised for continued long term success.
We would like to take this opportunity to thank our employees, channel partners, customers and shareholders for their
continued support and we look forward to an exciting, successful future.
Romolo Magarelli
Director, President and Chief Executive Officer
Douglas A. DeBruin
Executive Chairman
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EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year ended April 30, 2014
THE FOLLOWING MANAGEMENT’S DISCUSSION AND ANALYSIS IS A REVIEW OF RESULTS OF THE OPERATIONS AND THE
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY. IT SHOULD BE READ IN CONJUNCTION WITH THE SELECTED
CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA AND THE COMPANY’S CONSOLIDATED FINANCIAL STATEMENTS
AND THE ACCOMPANYING NOTES CONTAINED ON SEDAR. THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY
ARE PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”) AND ARE PRESENTED
IN CANADIAN DOLLARS. THE FISCAL YEAR OF THE COMPANY ENDS ON APRIL 30 OF EACH YEAR. CERTAIN INFORMATION
CONTAINED HEREIN IS FORWARD-LOOKING AND BASED UPON ASSUMPTIONS AND ANTICIPATED RESULTS THAT ARE SUBJECT
TO RISKS, UNCERTAINTIES AND OTHER FACTORS. SHOULD ONE OR MORE OF THESE UNCERTAINTIES MATERIALIZE OR SHOULD
THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY SIGNIFICANTLY FROM THOSE EXPECTED.
FORWARD-LOOKING STATEMENTS
The report contains forward-looking statements reflecting Evertz’s objectives, estimates and expectations.
Such forward-looking statements use words such as “may”, “will”, “expect”, “believe”, “anticipate”, “plan”, “intend”,
“project”, “continue” and other similar terminology of a forward-looking nature or negatives of those terms.
Although management of the Company believes that the expectations reflected in such forward-looking statements
are reasonable, all forward-looking statements address matters that involve known and unknown risks, uncertainties
and other factors. Accordingly, there are or will be a number of significant factors which could cause the Company’s
actual results, performance or achievements, or industry results to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements.
The report is based on information available to management on June 6, 2014.
OVERVIEW
Evertz is a leading equipment provider to the television broadcast telecommunications and new-media industries.
Founded in 1966, Evertz is a leading equipment provider to the television broadcast industry. Evertz designs,
manufactures and markets video and audio infrastructure equipment for the production, post-production and
transmission of television content. The Company’s solutions are purchased by content creators, broadcasters,
specialty channels and television service providers to support their increasingly complex multi-channel digital
and high definition television (“HDTV”) and next generation high bandwidth low latency IP network environments
and by telecommunications and new-media companies. The Company’s products allow its customers to generate
additional revenue while reducing costs through the more efficient signal routing, distribution, monitoring and
management of content as well as the automation of previously manual processes.
The Company’s growth strategy is based on capitalizing on its strong customer position and innovative integrated
product line. The Company’s financial objectives are to achieve profitable growth with our existing customers and with
new customers who were converting to HDTV, building out IPTV infrastructures, or in need of advanced video solutions.
Our plan is to bring to market the new technologies that we have invested heavily in for the past several years.
These technologically superior solutions help to enable our broadcast, cable, telco, satellite, content creator
and new media customers to address and implement their video infrastructure requirements.
Our broadcast customers continue to operate in a challenging economic environment which impacts their ability
to incur capital expenditures and often results in projects being scaled back or postponed to later periods.
While it does appear that industry conditions are showing some improvement in certain geographical areas,
it is unclear what the time frame will be for our customers to convert this to equipment purchases.
4
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES
Outlined below are those policies considered particularly significant:
Basis of Measurement
These financial statements have been prepared on the historical cost basis except for certain financial assets and
liabilities which are stated at fair value. Historical cost is generally based on the fair value of the consideration
given in exchange for assets.
Functional and Presentation Currency
These financial statements are presented in Canadian dollars, which is the Company’s functional currency. All financial
information presented in Canadian dollars has been rounded to the nearest thousand, except per share amount.
Basis of Consolidation
These financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries). Control is achieved where the Company has power over an entity, has exposure or rights
to variable returns from its involvement with the entity and has the ability to use its power over the entity to affect the
amount of the investor’s returns.
The results of subsidiaries acquired or disposed of are included in the consolidated statements of earnings and
comprehensive earnings from the effective date of acquisition of control and up to the effective date of disposal
of control, as appropriate. Total comprehensive earnings of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
All intra-Company transactions, balances, income and expenses are eliminated in full on consolidation.
Business Combinations
Business combinations are accounted for using the acquisition method. The cost of the acquisition is measured
at the aggregate of the fair values, at the date of acquisition, of assets transferred, liabilities incurred or assumed,
and equity instruments issued by the Company. The acquiree’s identifiable assets and liabilities assumed are
recognized at their fair value at the acquisition date. Acquisition-related costs are recognized in earnings as incurred.
Any contingent consideration is measured at fair value on date of the acquisition and is included as part of the
consideration transferred. The fair value of the contingent consideration liability is re-measured at each reporting
date with corresponding gain/loss recognized in earnings. The excess of the consideration over the fair value
of the net identifiable assets and liabilities acquired is recorded as goodwill.
On an acquisition by acquisition basis, any non-controlling interest is measured either at the fair value of the
non-controlling interest or at the fair value of the proportionate share of the net identifiable assets acquired.
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition
of the business less accumulated impairment losses, if any.
Revenue Recognition
Revenue is measured at the fair value of consideration received or receivable, net of discounts and after eliminating
intercompany sales.
Where revenue arrangements have separately identifiable components, the consideration received or receivable
is allocated to each identifiable component and the applicable revenue recognition criteria are applied to each
of the components.
Revenue is derived from the sale of hardware and software solutions including related services, training and
commissioning. Revenue from sales of hardware and software are recognized upon shipment, provided that the
significant risks and rewards of ownership have been transferred to the customer, the Company retains neither
continuing managerial involvement to the degree usually associated with ownership nor effective control over the
goods sold, revenue can be reliably measured and its probable that the economic benefits will flow to the Company.
Service revenue is recognized as services are performed.
5
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT Certain of the Company’s contracts are long-term in nature. When the outcome of the contract can be assessed
reliably, the Company recognizes revenue on long-term contracts using the percentage of completion method,
based on costs incurred relative to the estimated total contract costs. When the outcome of the contract cannot
be assessed reliably contract costs incurred are immediately expensed and revenue is recognized only to the
extent that costs are considered likely to be recovered.
Finance Income
Interest revenue is recognized when it is probable that the economic benefits will flow to the Company and the amount
of revenue can be measured reliably. Interest revenue is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in the bank, net of outstanding bank overdrafts.
Inventories
Inventories consist of raw materials and supplies, work in progress and finished goods. Inventories are stated at the
lower of cost and net realizable value. Cost is determined on a weighted average basis and includes raw materials,
the cost of direct labour applied to the product and the overhead expense.
Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and
costs necessary to make the sale.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognized impairment loss.
Where the costs of certain components of an item of property, plant and equipment are significant in relation to the
total cost of the item, they are accounted for and depreciated separately. Depreciation expense is calculated based on
depreciable amounts which is the cost of an asset less residual value and is recognized in earnings on a straight-line
basis over the estimated useful life of the related asset. Borrowing costs are capitalized to the cost of qualifying assets
that take a substantial period of time to be ready for their intended use.
The estimated useful lives are as follows:
Asset
Office furniture and equipment
Research and development equipment
Machinery and equipment
Leaseholds
Building
Airplanes
Basis
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
Rate
10 years
5 years
5 - 15 years
5 years
10 - 40 years
10 - 20 years
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognized in earnings.
The Company reviews the residual value, estimated useful life and the depreciation method annually.
6
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D) Impairment of Non-Financial Assets
Goodwill is tested for impairment annually, or whenever events or changes in circumstances indicate that the carrying
amount may be more than its recoverable amount. At each reporting period, the Company reviews the carrying
amounts of its other non-financial assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). Where the asset does not generate cash inflows that are largely
independent from other assets, the Company estimates the recoverable amount of the cash-generating unit (“CGU”)
to which the asset belongs. Goodwill is allocated to a group of CGU’s based on the level at which it is monitored for
internal reporting purposes.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount
of the asset or CGU is reduced to its recoverable amount. An impairment loss relating to a CGU to which goodwill has
been allocated, is allocated to the carrying amount of the goodwill first. An impairment loss is recognized immediately
in earnings.
An impairment loss in respect of goodwill is not reversed. Where an impairment loss subsequently reverses for other
non-financial assets, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of an impairment
loss is recognized immediately in earnings.
Intangible Assets
Intangible Assets
Intangible assets represent intellectual property acquired through business acquisitions and are recorded at cost less
any impairment loss and are amortized using the straight–line method over a four–year period. The estimated useful
life and amortization method are reviewed at the end of each reporting period.
Research and Development
All research and development expenditures are expensed as incurred unless a development project meets the criteria
for capitalization. Development expenditures are capitalized only if development costs can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable and the Company
intends to and has sufficient resources to complete development and to use or sell the asset. No internally generated
intangible assets have been recognized to date.
Research and development expenditures are recorded gross of investment tax credits and related government grants.
Investment tax credits for scientific research and experimental development are recognized in the period the qualifying
expenditures are incurred if there is reasonable assurance that they will be realized.
Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Company will be required to settle that obligation and a reliable estimate can be made
of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation
at the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision
is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value
of those cash flows.
7
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Company at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the
lessor is included in the statement of financial position as a finance lease obligation.
Rentals payable under operating leases are charged to earnings on a straight-line basis over the term of the
relevant lease.
Foreign Currency Translation
The individual financial statements of each subsidiary entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each group entity are presented in Canadian dollars (“CDN”),
which is the functional currency of the parent Company and the presentation currency for the financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the
transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated
at the rates prevailing at that date. Exchange differences are recognized in earnings in the period in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign
operations are expressed in Canadian dollars using exchange rates prevailing at the end of the reporting period.
Income and expense items are translated at the average exchange rates for the period. Foreign currency gains
and losses are recognized in other comprehensive earnings. The relevant amount in cumulative foreign currency
translation adjustment is reclassified into earnings upon disposition or partial disposition of a foreign operation
and attributed to non-controlling interests as appropriate.
Income Taxes
Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net earnings as reported in
the statement of earnings because it excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the statement of financial position date.
Deferred Tax
Deferred tax is the tax expected to be payable or recoverable on unused tax losses and credits, as well as differences
between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases
used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary
differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available
against which unused tax losses, credits and other deductible temporary differences can be utilized. Such assets and
liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.
8
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)
The carrying amount of deferred tax assets is reviewed at each reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realized. The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities. Deferred tax is charged or credited to earnings, except when it relates
to items charged or credited directly to other comprehensive earnings or equity, in which case the deferred tax
is also dealt with in other comprehensive earnings or equity.
Share Based Compensation
Equity-settled share-based payments to employees and others providing similar services are measured at the fair
value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled
share-based transactions are set out in note 15.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period of the option based on the Company’s estimate of the number of equity instruments that
will eventually vest. At each reporting period, the Company revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original estimates, if any, is recognized in earnings such that the
cumulative expense reflects the revised estimate, with a corresponding adjustment to share based payment reserve.
Earnings Per Share
The Company presents basic and diluted earnings per share (“EPS”) data for its common shares. Basic EPS is calculated
by dividing the net earnings attributable to shareholders by the weighted average number of common shares outstanding
during the period. Diluted EPS is determined by adjusting the net earnings attributable to shareholders and the
weighted average number of common shares outstanding for the effects of all potentially dilutive common shares,
which is comprised of share options granted to employees with an exercise price below the average market price.
Finance Costs
Finance costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost
of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for capitalisation.
All other finance costs are recognized in earnings in the period in which they are incurred.
Investment Tax Credits
The Company is entitled to investment tax credits, which are earned as a percentage of eligible research and
development expenditures incurred in each taxation year. Investment tax credits relate entirely to the Company’s
research and development expenses in the consolidated statement of earnings but are presented separately in the
consolidated statement of earnings for information purposes. Investment tax credits are recognized and recorded
within income tax receivable when there is reasonable assurance they will be received.
9
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
Financial Instruments
The Company’s financial assets and liabilities which are initially recorded at fair value and subsequently measured
based on their assigned classifications as follows:
Asset/Liability
Cash and cash equivalents
Instruments held for trading
Trade and other receivables
Trade and other payables
Long term debt
Category
Loans and receivables
Fair value through profit or loss
Loans and receivables
Other liabilities
Other liabilities
Measurement
Amortized cost
Fair value
Amortized cost
Amortized cost
Amortized cost
Financial Assets
All financial assets are initially measured at fair value, plus transaction costs, except for those financial assets
classified as fair value through profit or loss, which are initially measured at fair value. Transaction costs in respect
of financial instruments that are classified as fair value through profit or loss are recognized in earnings immediately.
Transaction costs in respect of other financial instruments are included in the initial measurement of the
financial instrument.
Financial assets are classified into the following specific categories: financial assets “at fair value through profit
or loss” (“FVTPL”), “held-to-maturity” investments, “available-for-sale” (“AFS”) financial assets and “loans and
receivables”. The classification depends on the nature and purpose of the financial assets and is determined
at the time of initial recognition.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement
recognized in earnings.
Impairment of Financial Assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting period.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred
after the initial recognition of the financial asset, the estimated future cash flows of the investment have been
affected. For certain categories of financial assets, such as trade and other receivables, assets that are assessed
not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence
of impairment of a financial asset can include a significant or prolonged decline in the fair value of an asset,
default or delinquency by a debtor, indication that a debtor will enter bankruptcy or financial re-organization
or the disappearance of an active market for a security.
For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original
effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.
When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying
amount of the allowance account are recognized in earnings.
Financial Liabilities and Equity Instruments Issued by the Company
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognized
in earnings. The net gain or loss recognized in earnings incorporates any interest paid on the financial liability and
is included in the “other income and expenses” line item in the consolidated statements of earnings.
10
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D) An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received,
net of direct issue costs.
Other financial liabilities, including long term debt, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortized cost using the effective interest method,
with interest expense recognized on an effective yield basis.
Use of Estimates and Judgments
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year.
Consequently, actual results could differ from those estimates. Those estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate
is revised and in any future periods affected. Significant estimates include the determination of the allowance for
doubtful accounts for trade receivables, provision for inventory obsolescence, the useful life of property, plant and
equipment for depreciation, amortization and valuation of net recoverable amount of property, plant and equipment,
determination of fair value for share-based compensation, evaluating deferred income tax assets and liabilities,
the determination of fair value of financial instruments and the likelihood of recoverability, and the determination
of implied fair value of goodwill and implied fair value of assets and liabilities for purchase price allocation purposes
and goodwill impairment test purposes.
Significant items requiring the use of judgment in application of accounting policies and assumptions include
the determination of functional currencies, classification of financial instruments, classification of leases,
application of the percentage of completion method on long-term contracts, degree of componentization
applied when calculating amortization of property, plant and equipment, and identification of cash generating
units for impairment testing purposes.
Operating Segments
An operating segment is a component of the Company that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s
other components. The Company reviewed its operations and determined that it operates a single reportable
segment, the television broadcast equipment market. The single reportable operating segment derives its revenue
from the sale of hardware and software solutions including related services, training and commissioning.
Non-Current Assets Held for Sale
Non-current assets that are expected to be recovered primarily through sale rather than through continuing
use are classified as held for sale and are not depreciated. Immediately before classification as held for sale,
the assets are remeasured in accordance with the Company’s accounting policies. The assets are measured
at the lower of their carrying amount and fair value less cost to sell. Impairment losses on initial classification
as held for sale and subsequent gains or losses on remeasurement are recognized in profit or loss. Gains are
not recognized in excess of any cumulative impairment loss.
11
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT CHANGES IN ACCOUNTING POLICIES
Consolidated Financial Statements
Effective May 1, 2013, the Company adopted IFRS 10, Consolidated Financial Statements (“IFRS 10”). IFRS 10
establishes principles for the presentation and preparation of consolidated financial statements when an entity
controls one or more other entities. IFRS 10 replaced the consolidation requirements in SIC-12, Consolidation –
Special Purpose Entities and IAS 27, Consolidated and Separate Financial Statements. The adoption of IFRS 10
did not have any impact on the Consolidated Financial Statements.
Disclosure of Interests in Other Entities
Effective May 1, 2013, the Company adopted IFRS 12, Disclosure of Interests in Other Entities (“IFRS 12”).
IFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interests in other
entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities.
The adoption of IFRS 12 has resulted in additional disclosures within Note 20 of the
Consolidated Financial Statements.
Fair Value Measurements
Effective May 1, 2013, the Company adopted IFRS 13, Fair Value Measurements (“IFRS 13”). IFRS 13 provides
new guidance on fair value measurement and disclosure requirements. The adoption of IFRS 13 resulted
in minor changes in disclosure within Note 17, but did not have a significant impact on the Consolidated
Financial Statements.
Presentation of Financial Statements
Effective May 1, 2013, the Company adopted Amendments to IAS 1, Presentation of Financial Statements
(“Amendments to IAS 1”), which became effective for annual periods beginning on or after July 1, 2012,
are applied retroactively. The amendments require that an entity present separately the items of other
comprehensive earnings that may be reclassified to profit or loss in the future from those that would never
be reclassified to profit or loss. The adoption of Amendments to IAS 1 resulted in minor changes to presentation
in the Company’s statement of comprehensive earnings but did not have a significant impact on the Consolidated
Financial Statements.
Financial Instruments
Effective May 1, 2013, the Company adopted Amendments to IFRS 7, Financial Instruments Disclosures
(“Amendments to IFRS 7”), which amend the disclosure requirements in IFRS 7 to require information
about all recognized financial instruments that are offset in accordance with paragraph 42 of IAS 32
Financial Instruments: Presentation. The adoption of Amendments to IFRS 7 did not have any
impact on the Consolidated Financial Statements.
NEW AND REVISED IFRSs ISSUED BUT NOT YET EFFECTIVE
Following is a listing of amendments, revisions and new International Financial Reporting Standards issued but not
yet effective. Unless otherwise indicated, earlier application is permitted. The Company has not yet determined the
impact of the changes to the adoption of the following standards.
12
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)
Financial Instruments
IFRS 9, Financial instruments (“IFRS 9”) was issued by the IASB on November 12, 2009 and October 2010, and will
replace IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 introduces new requirements
for the financial reporting of financial assets and financial liabilities. IFRS 9 does not have a current effective date.
IAS 32, Financial instruments: Presentation (“IAS 32”) was amended by the IASB in December 2011 to clarify certain
aspects of the requirements on offsetting. The amendments focus on the criterion that an entity currently has
a legally enforceable right to set off the recognized amounts and the criterion that an entity intends either to settle
on a net basis or to realize the asset and settle the liability simultaneously. The amendments to IAS 32 are effective
for periods beginning on or after January 1, 2014.
Revenue
IFRS 15, Revenue from contracts with customers (“IFRS 15”) was issued by the IASB in May 2014 and will replace
IAS 11, Construction Contracts and IAS 18 Revenue. IFRS 15 specifies how and when revenue will be recognized.
IFRS 15 is effective for annual periods beginning on or after January 1, 2017.
Levies
IFRIC 21, Levies (“IFRIC 21”) was issued by the IASB in May 2013. IFRIC 21 provides guidance on accounting for
levies in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets. IFRIC 21 defines a levy
as an outflow from an entity imposed by a government in accordance with legislation and confirms that an entity
recognizes a liability for a levy only when the triggering event specified in the legislation occurs. IFRIC 21 is effective
for annual periods beginning on or after January 2, 2014.
YEAR END HIGHLIGHTS
Revenue increased to $325.5 million for the year ended April 30, 2014 as compared to $316.3 million for the year
ended April 30, 2013.
For the year ended April 30, 2014, net earnings were $63.5 million and fully diluted earnings per share were $0.85.
Gross margin during the year ended April 30, 2014 was 57.2% as compared to 57.5% for the year ended April 30, 2013.
Selling and administrative expenses for the year ended April 30, 2014 was $55.2 million compared to the year ended
April 30, 2013 of $53.1 million. As a percentage of revenue, selling and administrative expenses totaled 16.9% for the
year ended April 30, 2014 as opposed to 16.8% for the year ended April 30, 2013.
Research and development (“R&D”) expenses were $60.2 million for the year ended April 30, 2014 as compared
to $52.9 million for the year ended April 30, 2013.
Cash and instruments held for trading were $102.0 million and working capital was $273.9 million as at April 30, 2014
as compared to cash and instruments held for trading of $220.7 million and working capital of $352.2 million as at
April 30, 2013.
13
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands of dollars except earnings per share and share data)
Revenue
Cost of goods sold
Gross margin
Expenses
Selling and administrative
General
Research and development
Investment tax credits
Foreign exchange gain
Finance income
Finance costs
Other income and expenses
Earnings before income taxes
Provision for (recovery of) income taxes
Current
Deferred
Net earnings for the year
Net earnings attributable to non-controlling interest
Net earnings attributable to shareholders
Net earnings for the year
Earnings per share
Basic
Diluted
2012
293,400
127,232
166,168
47,118
6,788
44,200
(9,872)
(2,342)
85,892
80,276
1,915
(197)
(154)
81,840
21,669
215
21,884
59,956
416
59,540
59,956
0.81
0.81
Year Ended April 30,
2014
2013
$
325,524
$
316,305
$
139,338
186,186
55,162
6,874
60,196
(12,292)
(6,917)
103,023
83,163
2,001
(398)
38
84,804
24,529
(3,264)
21,265
63,539
404
63,135
63,539
0.85
0.85
$
$
$
$
$
134,439
181,866
53,106
5,366
52,851
(13,178)
(3,037)
95,108
86,758
2,383
(559)
264
88,846
21,816
1,867
23,683
65,163
573
64,590
65,163
0.88
0.88
$
$
$
$
$
$
$
$
$
$
14
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D) SELECTED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONSOLIDATED BALANCE SHEET DATA
Cash and instruments held for trading
Inventory
Working capital
Total assets
Shareholders' equity
Number of common shares outstanding:
Basic
Fully-diluted
As at April 30,
2014
101,956
134,561
273,914
401,280
333,478
$
$
$
$
$
$
$
$
$
$
2013
220,668
111,619
352,164
465,307
406,797
$
$
$
$
$
2012
185,669
109,211
325,677
431,864
378,417
74,310,146
79,513,846
73,632,566
78,246,966
73,225,786
77,904,086
Weighted average number of shares outstanding:
Basic
Fully-diluted
74,064,205
74,485,461
73,300,647
73,816,338
73,612,759
73,812,767
15
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
SELECTED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Revenue
Cost of goods sold
Gross margin
Expenses
Selling and administrative
General
Research and development
Investment tax credits
Foreign exchange gain
Earnings before undernoted
Finance income
Finance costs
Other income and expenses
Earnings before income taxes
Provision for (recovery of) income taxes
Current
Deferred
Net earnings for the year
Net earnings attributable to non-controlling interest
Net earnings attributable to shareholders
Net earnings for the year
Earnings per share:
Basic
Diluted
REVENUE AND EXPENSES
2014
100.0%
42.8%
57.2%
16.9%
2.1%
18.5%
(3.8%)
(2.1%)
31.6%
25.6%
0.6%
(0.1%)
0.0%
26.1%
7.6%
(1.0%)
6.6%
19.5%
0.1%
19.4%
19.5%
2013
100.0%
42.5%
57.5%
16.8%
1.6%
16.7%
(4.2%)
(1.0%)
30.1%
27.4%
0.8%
(0.2%)
0.1%
28.1%
6.9%
0.6%
7.5%
20.6%
0.2%
20.4%
20.6%
2012
100.0%
43.4%
56.6%
16.1%
2.3%
15.1%
(3.3%)
(0.8%)
29.4%
27.2%
0.7%
(0.0%)
(0.0%)
27.9%
7.4%
0.1%
7.5%
20.4%
0.1%
20.3%
20.4%
$
$
0.85
0.85
$
$
0.88
0.88
$
$
0.81
0.81
REVENUE
The Company generates revenue principally from the sale of its broadcast equipment solutions to content creators,
broadcasters, specialty channels and television service providers.
The Company markets and sells its products and services through both direct and indirect sales strategies. The
Company’s direct sales efforts focus on large and complex end-user customers. These customers have long sales
cycles typically ranging from four to eight months before an order may be received by the Company for fulfillment.
16
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)
The Company monitors revenue performance in two main geographic regions: (i) United States/Canada
and (ii) International.
The Company currently generates approximately 45% to 55% of its revenue in the United States/Canada.
The Company recognizes the opportunity to more aggressively target markets in other geographic regions
and intends to invest in personnel and infrastructure in those markets.
While a significant portion of the Company’s expenses are denominated in Canadian dollars, the Company collects
substantially all of its revenues in currencies other than the Canadian dollar and therefore has significant exposure
to fluctuations in foreign currencies, in particular the US dollar. Approximately 70% to 80% of the Company’s
revenues are denominated in US dollars.
REVENUE
(In thousands of Canadian dollars)
United States/Canada
International
Year Ended April 30,
2014
172,280
153,244
325,524
$
$
2013
173,244
143,061
316,305
$
$
2012
149,884
143,516
293,400
$
$
Total revenue for the year ended April 30, 2014 was $325.5 million, an increase of $9.2 million as compared
to revenue of $316.3 million for the year ended April 30, 2013.
Revenue in the United States/Canada region was $172.3 million for the year ended April 30, 2014,
compared to revenue of $173.2 million for the year ended April 30, 2013.
Revenue in the International region was $153.2 million for the year ended April 30, 2014, an increase
of $10.1 million compared to revenue of $143.1 million for the year ended April 30, 2013.
Cost of Sales
Cost of sales consists primarily of costs of manufacturing and assembly of products. A substantial portion
of these costs is represented by components and compensation costs for the manufacture and assembly
of products. Cost of sales also includes related overhead, certain depreciation, final assembly, quality assurance,
inventory management and support costs. Cost of sales also includes the costs of providing services to clients,
primarily the cost of service-related personnel.
GROSS MARGIN
(In thousands of Canadian dollars, except for percentages)
2014
2013
2012
Gross margin
Gross margin % of sales
$
186,186
$
181,866
$
166,168
57.2%
57.5%
56.6%
Year Ended April 30,
Gross margin for the year ended April 30, 2014 was $186.2 million, compared to $181.9 million for the year ended
April 30, 2013. As a percentage of revenue, the gross margin was 57.2% for the year ended April 30, 2014,
as compared to 57.5% for the year ended April 30, 2013.
Gross margins vary depending on the product mix, geographic distribution and competitive pricing pressures and
currency fluctuations. For the year ended April 30, 2014 the gross margin, as a percentage of revenue, was in the
Company’s projected range. The pricing environment continues to be very competitive with substantial discounting
by our competition.
17
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT The Company expects that it will continue to experience competitive pricing pressures. The Company continually seeks
to build its products more efficiently and enhance the value of its product and service offerings in order to reduce the
risk of declining gross margin associated with the competitive environment.
Operating Expenses
The Company’s operating expenses consist of: (i) selling, administrative and general; (ii) research and development
and (iii) foreign exchange.
Selling expenses primarily relate to remuneration of sales and technical personnel. Other significant cost components
include trade show costs, advertising and promotional activities, demonstration material and sales support. Selling
and administrative expenses relate primarily to remuneration costs of related personnel, legal and professional fees,
occupancy and other corporate and overhead costs. The Company also records certain depreciation amortization
and share based compensation charges as general expenses. For the most part, selling, administrative and general
expenses are fixed in nature and do not fluctuate directly with revenue. The Company’s selling expenses tend
to fluctuate in regards to the timing of trade shows, sales activity and sales personnel.
The Company invests in research and development to maintain its position in the markets it currently serves and
to enhance its product portfolio with new functionality and efficiencies. Although the Company’s research and
development expenditures do not fluctuate directly with revenues, it monitors this spending in relation to revenues
and adjusts expenditures when appropriate. Research and development expenditures consist primarily of personnel
costs and material costs. Research and development expenses are presented on a gross basis (without deduction
of research and development tax credits). Research and development tax credits associated with research and
development expenditures are shown separately under research and development tax credits.
SELLING AND ADMINISTRATIVE
Year Ended April 30,
(In thousands of Canadian dollars, except for percentages)
2014
2013
2012
Selling and administrative
Selling and administrative % of sales
$
55,162
$
53,106
$
47,118
16.9%
16.8%
16.1%
Selling and administrative expenses excludes stock based compensation, operation of non-production property,
plant and equipment, and amortization of intangibles. Selling and administrative expenses for the year ended April 30,
2014 were $55.2 million or 16.9% of revenue as compared to selling and administrative expenses of $53.1 million
or 16.8% of revenue for the year ended April 30, 2013.
The increase of $2.1 million was a result of the inclusion of a full year of selling and administrative expenses
associated with the business acquired in December 2012, the increased translation costs associated with
an increase in the value of the US dollar, UK Sterling and Euro, offset by a decrease in bad debt expense.
RESEARCH AND DEVELOPMENT (R&D)
(In thousands of Canadian dollars, except for percentages)
2014
2013
2012
Research and development expenses
$
60,196
$
52,851
$
44,200
Research and development % of sales
18.5%
16.7%
15.1%
Year Ended April 30,
For the year ended April 30, 2014, gross R&D expenses increased to $60.2 million, an increase of 13.9%
or $7.3 million as compared to an expense of $52.9 million for the year ended April 30, 2013.
The increase of $7.3 million was predominantly a result of planned growth of R&D personnel and corresponding
increases in materials and prototypes.
18
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D) Foreign Exchange
For the year ended April 30, 2014, the foreign exchange gain was $6.9 million as compared to a foreign exchange
gain for the same period ended April 30, 2013 of $3.0 million. The current year gain was predominantly driven
by the increase in the value of the US dollar against the Canadian dollar since April 30, 2013.
Finance Income, Finance Costs, Other Income and Expenses
For the year ended April 30, 2014, finance income, finance costs, other income and expenses netted to a gain
of $1.6 million.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources
(In thousands of dollars except ratios)
Key Balance Sheet Amounts and Ratios:
Cash and instruments held for trading
Working capital
Long-term assets
Long-term debt
Days sales outstanding in accounts receivable
Statement of Cash Flow Summary
Operating activities
Investing activities
Financing activities
Net (decrease) increase in cash
Year Ended April 30,
2014
101,956
273,914
70,343
1,372
99
$
$
$
$
2013
220,668
352,164
64,919
1,539
62
Year Ended April 30,
2014
35,485
1,528
(144,241)
(106,702)
$
$
$
$
2013
89,610
(14,550)
(40,146)
34,993
$
$
$
$
$
$
$
$
Operating Activities
For the year ended April 30, 2014, the Company generated cash from operations of $35.5 million, compared to $89.6
million for the year ended April 30, 2013. Excluding the effects of the changes in non-cash working capital and current
taxes, the Company generated cash from operations of $74.2 million for the year ended April 30, 2014 compared
to $78.6 million for the year ended April 30, 2013.
Investing Activities
The Company generated cash from investing activities of $1.5 million for the year ended April 30, 2014 which was
predominantly from proceeds upon disposal of instruments held for trading for $12.2 million offset by cash used
for the acquisition of capital assets of $10.8 million.
Financing Activities
For the year ended April 30, 2014, the Company used cash from financing activities of $144.2 million, which was
principally driven dividends paid of $152.0 million which included a special dividend of $104.0 million and offset
by the issuance of capital stock pursuant to the Company Stock Option Plan of $8.2 million.
19
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
WORKING CAPITAL
As at April 30, 2014, the Company had cash and instruments held for trading of $102.0 million,
compared to $220.7 million at April 30, 2013.
The Company had working capital of $273.9 million as at April 30, 2014 compared to $352.2 million
as at April 30, 2013.
The Company paid a special dividend of $1.40 per common share on December 11, 2013 in the amount
of $104.0 million.
The Company believes that the current balance in cash and plus future cash flow from operations will be sufficient
to finance growth and related investment and financing activities in the foreseeable future.
Day sales outstanding in accounts receivable were 99 days at April 30, 2014 as compared to 62 for April 30, 2013.
SHARE CAPITAL STRUCTURE
Authorized capital stock consists of an unlimited number of common and preferred shares.
Common shares
Stock options granted and outstanding
Year Ended April 30,
2014
74,310,146
5,203,700
2013
73,632,566
4,614,400
FINANCIAL INSTRUMENTS
The Company’s financial instruments consist of cash and cash equivalents, trade and other receivables, trade and
other payables and long term debt. Unless otherwise noted, it is management’s opinion that the Company is not
exposed to significant interest or credit risks arising from these financial instruments. The Company estimates the
fair value of these instruments approximates the carrying values as listed below.
Fair Values and Classification of Financial Instruments:
The following summarizes the significant methods and assumptions used in estimating the fair values of financial
instruments:
I. Quoted prices (unadjusted) in active markets for identical assets or liabilities.
II. Inputs other than quoted prices included in level I that are observable for the asset or liability, either directly
or indirectly. Cash and cash equivalents, trade and other receivables, trade and other payables, and long-term
debt fair value measurements have been measured within level II.
III. Inputs for the asset or liability that are not based on observable market data.
CONTRACTUAL OBLIGATIONS
The following table sets forth the Company’s contractual obligations as at April 30, 2014:
(In thousands)
Operating leases
Other long-term debt
Total
18,067
1,787
19,854
$
$
Payments Due by Period
Less than
1 year
2-3 Years
4-5 Years
Thereafter
$
$
3,657
415
4,072
$
$
7,031
426
7,457
$
$
5,740
385
6,125
$
$
1,639
561
2,200
20
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)
OFF-BALANCE SHEET FINANCING
The Company does not have any off-balance sheet arrangements.
RELATED PARTY TRANSACTIONS
In the normal course of business, we may enter into transactions with related parties. These transactions occur
under market terms consistent with the terms of transactions with unrelated arms-length third parties. The Company
continues to lease a premise from a company in which two shareholders’ each indirectly hold a 10% interest, continues
to lease a facility from a company in which two shareholders each indirectly hold a 20% interest, continues to lease
a facility for manufacturing where two shareholders indirectly own 100% interest, continues to lease a facility from a
company in which two shareholders each indirectly own a 35% interest and continues to lease a facility with a director
who indirectly owns 100%.
SELECTED CONSOLIDATED QUARTERLY FINANCIAL INFORMATION
The following table sets out selected consolidated financial information for each of the eight quarters ended
April 30, 2014. In the opinion of management, this information has been prepared on the same basis as the
audited consolidated financial statements. The operating results for any quarter should not be relied upon
as any indication of results for any future period.
(In thousands)
2014
Quarter Ending
2013
2012
Sales
Cost of
goods sold
Gross margin
Operating
expenses
Earnings from
operations
Non-operating
income
Earnings
before taxes
Net earnings
Apr 30
Jan 31
Oct 31
July 31
Apr 30
Jan 31
Oct 31
July 31
$ 87,237 $ 93,185 $ 81,244 $ 63,858 $ 65,415 $ 71,771 $ 83,158 $ 95,961
38,154
40,306
$ 49,083 $ 53,737 $ 46,652 $ 36,714 $ 37,079 $ 40,272 $ 48,860 $ 55,655
27,144
39,448
28,336
34,298
31,499
34,592
30,545
25,514
25,797
21,167
26,557
23,164
22,966
22,421
$ 18,538 $ 28,223 $ 20,855 $ 15,547 $ 10,522 $ 17,108 $ 25,894 $ 33,234
234
482
399
526
509
872
231
476
$ 18,772 $ 28,705 $ 21,254 $ 16,073 $ 11,031 $ 17,980 $ 26,125 $ 33,710
$ 14,699 $ 21,281 $ 15,422 $ 11,733 $
8,110 $ 12,984 $ 18,907 $ 24,589
Net earnings
per share:
Basic
Diluted
Dividends
per share
$
$
$
0.20 $
0.20 $
0.29 $
0.29 $
0.21 $
0.21 $
0.16 $
0.11 $
0.18 $
0.26 $
0.16 $
0.11 $
0.18 $
0.26 $
0.34
0.34
0.16 $
1.56 $
0.16 $
0.16 $
0.16 $
0.14 $
0.14 $
0.14
The Companies revenue and corresponding earnings can vary from quarter to quarter depending on the delivery
requirements of our customers. Our customers can be influenced by a variety of factors including upcoming sports or
entertainment events as well as their access to capital. Net earnings represent net earnings attributable to shareholders.
21
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
DISCLOSURE CONTROLS AND PROCEDURES
Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company’s disclosure controls and procedures (as defined in National Instrument 52-109 of the Canadian Securities
Administrators) as of April 30, 2014.
Management has concluded that, as of April 30, 2014, the Company’s disclosure controls and procedures were
effective to provide reasonable assurance that material information relating to the Company would be made known
to them by others within the Company, particularly during the period in which this report was being prepared.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Management is responsible for and has designed internal controls over financial reporting, or caused it to be designed
under management’s supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with IFRS. Management has concluded
that, as of April 30, 2014, the Company’s internal controls over financial reporting were effective to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with IFRS.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes to the Company’s internal controls over financial reporting during the period ended
April 30, 2014 that have materially affected, or reasonably likely to materially affect, its internal controls over
financial reporting.
OUTLOOK
Management expects on an annual basis that the Company’s revenues will continue to outpace the industry growth.
Gross margin percentages may vary depending on the mix of products sold, the Company’s success in winning more
complete projects, utilization of manufacturing capacity and the competitiveness of the pricing environment. R&D will
continue to be a key focus as the Company invests in new product development.
RISKS AND UNCERTAINTIES
The Company risk factors are outlined in our AIF filed on SEDAR.
22
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Evertz Technologies Limited
We have audited the accompanying consolidated financial statements of Evertz Technologies Limited, which comprise
the consolidated statements of financial position as at April 30, 2014 and April 30, 2013, and the consolidated
statements of changes in equity, consolidated statements of earnings, consolidated statements of comprehensive
earnings, and consolidated statements of cash flows for the years then ended, and a summary of significant
accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of Evertz Technologies Limited as at April 30, 2014 and April 30, 2013, and its financial performance and its cash
flows for the years then ended in accordance with International Financial Reporting Standards.
CHARTERED PROFESSIONAL ACCOUNTANTS, CHARTERED ACCOUNTANTS
LICENSED PUBLIC ACCOUNTANTS
June 11, 2014
Burlington, Ontario
23
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Years ended April 30
(In thousands of Canadian dollars)
April 30, 2014
April 30, 2013
ASSETS
Current assets
Cash and cash equivalents
Instruments held for trading
Trade and other receivables (note 4)
Prepaid expenses
Inventories (note 5)
Income tax receivable
Assets held for sale (note 24)
Property, plant and equipment (note 6)
Goodwill (note 7)
Intangible assets (note 8)
LIABILITIES
Current liabilities
Trade and other payables
Provisions (note 9)
Deferred revenue
Current portion of long term debt (note 10)
Long term debt (note 10)
Deferred taxes (note 23)
EQUITY
Capital stock (note 11)
Share based payment reserve
Accumulated other comprehensive earnings (loss)
Retained earnings
Total equity attributable to shareholders
Non-controlling interest (note 20)
See accompanying notes to the consolidated financial statements.
$
$
$
$
101,956
-
87,981
4,704
134,561
1,735
330,937
$
208,658
12,010
53,813
3,274
111,619
7,233
396,607
-
3,781
51,831
18,269
243
401,280
44,888
1,624
10,096
415
57,023
1,372
6,468
64,863
92,931
10,217
2,966
227,364
230,330
333,478
2,939
336,417
401,280
46,637
17,724
558
465,307
36,237
1,104
6,712
390
44,443
1,539
9,590
55,572
81,453
10,727
(1,063)
315,680
314,617
406,797
2,938
409,735
465,307
$
$
$
24
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years ended April 30
Accumulated
other
comprehen-
sive
earnings
(loss)
Share-
based
payment
reserve
Total
equity
attributable
to
share-
holders
Non-
control-
ling
interest
Retained
earnings
Capital
stock
Total
Equity
$ 67,458
$ 14,320
$
(906) $ 297,545
$ 378,417 $ 1,537 $379,954
$
-
-
-
-
-
-
$
-
-
-
-
-
2,681
8,013
-
6,274
(6,274)
(292)
-
-
64,590
64,590
573
65,163
(157)
-
(157)
8
(149)
$
(157) $ 64,590
(42,501)
-
-
-
$ 64,433 $
(42,501)
-
581 $ 65,014
(42,901)
(400)
1,220
1,220
-
-
-
-
-
-
-
2,681
8,013
-
(3,954)
(4,246)
-
-
-
-
2,681
8,013
-
(4,246)
$ 81,453
$ 10,727
$
(1,063) $ 315,680 $ 406,797 $ 2,938 $409,735
-
-
-
-
-
$
-
-
-
-
2,738
$
8,234
-
3,248
(3,248)
(4)
-
-
63,135
63,135
404
63,539
4,029
-
4,029
197
4,226
$
4,029 $ 63,135
$ 67,164 $
601 $ 67,765
-
-
-
-
-
(151,404)
(151,404)
(600)
(152,004)
-
-
-
2,738
8,234
-
(47)
(51)
-
-
-
-
2,738
8,234
-
(51)
$ 92,931
$ 10,217
$
2,966 $ 227,364 $ 333,478 $ 2,939 $336,417
(In thousands
of Canadian dollars)
Balance at
April 30, 2012
Net earnings
for the year
Foreign currency
translation adjustment
Total comprehensive
earnings for the year
Dividends declared
Business acquisitions
Share based
compensation expense
Exercise of employee
stock options
Transfer on stock
option exercise
Repurchase of
common shares
Balance at
April 30, 2013
Net earnings
for the year
Foreign currency
translation adjustment
Total comprehensive
earnings for the year
Dividends declared
Share based
compensation expense
Exercise of employee
stock options
Transfer on stock
option exercise
Repurchase of
common shares
Balance at
April 30, 2014
See accompanying notes to the consolidated financial statements.
25
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended April 30
(In thousands of Canadian dollars, except per share amounts)
Revenue (note 12)
Cost of goods sold
Gross margin
Expenses
Selling, administrative and general (note 13)
Research and development
Investment tax credits
Foreign exchange gain
Finance income
Finance costs
Other income and expenses
Earnings before income taxes
Provision for (recovery of) income taxes
Current (note 23)
Deferred (note 23)
Net earnings for the year
Net earnings attributable to non-controlling interest
Net earnings attributable to shareholders
Net earnings for the year
Earnings per share (note 22)
Basic
Diluted
See accompanying notes to the consolidated financial statements.
2014
$
325,524
$
139,338
186,186
62,036
60,196
(12,292)
(6,917)
103,023
83,163
2,001
(398)
38
84,804
24,529
(3,264)
21,265
63,539
404
63,135
63,539
0.85
0.85
$
$
$
$
$
$
$
$
$
$
2013
316,305
134,439
181,866
58,472
52,851
(13,178)
(3,037)
95,108
86,758
2,383
(559)
264
88,846
21,816
1,867
23,683
65,163
573
64,590
65,163
0.88
0.88
26
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
Years ended April 30
(In thousands of Canadian dollars)
Net earnings for the year
Items that may be reclassified to net earnings:
Foreign currency translation adjustment
Comprehensive earnings
Comprehensive earnings attributable to non-controlling interest
Comprehensive earnings attributable to shareholders
Comprehensive earnings
See accompanying notes to the consolidated financial statements.
2014
2013
63,539
$
65,163
4,226
(149)
67,765
601
67,164
67,765
$
$
$
65,014
581
64,433
65,014
$
$
$
$
27
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended April 30
(In thousands of Canadian dollars)
Operating activities
Net earnings for the year
Add: Items not involving cash
Depreciation of property, plant and equipment
Amortization of intangible assets
Gain on instruments held for trading
Loss on disposal of property, plant and equipment
Share-based compensation
Interest expense
Deferred income tax expense
Current tax expenses, net of investment tax credits
Income taxes paid
Changes in non-cash working capital items (note 14)
Cash provided by operating activities
Investing activities
Acquisition of instruments held for trading
Proceeds from disposal of instruments held for trading
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Business acquisitions net of cash acquired (note 3)
Cash provided by (used in) investing activities
Financing activities
Repayment of long term debt
Interest paid
Dividends paid
Dividends paid by subsidiaries to non-controlling interests
Capital stock repurchase (note 11)
Capital stock issued
Cash used in financing activities
2014
2013
$
63,539
$
65,163
10,535
383
(152)
297
2,738
163
(3,264)
74,239
12,227
(6,309)
(44,672)
35,485
-
12,162
(10,821)
187
-
1,528
(257)
(163)
(151,404)
(600)
(51)
8,234
(144,241)
7,851
428
(149)
550
2,681
207
1,867
78,598
8,638
(4,100)
6,474
89,610
(12,000)
12,143
(11,030)
111
(3,774)
(14,550)
(806)
(207)
(42,501)
(400)
(4,246)
8,014
(40,146)
Effect of exchange rates on cash and cash equivalents
526
79
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents beginning of year
Cash and cash equivalents end of year
See accompanying notes to the consolidated financial statements.
(106,702)
208,658
$
101,956
$
34,993
173,665
208,658
28
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Audited)
Years ended April 30, 2014 and 2013
(In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
EVERTZ TECHNOLOGIES LIMITED (“EVERTZ” OR THE “COMPANY”) IS INCORPORATED UNDER THE CANADA BUSINESS
CORPORATIONS ACT. THE COMPANY IS INCORPORATED AND DOMICILED IN CANADA AND THE REGISTERED HEAD OFFICE IS
LOCATED AT 5292 JOHN LUCAS DRIVE, BURLINGTON, ONTARIO, CANADA. THE COMPANY IS A LEADING EQUIPMENT PROVIDER
TO THE TELEVISION BROADCAST INDUSTRY. THE COMPANY DESIGNS, MANUFACTURES AND DISTRIBUTES VIDEO AND AUDIO
INFRASTRUCTURE EQUIPMENT FOR THE PRODUCTION, POST–PRODUCTION, BROADCAST AND TELECOMMUNICATIONS MARKETS.
1. STATEMENT OF COMPLIANCE
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board ("IASB").
These consolidated financial statements were authorized for issue by the Board of Directors on June 11, 2014.
2. SIGNIFICANT ACCOUNTING POLICIES
Outlined below are those policies considered particularly significant:
Basis of Measurement
These financial statements have been prepared on the historical cost basis except for certain financial assets and
liabilities which are stated at fair value. Historical cost is generally based on the fair value of the consideration given
in exchange for assets.
Functional and Presentation Currency
These financial statements are presented in Canadian dollars, which is the Company’s functional currency. All financial
information presented in Canadian dollars has been rounded to the nearest thousand, except per share amounts.
Basis of Consolidation
These financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries). Control is achieved where the Company has power over an entity, has exposure or rights
to variable returns from its involvement with the entity and has the ability to use its power over the entity to affect the
amount of the investor’s returns.
The results of subsidiaries acquired or disposed of are included in the consolidated statements of earnings and
comprehensive earnings from the effective date of acquisition of control and up to the effective date of disposal
of control, as appropriate. Total comprehensive earnings of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
All intra-Company transactions, balances, income and expenses are eliminated in full on consolidation.
Business Combinations
Business combinations are accounted for using the acquisition method. The cost of the acquisition is measured
at the aggregate of the fair values, at the date of acquisition, of assets transferred, liabilities incurred or assumed,
and equity instruments issued by the Company. The acquiree’s identifiable assets and liabilities assumed are
recognized at their fair value at the acquisition date. Acquisition-related costs are recognized in earnings as incurred.
Any contingent consideration is measured at fair value on date of the acquisition and is included as part of the
consideration transferred. The fair value of the contingent consideration liability is re-measured at each reporting date
with corresponding gain/loss recognized in earnings. The excess of the consideration over the fair value of the net
identifiable assets and liabilities acquired is recorded as goodwill.
On an acquisition by acquisition basis, any non-controlling interest is measured either at the fair value of the
non-controlling interest or at the fair value of the proportionate share of the net identifiable assets acquired.
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition
of the business less accumulated impairment losses, if any.
29
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
Revenue is measured at the fair value of consideration received or receivable, net of discounts and after
eliminating intercompany sales.
Where revenue arrangements have separately identifiable components, the consideration received or receivable
is allocated to each identifiable component and the applicable revenue recognition criteria are applied to each
of the components.
Revenue is derived from the sale of hardware and software solutions including related services, training and
commissioning. Revenue from sales of hardware and software are recognized upon shipment, provided that the
significant risks and rewards of ownership have been transferred to the customer, the Company retains neither
continuing managerial involvement to the degree usually associated with ownership nor effective control over the
goods sold, revenue can be reliably measured and its probable that the economic benefits will flow to the Company.
Service revenue is recognized as services are performed.
Certain of the Company’s contracts are long-term in nature. When the outcome of the contract can be assessed
reliably, the Company recognizes revenue on long-term contracts using the percentage of completion method, based
on costs incurred relative to the estimated total contract costs. When the outcome of the contract cannot be assessed
reliably contract costs incurred are immediately expensed and revenue is recognized only to the extent that costs are
considered likely to be recovered.
Finance Income
Interest revenue is recognized when it is probable that the economic benefits will flow to the Company and the amount
of revenue can be measured reliably. Interest revenue is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in the bank, net of outstanding bank overdrafts.
Inventories
Inventories consist of raw materials and supplies, work in progress and finished goods. Inventories are stated at the
lower of cost and net realizable value. Cost is determined on a weighted average basis and includes raw materials,
the cost of direct labour applied to the product and the overhead expense.
Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and
costs necessary to make the sale.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognized impairment loss.
Where the costs of certain components of an item of property, plant and equipment are significant in relation to the
total cost of the item, they are accounted for and depreciated separately. Depreciation expense is calculated based on
depreciable amounts which is the cost of an asset less residual value and is recognized in earnings on a straight-line
basis over the estimated useful life of the related asset. Borrowing costs are capitalized to the cost of qualifying assets
that take a substantial period of time to be ready for their intended use.
30
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The estimated useful lives are as follows:
ASSET
Office furniture and equipment
Research and development equipment
Machinery and equipment
Leaseholds
Building
Airplanes
BASIS
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
RATE
10 years
5 years
5 - 15 years
5 years
10 - 40 years
10 - 20 years
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognized in earnings.
The Company reviews the residual value, estimated useful life and the depreciation method annually.
Impairment of Non-Financial Assets
Goodwill is tested for impairment annually, or whenever events or changes in circumstances indicate that the carrying
amount may be more than its recoverable amount. At each reporting period, the Company reviews the carrying
amounts of its other non-financial assets to determine whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the asset does not generate cash inflows that are largely
independent from other assets, the Company estimates the recoverable amount of the cash-generating unit (“CGU”)
to which the asset belongs. Goodwill is allocated to a group of CGU’s based on the level at which it is monitored for
internal reporting purposes.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount
of the asset or CGU is reduced to its recoverable amount. An impairment loss relating to a CGU to which goodwill has
been allocated, is allocated to the carrying amount of the goodwill first. An impairment loss is recognized immediately
in earnings.
An impairment loss in respect of goodwill is not reversed. Where an impairment loss subsequently reverses for other
non-financial assets, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of an impairment
loss is recognized immediately in earnings.
Intangible Assets
Intangible Assets
Intangible assets represent intellectual property acquired through business acquisitions and are recorded at cost less
any impairment loss and are amortized using the straight–line method over a four–year period. The estimated useful
life and amortization method are reviewed at the end of each reporting period.
31
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Research and Development
All research and development expenditures are expensed as incurred unless a development project meets the criteria
for capitalization. Development expenditures are capitalized only if development costs can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable and the Company
intends to and has sufficient resources to complete development and to use or sell the asset. No internally generated
intangible assets have been recognized to date.
Research and development expenditures are recorded gross of investment tax credits and related government grants.
Investment tax credits for scientific research and experimental development are recognized in the period the qualifying
expenditures are incurred if there is reasonable assurance that they will be realized.
Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Company will be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation
at the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision
is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of
those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Company at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the
lessor is included in the statement of financial position as a finance lease obligation.
Rentals payable under operating leases are charged to earnings on a straight-line basis over the term of the
relevant lease.
Foreign Currency Translation
The individual financial statements of each subsidiary entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each group entity are presented in Canadian dollars (“CDN”),
which is the functional currency of the parent Company and the presentation currency for the financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the
transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated
at the rates prevailing at that date. Exchange differences are recognized in earnings in the period in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
32
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign
operations are expressed in Canadian dollars using exchange rates prevailing at the end of the reporting period.
Income and expense items are translated at the average exchange rates for the period. Foreign currency gains and
losses are recognized in other comprehensive earnings. The relevant amount in cumulative foreign currency translation
adjustment is reclassified into earnings upon disposition or partial disposition of a foreign operation and attributed
to non-controlling interests as appropriate.
Income Taxes
Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net earnings as reported in
the statement of earnings because it excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the statement of financial position date.
Deferred Tax
Deferred tax is the tax expected to be payable or recoverable on unused tax losses and credits, as well as differences
between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases
used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary
differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available
against which unused tax losses, credits and other deductible temporary differences can be utilized. Such assets and
liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting period and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realized. The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities. Deferred tax is charged or credited to earnings, except when it relates
to items charged or credited directly to other comprehensive earnings or equity, in which case the deferred tax
is also dealt with in other comprehensive earnings or equity.
Share Based Compensation
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value
of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-
based transactions are set out in note 15.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period of the option based on the Company’s estimate of the number of equity instruments that
will eventually vest. At each reporting period, the Company revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original estimates, if any, is recognized in earnings such that the
cumulative expense reflects the revised estimate, with a corresponding adjustment to share based payment reserve.
33
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings Per Share
The Company presents basic and diluted earnings per share (“EPS”) data for its common shares. Basic EPS is
calculated by dividing the net earnings attributable to shareholders by the weighted average number of common shares
outstanding during the period. Diluted EPS is determined by adjusting the net earnings attributable to shareholders and
the weighted average number of common shares outstanding for the effects of all potentially dilutive common shares,
which is comprised of share options granted to employees with an exercise price below the average market price.
Finance Costs
Finance costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost
of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for capitalisation.
All other finance costs are recognized in earnings in the period in which they are incurred.
Investment Tax Credits
The Company is entitled to investment tax credits, which are earned as a percentage of eligible research and
development expenditures incurred in each taxation year. Investment tax credits relate entirely to the Company’s
research and development expenses in the consolidated statement of earnings but are presented separately in the
consolidated statement of earnings for information purposes. Investment tax credits are recognized and recorded
within income tax receivable when there is reasonable assurance they will be received.
Financial Instruments
The Company’s financial assets and liabilities which are initially recorded at fair value and subsequently measured
based on their assigned classifications as follows:
Asset/Liability
Category
Cash and cash equivalents
Instruments held for trading
Trade and other receivables
Trade and other payables
Long term debt
Loans and receivables
Fair value through profit or loss
Loans and receivables
Other liabilities
Other liabilities
Measurement
Amortized cost
Fair value
Amortized cost
Amortized cost
Amortized cost
Financial Assets
All financial assets are initially measured at fair value, plus transaction costs, except for those financial assets
classified as fair value through profit or loss, which are initially measured at fair value. Transaction costs in respect
of financial instruments that are classified as fair value through profit or loss are recognized in earnings immediately.
Transaction costs in respect of other financial instruments are included in the initial measurement of the financial
instrument.
Financial assets are classified into the following specific categories: financial assets “at fair value through profit or loss”
(“FVTPL”), “held-to-maturity” investments, “available-for-sale” (“AFS”) financial assets and “loans and receivables”.
The classification depends on the nature and purpose of the financial assets and is determined at the time
of initial recognition.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognized
in earnings.
34
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of Financial Assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting period.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred
after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
For certain categories of financial assets, such as trade and other receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment of a financial
asset can include a significant or prolonged decline in the fair value of an asset, default or delinquency by a debtor,
indication that a debtor will enter bankruptcy or financial re-organization or the disappearance of an active market
for a security.
For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original
effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When
a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries
of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the
allowance account are recognized in earnings.
Financial Liabilities and Equity Instruments Issued by the Company
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognized
in earnings. The net gain or loss recognized in earnings incorporates any interest paid on the financial liability and
is included in the “other income and expenses” line item in the consolidated statements of earnings.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all
of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct
issue costs.
Other financial liabilities, including long term debt, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortized cost using the effective interest method,
with interest expense recognized on an effective yield basis.
Use of Estimates and Judgments
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year.
Consequently, actual results could differ from those estimates. Those estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate
is revised and in any future periods affected. Significant estimates include the determination of the allowance for
doubtful accounts for trade receivables, provision for inventory obsolescence, the useful life of property, plant and
equipment for depreciation, amortization and valuation of net recoverable amount of property, plant and equipment,
determination of fair value for share-based compensation, evaluating deferred income tax assets and liabilities,
the determination of fair value of financial instruments and the likelihood of recoverability, and the determination
of implied fair value of goodwill and implied fair value of assets and liabilities for purchase price allocation
purposes and goodwill impairment test purposes.
35
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Significant items requiring the use of judgment in application of accounting policies and assumptions include the
determination of functional currencies, classification of financial instruments, classification of leases, application
of the percentage of completion method on long-term contracts, degree of componentization applied when
calculating amortization of property, plant and equipment, and identification of cash generating units for
impairment testing purposes.
Operating Segments
An operating segment is a component of the Company that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s
other components. The Company reviewed its operations and determined that it operates a single reportable segment,
the television broadcast equipment market. The single reportable operating segment derives its revenue from the sale
of hardware and software solutions including related services, training and commissioning.
Non-Current Assets Held for Sale
Non-current assets that are expected to be recovered primarily through sale rather than through continuing use are
classified as held for sale and are not depreciated. Immediately before classification as held for sale, the assets
are remeasured in accordance with the Company’s accounting policies. The assets are measured at the lower
of their carrying amount and fair value less cost to sell. Impairment losses on initial classification as held for sale
and subsequent gains or losses on remeasurement are recognized in profit or loss. Gains are not recognized
in excess of any cumulative impairment loss.
CHANGES IN ACCOUNTING POLICIES
Consolidated Financial Statements
Effective May 1, 2013, the Company adopted IFRS 10, Consolidated Financial Statements (“IFRS 10”). IFRS 10
establishes principles for the presentation and preparation of consolidated financial statements when an entity controls
one or more other entities. IFRS 10 replaced the consolidation requirements in SIC-12, Consolidation – Special Purpose
Entities and IAS 27, Consolidated and Separate Financial Statements. The adoption of IFRS 10 did not have any impact
on the Consolidated Financial Statements.
Disclosure of Interests in Other Entities
Effective May 1, 2013, the Company adopted IFRS 12, Disclosure of Interests in Other Entities (“IFRS 12”). IFRS 12
is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including
subsidiaries, joint arrangements, associates and unconsolidated structured entities. The adoption of IFRS 12 has resulted
in additional disclosures within Note 20 of the Consolidated Financial Statements.
Fair Value Measurements
Effective May 1, 2013, the Company adopted IFRS 13, Fair Value Measurements (“IFRS 13”). IFRS 13 provides new
guidance on fair value measurement and disclosure requirements. The adoption of IFRS 13 resulted in minor changes in
disclosure within Note 17, but did not have a significant impact on the Consolidated Financial Statements.
Presentation of Financial Statements
Effective May 1, 2013, the Company adopted Amendments to IAS 1, Presentation of Financial Statements
(“Amendments to IAS 1”), which became effective for annual periods beginning on or after July 1, 2012, are applied
retroactively. The amendments require that an entity present separately the items of other comprehensive earnings that
may be reclassified to profit or loss in the future from those that would never be reclassified to profit or loss. The adoption
of Amendments to IAS 1 resulted in minor changes to presentation in the Company’s statement of comprehensive
earnings but did not have a significant impact on the Consolidated Financial Statements.
36
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial Instruments
Effective May 1, 2013, the Company adopted Amendments to IFRS 7, Financial Instruments Disclosures (“Amendments
to IFRS 7”), which amend the disclosure requirements in IFRS 7 to require information about all recognized financial
instruments that are offset in accordance with paragraph 42 of IAS 32 Financial Instruments: Presentation. The adoption
of Amendments to IFRS 7 did not have any impact on the Consolidated Financial Statements.
NEW AND REVISED IFRSs ISSUED BUT NOT YET EFFECTIVE
Following is a listing of amendments, revisions and new International Financial Reporting Standards issued but not yet
effective. Unless otherwise indicated, earlier application is permitted. The Company has not yet determined the impact
of the changes to the adoption of the following standards.
Financial Instruments
IFRS 9, Financial instruments (“IFRS 9”) was issued by the IASB on November 12, 2009 and October 2010, and will
replace IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 introduces new requirements
for the financial reporting of financial assets and financial liabilities. IFRS 9 does not have a current effective date.
IAS 32, Financial instruments: Presentation (“IAS 32”) was amended by the IASB in December 2011 to clarify certain
aspects of the requirements on offsetting. The amendments focus on the criterion that an entity currently has a legally
enforceable right to set off the recognized amounts and the criterion that an entity intends either to settle on a net
basis or to realize the asset and settle the liability simultaneously. The amendments to IAS 32 are effective for periods
beginning on or after January 1, 2014.
Revenue
IFRS 15, Revenue from contracts with customers (“IFRS 15”) was issued by the IASB in May 2014 and will replace IAS
11, Construction Contracts and IAS 18 Revenue. IFRS 15 specifies how and when revenue will be recognized. IFRS 15
is effective for annual periods beginning on or after January 1, 2017.
Levies
IFRIC 21, Levies (“IFRIC 21”) was issued by the IASB in May 2013. IFRIC 21 provides guidance on accounting for levies
in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets. IFRIC 21 defines a levy as an
outflow from an entity imposed by a government in accordance with legislation and confirms that an entity recognizes
a liability for a levy only when the triggering event specified in the legislation occurs. IFRIC 21 is effective for annual
periods beginning on or after January 1, 2014.
3. BUSINESS ACQUISITIONS
On December 13, 2012 the Company completed the investment of 80% in the share capital of Antenna Technology
Communications Incorporated (“ATCI”), a global communication provider of synergistic services and a complementary
product portfolio, for cash consideration of $3,774, net of $1,391 in cash acquired. The acquisition price includes
$250 in contingent consideration that the Company has valued at 100% of the potential liability. The acquisition was
accounted for under the acquisition method and its operating results have been included in these financial statements
since the date of acquisition. During fiscal 2013 the Company recognized $140 of transaction costs in selling,
administrative and general expenses relating to the acquisition.
37
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
3. BUSINESS ACQUISITIONS (CONTINUED)
The final allocation of the purchase price is based on management's estimate of the fair value of assets acquired and
liabilities assumed. The final allocation of the purchase price is as follows:
Trade and other receivables
Inventories
Income tax receivable
Trade and other payables
Deferred revenue
Property, plant and equipment
Long term debt
Deferred tax liability
Goodwill (not tax deductible)
Non-controlling interest
$
$
1,054
1,742
345
(546)
(123)
2,994
(440)
(318)
286
(1,220)
3,774
The non-controlling interest has been valued at its proportionate share of net assets in the acquired company.
The goodwill is largely attributable to synergies expected to be achieved from integrating the Company into the
group. Fair value of trade and other receivables was determined by netting $1,091 in gross receivables with
$37 in receivables deemed uncollectable.
4. TRADE AND OTHER RECEIVABLES
Trade receivables
Receivables on construction contracts, net of progress billings
Other receivables
5. INVENTORIES
Finished goods
Raw material and supplies
Work in progress
2014
81,165
3,659
3,157
87,981
2014
59,958
48,409
26,194
134,561
$
$
$
$
2013
51,035
2,670
108
53,813
2013
47,052
47,247
17,320
111,619
$
$
$
$
Cost of sales for the year ended April 30, 2014 was comprised of $130,371 of inventory (2013 - $121,139)
and $5,326 of inventory write-offs (2013 - $3,987).
38
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
6. PROPERTY, PLANT AND EQUIPMENT
Office furniture and equipment
Research and development
equipment
Airplanes
Machinery and equipment
Leaseholds
Land
Buildings
April 30, 2014
Accumulated
Depreciation
Cost
Carrying
Amount
April 30, 2013
Accumulated
Depreciation
Cost
Carrying
Amount
$
2,507 $
1,413 $
1,094 $ 1,726 $
957 $
769
25,839
19,727
45,258
5,165
2,330
9,973
12,410
7,966
13,429
11,761
18,483
12,639
8,608
1,956
9,875
10,683
31,872
13,386
42,339
28,018
14,321
3,423
-
1,884
1,742
2,330
8,089
4,290
2,060
8,816
2,705
1,585
-
2,060
1,472
7,344
$ 110,799 $
58,968 $ 51,831 $ 90,353 $
43,716 $ 46,637
39
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
6. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Office
furniture
and
equip-
ment
Research
and
develop-
ment
equip-
ment Airplanes
Machin-
ery
and
equip-
ment
Lease-
holds
Land
Buildings
Total
Cost
Balance as at April 30, 2012
$ 1,680 $ 10,952 $ 12,639 $ 40,507 $ 3,598 $ 1,640 $ 7,418 $ 78,434
Additions
Acquisition of subsidiary
Foreign exchange
adjustments
Disposals
Balance as at April 30, 2013
100
240
7,560
31
-
-
2,742
900
(79)
(60)
-
43
628
68
(4)
-
-
11,030
396
1,359
2,994
24
39
(37)
(215)
(2,068)
$ 1,726 $ 18,483 $ 12,639 $ 42,339 $ 4,290 $ 2,060 $ 8,816 $ 90,353
(1,853)
-
-
-
-
-
Additions
238
6,768
-
2,940
875
Transfer from held for sale
Foreign exchange
adjustments
Disposals
Balance as at April 30, 2014
Accumulated Depreciation
Balance as at April 30, 2012
Depreciation for the year
Foreign exchange
adjustments
Disposals
-
-
7,088
-
543
588
-
246
-
-
-
-
-
-
10,821
7,088
270
1,157
2,804
-
(267)
$ 2,507 $ 25,839 $ 19,727 $ 45,258 $ 5,165 $ 2,330 $ 9,973 $110,799
(267)
-
-
-
-
-
$ 1,068 $ 6,365 $
809 $ 25,481 $ 2,225 $
103
2,235
1,147
3,712
483
- $ 1,296 $ 37,244
7,851
-
171
-
(214)
8
-
-
-
2
(1,177)
(3)
-
-
-
5
-
12
(1,391)
Balance as at April 30, 2013
Depreciation for the year
$
957 $ 8,608 $ 1,956 $ 28,018 $ 2,705 $
103
3,289
2,188
4,047
718
Transfer from held for sale
Foreign exchange
adjustments
Disposals
Balance as at April 30, 2014
-
-
3,822
-
353
-
513
-
-
-
67
(260)
-
-
-
$ 1,413 $ 12,410 $ 7,966 $ 31,872 $ 3,423 $
- $ 1,472 $ 43,716
10,535
-
190
-
-
-
3,822
222
1,155
-
(260)
-
- $ 1,884 $ 58,968
Carrying amounts
At April 30, 2013
At April 30, 2014
$
769 $ 9,875 $ 10,683 $ 14,321 $ 1,585 $ 2,060 $ 7,344 $ 46,637
$ 1,094 $ 13,429 $ 11,761 $ 13,386 $ 1,742 $ 2,330 $ 8,089 $ 51,831
40
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
7. GOODWILL
The changes in carrying amounts of goodwill are as follows:
Balance as at April 30, 2012
Business acquisitions (note 3)
Foreign exchange differences
Balance as at April 30, 2013
Foreign exchange differences
Balance as at April 30, 2014
Cost
17,507
286
(69)
17,724
545
18,269
$
$
$
The Company performs an impairment test annually on April 30th or whenever there is an indication of impairment.
For purposes of testing for impairment, goodwill has been allocated to the following cash-generating units as follows:
Evertz Microsystems Ltd.
Evertz UK
Holdtech Kft
ATCI
April 30,
2014
$
12,610
-
5,346
313
$
18,269
$
$
2013
9,238
2,852
5,346
288
17,724
During the year a change in classification of a CGU has resulted in goodwill being reallocated from Evertz UK
to Evertz Microsystems Ltd.
The key assumptions used in performing the impairment tests as at April 30, 2014 are as follows:
Method of determining recoverable amount
Discount Rate
Perpetual growth rate
Value in use
8%
2-4%
41
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
7. GOODWILL (CONTINUED)
Recoverable Amount
Management’s past experience and future expectations of the business performance is used to make a best estimate
of the expected revenue, earnings before interest, taxes, depreciation and amortization (“ EBITDA”) and operating cash
flows for a five year period. Subsequent to the fifth year period the present value of the fifth year cash flows
is calculated in perpetuity.
Discount Rate
The discount rate applied is a pretax rate that reflects the time value of money and risk associated with the business.
Perpetual Growth Rate
The perpetual growth rate is management’s current assessment of the long-term growth prospect of the Company
in the jurisdictions in which it operates.
Sensitivity Analysis
Management performs a sensitivity analysis on the key assumptions. The sensitivity analysis indicates reasonable
changes to key assumptions will not result in an impairment loss.
8. INTANGIBLE ASSETS
Cost
Balance as at April 30, 2012
Foreign exchange differences
Balance as at April 30, 2013
Foreign exchange differences
Balance as at April 30, 2014
Accumulated Depreciation
Balance as at April 30, 2012
Amortization for the year
Foreign exchange differences
Balance as at April 30, 2013
Amortization for the year
Foreign exchange differences
Balance as at April 30, 2014
Carrying amounts
At April 30, 2013
At April 30, 2014
42
Intellectual
property
7,866
(35)
7,831
257
8,088
(6,861)
(428)
16
(7,273)
(383)
(189)
(7,845)
558
243
$
$
$
$
$
$
$
$
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
9. PROVISIONS
Balance as at April 30, 2012
Net additions (provisions used)
Foreign exchange differences
Balance as at April 30, 2013
Net additions (provisions used)
Foreign exchange differences
Balance as at April 30, 2014
Warranty and
Returns
Lease/
Retirement
Obligations
$
$
$
762 $
236
2
1,000 $
610
5
1,615 $
47 $
59
(2)
104 $
(103)
8
9 $
Total
809
295
-
1,104
507
13
1,624
Warranty and Returns
The provision relates to estimate future costs associated with warranty repairs and returns on hardware solutions.
The provision is based on historical data associated with similar products. Estimate is expected to be incurred
within the next twelve months.
Lease/Retirement Obligations
The provision relates to estimate restoration costs expected to be incurred upon the conclusion of company leases.
10. LONG TERM DEBT
a) Credit Facilities
The Company has the following credit facilities available:
1. Credit facility of $15,000 and a treasury risk management facility up to $10,000 available, bearing interest
at prime, subject to certain covenants and secured by all Canadian based assets. Advances under these
facilities bear interest at prime. There were no borrowings against either of these facilities as at
April 30, 2014 or 2013.
2. Credit facility available of 484 Euros bearing interest at WIBOR plus 1.6% per annum. There were no
borrowings outstanding under this facility as at April 30, 2014 or 2013.
b) Long Term Debt
1. Mortgage payable denominated in Euros, secured by buildings,
bearing interest at LIBOR EUR three months fixed rate plus 1%,
payable monthly, maturing in March 2021 with an option to end
the contract prior to maturity upon payment of a penalty fee.
2. Loans payable denominated in Euros, secured by land and buildings,
payable monthly, bearing interest at WIBOR plus 1% per annum,
maturing on July 31, 2015.
3. Other
Less current portion
April 30,
2014
April 30,
2013
$
1,489 $
1,456
275
431
23
1,787 $
415
1,372 $
42
1,929
390
1,539
$
$
43
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
11. CAPITAL STOCK
Authorized capital stock consists of:
Unlimited number of preferred shares
Unlimited number of common shares
Balance as at April 30, 2012
Issued on exercise of stock options
Cancelled pursuant to NCIB
Transferred on stock option exercise
Balance as at April 30, 2013
Issued on exercise of stock options
Cancelled pursuant to NCIB
Transferred on stock option exercise
Balance as at April 30, 2014
Number of
Common
Shares
Amount
73,225,786
$
67,458
724,400
(317,620)
-
8,013
(292)
6,274
73,632,566
$
81,453
681,200
(3,620)
-
8,234
(4)
3,248
74,310,146
$
92,931
Normal Course Issuer Bid
In August 2013, the Company filed a Normal Course Issuer Bid (NCIB) with the TSX to repurchase, at the Company’s
discretion, until September 2, 2014 up to 3,700,397 outstanding common shares on the open market or as otherwise
permitted, subject to normal terms and limitations of such bids. During fiscal 2014 in combination with a prior NCIB
that expired in July 2013, the Company purchased and cancelled 3,620 common shares at a weighted average price
of $14.12 per share under the NCIB.
Dividends Per Share
During the year, $2.04 in dividends per share were declared, including a special dividend of $1.40 per share
(2013 - $0.58).
12. REVENUE
Hardware, software including related services, training
and commissioning
Long term contract revenue
13. SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling and administrative
Share-based compensation (note 15)
Depreciation of property, plant and equipment (non-production)
Amortization of intangible assets
2014
2013
$
$
309,087 $
16,437
325,524 $
299,950
16,355
316,305
2014
2013
$
55,162
$
53,106
2,738
3,753
383
2,681
2,257
428
$
62,036
$
58,472
44
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
14. STATEMENT OF CASH FLOWS
Changes in non–cash working capital items
Trade and other receivables
Inventories
Prepaid expenses
Trade and other payables
Deferred revenue
Provisions
2014
(32,867) $
(20,923)
(1,200)
6,414
3,384
520
(44,672) $
$
$
2013
6,603
(714)
(739)
(1,100)
2,129
295
6,474
15. SHARE BASED PAYMENTS
The Company established, in June 2006, a stock option plan to attract, retain, motivate and compensate employees,
officers and eligible directors who are integral to the growth and success of the Company. A number of shares equal
to 10% of the Company’s outstanding common shares are to be reserved for issuance under the stock option plan.
The Board of Directors administers the stock option plan and will determine the terms of any options granted.
The exercise price of an option is to be set by the Board of Directors at the time of grant but shall not be lower
than the market price as defined in the option plan at the time of grant. The term of the option cannot exceed
10 years. Stock options currently granted normally fully vest and expire by the end of the fifth year. The terms
for all options prior to June 2006 were set by the Board of Directors at the grant date.
The changes in the number of outstanding share options are as follows:
Balance as at April 30, 2012
Granted
Exercised
Forfeited
Expired
Balance as at April 30, 2013
Granted
Exercised
Forfeited
Expired
Balance as at April 30, 2014
Number of
Options
4,678,300
$
983,000
(724,400)
(113,000)
(209,500)
4,614,400
$
1,830,500
(681,200)
(390,000)
(170,000)
5,203,700
$
Weighted
Average
Exercise Price
12.60
14.81
11.06
11.96
18.04
13.09
16.94
12.09
13.05
18.10
14.41
45
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
15. SHARE BASED PAYMENTS (CONTINUED)
Stock options outstanding as at April 30, 2014 are:
Exercise Price
$ 11.88
$ 12.23 - $14.24
$ 14.61 - $16.29
$ 17.03 - $19.34
Totals
Weighted
Average
Exercise Price
$
$
$
$
$
11.88
13.45
15.61
17.11
14.41
Number of
Outstanding
Options
1,909,500
820,500
698,700
1,775,000
5,203,700
Weighted
Average
Remaining
Contractual
Life
2.2
2.8
2.8
4.8
3.3
Weighted
Average
Exercise Price
of Exercisable
Options
$
$
$
$
$
-
13.14
14.61
-
14.57
Number of
Options
Exercisable
-
3,000
101,300
-
104,300
Compensation expense
The share–based compensation expense that has been charged against earnings over the fiscal period is $2,738
(2013 - $2,681). Compensation expense on grants during the year was calculated using the Black–Scholes option
pricing model with the following weighted average assumptions:
Risk-free interest rate
Dividend yield
Expected life
Expected volatility
Weighted average grant-date fair value:
Where the exercise price equaled the market price
April 30, 2014
April 30, 2013
1.66%
3.78%
5 years
27%
1.27%
3.81%
5 years
42%
$
2.85
$
3.99
Expected volatility is based on historical share price volatility over the past 5 years of the Company. Share-based
compensation expense was calculated using a weighted average forfeiture rate of 19% (2013 - 19%).
16. COMMITMENTS AND CONTINGENCIES
The Company is committed under long term debt agreements and certain operating leases with minimum annual lease
payments as follows:
Long Term
Debt
Operating
Leases
2015
$
415
$
3,657
$
2016
2017
2018
2019
Thereafter
Balance as at April 30, 2014
$
246
180
188
197
561
1,787
$
3,581
3,450
3,282
2,458
1,639
18,067
$
Total operating lease expense during the year was $3,607 (2013 - $3,560).
Total
4,072
3,827
3,630
3,470
2,655
2,200
19,854
The Company has obtained documentary and standby letters of credit aggregating to a total of $2,442 (2013 - $3,446).
46
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company’s financial instruments consist of cash and cash equivalents, instruments held for trading, trade and
other receivables, trade and other payables and long term debt. Unless otherwise noted, it is management’s opinion
that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
The Company estimates the fair value of these instruments approximates the carrying values as listed below.
(a) Fair values and classification of financial instruments:
The following summarizes the significant methods and assumptions used in estimating the fair values
of financial instruments:
I. Quoted prices (unadjusted) in active markets for identical assets or liabilities.
II. Inputs other than quoted prices included in level I that are observable for the asset or liability, either directly
or indirectly. Cash and cash equivalents, instruments held for trading, trade and other receivables, trade and
other payables, and fair value disclosures have been determined using level II fair values.
III. Inputs for the asset or liability that are not based on observable market data.
(b) Financial risk management:
The Company, through its financial assets and liabilities, is exposed to various risks. The following analysis
provides a measurement of risks as at April 30, 2014:
Credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash
equivalents, instruments held for trading and trade and other receivables the total of which is the maximum exposure
to credit risk. The Company performs evaluations of the financial situations of its customers. Management does not
believe that there is significant credit concentration or risk.
The Company sets up an allowance for doubtful accounts based on the credit risks of the individual customer and
the customer history. Approximately 72% (2013 – 76%) of trade and other receivables are outstanding for less than
90 days as at April 30, 2014. The amounts owing over 90 days are individually evaluated and provided for where
appropriate in the allowance for doubtful accounts. The trade and other receivables are presented as follows net
of the allowance for doubtful accounts:
Trade and other receivables
Allowance for doubtful accounts
The change in the allowance for doubtful accounts was as follows:
Balance at beginning of year
Increase in allowance
Bad debt recaptured and write-offs
Impact of variation in exchange rates
Balance at end of year
April 30, 2014
April 30, 2013
$
$
92,216
(4,235)
87,981
$
$
57,247
(3,434)
53,813
April 30, 2014
April 30, 2013
$
3,434
$
687
(151)
265
1,808
2,317
(717)
26
$
4,235
$
3,434
47
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
Exchange Rate Risk
The Company transacts a significant portion of its business in U.S. dollars and is therefore exposed
to currency fluctuations.
U.S. dollar financial instruments are as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
April 30, 2014
April 30, 2013
$
$
29,671
$
55,499
(4,834)
80,336
$
36,326
34,083
(5,922)
64,487
Based on the financial instruments as at April 30, 2014, a 5% change in the value of the U.S. dollar would result
in a gain or loss of $4,017 in earnings before tax.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial
liabilities. The Company's primary source of liquidity is its cash reserves. The Company also maintains certain credit
facilities to support short term funding of operations and trade finance. The Company believes it has sufficient
available funds to meet current and foreseeable financial requirements. The Company expects to settle all
current financial liabilities within the next year. Maturity of long term debt is disclosed in Note 16.
18. SEGMENTED INFORMATION
The Company reviewed its operations and determined that it operates a single reportable segment, the television
broadcast equipment market. The single reportable operating segment derives its revenues from the sale
of hardware and software solutions including related services, training and commissioning.
Revenue
United States
International
Canada
2014
150,765 $
153,244
21,515
2013
146,918
143,061
26,326
325,524
$
316,305
$
$
April 30, 2014
April 30, 2013
Property,
Plant and
Equipment
Goodwill
Intangible
Assets
Property,
Plant and
Equipment
Goodwill
Intangible
Assets
United States $
13,415
$
313
$
-
$
12,367
$
288
$
International
Canada
11,751
26,665
17,956
-
243
-
10,481
23,789
17,436
-
$
51,831
$
18,269
$
243
$
46,637
$
17,724
$
-
558
-
558
48
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
19. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company,
have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the
Company and other related parties are disclosed below.
Related Party Transactions
Two shareholders each indirectly hold a 10% interest in the Company’s leased premises in Ontario. This lease expires
in 2019 with a total of $4,155 committed over the remaining term. During the year, rent paid for the leased principal
premises amounted to $823 (2013 – $819) with no outstanding amounts due as at April 30, 2014.
The Company also leases property where two shareholders indirectly own 100% interest. This lease expires in 2016 with
a total of $615 committed over the remaining term. During the year, rent paid was $246 (2013 – $246) with
no outstanding amounts due as at April 30, 2014.
On December 1, 2008 the Company entered into an agreement with two shareholders who each indirectly hold a 20%
interest in the Company’s leased premises in Ontario. This lease expires in 2018 with a total of $3,712 committed over
the remaining term. During the year, rent paid for the leased principal premises amounted to $756 (2013 - $736) with no
outstanding amounts due as at April 30, 2014.
On December 15, 2013 the Company renewed a property lease agreement with a director who indirectly owns 100%
interest. The lease expires in 2018 with a total of $659 committed over the remaining term. During the year, rent paid
was $137 (2013 - $136) with no outstanding amounts due as at April 30, 2014.
On May 1, 2009 the Company entered into a property lease agreement with two shareholders who each indirectly hold a
35% interest. This lease expires in 2019 with a total of $2,332 committed over the remaining term. During the year, rent
paid was $439 (2013 - $419) with no outstanding amounts due as at April 30, 2014.
These transactions were in the normal course of business and recorded at an exchange value established and agreed
upon by related parties.
The remuneration of directors and other members of key management personnel for the years ended April 30, 2014 and
April 30, 2013 are as follows:
Short-term salaries and benefits
Share-based payments
The total employee benefit expense was $97,190 (2013 - $89,462).
Subsidiaries:
The Company has the following significant subsidiaries:
2014
4,152
143
4,295
$
$
2013
3,948
1,301
5,249
$
$
Company
Evertz Microsystems Ltd.
Evertz USA
Evertz UK
Holdtech Kft.
Tech Digital Manufacturing Limited
Truform Metal Fabrication Ltd.
% Ownership
100%
100%
100%
100%
100%
75%
Location
Canada
United States
United Kingdom
Hungary
Canada
Canada
49
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
20. NON-CONTROLLING INTERESTS
The Company has non-controlling interests of 25% with Truform Metal Fabrication Ltd., located within Canada,
10% with Studiotech Poland located within Poland and 20% with ATCI, located within the USA. The table below
summarizes the aggregate financial information relating to subsidiaries before eliminating entries, as no such
subsidiary is individually significant.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity attributable to shareholders
Non-controlling interest
Revenue
Net earnings attributable to:
Shareholders
Non-controlling interest
$
$
April 30,
2014
12,731
9,132
4,230
472
14,233
2,939
April 30,
2014
April 30,
2013
13,346
8,491
4,597
852
13,325
2,938
April 30,
2013
$
31,347
$
22,755
1,524
418
1,887
557
21. CAPITAL DISCLOSURES
The Company’s capital is composed of shareholders’ equity which totals $333,478 (2013 - $406,797) as at April 30.
The Company’s objective in managing capital is to ensure sufficient liquidity to finance increases in non-cash
working capital, capital expenditures for capacity expansions, pursuit of selective acquisitions and the
payment of quarterly dividends.
The Company takes a conservative approach towards financial leverage and management of financial risk
and the Company currently satisfies their internal requirements.
The Company is not subject to any capital requirements imposed by a regulator.
22. EARNINGS PER SHARE
Weighted average common shares outstanding
Dilutive-effect of stock options
Diluted weighted average common shares outstanding
2014
2013
74,064,205
421,256
74,485,461
73,300,647
515,691
73,816,338
The weighted average number of diluted common shares excludes 2,150,000 options because they were anti-dilutive
during the year (2013 – 662,500).
50
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2014 and 2013 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
23. INCOME TAXES
The Company’s effective income tax rate differs from the statutory combined Canadian income tax rate as follows:
Expected income tax expense using statutory rates (25%, 2013-25%)
$
21,201
$
22,212
2014
2013
Difference in foreign tax rates
Benefit arising from a previously unrecognized tax loss
Non-deductible stock based compensation
Other
(322)
(264)
726
(76)
(219)
-
670
1,020
$
21,265
$
23,683
Benefit arising from a previously unrecognized tax loss has been recognized in the year as a result of new business
opportunities expected to result in taxable income in future years.
Components of deferred income taxes are summarized as follows:
Deferred income tax liabilities:
Tax loss carried forward
Research and development tax credits
Equipment tax vs accounting basis
Intangible assets
Non-deductible reserves
Other
April 30, 2014
April 30, 2013
$
$
(3,347)
2,445
8,339
68
(750)
(287)
$
6,468
$
(1,427)
2,654
8,466
156
-
(259)
9,590
As at April 30, 2014 the Company had $7,167 (2013 - $8,285) in tax losses for which no deferred tax asset has been
recognized in the statement of financial position.
24. NON-CURRENT ASSETS HELD FOR SALE
Due to poor market conditions, assets previously held for sale have been reclassified to property, plant and equipment.
During the year, depreciation of $828, which would have been previously recognized had the asset not been classified
as held for sale, was recorded within selling, administrative and general expenses on the statements of earnings.
25. SUBSEQUENT EVENT
On June 11, 2014 the Company declared a dividend of $0.16 with a record date of June 20, 2014 and a payment
date of June 27, 2014.
51
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT 5-YEAR FINANCIAL HIGHLIGHTS
(all amounts in thousands, except EPS and share amounts)
Consolidated Statement of Earnings Data
Year Ended April 30,
2014
2013
2012
2011
2010
Sales
$ 325,524
$ 316,305
$ 293,400
$ 309,259
$ 286,455
Selling and administrative expenses
Research and development expenses
Earnings before income taxes
Net earnings
Fully diluted EPS
55,162
60,196
84,804
63,539
0.85
53,106
52,851
88,846
65,163
0.88
47,118
44,200
81,840
59,956
0.81
37,583
35,719
108,346
78,259
1.04
36,118
32,026
90,275
61,481
0.83
Consolidated Balance Sheet Data
Year Ended April 30,
2014
2013
2012
2011
2010
Cash and instruments held for trading $ 101,956
401,280
Total assets
$ 220,668
$ 185,669
$ 192,025
$ 145,029
465,307
431,864
333,478
406,797
378,417
410,511
372,209
345,787
312,169
Shareholder’s equity
Number of common shares
outstanding
Basic
74,310,146
73,632,566
73,225,786
74,470,606
73,607,506
Fully-diluted
79,513,846
78,246,966
77,904,086
78,577,206
77,703,006
52
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT CORPORATE AND SHAREHOLDER INFORMATION
Vince Silvestri
Vice-President of Software
Systems
Kevin Hellam
Vice-President of Global Delivery
& Support
Jeff Marks
Vice-President
of Manufacturing
1 Member of the Audit Committee.
2 Member of the Compensation Committee.
DIRECTORS AND EXECUTIVE OFFICERS
Romolo Magarelli
Director, President and Chief Executive Officer
Douglas DeBruin
Executive Chairman
Christopher Colclough 1, 2
Director
Dr. Thomas Pistor 1
Director
Dr. Ian McWalter 1, 2
Director
Brian Campbell
Executive Vice-President,
Business Development
Rakesh Patel
Chief Technology Officer
Anthony Gridley
Chief Financial Officer
Eric Fankhauser
Vice-President, Advanced
Product Development
Joe Cirincione
Vice-President of Sales - Central
and Western, USA
Robert Peter
Vice-President
International Operations
53
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT CORPORATE AND SHAREHOLDER INFORMATION (continued)
AUDITORS
Deloitte LLP
Chartered Accountants
1005 Skyview Drive, Suite 202
Burlington, ON Canada L7P 5B1
T: (905) 315-6770
LEGAL COUNSEL
Norton Rose Fulbright Canada LLP
Royal Bank Plaza, South Tower
200 Bay Street, Suite 3800
PO Box 84, Toronto, ON Canada M5J 2Z4
T: (416) 216-4000
EXCHANGE LISTING
The common shares of the Company are listed
on the Toronto Stock Exchange under the symbol ET
INVESTOR RELATIONS
Anthony Gridley
Chief Financial Officer
T: (905) 335-7580
email: ir@evertz.com
ANNUAL SHAREHOLDERS MEETING
12:30 p.m., Tuesday, September 9, 2014
The Fairmont Royal York
100 Front Street West
Toronto, ON Canada M5J 1E3
REGISTRAR AND TRANSFER AGENT
Computershare Investor Services Inc.
100 University Ave., 8th floor, North Tower
Toronto, ON Canada M5J 2Y1
email: service@computershare.com
T: 1-800-736-1755
www.computershare.com
54
EVERTZ TECHNOLOGIES LIMITED2014 ANNUAL REPORT 2014 HIGHLIGHTS
EVERTZ TECHNOLOGIES LIMITED CORPORATION OFFICES
PROFITABILITY
INNOVATION
ENDURANCE
GROWTH
CORPORATE HEAD OFFICE
Evertz Technologies Ltd.
EVERTZ TECHNOLOGIES LIMITED CORPORATION OFFICES
Evertz UK
100 Berkshire Place
Wharfedale Road
Winnersh Triangle
Berkshire, UK
RG41 5RD
T: 44-118-921-6800
F: 44-118-921-6802
Evertz Asia Ltd.
Nan Fung Tower
Room 601, 6/F
173 Des Voeux RD Central
Hong Kong
T: (852) 2850-7989
F: (852) 2850-7978
Evertz UK
100 Berkshire Place
Wharfedale Road
Winnersh Triangle
Berkshire, UK
RG41 5RD
T: 44-118-921-6800
F: 44-118-921-6802
Evertz Asia Ltd.
Nan Fung Tower
Room 601, 6/F
173 Des Voeux RD Central
Hong Kong
T: (852) 2850-7989
F: (852) 2850-7978
Burlington, ON
Phoenix, AZ
Burbank, CA
New York City, NY
5292 John Lucas Dr.
Burlington, ON
L7L 5Z9
T: (905) 335-3700
CORPORATE HEAD OFFICE
Evertz Technologies Ltd.
5292 John Lucas Dr.
Burlington, ON
L7L 5Z9
T: (905) 335-3700
Manassas
10621 Gateway Blvd., Suite 206
Manassas, VA
20110
T: (703) 330-8600
F: (703) 330-5549
Manassas
10621 Gateway Blvd., Suite 206
Manassas, VA
20110
T: (703) 330-8600
F: (703) 330-5549
Burbank
212 N. Evergreen Street
Burbank, CA
91505
T: (818) 558-3910
F: (818) 558-3906
Burbank
212 N. Evergreen Street
Burbank, CA
91505
T: (818) 558-3910
F: (818) 558-3906
2014 HIGHLIGHTS
"40 Consecutive
Profi table Quarters"
Industry Leading
Pre-Tax Profi t
Re-investment of
Sales in R&D
"$1 Billion Market Value"
Net Cash & Equivalents
Record
Annual Revenue
INNOVATION
26%
ENDURANCE
18.5%
GROWTH
$102M
$326M
Re-investment of
Sales in R&D
"$1 Billion Market Value"
Net Cash & Equivalents
Record
Annual Revenue
PROFITABILITY
"40 Consecutive
Profi table Quarters"
Industry Leading
Pre-Tax Profi t
26%
QUARTERLY DIVIDEND HISTORY
18.5%
18¢
$102M
$326M
4.5%
4.0
3.5
3.0
2.5
4.5%
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
2014*
16
14
QUARTERLY DIVIDEND HISTORY
12
10
8
6
4
2
0
18¢
16
14
12
10
8
6
4
2
0
2008
2008
2009
2010
2011
2012
2013
2.0
1.5
ANNUAL REVENUE GROWTH
2011
2010
Year ended April 30,
(in millions of dollars)
2009
¢ Per Share
¢ Per Share
Yield %
*excludes $1.40 special dividend December 2013
1.0
$326
0.5
0
2012
2013
2014*
$316
Yield %
*excludes $1.40 special dividend December 2014
ANNUAL REVENUE GROWTH
Year ended April 30,
(in millions of dollars)
$316
$293
$326
$293
2012
2013
2014
Annual Report F_B Cover 2014_AUG 6.pdf - p2 (August 7, 2014 18:52:48)
2012
2013
2014
Annual Report F_B Cover 2014_AUG 6.pdf - p2 (August 7, 2014 18:52:48)
Manassas, VA
Berkshire, UK
Beijing
Hong Kong
Shanghai
Singapore
Australia
Croatia
Germany
Dubai, U.A.E
India
Burlington, ON
Phoenix, AZ
Burbank, CA
New York City, NY
Manassas, VA
Berkshire, UK
Beijing
Hong Kong
Shanghai
Singapore
Australia
Croatia
Germany
Dubai, U.A.E
India
DT
DT
Annual Report F_B Cover 2014_AUG 6.pdf - p1 (August 7, 2014 18:52:47)
DT