Computer Modelling Group Announces Third Quarter Results

Computer Modelling Group Announces Third Quarter Results 
CALGARY, ALBERTA -- (Marketwire) -- 02/12/13 -- Computer Modelling
Group Ltd. (TSX:CMG) ("CMG" or the "Company") is very pleased to
report our third quarter results for the three and nine months ended
December 31, 2012. 


 
                                                                            
THIRD QUARTER HIGHLIGHTS                                                    
                                                                            
For the three months ended                                                  
December 31,                              2012      2011 $ change  % change 
($ thousands, except per share data)                                        
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance software                                                
 licenses                               14,004    12,056    1,948        16%
Perpetual software licenses              1,365     2,321     (956)      -41%
Total revenue                           16,802    15,898      904         6%
Operating profit                         8,276     8,093      183         2%
Net income                               6,119     5,790      329         6%
Earnings per share - basic                0.16      0.16        -         0%
----------------------------------------------------------------------------
                                                                            
For the nine months ended                                                   
December 31,                              2012      2011 $ change  % change 
($ thousands, except per share data)                                        
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance software                                                
 licenses                               39,196    30,361    8,835        29%
Perpetual software licenses              6,106     9,308   (3,202)      -34%
Total revenue                           49,341    43,819    5,522        13%
Operating profit                        24,413    22,411    2,002         9%
Net income                              17,569    16,771      798         5%
Earnings per share - basic                0.47      0.46     0.01         2%
----------------------------------------------------------------------------

 
MANAGEMENT'S DISCUSSION AND ANALYSIS 
This Management's Discussion and Analysis ("MD&A") for Computer
Modelling Group Ltd. ("CMG," the "Company," "we" or "our"), presented
as at February 11, 2013, should be read in conjunction with the
unaudited condensed consolidated financial statements and related
notes of the Company for the three and nine months ended December 31,
2012 and the audited consolidated financial statements and MD&A for
the years ended March 31, 2012 and 2011 contained in the 2012 Annual
Report for CMG. Additional information relating to CMG, including our
Annual Information Form, can be found at www.sedar.com. The financial
data contained herein have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and, unless
otherwise indicated, all amounts in this report are expressed in
Canadian dollars and rounded to the nearest thousand. 
FORWARD-LOOKING INFORMATION 
Certain information included in this MD&A is forward-looking.
Forward-looking information includes statements that are not
statements of historical fact and which address activities, events or
developments that the Company expects or anticipates will or may
occur in the future, including such things as investment objectives
and strategy, the development plans and status of the Company's
software development projects, the Company's intentions, results of
operations, levels of activity, future capital and other expenditures
(including the amount, nature and sources of funding thereof),
business prospects and opportunities, research and development
timetable, and future growth and performance. When used in this MD&A,
statements to the effect that the Company or its management
"believes", "expects", "expected", "plans", "may", "will",
"projects", "anticipates", "estimates", "would", "could", "should",
"endeavours", "seeks", "predicts" or "intends" or similar statements,
including "potential", "opportunity", "target" or other variations
thereof that are not statements of historical fact should be
construed as forward-looking information. These statements reflect
management's current beliefs with respect to future events and are
based on information currently available to management of the
Company. The Company believes that the expectations reflected in such
forward-looking information are reasonable, but no assurance can be
given that these expectations will prove to be correct and such
forward-looking information should not be unduly relied upon. 
With respect to forward-looking information contained in this MD&A,
we have made assumptions regarding, among other things: 


 
--  Future software license sales 
--  The continued financing by and participation of the Company's partners
    in the DRMS project and it being completed in a timely manner 
--  Ability to enter into additional software license agreements 
--  Ability to continue current research and new product development 
--  Ability to recruit and retain qualified staff 

 
Forward-looking information is not a guarantee of future performance
and involves a number of risks and uncertainties, only some of which
are described herein. Many factors could cause the Company's actual
results, performance or achievements, or future events or
developments, to differ materially from those expressed or implied by
the forward-looking information including, without limitation, the
following factors which are described in the MD&A of CMG's 2012
Annual Report under the heading "Business Risks": 


 
--  Economic conditions in the oil and gas industry 
--  Reliance on key clients 
--  Foreign exchange 
--  Economic and political risks in countries where the Company currently
    does or proposes to do business 
--  Increased competition 
--  Reliance on employees with specialized skills or knowledge 
--  Protection of proprietary rights 

 
Should one or more of these risks or uncertainties materialize, or
should assumptions underlying the forward-looking statements prove
incorrect, actual results, performance or achievement may vary
materially from those expressed or implied by the forward-looking
information contained in this MD&A. These factors should be carefully
considered and readers are cautioned not to place undue reliance on
forward-looking information, which speaks only as of the date of this
MD&A. All subsequent forward-looking information attributable to the
Company herein is expressly qualified in its entirety by the
cautionary statements contained in or referred to herein. The Company
does not undertake any obligation to release publicly any revisions
to forward-looking information contained in this MD&A to reflect
events or circumstances that occur after the date of this MD&A or to
reflect the occurrence of unanticipated events, except as may be
required under applicable securities laws. 
NON-IFRS FINANCIAL MEASURES 
This MD&A includes certain measures which have not been prepared in
accordance with IFRS such as "EBITDA"
, "direct employee costs" and
"other corporate costs." Since these measures do not have a standard
meaning prescribed by IFRS, they are unlikely to be comparable to
similar measures presented by other issuers. Management believes that
these indicators nevertheless provide useful measures in evaluating
the Company's performance. 
"Direct employee costs" include salaries, bonuses, stock-based
compensation, benefits, commission expenses, and professional
development. "Other corporate costs" include facility-related
expenses, corporate reporting, professional services, marketing and
promotion, computer expenses, travel, and other office-related
expenses. Direct employee costs and other corporate costs should not
be considered an alternative to total operating expenses as
determined in accordance with IFRS. People-related costs represent
the Company's largest area of expenditure; hence, management
considers highlighting separately corporate and people-related costs
to be important in evaluating the quantitative impact of cost
management of these two major expenditure pools. See "Expenses"
heading for a reconciliation of direct employee costs and other
corporate costs to total operating expenses. 
"EBITDA" refers to net income before adjusting for depreciation
expense, finance income, finance costs, and income and other taxes.
EBITDA should not be construed as an alternative to net income as
determined by IFRS. The Company believes that EBITDA is useful
supplemental information as it provides an indication of the results
generated by the Company's main business activities prior to
consideration of how those activities are amortized, financed or
taxed. See "EBITDA" heading for a reconciliation of EBITDA to net
income. 
CORPORATE PROFILE 
CMG is a computer software technology company serving the oil and gas
industry. The Company is a leading supplier of advanced processes
reservoir modelling software with a blue chip client base of
international oil companies and technology centers in over 50
countries. The Company also provides professional services consisting
of highly specialized support, consulting, training, and contract
research activities. CMG has sales and technical support services
based in Calgary, Houston, London, Caracas and Dubai. CMG's Common
Shares are listed on the Toronto Stock Exchange ("TSX") and trade
under the symbol "CMG". 


 
QUARTERLY PERFORMANCE                                                       
                                                                            
                   Fiscal                                                   
                  2011(1)        Fiscal 2012(2)           Fiscal 2013(3)    
($ thousands,                                                               
 unless otherwise                                                           
 stated)               Q4     Q1     Q2     Q3      Q4     Q1     Q2      Q3
----------------------------------------------------------------------------
                                                                            
Annuity/                                                                    
 maintenance                                                                
 licenses           8,531  8,997  9,308 12,056  12,497 13,179 12,012  14,004
Perpetual licenses  3,911  5,391  1,596  2,321   3,416  2,070  2,671   1,365
----------------------------------------------------------------------------
Software licenses  12,442 14,388 10,904 14,377  15,913 15,249 14,683  15,369
Professional                                                                
 services           1,936  1,551  1,078  1,521   1,302  1,216  1,390   1,433
----------------------------------------------------------------------------
Total revenue      14,378 15,939 11,982 15,898  17,215 16,465 16,073  16,802
Operating profit    7,532  9,092  5,226  8,093   9,193  8,105  8,032   8,276
Operating profit %     52     57     44     51      53     49     50      49
EBITDA(4)           7,818  9,366  5,508  8,414   9,543  8,423  8,425   8,687
Profit before                                                               
 income and other                                                           
 taxes              7,413  9,240  6,096  8,184   9,104  8,577  7,703   8,556
Income and other                                                            
 taxes              2,605  2,577  1,778  2,394   2,484  2,487  2,342   2,437
Net income for the                                                          
 period             4,808  6,663  4,318  5,790   6,620  6,090  5,361   6,119
Cash dividends                                                              
 declared and paid  3,643  7,519  4,053  4,079   4,848  9,736  6,020   6,050
----------------------------------------------------------------------------
Per share amounts                                                           
 - ($/share)                                                                
Earnings per share                                                          
 - basic             0.13   0.18   0.12   0.16    0.18   0.16   0.14    0.16
Earnings per share                                                          
 - diluted           0.13   0.18   0.11   0.15    0.17   0.16   0.14    0.16
Cash dividends                                                              
 declared and paid   0.10  0.205   0.11   0.11    0.13   0.26   0.16    0.16
----------------------------------------------------------------------------
(1) Q4 of fiscal 2011 includes $0.1 million in revenue that pertains to     
    usage of CMG's products in prior quarters.                              
(2) Q1, Q2, Q3 and Q4 of fiscal 2012 include $0.3 million, $0.04 million,   
    $2.6 million and $2.7 million, respectively, in revenue that pertains to
    usage of CMG's products in prior quarters.                              
(3) Q1, Q2 and Q3 of fiscal 2013 include $2.1 million, $0.2 million and $1.8
    million, respectively, in revenue that pertains to usage of CMG's       
    products in prior quarters.                                             
(4) EBITDA is defined as net income before adjusting for depreciation       
    expense, finance income, finance costs, and income and other taxes. See 
    "Non-IFRS Financial Measures".                                          

 
Highlights 
During the nine months ended December 31, 2012, as compared to the
same period of prior fiscal year, CMG: 


 
--  Increased annuity/maintenance revenue by 29% 
--  Increased operating profit by 9% 
--  Increased net income by 5% 
--  Increased spending on research and development by 19% 
--  Increased EBITDA by 10% 
--  Realized earnings per share of $0.47, representing a 2% increase 
 
Revenue                                                                     
                                                                            
For the three months ended                                                  
December 31,                             2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Software licenses                      15,369    14,377       9
92         7%
Professional services                   1,433     1,521       (88)       -6%
----------------------------------------------------------------------------
Total revenue                          16,802    15,898       904         6%
----------------------------------------------------------------------------
                                                                            
Software license revenue - % of                                             
 total revenue                             91%       90%                    
Professional services - % of total                                          
 revenue                                    9%       10%                    
----------------------------------------------------------------------------
                                                                            
For the nine months ended                                                   
December 31,                             2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Software licenses                      45,302    39,669     5,633        14%
Professional services                   4,039     4,150      (111)       -3%
----------------------------------------------------------------------------
Total revenue                          49,341    43,819     5,522        13%
----------------------------------------------------------------------------
                                                                            
Software license revenue - % of                                             
 total revenue                             92%       91%                    
Professional services - % of total                                          
 revenue                                    8%        9%                    
----------------------------------------------------------------------------

 
CMG's revenue is comprised of software license sales, which provide
the majority of the Company's revenue, and fees for professional
services. 
Total revenue increased by 6% for the three months ended December 31,
2012, compared to the same period of the previous fiscal year, due to
an increase in software license sales driven by the growth in
annuity/maintenance license sales. 
Similarly, total revenue increased by 13% in the nine months ended
December 31, 2012, compared to the same period of the previous fiscal
year, as a result of the increase in software license sales led by
the increase in annuity/maintenance revenue. 
SOFTWARE LICENSE REVENUE 
Software license revenue is made up of annuity/maintenance license
fees charged for the use of the Company's software products which is
generally for a term of one year or less and perpetual software
license sales, whereby the customer purchases the-then-current
version of the software and has the right to use that version in
perpetuity. Annuity/maintenance license fees have historically had a
high renewal rate and, accordingly, provide a reliable revenue stream
while perpetual license sales are more variable and unpredictable in
nature as the purchase decision and its timing fluctuate with the
customers' needs and budgets. The majority of CMG's customers who
have acquired perpetual software licenses subsequently purchase our
maintenance package to ensure ongoing product support and access to
current versions of CMG's software. 


 
For the three months ended                                                  
December 31,                             2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance licenses           14,004    12,056     1,948        16%
Perpetual licenses                      1,365     2,321      (956)      -41%
----------------------------------------------------------------------------
Total software license revenue         15,369    14,377       992         7%
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance as a % of total                                         
 software license revenue                  91%       84%                    
Perpetual as a % of total software                                          
 license revenue                            9%       16%                    
----------------------------------------------------------------------------
                                                                            
For the nine months ended                                                   
December 31,                             2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance licenses           39,196    30,361     8,835        29%
Perpetual licenses                      6,106     9,308    (3,202)      -34%
----------------------------------------------------------------------------
Total software license revenue         45,302    39,669     5,633        14%
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance as a % of total                                         
 software license revenue                  87%       77%                    
Perpetual as a % of total software                                          
 license revenue                           13%       23%                    
----------------------------------------------------------------------------

 
Total software license revenue grew by 7% in the three months ended
December 31, 2012, compared to the same period of the previous fiscal
year, due to the increase in annuity/maintenance license revenue
offset by a decrease in perpetual sales. Similarly, total software
license revenue grew by 14% for the nine months ended December 31,
2012, compared to the same period of the previous fiscal year, as a
result of the increase in annuity/maintenance revenue stream offset
by the decrease in perpetual license sales. 
CMG's annuity/maintenance license revenue increased by 16% and 29%
during the three and nine months ended December 31, 2012,
respectively, compared to the same periods of last year. These
increases were driven by sales to new and existing clients as well as
an increase in maintenance revenue tied to perpetual sales generated
in the current and previous fiscal years. The majority of this
increase was attributed to sales to our Canadian and the United
States' markets. The increase in our annuity/maintenance revenue for
the three months ended December 31, 2012 has been obscured by the
variability of a payment received from one of our large customers for
whom revenue recognition criteria are fulfilled only at the time of
the receipt of funds. During the current quarter, we received
approximately half of the amount received during the same period of
the previous year. The amount received during the third quarter of
the previous year represented an initial payment on a multi-year
arrangement. If we were to exclude revenue received from this
particular customer from the third quarter's recorded revenue in both
the current and previous years, to provide a normalized comparison,
we would note that the annuity/maintenance revenue actually grew by
34% for the three months ended December 31, 2012, compared to the
same period of the previous fiscal year. 
This arrangement did not have a 
significant impact on our
year-to-date comparative information since similar payments have been
received during the nine months ended December 31, 2012 and 2011. 
Given our long-standing relationship with this client, and the
multi-year nature of the contract, we expect to continue to receive
payments under this arrangement; however, the amount and timing are
uncertain and will continue to be recorded on a cash basis which may
introduce some variability in our reported quarterly
annuity/maintenance revenue results. 
Our annuity/maintenance license sales, representing our recurring
revenue stream, have continued to experience consecutive quarterly
increases over the past several fiscal years, and this trend
continued in the third quarter of fiscal 2013. 
We can observe from the table below that the exchange rates between
the US and Canadian dollars during the three and nine months ended
December 31, 2012, compared to the same periods of the previous
fiscal year, had only a slight positive impact on our reported
annuity/maintenance revenue. 
Software license revenue under perpetual sales decreased by 41% for
the three months ended December 31, 2012, compared to the same period
of the previous fiscal year, due to fewer perpetual sales being
realized in the United States and Eastern Hemisphere markets in the
current quarter. 
Perpetual license sales for the nine months ended December 31, 2012,
decreased by 34% compared to the same period of the previous fiscal
year. In the first quarter of the previous fiscal year, we reported
an amount associated with a multi-million dollar perpetual contract
in the Eastern Hemisphere which contributed significantly to the
revenue growth in the first nine months of the previous fiscal year. 
Software licensing under perpetual sales is a significant part of
CMG's business, but may fluctuate significantly between periods due
to the uncertainty associated with the timing and the location where
sales are generated. For this reason, even though we expect to
achieve a certain level of aggregate perpetual sales on an annual
basis, we expect to observe fluctuations in the quarterly perpetual
revenue amounts throughout the fiscal year. It should be further
pointed out that strong perpetual sales in previous quarters
contributed to the increase in our recurring maintenance revenue in
the current quarter. 
We can observe from the table below that the exchange rates between
the US and Canadian dollars during the three months ended December
31, 2012, had a slight negative effect on our reported perpetual
license revenue whereas the inverse is true for the nine months ended
December 31, 2012. 
The following table summarizes the US dollar denominated revenue and
the weighted average exchange rate at which it was converted to
Canadian dollars: 


 
For the three months ended                                                  
 December 31,                             2012      2011 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
US dollar                                                                   
 annuity/maintenance                                                        
 license sales                   US$     8,785     8,711       74         1%
Weighted average                                                            
 conversion rate                         1.001     0.992                    
----------------------------------------------------------------------------
Canadian dollar equivalent      CDN$     8,795     8,643      152         2%
----------------------------------------------------------------------------
                                                                            
US dollar perpetual                                                         
 license sales                   US$       908     1,866     (958)      -51%
Weighted average                                                            
 conversion rate                         0.994     1.019                    
----------------------------------------------------------------------------
Canadian dollar equivalent      CDN$       903     1,902     (999)      -53%
----------------------------------------------------------------------------
                                                                            
For the nine months ended                                                   
 December 31,                             2012      2011 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
US dollar                                                                   
 annuity/maintenance                                                        
 license sales                   US$    24,361    20,160    4,201        21%
Weighted average                                                            
 conversion rate                         1.001     0.993                    
----------------------------------------------------------------------------
Canadian dollar equivalent      CDN$    24,393    20,020    4,373        22%
----------------------------------------------------------------------------
                                                                            
US dollar perpetual                                                         
 license sales                   US$     4,159     9,144   (4,985)      -55%
Weighted average                                                            
 conversion rate                         1.000     0.969                    
----------------------------------------------------------------------------
Canadian dollar equivalent      CDN$     4,160     8,857   (4,697)      -53%
----------------------------------------------------------------------------
                                                                            
                                                                            
REVENUE BY GEOGRAPHIC SEGMENT                                               
                                                                            
For the three months ended                                                  
 December 31,                             2012      2011 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
Annuity/maintenance                                                         
 revenue                                                                    
  Canada                                 5,490     4,007    1,483        37%
  United States                          2,818     2,139      679        32%
  South America                          2,435     3,481   (1,046)      -30%
  Eastern Hemisphere(1)                  3,261     2,429      832        34%
----------------------------------------------------------------------------
                                        14,004    12,056    1,948        16%
----------------------------------------------------------------------------
Perpetual revenue                                                           
  Canada                                   227       420     (193)      -46%
  United States                              -       390     (390)     -100%
  South America                             26         -       26         - 
  Eastern Hemisphere                     1,112     1,511     (399)      -26%
----------------------------------------------------------------------------
                                         1,365     2,321     (956)      -41%
----------------------------------------------------------------------------
Total software l
icense                                                      
 revenue                                                                    
  Canada                                 5,717     4,427    1,290        29%
  United States                          2,818     2,529      289        11%
  South America                          2,461     3,481   (1,020)      -29%
  Eastern Hemisphere                     4,373     3,940      433        11%
----------------------------------------------------------------------------
                                        15,369    14,377      992         7%
----------------------------------------------------------------------------
                                                                            
For the nine months ended                                                   
 December 31,                             2012      2011 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
Annuity/maintenance                                                         
 revenue                                                                    
  Canada                                15,902    11,648    4,254        37%
  United States                          7,759     6,191    1,568        25%
  South America                          6,770     5,229    1,541        29%
  Eastern Hemisphere(1)                  8,765     7,293    1,472        20%
----------------------------------------------------------------------------
                                        39,196    30,361    8,835        29%
----------------------------------------------------------------------------
Perpetual revenue                                                           
  Canada                                 1,541       452    1,089       241%
  United States                            662       992     (330)      -33%
  South America                     
       509     1,291     (782)      -61%
  Eastern Hemisphere                     3,394     6,573   (3,179)      -48%
----------------------------------------------------------------------------
                                         6,106     9,308   (3,202)      -34%
----------------------------------------------------------------------------
Total software license                                                      
 revenue                                                                    
  Canada                                17,443    12,100    5,343        44%
  United States                          8,421     7,183    1,238        17%
  South America                          7,279     6,520      759        12%
  Eastern Hemisphere                    12,159    13,866   (1,707)      -12%
----------------------------------------------------------------------------
                                        45,302    39,669    5,633        14%
----------------------------------------------------------------------------
                                                                            
(1) Includes Europe, Africa, Asia and Australia.                            

 
On a geographic basis, total software license sales increased across
all regions with the exception of the South American market which
experienced an overall decrease during the three months ended
December 31, 2012, compared to the same period of the previous fiscal
year, due to lower annuity/maintenance revenue, and the Eastern
Hemisphere, which experienced a 12% decrease in the nine months ended
December 31, 2012, compared to the same period of the previous fiscal
year, due to lower perpetual sales. The most significant growth came
from our annuity/maintenance license sales, with increases
experienced across all regions for the nine months ended December 31,
2012. 
The Canadian market (representing 39% of year-to-date total software
revenue) experienced strong increases in annuity/maintenance license
sales during the three and nine months ended December 31, 2012,
compared to the same periods of the previous fiscal year. These
increases were supported by the sales to both new and existing
clients. While perpetual sales decreased slightly in the current
quarter, compared to the same period of the previous fiscal year,
they experienced a healthy increase on a year-to-date basis. The
Canadian market continues to be the leader in generating total
software license revenue and, particularly, in generating the
recurring annuity/maintenance revenue as evidenced by the quarterly
year-over-year increases of 40%, 17%, 32% and 37% recorded during Q3
2012, Q4 2012, Q1 2013, and Q2 2013, respectively. This growth trend
has continued into the third quarter of the current fiscal year with
the recorded increase of 37%. 
The US market (representing 19% of year-to-date total software
revenue) also grew annuity/maintenance license sales during the three
and nine months ended December 31, 2012, compared to the same periods
of the previous fiscal year. Fewer perpetual license sales were made
during the three and nine months ended December 31, 2012, compared to
the same periods of the previous fiscal year. Similar to the Canadian
market, we have continued to see successive increases in the
annuity/maintenance license sales in the US as evidenced by the
quarterly year-over-year increases of 20%, 26%, 20% and 24% recorded
during Q3 2012, Q4 2012, Q1 2013, and Q2 2013, respectively. This
growth trend has continued into the third quarter of the current
fiscal year with the recorded increase of 32%. 
South America (representing 16% of year-to-date total software
revenue) experienced a decrease in annuity/maintenance revenue during
the three months ended December 31, 2012, compared to the same period
of the previous fiscal year. This decrease occurred due to the
variability of the payment recorded on the long-term contract for
which revenue is recognized on a cash basis. The third quarter of the
previous year included the initial payment for a multi-year
arrangement which was higher than the payment received in the current
quarter for the provision of services in prior quarters (see the
discussion about revenue earned in the current period that pertains
to usage of products in prior quarters above the "Quarterly Software
License Revenue" graph). If we were to adjust annuity/maintenance
revenue recorded for the three months ended December 31, 2012 and
2011 for the described amounts, we would notice that the current
quarter's revenue actually increased by 36%. Annuity/maintenance
revenue for the nine months ended December 31, 2012 increased
compared to the same period of the previous fiscal year due to sales
to both new and existing clients. The increase in annuity/maintenance
license sales was offset by a decrease in perpetual license sales
during the nine months ended December 31, 2012. 
Eastern Hemisphere (representing 27% of the year-to-date total
software revenue) grew annuity/maintenance license sales during both
the three and nine months ended December 31, 2012, compared to the
same periods of the previous fiscal year. Perpetual license sales
decreased in both the three and nine months ended December 31, 2012,
compared to the same periods of the previous fiscal year.
Year-to-date perpetual sales decreased as a result of the large
perpetual sale made during the first quarter of the previous fiscal
year which contributed significantly to revenue growth during the
nine months ended December 31, 2011. 
Movements in perpetual sales across regions are indicative of the
unpredictable nature of the timing and location of perpetual license
sales. Overall, our recurring annuity/maintenance revenue base
continues to be strong and growing across all regions. We will
continue to focus our efforts on increasing our license sales to both
existing and new clients and, supported by our product suite offering
and our customer-oriented approach, we will endeavor to continue
expanding our market 
share globally. 
As footnoted in the Quarterly Performance table, in the normal course
of business, CMG may complete the negotiation of certain
annuity/maintenance contracts and/or fulfill revenue recognition
requirements within a current quarter that includes usage of CMG's
products in prior quarters. This situation particularly affects
contracts negotiated with countries that face increased economic and
political risks leading to revenue recognition criteria being
satisfied only at the time of the receipt of cash. The dollar
magnitude of such contracts may be significant to the quarterly
comparatives of our annuity/maintenance revenue stream and, to
provide a normalized comparison, we specifically identify the revenue
component where revenue recognition is satisfied in the current
period for products provided in previous quarters. 
QUARTERLY SOFTWARE LICENSE REVENUE ($THOUSANDS) 
To view the, 'Quarterly Software License Revenue" chart, please visit
the following link:
http://media3.marketwire.com/docs/211cmg_image1.jpg  


 
DEFERRED REVENUE                                                            
                                                                            
                                          2012      2011  $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
Deferred revenue at:                                                        
March 31                                21,693    16,755     4,938       29%
June 30                                 18,779    15,326     3,453       23%
September 30                            18,241    14,600     3,641       25%
December 31                             15,510    14,746       764        5%
----------------------------------------------------------------------------

 
CMG's deferred revenue consists primarily of amounts for pre-sold
licenses. Our annuity/maintenance revenue is def
erred and recognized
on a straight-line basis over the life of the related license period,
which is generally one year or less. Amounts are deferred for
licenses that have been provided and revenue recognition reflects the
passage of time. 
The increase in deferred revenue year-over-year as at December 31,
September 30, June 30 and March 31 is reflective of the growth in
annuity/maintenance license sales. The variation within the year is
due to the timing of renewals of annuity and maintenance contracts
that are skewed to the beginning of the calendar year which explains
the decreases in the deferred revenue balance at the end of the first
quarter (June 30), second quarter (September 30), and third quarter
(December 31) compared to fiscal year-end (March 31). 
Deferred revenue at December 31, 2012 increased by 5% compared to the
same period of the prior fiscal year. This increase appears lower
than the increases recorded in a 20% range in the previous three
quarters. The increase in the current quarter is lower due to the
timing of the renewal and invoicing of two significant contracts.
Whereas in the previous fiscal year, these contracts were renewed and
included in our third quarter's deferred revenue balance, in the
current fiscal year, the renewal has been deferred to and is expected
to be captured in our fourth quarter's deferred revenue balance. 
If we were to include these renewals in the current quarter's
deferred revenue balance, to provide a normalized comparison, we
would notice that the increase at December 31, 2012 compared to the
same period of the previous fiscal year, would follow a similar trend
as in the previous three quarters of increasing by approximately 23%. 
PROFESSIONAL SERVICES REVENUE 
CMG recorded professional services revenue of $1.4 million for the
three months ended December 31, 2012, representing a decrease of
$0.09 million compared to the same period of the previous fiscal
year, resulting from a slight decrease in project activities by our
clients and the associated consulting activities in the current
quarter. Professional services for the nine months ended December 31,
2012 amounted to $4.0 million compared to $4.2 million recorded in
the same period of the previous fiscal year. The year-to-date revenue
related to consulting activities actually increased slightly;
however, this increase was not evident due to the inclusion of a $0.3
million grant in the professional services revenue during the first
quarter of the previous fiscal year, which was received from the CMG
Reservoir Simulation Foundation ("Foundation CMG") for the DRMS
project. The grant was fulfilled during that same quarter; hence, no
additional amounts related to the grant have been subsequently
recorded as professional services. 
Professional services revenue consists of specialized consulting,
training, and contract research activities. CMG performs consulting
and contract research activities on an ongoing basis, but such
activities are not considered to be a core part of our business and
are primarily undertaken to increase our knowledge base and hence
expand the technological abilities of our simulators in a funded
manner, combined with servicing our customers' needs. In addition,
these activities are undertaken to market the capabilities of our
suite of software products with the ultimate objective to increase
software license sales. Our experience is that consulting activities
are variable in nature as both the timing and dollar magnitude of
work are dependent on activities and budgets within client companies. 


 
Expenses                                                                    
                                                                            
For the three months ended                                                  
December 31,                              2012      2011  $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Sales, marketing and professional                                           
 services                                3,778     3,536       242        7%
Research and development                 3,136     2,747       389       14%
General and administrative               1,612     1,522        90        6%
----------------------------------------------------------------------------
Total operating expenses                 8,526     7,805       721        9%
----------------------------------------------------------------------------
                                                                            
Direct employee costs(i)                 6,716     6,063       653       11%
Other corporate costs                    1,810     1,742        68        4%
----------------------------------------------------------------------------
                                         8,526     7,805       721        9%
----------------------------------------------------------------------------
                                                                            
For the nine months ended                                                   
December 31,                              2012      2011  $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Sales, marketing and professional                                           
 services                               11,333     9,703     1,630       17%
Research and development                 9,061     7,635     1,426       19%
General and administrative               4,534     4,070       464       11%
----------------------------------------------------------------------------
Total operating expenses                24,928    21,408     3,520       16%
 
----------------------------------------------------------------------------
                                                                            
Direct employee costs(i)                19,802    17,028     2,774       16%
Other corporate costs                    5,126     4,380       746       17%
----------------------------------------------------------------------------
                                        24,928    21,408     3,520       16%
----------------------------------------------------------------------------
(i) Includes salaries, bonuses, stock-based compensation, benefits,         
    commissions, and professional development.                              

 
CMG's total operating expenses increased by 9% and 16% for the three
and nine months ended December 31, 2012, respectively, compared to
the same periods of the previous fiscal year, due to increases in
both direct employee and other corporate costs. 
DIRECT EMPLOYEE COSTS 
As a technology company, CMG's largest area of expenditure is for its
people. Approximately 79% of the total operating expenses in the nine
months ended December 31, 2012 related to staff costs, compared to
80% recorded in the comparative period of last year. Staffing levels
for the first nine months of the current fiscal year grew in
comparison to the same period of the previous fiscal year to support
our continued growth. At December 31, 2012, CMG's staff complement
was 166 employees, up from 148 employees as at December 31, 2011.
Direct employee costs increased during the three and nine months
ended December 31, 2012, compared to the same periods of the previous
fiscal year due to staff additions, increased levels of compensation,
commissions and related benefits. 
OTHER CORPORATE COSTS 
Other corporate costs were comparable between the three months ended
December 31, 2012 and 2011 with only a slight increase of 4%. 
Other corporate costs increased by 17% for the nine months ended
December 31, 2012, compared to the sa
me period of the previous fiscal
year, mainly due to inclusion of the costs associated with CMG's
biennial technical symposium which took place during the first
quarter of the current fiscal year. The remaining increase is
attributable to the costs associated with the expansion of our office
space, which are comprised of additional office rent, increased
computing resources and increased depreciation associated with
capital spending on the new space. 


 
RESEARCH AND DEVELOPMENT                                                    
                                                                            
For the three months ended                                                  
December 31,                             2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Research and development (gross)        3,586     3,104       482        16%
SR&ED credits                            (450)     (357)      (93)       26%
----------------------------------------------------------------------------
Research and development                3,136     2,747       389        14%
----------------------------------------------------------------------------
                                                                            
Research and development as a % of                                          
 total revenue                             19%       17%                    
----------------------------------------------------------------------------
                                                                            
For the nine months ended                                                   
December 31,                             2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Research and development (gross)       10,458     8,656     1,802        21%
SR&ED credits                          (1,397)   (1,021)     (376)       37%
----------------------------------------------------------------------------
Research and development                9,061     7,635     1,426        19%
----------------------------------------------------------------------------
                                                                            
Research and development as a % of                                          
 total revenue                             18%       17%                    
----------------------------------------------------------------------------

 
CMG maintains its belief that its strategy of growing long-term value
for shareholders can only be achieved through continued investment in
research and development. CMG works closely with its customers to
provide solutions to complex problems related to proven and new
advanced recovery processes. 
The above research and development includes CMG's share of joint
research and development costs associated with the DRMS project of
$1.0 million and $2.8 million for the three and nine months ended
December 31, 2012, respectively, (2011 - $0.9 million and $2.3
million). See discussion under "Commitments, Off Balance Sheet Items
and Transactions with Related Parties." 
The increases of 16% and 21% in our gross spending on research and
development for the three and nine months ended December 31, 2012,
respectively, demonstrate our continued commitment to advancement of
our technology which is the focal part of our business strategy.
Research and development costs, net of research and experimental
development ("SR&ED") credits, increased by 14% and 19% during the
three and nine months ended December 31, 2012, respectively, compared
to the same periods of the previous fiscal year, due to increased
employee compensation costs, investment in computing resources and
facilities costs associated with the newly leased office space. 
At the same time, we had an increase in SR&ED credits driven mainly
by the increases in our direct employee costs as well as the increase
in the eligibility of our expenses for SR&ED credits.  


 
DEPRECIATION                                                                
                                                                            
For the three months ended December 31,   2012   2011   $ change   % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Depreciation of property and equipment,                                     
 allocated to:                                                              
 Sales, marketing and professional                                          
  services                                 124    118          6          5%
 Research and development                  235    145         90         62%
 General and administrative                 52     58         (6)       -10%
----------------------------------------------------------------------------
Total depreciation                         411    321         90         28%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,    2012   2011   $ change   % change 
($ thousands)                                                               
----------------------------------------------------------------------------
------------------------------------------
----------------------------------
                                                                            
Depreciation of property and equipment,                                     
 allocated to:                                                              
 Sales, marketing and professional                                          
  services                                 341    305         36         12%
 Research and development                  641    383        258         67%
 General and administrative                140    189        (49)       -26%
----------------------------------------------------------------------------
Total depreciation                       1,122    877        245         28%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The quarterly and year-to-date increases in depreciation, compared to
the same periods of the previous fiscal year, reflect the increase in
our asset base, mainly as a result of increased spending on computing
resources and expansion of the office space in the third quarter of
the previous fiscal year, and a minor office space addition in the
second quarter of the current fiscal year.  


 
Finance Income and Costs                                                    
                                                                            
For the three months ended December 31,   2012   2011   $ change   % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Interest income                            133    123         10          8%
Net foreign exchange gain                  147      -        147          - 
----------------------------------------------------------------------------
Total finance income                       280    123        157        128%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Total finance costs (represented by net                                     
 foreign exchange loss)                      -    (32)        32       -100%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the nine months ended December 31,    2012   2011   $ change   % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Interest income                            409    341         68         20%
Net foreign exchange gain                   13    768       (755)       -98%
----------------------------------------------------------------------------
Total finance income                       422  1,109       (687)       -62%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total finance costs (represented by net                                     
 foreign exchange loss)                      -      -          -          - 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Interest income increased in the three and nine months ended December
31, 2012, compared to the same periods of the prior fiscal year,
mainly due to investing larger cash balances. 
CMG is impacted by the movement of the US dollar against the Canadian
dollar as approximately 67% (2011 - 72%) of CMG's revenue for the
nine months ended December 31, 2012 is denominated in US dollars,
whereas only approximately 22% (2011 - 23%) of CMG's total costs are
denominated in US dollars. 


 
                                                                  Nine month
                                                                    trailing
CDN$ to US$     At June 30   At September 30    At December 31       average
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2010                0.9429            0.9711            1.0054        0.9697
2011                1.0370            0.9626            0.9833        1.0132
2012                0.9813            1.0166            1.0051        0.9998
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
CMG recorded a foreign exchange gain of $0.1 million and $0.01
million for the three and nine months ended December 31, 2012,
respectively, compared to a $0.03 million foreign exchange loss and a
$0.8 million foreign exchange gain recorded in the three and nine
months ended December 31, 2011, respectively.  
The weakening of the Canadian dollar during the third quarter of the
current fiscal year, contributed positively to the valuation of our
US-denominated working capital for the three months ended December
31, 2012 compared to the same period of the previous fiscal year. On
the other hand, the fluctuation in the exchange rates between the
Canadian and the US dollars during the current fiscal year, has
contributed negatively to the valuation of our US-denominated working
capital for the nine months ended December 31, 2012 compared to the
same period of the previous fiscal year.  
Income and Other Taxes  
CMG's effective tax rate for the nine months ended December 31, 2012
is reflected as 29.26% (2011 - 28.69%), whereas the prevailing
Canadian statutory tax rate is now 25.0%. This is primarily due to a
combination of the non-tax deductibility of stock-based compensation
expense and the benefit of foreign withholding taxes being realized
only as a tax deduction as opposed to a tax credit. 
The benefit recorded in CMG's books on the SR&ED investment tax
credit program impacts deferred income taxes. The investment tax
credit earned in the current fiscal year is utilized by CMG to reduce
income taxes otherwise payable for the current fiscal year and the
federal portion of this benefit bears an inherent tax liability as
the amount of the credit is included in the subsequent year's taxable
income for both federal and provincial purposes. The inherent tax
liability on these investment tax credits is reflected in the year
the credit is earned as a non-current deferred tax liability and
then, in the following fiscal year, is transferred to income taxes
payable. 


 
Operating Profit and Net Income                                             
                                                                            
For the three months ended December 31,   2012     2011  $ change  % change 
($ thousands, except per share amounts)                                     
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Total revenue                           16,802   15,898       904         6%
Operating expenses                      (8,526)  (7,805)     (721)        9%
----------------------------------------------------------------------------
                                                                            
Operating profit                         8,276    8,093       183         2%
                                                     
                       
Operating profit as a % of total                                            
 revenue                                    49%      51%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income for the period                6,119    5,790       329         6%
                                                                            
Net income for the period as a % of                                         
 total revenue                              36%      36%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Earnings per share ($/share)              0.16     0.16         -         0%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the nine months ended December 31,    2012     2011  $ change  % change 
($ thousands, except per share amounts)                                     
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Total revenue                           49,341   43,819     5,522        13%
Operating expenses                     (24,928) (21,408)   (3,520)       16%
----------------------------------------------------------------------------
                                                                            
Operating profit                        24,413   22,411     2,002         9%
                                                                         
   
Operating profit as a % of total                                            
 revenue                                    49%      51%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income for the period               17,569   16,771       798         5%
                                                                            
Net income for the period as a % of                                         
 total revenue                              36%      38%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Earnings per share ($/share)              0.47     0.46      0.01         2%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Operating profit as a percentage of total revenue for the three and
nine months ended December 31, 2012 was at 49%, compared to 51%
recorded in the same periods of the previous fiscal year. While our
total revenue grew by 6%, our operating expenses grew by 9%, having a
slight negative impact on our operating profit. Our high levels of
operating profit as a percentage of revenue demonstrate our ability
to effectively manage our costs.  
Net income as a percentage of revenue remained consistent at 36% for
the three months ended December 31, 2012, compared to the same period
of the previous fiscal year.  
Net income for the period as a percentage of revenue decreased to 36%
for the nine months ended December 31, 2012, compared to 38% for the
same period of the previous fiscal year, mainly as a result of
recording a lower net foreign exchange gain.  
We have continued to maintain our profitability by focusing our
efforts on increasing license sales while, at the same time,
effectively controlling our operating costs. Managing these variables
will continue to be imperative to our future success. 


 
EBITDA                                                                      
                                                                            
For the three months ended December 31,   2012    2011   $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income for the period                6,119   5,790        329         6%
Add (deduct):                                                               
 Depreciation                              411     321         90        28%
 Finance income                           (280)   (123)      (157)      128%
 Finance costs                               -      32        (32)     -100%
 Income and other taxes                  2,437   2,394         43         2%
----------------------------------------------------------------------------
EBITDA                                   8,687   8,414        273         3%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
EBITDA as a % of total revenue              52%     53%                     
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the nine months ended December 31,    2012    2011   $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income for the period               17,569  16,771        798         5%
Add (deduct):                                                               
 Depreciation                            1,122     877        245        28%
 Finance income                           (422) (1,109)       687       -62%
 Finance costs                               -       -          -         - 
 Income and other taxes                  7,266   6,749        517         8%
----------------------------------------------------------------------------
EBITDA                                  25,535  23,288      2,247        10%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
EBITDA as a % of total revenue              52%     53%                     
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
EBITDA increased by 3% and 10% for the three and nine months ended
December 31, 2012, compared to the same periods of the previous
fiscal year. These increases provide further indication of our
ability to keep growing our recurring annuity/maintenance license
sales while effectively managing costs in relation to this base.  
EBITDA as a percent of total revenue held steady at 52% for the three
and nine months ended December 31, 2012, which is comparable to 53%
recorded in the same periods of the previous fiscal year.  


 
Liquidity and Capital Resources                                             
                                                                            
 
For the three months ended December 31,   2012     2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Cash, beginning of period               50,694   43,310     7,384        17%
Cash flow from (used in):                                                   
 Operating activities                    6,720    7,511      (791)      -11%
 Financing activities                   (4,777)  (2,404)   (2,373)       99%
 Investing activities                     (401)    (802)      401       -50%
----------------------------------------------------------------------------
Cash, end of period                     52,236   47,615     4,621        10%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the nine months ended December 31,    2012     2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Cash, beginning of period               55,374   41,753    13,621        33%
Cash flow from (used in):                                                   
 Operating activities                   16,918   18,673    (1,755)       -9%
 Financing activities                  (18,296) (11,745)   (6,551)       56%
 Investing activities                   (1,760)  (1,066)     (694)       65%
----------------------------------------------------------------------------
Cash, end of period                     52,236   47,615     4,621        10%
-------------------
---------------------------------------------------------
----------------------------------------------------------------------------

 
OPERATING ACTIVITIES 
Cash flow generated from operating activities decreased by $0.8
million and $1.8 million in the three and nine months ended December
31, 2012, respectively, compared to the same periods of last year,
mainly due to the timing differences of when the sales are made and
when the resulting receivables are collected, the change in the
deferred revenue balance and higher tax payments. 
FINANCING ACTIVITIES 
Cash used in financing activities during the three and nine months
ended December 31, 2012 increased by $2.4 million and $6.6 million,
respectively, compared to the same periods of last year, as a result
of paying larger dividends. The year-to-date increase was also
affected by the amount spent on buying back common shares. 
During the nine months ended December 31, 2012, CMG employees and
directors exercised options to purchase 601,000 Common Shares, which
resulted in cash proceeds of $5.1 million. 
In the nine months ended December 31, 2012, CMG paid $21.8 million in
dividends, representing the following quarterly dividends:  


 
($ per share)                                         Q1        Q2        Q3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Dividends declared and paid                         0.16      0.16      0.16
Special dividend declared and paid                  0.10         -         -
----------------------------------------------------------------------------
Total dividends declared and paid                   0.26      0.16      0.16
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
On February 11, 2013, CMG announced the payment of a quarterly
dividend of $0.16 per share on CMG's Common Shares. The dividend will
be paid on March 15, 2013 to shareholders of record at the close of
business on March 8, 2013.  
On April 6, 2011, the Company announced a Normal Course Issuer Bid
("NCIB") commencing on April 7, 2011 to purchase for cancellation up
to 1,636,000 of its Common Shares. During the year ended March 31,
2012, 33,000 Common Shares were purchased at market price for a total
cost of $438,000. 
On April 16, 2012, the Company announced a NCIB commencing on April
18, 2012 to purchase for cancellation up to 3,416,000 of its Common
Shares. During the nine months ended December 31, 2012, a total of
91,000 Common Shares were purchased at market price for a total cost
of $1,551,000. 
INVESTING ACTIVITIES 
CMG's current needs for capital asset investment relate to computer
equipment and office infrastructure costs, all of which will be
funded internally. During the nine months ended December 31, 2012,
CMG expended $1.8 million on property and equipment additions,
primarily composed of computing equipment and leasehold improvements,
and currently has a capital budget of $2.1 million for fiscal 2013.  
LIQUIDITY AND CAPITAL RESOURCES 
At December 31, 2012, CMG has $52.2 million in cash, no debt, and has
access to just over $0.8 million under a line of credit with its
principal banker. 
During the nine months ended December 31, 2012, 6,735,000 shares of
CMG's public float were traded on the TSX. As at December 31, 2012,
CMG's market capitalization based upon its December 31, 2012 closing
price of $21.32 was $806.2 million. 
Commitments, Off Balance Sheet Items and Transactions with Related
Parties  
The Company is the operator of the DRMS research and development
project (the "DRMS Project"), a collaborative effort with its
partners Shell International Exploration and Production BV ("Shell")
and Petroleo Brasileiro S.A. ("Petrobras"), to jointly develop the
newest generation of reservoir and production system simulation
software. The project has been underway since 2006 and, with the
ongoing support of the participants, it is expected to continue until
ultimate delivery of the software. The Company's share of costs
associated with the project is estimated to be $4.0 million ($2.2
million net of overhead recoveries) for the current fiscal year. CMG
plans to continue funding its share of the project costs associated
with the development of the newest generation reservoir simulation
software system from internally generated cash flows. 
CMG has very little in the way of other ongoing material contractual
obligations other than for pre-sold licenses which are reflected as
deferred revenue on its statement of financial position, and
contractual obligations for office leases which are estimated as
follows: 2013 - $0.5 million; 2014 to 2016 - $2.0 million per year;
and 2017 - $1.0 million. 
Business Risks and Critical Accounting Estimates 
These remain unchanged from the factors detailed in CMG's 2012 Annual
Report. 
Accounting Standards and Interpretations Issued But Not Yet Effective 
The following standards and interpretations have not been adopted by
the Company as they apply to future periods: 


 
Standard/Interpret    Nature of impending change in       Impact on CMG's   
ation                 accounting policy                   financial         
                                                          statements        
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IFRS 9 Financial      IFRS 9 (2009) replaces the          IFRS 9 (2010)     
Instruments           guidance in IAS 39 Financial        supersedes IFRS 9 
                      Instruments: Recognition and        (2009) and is     
In November 2009      Measurement, on the                 effective for     
the IASB issued       classification and measurement      annual periods 
   
IFRS 9 Financial      of financial assets. The            beginning on or   
Instruments (IFRS     Standard eliminates the existing    after January 1,  
9 (2009)), and in     IAS 39 categories of held to        2015, with early  
October 2010 the      maturity, available-for-sale and    adoption          
IASB published        loans and receivable.               permitted. For    
amendments to IFRS                                        annual periods    
9 (IFRS 9 (2010)).    Financial assets will be            beginning before  
In December 2011,     classified into one of two          January 1, 2015,  
the IASB issued an    categories on initial               either IFRS 9     
amendment to IFRS     recognition:                        (2009) or IFRS 9  
9 to defer the                                            (2010) may be     
mandatory             - financial assets measured at      applied.          
effective date to     amortized cost; or                                    
annual periods        - financial assets measured at      The Company       
beginning on or       fair value.                         intends to adopt  
after January 1,                                          IFRS 9 (2010) in  
2015.                 Gains and losses on                 its financial     
                      remeasurement of financial          statements for the
                      assets measured at fair value       annual period     
                      will be recognized in profit or     beginning on April
                      loss, except that for an            1, 2015. The      
                      investment in an equity             Company does not  
                      instrument which is not held-       expect IFRS 9     
                      for-trading, IFRS 9 provides, on    (2010) to have a  
                      initial recognition, an             material impact on
                      irrevocable election to present     the financial     
                      all fair value changes from the     statements. The   
                      investment in other                 classification and
                      comprehensive income (OCI). The     measurement of the
                      election is available on an         Company's         
                      individual share-by-share basis.    financial assets  
                      Amounts presented in OCI will       and liabilities is
                      not be reclassified to profit or    not expected to   
                      loss at a later date.               change under IFRS 
                                                          9 (2010) because  
                      IFRS 9 (2010) added guidance to     of the nature of  
                      IFRS 9 (2009) on the                the Company's     
                      classification and measurement      operations and the
                      of financial liabilities, and       types of financial
                      this guidance is consistent with    assets that it    
                      the guidance in IAS 39 expect as    holds.            
                      described below.                                      
                                                                            
                      Under IFRS 9 (2010), for                              
                      financial liabilities measured                        
                      at fair value under the fair                          
                      value option, changes in fair                         
                      value attributable to changes in                      
                      credit risk will be recognized                        
                      in OCI, with the remainder of                         
                      the change recognized in profit                       
                      or loss. However, if this                             
                      requirement c
reates or enlarges                       
                      an accounting mismatch in profit                      
                      or loss, the entire change in                         
                      fair value will be recognized in                      
                      profit or loss. Amounts                               
                      presented in OCI will not be                          
                      reclassified to profit or loss                        
                      at a later date.                                      
                                                                            
                      IFRS 9 (2010) also requires                           
                      derivative liabilities that are                       
                      linked to and must be settled by                      
                      delivery of an unquoted equity                        
                      instrument to be measured at                          
                      fair value, whereas such                              
                      derivative liabilities are                            
                      measured at cost under IAS 39.                        
                                                                            
                      IFRS 9 (2010) also added the                          
                      requirements of IAS 39 for the                        
                      derecognition of financial                            
                      assets and liabilities to IFRS 9                      
                      without change.                                       
                                                                            
                      The IASB has deferred the                             
                      mandatory effective date of the                       
                      existing chapters of IFRS 9                           
                      Financial Instruments (2009) and                      
                      IFRS 9 (2010) to annual periods                       
                      beginning on or after January 1,                      
                      2015. The early adoption of                           
                      either standard continues to be                       
                      permitted.                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IFRS 10               IFRS 10 replaces the guidance in    The Company       
Consolidated          IAS 27 Consolidated and Separate    intends to adopt  
Financial             Financial Statements and SIC-12     IFRS 10 in its    
Statements            Consolidation - Special Purpose     financial         
                      Entities.  IAS 27 (2008)            statements for the
In May 2011, the      survives as IAS 27 (2011)           annual period     
IASB issued IFRS      Separate Financial Statements,      beginning on April
10 Consolidated       only to carry forward the           1, 2013.  The     
Financial             existing accounting requirements    Company does not  
Statements, which     for separate financial              expect IFRS 10 to 
is effective for      statements.                         have a material   
annual periods                                            impact on the     
beginning on or       IFRS 10 provides a single model     financial         
after January 1,      to be applied in the control        statements.       
2013, with early      analysis for all investees,                           
adoption              including entities that                               
permitted.  If an     currently are SPEs in the scope                       
entity applies        of SIC-12.  In addition, the                         
 
this Standard         consolidation procedures are                          
earlier, it shall     carried forward substantially                         
also apply IFRS       unmodified from IAS 27 (2008).                        
11, IFRS 12, IAS                                                            
27 (2011) and IAS                                                           
28 (2011) at the                                                            
same time.                                                                  
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IFRS 11 Joint         IFRS 11 replaces the guidance in    The Company       
Arrangements          IAS 31 Interests in Joint           intends to adopt  
                      Ventures.                           IFRS 11 in its    
In May 2011, the                                          financial         
IASB issued IFRS      Under IFRS 11, joint                statements for the
11 Joint              arrangements are classified as      annual period     
Arrangements,         either joint operations or joint    beginning on April
which is effective    ventures.  IFRS 11 essentially      1, 2013.  The     
for annual periods    carves out of previous jointly      Company does not  
beginning on or       controlled entities, those          expect IFRS 11 to 
after January 1,      arrangements which although         have a material   
2013, with early      structured through a separate       impact on the     
adoption              vehicle, such separation is         financial         
permitted. If an      ineffective and the parties to      statements.       
entity applies        the arrangement have rights to                        
this Standard         the assets and obligations for                        
earlier, it shall     the liabilities and are                               
also apply IFRS       accounted for as joint                                
10, IFRS 12, IAS      operations in a fashion                               
27 (2011) and IAS     consistent with jointly                               
28 (2011) at the      controlled assets/operations                          
same time.            under IAS 31. In addition, under                      
                      IFRS 11 joint ventures are                            
                      stripped of the free choice of                        
                      equity accounting or                                  
                      proportionate consolidation;                          
                      these entities must now use the                       
                      equity method.                                        
                                                                            
                      Upon application of IFRS 11,                          
                      entities which had previously                         
                      accounted for joint ventures                          
                      using proportionate                                   
                      consolidation shall collapse the                      
                      proportionately consolidated net                      
                      asset value (including any                            
                      allocation of goodwill) into a                        
                      single investment balance at the                      
                      beginning of the earliest period                      
                      presented.  The investment's                          
                      opening balance is tested for                         
                      impairment in accordance with                         
                      IAS 28 (2011) and IAS 36                              
                      Impairment of A
ssets.  Any                            
                      impairment losses are recognized                      
                      as an adjustment to opening                           
                      retained earnings at the                              
                      beginning of the earliest period                      
                      presented.                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IFRS 12 Disclosure    IFRS 12 contains the disclosure     The Company       
of Interests in       requirements for entities that      intends to adopt  
Other Entities        have interests in subsidiaries,     IFRS 12 in its    
                      joint arrangements (i.e. joint      financial         
In May 2011, the      operations or joint ventures),      statements for the
IASB issued IFRS      associates and/or unconsolidated    annual period     
12 Disclosure of      structured entities. Interests      beginning on April
Interests in Other    are widely defined as               1, 2013.  The     
Entities, which is    contractual and non-contractual     Company does not  
effective for         involvement that exposes an         expect the        
annual periods        entity to variability of returns    amendments to have
beginning on or       from the performance of the         a material impact 
after January 1,      other entity.  The required         on the financial  
2013, with early      disclosures aim to provide          statements,       
adoption              information in order to enable      because of the    
permitted. If an      users to evaluate the nature of,    nature of the     
entity applies        and the risks associated with,      Company's         
this Standard         an entity's interest in other       interests in other
earlier, it needs     entities, and the effects of        entities.         
not to apply IFRS     those interests on the entity's                       
10, IFRS 11, IAS      financial position, financial                         
27 (2011) and IAS     performance and cash flows.                           
28 (2011) at the                                                            
same time.                                                                  
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IFRS 13 Fair Value    IFRS 13 replaces the fair value     The Company       
Measurement           measurement guidance contained      intends to adopt  
                      in individual IFRSs with a          IFRS 13           
In May 2011, the      single source of fair value         prospectively in  
IASB published        measurement guidance. It defines    its financial     
IFRS 13 Fair Value    fair value as the price that        statements for the
Measurement, which    would be received to sell an        annual period     
is effective          asset or paid to transfer a         beginning on April
prospectively for     liability in an orderly             1, 2013.  The     
annual periods        transaction between market          extent of the     
beginning on or       participants at the measurement     impact of adoption
after January 1,      date, i.e. an exit price. The       of IFRS 13 has not
2013.  The            standard also establishes a         yet been          
disclosure            framework for measuring fair        determined.       
requirements of       value and sets out disclosure                         
IFRS 13 need not      requirements for fair value                           
be applied in         measurements to provide                               
comparative           information that enables                              
information for       financial statement users to                          
 
periods before        assess the methods and inputs                         
initial               used to develop fair value                            
application.          measurements and, for recurring                       
                      fair value measurements that use                      
                      significant unobservable inputs                       
                      (Level 3), the effect of the                          
                      measurements on profit or loss                        
                      or other comprehensive income.                        
                                                                            
                      IFRS 13 explains 'how' to                             
                      measure fair value when it is                         
                      required or permitted by other                        
                      IFRSs. IFRS 13 does not                               
                      introduce new requirements to                         
                      measure assets or liabilities at                      
                      fair value, nor does it                               
                      eliminate the practicability                          
                      exceptions to fair value                              
                      measurements that currently                           
                      exist in certain standards.                           
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Amendments to IAS     The amendments require that an      The Company       
1 Presentation of     entity present separately the       intends to adopt  
Financial             items of OCI that may be            the amendments in 
Statements         
   reclassified to profit or loss      its financial     
                      in the future from those that       statements for the
In June 2011, the     would never be reclassified to      annual period     
IASB published        profit or loss. Consequently an     beginning on April
amendments to IAS     entity that presents items of       1, 2013. As the   
1 Presentation of     OCI before related tax effects      amendments only   
Financial             will also have to allocate the      require changes in
Statements:           aggregated tax amount between       the presentation  
Presentation of       these categories.                   of items in other 
Items of Other                                            comprehensive     
Comprehensive         The existing option to present      income, the       
Income, which are     the profit or loss and other        Company does not  
effective for         comprehensive income in two         expect the        
annual periods        statements has remained             amendments to IAS 
beginning on or       unchanged.                          1 to have a       
after July 1, 2012                                        material impact on
and are to be                                             the financial     
applied                                                   statements.       
retrospectively.                                                            
Early adoption is                                                           
permitted.                                                                  
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Amendments to IAS     The amendments to IAS 32 clarify    The Company       
32 and IFRS 7,        that an entity currently has a      intends to adopt  
Offsetting            legally enforceable right to        the amendments to 
Financial Assets      set-off if that right is:           IFRS 7 in its     
and Liabilities                                           financial         
                      - not contingent on a future        statements for the
In December 2011,     event; and                          annual period     
the IASB published    - enforceable both in the normal    beginning on April
Offsetting            course of business and in the       1, 2013, and the  
Financial Assets      event of default, insolvency or     amendments to IAS 
and Financial         bankruptcy of the entity and all    32 in its         
Liabilities and       counterparties.                     financial         
issued new                                                statements for the
disclosure            The amendments to IAS 32 also       annual period     
requirements in       clarify when a settlement           beginning April 1,
IFRS 7 Financial      mechanism provides for net          2014. The Company 
Instruments:          settlement or gross settlement      does not expect   
Disclosures.          that is equivalent to net           the amendments to 
                      settlement.                         have a material   
The effective date                                        impact on the     
for the amendments    The amendments to IFRS 7 contain    financial         
to IAS 32 is          new disclosure requirements for     statements.       
annual periods        financial assets and liabilities                      
beginning on or       that are:                                             
after January 1,                                                            
2014. The             - offset in the statement of                          
effective date for    financial position; or                                
the amendments to     - subject to master netting                           
IFRS 7 is annual      arrangements or similar                               
periods beginning     arrangements.                                         
on or after                                                                 
January 1, 2013.                                                            
These amendments                                                            
are to be applied                                                           
retrospectively.                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Annual                The new cycle of improvements       The Company       
Improvements to       contains amendments to the          intends to adopt  
IFRSs 2009-2011       following four standards            the amendments to 
Cycle - various       (excluding IFRS 1) with             the standards in  
standards             consequential amendments to         its financial     
                      other standards and                 statements for the
In May 2012, the      interpretations.                    annual period     
IASB published                                            beginning on April
Annual                - IAS 1 Presentation of             1, 2013.  The     
Improvements to       Financial Statements                extent of the     
IFRSs - 2009-2011     -- Comparative information          impact of adoption
Cycle as part of      beyond minimum requirements         of the amendments 
its annual            -- Presentation of the opening      has not yet been  
improvements          statement of financial position     determined.       
process to make                                                             
non-urgent but        - IAS 16 Property, Plant and                          
necessary             Equipment                                             
amendments to         -- Classification of servicing                        
IFRS.                 equipment                                             
 
                                                                           
These amendments      - IAS 32 Financial Instruments:                       
are effective for     Presentation                                          
annual periods        -- Income tax consequences of                         
beginning on or       distributions                                         
after Jan 1, 2013                                                           
with retrospective    - IAS 34 Interim Financial                            
application.          Reporting                                             
                      --Segment assets and liabilities                      
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Outstanding Share Data  
The following table represents the number of Common Shares and
options outstanding:  


 
As at February 11, 2013                                                     
(thousands)                                                                 
----------------------------------------------------------------------------
Common Shares                                                         37,873
Options                                                                3,201
----------------------------------------------------------------------------

 
On July 13, 2005, CMG adopted a rolling stock option plan which
allows the Company to grant options to its employees and directors to
acquire Common Shares of up to 10% of the outstanding Common Shares
at the date of grant. Based upon this calculation, at February 11,
2013, CMG could grant up to 3,787,000 stock options. 
Disclosure Controls and Procedures and Internal Control over
Financial Reporting 
Management is responsible for establishing and maintaining disclosure
controls and procedures ("DC&P") and internal control over financial
reporting ("ICFR") as defined 
under National Instrument 52-109. These
controls and procedures were reviewed and the effectiveness of their
design and operation was evaluated in fiscal 2012 in accordance with
the COSO control framework. The evaluation confirmed the
effectiveness of DC&P and ICFR at March 31, 2012. During our fiscal
year 2013, we continue to monitor and review our controls and
procedures.  
During the nine months ended December 31, 2012, there have been no
significant changes to the Company's ICFR that have materially
affected, or are reasonably likely to materially affect, the
company's ICFR.  
Outlook 
Our third quarter of fiscal 2013 has continued to show growth in our
annuity/maintenance revenue stream with increases experienced across
all geographic regions. Over 80% of our software license revenue is
derived from our annuity and maintenance contracts, and with a strong
renewal rate, we expect to see continued growth in this revenue base.
During the third quarter, our EBITDA represented 52% of our total
revenue which demonstrates our ability to effectively manage our
corporate costs.  
CMG continues to focus its resources on the development, enhancement
and deployment of simulation software tools relevant to the
challenges and opportunities facing its diverse customer base. While
oil prices continue to fluctuate, they remain at levels that should
allow our customers to move forward on projects involving various
types of unconventional reserves and advanced recovery processes. The
greater challenges have been with natural gas prices, which have not
fared as well, and petroleum producers are faced with uncertainty
related to the fears of another worldwide economic recession,
political unrest in several petroleum producing countries and
environmental issues that have threatened to increase the costs of
development and production.  
CMG's joint project to develop the newest generation of dynamic
reservoir modelling systems ("DRMS Project") continued to make
progress in the third quarter of fiscal 2013. The most recent beta
version of the software was recently released. During the first
quarter we reported that Rob Eastick had been promoted to the
position of Vice President, DRMS and Visualization, taking on the
role of Project Manager for the DRMS Project. Rob and the entire DRMS
team continue to make progress toward the anticipated limited
commercial release of the software by the end of calendar 2013. CMG
and its partners remain committed to funding the ongoing development
and to the future success of the project. 
We will continue to extend our reach globally and focus our efforts
on increasing our license sales to both existing and new clients. Our
newest effort towards this expansion includes opening a branch office
in Colombia which will help us to grow our presence in the South
American market.  
The excellent reputation behind our Company and its product suite
offering will continue to enable us to grow and sustain a healthy
market share while generating solid software license revenue. With
our strong working capital position, we are well positioned to
continue to invest in all aspects of our business in order to
continue to grow and diversify our revenue base and to ultimately
return value to our shareholders in the form of regular quarterly
dividend payments and growth in share value.  
Finally, I regret to report that John Kalman, our Vice President,
Finance and CFO, has informed the Company of his intention to retire
effective August 31, 2013. The Company is currently reviewing its
options regarding John's replacement and it is expected that his
responsibilities will be gradually transitioned once a successor is
in place. 
Kenneth M. Dedeluk, President and Chief Executive Officer  
February 11, 2013 


 
COMPUTER MODELLING GROUP LTD.                                               
                                                                            
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                     
                                                                            
UNAUDITED (thousands of Canadian $)        December 31, 2012  March 31, 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Assets                                                                      
Current assets:                                                             
 Cash                                                 52,236          55,374
 Trade and other receivables                          10,636          15,494
 Prepaid expenses                                      1,007           1,195
 Prepaid income taxes                                    510               -
----------------------------------------------------------------------------
                                                      64,389          72,063
Property and equipment                                 3,467           2,829
----------------------------------------------------------------------------
Total assets                                          67,856          74,892
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Liabilities and Shareholders' Equity                                        
Current liabilities:                                                        
 Trade payables and accrued liabilities                4,809           5,358
 Income taxes payable                                      -           1,404
 Deferred revenue                                     15,510          21,693
----------------------------------------------------------------------------
                                                      20,319          28,455
Deferred tax liability (note 7)  
                        297             358
----------------------------------------------------------------------------
Total liabilities                                     20,616          28,813
----------------------------------------------------------------------------
                                                                            
Shareholders' equity:                                                       
 Share capital                                        37,705          31,751
 Contributed surplus                                   4,450           3,535
 Retained earnings                                     5,085          10,793
----------------------------------------------------------------------------
Total shareholders' equity                            47,240          46,079
----------------------------------------------------------------------------
Total liabilities and shareholders' equity            67,856          74,892
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.      
                                                                            
COMPUTER MODELLING GROUP LTD.                                               
                                                                            
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME    
                                                                            
                                     Three months ended    Nine months ended
                                            December 31          December 31
UNAUDITED (thousands of Canadian $                                          
 except per share amounts)                2012     2011       2012      2011
----------------------------------------------------------------------------
-----------------------------------------------------
-----------------------
                                                                            
Revenue (note 4)                        16,802   15,898     49,341    43,819
----------------------------------------------------------------------------
                                                                            
Operating expenses                                                          
 Sales, marketing and professional                                          
  services                               3,778    3,536     11,333     9,703
 Research and development (note 5)       3,136    2,747      9,061     7,635
 General and administrative              1,612    1,522      4,534     4,070
----------------------------------------------------------------------------
                                         8,526    7,805     24,928    21,408
----------------------------------------------------------------------------
Operating profit                         8,276    8,093     24,413    22,411
                                                                            
Finance income (note 6)                    280      123        422     1,109
Finance costs (note 6)                       -      (32)         -         -
----------------------------------------------------------------------------
Profit before income and other taxes     8,556    8,184     24,835    23,520
Income and other taxes (note 7)          2,437    2,394      7,266     6,749
----------------------------------------------------------------------------
                                                                            
Net and total comprehensive income       6,119    5,790     17,569    16,771
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Earnings Per Share                                                       
   
Basic (note 8(e))                         0.16     0.16       0.47      0.46
Diluted (note 8(e))                       0.16     0.15       0.45      0.44
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.      
                                                                            
COMPUTER MODELLING GROUP LTD.                                               
                                                                            
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                      
                                                                            
                                  Common                                    
UNAUDITED (thousands of            Share  Contributed   Retained      Total 
 Canadian $)                     Capital      Surplus   Earnings     Equity 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2011            24,801        2,655      8,314     35,770 
Total comprehensive income for                                              
 the period                            -            -     16,771     16,771 
Dividends paid                         -            -    (15,651)   (15,651)
Shares issued for cash on                                                   
 exercise of stock options                                                  
 (note 8(b))                       4,344            -          -      4,344 
Common shares buy-back (notes                                               
 8(b) & (c))                         (25)           -       (413)      (438)
Stock-based compensation:                                                   
 Current period expense                -        1,433          -      1,433 
 Stock options exercised             812         (812)         -          - 
----------------------------------------------------------------------------
Balance, December 31, 2011        29,932        3,276      9,021     42,229 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2012            31,751        3,535     10,793     46,079 
Total comprehensive income for                                              
 the period                            -            -     17,569     17,569 
Dividends paid                         -            -    (21,806)   (21,806)
Shares issued for cash on                                                   
 exercise of stock options                                                  
 (note 8(b))                       5,061            -          -      5,061 
Common shares buy-back (notes                                               
 8(b) & (c))                         (80)                 (1,471)    (1,551)
Stock-based compensation:                                                   
 Current period expense                -        1,888          -      1,888 
 Stock options exercised             973         (973)         -          - 
----------------------------------------------------------------------------
Balance, December 31, 2012        37,705        4,450      5,085     47,240 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.      
                                                                            
COMPUTER MODELLING GROUP LTD.                                               
                                   
                                         
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                             
                                                                            
                                     Three months ended   Nine months ended 
                                            December 31         December 31 
UNAUDITED (thousands of Canadian $)      2012      2011      2012      2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Cash flows from operating activities                                        
 Net income                             6,119     5,790    17,569    16,771 
Adjustments for:                                                            
 Depreciation                             411       321     1,122       877 
 Income and other taxes (note 7)        2,437     2,394     7,266     6,749 
 Stock-based compensation (note                                             
  8(d))                                   656       566     1,888     1,433 
 Interest income (note 6)                (133)     (123)     (409)     (341)
----------------------------------------------------------------------------
                                        9,490     8,948    27,436    25,489 
Changes in non-cash working capital:                                        
 Trade and other receivables            1,775    (1,151)    4,855     1,594 
 Trade payables and accrued                                                 
  liabilities                             660     1,306      (549)      (17)
 Prepaid expenses                         179       102       188      (174)
 Deferred revenue                      (2,731)      146    (6,183)   (2,009)
----------------------------------------------------------------------------
Cash generated from operating                          
                     
 activities                             9,373     9,351    25,747    24,883 
 Interest received                        132       120       412       332 
 Income taxes paid                     (2,785)   (1,960)   (9,241)   (6,542)
----------------------------------------------------------------------------
Net cash from operating activities      6,720     7,511    16,918    18,673 
----------------------------------------------------------------------------
                                                                            
Cash flows from financing activities                                        
Proceeds from issue of common shares    1,273     1,675     5,061     4,344 
Dividends paid                         (6,050)   (4,079)  (21,806)  (15,651)
Common shares buy-back (note 8(c))          -         -    (1,551)     (438)
----------------------------------------------------------------------------
Net cash used in financing                                                  
 activities                            (4,777)   (2,404)  (18,296)  (11,745)
----------------------------------------------------------------------------
                                                                            
Cash flows used in investing                                                
 activities                                                                 
Property and equipment additions         (401)     (802)   (1,760)   (1,066)
----------------------------------------------------------------------------
Increase (decrease) in cash             1,542     4,305    (3,138)    5,862 
Cash, beginning of period              50,694    43,310    55,374    41,753 
----------------------------------------------------------------------------
Cash, end of period                    52,236    47,615    52,236    47,615 
----------------------------------------------------------------------------
---------------------------------------------------------------------------
-
See accompanying notes to condensed consolidated financial statements.      

 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
For the three and nine months ended December 31, 2012 and 2011
(unaudited). 
1. Reporting Entity: 
Computer Modelling Group Ltd. ("CMG") is a company domiciled in
Alberta, Canada and is incorporated pursuant to the Alberta Business
Corporations Act, with its Common Shares listed on the Toronto Stock
Exchange under the symbol "CMG". The address of CMG's registered
office is Suite 200, 1824 Crowchild Trail N.W., Calgary, Alberta,
Canada, T2M 3Y7. The condensed consolidated financial statements as
at and for the three and nine months ended December 31, 2012 comprise
CMG and its subsidiaries (together referred to as the "Company"). The
Company is a computer software technology company engaged in the
development and licensing of reservoir simulation software. The
Company also provides professional services consisting of highly
specialized support, consulting, training, and contract research
activities.  
2. Basis of Preparation: 
(a) STATEMENT OF COMPLIANCE: 
These condensed consolidated financial statements have been prepared
on a going concern basis in accordance with International Accounting
Standard ("IAS") 34, Interim Financial Reporting, as issued by the
International Accounting Standards Board ("IASB"), and using the
accounting policies disclosed in note 3 of the Company's annual
consolidated financial statements as at and for the year ended March
31, 2012. Accordingly, the condensed consolidated financial
statements do not include all of the information required for full
annual financial statements, and should be read in conjunction with
the Company's most recent annual consolidated financial statements as
at and for the year ended March 31, 2012, prepared in accordance with
International Financial Reporting Standards ("IFRS"). 
The unaudited condensed consolidated financial statements as at and
for the three and nine months ended December 31, 2012 were authorized
for issuance by the Board of Directors on February 11, 2013. 
(b) BASIS OF MEASUREMENT: 
The condensed consolidated financial statements have been prepared on
the historical cost basis, which is based on the fair value of the
consideration at the time of the transaction. 
(c) FUNCTIONAL AND PRESENTATION CURRENCY: 
The condensed consolidated financial statements are presented in
Canadian dollars, which is the functional currency of CMG and its
subsidiaries. All financial information presented in Canadian dollars
has been rounded to the nearest thousand.  
(d) USE OF ESTIMATES, JUDGMENTS AND ASSUMPTIONS: 
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions that
affect the application of accounting policies, the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue, costs and expenses for the period. Estimates and
underlying assumptions are based on historical experience and other
assumptions that are considered reasonable in the circumstances and
are reviewed on an on-going basis. Actual results may differ from
such estimates and it is possible that the differences could be
material. Revisions to accounting estimates are recognized in the
period in which the estimates are revised and in any future periods
affected. In preparing these condensed consolidated financial
statements, the significant judgments made by management in applying
the Company's accounting policies and the key sources of estimation
uncertainty are the same as those applied in the annual IFRS
consolidated financial statements for the year ended March 31, 2012.  
3. Significant Accounting Policies: 
The condensed consolidated financial statements should be read in
conjunction with the Company's annual financial statements for the
year ended March 31, 2012 prepared in accordance wit
h IFRS applicable
to those annual consolidated financial statements. The same
accounting policies, presentation and methods of computation have
been followed in these condensed consolidated financial statements as
were applied in the Company's first annual IFRS consolidated
financial statements for the year ended March 31, 2012. 
4. Revenue: 


 
For the three months ended December 31,                  2012           2011
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Software licenses                                      15,369         14,377
Professional services                                   1,433          1,521
----------------------------------------------------------------------------
                                                       16,802         15,898
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
For the nine months ended December 31,                   2012           2011
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Software licenses                                      45,302         39,669
Professional services                                   4,039          4,150
----------------------------------------------------------------------------
                                                       49,341         43,819
----------------------------------------------------------------------------
--------------------------------------------------
--------------------------

 
5. Research and Development Costs: 


 
For the three months ended December 31,                 2012           2011 
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Research and development                               3,586          3,104 
Scientific research and experimental                                        
 development ("SR&ED") investment tax credits           (450)          (357)
----------------------------------------------------------------------------
                                                       3,136          2,747 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
For the nine months ended December 31,                  2012           2011 
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Research and development                              10,458          8,656 
Scientific research and experimental                                        
 development ("SR&ED") investment tax credits         (1,397)        (1,021)
----------------------------------------------------------------------------
                                                       9,061          7,635 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
6. Finance Income and Finance Costs: 


 
For the three months ended December 31,                  2012          2011 
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest income                                           133           123 
Net foreign exchange gain                                 147             - 
----------------------------------------------------------------------------
Finance income                                            280           123 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net foreign exchange loss                                   -           (32)
----------------------------------------------------------------------------
Finance costs                                               -           (32)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
For the nine months ended December 31,                   2012          2011 
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest income                                           409           341 
Net foreign exchange gain                                  13           768 
----------------------------------------------------------------------------
Finance income                                            422         1,109 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net foreign exchange loss                                   -             - 
----------------------------------------------------------------------------
Finance costs                                               -             - 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
7. Income and Other Taxes: 
The major components of income tax expense are as follows: 


 
For the nine months ended December 31,                  2012           2011 
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current year income taxes                              6,655          6,580 
Adjustment for prior year                                 67              - 
----------------------------------------------------------------------------
Current income taxes                                   6,722          6,580 
                                                                            
Deferred tax recovery                                    (61)           (97)
Foreign withholding and other taxes                      605            266 
----------------------------------------------------------------------------
                                                       7,266          6,749 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The provision for income and other taxes reported differs from the
amount computed by applying the combined Canadian Federal and
Provincial statutory rate to the profit before income and other
taxes. 
The reasons for this difference and the related tax effects are as
follows: 


 
For the nine months ended December 31,                  2012           2011 
(thousands of $, unless otherwise stated)                                   
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Combined statutory tax rate                            25.00%         26.13%
----------------------------------------------------------------------------
Expected income tax                                    6,209          6,147 
Non-deductible costs                                     494            396 
Withholding taxes                                        454            188 
Adjustment for prior year                                 67              - 
Other                                                     42             18 
----------------------------------------------------------------------------
                                                       7,266          6,749 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The components of the Company's deferred tax liability are as
follows: 


 
(thousands of $)                           December 31, 2012 March 31, 2012 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tax liability on SR&ED investment tax                                       
 credits                                                (263)          (267)
Tax liability on property and equipment                  (34)           (91)
----------------------------------------------------------------------------
Deferred tax liability                                  (297)          (358)
--------------------------------------------------------------------------
--
----------------------------------------------------------------------------

 
All movement in deferred tax assets and liabilities is recognized
through comprehensive income of the respective period. 
8. Share Capital: 
(a) AUTHORIZED: 
An unlimited number of Common Shares, an unlimited number of
Non-Voting Shares, and an unlimited number of Preferred Shares,
issuable in series. 
(b) ISSUED: 


 
(thousands of shares)                                         Common Shares 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, April 1, 2011                                               36,427 
Issued for cash on exercise of stock options                            698 
Common shares buy-back                                                  (33)
----------------------------------------------------------------------------
Balance, December 31, 2011                                           37,092 
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2012                                               37,307 
Issued for cash on exercise of stock options                            601 
Common shares buy-back                                                  (91)
----------------------------------------------------------------------------
Balance, December 31, 2012                                           37,817 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Subsequent to December 31, 2012, 56,000 stock options were exercised
for cash proceeds of $487,000.  
On May 23, 2012, the Board of Directors considered the merits of
renewing the Company's shareholder rights plan on or before the
third-year anniversary of shareholder approval of th
e plan and
determined that it was in the best interest of the Company to
continue to have a shareholder rights plan in place. Upon careful
review, the Board of Directors agreed to approve an amended and
restated rights plan (the "Amended and Restated Rights Plan") between
the Company and Valiant Trust Company, which is similar in all
respects to the existing shareholder rights plan, with the exception
of certain minor amendments. The Amended and Restated Rights Plan was
approved by the Company's shareholders on July 12, 2012.  
(c) COMMON SHARES BUY-BACK: 
On April 6, 2011, the Company announced a Normal Course Issuer Bid
("NCIB") commencing on April 7, 2011 to purchase for cancellation up
to 1,636,000 of its Common Shares. This NCIB ended on April 6, 2012
and a total of 33,000 Common Shares were purchased at market price
for a total cost of $438,000 during the year ended March 31, 2012. 
On April 16, 2012, the Company announced a NCIB commencing on April
18, 2012 to purchase for cancellation up to 3,416,000 of its Common
Shares. During the nine months ended December 31, 2012, a total of
91,000 Common Shares were purchased at market price for a total cost
of $1,551,000. 
(d) STOCK-BASED COMPENSATION PLAN: 
The Company adopted a rolling stock option plan as of July 13, 2005,
which was reaffirmed by the Company's shareholders on July 7, 2011,
which allows it to grant options to acquire Common Shares of up to
10% of the outstanding Common Shares at the date of grant. Based upon
this calculation, at December 31, 2012, the Company could grant up to
3,781,000 stock options. Pursuant to the stock option plan, the
maximum term of an option granted cannot exceed five years from the
date of grant. The outstanding stock options vest as to 50% after the
first year anniversary, from date of grant, and then vest as to 25%
of the total options granted after each of the second and third year
anniversary dates.  
The following table outlines changes in stock options:  


 
                              For the nine months ended   For the year ended
(thousands except per share                                                 
 amounts)                             December 31, 2012       March 31, 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                               Weighted             Weighted
                                                Average              Average
                                               Exercise             Exercise
                                    Options       Price  Options       Price
                                    Granted   ($/share)   Granted  ($/share)
----------------------------------------------------------------------------
Outstanding at beginning of                                                 
 period                               2,903        9.85     2,825       7.41
Granted                               1,004       18.18     1,071      13.43
Exercised                              (601)       8.42      (913)      6.43
Forfeited/cancelled                     (49)      15.00       (80)     10.57
----------------------------------------------------------------------------
Outstanding at end of period          3,257       12.60     2,903       9.85
----------------------------------------------------------------------------
Options exercisable at end of                                               
 period                               1,516        9.30     1,120       7.31
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The range of exercise prices of stock options outstanding and
exercisable at December 31, 2012 is as follows: 


 
                                          Outstanding            Exercisable
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                  Weighted   Weighted               Weighted
                                   Average    Average                Average
                    Number of    Remaining   Exercise   Number of   Exercise
Exercise Price        Options  Contractual      Price     Options      Price
 ($/option)       (thousands) Life (years) ($/option) (thousands) ($/option)
----------------------------------------------------------------------------
4.52 - 5.63               248          0.6       5.37         248       5.37
5.64 - 7.80               404          1.6       7.80         404       7.80
7.81 - 9.07               706          2.6       9.07         455       9.07
9.08 - 13.43              894          3.6      13.40         400      13.40
13.44 - 20.00           1,005          4.6      18.09           9      13.89
----------------------------------------------------------------------------
                        3,257          3.2      12.60       1,516       9.30
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The fair value of stock options granted was estimated using the
Black-Scholes option pricing model under the following assumptions: 


 
                                     For the nine months                    
                                      ended December 31,  For the year ended
                                                    2012      March 31, 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fair value at grant date ($/option)         2.45 to 3.81        1.23 to 3.42
Share price at grant date ($/share)       17.90 to 20.00      13.00 to 16.35
Risk-free interest rate (%)                 1.13 to 1.26        0.99 to 2.06
Estimated h
old period prior to                                              
 exercise (years)                                 2 to 4              2 to 4
Volatility in the price of common                                           
 shares (%)                                     27 to 36            24 to 37
Dividend yield per common share (%)         3.57 to 4.12        3.20 to 4.94
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The Company recognized total stock-based compensation expense for the
three and nine months ended December 31, 2012 of $656,000 and
$1,888,000 respectively (three and nine months ended December 31,
2011 - $566,000 and $1,433,000 respectively). 
(e) EARNINGS PER SHARE: 
The following table summarizes the earnings and weighted average
number of Common Shares used in calculating basic and diluted
earnings per share: 


 
For the three months                                                        
ended December 31,                                                          
(thousands except per                                                       
share amounts)                           2012                           2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                           Weighted                       Weighted          
                            Average Earnings               Average  Earnings
               Earnings      Shares Per Share Earnings      Shares Per Share
                    ($) Outstanding ($/share)      ($) Outstanding ($/share)
----------------------------------------------------------------------------
Basic             6,119      37,754      0.16    5,790      36,976      0.16
Dilutive                                                                    
 effect of                                              
                    
 stock options                1,103                            990          
----------------------------------------------------------------------------
Diluted           6,119      38,857      0.16    5,790      37,966      0.15
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
For the nine months                                                         
ended December 31,                                                          
(thousands except per                                                       
share amounts)                           2012                           2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                           Weighted                       Weighted          
                            Average Earnings               Average  Earnings
               Earnings      Shares Per Share Earnings      Shares Per Share
                    ($) Outstanding ($/share)      ($) Outstanding ($/share)
----------------------------------------------------------------------------
Basic            17,569      37,538      0.47   16,771      36,757      0.46
Dilutive                                                                    
 effect of                                                                  
 stock options                1,127                          1,056          
----------------------------------------------------------------------------
Diluted          17,569      38,665      0.45   16,771      37,813      0.44
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
During the three and nine months ended December 31, 2012, 31,000 and
118,000 options respectively (three and nine months ended December
31, 2011 - 88,000, and 155,000 respectively) were excluded from the
computation of the weighted-average number of diluted shares
outstanding because their effect was not dilutive. 
9. Commitments: 
(a) RESEARCH COMMITMENTS: 
The Company is the operator of the DRMS research and development
project (the "DRMS project"), a collaborative effort with its
partners Shell International Exploration and Production BV ("Shell")
and Petroleo Brasileiro S.A. ("Petrobras"), to jointly develop the
newest generation of reservoir and production system simulation
software. The project has been underway since 2006 and, with the
ongoing support of the participants, it is expected to continue until
ultimate delivery of the software. The Company's share of costs
associated with the project is estimated to be $4.0 million ($2.2
million net of overhead recoveries) for fiscal 2013. 
(b) LEASE COMMITMENTS: 
The Company has operating lease commitments relating to its office
premises with the minimum annual lease payments as follows:  


 
Nine months ended December 31,                           2012           2011
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Less than one year                                        499            475
Between one and five years                              7,089          5,533
----------------------------------------------------------------------------
                                                        7,588          6,008
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
10. Line Of Credit: 
The Company has arranged for a $1.0 million line of credit with its
principal banker, which can be drawn down by way of a demand
operating credit facility or may be used to support letters of
credit. As at December 31, 2012, US $165,000 (2011 - US $165,000) had
been reserved on this line of credit for the letter of credit
supporting a performance bond. 
11. Segmented Information: 
The Company is organized into one operating segment represented by
the development and licensing of reservoir simulation software. The
Company provides professional services, consisting of support,
training, consulting and contract research activities, to promote the
use and development of its software; however, these activities are
not evaluated as a separate business segment.  
Revenues and property and equipment of the Company arise in the
following geographic regions: 


 
(thousands of $)                             Revenue  Property and equipment
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                 For the nine months                        
                                  ended December 31,      As at December 31,
                                    2012        2011        2012        2011
----------------------------------------------------------------------------
                                                                            
Canada                            19,243      14,059       3,323       2,548
United States                      8,736       7,439          49          83
South America                      8,345       7,906          51          83
Eastern Hemisphere(1)             13,017      14,415          44          29
----------------------------------------------------------------------------
                                  49,341      43,819       3,467       2,743
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Includes Europe, Africa, Asia and Australia.                            

 
In the nine months ended December 31, 2012, the Company derived 7.3%
(2011 - 9.5%) of its revenue from one customer. 
12. Joint Venture: 
The Company is the operator of a joint software development project,
the DRMS project, which gives the Company exclusive rights to
commercialize the jointly developed software while the other partners
will have unlimited software access for their internal use.
Accordingly, the Company records its proportionate share of costs
incurred on the project (37.04%) as research and development costs
within the condensed consolidated statements of operations and
comprehensive income. 
For the three and nine months ended December 31, 2012, CMG included
$1.0 million and $2.8 million, respectively (2011 - $0.9 million and
$2.3 million, respectively) of costs in its condensed consolidated
statements of operations and comprehensive income related to this
joint project.  
Additionally, the Company is entitled to charge the project for
various services provided as operator, which were recorded in revenue
as professional services and amounted to $0.4 million and $1.3
million during the three and nine months ended December 31, 2012
(2011 - $0.4 million and $1.2 million, respectively). 
13. Subsequent Events: 
On February 11, 2013, the Board of Directors declared a cash dividend
of $0.16 per share on its Common Shares, payable on March 15, 2013,
to all shareholders of record at the close of business on March 8,
2013. 
Contacts:
Computer Modelling Group Ltd.
Kenneth M. Dedeluk
President & CEO
(403) 531-1300
ken.dedeluk@cmgl.ca 
Computer Modelling Group Ltd.
John Kalman
Vice President, Finance & CFO
(403) 531-1300
john.kalman@cmgl.ca
www.cmgl.ca