Calian Reports Third Quarter Results: Financial Results as

OTTAWA, ONTARIO--(Marketwire - Aug. 10, 2011) -

(All amounts in this release are in Canadian Dollars)

Calian Technologies Ltd. (TSX:CTY) today released unaudited results for the third quarter ended June 30, 2011. Revenues for the quarter were $58.5 million, a 2% increase from the $57.6 million reported in the same quarter of the previous year. Net earnings were $3.5 million or $0.45 per share basic and diluted, compared to $3.8 million or $0.49 per share basic and diluted in the same quarter of the previous year. For the nine-month period ending June 30, 2011, the Company reported revenues of $171.2 million and net earnings of $9.8 million or $1.28 per share basic and diluted, compared to revenues of $162.8 million and net earnings of $10.4 million or $1.33 per share basic and diluted in the prior year.

"Results for the quarter were once again in line with management expectations with both divisions reporting revenues marginally above the same quarter last year. Our BTS division was negatively impacted by a slowdown in government spending leading up to, and following, the recent federal election. Both our short term staffing and longer term outsourcing segments continue to see excellent opportunities, which bodes well for longer term growth potential. Revenues in the SED division were consistent with those achieved in the same quarter last year as well as with recent quarters as both project related revenue and manufacturing revenues have remained steady. Recently signed contracts are expected to fill the revenue gap associated with the wind down of projects nearing completion", stated Ray Basler, President and CEO.

"As expected, overall margins have decreased from last year. Margins in the SED division are lower than last year due to the reducing mix of work associated with projects signed before the Canadian dollar strengthened significantly. Also, competitive pressures have served to tighten margins on new work. The BTS division's margins remain relatively steady, despite a business mix that is somewhat different from the prior year. We expect continued pressures on new opportunities as customers seek to reduce costs and competitors become more aggressive. That being said, we expect to maintain our win ratios by continuing to provide the quality service for which we are well known, priced accordingly", continued Basler.

Overall, while growth has been modest this quarter, we are proud of our accomplishments within a very competitive landscape, particularly during this period of continued worldwide economic uncertainty. We believe that our key markets will remain strong, although we recognize the potential impact due to government cost cutting initiatives. Ultimately, revenues realized will be dependent on the extent and timing of future contract awards as well as customer utilization of existing contracting vehicles. We remain confident in our ability to achieve results within the range of our previously issued guidance. Accordingly, we expect revenues for 2011 to be in the range of $220 million to $230 million and net earnings per share in the range of $1.55 to $1.80 per share.

About Calian

Calian sells technology services to industry and government in Canada and around the world. Calian provides customers with ready access to an exceptional team of engineers, telecommunications and technology professionals, health care professionals and other highly qualified staff. The Business and Technology Services Division augments customer workforces with flexible short and long-term placements, recruitment and outsourcing of engineering, health care professionals and other skilled professionals. The Systems Engineering Division plans, designs and implements solutions for many of the world's space agencies and leading communications satellite manufacturers and operators, as well as providing contract manufacturing services for customers in North America.

For further information, please visit our website at www.calian.com, or contact us at ir@calian.com

DISCLAIMER

Certain information included in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Such statements are generally accompanied by words such as "intend", "anticipate", "believe", "estimate", "expect" or similar statements. Factors which could cause results or events to differ from current expectations include, among other things: the impact of price competition; scarce number of qualified professionals; the impact of rapid technological and market change; loss of business or credit risk with major customers; technical risks on fixed price projects; general industry and market conditions and growth rates; international growth and global economic conditions, and including currency exchange rate fluctuations; and the impact of consolidations in the business services industry. For additional information with respect to certain of these and other factors, please see the Company's most recent annual report and other reports filed by Calian with the Ontario Securities Commission. Calian disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. No assurance can be given that actual results, performance or achievement expressed in, or implied by, forward-looking statements within this disclosure will occur, or if they do, that any benefits may be derived from them.

CALIAN TECHNOLOGIES LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS

(Canadian dollars in thousands, except per share data)

			Three months ended						Nine months ended
			June 30						June 30
			2011			2010			2011			2010
Revenues		$	58,529		$	57,565		$	171,222		$	162,814
Cost of revenues			47,662			45,911			139,335			130,384
Gross profit			10,867			11,654			31,887			32,430
Selling and marketing			1,418			1,226			4,017			3,714
General and administration			3,865			3,892			11,754			11,566
Facilities			789			778			2,460			2,224
Stock option compensation (Note 8)			19			3			50			17
Amortization			274			248			839			691
Earnings before other expense, interest income and income tax expense			4,502			5,507			12,767			14,218
Unrealized gain (loss) on fair value of conversion options of long-term investment (Note 6)			-			(112	)		-			(50	)
Interest income (Note 7)			229			157			696			538
Earnings before income tax expense			4,731			5,552			13,463			14,706
Income tax expense – current			1,005			1,582			3,133			3,961
Income tax expense – future			275			125			487			375
			1,280			1,707			3,620			4,336
NET EARNINGS			3,451			3,845			9,843			10,370
Retained earnings, beginning of period as previously stated			41,705			37,738			39,769			42,692
Adjustment to opening retained earnings for a change in accounting policy (Note 2)			-			(367	)		-			(367	)
Excess of purchase price over stated capital on repurchase of shares (Note 8)			(29	)		(709	)		(860	)		(1,502	)
Dividends			(1,924	)		(1,557	)		(5,549	)		(12,243	)
Retained earnings, end of period		$	43,203		$	38,950		$	43,203		$	38,950
Net earnings per share: (Note 9)
	Basic	$	0.45		$	0.49		$	1.28		$	1.33
	Diluted	$	0.45		$	0.49		$	1.28		$	1.33
Weighted average number of shares: (Note 9)
	Basic		7,694,950			7,774,618			7,700,272			7,770,267
	Diluted		7,714,850			7,803,460			7,716,955			7,799,039




CALIAN TECHNOLOGIES LTD.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Canadian dollars in thousands)

		June 30, 2011	September 30, 2010
ASSETS			(Note 2)
CURRENT ASSETS
	Cash	$ 24,235	$ 29,055
	Accounts receivable	43,793	33,954
	Work in process	4,559	3,576
	Prepaid expenses (Note 5)	1,286	6,329
	Future income taxes	92	696
	Derivative assets (Note 12)	1,087	158
	Short-term portion of investment (Note 6)	1,397	953
		76,449	74,721
LONG-TERM INVESTMENT (Note 6)		1,500	2,464
EQUIPMENT		4,235	4,611
INTANGIBLE		445	543
GOODWILL		9,518	9,518
		$ 92,147	$ 91,857

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Accounts payable and accrued liabilities	$ 17,747	$ 17,024
	Unearned contract revenue	11,107	16,002
	Derivative liabilities (Note 12)	335	48
		29,189	33,074
CONTINGENCIES (Note 10)

SHAREHOLDERS' EQUITY
	Share capital (Note 8)	19,159	18,689
	Contributed surplus (Note 8)	200	171
	Retained earnings	43,203	39,769
	Accumulated other comprehensive income	396	154
		62,958	58,783
		$ 92,147	$ 91,857

CALIAN TECHNOLOGIES LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Canadian dollars in thousands)

		Three months ended June 30				Nine months ended June 30
		2011		2010		2011		2010
Net earnings		$ 3,451		$ 3,845		$ 9,843		$ 10,370
	Unrealized gain (loss) on translating financial statements of self-sustaining foreign operation, net of tax of nil (2010 – nil)	(10	)	68		(56	)	(4	)
	Change in deferred gain (loss) on derivatives designated as cash flow hedges, net of tax of $57 and $122 year to date (2010 - $292 and $75 year to date)	(138	)	(606	)	298		157
Other comprehensive income (loss)		(148	)	(538	)	242		153
Comprehensive income		$ 3,303		$ 3,307		$ 10,085		$ 10,523

CALIAN TECHNOLOGIES LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME
(Canadian dollars in thousands)

	June 30, 2011		September 30, 2010 (Note 2)
Unrealized cumulative loss on translating financial statements of self-sustaining foreign operation	$ (413	)	$ (357	)
Deferred gain on derivatives designated as cash flow hedges	809		511
Accumulated other comprehensive income, end of period	396		154
Retained earnings, end of period	43,203		39,769
Accumulated other comprehensive income and retained earnings, end of period	$ 43,599		$ 39,923

CALIAN TECHNOLOGIES LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Canadian dollars in thousands)

		Three months June 30				Nine months June 30
		2011		2010		2011		2010
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net earnings		$ 3,451		$ 3,845		$ 9,843		$ 10,370
Items not affecting cash:
	Interest accreted on host contract component of long-term investment (Note 7)	(159	)	(110	)	(479	)	(400	)
	Employee stock purchase plan compensation expense	16		12		52		44
	Stock option compensation (Note 8)	19		3		50		17
	Amortization	274		248		839		691
	Future income tax expense	275		125		487		375
	Unrealized (gain) loss on fair value of conversion options of long-term investment (Note 6)	-		112		-		50
		3,876		4,235		10,792		11,147
Change in non-cash working capital
	Accounts receivable	(1,012	)	(19	)	(10,135	)	(2,277	)
	Work in process	(2,277	)	(1,114	)	(982	)	(1,311	)
	Prepaid expenses (Note 5)	1,750		(4,111	)	5,043		(1,988	)
	Accounts payable and accrued liabilities	(18	)	2,232		802		1,288
	Unearned contract revenue	(1,381	)	(3,146	)	(4,896	)	(4,981	)
		938		(1,923	)	624		1,878
CASH FLOWS USED IN FINANCING ACTIVITIES
	Issuance of common shares	59		-		519		1,013
	Dividends	(1,924	)	(1,557	)	(5,549	)	(12,243	)
	Repurchase of shares (Note 8)	(33	)	(822	)	(993	)	(1,740	)
		(1,898	)	(2,379	)	(6,023	)	(12,970	)
CASH FLOWS FROM (USED IN) IN INVESTING ACTIVITIES
	Equipment expenditures	(69	)	(358	)	(365	)	(886	)
	Investment	-		-		1,000		-
		(69	)	(358	)	635		(886	)
FOREIGN CURRENCY ADJUSTMENT		(10	)	69		(56	)	(4	)
NET CASH OUTFLOW		(1,039	)	(4,591	)	(4,820	)	(11,982	)
CASH, BEGINNING OF PERIOD		25,274		36,271		29,055		43,662
CASH, END OF PERIOD		$ 24,235		$ 31,680		$ 24,235		$ 31,680

CALIAN TECHNOLOGIES LTD.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the periods ended June 30, 2011 and 2010

(Canadian dollars in thousands, except per share amount)

(Unaudited)

1. ACCOUNTING POLICIES

These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. They do not include all of the information and notes required by generally accepted accounting principles for annual financial statements.

These interim consolidated financial statements have been prepared using the same accounting policies used in the preparation of the audited annual consolidated financial statements for the year ended September 30, 2010 with the exception of the application of the accounting policy described in Note 2. These interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements.

2. CHANGE IN ACCOUNTING POLICY

Effective October 1, 2010, the Company changed its accounting policy with regards to the recognition of warranty costs related to fixed price contracts. Previously a provision for warranty claims was established when revenue was recognized, based on the warranty terms and prior claim experience. To better align revenue recognized with the warranty obligations, warranty costs are now included in estimated total contract costs at the beginning of the project and flow through cost of revenues when a warranty claim is made. Revenue is recognized using the percentage completion method based on management's best estimate of the costs to complete each contract. This change in accounting policy is applied retroactively to October 1, 2009 with a reduction in the warranty provision of $3,715 (through accounts payable and accrued liabilities), an increase in unearned contract revenue of $4,239, a decrease in taxes payable of $157 (through accounts payable and accrued liabilities) and a reduction in opening retained earnings of $367. The impact on the net income for the quarter and the nine-month period ended June 30, 2010 is not material.

3. ACCOUNTING ESTIMATES

For the periods ended June 30, 2011 and 2010, no material changes in estimates have been made.

4. SEASONALITY

The Company's revenues and earnings have historically been subject to some quarterly seasonality due to the timing of vacation periods and statutory holidays.

5. PREPAID EXPENSES

	June 30		September 30
	2011		2010
Prepaid operating expenses	$	1,034	$	705
Milestone advance to subcontractor		252		5,624
	$	1,286	$	6,329

6. INVESTMENT

On July 11, 2006, the Company invested $3,623 in Med-Emerg International Inc. (Med-Emerg) in the form of convertible preferred shares and on January 20, 2009, Med-Emerg announced a merger with AIM Health Group Inc. (AIM). At that time, Calian surrendered its preferred shares in Med-Emerg in exchange for a secured convertible debenture of AIM with a face value of $3,897. On January 6, 2011, AIM repaid $1,000 of the debenture in cash.

On June 30, 2011, the remaining convertible debenture was settled through the issuance of a new convertible debenture. Under the new agreement, the Company received $697 in cash on July 7, 2011 with the remaining amounts due under the new convertible debenture to be satisfied by payments of $700 on December 15, 2011 and $1,500 on December 30, 2013. The debenture carries an annual interest rate of 10% and is convertible into common shares of AIM at the rate of $0.30 per share. AIM is also entitled to cause the debenture to be converted into common shares at the rate of $0.40 per share when in any given 6 month period, trading volume of AIM common shares exceed 1,089,642 shares and the weighted average share price is at least $0.46. Conversion is limited to 50% of the debenture in any 6 month period. On a fully converted basis, this investment represents a 6% interest based on the current number of common shares outstanding. The debenture is subordinate to bank indebtedness and also, under certain circumstances, future borrowings. The debenture is subject to early repayment by AIM in whole or in part upon meeting prescribed notice requirements.

On July 22, 2011 AIM informed the Company that pursuant to AIM entering into a definitive support agreement on July 6, 2011 with Imperial Capital Group Ltd. (ICG), upon satisfaction of all of the conditions of the definitive support agreement between AIM and ICG, a change of control of AIM should occur during the fourth quarter of 2011. In that event, AIM expects to repay the full amount of the debenture.

Carrying value of investment:

	June 30, 2011			September 30, 2010
AIM investment, at cost on January 20, 2009	$	2,517		$	2,517
AIM cumulative unrealized loss on conversion options		(17	)		(17	)
AIM cumulative interest accretion on host contract		1,397			917
Payment January 2011		(1,000	)		-
Carrying value of investment at June 30, 2011 prior to the exchange	$	2,897		$	3,417

	June 30, 2011
AIM investment, at fair value at date of exchange	$	2,897

10% Debenture, at fair value		2,575
Conversion feature, at fair value		322
Carrying value of investment at June 30, 2011 after the exchange	$	2,897
Short-term portion of investment	$	1,397
Long-term portion of investment	$	1,500

The Company's investment is considered a hybrid instrument as it includes a receivable component as well as rights to convert to common shares. The Company has elected to treat the new debenture host contract as a loan and receivable and as such will recognize it using amortized cost. The conversion options are considered to be embedded derivatives to be separated and valued independently of the underlying host contract. The conversion options are measured at fair value with changes in fair value recorded in net income. The fair value of the conversion options applies the following data and assumptions to the Black-Scholes option pricing model:

Debenture:	due December			due December
		2011			2013
Amount:	$	700		$	1,500
AIM 60 day weighted average share price	$	0.16		$	0.16
Risk free interest rate		1.02	%		1.88	%
Actual stock price volatility		77	%		90	%
Expected life of options	0.5 year			2.5 years

Under the Black-Scholes model, a one cent increase (decrease) in AIM stock price would result in a $38 increase (decrease) in the fair value of the conversion options. A 10% increase (decrease) in the volatility of AIM stock price would result in a $55 increase (decrease) in the fair value of the conversion option. AIM shares are traded on the TSX Venture Exchange and currently trade in limited volume.

7. INTEREST INCOME

	Three months ended					Nine months ended
	June 30					June 30
		2011		2010		2011		2010
Interest earned on cash balances	$	69	$	47	$	216	$	138
Accreted interest on host contract component of investment		160		110		480		400
Interest income	$	229	$	157	$	696	$	538

8. SHARE CAPITAL

Employee Share Purchase Plan

During the nine-month period ending June 30, 2011 (2010), the Company issued 22,888 (31,661) shares under the Company's Employee Share Purchase Plan at an average price of $14.06 ($10.87).

Share repurchase

During the quarter ending June 30, 2011 (2010), the Company acquired 1,800 (47,460) of its outstanding common shares at an average price of $18.74 ($17.29) per share for a total of $33 ($822) including related expenses, through a normal course issuer bid in place during the period. During the nine-month period ending June 30, 2011 (2010), the Company acquired 54,400 (100,630) of its outstanding common shares at an average price of $18.26 ($17.30) for a total of $993 ($1,740) including related expenses. The excess of the purchase price over the stated capital of the shares was charged to retained earnings.

Stock options

The Company has an established stock option plan, which provides that the Board of Directors may grant stock options to eligible directors and employees. Under the plan, eligible directors and employees are granted the right to purchase shares of common stock at a price established by the Board of Directors on the date the options are granted but in no circumstances below fair market value of the shares at the date of grant. During the nine-month period ending June 30, 2011 the Company granted 95,000 options to directors and officers at an average price of $18.65 per share with 28,000 options vesting immediately and 67,000 options vesting over a period of two years. The options expire on February 14, 2016. The weighted average fair value of options granted was $1.27 per option. A total of 500,000 common shares are authorized for issuance under the plan, of which 345,000 are issued at June 30, 2011. At June 30, 2011 there were 150,000 options outstanding.

9. NET EARNINGS PER SHARE

The diluted weighted average number of shares has been calculated as follows:

	Three months ended		Nine months ended
	June 30		June 30
	2011	2010	2011	2010
Weighted average number of shares – basic	7,694,950	7,774,618	7,700,272	7,770,267
Addition to reflect the dilutive effect of employee stock options	19,900	28,842	16,683	28,772
Weighted average number of shares – diluted	7,714,850	7,803,460	7,716,955	7,799,039

Options that are anti-dilutive because the exercise price was greater than the average market price of the common shares are not included in the computation of diluted earnings per share. For the three and nine-month periods ending June 30, 2010 and the three-month period ending June 30, 2011, no options were excluded from the above computation. For the nine-month period ending June 30, 2011, 95,000 were excluded from the above computation.

10. CONTINGENCIES

In the normal course of business, the Company is party to employee related claims. The potential outcomes related to existing matters faced by the Company are not determinable at this time. The Company intends to defend these actions, and management believes that the resolution of these matters will not have a material adverse effect on the Company's financial condition.

11. SEGMENTED INFORMATION

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, regarding how to allocate resources and assess performance. The Company's chief operating decision maker is the Chief Executive Officer. The Company operates in two reportable segments described below, defined by their primary type of service offering, namely Systems Engineering and Business and Technology Services.

Systems Engineering involves planning, designing and implementing solutions that meet a customer's specific business and technical needs, primarily in the satellite communications sector.
Business and Technology Services involves both short long-term and placements of personnel to augment customers' workforces (Staffing) as well as the long-term management of projects, facilities and customer business processes (Outsourcing).

The Company evaluates performance and allocates resources based on earnings before other expense, interest income and income taxes. The accounting policies of the segments are the same as those described in the significant accounting policies note in the audited annual consolidated financial statements.

Three months ended June 30, 2011
			Business and
	Systems		Technology
	Engineering		Services		Corporate				Total
Revenues	$	18,243	$	40,286	$	-		$	58,529
Earnings before interest income and income tax expense		2,840		2,301		(639	)		4,502
Interest income (Note 7)									229
Income tax expense									(1,280	)
Net earnings								$	3,451


Total assets other than cash and goodwill	$	15,011	$	40,327	$	3,056		$	58,394
Goodwill		-		9,518		-			9,518
Cash		-		-		24,235			24,235
Total assets		15,011		49,845		27,291		$	92,147
Equipment and intangible expenditures	$	47	$	22	$	-		$	69


Three months ended June 30, 2010
			Business and
	Systems		Technology
	Engineering		Services		Corporate				Total
Revenues	$	17,646	$	39,919	$	-		$	57,565
Earnings before other expense, interest income and income tax
expense		3,557		2,614		(664	)		5,507
Unrealized loss on fair value of conversion options of long-term
investment (Note 6)									(112	)
Interest income (Note 7)									157
Income tax expense									(1,707	)
Net earnings								$	3,845


September 30, 2010

Total assets other than cash and goodwill	$	16,507	$	33,287	$	3,490		$	53,284
Goodwill		-		9,518		-			9,518
Cash		-		-		29,055			29,055
Total assets	$	16,507	$	42,805	$	32,545		$	91,857
Equipment and intangible expenditures	$	668	$	710	$	-		$	1,378


Nine months ended June 30, 2011
			Business and
	Systems		Technology
	Engineering		Services		Corporate				Total

Revenues	$	48,906	$	122,316	$	-		$	171,222
Earnings before interest income and income tax expense		7,179		7,493		(1,905	)		12,767
Interest income (Note 7)									696
Income tax expense									(3,620	)

Net earnings								$	9,843



Nine months ended June 30, 2010
			Business and
	Systems		Technology
	Engineering		Services		Corporate			Total

Revenues	$	48,349	$	114,465	$	-		$	162,814
Earnings before other expense, interest income and income tax
expense		8,578		7,540		(1,900	)		14,218
Unrealized loss on fair value of conversion options of long-term
investment (Note 6)									(50	)
Interest income (Note 7)									538
Income tax expense									(4,336	)
Net earnings								$	10,370

12. HEDGING

Foreign currency risk related to contracts

The Company is exposed to foreign currency fluctuations on its cash balance, accounts receivable, accounts payable and future cash flows related to contracts denominated in a foreign currency. Future cash flows will be realized over the life of the contracts. The Company utilizes derivative financial instruments, principally in the form of forward exchange contracts, in the management of its foreign currency exposures. The Company's objective is to manage and control exposures and secure the Company's profitability on existing contracts and therefore, the Company's policy is to hedge 100% of its foreign currency exposure excluding its exposure arising from the Company's US subsidiary. The Company does not utilize derivative financial instruments for trading or speculative purposes. The Company applies hedge accounting when appropriate documentation and effectiveness criteria are met.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives to specific firm contractually related commitments on projects.

The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Hedge ineffectiveness has historically been insignificant.

The forward foreign exchange contracts primarily require the Company to purchase or sell certain foreign currencies with or for Canadian dollars at contractual rates. At June 30, 2011, the Company had the following forward foreign exchange contracts:

				Equivalent		Fair Value
Type	Notional	Currency	Maturity	Cdn. Dollars		June 30, 2011
SELL	35,594	USD	August 2011	$	35,014	$	684
SELL	1,000	USD	September 2015		1,057		93
SELL	1,000	USD	September 2016		1,057		93
SELL	1,000	USD	September 2017		1,057		93
SELL	11,040	EURO	August 2011		15,565		124
Derivative assets						$	1,087

BUY	14,065	USD	August 2011	$	13,836	$	270
BUY	5,531	EURO	August 2011		7,798		62
BUY	85	GPB	August 2011		243		3
Derivative liabilities						$	335

A 10% strengthening (weakening) of the Canadian dollar against the following currency at June 30, 2011 would have increased (decreased) other comprehensive income as related to the forward foreign exchange contracts by the amounts shown below.

		June 30,
		2011
USD	$	1,873
EURO		636
GBP		-
	$	2,509

Management Discussion and Analysis – June 30, 2011:

(Canadian dollars in thousands, except per share data)

RESULTS OF OPERATIONS

Revenues:

For the third quarter 2011, revenues were $58,529 compared to $57,565 reported for the same period in 2010 representing a 2% increase from the prior year. For the nine month period ending June 30, 2011 revenues were $171,222 compared to $162,814 for 2010 an increase of 5%.

Systems Engineering's (SED) revenues were $18,243 in the quarter and $48,906 on a year-to-date basis representing a 3% increase from the $17,646 and a 1% increase from the $48,349 year-to-date recorded last year. Although the project mix has changed, the overall level of activity is consistent with the same quarter of the previous year. Due to the project nature of its business, the SED division is susceptible to significant variation in volumes of activity from period to period.

Business and Technology Services (BTS) revenues were $40,286 in the quarter and $122,316 on a year-to-date basis representing an increase of 1% for the quarter compared to the $39,919 and a 7% increase compared to $114,465 year-to-date for the same period last year. This quarter's results for BTS were impacted by a delay in government spending following the recent federal election. Overall the short-term staffing group continues to generate solid activity levels while the division's long-term outsourcing contracts experienced a slight decrease in revenues following a record level of activity in the second quarter of this year.

Management expects that the marketplace over the next year will continue to be very competitive. The market conditions for SED are expected to continue to be positive and should present new opportunities, although the related timing is somewhat uncertain. Current BTS backlog will provide a solid level of activity on existing contracts and new opportunities are expected to arise. However, the timing of future contract awards and customer demand will ultimately determine revenues for the next year.

Gross margin:

Gross margin was 18.6% in the third quarter of 2011, compared to the 20.2% reported in the third quarter a year ago. On a year- to-date basis the Company reported margins of 18.6 % compared to 19.9% for the same period last year. The consolidated gross margin for the third quarter 2011 was in line with expectations and reflects a continued downward pressure on margins.

Gross margin in Systems Engineering was 24.1% this quarter compared to 28.7% in the third quarter of 2010 and was 24.0% for the nine month period ending June 30, 2011 compared to 26.7% for the same period last year. The gross margin for SED reflects pressures associated with a very competitive landscape as well as the impact of an exceptionally strong Canadian dollar.

Gross margin in Business and Technology Services was 16.1% compared to the 16.5% reported in the third quarter of 2010. Gross margin for this third quarter 2011 is reflective of the current mix of business and therefore is representative of expected margins in the near term. For the nine-month period ending June 30, 2011 gross margin was 16.5% compared to the 17.0% reported for the same period last year; a reflection of the continued competitive pressures on margins.

Because of the significant difference in gross margin between each of the two divisions, the overall gross margin of the Company is dependent on the relative level of revenue generated from each division. Management will continue to focus on execution in order to maximize margins. Increased competition continues to put downward pressure on margins in both divisions. The volatility of the Canadian dollar will continue to impact margins on new work in the SED division.

Operating expenses:

Selling and marketing, general and administration and facilities totalled $6,072 or 10.4% of revenues in the third quarter of 2011 compared to $5,896 or 10.2% of revenues reported in the third quarter of 2010. Operating expenses are stable and in line with the overall level of revenues. For the nine-month period ending June 30, 2011 operating expenses totaled $18,231 compared to $17,504 in 2010.

Interest income:

Interest income for the third quarter of 2011 was $229 compared to $157 in 2010. For the nine-month period ending June 30, 2011 interest income was $696 compared to $538 in 2010. Interest income is comprised of interest earned on the Company's cash balances and accrued interest related to the investment in AIM Health Group Inc. (AIM). Interest income increased as a result of increased interest rates.

Unrealized gain on fair value of conversion options of investment:

For the quarter ended June 30, 2010 the Company recorded a loss of $112 relating to the fair value of conversion options of investment. The reported unrealized loss is a reflection of the movement in quoted market prices of AIM shares and the remaining term of the related conversion privilege. With only 9 months remaining on the conversion feature at September 30, 2010, the fair value of the conversion options was estimated at NIL with no changes reported at June 30, 2011. Therefore no gain or loss was recorded this quarter or on a year-to-date basis.

Income taxes:

The provision for income taxes for the third quarter of 2011 was $1,280 or 27.1 % of earnings before tax compared to $1,707 in 2010 or 30.7% of earnings before tax. On a year-to-date basis, the provision for income taxes was $3,620 or 26.9% of earnings before tax compared to $4,336 or 29.5% of earnings before tax. The decrease in the realized tax rate is the result of a continued decrease in prescribed federal and provincial tax rates. The effective tax rate for 2011, prior to considering the impact of non- taxable transactions, is expected to be approximately 28%.

Net earnings:

As a result of the foregoing, in the third quarter of 2011 the Company recorded net earnings of $3,451 or $0.45 per share basic and diluted, compared to $3,845 or $0.49 per share basic and diluted in the same quarter of the prior year. For the nine-month period ending June 30, 2011, the Company reported net earnings of $9,843 or $1.28 per share basic and diluted compared to $10,370 or $1.33 per share basic and diluted in the same period of the prior year.

BACKLOG

The Company's backlog at June 30, 2011 was $734 million with terms extending to fiscal 2018. This compares to $962 million reported at September 30, 2010. Contracted Backlog represents maximum potential revenues remaining to be earned on signed contracts, whereas Option Renewals represent customers' options to further extend existing contracts under similar terms and conditions.

Most fee for service contracts provide the customer with the ability to adjust the timing and level of effort throughout the contract life and as such the amount actually realized could be materially different from the original contract value. The following table represents management's best estimate of the backlog realization for 2011, 2012 and beyond based on management's current visibility into customers' existing requirements.

Management's estimate of the realizable portion (current utilization rates and known customer requirements) is less than the total value of signed contracts and related options by approximately $123 million. In June 2011, the Company reduced its backlog by $122 million based on DND exercising year eight and nine of the contract with funding levels consistent with those recently experienced. While the excess funding is still available to DND, this was considered an indication that this portion of the contracted backlog would not materialize. The Company's policy is to reduce the reported contractual backlog once it receives confirmation from the customer that indicates the utilization of the full contract value may not materialize.

(dollars in millions)	Fiscal 2011		Fiscal 2012		Beyond 2012		Estimated realizable portion of Backlog		Excess over estimated realizable portion		TOTAL
Contracted Backlog	$	52	$	145	$	178	$	375	$	54	$	429
Option Renewals		-		16		220		236		69		305
TOTAL	$	52	$	161	$	398	$	611	$	123	$	734

Business and	$	37	$	131	$	367	$	535	$	123	$	658
Technology Services
Systems Engineering		15		30		31		76		-		76
TOTAL	$	52	$	161	$	398	$	611	$	123	$	734

FINANCIAL CONDITION AND CASHFLOWS

Operating activities:

Cash inflows from operating activities for the nine-month period ending June 30, 2011 were $624 compared to $1,878 in 2010. This year's decrease is mainly as the result of working capital fluctuations, mostly with changes in accounts receivable levels, in line with the ebbs and flows of the business. The market for the Systems Engineering Division is characterized by contracts with billings tied to milestones achieved, which often results in significant working capital requirements. Conversely, given the nature of this business, it is sometimes possible to negotiate advance payments on contracts. Such advance payments give rise to unearned revenue that will be realized as revenue over the course of the contract. As at June 30, 2011, the Company's total unearned revenue amounted to $11,107. This compares to $16,022 at September 30, 2010, with the decrease primarily attributable to work progressing on the third deep space antenna contract for ESA.

Financing activities:

During the nine month period ending June 30, 2011, the Company paid quarterly dividends of $0.72 per share compared to 2010 when the Company paid $0.57 per share of quarterly dividends and a $1.00 special dividend. The Company intends to continue with its quarterly dividend policy for the foreseeable future.

During the nine-month period ending June 30, 2011, the Company repurchased 54,400 common shares through its normal course issuer bid at an average price of $18.26 compared to the previous year when the Company repurchased 100,630 shares at an average price of $17.30.

Capital resources:

At June 30, 2011 the Company had a short-term credit facility of $10,000 with a Canadian chartered bank that bears interest at prime and is secured by assets of the Company. An amount of $612 was drawn to issue a letter of credit to meet customer contractual requirements. Management believes that Calian has sufficient cash resources to continue to finance its working capital requirements and pay a quarterly dividend.

ADOPTION OF NEW ACCOUNTING RULES AND IMPACT ON FINANCIAL RESULTS

SELECTED QUARTERLY FINANCIAL DATA

			Q3/11		Q2/11		Q1/11		Q4/10		Q3/10		Q2/10		Q1/10		Q4/09

Revenues		$	58,529	$	59,433	$	53,260	$	52,911	$	57,565	$	53,141	$	52,108	$	54,365
Net earnings		$	3,451	$	3,254	$	3,138	$	3,240	$	3,845	$	3,082	$	3,443	$	3,449

Net earnings per
share
	Basic	$	0.45	$	0.42	$	0.41	$	0.42	$	0.49	$	0.40	$	0.44	$	0.45
	Diluted	$	0.45	$	0.42	$	0.41	$	0.42	$	0.49	$	0.40	$	0.44	$	0.44

SEASONALITY

The Company's operations are subject to some quarterly seasonality due to the timing of vacation periods and statutory holidays. Typically the Company's first and last quarter will be negatively impacted as a result of the Christmas season and summer vacation period. During these periods, the Company can only invoice for work performed and is also required to pay for statutory holidays. This results in reduced levels of revenues and in a drop in gross margins. This seasonality may not be apparent in the overall results of the Company depending on the impact of the realized sales mix of its various projects.

OUTLOOK

Management believes the Company is well positioned for sustained growth. The Company operates in markets that will continue to require the services that the Company offers. To further assure itself of a stable source of revenues, the Company will focus on increasing the percentage of its revenues derived from recurring business while pursuing new business in adjacent markets. The Systems Engineering Division has been working within a stable satellite sector for the last two years and the division is expecting new opportunities to arise as systems adopting the latest technologies will be required by customers to maintain and improve their service offerings. Management is also confident that systems such as MSTAR will continue to be in demand in the security and surveillance market although it cannot predict the timing and extent of future orders. Custom manufacturing activity levels will continue to be directly dependent upon SED's customers' requirements. The continued volatility of the Canadian dollar could impact the Systems Engineering Division's competitiveness when bidding against foreign competition on projects denominated in foreign currencies.

The Business and Technology Services Division's services are adaptable to many different markets. Currently, its strength lies in providing program management and delivery services to the Department of National Defence. Management believes that this department and many others within the federal government will continue to require more support services from private enterprises to supplement their current workforce. Management believes that the types of service the division offers will continue to be attractive to government agencies going forward and the division continues to assess how it can service new markets and increase new opportunities available to the division.

GUIDANCE

INTERNATIONAL FINANCIAL REPORTING STANDARDS

The Canadian Accounting Standards Board has announced that Canadian publicly accountable enterprises will be required to report under International Financial Reporting Standards (IFRS) as replacement guidance for the Canadian generally accepted accounting principles (Canadian GAAP) effective for fiscal years beginning after January 1, 2010. Therefore, the Company will adopt IFRS as the basis of preparation for its interim and annual financial statements for periods beginning on October 1, 2011 with a transition date of October 1, 2010 to allow for comparative financial information. IFRS uses a conceptual framework similar to current Canadian GAAP, but there are significant differences in recognition, measurement and disclosures. In addition, it is expected that IFRS in effect at the time of reporting the Company's first IFRS financial statements will evolve from current IFRS and may result in additional differences.

In order to prepare for the conversion to IFRS, the Company has developed an IFRS changeover plan. This plan addresses key elements of the Company's conversion to IFRS including:

Accounting policy changes and financial reporting requirements;
Education and training requirements;
Impacts on business activities and on Information technology and data systems;
Internal control over financial reporting; and
Disclosure controls and procedures.

We have also established a formal governance structure for the conversion to IFRS. The initiative is lead by the Chief Financial Officer who reports regularly to the Chief Executive Officer. The Chief Financial Officer also reports quarterly to the Audit Committee of the Board of Directors on the status of the project and the implications of the changeover to IFRS.

During 2010, the following activities were performed:

A detailed assessment was substantially completed for all key standards and significant accounting policy choices including IFRS 1 elective exemption choices using IFRS standards in effect on date of transition;
The creation of a duplicate IFRS compliant environment to track all adjusting IFRS entries for the Company's opening balance sheet and throughout the Company's dual reporting period of October 1, 2010 to September 30, 2011;
A detailed assessment was performed of required changes to internal controls. Management concluded that internal controls applicable to the Company's reporting process under Canadian GAAP are fundamentally the same as those required in the Company's IFRS reporting environment;
A detailed assessment was performed and minimal changes to disclosure controls and procedures were identified. Disclosure controls and procedures have been updated to include all data required for financial statements disclosures under IFRS;
A detailed assessment has been completed of the impact of IFRS on key performance indicators and business activities such as compensation arrangements, hedging activities and risk management practices.
A detailed assessment was performed of required changes to internal controls, systems, processes and documentation. With the exception of adjusting the Company's hedging documentation to reflect IFRS standard requirements, no significant changes were required;
A complete IFRS financial statement model was built and reviewed by management and the board of directors;
Data collection for the opening balance sheet is in progress; and
Key finance employees responsible to carry out the IFRS conversion were provided with adequate training and resources throughout this process. The Company also held an IFRS information session with all members of the board of directors. The Audit Committee is also appraised quarterly on IFRS standards and policy choices available to the Company.

For 2011 the following activities are in progress:

Monitor standards to be issued by the IASB and provide the related training on such. Assess the impact of new IASB standards on the Company's opening balance sheet and its financial position and results of operations throughout the conversion period;
Complete the data collection and finalize the assessment of the impact of adopting IFRS. Data collection for each quarter in fiscal 2011 is performed shortly following the closing of each quarter under Canadian GAAP;
Complete the necessary work required to quantify the impact of the changeover to IFRS on the Company's financial position and result of operations at date of transition and affecting the comparative year 2011 and the first reporting year 2012;
Prepare fiscal 2011 quarterly financial statements under IFRS standards, in preparation for reporting comparative information in 2012; the Company's first year of reporting under IFRS.

First-time adoption of IFRS:

IFRS 1 – First-Time Adoption of International Financial Reporting Standards generally requires that a first-time adopter apply IFRS accounting policies retrospectively to all periods presented in its first IFRS compliant financial statements. IFRS 1 also provides certain mandatory and optional exemptions to the full retrospective application. The most significant optional exemptions applicable to the Company are summarized on page 22 of the Company's Management Discussion and Analysis in the 2010 Annual Report. During the first nine months of 2011, the Company has not identified any additional elections to be considered by management.

Expected areas of significance:

The Company's key changes in accounting policies required under IFRS standards are summarized on page 22 and 23 of the Company's Management Discussion and Analysis in the 2010 Annual Report. The differences identified in this document should not be regarded as an exhaustive list and other changes may result from the Company's conversion to IFRS. Furthermore, as a result of changes in circumstances, such as economic conditions or operations, and the inherent uncertainty from the use of assumptions, the actual impacts may be different from those presented. During the first nine months of 2011, the Company did not identify any additional changes in accounting policy to be considered by management.

Many of the differences identified between IFRS and Canadian GAAP have now been quantified. We have not yet prepared a full set of annual financial statements under IFRS; therefore, amounts are unaudited. Based on the Company's work to date, we do not expect that the conversion to IFRS will result in a significant impact on the financial position or results of operations of the Company and believe that the areas of higher potential impact will be around overall presentation and disclosure requirements. However, our assessment of the impacts of certain potential differences will not be finalized until the Company has prepared a full set of annual financial statements under IFRS, the future impacts of converting to IFRS will depend on the particular circumstances prevailing in those years.

The International Accounting Standards Board (IASB) has a number of ongoing projects on its agenda. Management continues to monitor standards to be issued by the IASB, but we do not expect these standards to be mandatory for the Company's fiscal 2012 financial statements. The summary of key expected changes summarized on page 22 and 23 of the Company's Management Discussion and Analysis in the 2010 Annual Report was completed with the expectation that we will apply IFRS standards expected to be effective at the date of conversion. However, management will only make final decisions regarding early adoption of any new standards as they are issued by the IASB.

INTERNAL CONTROLS OVER FINANCIAL REPORTING

During the most recent interim quarter ending June 30, 2011, there have been no changes in the design of the Company's internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

FORWARD-LOOKING STATEMENT

Certain information included in this management discussion and analysis is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Such statements are generally accompanied by words such as "intend", "anticipate", "believe", "estimate", "expect" or similar statements. Factors which could cause results or events to differ from current expectations include, among other things: the impact of price competition; scarce number of qualified professionals; the impact of rapid technological and market change; loss of business or credit risk with major customers; technical risks on fixed price projects; general industry and market conditions and growth rates; international growth and global economic conditions, currency exchange rate fluctuations; and the impact of consolidations in the business services industry. For additional information with respect to certain of these and other factors, please see the Company's most recent annual report and other reports filed by the Company with the Ontario Securities Commission. Calian disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. No assurance can be given that actual results, performance or achievement expressed in, or implied by, forward-looking statements within this disclosure will occur, or if they do, that any benefits may be derived from them.

The foregoing discussion and analysis should be read in conjunction with the financial statements for the third quarter of 2011, and with the Management Discussion and Analysis in the 2010 annual report, including the section on risks and opportunities.

Contact Information:

Ray Basler
President and Chief Executive Officer
306-931-3425

Jacqueline Gauthier
Chief Financial Officer
613-599-8600
www.calian.com
ir@calian.com

Calian Reports Third Quarter Results: Financial Results as Expected