Nurun Inc.
TSX : NUR

Nurun Inc.

November 02, 2006 12:27 ET

Nurun's Net Earnings Surge to $1.7 Million in Third Quarter

MONTREAL, QUEBEC--(CCNMatthews - Nov. 2, 2006) - Nurun Inc. (TSX:NUR), a subsidiary of Quebecor Media Inc., today reported its financial results for the third quarter ended September 30, 2006. Unless otherwise indicated, all amounts are in Canadian dollars.

KEY THIRD QUARTER 2006 FINANCIAL RESULTS

- Revenues: up $1.6 million or 10% to $17.2 million

- Net earnings: $1,737,000 or $0.05 per share, compared with $14,000 or $0.00 per share in the same quarter of 2005

"Nurun's financial results improved again in the third quarter of 2006," said Jacques-Herve Roubert, Nurun's President and Chief Executive Officer. "Revenues increased by 10%, while operating income more than doubled and net earnings totalled $1.7 million. These are satisfactory numbers for the third quarter, traditionally the weakest time of year in our industry. Nurun continued to grow, landing major new accounts such as France 24 in Europe and Pierre Fabre in China, and renewing its contract with Bombardier Recreational Products. Moreover, our profitability shows steady improvement."

FINANCIAL RESULTS

Nurun's revenues continued to climb, increasing by $1.6 million or 10.0% from $15.6 million in the third quarter of 2005 to $17.2 million in the third quarter of 2006. The revenue growth was 5.1% organic, driven by the favourable impact of new clients such as W.L. Gore, Loews Hotels, NADAguides, Clarins, Yves Rocher and Tourisme Quebec, and by strengthened relationships with existing clients. Acquisitions accounted for 7.0% of quarterly revenue growth, while foreign currency fluctuations against the Canadian dollar had a negative impact of 2.1%.

Year-to-date revenues were $53.9 million, an increase of $5.0 million or 10.3% higher than the $48.9 million recorded at the same point in 2005. As regards to year-to-date revenue growth, organic growth accounted for 11.8% and acquisitions for 3.1% while foreign currency fluctuations against the Canadian dollar had a negative impact of 4.6%.

Nurun's operating income totalled $1,398,000 in the third quarter of 2006, compared with $593,000 in the same quarter of 2005, or an $805,000 increase. As a percentage of revenues, operating income was 8.1% in the third quarter of 2006, compared with 3.8% in the same period of 2005. Year-to-date operating income was $4.2 million, an increase of $1.3 million or 44.8% higher than the $2.9 million recorded in the same period of 2005. As a percentage of revenues, year-to-date operating income was 7.7%, compared with 5.9% in 2005. The favourable impact on operating income for the three-month and nine-month periods ended September 30, 2006 was primarily due to productivity improvements that were reflected in lower labour costs, as expressed as a percentage of revenues.

Net earnings were $1,737,000 or $0.05 per share in the third quarter of 2006, compared with $14,000 or $0.00 per share in the same quarter of 2005. On a year-to-date basis, Nurun's net earnings totalled $3.7 million or $0.11 per share, compared with $1.3 million or $0.04 per share in the same period of last year, or a $2.4 million or $0.07 per share increase. As a percentage of revenues, net earnings were 6.9% in the first nine months of 2006, compared with 2.7% in the same period of 2005. The net earnings improvement for the three-month and nine-month periods ended September 30, 2006 was due to higher operating income and income tax recoveries.

ACQUISITION OF CRAZY LABS IN SPAIN

On July 11, 2006, Nurun announced the acquisition of Crazy Labs, an interactive communications agency based in Madrid, Spain. Founded in 2000, Crazy Labs has a staff of 37 and has worked with local and international blue-chip clients such as Caja Madrid, Cordoniu, Grupo Telefonica, Procter & Gamble, Nintendo, Vodafone, Xbox, Microsoft (MSN) and Warner Brothers during all phases of their interactive communications projects, from strategy to design of interactive advertisements and websites. This acquisition strengthens Nurun's Spanish presence, which previously consist of an office in Barcelona.

DEFINITION OF OPERATING INCOME

The Company defines operating income as earnings before interest, depreciation, income taxes and net loss from discontinued operations.

As defined above, operating income does not measure results in accordance with generally accepted accounting principles. It is not intended to replace other financial operating performance measures or the statement of cash flows as a measure of liquidity. Operating income is used by the Company because management believes it is a meaningful measure of performance. Operating income is commonly used by the investment community to analyze and compare corporate performance. It also facilitates year-over-year comparison of results since it excludes, unusual items that are not readily comparable from year to year, among other things. The Company's definition of operating income may not be identical to similarly titled measures reported by other companies.

FORWARD-LOOKING STATEMENTS

The statements in this press release that are not historical facts constitute forward - looking statements and are subject to known and unknown material risks, uncertainties and assumptions that could cause Nurun's actual results for future periods to differ materially from those set forth in the forward - looking statements. Certain factors that may cause actual results to differ from current expectations include competition, dependence on major clients, pricing, general changes in the economic environment, international expansion, key staff recruitment, further acquisitions and foreign exchange exposure. Investors and others are cautioned that the foregoing list of factors is not exhaustive and that undue reliance should not be placed on any forward-looking statements. For more information on the risks, uncertainties and assumptions that could cause Nurun's actual results to differ from current expectations, please refer to Nurun's public filings available at www.sedar.com and www.nurun.com including, in particular, the "Risks and Uncertainties" section of Nurun's Management Discussion and Analysis for the year ended December 31, 2005 and updated information in Nurun's quarterly Management Discussion and Analysis reports.

The forward - looking statements in this press release reflect Nurun's expectations at October 25, 2006 and are subject to change after this date. Nurun expressly disclaims any obligation or intention to update or revise any forward - looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

ABOUT NURUN INC.

Nurun Inc. (TSX:NUR), a subsidiary of Quebecor Media Inc., is a global company which strategizes, executes and measures interactive programs that use new technologies. From building awareness to acquiring and retaining clients, our solutions provide exceptional user experiences that enable e-commerce / transactions while leveraging the lifetime value of client relationships.

Since it was founded in 1985, Nurun has worked with a wide variety of companies and organizations, including L'Oreal, Groupe DANONE, Cingular Wireless, Louis Vuitton, Thales, Club Med, Pfizer, SkyTeam, Home Depot, Pleasant Holidays, Renault, Europcar, Autotrader.com, Equifax, Telecom Italia and the Government of Quebec. Nurun's centres of expertise employ approximately 630 professionals in Canada, the U.S., Europe and China. For more information, please visit www.nurun.com.



NURUN INC.
Consolidated Balance Sheets
September 30, 2006, with comparative figures as at December 31, 2005
(in thousands of dollars)
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2006 2005
(unaudited) (audited)
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Assets

Current assets:
Cash and cash equivalents $33,234 $31,834
Temporary investment 120 120
Accounts receivable 16,524 16,914
Work in process 8,611 7,417
Income taxes and tax credits receivable 2,507 2,755
Prepaid expenses 1,250 1,165
Future tax assets 1,402 1,039
Subordinated loan to an affiliated
company and interests receivable 165,108 -
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228,756 61,244
Capital assets 2,953 2,918
Intangible assets 573 357
Future tax assets 4,271 3,248
Goodwill 15,477 7,343
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$252,030 $75,110
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Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued liabilities $17,647 $14,644
Income taxes payable 114 467
Deferred revenues 2,892 2,420
Preferred shares and dividends payable 165,108 -
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185,761 17,531

Other liability 875 -
Shareholders' equity:
Share capital 303,974 305,079
Contributed surplus 10,200 4,978
Deficit (244,260) (247,963)
Cumulative translation adjustment (4,520) (4,515)
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65,394 57,579
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$252,030 $75,110
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NURUN INC.
Consolidated Statements of Earnings and Deficit
Three-month periods ended September 30, 2006 and 2005
(in thousands of dollars, except amounts per share) (unaudited)
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2006 2005
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Revenues $17,198 $15,628

Expenses:
Cost of services and selling and
administrative expenses 15,759 14,708
Loss on foreign exchange 41 327
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15,800 15,035
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Operating income 1,398 593

Interest income, net (229) (183)
Depreciation and amortization 426 468
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Earnings before income taxes 1,201 308

Income taxes (recovery) (1,411) 294
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Net earnings from continuing operations 2,612 14

Net loss from discontinued operations 875 -
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Net earnings 1,737 14

Deficit, beginning of period (245,997) (250,300)
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Deficit, end of period $(244,260) $(250,286)
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Net earnings per share -- basic and diluted
-- continuing operations $0.08 $-

Net loss per share -- basic and diluted --
discontinued operations 0.03 -
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Net earnings per share -- basic and diluted $0.05 $-
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Basic weighted average number of shares
outstanding (in thousands) 33,213 32,957

Diluted weighted average number of shares
outstanding (in thousands) 33,716 33,079
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NURUN INC.
Consolidated Statements of Earnings and Deficit
Nine-month periods ended September 30, 2006 and 2005
(in thousands of dollars, except amounts per share) (unaudited)
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2006 2005
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Revenues $53,907 $48,882

Expenses:
Cost of services and selling and
administrative expenses 49,506 45,807
Loss on foreign exchange 244 205
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49,750 46,012
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Operating income 4,157 2,870

Interest income, net (698) (660)
Depreciation and amortization 1,235 1,299
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Earnings before income taxes 3,620 2,231

Income taxes (recovery) (958) 887
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Net earnings from continuing operations 4,578 1,344

Net loss from discontinued operations 875 -
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Net earnings 3,703 1,344

Deficit, beginning of period (247,963) (251,630)
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Deficit, end of period $(244,260) $(250,286)
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Net earnings per share -- basic and diluted
-- continuing operations $0.14 $0 .04

Net loss per share -- basic and diluted --
discontinued operations 0.03 -
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Net earnings per share -- basic and diluted $0.11 $0.04
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Basic weighted average number of shares
outstanding (in thousands) 33,132 33,116

Diluted weighted average number of shares
outstanding (in thousands) 33,712 33,254
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NURUN INC.
Consolidated Statements of Cash Flows
Three-month periods ended September 30, 2006 and 2005
(in thousands of dollars) (unaudited)
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2006 2005
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Cash flows related to operating activities:
Net earnings $1,737 $14
Adjustments for:
Depreciation and amortization 426 468
Future income taxes (1,395) 76
Stock-based compensation and other 278 176
Net loss from discontinued operations 875 -
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1,921 734
Tax consolidation 2,700 -
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4,621 734
Net change in non -cash operating working
capital items
Accounts receivable 1,381 898
Work in process 72 (3,358)
Income taxes and tax credits receivable (744) (372)
Accounts payable and accrued liabilities (27) (1,393)
Deferred revenues 392 182
Other (127) 90
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5,568 (3,219)
Cash flows related to financing activities:
Issuance of common shares 31 -
Redemption of common shares (274) (129)
Issuance of preferred shares 165,000 -
Subordinated loan to an affiliated company (165,000) -
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(243) (129)
Cash flows related to investing activities:
Business acquisitions, net of acquired cash
and cash equivalents (2,788) -
Additions to capital assets (388) (179)
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(3,176) (179)
Effect of exchange rate changes on cash and
cash equivalents 36 (373)
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Net increase (decrease) in cash and cash
equivalents 2,185 (3,900)

Cash and cas h equivalents, beginning of
period 31,049 32,282
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Cash and cash equivalents, end of period $33,234 $28,382
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NURUN INC.
Consolidated Statements of Cash Flows
Nine-month periods ended September 30, 2006 and 2005
(in thousands of dollars) (unaudited)
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2006 2005
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Cash flows related to operating activities:
Net earnings $3,703 $1,344
Adjustments for:
Depreciation and amortization 1,235 1,299
Future income taxes (1,351) 278
Stock-based compensation and other 854 576
Net loss from discontinued operations 875 -
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5,316 3,497
Tax consolidation 2,700 -
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8,016 3,497
Net change in non -cash operating working
capital items
Accounts receivable 1,459 321
Work in process (988) (5,738)
Income taxes and tax credits receivable (211) 63
Accounts payable and accrued liabilities 900 1,611
Deferred revenues 471 23
Other (53) 14
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9,594 (209)
Cash flows related to financing activities:
Issuance of common shares 131 -
Redemption of common shares (1,248) (764)
Issuance of preferred shares 165,000 -
Subordinated loan to an affiliated company (165,000) -
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(1,117) (764)
Cash flows related to investing activities:
Net proceeds from disposal of a subsidiary - 3,839
Business acquisitions, net of acquired cash
and cash equivalents (6,065) (1,257)
Additions to capital assets (900) (1,089)
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(6,965) 1,493
Effect of exchange rate changes on cash and
cash equivalents (112) (450)
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Net increase in cash and cash equivalents 1,400 70

Cash and cas h equivalents, beginning of period 31,834 28,312
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Cash and cash equivalents, end of period $33,234 $28,382
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