Xentel DM Incorporated
TSX VENTURE : XDM

Xentel DM Incorporated

May 01, 2008 06:00 ET

Xentel Reports December 31, 2007 Fiscal Year End Results

CALGARY, ALBERTA--(Marketwire - May 1, 2008) -



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Three months Fiscal year
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Period ended December 31 2007 2006 2007 2006
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($ 000's, except per share amounts)
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Revenue $ 22,866 $ 28,364 $ 100,079 $ 113,643
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Gross Margin 3,672 6,722 20,412 27,672
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Net (loss) earnings (1,234) (249) (1,660) 160
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EBITDA (1,411) 1,205 1,017 5,804
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EPS, fully diluted $ (0.05) $ (0.01) $ (0.06) $ 0.01
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EBITDA, per share, fully diluted $ (0.05) $ 0.05 $ 0.04 $ 0.22
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- EBITDA - Net Earnings before income taxes, interest, depreciation and
amortization. Since Gross Margin, EBITDA and diluted EBITDA per share have
no standardized GAAP meaning, the comparability of these amounts to other
enterprises may not be possible if the basis of calculation of differs.
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Xentel DM Incorporated (TSX VENTURE:XDM) a North American specialty entertainment and relationship marketing company, today reported its financial results for the three and twelve months ended December 31, 2007.

Net loss for the fourth quarter 2007 was $1,234 thousand compared to a net loss of $249 thousand for the fourth quarter 2006. Revenues amounted to $22,866 thousand compared to $28,364 thousand for the fourth quarters 2007 and 2006 respectively. EBITDA for the three months ended December 31, 2007 was negative $1,411 thousand compared to $1,205 thousand for the same period in 2006. The 2007 fourth quarter loss was partially the result of a conscious decision to increase data development activity designed to freshen the transactional database which had the effect of significantly reducing productivity and margins.

For the fiscal years ended December 31, 2007 and 2006 revenues were $100,079 thousand and $113,643 thousand respectively. For the twelve months ended December 31, 2007 the Company incurred a net loss of $1,660 thousand compared to net earnings of $160 thousand for the same period in 2006 or negative $0.06 per diluted share for 2007 compared to $0.01 per diluted share for 2006. EBITDA for the year ended December 31, 2007 was $1,017 thousand or $0.04 per basic and diluted share compared to EBITDA for the same period in 2006 of $5,804 thousand or $0.22 per basic and diluted share.

During the year, the Company had:

- strategically adjusted commercial arrangements with clients or not renewed selected client contracts designed to improve profitability,

- made management changes designed to improve productivity, and,

- continued its cost optimization measures.

2007 was a year of refocus and redirection. Branch overhead and corporate administration costs decreased 11% year over year. These dramatic changes were made in an effort to control costs and improve profitability; however, continuing consumer resistance to telemarketing adversely affected productivity resulting in a financial loss for the Company. While consumer attitudes are not controllable, management is adjusting its marketing techniques to improve consumer relations. Going into 2008, management is taking further steps to realign labour utilization and significantly alter the previously proven business model to better adapt to current circumstances as part of a program to improve future results. In 2007, there was a significant decline in revenues resulting from the measures taken and the revised model for 2008 will further that impact.

David Winograd, President US operations noted, "The restructuring efforts by management earlier in the year did not produce the desired results as timely as anticipated but nonetheless were necessary to prevent further erosion to profitability. Management is reviewing all aspects of the strategic business model, finding new ways to improve profitability and adapt to current circumstances."

Michael Platz, Chairman, further stated, "New tactical plans for labour utilization will have a positive impact on productivity combined with management realignment and office relocation will move the Company to improved margins."

Xentel DM Incorporated is one of North America's leading relationship-marketing concerns and producers of cause related entertainment events. The Company's success is attributable to proprietary sales tools including technologically advanced teleservices and sophisticated customer databases. Xentel DM Incorporated has over 400 clients and 2,100 employees in over 30 offices across North America.

Certain statements in this press release may constitute "forward looking statements" and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any performance or achievement expressed or implied by such "forward looking statements".



Xentel DM Incorporated
Consolidated Balance Sheets
As at December 31 2007 2006
('000s)

Assets
Current assets

Cash and cash equivalents $ 205 $ 795
Accounts receivable, net of allowances 6,488 8,956
Inventory
628 628
Work in process 5,630 6,421
Prepaid expenses 838 1,106
Due from related party - 1,514
Future income taxes 230 643

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14,019 20,063

Deferred financing costs, net of amortization - 210
Due from related party 1,288 -
Equipment 2,987 3,622
Future income taxes 3,163 2,843
Other intangible assets 1,277 3,207
Goodwill 1,004 1,180

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$ 23,738 $ 31,125
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Liabilities
Current liabilities

Bank indebtedness $ 1,303 $ 1,259
Accounts payable and accrued liabilities 5,913 6,654
Income taxes payable 64 365
Current portion of long term liabilities 1,343 2,058
Future income taxes 662 1,016

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9,285 11,352

Long term debt 24 1,542
Due to related party 2,488 2,729
Future income taxes 1,028 1,628
Deferred tenant inducement 306 389

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13,131 17,640

Shareholders' equity

Share capital 9,280 9,280
Warrants 205 205
Contributed surplus 79 70
Accumulated other comprehensive income (4,224) (2,997)
Retained earnings 5,267 6,927

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10,607 13,485

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$ 23,738 $ 31,125
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Xentel DM Incorporated
Consolidated Statements of Operations
and Retained Earnings
For the years ended December 31 2007 2006
('000s, except per share amounts)

Revenue $ 100,079 $ 113,643

Cost of revenue 79,667 85,971

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Gross margin 20,412 27,672

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Corporate expenses

Branch overhead and corporate administration 19,395 21,868
Interest expense 702 1,201
Amortization of equipment 1,156 1,894
Amortization of intangible assets 1,584 1,673

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22,837 26,636

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Earnings (loss) before undernoted items (2,425) 1,036

Other items
Expenses relating to the 2003 privatization
lawsuit (240) (151)
Loss on disposal of other investments - (191)

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Earnings (loss) before income taxes (2,665) 694

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Income tax expense (recovery)
Current income tax expense (recovery) (256) 802
Future income tax (recovery) (749) (268)

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(1,005) 534

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Net earnings (loss) (1,660) 160

Retained earnings, beginning of year 6,927 6,767

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Retained earnings, end of year $ 5,267 $ 6,927
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Basic and diluted net earnings (loss)
per share $ (0.06) $ 0.01
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Basic weighted average number of shares 26,195 26,203
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Diluted weighted average number of shares 26,195 26,213
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Xentel DM Incorporated
Consolidated Statements of Contributed Surplus
For the years ended December 31 2007 2006
('000s)

Balance, beginning of year $ 70 $ 58

Stock based compensation on vesting of options 9 15
Forfeited options on termination - (3)

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Balance, end of year $ 79 $ 70
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Xentel DM Incorporated
Consolidated Statements of Comprehensive Income
For the years ended December 31 2007 2006
('000s)

Net earnings (loss) for the year $ (1,660) $ 160

Foreign currency translation adjustment
from self sustaining foreign operations (1,227) (2)

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Comprehensive income (loss) $ (2,887) $ 158
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Xentel DM Incorporated
Consolidated Statements of Accumulated
Other Comprehensive Income
For the years ended December 31 2007 2006
('000s)

Transition adjustment - January 1, 2006 $ - $ (2,995)

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Balance, beginning of year (2,997) (2,995)

Foreign currency translation adjustment from
self sustaining foreign operations (1,227) (2)

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Balance, end of year $ (4,224) $ (2,997)
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Xentel DM Incorporated
Consolidated Statements of Cash Flows
For the years ended December 31 2007 2006
('000s)

Cash flows from (used in) operating activities

Net earnings (loss) for the year $ (1,660) $ 160

Non cash transactions reflected in net
earnings (loss)

Amortization 2,740 3,567
Future income tax (recovery) (748) (268)
Stock based compensation 9 15
Adjustment for non cash interest 322 475

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663 3,949

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Net change in non cash working capital items
Accounts receivable 1,916 347
Inventory and work in process 215 (320)
Prepaid expenses 194 (600)
Other current assets - 203
Income taxes payable (737) (377)
Accounts payable and accrued liabilities (373) (224)

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Net change in non cash working capital items 1,215 (971)

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1,878 2,978

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Cash flows from (used in) financing activities

Bank indebtedness 192 (35)
Long term debt repaid (1,989) (1,705)
Tenant inducement payment - 500

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(1,797) (1,240)

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Cash flows (used in) investing activities

Investment in equipment, excluding tenant
improvement (772) (877)
Investment in tenant improvement - (500)

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(772) (1,377)

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Effect of exchange rate fluctuations on
cash balances 101 (18)

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Net increase (decrease) in cash and
cash equivalents (590) 343

Cash and cash equivalents, beginning of year 795 452

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Cash and cash equivalents, end of year $ 205 $ 795
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