Xentel DM Incorporated
TSX VENTURE : XDM

Xentel DM Incorporated

June 01, 2005 07:00 ET

Xentel Reports First Quarter 2005 Results

CALGARY, ALBERTA--(CCNMatthews - May 31, 2005) - Xentel DM Incorporated (TSX VENTURE:XDM) -



--------------------------------------------------------
Three months ended March 31 2005 2004
--------------------------------------------------------
($ 000's, except per share amounts)
--------------------------------------------------------
Revenue $ 33,081 $ 34,595
--------------------------------------------------------
Gross Margin 9,013 10,313
--------------------------------------------------------
Net earnings 950 906
--------------------------------------------------------
EBITDA (i) 2,781 3,092
--------------------------------------------------------
Diluted EPS $ 0.04 $ 0.04
--------------------------------------------------------
Diluted EBITDA per share (i) $ 0.11 $ 0.12
--------------------------------------------------------

(i) EBITDA - Net Earnings before income taxes, interest,
depreciation and amortization. Since 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 EBITDA differs


Xentel DM Incorporated a North American specialty entertainment and relationship marketing company, today reported its first quarter financial results for the three months ended March 31, 2005.

For the first quarter 2005 the Company reported net earnings of $1.0 million compared to $0.9 for the first quarter 2004. For the same periods, revenues decreased by 4% to $33.1 million from $34.6 million.

The Canadian operations contributed $0.5 million of the net earnings and the US operations contributed $0.5 million of the net earnings for the first quarter 2005 compared to respective contributions of net earnings for the first quarter of 2004 of $0.8 million and $0.1 million. The Canadian earnings returned to more normalized levels after a strong first quarter 2004. Fulfillment rates in the US show improvement over the late 2004 levels.

In the latter part of 2004 and in early 2005, management implemented a number of programs for revenue enhancement and cost containment as part of the strategic business plan designed to refocus and revitalize the enterprise for a return to profitability in 2005.

Business highlights

- A number of revenue guarantees to US clients have been renegotiated to reduced levels which will decrease operating costs in 2005 by $1.0 million.

- The Company continues to work with its lenders to realign the banking covenants. The lender providing the Canadian operating facility has requested the Company secure alternative financing and, in that connection, the Company is evaluating a number of banking proposals to replace the Canadian facility.

- Corporate offices in Fort Lauderdale and Toronto have been relocated resulting in space cost reductions.

- The Schroder legal action remains unchanged except that discoveries are expected to proceed in the latter half of 2005.

"We are excited about the first quarter 2005 results," said Mr. Platz, Chairman. "The measures introduced for revenue enhancement and cost containment are having a positive effect and it appears the consumer resistance in the US experienced in the latter part of 2004 is abating."

Geoff Pickering, President, added, "We are well ahead of our budget projections for 2005 which will assist greatly in re establishing our lending relationships."

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. With the completion of the AMT acquisition, Xentel DM Incorporated has over 450 clients and 3,000 employees in 31 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
('000s)
March 31, March 31, Dec. 31,
2005 2004 2004
(unaudited) (unaudited) (audited)
Assets
Current assets

Cash and cash equivalents $ 116 $ 1,795 $ 280
Accounts receivable, net of
allowances 8,251 8,543 8,512
Inventory 711 419 536
Work in process 7,222 8,372 6,703
Prepaid expenses 1,361 1,983 651
Future income taxes 32 928 73
Other current assets 128 77 120
--------- --------- ---------

17,821 22,117 16,875

Deferred financing costs, net
of amortization 363 538 385
Equipment 4,783 5,556 5,176
Future income taxes 5,607 2,313 5,917
Other intangible assets 7,649 10,466 8,060
--------- --------- ---------

$ 36,223 $ 40,990 $ 36,413
--------- --------- ---------
--------- --------- ---------
Liabilities
Current liabilities

Bank indebtedness $ 2,031 $ 829 $ 2,756
Accounts payable and accrued
liabilities 7,049 8,479 7,050
Income and other taxes payable 85 6 109
Current portion of long term debt 5,397 1,564 5,732
Future income taxes 1,066 1,068 1,066
--------- --------- ---------

15,628 11,946 16,713

Long term debt 5,065 10,637 4,930
Future income taxes 3,423 2,475 3,298
--------- --------- ---------

24,116 25,058 24,941
Shareholders' equity

Share capital 8,728 8,278 8,728
Warrants 185 635 185
Cumulative translation adjustment (2,987) (1,900) (2,672)
Retained earnings 6,181 8,919 5,231
--------- --------- ---------

12,107 15,932 11,472
--------- --------- ---------

$ 36,223 $ 40,990 $ 36,413
--------- --------- ---------
--------- --------- ---------


Xentel DM Incorporated
Consolidated Statements of Operations and Retained Earnings
For the Three Months Ended March 31 2005 2004
('000s, except per share amount) (unaudited) (unaudited)

Revenue $ 33,081 $ 34,595

Cost of revenue 24,068 24,282
--------- ---------

Gross margin 9,013 10,313
--------- ---------
Corporate expenses

Branch overhead and corporate
administration 6,232 7,221
Interest expense 285 317
Amortization 1,012 1,117
--------- ---------

7,529 8,655
--------- ---------

Earnings before income taxes 1,484 1,658

Income tax expense
Current income tax expense 272 551
Future income tax expense 262 201
--------- ---------

534 752
--------- ---------

Net earnings 950 906

Retained earnings, beginning
of period 5,231 8,013
--------- ---------

Retained earnings, end of period $ 6,181 $ 8,919
--------- ---------
--------- ---------

Basic and diluted net
earnings per share $ 0.04 $ 0.04
--------- ---------
--------- ---------

Basic and diluted weighted
number of shares outstanding 24,814 24,814
--------- ---------
--------- ---------


Xentel DM Incorporated
Consolidated Statements of Cash Flows
For the Three Months Ended March 31 2005 2004
('000s) (unaudited) (unaudited)

Cash flows from (used in)
operating activities

Net earnings for the period $ 950 $ 906

Non cash transactions
reflected in net earnings
Amortization 1,012 1,117
Future income tax expense 262 201
Adjustment for debt accretion charges 86 140
2,310 2,364
Net change in non cash
working capital items
Accounts Receivable 321 (993)
Inventory and work in process (652) (1,413)
Prepaid expenses (708) (729)
Other current assets (7) 72
Income and other taxes payable 221 571
Accounts payable and accrued
liabilities (47) 219
Net change in non cash
working capital items (872) (2,273)

1,438 91
Cash flows from (used in)
financing activities

Bank indebtedness (758) 493
Long term debt - external (399) (93)
(1,157) 400
Cash flow from (used in)
investing activities

Investment in capital assets, net (62) (187)
(62) (187)

Effect of exchange rate
fluctuations on cash balances (383) (298)

Net increase (decrease) in
cash and cash equivalents (164) 6

Cash and cash equivalents,
beginning of period 280 1,789

Cash and cash equivalents,
end of period $ 116 $ 1,795


The TSX Venture Exchange has neither approved nor disapproved the contents of this announcement.

Contact Information