Xentel DM Incorporated
TSX VENTURE : XDM

Xentel DM Incorporated

June 05, 2006 14:49 ET

Xentel Reports First Quarter 2006 Results

CALGARY, ALBERTA--(CCNMatthews - June 5, 2006) - Xentel DM Incorporated (TSX VENTURE:XDM) -



--------------------------------------------------------------------
Three months ended March 31 2006 2005
--------------------------------------------------------------------
($ 000's, except per share amounts)
Revenue $ 31,227 $ 33,081
--------------------------------------------------------------------
Gross Margin $ 7,877 $ 9,013
--------------------------------------------------------------------
Net (loss) earnings $ 182 $ 950
--------------------------------------------------------------------
EBITDA(i) $ 1,608 $ 2,781
--------------------------------------------------------------------
EPS, fully diluted $ 0.01 $ 0.04
--------------------------------------------------------------------
EBITDA, per share, fully diluted $ 0.06 $ 0.11
--------------------------------------------------------------------

(i)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.
--------------------------------------------------------------------


Xentel DM Incorporated a North American specialty entertainment and relationship marketing company, today reported its financial results for the three and twelve months ended March 31, 2006.

The results of operations for the first quarter ended March 31, 2006 produced net earnings of $182 thousand compared to net earnings of $950 thousand for the same period in 2005. The reduction in net earnings is significantly attributable to a trial program the Company undertook commencing in late 2005 to execute telemarketing services from offshore which cost approximately $590 thousand. This program was cancelled in the early part of the second quarter 2006.

Michael Platz, Company Chairman and CEO stated, "The revenue decline of $1,854 thousand is focused in the US and is the result of a combination of the foreign exchange conversion into Canadian dollars and an absolute decline in revenues of approximately of $1,003 thousand from less than profitable clients whose contracts were not renewed. We continue to rethink the business structure and to focus on cost containment as well as the development of marketing strategies to strengthen profitability. Additionally, indications are that the Canadian Do Not Call legislation passed into law in Canada in late 2005 will not be implemented until a number of administrative issues are resolved likely in late 2007 or early 2008."

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 450 clients and 3,000 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
($ '000s)

March 31, March 31, December 31,
2006 2005 2005
(unaudited) (unaudited) (audited)
Assets
Current assets

Cash and cash equivalents $ 325 $ 116 $ 452
Accounts receivable, net of
allowances 9,117 8,251 9,295
Inventory 537 711 461
Work in progress 6,888 7,222 6,263
Prepaid expenses 644 1,361 497
Future income taxes 919 32 915
Other current assets 199 128 203
--------- --------- ---------

18,629 17,821 18,086

Deferred financing costs 336 363 381
Due from related party 1,518 - 1,512
Equipment 4,107 4,783 4,151
Future income taxes 3,397 5,607 3,655
Other intangible assets 4,504 6,419 4,915
Goodwill 1,182 1,230 1,178
--------- --------- ---------
$ 33,673 $ 36,223 $ 33,878
--------- --------- ---------
--------- --------- ---------
Liabilities
Current liabilities

Bank indebtedness $ 1,781 $ 2,031 $ 1,309
Accounts payable and accrued
liabilities 6,318 7,049 6,868
Income taxes payable 822 85 999
Current portion of long
term debt 1,954 5,397 1,885
Future income taxes 835 1,066 835
--------- --------- ---------

11,710 15,628 11,896

Long term debt 3,035 82 3,337
Due to related parties 2,447 4,983 2,416
Future income taxes 2,962 3,423 2,903
--------- --------- ---------
20,154 24,116 20,552
Shareholders' equity

Share capital 9,291 8,728 9,291
Warrants 205 185 205
Contributed surplus 58 - 58
Cumulative translation
adjustment (2,984) (2,987) (2,995)
Retained earnings 6,949 6,181 6,767
--------- --------- ---------
13,519 12,107 13,326

--------- --------- ---------

$ 33,673 $ 36,223 $ 33,878
--------- --------- ---------
--------- --------- ---------


Xentel DM Incorporated
Consolidated Statements of
Operations and Retained Earnings
For the Three Months Ended March 31 2006 2005
('000s, except per share amount) (unaudited) (unaudited)

Revenue $ 31,227 $ 33,081

Cost of revenue 23,350 24,068
--------- ---------

Gross margin 7,877 9,013
--------- ---------
Corporate expenses

Branch overhead and corporate
administration 6,269 6,232
Interest expense 255 285
Amortization of equipment 551 508
Amortization of intangible assets 427 504
--------- ---------
7,502 7,529
--------- ---------

Earnings before income taxes 375 1,484

Income tax expense
Current income tax expense (recovery) (77) 272
Future income tax expense 270 262
--------- ---------

193 534
--------- ---------

Net earnings 182 950

Retained earnings, beginning
of period 6,767 5,231
--------- ---------
Retained earnings, end of period $ 6,949 $ 6,181
--------- ---------
--------- ---------

Basic and diluted net earnings per
share $ 0.01 $ 0.04
--------- ---------
--------- ---------

Basic and diluted weighted number
of shares outstanding 26,205 24,814
--------- ---------
--------- ---------


Consolidated Statements of
Contributed Surplus

Balance at beginning of period $ 58 $ -
--------- ---------
Balance at end of period $ 58 -
--------- ---------
--------- ---------


Xentel DM Incorporated
Consolidated Statements of Cash Flows
For the Three Months Ended March 31 2006 2005
('000s) (unaudited) (unaudited)

Cash flows from (used in)
operating activities

Net earnings for the period $ 182 $ 950

Non cash transactions reflected
in net earnings
Amortization 978 1,012
Future income tax expense 270 262
Adjustment for debt accretion charges 28 86
--------- ---------
1,458 2,310
--------- ---------
Net change in non cash working
capital items
Accounts receivable 201 321
Inventory and work in process (684) (652)
Prepaid expenses (145) (708)
Other current assets (16) (7)
Income and other taxes payable (131) 221
Accounts payable and accrued
liabilities (566) (47)
--------- ---------
(1,341) (872)
--------- ---------

117 1,438

Cash flows from (used in)
financing activities

Bank indebtedness 461 (758)
Long term debt (257) (399)
--------- ---------
204 (1,157)
--------- ---------
Cash flow from (used in)
investing activities

Investment in capital assets, net (452) (62)
--------- ---------
(452) (62)
--------- ---------

Effect of exchange rate fluctuations
on cash balances (4) (383)
--------- ---------

Net increase (decrease) in cash and
cash equivalents (127) (164)

Cash and cash equivalents, beginning
of period 452 280
--------- ---------

Cash and cash equivalents, end
of period $ 325 $ 116
--------- ---------
--------- ---------



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

Contact Information