Xentel DM Incorporated
TSX VENTURE : XDM

Xentel DM Incorporated

August 22, 2005 09:00 ET

Xentel Reports Second Quarter 2005 Results

CALGARY, ALBERTA--(CCNMatthews - Aug. 22, 2005) - Xentel DM Incorporated (TSX VENTURE:XDM) -



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Three months ended June 30 2005 2004
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($ 000's, except per share amounts)
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Revenue $ 32,335 $ 32,701
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Gross Margin 8,039 8,180
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Net (loss) earnings 366 (673)
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EBITDA 2,061 278
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EPS, fully diluted $ 0.01 $ (0.03)
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EBITDA, per share, fully diluted $ 0.09 $ 0.01
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Six months ended June 30 2005 2004
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($ 000's, except per share amounts)
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Revenue $ 65,416 $ 67,296
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Gross Margin 17,052 18,493
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Net earnings 1,316 233
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EBITDA 4,842 3,370
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EPS, fully diluted $ 0.05 $ 0.01
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EBITDA, per share, fully diluted $ 0.20 $ 0.13
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(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.
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Xentel DM Incorporated a North American specialty entertainment and relationship marketing company, today reported its second quarter financial results for the three and six months ended June 30, 2005.

The second quarter 2005 continued to produce improved results with net earnings of $0.4 million compared to a loss of $0.7 million for the second quarter 2004. Year to date for fiscal 2005, net earnings were $1.3 million compared to $0.2 million for the six months ended June 30, 2004. On an earnings per share basis, the three and six months ended June 30, 2005 generated $0.01 and $0.05 per diluted share respectively compared to a loss of $0.03 for the three months ended June 30, 2004 and earnings of $0.01 for the six months ended June 30, 2004.

Year to date 2005, the Canadian operations contributed $0.5 million of net earnings and the US operations contributed $0.8 million of net earnings.

The Canadian operations continue to be stable with moderate growth and continuing earnings improvement. The results for the US operations continue to be adversely affected by the conversion impact of the exchange rates between Canada and the US; however, earnings have improved with the improvement in consumer attitudes and the related improvement in fulfillment rates.

Business highlights

- Fulfillment rates are continuing to trend upwards.

- Continuing pursuit of cost cutting measures as reflected in the reduction of branch overhead and corporate administration expenses year over year.

- Optimization of the Company operating strategy in the realignment of capacity in the US by the closure of a number of offices and the commitment to the opening of new offices.

- The restructuring and reduction of events in Canada in parallel to similar reductions made in the US in 2004.

- The Company is continuing to arrange new operating credit facilities which will put it onside with its banking covenants and allow the long term debt to be moved out of current liabilities.

Mr. Mike Platz, Chairman, stated, "We are very pleased with the second quarter results. It shows that the measures introduced to return the Company to profitability are taking effect."

"It was important for positive second quarter results to prove that this was not going to be a repeat of 2004," noted Mr. Geoff Pickering, President.

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 34 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)
June 30, June 30, Dec. 31,
2005 2004 2004
(unaudited) (unaudited) (audited)
Assets
Current assets

Cash and cash equivalents $ 179 $ 1,295 $ 280
Accounts receivable, net
of allowances 8,245 8,713 8,512
Inventory 716 483 536
Work in process 6,923 8,549 6,703
Prepaid expenses 887 1,214 651
Future income taxes 22 1,434 73
Other current assets 146 88 120

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

17,118 21,776 16,875

Deferred financing costs,
net of amortization 327 461 385
Equipment 4,378 5,945 5,176
Future income taxes 5,356 2,369 5,917
Other intangible assets 7,210 10,036 8,060

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

$ 34,389 $ 40,587 $ 36,413

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

Liabilities
Current liabilities

Bank indebtedness $ 1,066 $ 1,323 $ 2,756
Accounts payable and
accrued liabilities 6,018 7,455 7,050
Income and other taxes
payable 242 65 109
Current portion of long
term debt 4,920 1,769 5,732
Future income taxes 1,066 1,068 1,066

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

13,312 11,680 16,713

Long term debt 5,242 10,681 4,930
Future income taxes 3,246 2,496 3,298

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

21,800 24,857 24,941

Shareholders' equity

Share capital 8,728 8,728 8,728
Warrants 185 185 185
Contributed surplus 22 - -
Cumulative translation
adjustment (2,893) (1,429) (2,672)
Retained earnings 6,547 8,246 5,231

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

12,589 15,730 11,472

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

$ 34,389 $ 40,587 $ 36,413

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


Xentel DM Incorporated
Consolidated Statements of Operations and Retained Earnings
('000s, except per share amount, unaudited)

Three Months Ending Six Months Ending
June 30 June 30
2005 2004 2005 2004


Revenue $ 32,335 $ 32,701 $ 65,416 $ 67,296

Cost of revenue 24,296 24,521 48,364 48,803

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

Gross margin 8,039 8,180 17,052 18,493

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

Corporate expenses

Branch overhead and
corporate administration 5,978 7,902 12,210 15,123
Interest expense 288 321 574 639
Amortization 1,024 1,236 2,035 2,353

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

7,290 9,459 14,819 18,115


Earnings (loss) before
income taxes 749 (1,279) 2,233 378

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

Income tax expense
(recovery)
Current income tax
expense (recovery) 70 (129) 342 422
Future income tax
expense (recovery) 313 (477) 575 (277)

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

383 (606) 917 145

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

Net earnings (loss) 366 (673) 1,316 233

Retained earnings,
beginning of period 6,181 8,919 5,231 8,013
-------- -------- -------- --------

Retained earnings,
end of period $ 6,547 $ 8,246 $ 6,547 $ 8,246

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

Basic and diluted net
earnings (loss)
per share $ 0.01 $ (0.03) $ 0.05 $ 0.01

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

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

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

Consolidated Statements
of Contributed Surplus

Balance at beginning
of period $ - $ - $ - $ -

Stock based compensation
on issuance of options 22 - 22 -

-------- -------- -------- --------
Balance at end of period $ 22 - $ 22 -
-------- -------- -------- --------
-------- -------- -------- --------


Xentel DM Incorporated
Consolidated Statements of Cash Flows
('000s, unaudited)
Three Months Ending Six Months Ending
June 30 June 30
2005 2004 2005 2004

Cash flows from (used in)
operating activities

Net earnings (loss) for
the period $ 366 $ (673) $ 1,316 $ 233


Non cash transactions
reflected in net earnings
Amortization 1,024 1,236 2,035 2,353
Future income tax
expense(recovery) 313 (477) 575 (277)
Stock based compensation 22 - 22 -
Adjustment for debt
accretion charges 86 95 172 234

-------- -------- -------- --------
1,811 181 4,120 2,543

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

Net change in non cash
working capital items
Accounts Receivable 68 (170) 389 (1,163)
Inventory and work
in process 336 (241) (316) (1,654)
Prepaid expenses 478 769 (229) 40
Other current assets (18) (11) (25) (61)
Income and other taxes
payable (46) 59 175 630
Accounts payable and
accrued liabilities (1,059) (1,024) (1,105) (805)

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

Net change in non cash
working capital items (241) (618) (1,111) (3,013)

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

1,570 (437) 3,009 (470)

Cash flows from (used in)
financing activities

Bank indebtedness (975) 494 (1,733) 987
Long term debt (472) 40 (871) 249

-------- -------- -------- --------
(1,447) 534 (2,604) 1,236

-------- -------- -------- --------
Cash flow (used in)
investing activities

Investment in capital
assets, net (46) (754) (108) (941)

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

Effect of exchange rate
fluctuations on cash
balances (14) 157 (398) (319)

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

Net increase (decrease)
in cash and cash
equivalents 63 (500) (101) (494)

Cash and cash equivalents,
beginning of period 116 1,795 280 1,789

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

Cash and cash equivalents,
end of period $ 179 $ 1,295 $ 179 $ 1,295
-------- -------- -------- --------
-------- -------- -------- --------



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