Xentel DM Incorporated
TSX VENTURE : XDM

Xentel DM Incorporated

November 17, 2005 09:00 ET

Xentel Reports Third Quarter 2005 Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 17, 2005) - Xentel DM Incorporated (TSX VENTURE:XDM) -



--------------------------------------------------------------------
Three months ended September 30 2005 2004
--------------------------------------------------------------------
($ 000's, except per share amounts)
--------------------------------------------------------------------
Revenue $ 29,560 $ 29,111
--------------------------------------------------------------------
Gross Margin 7,658 6,643
--------------------------------------------------------------------
Net (loss) earnings 179 (904)
--------------------------------------------------------------------
EBITDA 1,422 (329)
--------------------------------------------------------------------
EPS, fully diluted $ 0.01 $ (0.04)
--------------------------------------------------------------------
EBITDA, per share, fully diluted $ 0.05 $ (0.01)
--------------------------------------------------------------------

--------------------------------------------------------------------
Nine months ended September 30 2005 2004
--------------------------------------------------------------------
($ 000's, except per share amounts)
--------------------------------------------------------------------
Revenue $ 94,976 $ 96,407
--------------------------------------------------------------------
Gross Margin 24,710 25,136
--------------------------------------------------------------------
Net (loss) earnings 1,495 (671)
--------------------------------------------------------------------
EBITDA 6,265 3,041
--------------------------------------------------------------------
EPS, fully diluted $ 0.06 $ (0.03)
--------------------------------------------------------------------
EBITDA, per share, fully diluted $ 0.25 $ 0.12
--------------------------------------------------------------------

--------------------------------------------------------------------
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 third quarter financial results for the three and nine months ended September 30, 2005.

The Company's earnings for the third quarter 2005 are a significant improvement over comparable results for the third quarter 2004. For the three months ending September 30, 2005 compared to the same period earnings increased $1,083 thousand from a loss of $904 thousand to earnings of $179 thousand. Similarly for the nine months ending September 30, 2005 and 2004 earnings increased $2,166 thousand from a loss of $671 thousand to earnings of $1,495 thousand.

On an earnings per share basis, the three and nine months ended September 30, 2005 generated $0.01 and $0.06 per share respectively compared to a loss of $0.04 and $0.03 per share for the three and nine months ended September 30, 2004.

Year to date 2005, the Canadian operations contributed $1,119 thousand of net earnings and the US operations contributed $376 thousand of net earnings.

The Canadian operations continue to be stable with reasonable growth and continuing earnings improvement. Part of the improvement in the Canadian operational results is the expansion of the Legends hockey tournament from one game in 2004 to a five city tour in 2005.

In the US, there has been a program initiated to realign the client mix towards a more profitable client portfolio; however, as part of that initiative there has been a reduction of revenues from selected clients. Notwithstanding, revenues in US dollars have moderately increased between the respective periods in 2004 and 2005, although the comparative results, particularly as they relate to revenue, between 2005 and 2004 have been adversely impacted by the changes in the Canadian US exchange rates.

It is too early to assess the full impact of the hurricanes in the US; however, our three South Florida call centers were out of operation for almost two weeks during Hurricanes Rita and Wilma and sales slowed during September and October 2005. Fulfillment rates may also be adversely affected.

Business highlights to this date;

- Completed the reorganization of its lending arrangements and is no longer in default.

- Restructured the purchase debt incurred in the 2003 acquisition which will positively affect in the fourth quarter 2005 earnings before taxes by $2,357 thousand and reduce long term debt by $1,248 thousand. The effect on earnings will reflect an adjustment to future taxes but there are no immediate taxes payable.

- Added two new members to the board of directors, Craig Copland and Barry Sattell. John Burns, Director resigned after providing support and guidance to the company for many years.

- One of the officers from the 2003 acquisition has resigned and transferred his Xentel ownership to David Winograd, the other officer from the 2003 acquisition, who is also President of US operations. Details of this transaction can be viewed in the press release dated November 1, 2005.

- This transaction establishes David Winograd as a significant shareholder with Messrs. Platz and Pickering.

- Geoff Pickering, President, Co-CEO and Director has resigned. This is a first step in the development of a succession plan for Xentel DM Incorporated. Mr. Pickering will continue with similar duties for the company on a consulting basis.

"The third quarter continued to produce positive results and with the restructuring of the Company debt and lending arrangements we have a much stronger balance sheet and working capital position as we go forward for the balance of 2005 and into 2006," noted Michael Platz, Chairman.

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)
September September December
30, 30, 31,
2005 2004 2004
(unaudited) (unaudited) (audited)
Assets
Current assets

Cash and cash equivalents $ 12 $ 738 $ 280
Accounts receivable,
net of allowances 9,367 8,875 8,512
Inventory 572 534 536
Work in process 6,602 7,366 6,703
Prepaid expenses 991 1,448 651
Future income taxes 368 1,275 73
Other current assets 176 87 120

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

18,088 20,323 16,875

Deferred financing costs,
net of amortization 321 429 385
Equipment 4,056 5,462 5,176
Future income taxes 4,986 3,344 5,917
Other intangible assets 6,510 9,011 8,060

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

$ 33,961 $ 38,569 $ 36,413
-------- -------- --------
-------- -------- --------

Liabilities
Current liabilities

Bank indebtedness $ 1,124 $ 2,439 $ 2,756
Accounts payable and
accrued liabilities 6,499 6,668 7,050
Income and other taxes payable 839 593 109
Current portion of long term debt 4,111 6,460 5,732
Future income taxes 903 1,068 1,066

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

13,476 17,228 16,713

Long term debt 4,971 5,119 4,930
Future income taxes 3,032 2,275 3,298

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

21,479 24,622 24,941

Shareholders' equity

Share capital 8,728 8,728 8,728
Warrants 185 185 185
Contributed surplus 95 - -
Cumulative translation adjustment (3,252) (2,308) (2,672)
Retained earnings 6,726 7,342 5,231

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

12,482 13,947 11,472

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

$ 33,961 $ 38,569 $ 36,413
-------- -------- --------
-------- -------- --------

Contingencies


Xentel DM Incorporated
Consolidated Statements of Operations and Retained Earnings
('000s, except per share amount, unaudited)
Three Months Ending Nine Months Ending
September 30 September 30
2005 2004 2005 2004

Revenue $ 29,560 $ 29,111 $ 94,976 $ 96,407

Cost of revenue 21,902 22,468 70,266 71,271

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

Gross margin 7,658 6,643 24,710 25,136

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

Corporate expenses

Branch overhead and
corporate
administration 6,236 6,972 18,445 22,095
Interest expense 271 301 845 940
Amortization 853 987 2,888 3,340

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

7,360 8,260 22,178 26,375

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

Earnings (loss) before
income taxes 298 (1,617) 2,532 (1,239)

Income tax expense
(recovery)
Current income tax
expense 370 357 713 779
Future income tax
expense (recovery) (251) (1,070) 324 (1,347)

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

119 (713) 1,037 (568)

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

Net earnings (loss) 179 (904) 1,495 (671)

Retained earnings,
beginning of period 6,547 8,246 5,231 8,013

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

$ 6,726 $ 7,342 $ 6,726 $ 7,342
Retained earnings,
end of period

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

Basic and diluted net
earnings (loss) per
share $ 0.01 $ (0.04) $ 0.06 $ (0.03)
-------- -------- -------- --------
-------- -------- -------- --------

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 $ 22 $ - $ - $ -

Stock based compensation
on issuance of options 73 - 95 -

-------- -------- -------- --------
Balance at end of
period $ 95 $ - $ 95 $ -
-------- -------- -------- --------
-------- -------- -------- --------


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


Cash flows from (used in)
operating activities

Net earnings (loss) for
the period $ 179 $ (904) $ 1,495 $ (671)


Non cash transactions
reflected in net earnings

Amortization 853 987 2,888 3,340
Future income tax
expense (recovery) (251) (1,070) 324 (1,347)
Stock based compensation 73 - 95 -
Adjustment for debt
accretion charges 83 34 255 268

-------- -------- -------- --------
937 (953) 5,057 1,590

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


Net change in non cash
working capital items

Accounts Receivable (1,330) (161) (940) (1,326)
Inventory and work
in process 214 1,132 (102) (522)
Prepaid expenses (135) (234) (364) (194)
Other current assets (30) 1 (56) 62
Income and other
taxes payable 381 65 556 1,158
Accounts payable and
accrued liabilities 632 (787) (473) (1,592)

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

(268) 16 (1,379) (2,414)

Net change in non cash
working capital items

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

669 (937) 3,678 (824)

Cash flows from (used in)
financing activities

Bank indebtedness 119 1,116 (1,614) 2,102
Long term debt (667) (871) (1,538) (747)

-------- -------- -------- --------
(548) 245 (3,152) 1,355

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


Cash flow (used in)
investing activities

Investment in capital
assets, net (314) (218) (422) (1,159)

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

Effect of exchange rate
fluctuations on cash
balances 26 353 (372) (423)

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

Net increase (decrease)
in cash and cash
equivalents (167) (557) (268) (1,051)

Cash and cash
equivalents, beginning
of period 179 1,295 280 1,789

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

Cash and cash
equivalents, end of
period $ 12 $ 738 $ 12 $ 738
-------- -------- -------- --------
-------- -------- -------- --------



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

Contact Information