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Xentel | | . | Financial Report - August 17, 2001 |
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Management Discussion and Analysis—June 30, 2001The following Management Discussion and Analysis of the financial condition and results of operations and cash flows for Xentel DM Incorporated for the six months ended June 30, 2001 should be read in conjunction with the unaudited consolidated financial statements contained in this interim report and the Management Discussion and Analysis of December 31, 2000 of the financial condition and results of operations and cash flows and the audited consolidated financial statements with the related notes to the consolidated financial statements as of December 31, 2000 contained in the Company’s Annual Report. Certain statements in this report 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". Revenues Revenues for the three months ended June 30, 2001 were $23,775,000, an increase of $1,690,000 or 8% over the three months ended June 30, 2000 of $22,085,000. Canadian revenues increased $635,000 and US revenues increased $1,055,000. For the six months ended June 30, 2001, the revenue increase was $701,000 or 1%. The stronger second quarter 2001 revenues are primarily attributable to a higher level of event activity. Divisional revenues for the six months ending June 30, 2001 were as follows:
Revenues for the six months ending June 30, 2001 were derived as follows:
Cost of Revenues The cost of revenues for the first half of 2001 were $33,547,000 or 70% of revenues compared to $37,010,000 or 78% of revenues for the second half of 2000. Divisional cost of revenues for the six months ended June 30, 2001 were as follows:
There has been steady improvement in the gross margin rate attributable to:
Expenses For the six months ending June 30, 2001, the Branch and corporate administration costs were $10,005,000 or 21% of revenues compared to $10,248,000 or 22% of revenues for the same period in 2000. Depreciation and amortization for the six months ending June 30, 2001 was $1,050,000 or 2% of revenues compared to $1,065,000 or 2% of revenues for the six months ending June 30, 2000. For the first half of 2001 interest expense was $476,000 compared to $514,000 for the first half of 2000. Income Taxes Following is a reconciliation of income taxes calculated at statutory rates to the actual income taxes expensed in the accounts:
At June 30, 2001, the Company has available Canadian non capital income tax losses of approximately $300,000 which expire in the years 2002 to 2004. In the United States, the Company has net operating losses for tax purposes of approximately $7,500,000 which expire from the years 2006 to 2017. No recognition has been made in the accounts for the future tax benefit available from the US net operating losses. Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) EBITDA for the six months ending June 30, 2001was $4,391,000 or $0.23 per share compared to negative EBITDA for the same period in 2000 of $16,000. Net Earnings The net earnings for the six months ending June 30, 2001 were $2,217,000 compared to a net loss of $ 2,025,000 for the six months ending June 30, 2000, an increase of $4,242,000. These net earnings were generated as follows:
Trailing Four Quarters ended June 30, 2001 The Company has now had four continuous quarters of profitable operations producing total net earnings for the period of $4,596,000 or $0.24 per share on both a basic and dilutive share basis. The EBITDA for the 4 quarters ended June 30, 2001 was $8,904,000 or $0.47 per share on both a basic and dilutive share basis. Capital Resources and Liquidity During the first half of 2001, the Company’s capital requirements were related to the purchase of additional capital assets of $200,000 and repayment of long term debt and capital leases amounting to $224,000. There was a positive cash flow from operating activities of $811,000 which was used in payment of these activities and permitted a decrease in bank indebtedness of $387,000. Business Risks The Company’s business risks have not changed since December 31, 2000. These risks were outlined in the Management Discussion and Analysis of that date included in the Annual Report. Outlook Revenues increased for the first six months of 2001. For the year 2001, the Company expects the revenues to show a slight increase over the revenues of 2000. The Company continues to emphasize its cost reduction programs, labour productivity improvements and the renewal of existing business on more profitable terms enabling the Company to return to profitably levels consistent with those experienced prior to the US acquisition. Additionally, the Company is implementing over the next 18 to 24 months leading edge teleservices technology which is expected to increase productivity significantly. |
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