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Mitec reports fourth quarter and year end results29 July 2006
Mitec Telecom Inc. (TSX: MTM) today announced its results for the fourth quarter and the year-end of its 2006 fiscal year ended April 30, 2006.
Revenues for the fourth quarter were $10.4 million, compared to $13.4 million in the corresponding quarter in fiscal 2005. Gross profit for the fourth quarter of fiscal 2006 totalled $1.2 million, compared to a gross loss of $0.8 million in the same period in fiscal 2005. Operating expenses for the fourth quarter were $3.9 million, compared to $5.7 million in the prior period. The net loss for the fourth quarter of fiscal 2006 was $4.4 million or $0.06 per share, versus a net loss of $11.5 million, or $0.15 per share in the fourth quarter of fiscal 2005. The net loss includes non-recurring expenses of approximately $1.1 million, which is comprised of a write-down of intangibles, a write-down of fixed assets, an obsolescence provision and accrued fees for the external financial consultant engaged to assist in the evaluation of strategic alternatives.
For the 2006 fiscal year, sales were $44.5 million, compared to $57.5 million in fiscal 2005. Gross profit for the full year was $5.3 million, compared to a gross profit of $5.4 million in 2005. For fiscal 2006, operating expenses totalled $16.5 million, versus the $20.2 million reported in the prior year. Net loss in fiscal 2006 was $17.2 million, or $0.22 per share, versus a net loss of $24.7 million, or $0.34 per share, in the corresponding period last year.
"There is still much work to be done to bring our top line back up to levels where we can be profitable, but I am encouraged by the increased traction we are beginning to gain in certain of our markets," said Keith Findlay, Mitec's President and Chief Executive Officer. "Of particular note are the successes we are beginning to realize in the power amplifier space. The BWT business, which we acquired last year for $1.6 million, is now generating in excess of $4 million in revenues; this market niche offers Mitec excellent opportunities for growth going forward."
STRATEGIC REVIEW UPDATE
On October 18, 2005 Mitec's Board of Directors initiated a review of the Company's global operations. The objective of this analysis has been to examine strategic alternatives that will allow Mitec's Telecom and Satcom groups to realize their inherent potential and maximize shareholder value.
As a part of this process, the Board announced today that it is reviewing the Company's business segments as well as its product and technology portfolio in order to rigorously focus and rationalize Mitec's activities. The subsequent restructuring may include, among other options, a financing and a divestiture of certain assets.
DAVID SCOTT STEPS DOWN AS CHAIRMAN
Mitec's Board of Directors also announced today that David Scott has left the Board in order to concentrate on his other business commitments. Hubert Marleau, who has been a member of the Company's Board since 1996, has been appointed Interim Chair.
"David's counsel and guidance amidst the significant challenges Mitec has faced over the past two years have been extremely valuable, and his tireless efforts as Chairman are greatly appreciated," Mr. Marleau said. "We wish him the best with his current and future endeavours."
SEGMENT INFORMATION
Sales in the Telecom segment in the fourth quarter of fiscal 2006 decreased to $5.6 million, compared to $8.5 million in the fourth quarter of fiscal 2005. Weak sales to a Tier 1 customer, which is transitioning to a new base station platform, contributed to this decrease. In future quarters, the Company anticipates being able to compensate for this revenue shortfall by sales of products derived from its new LMR technology platform. The gross margin in the fourth quarter of fiscal 2006 was 1.2%, compared to a negative gross margin of 27.0% for the same period last year. For the 2006 fiscal year, sales in the Telecom segment reached $24.5 million, compared to $35.4 million in the prior year. The $10.9 million decrease in revenues is largely due to the reasons cited above.
Sales in the Satcom segment in the fourth quarter of fiscal 2006 totalled $4.8 million, virtually unchanged from the sales achieved in the fourth quarter of fiscal 2005. The gross margin was 24.5%, versus 32.8% in the same quarter last year. For the 2006 fiscal year, sales were $20.0 million, compared to $22.1 million in fiscal 2005. Most of this decrease can be attributed to general fluctuations in opportunities for application engineered products. Additionally, both the Telecom and Satcom segments were negatively impacted by the rise of the Canadian dollar in relation to its U.S. counterpart in comparison to 2005 levels.
<<
SELECT FINANCIAL INFORMATION
(in thousands of Canadian dollars except per share data)
Periods ended April 30
Q4 FY06 Q4 FY05 FY06 FY05
-------------------------------------------------------------------------
Sales 10,350 13,351 44,510 57,483
Gross profit 1,245 (721) 5,346 5,405
SG&A 1,976 3,686 9,146 12,303
R&D 1,949 1,994 7,335 7,919
Amortization of
intangible assets 541 576 2,118 2,239
Financing expenses 191 318 1,286 789
Stock-based compensation 58 295 843 1,212
Write-down of property,
plant and equipment,
intangible assets and
goodwill 833 1,943 833 2,873
Restructuring and other
expenses 231 1,142 1,764 2,222
Income tax recovery (149) (137) (594) (379)
Loss from continuing
operations (4,298) (10,427) (17,042) (23,378)
Net loss (4,367) (11,515) (17,163) (24,651)
Loss per share - basic
and diluted:
- Continuing operations (0.06) (0.14) (0.22) (0.32)
- Net loss (0.06) (0.15) (0.22) (0.34)
Total assets 46,972 70,452
Long-term debt 1,911 2,618
Capital leases - 48
Cash and temporary
investments 11,557 17,798
EBITDA(*) from continuing
activities (2,185) (7,155) (11,285) (14,330)
(*) EBITDA is defined as earnings before provisions for interest expense,
income taxes, amortization, write-downs, and non-controlling
interests. EBITDA is not a measure of performance under Canadian
generally accepted accounting principles; however, management uses
this performance measure to assess the operating performance of its
assets.
FINANCIAL UPDATE
"Pending the completion of the strategic review process, we determined it would be prudent to include the going-concern uncertainty in our year-end financial statements," said Stefano Bazzocchi, Mitec's Vice-President, Finance and CFO. "As at April 30 our capital position remained sound, with cash, cash equivalents and short-term investments totalling approximately $11.6 million, and $1.9 million of term debt. However, subsequent to the end of the quarter, we cancelled our line-of-credit facility, which had an availability of $6.0 million. We do not expect that this will have a negative impact on our ability to conduct our operations. In keeping with the strategic review process, we continue to investigate other financing alternatives."
RECENT EVENTS
- On April 3, 2006 Mitec announced that it received new purchase
orders for its Block Up-Converters (BUCS) valued at approximately
$1.5 million. The first order is from a global satellite
communications company that delivers complete solutions to
customers in broadcasting, telecommunications, Internet, industry
and government markets. The second purchase order is from a
worldwide systems integrator specializing in customized satellite
earth terminals and mission-critical network solutions for
governments and businesses.
- On April 20, 2006 Mitec announced that its high-power block up
converters (BUCs) have been selected to support a network for
GSM backhaul in Africa.
- On May 12, 2006 Mitec announced that Jeffrey A. Mandel has been
appointed to the Company's Board of Directors.
- On May 23, 2006 Mitec announced that it has commenced volume
production of a new radio frequency filter product derived from
the Company's proprietary Lid Mounted Resonator (LMR) technology,
and that it has received purchase orders for its filter products
from a major Tier 1 OEM valued at approximately $2.1 million.
OUTLOOK
"Pending the outcome of our restructuring efforts, which will have an impact on our business strategy going forward, it would be premature to provide guidance for the 2007 fiscal year," Mr. Findlay said. "However, we will endeavor to provide a detailed outlook as soon as it is feasible to do so."
CONFERENCE CALL
A conference call will be held on Friday, July 28 at 3:00 PM. (Eastern Time) to discuss this announcement. Interested parties can join the call by dialing (514) 807-8791 (Montreal or overseas) or (800) 814-4862 (elsewhere in North America). The conference call can also be accessed via live webcast at www.newswire.ca or www.q1234.com. Participants will require Windows Media Player(TM) to listen to the webcast.
If you are unable to call in at this time, you may access a tape recording of the meeting by calling (877) 289-8525 and entering the pass code 21198301 (pound key) on your phone. This tape recording will be available on Friday, July 28 as of 5:00 P.M. until 11:59 P.M. on Friday, August 4.
About Mitec Telecom
Mitec Telecom is a leading designer and provider of radio frequency (RF) products for the telecommunications and satellite communications industries, as well as a variety of other sectors. The Company sells its products worldwide to network providers for incorporation into high-performing wireless networks used in voice and data/Internet communications. Headquartered in Montreal, Canada, the Company also operates facilities in the United States and China.
Mitec Telecom Inc. is listed on the Toronto Stock Exchange under the
symbol MTM. On-line information about Mitec is available at
www.mitectelecom.com.
Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of the Company. These statements are based on suppositions and uncertainties as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company's products and services, the impact of price pressures exerted by competitors, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.
CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)
As at As at
April 30, April 30,
2006 2005
$ $
-------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents 1,468 5,569
Short term investments 10,089 12,229
Trade receivables 10,849 13,270
Other receivables 632 1,025
Income taxes recoverable 1,075 1,316
Inventories 7,546 11,713
Prepaid expenses and other 491 614
Current assets related to discontinued activities 278 4,212
-------------------------------------------------------------------------
Total current assets 32,428 49,948
-------------------------------------------------------------------------
Property, plant and equipment 8,564 11,017
Intangible assets 3,851 6,263
Deferred charges 2,129 3,224
-------------------------------------------------------------------------
46,972 70,452
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness 6,016 5,678
Accounts payable and accrued liabilities 11,912 14,047
Current portion of long-term debt 953 708
Current portion of obligations under capital lease - 48
Current liabilities related to discontinued
activities 63 4,477
-------------------------------------------------------------------------
Total current liabilites 18,944 24,958
-------------------------------------------------------------------------
Long-term debt 958 1,910
-------------------------------------------------------------------------
19,902 26,868
-------------------------------------------------------------------------
Shareholders' equity
Common shares 116,357 116,357
Warrants - 1,129
Contributed surplus 8,126 6,154
Deficit (95,680) (78,517)
Cumulative translation adjustment (1,733) (1,539)
-------------------------------------------------------------------------
Total shareholders' equity 27,070 43,584
-------------------------------------------------------------------------
46,972 70,452
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
Periods ended April 30
(In thousands of Canadian
dollars, except per share
data and number of shares)
For the three months For the twelve months
ended ended
2006 2005 2006 2005
$ $ $ $
-------------------------------------------------------------------------
Sales 10,350 13,351 44,510 57,483
Cost of sales 9,105 14,072 39,164 52,078
-------------------------------------------------------------------------
Gross profit 1,245 (721) 5,346 5,405
-------------------------------------------------------------------------
Expenses
Selling and
administrative 1,976 3,686 9,147 12,303
Research and development 1,949 1,994 7,335 7,919
Amortization of
intangible assets 541 576 2,118 2,239
Financial expenses 191 318 1,286 789
Interest income (87) (111) (344) (395)
Write-down of property,
plant and equipment 470 930 470 930
Write-down of intangibles
assets 363 1,899 363 1,899
Write-down of goodwill - 44 - 44
Stock-based compensation 58 295 843 1,212
Restructuring and other
expenses 231 212 1,764 2,222
-------------------------------------------------------------------------
5,692 9,843 22,982 29,162
-------------------------------------------------------------------------
Loss before income taxes (4,447) (10,564) (17,636) (23,757)
Income tax recovery (149) (137) (594) (379)
-------------------------------------------------------------------------
Loss from continuing
operations (4,298) (10,427) (17,042) (23,378)
Loss from discontinued
operations (69) (1,088) (121) (1,273)
-------------------------------------------------------------------------
Net loss for the period (4,367) (11,515) (17,163) (24,651)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted loss
per common share
Loss from continuing
operations (0.06) (0.14) (0.22) (0.32)
Loss from discontinued
operations (0.00) (0.01) (0.00) (0.02)
-------------------------------------------------------------------------
Net loss (0.06) (0.15) (0.22) (0.34)
-------------------------------------------------------------------------
Weighted average number
of outstanding common
shares 76,405,263 73,158,901 76,405,263 73,040,106
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF DEFICIT
Periods ended April 30
(In thousands of
Canadian dollars)
For the three months For the twelve months
ended ended
2006 2005 2006 2005
$ $ $ $
-------------------------------------------------------------------------
Deficit, beginning
of the period (91,313) (67,002) (78,517) (53,176)
Net loss for the period (4,367) (11,515) (17,163) (24,651)
Transitional adjustment
for stock-based
compensation - - - (690)
-------------------------------------------------------------------------
Deficit, end of the period (95,680) (78,517) (95,680) (78,517)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
Periods ended April 30
(In thousands of
Canadian dollars)
For the three months For the twelve months
ended ended
2006 2005 2006 2005
$ $ $ $
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Loss from continuing
operations (4,298) (10,427) (17,042) (23,378)
Add items not
affecting cash
Amortization and
write-down of
property, plant
and equipment,
intangible assets
and deferred charges 1,319 542 5,283 6,530
Loss on disposal and
write-down of property,
plant and equipment 537 932 563 930
Write-down of
intangibles assets 363 1,899 363 1,899
Write-down of goodwill - 44 - 44
Future income tax - (268) - (308)
Stock-based compensation 58 295 843 1,212
Write-down of recognized
non-refundable
investment tax credits - 314 - 662
-------------------------------------------------------------------------
(2,021) (6,669) (9,990) (12,409)
Changes in non-cash working
capital balances related
to continuing operations 790 6,628 5,210 7,696
-------------------------------------------------------------------------
Cash flows relating to
operating activities (1,231) (41) (4,780) (4,713)
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to property,
plant and equipments
and intangible assets (135) (430) (468) (1,169)
Proceeds on disposal of
property, plant and
equipment 88 85 142 140
Business acquisition - (864) - (864)
Increase in deferred
charges - (2) - (5)
Purchase of short-term
investments (10,089) (12,229) (23,187) (43,584)
Sale or maturity of
short-term investments 5,446 8,027 25,327 44,355
-------------------------------------------------------------------------
Cash flows relating to
investing activities (4,690) (5,413) 1,814 (1,127)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in bank
indebtedness 818 562 3,665 6,060
Repayment of bank
indebtedness (834) (382) (3,327) (382)
Repayment of
long-term debt (177) (176) (707) (673)
Repayment of obligations
under capital lease (10) (32) (46) (474)
Issuance of common shares - 518 - 2,291
-------------------------------------------------------------------------
Cash flows relating to
financing activities (203) 490 (415) 6,822
-------------------------------------------------------------------------
Cash flows relating to
discontinued activities 110 (149) (371) (448)
Effect of exchange rate
fluctuations changes on
cash and cash equivalents (159) (143) (349) (220)
-------------------------------------------------------------------------
Net increase (decrease) in
cash and cash equivalents (6,173) (5,256) (3,730) 762
Cash and cash equivalents,
beginning of the period 7,577 10,825 5,569 5,255
-------------------------------------------------------------------------
Cash and cash equivalents,
end of the period 1,468 5,569 1,468 5,569
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>
For further information: Mr. Stefano Bazzocchi, VP Finance and CFO, (514) 694-9000; Maison Brison: Mr. Scott Lawrence and Mr. Brian Quick, (514) 731-0000, brison1@maisonbrison.com; Source: Mitec Telecom Inc.
Source: newswire
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