NHC Communications INC. Announces Third Quarter Fiscal 2001 Results
Highlights for the quarter:
- Shipped ControlPoint(TM) solutions to a second Incumbent Local Exchange
Carrier (ILEC) for two First Office Applications (FOAs);
- Concluded an interoperability agreement with Harris Corporation;
- Bought deal financing completed on March 30, 2001 for gross proceeds of
$10 million; and
- Subsequent to quarter end, NHC concluded an exclusive distribution
agreement with Alcatel's spin-off, Nexans, for the European territory.
MONTREAL, June 4 /CNW/ - NHC COMMUNICATIONS INC. (TSE: NHC), a leading
provider of carrier class test access and deployment solutions for the copper-
based telecommunications and Internet access markets, today announced its
results for the third quarter and nine months ended May 4, 2001.
Net sales for the third quarter of 2001 increased 10% to $3.45 million
from $3.14 million in the same period in 2000. Net sales for the quarter do
not reflect any activity from the Company's principal targeted customers, the
Incumbent Local Exchange Carriers (ILECs), and were affected by the continuing
weakness of small to mid-sized participants in the Competitive Local Exchange
Carrier (CLEC) market.
Net loss for the third quarter was $1.98 million or $0.11 per share,
compared with a net loss of $0.42 million or $0.03 per share for the same
period last year. Net loss for the third quarter of fiscal 2001 includes a
$0.56 million charge to write down the value of excess inventory related to a
discontinued product line.
For the first nine months of 2001, net sales increased 45% to $8.33
million from $5.74 million in the same period in 2000. Net loss for the nine-
month period was $7.21 million or $0.39 per share, compared with a net loss of
$4.09 million or $0.32 per share for the same period last year.
"During the past nine months, we have made excellent progress in our
penetration of the global ILEC market," said Sylvain Abitbol, President and
CEO of NHC Communications. "The large telecommunications carriers we are
currently working with in North America and Europe represent significant
opportunities for a wide range of applications and markets for our
ControlPoint(TM) solutions."
Mr. Abitbol added, "LECs recognize that our ControlPoint(TM) family of
products significantly reduce the operating costs associated with providing
POTS, T1 and DSL services. Our proven technology, combined with a very short
payback period on investment, makes the ControlPoint(TM) family of products an
attractive solution for these large global carriers."
On March 30, NHC closed a financing agreement through the sale of
3,335,000 units, consisting of one common share and one half of one common
share purchase warrant. The units were priced at $3 each, for total gross
proceeds of $10 million. In addition, each full warrant entitles the holder to
purchase one common share of NHC at a purchase price of $4 until March 29,
2003. If fully exercised, these warrants will provide NHC with an additional
$6.67 million in capital.
NET SALES for the third quarter ended May 4, 2001 are based on the
application of NHC's new accounting policy on revenue recognition, to be
consistent with US GAAP as clarified by Staff Accounting Bulleting 101 (SAB
101). They are primarily due to the collection of $2.7 million from the Export
Development Corporation (EDC) through an insurance claim related to the
outstanding balance receivable from a contract with a CLEC customer. NHC's
insurance covered $2.7 million of the $3.9 million shipment delivered to the
CLEC last year. During the third quarter, the Company wrote down and offset
the balance receivable of $1.20 million against deferred revenue, with no
adverse impact on results of operations.
On a geographic basis, sales for the third quarter of fiscal 2001 were
$3.08 million for the North American segment (Q3 2000 - $2.60 million),
$0.23 million for the European segment (Q3 2000 - $0.54 million), and $0.14
million (Q3 2000 - $28,100) for the rest of the world.
GROSS MARGIN as a percentage of sales was 27% in the third quarter of
fiscal 2001, as compared with 30% in the same period of fiscal 2000. This
figure includes a $0.56 million charge to write down the value of excess
inventory related to a discontinued product line. Excluding this charge, gross
margin was 43%.
RESEARCH AND DEVELOPMENT expenses in the third quarter of fiscal 2001
increased to $0.45 million from $0.29 million in the same period of fiscal
2000. Major research and development efforts in the third quarter of fiscal
2001 were focused on the development of the hardware and software aspects of
NHC's ControlPoint(TM) solutions, as well as the development of new
applications for these products. These efforts will enable the Company to
penetrate new markets and help maintain a leadership position in its niche:
remotely controlled, physical layer cross-connect solutions.
SALES AND MARKETING expenses for the third quarter of fiscal 2001
increased 129% to $1.57 million compared with $0.69 million in the third
quarter of fiscal 2000. This increase is attributable to the Company's efforts
to expand its sales and marketing operations both domestically and
internationally, in order to increase market awareness. In particular, this
increase is mainly explained by an increase in expenses for new employees
hired by NHC's wholly- owned subsidiary, NHC Communications USA, Inc., for
sales, marketing, pre- sales and post-sales support activities.
GENERAL AND ADMINISTRATIVE expenses for the third quarter of fiscal 2001
increased to $0.63 million compared with $0.31 million for the third quarter
of fiscal 2000. The increase is mainly explained by an increase in personnel,
personnel-related costs and consulting fees.
<<
NHC COMMUNICATIONS INC.
_________________________________________________________________________
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND DEFICIT
_________________________________________________________________________
(Unaudited. In thousands of Canadian dollars, except per-share amounts)
Quarters Ended Nine Months Ended
___________________________ ___________________________
May 4, April 28, May 4, April 28,
2001 2000 2001 2000
____________ ____________ ____________ ____________
(Restated) (Restated)
NET SALES 3,447.6 3,135.6 8,333.0 5,739.7
Cost of sales 2,512.8 2,181.5 5,444.6 3,916.0
____________ ____________ ____________ ____________
GROSS MARGIN 934.8 954.2 2,888.4 1,823.7
Operating expenses:
Research and
development 445.9 292.9 1,213.3 1,100.3
Sales and
marketing 1,571.7 687.7 5,967.9 2,358.3
General and
administrative 627.4 311.7 2,749.6 1,242.3
____________ ____________ ____________ ____________
Total operating
expenses 2,645.0 1,292.3 9,930.8 4,700.9
____________ ____________ ____________ ____________
OPERATING INCOME
FROM CONTINUING
OPERATIONS (1,710.2) (338.1) (7,042.4) (2,877.2)
Other:
Financial income
(expense) 98.9 (48.9) 231.1 (164.0)
Gain (loss) on
foreign exchange (360.9) (0.3) (126.8) (106.7)
Restructuring costs 1.7 (58.2) (253.7) (970.6)
____________ ____________ ____________ ____________
(260.3) (107.4) (149.4) (1,241.3)
LOSS BEFORE INCOME
TAXES AND
DISCONTINUED
OPERATIONS (1,970.5) (445.5) (7,191.8) (4,118.5)
Income taxes (10.4) - (19.8) 16.6
____________ ____________ ____________ ____________
LOSS FROM CONTINUING
OPERATIONS (1,980.9) (445.5) (7,211.6) (4,101.9)
Discontinued
operations - 22.4 - 13.5
____________ ____________ ____________ ____________
NET INCOME (LOSS) (1,980.9) (423.1) (7,211.6) (4,088.4)
Deficit, beginning
of the period (13,312.6) (5,911.0) (8,074.5) (2,208.6)
Share capital
issue costs (892.2) (899.9) (899.5) (937.0)
____________ ____________ ____________ ____________
DEFICIT, END OF
THE PERIOD (16,185.7) (7,233.9) (16,185.7) (7,233.9)
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Loss from
continuing
operation per
share-basic ($0.11) ($0.03) ($0.39) ($0.32)
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Net income (loss)
from continuing
operations per share-
diluted (ad: anti-
dilutive) ad ad ad ad
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Loss per share-
basic ($0.11) ($0.03) ($0.39) ($0.32)
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Net income (loss)
per share-diluted ad ad ad ad
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Shares used in
per-share
calculation-basic 18,568.5 13,300.6 18,568.5 12,642.6
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Shares used in
per-share
calculation-
diluted 21,469.3 17,304.1 21,469.3 16,707.5
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Capital Stock -
As at June 4
Issued and
fully paid
(in 000's) 20,892.5 16,627.8 20,892.5 16,627.8
Stock options
unexercised
(in 000's) 1,851.6 1,839.3 1,851.6 1,839.3
Common shares
purchase warrants
(in 000's) 2,260.8 93.0 2,260.8 93.0
Performance
shares
(in 000's) 437.5 0.0 437.5 0.0
Secured convertible
debentures/warrants 0.0 215.0 0.0 215.0
____________ ____________ ____________ ____________
25,442.4 18,775.1 25,442.4 18,775.1
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
See accompanying notes
NHC COMMUNICATIONS INC.
_________________________________________________________________________
CONSOLIDATED STATEMENTS OF CASH FLOW
_________________________________________________________________________
(Unaudited. In thousands of Canadian dollars)
Quarters Ended Nine Months Ended
___________________________ ___________________________
May 4, April 28, May 4, April 28,
2001 2000 2001 2000
____________ ____________ ____________ ____________
(Restated) (Restated)
Continuing Operations
Loss from
continuing
operations (1,980.9) (445.5) (7,211.6) (4,101.9)
Add item not
involving cash:
Amortization 115.3 70.0 275.4 241.0
____________ ____________ ____________ ____________
(1,865.6) (375.5) (6,936.2) (3,860.9)
Change in working
capital:
(Increase) in
short-term
investments (42.1) - (42.1) -
(Increase) decrease
in trade and other
receivables 3,899.3 (424.4) 3,194.9 1,769.6
(Increase) in
government
assistance
receivable (79.5) (80.6) (200.9) (279.5)
(Increase) in
inventories (597.8) (1,233.3) (3,279.2) (994.1)
(Increase) decrease
in prepaid
expenses 120.7 (108.4) (187.5) (127.2)
Increase (decrease)
in payables and
accrued
liabilities (4,791.9) 1,874.6 (1,086.7) 1,275.5
Increase in
income taxes
payable 10.4 - 19.8 -
(Decrease) in
deferred
revenues (4,037.2) - (3,323.9) -
____________ ____________ ____________ ____________
(5,518.2) 27.8 (4,905.7) 1,644.3
____________ ____________ ____________ ____________
Cash used in
continuing
operations (7,383.7) (347.7) (11,841.9) (2,216.6)
____________ ____________ ____________ ____________
Discontinued
Operations
Cash used in
discontinued ____________ ____________ ____________ ____________
operations - 22.4 - 13.5
____________ ____________ ____________ ____________
Investing Activities
Acquisition of
capital assets (228.7) (9.5) (659.6) (17.2)
Acquisition of
other assets (14.1) (0.5) (141.8) (5.0)
____________ ____________ ____________ ____________
Cash used in
investing
activities (242.8) (10.0) (801.4) (22.2)
____________ ____________ ____________ ____________
Financing Activities
Proceeds from
issuance of common
shares 10,005.0 11,180.5 10,916.9 11,318.0
Proceeds from
Secured Convertible
Debentures - (282.0) - 43.0
Repayment of
obligations
under capital
leases (47.3) (32.1) (124.0) (110.5)
Proceeds from long
term debt - - 156.3 -
Share capital issue
costs (892.2) (899.9) (899.5) (937.0)
____________ ____________ ____________ ____________
Cash provided by
financing
activities 9,065.5 9,966.5 10,049.7 10,313.5
____________ ____________ ____________ ____________
Net increase
(decrease) in
cash and cash
equivalents
during the period 1,439.0 9,631.2 (2,593.6) 8,088.2
Cash and cash
equivalents -
Beginning of
period 5,533.6 (17.9) 9,566.2 1,525.1
____________ ____________ ____________ ____________
Cash and cash
equivalents -
End of period 6,972.6 9,613.3 6,972.6 9,613.3
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Cash and cash
equivalents are
comprised of
Cash 1,734.7 1,246.4
Cash equivalents 5,237.9 8,367.0
____________ ____________
6,972.6 9,613.3
____________ ____________
____________ ____________
Additional
disclosure
Interest paid 13.4 12.6 29.8 31.0
Income taxes - - - -
See accompanying notes
NHC COMMUNICATIONS INC.
_________________________________________________________________________
CONSOLIDATED BALANCE SHEETS
_________________________________________________________________________
(In thousands of Canadian dollars)
May 4, August 4,
2001 2000
____________ ____________
(Unaudited) (Restated)
ASSETS
Current assets
Cash and cash equivalents 6,972.6 9,566.2
Short-term investments (market value: $96.2) 42.1 -
Trade receivable 874.4 4,296.5
Government assistance receivable 648.9 448.0
Other receivables 1,124.8 897.7
Inventories 7,516.8 4,237.6
Prepaid expenses and other current assets 592.0 404.5
____________ ____________
Total current assets 17,771.7 19,850.5
Fixed assets 1,263.0 623.5
Other assets 127.0 6.0
____________ ____________
TOTAL ASSETS 19,161.6 20,480.0
____________ ____________
____________ ____________
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 3,871.9 4,958.5
Income taxes payable 19.8 -
Current portion of deferred revenues 825.9 3,948.8
Current portion of obligations under capital
leases 163.1 140.9
Current portion of long-term debt 100.1 68.8
____________ ____________
Total current liabilities 4,980.8 9,117.0
Deferred revenues - 201.0
Obligations under capital leases 274.7 186.5
Long-term debt 125.0 -
____________ ____________
Total liabilities 5,380.5 9,504.5
____________ ____________
SHAREHOLDER'S EQUITY
Capital stock 29,929.7 19,012.9
Contributed surplus 42.5 42.5
Deficit (16,185.7) (8,074.5)
Cumulative translation adjustments (5.4) (5.4)
____________ ____________
Total shareholder's equity 13,781.1 10,975.5
____________ ____________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 19,161.6 20,480.0
____________ ____________
____________ ____________
See accompanying notes
>>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
1. FINANCIAL SITUATION AND GOING CONCERN
The accompanying financial statements have been prepared using
Canadian generally accepted accounting principles applicable to a
going concern. The use of such principles may not be appropriate
because, as of May 4, 2001, there was significant doubt that the
Company would be able to continue as a going concern.
Historically, the Company has financed its operations mainly through
stock issuances. During the past 13 months, to address its cash
requirements, the Company has been successful at completing two
financing arrangements. Moreover, the Company might also finance its
activities from future sales and the collection of the related revenue
prior to needing additional financing.
Although there is no assurance that the Company will be successful in
completing these sales on a timely basis, management is confident that
it will be able to secure the necessary financing and improvement in
operating cash flow to enable it to continue as a going concern.
Accordingly, these financial statements do not reflect adjustments to
the carrying value of assets and liabilities, the reported revenue and
expenses and balance sheet classifications used that would be
necessary if the going concern assumption were not appropriate. Such
adjustments could be material.
2. BASIS OF PRESENTATION
The financial information as at May 4, 2001 and for the three and nine
months ended May 4, 2001 and for the three and nine months ended
April 28, 2000 is unaudited. In the opinion of management, all
adjustments necessary to present fairly the results of these periods
have been included. The adjustments made were of a normal-recurring
nature. The results of operations for the three and nine months ended
May 4, 2001 are not necessarily indicative of the operating results
anticipated for the full year.
These interim financial statements should be read in conjunction with
the annual financial statements for the year ended August 4, 2000.
These interim financial statements follow the same accounting policies
and methods of their application as the annual financial statements
for the year ended August 4, 2000.
3. COMMITMENTS
The Company is currently renegotiating the terms of a blanket purchase
agreement to buy $21 million from its major vendor of the component
representing its main source of revenues.
Management will host a conference call to discuss third quarter results
on Tuesday, June 5, 2001 at 10 a.m. (EDT). To listen in, please access the
live audio web cast at www.newswire.ca or www.nhc.com. You will require
RealPlayer to listen to the call.
NHC may be contacted through its web site: www.nhc.com
_________________________________________________________________________
Statements included here, which are not historical in nature, are forward-
looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, including without
limitation, statements as to management's beliefs, strategies, plans,
expectations or opinions in connection with the Company's performance,
which are based on a number of assumptions concerning future conditions
that may ultimately prove to be inaccurate and may differ materially from
actual future events or results. Readers are referred to the documents
filed by NHC with the pertinent Canadian security exchange commissions,
specifically the most recent Quarterly Reports, Prospectus, Annual
Information Form and Annual Report, each as it may be amended from time
to time, which identify important risk factors that could cause actual
results to differ from those contained in the forward-looking statements,
including rapid technological change along with the need to continually
develop new products; the Company's dependence on a dominant product
line; competition; the Company's dependence on key employees;
difficulties in managing the Company's growth; the Company's dependence
upon certain customers and certain suppliers; the Company's dependence
upon proprietary rights; risks of third party claims of infringement; and
government regulation. The financial information contained in this
release should be read in conjunction with the consolidated financial
statements and notes thereto included in NHC's most recent Quarterly
Reports and Annual Report filed, each as it may be amended from time to
time. NHC's results of operations for the three and nine months ended
May 4, 2001 are not necessarily indicative of NHC's operating results for
the full fiscal year or any future periods.
_________________________________________________________________________
%SEDAR: 00001989EB
For further information: Sylvain Abitbol, President and CEO, NHC
Communications Inc., e-mail: pr@nhc.com; Sylvain Brossard, CA, VP Finance
and Operations, NHC Communications Inc., e-mail: s.brossard@nhc.com,
1-800-361-1965, Fax: (514) 735-8057;
To request a free copy of this organization's annual report, please go to
www.newswire.ca and click on reports@cnw. |
