TORONTO and ENGLEWOOD, CO, May 15 /PRNewswire-FirstCall/ - 180 Connect
Inc. ("180 Connect" or the "Company") (OTCBB: CNCT.OB, CNCTU.OB, CNCTW.OB),
one of North America's largest providers of installation, integration and
fulfillment services to the home entertainment, communication, and home
integration service industries, today released its financial results for the
first quarter ended March 31, 2008.
Certain information contained in this news release constitutes
forward-looking information, including anticipated growth and financial
performance. See "Forward-Looking Information".
Selected Financial Highlights - First Quarter Ended March 31, 2008
For the three months ended March 31, 2008 as compared to the three months
ended March 31, 2007:
First Quarter 2008 Highlights
- Revenue grew to $94.2 million, an increase of $2.6 million, or 2.9%,
compared to revenue of $91.6 million in 2007.
- EBITDA from continuing operations(2) was $0.3 million, a decrease of
$3.0 million or 91.5% compared to $3.3 million in 2007.
- Total cash provided by operating activities was $2.5 million, an
increase of $3.7 million from the cash used by operating activities
of $1.2 million in 2007.
- Loss from continuing operations was $6.0 million, an improvement of
$0.2 million compared to a loss from continuing operations of
$6.2 million in 2007.
- Net loss was $6.0 million unchanged compared to 2007.
- Net loss per share for the three months ended March 31, 2008 and
March 31, 2007, respectively, is as follows:
- Loss from continuing operations was $0.23 per share basic and
diluted compared to a loss from continuing operations of $0.42 per
share basic and diluted in 2007.
- Net loss was $0.23 per share basic and diluted compared to net
loss of $0.41 per share basic and diluted in 2007.
Revenue in the first quarter increased to $94 million, from $92 million in
2007. This 2.9% increase reflects continued growth resulting from higher
DIRECTV volume partially offset by modest declines in the Company's Cable, 180
Home and Network Services businesses. DIRECTV volume increased 2.8% from the
three months ended March 31, 2007 due to the effect of the DIRECTV rate
increase implemented during the second quarter of 2007, which was partially
offset by a less favourable mix and increase in chargebacks. The net impact of
the volume, rate, mix effect, and chargebacks was an increase in revenue of
$3.6 million for the three months ended March 31, 2008.
Cable revenues in the first quarter decreased by 6% from the three months
ended March 31, 2007. A revenue increase of 28% in Rogers Communications Inc.
was offset by decreases at certain other cable operations. Revenue in 180
Connect's Network Services business declined by 17% from the same period in
the previous year and 180 Home experienced a decline in revenue of
approximately 8% off a relatively small base.
EBITDA from continuing operations(2) was $0.3 million for the first
quarter of 2008, a decrease of 91.5% over results reported for the same period
in 2007.
Looking Forward
In April 2008, 180 Connect signed a definitive merger agreement with a
wholly-owned subsidiary of The DIRECTV Group, Inc. ("DIRECTV"), the nation's
leading satellite television service. Under the terms of the merger agreement,
a subsidiary of DIRECTV will be merged with and into the Company, with the
Company continuing as the surviving corporation and an indirect wholly-owned
subsidiary of DIRECTV. DIRECTV will acquire 100% of 180 Connect's outstanding
common stock and exchangeable shares for $1.80 per share in cash. Including
the assumption of the Company's debt outstanding the implied enterprise value
of the transaction is approximately $105 million. The transaction is expected
to close during the third quarter 2008.
In a separate transaction to which 180 Connect is not a party, UniTek USA,
LLC ("UniTek") has agreed to acquire 100% of 180 Connect's cable services
operating unit and certain DIRECTV installation services from DIRECTV,
immediately following DIRECTV's acquisition of 180 Connect, in exchange for
UniTek's satellite installation services in New York, Burbank, California and
Bloomington, California and cash.
Under the terms of the merger agreement, the board of directors of 180
Connect, through its special committee and with the assistance of its
independent advisors, intends to file all necessary documents related to the
agreement in the month of May.
Summary Results
The following is a summary of the Company's selected consolidated data and
operating information for the three months ended March 31, 2008 and 2007 and
should be read in conjunction with the accompanying unaudited consolidated
financial statements for the three months ended March 31, 2008.
Selected Consolidated Financial and Operating Data:
For the Three For the Three
Months Ended Months Ended
March 31, March 31,
2008 2007 % Change
--------------------------------------------
Revenue..................... $ 94,208,200 $ 91,556,785 2.9%
Direct expenses............. 87,903,038 82,928,200 6.0%
--------------------------------------------
Direct contribution
margin(1).................. 6,305,162 8,628,585 (26.9)%
General and
administrative(a).......... 6,024,905 5,037,953 19.6%
Foreign exchange loss....... - 11,138 (100.0)%
Restructuring costs......... - 275,000 (100.0)%
--------------------------------------------
EBITDA(2)................... 280,257 3,304,494 (91.5)%
Depreciation................ 3,427,698 2,715,565 26.2%
Amortization of customer
contracts.................. 920,033 920,376 -
Other expense:
Interest and loan fees...... 1,582,132 2,976,134 (46.8)%
Loss on sale of assets...... 85,093 71,778 18.6%
Loss on change in fair value
of derivative liabilities.. 35,831 2,786,391 (98.7)%
--------------------------------------------
Loss from continuing
operations before income
tax expense................ (5,770,530) (6,165,750) (6.4)%
Income tax expense.......... 214,077 74,000 189.3%
--------------------------------------------
Loss from continuing
operations................. (5,984,607) (6,239,750) (4.1)%
Income (loss) from
discontinued operations.... (9,335) 250,683 (103.7)%
--------------------------------------------
Net loss for the period..... $ (5,993,942) $ (5,989,067) 0.1%
--------------------------------------------
--------------------------------------------
(a) General and administrative includes stock-based compensation of
$518,244 and $0, for the three months ended March 31, 2008 and
March 31, 2007, respectively.
Per Share Data
Three Three
Months Ended Months Ended
March 31, March 31,
2008 2007
------------------------------
Loss per share from continuing operations
Basic and diluted....................... $ (0.23) $ (0.42)
Net loss per share:
Basic and diluted....................... $ (0.23) $ (0.41)
Weighted average number of shares
outstanding:
Basic and diluted....................... 25,520,152 14,689,112
------------------------------
------------------------------
Selected Consolidated Balance Sheet Data
As of
March 31, December 31,
2008 2007
------------------------------
Cash and cash equivalents................. $ 1,697,153 $ 366,449
Working capital deficit................... 33,857,952 30,162,680
Total assets.............................. 133,011,918 158,284,151
Total debt and capital lease obligations.. 56,209,864 56,765,878
Total shareholders' equity................ $ 16,721,990 $ 22,211,042
A copy of the first quarter unaudited consolidated financial statements of
the Company for the three months ended March 31, 2008 is attached to this news
release. The Company will be releasing its first quarter report on May 15,
2008 which will be available on EDGAR and the Company's website. Additional
information relating to the Company is available on EDGAR at
www.sec.gov/edgar.shtml, on SEDAR at www.sedar.com and on the Company's
website at www.180connect.net.
Non-GAAP Measures:
(1) The term "Direct Contribution Margin" consists of revenue less direct
expenses and excludes general and administrative expense, foreign
exchange loss, loss on sale of assets, depreciation, amortization
of customer contracts, interest and loan costs, loss on change in
fair value of derivative liabilities, and income tax expense. DCM, as
referred to in this news release, is a non-U.S. GAAP measure which
does not have any standardized meaning prescribed by U.S. GAAP and is
therefore unlikely to be comparable to similar measures presented by
other issuers. We believe that this term provides a better assessment
of the contribution of the field operations dealing directly with our
customers' subscribers by eliminating: (1) the general and
administrative costs that are not part of the direct costs of
generating revenue; (2) the charge for customer contracts and
depreciation which are non-cash expense items; and (3) loss on sale
of assets, and loss on change in fair value of derivative
liabilities, which are not considered to be in the normal course of
operating activity. Investors should be cautioned, however, that DCM
should not be construed as an alternative to loss from continuing
operations determined in accordance with U.S. GAAP as an indicator of
our performance.
Following is a reconciliation of DCM to the comparable U.S. GAAP measure
being net loss from continuing operations:
Three Months Three Months
Ended Ended
March 31, March 31,
2008 2007
------------------------------
Direct contribution margin(1)............. $ 6,305,162 $ 8,628,585
General and administrative................ 6,024,905 5,037,953
Foreign exchange loss..................... - 11,138
Restructuring costs....................... - 275,000
Depreciation.............................. 3,427,698 2,715,585
Amortization of customer contracts........ 920,033 920,376
Other expense:
Interest and loan fees.................... 1,582,132 2,976,134
Loss on sale of assets.................... 85,093 71,778
Loss on change in market value of
derivative liabilities................... 35,831 2,786,391
------------------------------
Loss from continuing operations
before income tax expense................ (5,770,530) (6,165,750)
Income tax expense 214,077 74,000
------------------------------
Loss from continuing operations........... $ (5,984,607) $ (6,239,750)
------------------------------
------------------------------
(2) The term "EBITDA from continuing operations" refers to loss from
continuing operations before deducting depreciation, amortization of
customer contracts, loss on sale of assets, interest and loan fees,
loss on change in fair value of derivative liabilities, and income
tax expense. EBITDA from continuing operations, as referred to in
this news release, is a non-U.S. GAAP measure which does not have any
standardized meaning prescribed by U.S. GAAP and is therefore
unlikely to be comparable to similar measures presented by other
issuers. Management believes that EBITDA from continuing operations
provides a better assessment of cash flow from our operations by
eliminating: (1) the charge for depreciation, and amortization of
customer contracts which are non-cash expense items and (2) loss on
sale of assets, and loss on change in fair market value of derivative
liabilities, which are not considered to be in the normal course of
operating activity. In addition, financial analysts and investors use
a multiple of EBITDA from continuing operations for valuing companies
within the same sector, in order to eliminate the differences in
accounting treatment from one company to the next. Given that we are
in a growth stage, we believe the focus on EBITDA from continuing
operations gives the investor or reader of our consolidated financial
statements and MD&A more insight into the operating capabilities of
management and its utilization of our operating assets. Management
further believes that EBITDA from continuing operations is also the
best metric for measuring our valuation. Investors should be
cautioned, however, that EBITDA from continuing operations should not
be construed as an alternative to loss from continuing operations
determined in accordance with U.S. GAAP as an indicator of our
performance.
Following is a reconciliation of EBITDA from continuing operations to the
comparable U.S. GAAP measure being net loss from continuing operations:
Three Months Three Months
Ended Ended
March 31, March 31,
2008 2007
------------------------------
EBITDA from continuing operations(2)...... $ 280,257 $ 3,304,494
Depreciation.............................. 3,427,698 2,715,565
Amortization of customer contracts........ 920,033 920,376
Other expense:
Interest and loan fees.................... 1,582,132 2,976,134
Loss on sale of assets.................... 85,093 71,778
Loss on change in fair value of
derivative liabilities................... 35,831 2,786,391
------------------------------
Loss from continuing operations
before income tax expense ............... (5,770,530) (6,165,750)
Income tax expense........................ 214,077 74,000
------------------------------
Loss from continuing operations........... $ (5,984,607) $ (6,239,750)
------------------------------
------------------------------
180 Connect Inc.
180 Connect Inc. is one of North America's largest providers of
installation, integration and fulfillment services to the home entertainment,
communications and home integration service industries. With more than 4,000
skilled technicians and 750 support personnel based in over 85 operating
locations, 180 Connect is well positioned as the only pure play national
residential service provider in the market. 180 Connect shares are traded
under the name of 180 Connect Inc. on the OTCBB under the symbols CNCT.OB,
CNCTU.OB and CNCTW.OB.
Forward-Looking Information
This news release contains forward-looking statements which reflect
management's expectations regarding the Company's future growth, results of
operations, performance and business prospects and opportunities. Statements
about the Company's future plans and intentions, results, levels of activity,
performance, goals or achievements or other future events constitute
forward-looking statements. Wherever possible, words such as "will be", "may",
"should", "could", "expect", "plan", "intend", "anticipate", "believe",
"estimate", "predict" or "potential" or the negative or other variations of
these words, or other similar words or phrases, have been used to identify
these forward-looking statements. These statements reflect management's
current beliefs and are based on information currently available to
management. Forward-looking statements involve significant risk, uncertainties
and assumptions. Many factors, including those discussed under section 1A
"Risk Factors" on the Company's current Report on Form 10-K filed with the
Securities and Exchange Commission on Marc
