GLENTEL Inc. reports solid 3rd quarter earnings of $0.53 per share

BURNABY, BC, Oct. 28 /CNW/ - GLENTEL Inc. (TSX: GLN) today reported its results for the 3rd quarter and nine months ended September 30, 2009.

Financial highlights (tabular amounts in thousands of Canadian dollars, except per share data), are:

    
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                                      Three months ended   Nine months ended
                                            September 30        September 30
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                                          2009      2008      2009      2008
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    Sales                              $81,905   $90,614  $217,198  $201,826
    -------------------------------------------------------------------------
    Income, before interest, taxes
     and amortization                  $10,404   $11,328   $20,818   $17,514
    -------------------------------------------------------------------------
    Operating income, before interest
     and taxes                          $8,856    $9,685   $16,266   $12,722
    -------------------------------------------------------------------------
    Net income                          $5,834    $6,550   $10,894    $8,626
    -------------------------------------------------------------------------
    Basic net income per share           $0.53     $0.61     $1.01     $0.81
    -------------------------------------------------------------------------
    Diluted net income per share         $0.52     $0.59     $0.99     $0.78
    -------------------------------------------------------------------------
    

Consolidated sales for the three months ended September 30, 2009 were $81,905,000 compared to $90,614,000 in the same period in 2008. Operating income before interest and taxes for the 3rd quarter was $8,856,000 compared to $9,685,000 in 2008. Net income and basic earnings per share for the 3rd quarter were $5,834,000, $0.53 per share, compared to $6,550,000, $0.61 per share, in 2008.

Consolidated sales for the nine months ended September 30, 2009 grew 7%, to $217,198,000 compared to $201,826,000 in the same period of 2008. Operating income before interest and taxes for the nine months increased to $16,266,000 compared to $12,722,000 in 2008. Net income and basic earnings per share for the nine months increased to $10,894,000, $1.01 per share, compared to $8,626,000, $0.81 per share, for the same period in 2008.

"We are very pleased with our 3rd quarter financial results," said Thomas Skidmore, GLENTEL's President and Chief Executive Officer. "Retail sales are in line with our 2009 targets but down when compared to the extraordinary results for the 3rd quarter in 2008 due to the launch of the Apple iPhone. Smartphone devices continue to be a major driver of retail wireless sales and profits, and we anticipate a strong finish to our year."

Retail Division sales of mobile phone products and services were $74,512,000 for the 3rd quarter compared to $81,118,000 for the same period in 2008. Sales for the 3rd quarter in 2009 were in line with divisional goals and more reflective of 3rd quarter results prior to 2008. In 2008, the 3rd quarter results were extraordinary. The strength of 2008 sales was driven by consumers' immediate adoption of Smartphone technology, which included sales of the BlackBerry Bold and the launch of the Apple iPhone by Rogers Communications. In 2009, the 3rd quarter sales of Smartphone devices continue to be the driving force in meeting sales expectations. However, selective management of the cost of acquisition by the carriers had a large impact on sales, thus impeding the ability of the Retail Division to exceed its 3rd quarter goals. This activity included a reduction of promotional funds which drive sales, and a reduction of certain hardware subsidies which changed the retail value proposition to consumers. As a result, sales softened in the 3rd quarter of 2009 when compared to the extraordinary sales in the 3rd quarter of 2008, when the Apple iPhone was launched. Additionally, customer demand outstripped the supply of certain inventory, such as the Apple iPhone, and further restricted sales in all three retail banners. These factors resulted in same-store activations of mobile phones and other wireless devices sold in the Retail Division, being down 4% in the 3rd quarter of 2009 over the corresponding period in 2008 for stores that were open throughout both periods. Sales were impacted positively due to the division operating 262 stores during the 3rd quarter in 2009 (a 6% increase over the prior year) compared to 246 stores in the same period of 2008.

For the nine months ended September 30, 2009, sales of mobile phone products and services in the Retail Division grew 10% to $189,997,000 compared to $172,989,000 in 2008. The growth in sales is the result of the success in the 1st and 2nd quarters and the relative positive results in the 3rd quarter of 2009. This success is driven by sales of Smartphone technology that focuses on combined voice and data activation plans, which maximize compensation and align with the goals of the network carriers. As a result, same-store activations of mobile phones and other wireless devices sold in the Retail Division grew 8% in the nine months ended September 30, 2009 over the corresponding period in 2008 for stores that were open throughout both periods.

Operating income before interest and taxes in the Retail Division for the 3rd quarter was $12,840,000 compared to $13,197,000 in the previous year. For the nine months ended September 30, 2009, operating income before interest and taxes increased to $27,044,000 compared to $21,564,000 in 2008.

Business Division sales of terrestrial narrowband and broadband radio systems, satellite network services, and implementation services were $7,393,000 for the 3rd quarter compared to $9,496,000 in the same period in 2008. Sales in the 3rd quarter continued to reflect the weakness in the oil and gas economy although there is a sense of renewed optimism that the economy in other parts of the country is getting stronger. In certain regions, such as Ontario, customers are planning to budget for their business needs as opposed to having a budget freeze or a delay in implementing new projects. Gross margin in the 3rd quarter continued to suffer from competitive pressures and was reduced by four percentage points in 2009 compared to the same period in 2008, which negatively impacted the performance of the division.

For the nine months ended September 30, 2009, sales of terrestrial narrowband and broadband radio systems, satellite network services, and implementation services in the Business Division was $27,201,000 compared to $28,837,000 in 2008. The economic slowdown has significantly impacted the overall sales performance of the division. In addition, gross margin on sales has been eroded by five percentage points during the first nine months in 2009 compared to the same period in 2008. Operating expenses for the nine months ended September 30, 2009 were contained at $8,037,000 compared to $8,711,000 in 2008.

As a result, operating income before interest and taxes for the 3rd quarter in the Business Division was a loss of $684,000 compared to a loss of $362,000 in 2008. For the nine months ended September 30, 2009, operating income before interest and taxes was a loss of $1,024,000 compared to income of $142,000 in 2008.

Corporate operating expenses for the 3rd quarter of 2009 increased to $3,142,000 (3.8% of sales) compared to $2,992,000 (3.3% of sales) last year. The growth in the Retail Division continues to demand additional administrative resources/costs to support this growth.

Operating expenses for the nine months ended September 30, 2009 increased to $9,289,000 (4.3% of sales) compared to $8,270,000 (4.1% of sales) last year. Approximately $475,000 of this increase was for incremental professional services fees incurred in the 1st quarter, related to corporate development activities with a focus on a potential acquisition and expansion of the Company's retail footprint and presence in Canada. The balance of the increase was due to the additional administrative resources/costs required to support the growth in the Retail Division.

About Glentel:

GLENTEL (TSX: GLN) is a leading provider of innovative and reliable telecommunications services and solutions in Canada and the United States. Founded in 1963 and headquartered in Burnaby, B.C., GLENTEL comprises two operating divisions - Retail and Business - that service thousands of consumers and commercial telecommunications customers. Together with its divisions, the company operates more than 280 locations across Canada located in retail malls and high pedestrian-traffic street-front locations, Costco Wholesale stores, and business centers. As the largest multi-carrier mobile phone retailer in Canada, it offers a choice of network carrier and wireless device or phone. To its business and government customers, GLENTEL offers wireless service, rental equipment, satellite and terrestrial network systems, tower sites, and wireless asset monitoring. GLENTEL operates its business under the trading names Glentel Wireless, WirelessWave, The Telephone Booth (Tbooth and la cabine T) and WIRELESS etc.

Forward-Looking Statements:

Statements in this release relating to matters that are not historical fact are forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to, general economic conditions, changes in technology, reliance on third-party manufacturing, managing rapid growth, limited intellectual property protection, and other risks and uncertainties described in GLENTEL's public filings with securities regulatory authorities.

NO STOCK EXCHANGE, SECURITIES COMMISSION, OR OTHER REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE INFORMATION CONTAINED HEREIN.

To secure a copy of GLENTEL's annual report or for additional information visit www.glentel.com or www.sedar.com.

SOURCE GLENTEL Inc.

For further information: For further information: Investor Relations Contact: Dale B. Belsher, Chief Financial Officer, GLENTEL INC., (604) 415-6500, investors@glentel.com; Media Contact: Shafiq Jamal, VP, James Hoggan & Associates, (604) 739-7500, sjamal@hoggan.com

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