Mitec Telecom announces year-end and fourth quarter results for fiscal 2010

MONTREAL, July 28 /CNW Telbec/ - Mitec Telecom (TSX: MTM) today announced its year-end and fourth quarter results for the 2010 fiscal year, which ended April 30, 2010.

    
    Annual Results
    --------------
    

Annual sales in fiscal 2010 were $25.4 million, compared with $40.3 million in fiscal 2009. The Corporation's net loss for the year was $11.4 million, or $0.05 per share compared with a net loss of $4.6 million, or $0.02 per share in the previous year. These results also include a one-time, non-cash, accounting charge of $2.7 million for goodwill and intangible assets impairment associated with the prior acquisition of the Corporation's U.S. operations. Without this adjustment, Mitec's net loss for the year would have been reduced to $8.7 million.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for fiscal 2010 were negative $6.7 million, compared with negative $0.7 million for fiscal 2009.

    
    Fourth Quarter Results
    ----------------------
    

Sales for the fourth quarter of fiscal 2010 were $6.4 million, compared with $6.9 million in fiscal 2009.

The net loss for the quarter was $5.2 million, or $0.02 per share compared with a net loss of $3.1 million, or $0.01 in the fourth quarter of 2009. Results for the quarter also include the one-time, non-cash, accounting charge of $2.7 million referred to in the summary of year-end results above. Without this adjustment, the fourth quarter net loss would have been $2.5 million, compared with a net loss of $2.0 million in the fourth quarter of the previous year.

EBITDA for the quarter was negative $1.8 million compared to negative $1.4 million during the fourth quarter of fiscal 2009.

    
    Management Commentary
    ---------------------
    

The period encompassing fiscal 2010 was a challenging period worldwide for companies in the Telecommunications industry. In addition to reacting to the realities that the unprecedented global financial crisis and worldwide recession presented, Mitec had to revisit its sales strategy to adapt to constantly changing requirements from customers having to deal with reduced capital expenditure budgets while at the same time fulfilling the demand that the growth of wireless communication, broadcasting and social networking trends continue to generate.

During the same period, Mitec succeeded in penetrating the Satcom market with a series of new Very Small Aperture Terminal (VSAT) products, which have generated global interest and have been accepted by its customer base as Mitec's standard line of products going forward. Significant R&D and marketing efforts were made during fiscal 2010, which impacted the profitability of this new line of products as the company transitioned out of the legacy product line into the next generation MTX product line, which is now well positioned to deliver long-term, profitable revenues for these products going forward.

The Corporation's San Diego, California based Military division, Keragis Corporation, was also negatively impacted by ongoing budget approval delays which inhibited its backlog. These delays are only now being gradually lifted as military spending budgets are now slowly reaching approval. Nevertheless, Keragis' patented and disruptive Solid State Power Amplifier (SSPA) technology is considered the industry leader for a variety of applications currently being assessed by Keragis.

Management, the board of directors and the company's major shareholders continued to support a strategy of streamlining product lines to service niche markets and shifting its focus away from supplying generic components in what continues to be a highly competitive marketplace. During fiscal 2009, major shareholders reinforced their commitment to supporting Mitec by providing funds required to redeem maturing debt. In addition, the Corporation continues to evaluate ways to ensure that it is able to continue to have the financial strength to stay competitive and achieve long-term profitability.

"Although Mitec's operations in fiscal 2010 generated losses, in order to stay competitive and protect our position as a niche player in various sectors, we continued to design and deliver state of the art solutions which provide our customers with ways of reducing operating costs and expanding bandwidth", commented Dan Piergentili, Mitec's President and CEO. "We are beginning to see that these solutions are gaining traction now that we have finished shifting our focus into these areas and are optimistic about our wireless portfolio going forward", he said.

Over the past several months, Mitec has announced several major wireless wins relating to these product lines, including:

    
    - Selection as lead supplier for a core component (diplexers) for point-
      to-point radios by one of the world's largest and fastest growing
      telecom providers. To date, volume production has been set up in
      Mitec's Suzhou, China facility and remains on schedule for $3.0 million
      in orders for the balance of the year;

    - Selection as lead supplier for an additional core component (flexible
      waveguide) for point-to-point radios by the same customer referred to
      above. To date volume production has generated over $1.5 million in
      orders and should reach $2.0 million as anticipated;

    - Receipt of first commercial order for its Distributed Antenna System
      (DAS network) from a North American integrator. Although this
      technology has been field tested over the past several years,
      deliveries have now been made and Mitec is optimistic that its solution
      can be a significant entrant in this growing, valuable telecom market;

    - Selection as lead supplier and initial shipment of Long Term Evolution
      (LTE) 4G wireless network components to the same customer referred to
      above. These initial shipments, which totalled $1.7 million, are part
      of a larger volume initiative to support 4G growth worldwide with this
      customer;

    - Selection as supplier of low noise amplifiers as part of a European
      Telecom company's network upgrade with a value of $1.5 million;

    - Selection for mobile broadcast trials for a North American satellite
      radio service provider involving Mitec's proven, high performance
      filters. These trials are expected to generate a series of higher
      volume, follow-on orders in 2011.
    

About Mitec Telecom

Mitec 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. Mitec 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, Mitec also operates facilities in California and China. Mitec is listed on the Toronto Stock Exchange under the symbol MTM. On-line information about Mitec is available at www.mitectelecom.com.

Due to confidentiality provisions, Mitec is generally not able to disclose the names of its major customers or the financial data related to sales transactions. Certain statements in this release, including statements regarding future results and performance, are forward-looking statements based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to, the effect of general economic conditions, decreases in demand for Mitec's products, fluctuations in selling prices and adverse changes in general market and industry conditions and other factors listed in Mitec's public filings with the appropriate securities regulatory authorities.

    
    MITEC TELECOM INC.
    CONSOLIDATED BALANCE SHEETS
    (in thousands of Canadian dollars)
    Audited
                                                          As at        As at
                                                       April 30,    April 30,
                                                           2010         2009
                                                              $            $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash                                                  1,886        4,485
    Short-term investments                                  181          181
    Trade receivables                                     5,732        5,592
    Other receivables                                       288          126
    Income tax recoverable                                  380          323
    Inventories                                           5,447        8,088
    Prepaid expenses and other assets                       493          629
    -------------------------------------------------------------------------
    Total current assets                                 14,407       19,424

    Property, plant and equipment                         4,510        5,493
    Intangible assets                                     1,762        3,263
    Goodwill                                                  -        1,991
    Investments                                              25           25
    Future income tax                                         -          125
    -------------------------------------------------------------------------
                                                         20,704       30,321
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Credit facility                                         733            -
    Accounts payable and accrued liabilities              6,061        5,449
    Current portion of long-term debt                         -        1,215
    -------------------------------------------------------------------------
    Total current liabilities                             6,794        6,664

    Long-term debt                                        1,157            -
    -------------------------------------------------------------------------
                                                          7,951        6,664
    -------------------------------------------------------------------------

    Shareholders' equity
    Common shares                                       132,142      132,142
    Warrants                                              1,152        1,925
    Equity component of convertible debentures              768           14
    Contributed surplus                                  10,802        9,836
    Deficit                                            (131,427)    (119,980)
    Accumulated other comprehensive loss                   (684)        (280)
    -------------------------------------------------------------------------
    Total shareholders' equity                           12,753       23,657
    -------------------------------------------------------------------------
                                                         20,704       30,321
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MITEC TELECOM INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
    (in thousands of Canadian dollars, except per share data and number of
     shares)
                                         Unaudited                   Audited
                                               For                       For
                            the three months ended   the twelve months ended
                                          April 30,                 April 30,
                                 2010         2009         2010         2009
                                    $            $            $            $
    -------------------------------------------------------------------------

    Sales                       6,358        6,927       25,424       40,348
    Cost of sales               5,403        5,844       21,756       31,836
    -------------------------------------------------------------------------
    Gross profit                  955        1,083        3,668        8,512
    -------------------------------------------------------------------------

    Expenses
    Research and
     development                  777        1,137        3,559        4,369
    Selling and
     administrative             1,794        2,087        6,712        7,510
    Financial expenses            299          178          834          853
    Foreign exchange loss
     (gain)                       287         (470)         969       (1,706)
    Loss on disposal and
     impairment of property,
     plant and equipment           33           80            8          470
    Impairment of intangible
     assets                       724           50          724           50
    Impairment of goodwill      1,991        1,607        1,991        1,607
    Stock-based compensation       44           45          193          607
    -------------------------------------------------------------------------
                                5,949        4,714       14,990       13,760
    -------------------------------------------------------------------------

    Loss before income taxes   (4,994)      (3,631)     (11,322)      (5,248)
    Income tax expense
     (recovery)                   242         (523)         125         (640)
    -------------------------------------------------------------------------
    Net loss for the year      (5,236)      (3,108)     (11,447)      (4,608)

    Net change in the
     unrealized (loss)
     gain on translating
     financial statements of
     self-sustaining foreign
     operations                   (21)        (575)        (404)         614
    -------------------------------------------------------------------------
    Comprehensive loss for
     the year                  (5,260)      (3,683)     (11,851)      (3,994)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted loss
     per outstanding common
     share                      (0.02)       (0.01)       (0.05)       (0.02)
    -------------------------------------------------------------------------
    Weighted average
     number of
     outstanding
     common shares        220,666,756  220,666,756  220,666,756  220,658,990
    -------------------------------------------------------------------------


    MITEC TELECOM INC.
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
    (in thousands of Canadian dollars, except for number of shares)
    Audited
                                                                      Equity
                                                                   component
                                                                   of conver-
                                                                    tible de-
                                 Common shares            Warrants  bentures
                              Number              Number
                                (000)        $      (000)        $         $
    -------------------------------------------------------------------------


    Balance,
     April 30, 2008          220,312   132,097    38,016     1,931        46

    Issued upon
     conversion of
     convertible
     debentures                  354        45         -         -       (32)
    Expired warrants               -         -      (187)       (6)        -
    Stock-based
     compensation                  -         -         -         -         -
    Other comprehensive
     profit for the year           -         -         -         -         -
    Net loss for the year          -         -         -         -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Balance,
     April 30, 2009          220,666   132,142    37,829     1,925        14

    Issued under a
     convertible
     debenture
     financing                     -         -         -         -       754
    Expired warrants               -         -   (14,226)     (773)        -
    Stock-based
     compensation                  -         -         -         -         -
    Other comprehensive
     loss for the year             -         -         -         -         -
    Net loss for the year          -         -         -         -         -
    -------------------------------------------------------------------------
    Balance,
     April 30, 2010          220,666   132,142    23,603     1,152       768
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                              Accu-
                                                           mulated
                                                             other
                                        Contri-             compre-    Share-
                                         buted             hensive   holders'
                                       surplus   Deficit      loss    equity
                                             $         $         $         $
    -------------------------------------------------------------------------

    Balance,
     April 30, 2008                      9,223  (115,372)     (894)   27,031

    Issued upon
     conversion of
     convertible
     debentures                              -         -         -        13
    Expired warrants                         6         -         -         -
    Stock-based
     compensation                          607         -         -       607
    Other comprehensive
     profit for the year                     -         -       614       614
    Net loss for the year                    -    (4,608)        -    (4,608)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Balance,
     April 30, 2009                      9,836  (119,980)     (280)   23,657

    Issued under a
     convertible
     debenture
     financing                               -         -         -       754
    Expired warrants                       773         -         -         -
    Stock-based
     compensation                          193         -         -       193
    Other comprehensive
     loss for the year                       -         -      (404)     (404)
    Net loss for the year                    -   (11,447)        -   (11,447)
    -------------------------------------------------------------------------
    Balance,
     April 30, 2010                     10,802  (131,427)     (684)   12,753
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MITEC TELECOM INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (in thousands of Canadian dollars)
                                         Unaudited                   Audited
                                               For                       For
                            the three months ended   the twelve months ended
                                          April 30,                 April 30,
                                 2010         2009         2010         2009
                                    $            $            $            $
    -------------------------------------------------------------------------

    CASH FLOW FROM
     OPERATING ACTIVITIES
    Net loss for the period    (5,236)      (3,108)     (11,447)      (4,608)
    Items not affecting cash

      Amortization                405          478        1,714        2,327
      Loss on disposal and
       impairment of
       property, plant and
       equipment                   33           80            8          470
      Impairment of
       intangibles assets         724           50          724           50
      Impairment of goodwill    1,991        1,607        1,991        1,607
      Income tax charge
       (recovery)                 242         (523)         125         (640)
      Stock-based compensation    140           45          193          607
      Accretion expense            44          104          448          636
    -------------------------------------------------------------------------
                               (1,657)      (1,267)      (6,244)         449
    Changes in non-cash
     working capital
     balances related to
     operating activities         746        2,246        2,787          435
    -------------------------------------------------------------------------
                                 (911)         979       (3,457)         884
    -------------------------------------------------------------------------

    CASH FLOW FROM INVESTING
     ACTIVITIES
    Additions to property,
     plant and equipment           (5)        (437)        (166)        (786)
    Additions to intangible
     assets                         -           (3)         (10)          (3)
    Proceeds on disposal of
     property, plant and
     equipment                     14            2           31           15
    Purchase of short-term
     investment                     -         (337)        (181)        (516)
                                    -          335          181          412
    -------------------------------------------------------------------------
                                    9         (440)        (145)        (878)
    -------------------------------------------------------------------------

    CASH FLOW FROM FINANCING
     ACTIVITIES
    Convertible debentures
     issued                         -            -        1,678            -
    Repayment of long-term
     debt                           -          (68)      (1,400)        (458)
    Credit facility               733            -          733            -
    -------------------------------------------------------------------------
                                  733          (68)       1,011         (458)
    -------------------------------------------------------------------------

    (Loss) gain on foreign
     cash and cash held            19          153           (8)         153
    -------------------------------------------------------------------------

    Net decrease in cash         (150)         624       (2,599)        (299)
    Cash, beginning of
     the year                   2,036        3,861        4,485        4,784
    -------------------------------------------------------------------------
    Cash, end of the
     period                     1,886        4,485        1,886        4,485
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

%SEDAR: 00002350EF

SOURCE Mitec Telecom Inc.

For further information: For further information: Mr. Jeffrey Mandel, Executive Chairman and Director, Investor and Corporate Relations, Tel.: (514) 694-9000, jeffrey.mandel@mitectelecom.com; Source: Mitec Telecom Inc.

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