Cabletel Reports Third Quarter 2003 Results.Business Editors MARKHAM Markham City (pop., 1991: 154,000), southeastern Ontario. It is situated on the Rouge River, northeast of Toronto. Settled in 1794, the town was named for William Markham, archbishop of York. It annexed the nearby township of Markham in 1971. , Ontario--(BUSINESS WIRE)--Nov. 11, 2003 Cabletel Communications Corp. (AMEX AMEX See: American Stock Exchange : TTV TTV Transfusion Transmitted Virus TTV Total Thickness Variation (semiconductor wafer planarity) TTV TechTV TTV Total Transaction Value TTV Tapping the Vein (band) TTV Target Test Vehicle ; TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension : TTV), a leading distributor of broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). equipment to the Canadian television Canadian television may refer to:
loonie dollar - the basic monetary unit in many countries; equal to 100 cents ).
For the Three Months For the Nine Months
Ended Sept. 30, Ended Sept. 30,
2003 2002 2003 2002
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Net Sales $9,433,123 $13,650,216 $29,328,440 $41,794,281
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Gross Profit $1,693,089 3,186,651 4,395,243 8,297,657
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Loss before income
taxes $(288,521) (104,412) (3,083,371) (699,615)
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Net loss $(297,521) (113,412) (3,089,892) (726,615)
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Operating cash flow $ (79,393) 72,249 (1,871,279) 381,755
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Basic loss per share ($0.04) ($0.02) ($0.43) ($0.10)
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Diluted loss per share ($0.04) ($0.02) ($0.43) ($0.10)
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Weighted average number
of shares outstanding
on a basic and diluted
basis 7,167,612 7,167,612 7,167,612 7,167,612
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Greg GREG Great Egg Harbor National Scenic and Recreational River (US National Park Service) Walling, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Cabletel, stated, "The reduction of capital expenditures in the cable industry continues to affect our business. However, the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). initiatives implemented during the third quarter have positively impacted the Company." Mr. Walling also noted that, "Selling, general and administrative expenses for the third quarter ended September 30, 2003 are $1,177,602 lower than $2,878,464 reported for the comparable quarter a year ago and $373,274 less than the second quarter ended June June: see month. 30, 2003. An operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $288,521 for the third quarter ended September 30, 2003, represents a significant improvement over the second quarter ended June 30, 2003 operating loss of $1,937,360." Third Quarter Highlights: -- Bank indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. down by $3,576,668 compared to December December: see month. 31, 2002, and accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. down by $2,522,544 compared to December 31, 2002. -- Third quarter net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight in the Technology segment increased by $1,400,172 or 230% compared to the same quarter last year. -- Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. loss per share for the third quarter was 4 cents per share vs. a loss of 2 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. for the same quarter last year. -- While third quarter sales fell by $4,217,093 to $9,433,123, the Company was able to reduce selling, general and administrative expenses by $1,177,602, compared to the same quarter last year. Consolidated Results For the three months ended September 30, 2003, the Company incurred a net loss of $297,521 compared to a net loss of $113,412 for the three months ended September 30, 2002. Basic and fully diluted loss per share was $0.04 for the three months ended September 30, 2003 compared to basic and fully diluted loss per share of $0.02 for the three months ended September 30, 2002. For the nine months ended September 30, 2003, net loss was $3,089,892 compared to a net loss of $726,615 for the nine months ended September 30, 2002. Basic and fully diluted loss per share was $0.43 for the nine months ended September 30, 2003 compared to basic and fully diluted loss per share of $0.10 for the nine months ended September 30, 2002. Consolidated net sales for the three months ended September 30, 2003 decreased by $4,217,093 or 31% to $9,433,123 compared to consolidated net sales of $13,650,216 for the three months ended September 30, 2002. Consolidated net sales of $29,328,440 for the nine months ended September 30, 2003 decreased by $12,465,841 or 30% compared to consolidated net sales of $41,794,281 for the nine months ended September 30, 2002. The primary reason for the decrease for the three and nine month periods ending September 30, 2003 is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the financial and market conditions that impacted growth in the cable, and satellite industry resulting in reduced capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. within the industry. There is a risk that the softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. will continue within the industry with respect to reduced capital expenditures among the major cable companies throughout the remainder of the year. Gross profit for the three months ended September 30, 2003 of $1,693,089 decreased by $1,493,562 or 47% compared to gross profit of $3,186,651 for the three months ended September 30, 2002. Gross margin for the three months ended September 30, 2003 was 17.9% compared to 23.3% for the three months ended September 30, 2002. Gross profit for the nine months ended September 30, 2003 of $4,395,243 decreased by $3,902,414 or 47% compared to gross profit of $8,297,657 for the nine months ended September 30, 2002. Gross margin for the nine months ended September 30, 2003 was 15% compared to 20% for the nine months ended September 30, 2002. The primary reason for the decrease in gross margin for the three and nine months ended September 30, 2003 is due to a slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in the industry that resulted in a more competitive environment. The Manufacturing segment experienced production shut downs during periods when tooling changes were required as well as when demand for product was soft. In addition, for the nine months ended September 30, 2003, the Company took a charge for inventory obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. amounting to approximately $641,000 that was expensed through cost of sales in the second quarter. Selling, general and administrative expenses for the three months ended September 30, 2003 decreased $1,177,602 or 41% to $1,700,862 compared to $2,878,464 for the three months ended September 30, 2002. As a percentage of sales, selling, general and administrative expenses for the three months ended September 30, 2003 were 18% compared to 21% for the three months ended September 30, 2002. Selling, general and administrative expenses for the nine months ended September 30, 2003 decreased $1,575,498 or 22% to $5,699,017 compared to $7,274,515 for the nine months ended September 30, 2002. As a percentage of sales, selling, general and administrative expenses for the nine months ended September 30, 2003 were 19% compared to 17.4% for the nine months ended September 30, 2002. The Company has made a conscious effort to reduce certain costs in an attempt to return the Company to profitability. Such cost cutting measures included reductions in the Company's labour force as well as reductions in marketing costs. Included in selling, general and administrative expenses is a foreign exchange gain of $247,046 for the three months ended September 30, 2003 compared to a foreign exchange loss of $432,306 for the three months ended September 30, 2002 and a foreign exchange gain of $1,051,691 for the nine months ended September 30, 2003 compared to a foreign exchange loss of $403,944 for the nine months ended September 30, 2002. Interest expense decreased $91,009 to $238,238 for the three months ended September 30, 2003 compared to $329,247 for the three months ended September 30, 2002. Interest expense on bank indebtedness for the three months ended September 30, 2003 decreased by $61,045 due to lower levels of borrowings under the Company's credit facility, and interest expense on long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. decreased by $29,964 primarily due to the repayment of a portion of the Company's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. obligation with a major supplier. For the nine months ended September 30, 2003, interest expense decreased by $18,302 to $731,989 compared to $750,291 for the nine months ended September 30, 2002. Interest on bank indebtedness decreased by $62,973, and interest on long-term debt increased by $44,671. The decrease in interest expense on bank indebtedness reflects lower levels of borrowings of the Company's line of credit during the first nine months of the year while interest expense on long-term debt was incurred on a long-term note from the renegotiation of credit terms Credit Terms The conditions under which credit will be extended to a customer. The components of credit terms are: cash discount, credit period, net period. with a major supplier during the second quarter of 2002. Earnings from operations before non-recurring items and income taxes for the three months ended September 30, 2003 was a loss of $288,521 compared to a loss of $93,371 for the three months ended September 30, 2002. Total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. of $1,981,610 for the three months ended September 30, 2003 were $1,298,412 lower than $3,280,022 reported for the three months ended September 30, 2002. Earnings from operations before non-recurring items and income taxes for the nine months ended September 30, 2003 was a loss of $2,453,496 compared to income of $80,235 for the nine months ended September 30, 2002. Total operating expenses of $6,848,739 for the nine months ended September 30, 2003 were $1,368,683 lower than $8,217,422 reported for the nine months ended September 30, 2002. Included in operating expenses for the nine months ended September 30, 2003 is a special charge amounting to $280,000 relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc a severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when liability in connection with a reduction in the Company's work force related to termination expenses of approximately 25% of Cabletel's workforce. As of September 30, 2003, the unpaid balance of these charges included in accrued liabilities was $192,086. For the three and nine months ended September 30, 2003 the Company has paid out $87,914 relating to the special charge. For the nine months ended September 30, 2003, the Company wrote down manufacturing equipment amounting to $400,000. The Company re-assessed the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of its equipment and determined that there was impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. in value and accordingly, took a write down based on the net realizable value Net realizable value (NRV) is a commonly used method of evaluating an asset's worth in the field of inventory accounting. NRV is part of GAAP rules that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. of the equipment. For the nine months ended September 30, 2003, the Company recorded a write off of goodwill amounting to $198,606 in connection with its acquisition of Allied. The Company assessed the carrying value of the goodwill and determined that it had been impaired See assistive technology. due to Allied's poor performance and continued uncertainty in the telecommunications industry, as well as uncertainty as to whether or not Allied will be successful in obtaining an extension of its senior bank facility beyond its current maturity date. For the nine months ended September 30, 2002, the Company recorded a non-cash item amounting to $164,000 related to the issuance of warrants in connection with a settlement of debt with a major supplier. In connection with the debt settlement the Company issued to the supplier a Warrant to acquire up to 200,000 shares of the Company's common stock at an exercise price of Cdn. $1.64 per share up to and including May 31, 2007. In addition, for the nine months ended September 30, 2002, the Company wrote off other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. amounting to $615,850 relating to an amount owed to the Company by Allied. Distribution Segment Net sales of $6,057,386 in the Distribution segment for the three months ended September 30, 2003 reflects a decrease of $4,397,137 or 42% compared to $10,454,523 for the three months ended September 30, 2002. Net sales of $20,054,468 in the Distribution segment for the nine months ended September 30, 2003 reflects a decrease of $14,244,158 or 42% compared to $34,298,626 for the nine months ended September 30, 2002. The primary reason for the decrease for the three and nine month periods ending September 30, 2003 in the Distribution segment is attributable to financial and market conditions that impacted growth in the cable, technology and satellite industry resulting in reduced capital spending within the industry during the year. Manufacturing Segment Net sales in the Manufacturing segment of $2,067,634 for the three months ended September 30, 2003, reflects a decrease of $753,047 or 27% compared to net sales of $2,820,681 for the three months ended September 30, 2002. The decrease for the three month period is primarily due to a reduced demand for the Manufacturing segments products as a result of a reduction in capital spending within the cable and satellite industry. Net sales in the Manufacturing segment of $6,846,339 for the nine months ended September 30, 2003 reflects an increase of $623,168 or 10% compared to $6,223,171 for the nine months ended September 30, 2002. The increase for the nine month period is due to increased sales to a customer in Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. during the first quarter. Technology Segment Net sales of $2,008,630 in the Technology segment for the three months ended September 30, 2003 reflects an increase of $1,400,172 or 230% compared to $608,458 for the three months ended September 30, 2002. Net sales of $4,357,195 in the Technology segment for the nine months ended September 30, 2003 reflects an increase of $2,498,878 or 134% compared to $1,858,317 for the nine months ended September 30, 2002. The increase is primarily due to the acquisition and consolidation of Allied, representing approximately $501,289 in sales for the three months ended September 30, 2003 and $1,594,812 for the nine months ending September 30, 2003. Financial Liquidity, Capital Resources and Bank Facility Covenants Historically, the Company's principal sources of liquidity both on a short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. and long-term basis are cash flows provided by operations and availability under our senior secured revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility. Reduced sales and profitability could reduce cash provided by operations and limit availability under the secured credit facility. In addition, increases in working capital, due to seasonal fluctuations in sales and collections, among other things could reduce our operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. in the short term. Net cash provided by operating activities for the three months ended September 30, 2003 was $1,416,645. Cash flow from reductions in inventory and receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed amounted to $2,235,620 and $168,076 respectively. Decreases in accounts payables Payables Related: Accounts payable and accrued liabilities amounted to $691,332 and cash used by prepaid expenses Prepaid Expense An asset that arises on a balance sheet because of the payment of something in advance (prepayment). Services for the payment will be received in the near future. , deposits and other amounted to $166,326. Net cash provided by operating activities for the nine months ended September 30, 2003 was $4,668,376. Cash flow from reductions in inventory amounted to $3,206,913 while decreases in accounts payables and accrued liabilities amounted to $2,522,544. Cash provided by reductions in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and prepaid expenses, deposits and other amounted to $4,793,555 and $991,731, respectively. Income taxes recoverable decreased by $120,000 for the nine months ended September 30, 2003. Net cash of $1,415,171 was used during the three months ended September 30, 2003 by financing activities. Of such amount $1,212,646 was used to repay bank indebtedness and $202,525 was used to repay long-term debt on a term loan from the landlord of the Company's head office building, long-term debt on a note payable to a major supplier and to repay long-term debt on an equipment loan. Net cash of $4,792,079 was used during the nine months ended September 30, 2003 by financing activities. Of such amount $3,822,535 was used to pay down bank indebtedness and $969,544 was used to repay long-term debt on a term loan from the landlord of the Company's head office building, long-term debt on a note payable to a major supplier and to repay long-term debt on an equipment loan. Net cash used in investing activities for the three months ended September 30, 2003 was $4,846 relating to the purchase of capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) . Net cash provided by investing activities for the nine months ended September 30, 2003 was $86,868 relating to the acquisition of goodwill amounting to $36,990 which was offset by the disposal of assets amounting to 123,858. On May 16, 2002, Cabletel entered into a Revolving Credit Facility Agreement with LaSalle Lasalle (ləsăl`) or Ville Lasalle (vēl), city (1991 pop. 73,804), S Que., Canada, SW of Montreal on the St. Lawrence River at the head of the Lachine Rapids. It is a suburb of Montreal. Business Credit, a division of ABN ABN Advance beneficiary notice, see there AMBRO BANK N.V., Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of Branch ("LaSalle") for a three year committed fifteen million Canadian dollars (CAD CAD: see computer-aided design. (Computer-Aided Design) Using computers to design products. CAD systems are high-speed workstations or desktop computers with CAD software. $15,000,000), or its United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. dollar equivalent. The new facility replaces the Company's previous $12 million credit facility with HSBC Bank Canada HSBC Bank Canada (Traditional Chinese: 加拿大滙豐銀行; Pinyin: ), formerly the Hongkong Bank of Canada . At September 30, 2003 the Company owed $8,164,756 on its Revolving Credit Facility compared to $11,741,424 at December 31, 2002. The facility contains certain customary covenants. As of September 30, 2003 and since March 31, 2003, as a result of a variation from the required minimum adjusted net worth, interest coverage ratio and debt service ratio, the Company had a technical violation VIOLATION. An act done unlawfully and with force. In the English stat. of 25 E. III., st. 5, c. 2, it is declared to be high treason in any person who shall violate the king's companion; and it is equally high treason in her to suffer willingly such violation. of the applicable covenants. The Company is working with its lender to resolve the matter and expects to receive either a waiver The voluntary surrender of a known right; conduct supporting an inference that a particular right has been relinquished. The term waiver is used in many legal contexts. or amendment to the agreement shortly. There can be no assurance that the Company will be successful in obtaining either a waiver or amendment. As of November November: see month. 1, 2002, the Company began consolidating the results of Allied, as a result of the Company's ability to convert it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have convertible debenture Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. into 100% ownership of all issued and outstanding common shares of Allied for a nominal Trifling, token, or slight; not real or substantial; in name only. Nominal capital, for example, refers to extremely small or negligible funds, the use of which in a particular business is incidental. NOMINAL. Relating to a name. consideration. Subsequently, on May 9, 2003, Cabletel exercised its option and acquired all the outstanding shares of Allied. Allied is currently in negotiations with its senior bank lender with regards to an extension of its senior bank facility beyond its current maturity date. If Allied is unable to obtain such an extension, this could adversely affect the consolidated results of the Company as the Company would be required to write off its investment and receivables due from goods sold in the ordinary course of business amounting to approximately $300,000. The Company has undertaken a restructuring initiative which was implemented during the third quarter seeking to reduce operating costs operating costs npl → gastos mpl operacionales and total indebtedness. The restructuring plan includes but is not limited to the following key components: -- A reduction in the size of its workforce by approximately 25%. -- Explore the sale of non-core assets. -- A reduction of occupancy costs Occupancy costs are the whole life costs of buildings and their associated land from occupancy until disposal. These costs may be incurred on a regular or irregular basis. Occupancy costs are those costs related to occupying a space including; rent, real estate taxes, personal through the consolidation of its operation into fewer facilities. -- Efforts to renegotiate re·ne·go·ti·ate tr.v. re·ne·go·ti·at·ed, re·ne·go·ti·at·ing, re·ne·go·ti·ates 1. To negotiate anew. 2. To revise the terms of (a contract) so as to limit or regain excess profits gained by the contractor. terms with key suppliers. The Company has commenced these efforts and believes that, if successful, they should result in cost savings and increased working capital. In particular, in connection with its restructuring plan, the Company is in the process of renegotiating the payment terms of its US $2.2 million subordinated promissory note promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. , (as of September 30, 2003, US $1.3 million). The Company has obtained the consent of the payee The person who is to receive the stated amount of money on a check, bill, or note. payee n. the one named on a check or promissory note to receive payment. PAYEE. The person in whose favor a bill of exchange is made payable. to pay one half of each of the full US $120,000 installments due under the note on each of May 31, June 30, and July July: see month. 31, 2003, and one quarter of the installments due on each of August 31, September 30, and October October: see month. 31, 2003. In connection with that restructuring, Cabletel has been in discussions with the payee of the note regarding a restructuring which would reduce the monthly payment below the required US $120,000 to US $30,000 per month for the first six months and US $45,000 per month for the remainder of the payments. Although discussions with the payee have commenced, and an agreement in principle has been reached, to date Cabletel and the payee have not completely finalized See finalization. the terms of a restructuring. Unless an agreement is completed by November 15, 2003, Cabletel will be required to pay the full US $120,000 installment due on November 30, 2003, plus the amount of Cabletel's total underpayment of US $450,000 with respect to May 31, June 30, July 31, August 31, September 30, and October 31, 2003 installments. Unless an agreement is reached, Cabletel does not expect to be in a position to make those payments. If Cabletel is unable or otherwise fails to make those payments in full it would constitute a default of the terms of the note, which is unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. and subordinated to the rights of the senior bank lenders under Cabletel's senior credit facility. If no agreement is reached, Cabletel may not be in a position to make all of the required payments, an event that could permit the payee to call an event of default under the note and have a material adverse impact on Cabletel and its business. At September 30, 2003, the Company's current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. exceeded its current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. by $821,870. However, during the three and nine months ended September 30, 2003, the liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy of inventory slowed from prior experience, primarily as a result of the slowdown in the industry. As a result the Company has been slower than usual in meeting vendor terms. Should this trend continue it may present a long-term liquidity concern for the Company. The Company's agent in Israel has asserted a claim against Cabletel under Israel law seeking payment for commissions he claims are due to him. The agent has also been successful in obtaining an injunction injunction, in law, order of a court directing a party to perform a certain act or to refrain from an act or acts. The injunction, which developed as the main remedy in equity, is used especially where money damages would not satisfy a plaintiff's claim, or to against the Company's Israel bank account which prevents Cabletel from withdrawing funds on that account and that also prevents the Company's Israel customers from making payments directly to Cabletel. The injunction restricts funds which are in excess of the amount the agent claims is owed to him. The Company believes this matter will be settled without litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. for a lesser amount than that claimed by the agent. The Company has provided for, in its consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge , the balance it believes is due to the agent. However, should the matter proceed to litigation there can be no assurances of the outcome. Should the Company not have access to these funds in a timely manner, the operations of the Company could be impacted adversely. In order to meet its liquidity needs and fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. its other obligations, the Company is exploring a number of options including, without limitation, (i) raising additional financing through the issuance of debt or equity securities, and (ii) selling certain assets of the Company. However, there can be no assurance that the Company will be successful in implementing its plans. Forward Looking Statements Certain information and statements contained in this Management Discussion and Analysis of Financial Condition and Results of Operations and other sections of this report, including statements using terms such as "may," "expect," "anticipate," "intend," "estimate," "believe," "plan," "continue," "could be," or similar variations or the negative thereof, constitute forward looking statements with respect to the financial condition, results of operations, and business of Cabletel, including statements that are based on current expectations, estimates, forecasts, and projections about the markets in which the Company operates, the margins it expects from its products and its expectations regarding selling, general and administrative expenses, as well as management's beliefs and assumptions regarding these markets. Any statements that are not statements about historical facts also are forward looking statements. The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 (the "Litigation Reform Act") provides a "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " for forward looking statements. These Cautionary Statements are being made pursuant to the provisions of the Litigation Reform Act and with the intention of obtaining the benefits of the terms of the "safe harbor" provisions of the Act. In order to comply with the terms of the "safe harbor," the Company cautions investors that any forward looking statements made by the Company are not guarantees of future performance and that a variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations expressed in the Company's forward looking statements. Several factors that could cause results or events to differ from current expectations are discussed below. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the operations, performance, development and results of the Company's business. In providing forward looking statements, the Company is not undertaking any obligation to update publicly or otherwise these statements, whether as a result of new information, future events or otherwise. The Company's public filings are available at www.sec.gov/edgar.shtml or www.sedar.com
CABLETEL COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
(Canadian Funds)
Unaudited
ASSETS
Audited
Sept. 30, Dec. 31,
2003 2002
----------- -----------
(Unaudited)
CURRENT
Cash $ 26,334 $ 63,169
Accounts receivable
(net of allowance of $141,865; 2002 -
$109,914) 9,498,019 14,291,574
Inventory 7,281,532 10,488,445
Other receivables 246,250 235,000
Income taxes recoverable - 120,000
Prepaid expenses and deposits 415,438 1,407,169
----------- -----------
17,467,573 26,605,357
PROPERTY, PLANT AND EQUIPMENT 1,318,851 2,198,086
DEFERRED REFINANCING FEES 433,334 633,334
GOODWILL - 161,616
PRODUCT DEVELOPMENT COSTS
(net of amortization of $129,397; 2002 -
$103,517) 5,751 31,631
----------- -----------
$ 19,225,509 $ 29,630,024
=========== ===========
LIABILITIES
CURRENT
Bank indebtedness $ 8,638,889 $ 12,461,424
Accounts payable 4,382,974 6,736,089
Accrued liabilities 1,825,218 1,994,647
Current portion of long-term debt 1,798,622 2,067,558
----------- -----------
16,645,703 23,259,718
LONG-TERM DEBT 453,480 1,154,088
----------- -----------
17,099,183 24,413,806
=========== ===========
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
CAPITAL STOCK
AUTHORIZED
Unlimited First preferred shares,
issuable in series
Unlimited Common shares
ISSUED
7,167,612 Common shares (2002 -
7,167,612) 16,136,761 16,136,761
Paid in Capital - Warrant 164,000 164,000
DEFICIT (14,174,435) (11,084,543)
------------ ------------
2,126,326 5,216,218
------------ ------------
$ 19,225,509 $ 29,630,024
============ ============
CABLETEL COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Canadian Funds)
(Undaudited)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
For the Three Month For the Nine Month
Period Ended Sept. 30, Period Ended Sept. 30,
2003 2002 2003 2002
------------ ------------ ------------ ------------
SALES $ 9,433,123 $13,650,216 $29,328,440 $41,794,281
COST OF SALES 7,740,034 10,463,565 24,933,197 33,496,624
------------ ------------ ------------ ------------
GROSS PROFIT 1,693,089 3,186,651 4,395,243 8,297,657
------------ ------------ ------------ ------------
EXPENSES
Selling,
general and
administrative 1,700,862 2,878,464 5,699,017 7,274,515
Special charge - - 280,000 -
Amortization 42,510 72,311 137,733 192,616
Interest - bank
indebtedness 166,832 227,877 491,689 554,662
Interest -
long-term debt 71,406 101,370 240,300 195,629
------------ ------------ ------------ ------------
1,981,610 3,280,022 6,848,739 8,217,422
------------ ------------ ------------ ------------
INCOME (LOSS)
BEFORE THE
FOLLOWING (288,521) (93,371) (2,453,496) 80,235
------------ ------------ ------------ ------------
Loss on
disposition
of assets - - 31,269 -
Write down of
long-lived
assets - - 400,000 -
Write off of
goodwill - - 198,606 -
Write off of
other assets - 11,041 - 615,850
Loss on settlement
of debt - - - 164,000
------------ ------------ ------------ ------------
- 11,041 629,875 779,850
------------ ------------ ------------ ------------
LOSS BEFORE INCOME
TAXES (288,521) (104,412) (3,083,371) (699,615)
Income taxes 9,000 9,000 6,521 27,000
------------ ------------ ------------ ------------
NET LOSS FOR THE
PERIOD $ (297,521) $(113,412) $(3,089,892) $ (726,615)
------------ ------------ ------------ ------------
DEFICIT, beginning
of period $(13,876,914)$(10,679,629)$(11,084,543)$(10,066,426)
------------ ------------ ------------ ------------
DEFICIT, end of
period $(14,174,435)$(10,793,041)$(14,174,435)$(10,793,041)
============ ============ ============ ============
Earnings (loss)
per share
Basic ($0.04) ($0.02) ($ 0.43) ($0.10)
============ ============ ============ ============
Fully diluted ($0.04) ($0.02) ($ 0.43) ($0.10)
============ ============ ============ ============
Weighted average
number of shares
Basic and Fully
diluted 7,167,612 7,167,612 7,167,612 7,167,612
============ ============ ============ ============
CABLETEL COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Canadian Funds)
(Unaudited)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
For the Three Month For the Nine Month
Period Ended Sept. 30, Period Ended Sept. 30,
2003 2002 2003 2002
----------- ----------- ----------- ------------
OPERATING ACTIVITIES
Loss for the period $ (297,521) $ (113,412) $(3,089,892) $ (726,615)
Amortization 105,211 89,660 349,988 266,399
Amortization of
prepaid
refinancing fees 66,667 100,000 200,000 100,000
Write down of long-
lived assets - - 400,000 -
Write off of
goodwill - - 198,606 -
Write off of other
assets - 11,041 - 615,850
Loss on settlement
of debt - - - 164,000
Loss on disposition
of assets - - 31,269 -
Imputed interest (3,750) (3,999) (11,250) (11,999)
Change in accounts
receivable 168,076 (1,300,360) 4,793,555 (4,669,205)
Change in inventory 2,235,620 141,930 3,206,913 687,957
Change in prepaid
expenses, deposits
and other (166,326) (114,885) 991,731 (1,110,076)
Change in accounts
payable and accrued
liabilities (691,332) (309,915) (2,522,544) 1,663,059
Change in income
taxes recoverable - - 120,000 (80,192)
----------- ----------- ----------- ------------
1,416,645 (1,499,940) 4,668,376 (3,100,822)
----------- ----------- ----------- ------------
FINANCING ACTIVITIES
Bank indebtedness
incurred
(repayment) (1,212,646) 1,621,983 (3,822,535) 3,536,534
Repayment of
long- term debt (202,525) (128,814) (969,544) (388,134)
----------- ----------- ----------- ------------
(1,415,171) 1,493,169 (4,792,079) 3,148,400
----------- ----------- ----------- ------------
INVESTING ACTIVITIES
Goodwill acquired - - (36,990) -
Disposition of
(purchase of)
equipment (4,846) (23,460) 123,858 (49,020)
----------- ----------- ----------- ------------
(4,846) (23,460) 86,868 (49,020)
----------- ----------- ----------- ------------
CHANGE IN CASH (3,372) (30,231) (36,835) (1,442)
CASH, beginning of
period 29,706 41,081 63,169 12,292
=========== =========== =========== ============
CASH, end of period $ 26,334 $ 10,850 $ 26,334 $ 10,850
=========== =========== =========== ============
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