Clearnet Communications Inc. Announces Year Ended December 31, 1996 Results Closes Acquistion of Mobilair Communications.PICKERING, Ontario--(BUSINESS WIRE)--March 4, 1997--CLEARNET COMMUNICATI (TSE, ME NET.A., NASDAQ CLNTF.) Clearnet Communications Inc. ("Clearnet" or "the Company"; NASDAQ - CLNTF; TSE, ME - NET.A) reports the following financial results: -0-
12 Months Ended 12 Months Ended
Dec 31, 1996 Dec 31, 1995
-----------------------------------------------------
(audited) (unaudited)
Revenue $38,762,000 $ 32,137,000
EBITDA (39,210,000) (8,859,000)
Net Loss Before
Income Taxes (73,600,000) (16,055,000)
Net Loss for the
Period (74,812,000) (17,131,000)
Loss per Share
under Cdn. GAAP (2.07) (0.62)
Loss per Share
under U.S. GAAP (2.11) (0.65)
Capital Expenditures 124,569,000 126,947,000
Total Subscribers 59,302 54,628
-0- For the twelve months ended December 31, 1996, revenue increased 20.6 percent to $38.8 million from $32.1 million in the same period in the prior year. For the twelve months ended December 31, 1996, there was a net loss of $74.8 million as compared to a net loss of $17.1 million in the same period in the prior year. The increase in net loss in the twelve months ended December 31, 1996 resulted primarily from an increase in selling, general, and administration expenses and increases in depreciation and amortization expenses. Loss per share for the twelve months ended December 31, 1996 was $2.07 as compared to a loss per share of $0.62 for the same period one year earlier. The average number of Class A share equivalents outstanding in the twelve months ended December 31, 1996 was 36,225,000 versus 27,560,000 for the twelve months ended one year earlier. In the 1995 annual report, Clearnet projected negative operating cash flow before cash interest income or expense for 1996 of $50 million and capital expenditures of $225 million. Actual results for 1996 were negative operating cash flow before cash interest income or expense of $44 million and capital expenditures of $125 million. Capital expenditures were lower than projected primarily because of PCS expenditures being deferred to the first quarter of 1997 and therefore the difference is considered to be one of timing and not permanent in nature. CORPORATE DEVELOPMENTS Mobilair Acquisition Closes - On February 28, 1997, Clearnet closed the acquisition (previously announced on February 5th) of the wireless communication business of Autostock Inc. known as the Mobilair Communications division for a purchase price of $19.8 million payable substantially in cash. Mobilair operates entirely in the province of Quebec. Mobilair is believed to be the largest distributor of wireless two-way radio product in Quebec with 14 sales and service outlets and over 130 employees, substantially all of whom were offered employment with Clearnet. Mobilair also provides wireless dispatch communications over an analogue SMR ("specialized mobile radio") network of approximately 100 transmission sites utilizing over 300 radio channels (including 3.5 MHz in Montreal) to approximately 10,000 subscribers. Mobilair is also an integration specialist in the field of mobility and public safety. Mobilair has annual combined revenue of approximately $18 million. Consent to Amendment of Senior Discount Notes Obtained - In February 1997, Clearnet announced that it had received the required consents from its noteholders to permit its wholly- owned subsidiary, Clearnet PCS Inc. ("CPI"), to borrow under certain vendor financing arrangements which have been arranged to enable CPI to construct and operate its new PCS network. As a result of the amendments, Clearnet has the necessary flexibility to incur the Lucent vendor financing as well as other financing arrangements necessary to fund the Company's future debt requirements. Fall 1997 Move to New Head Office Facility - In January 1997, Clearnet announced that in the fall of 1997 it will consolidate its fast-growing national headquarters into a single 220,000 square-foot operation in the Toronto suburb of Scarborough. Clearnet has entered into a 10 year lease for the space in Scarborough's prestigious Consilium Place office complex. The deal represents an approximate $45 million commitment over the entire lease term. The new space is more than four times the size of Clearnet's existing Pickering head-office space and will allow the wireless-communications company to consolidate employees from four Toronto-area locations into the facility at 200 Consilium Place. PCS Supply Contract and Credit Facility Signed - In December 1996, Clearnet announced that it had entered into binding contracts for the purchase and financing of CDMA (Code Division Multiple Access) PCS (Personal Communications Services) infrastructure and subscriber equipment from Lucent Technologies Canada Inc. ("Lucent"). Clearnet's credit facility with a Lucent affiliate provides for Cdn. $475 million in financing (the "Lucent Credit Facility"). It is believed to be the largest wireless equipment supply arrangement and financing ever in Canada. Including the Lucent Credit Facility, Clearnet has now raised over $1.1 billion in financing for the build-out and implementation of the Company's MiKETM and PCS networks since completing its initial public offering in October 1994. Clearnet does not expect any material cash interest payments on any debt obligations to be required until after the completion of the build-out and commercialization of both its MiKETM and PCS digital networks. Management's Discussion and Analysis of Financial Results Clearnet's financial results reflect (i) the construction, initial operation and expansion of the MiKE network which was launched in October 1996; (ii) the construction of the PCS digital network since Clearnet was awarded one of two national 30 MHz PCS licences for Canada in December 1995; (iii) the operation of the Company's analogue Specialized Mobile Radio ("SMR") network business; and (iv) the operation of mobile equipment sales, rental and service dealerships known as the Clearnet Communications Business Centres. Accordingly, Clearnet's financial results are not necessarily indicative of future operational performance, given the Company's strategy which entails the construction and operation of the Company's MiKE and PCS networks and the expected resulting significant future expansion of the Company's subscriber base. MiKE services are directed at the commercial market place, particularly the dispatch and integrated markets (two or more of enhanced dispatch (group calling), mobile telephone, text messaging with acknowledgment (paging) and mobile data services). PCS is intended to be directed at the consumer market for mobile telephone and other wireless services on a national basis. As previously announced, Clearnet changed its fiscal year end to December 31 from April 30 effective December 31, 1995. Accordingly, Clearnet is reporting its audited financial results for the twelve months ended December 31, 1996 and, for comparison purposes, unaudited results for the twelve months ended December 31, 1995 are also provided. Revenue increased 20.6 percent to $38.8 million for the twelve months ended December 31, 1996 from $32.1 million in the twelve months ended December 31, 1995. Network revenue increased by $0.8 million or 5.3 percent primarily due to the MiKE digital network launch in October 1996 which had 5,065 subscribers at December 31, 1996. The average revenue per subscriber unit ("ARPU") for MiKE was $45.08 since its commercial launch in October 1996. Clearnet expects MiKE ARPU to increase in 1997 as the proportion of higher yielding client units to dealer units increases. Analogue subscribers remained relatively unchanged at December 31, 1996 from December 31, 1995 at 54,237 and 54,628, respectively. The average ARPU for analogue for the year ended December 31, 1996 was $23.41 representing a 6.7 percent increase as compared to $21.94 for the twelve month period ended December 31, 1995. Equipment sales, rental and service sales increased 33.7 percent to $23.1 million in the twelve month period ended December 31, 1996 as compared to $17.3 million in the twelve month period ended December 31, 1995. Equipment sales increased over the prior year due to MiKE subscriber unit sales for the last three months of 1996 since the MiKE commercial launch and two new dealerships that were acquired in the second half of fiscal 1995. The analogue "churn rate" (number of subscriber units disconnected divided by the average number of units on the network) increased slightly during the twelve month period ended December 31, 1996 to 1.63 percent per month from 1.5 percent per month for the twelve month period ended December 31, 1995. The churn rate for the MiKE digital network since its commercial launch was 1.25 percent per month for the three months ending December 31, 1996. Earnings before interest, taxes, depreciation, amortization and other ("EBITDA") was negative $39.2 million or negative 101.2 percent of revenue and negative $8.9 million or negative 27.6 percent of revenue for the twelve month periods ended December 31, 1996 and 1995, respectively. Clearnet currently expenses subscriber acquisition costs as incurred. General marketing expenses, training costs, subscriber acquisition costs and increased employee levels especially in the retail distribution area were significantly higher in the twelve month period ended December 31, 1996 with the MiKE network commercial launch in October 1996. Operating, selling, general and administrative expenses increased by $37.0 million over the comparable period in the prior year. As at December 31, 1996, Clearnet had 680 employees, compared with 375 employees as at December 31, 1995. Increases in operating, selling, general and administrative expenses are consistent with the Company's business plan and are expected to continue during the construction and initial operation of the Company's MiKE and PCS networks and the expected resulting significant future expansion of the Company's subscriber base. Accordingly, overhead costs are expected to continue to increase faster than revenues until sometime after the initiation of commercial service of the PCS digital wireless network. Clearnet generated an operating loss of $66.5 million and $16.2 million for the twelve month periods ended December 31, 1996 and 1995, respectively. Clearnet expects that it will incur net operating losses over the next several years in connection with the expansion of the MiKE network, the build-out and launch of the PCS network and the expected resulting expansion of the subscriber base. Losses before taxes and minority interest of $73.6 million for the twelve month period ended December 31, 1996 increased from a loss before taxes and minority interest of $16.1 million for the comparable period one year earlier. The increase in net losses of $74.8 million from $17.1 million for the twelve months ended December 31, 1996 and 1995, respectively, is due mainly to the increase in operating losses, interest expenses and depreciation and amortization expenses. The loss per share for the period ended December 31, 1996 was $2.07 as compared to the net loss per share of $0.62 per share for the comparable period ended December 31, 1995. The average Class A non-voting shares outstanding was 36,225,000 and 27,560,000 for the periods ended December 31, 1996 and 1995, respectively. In addition, as at December 31, 1996 there were 2,706,000 options outstanding as well as 1,211,000 warrants, which when exercised would entitle the holders thereof to acquire 1,211,000 Class A Non-Voting Shares. The increase in the average number of shares outstanding was principally a result of the May 1996 issuance of 9.2 million Class A Non-Voting shares. Clearnet used $25.3 million in cash from operating activities during the twelve month period ended December 31, 1996, as compared to $5.8 million during the same period one year earlier. The $25.3 million in cash used in operating activities during the twelve month period ended December 31, 1996 resulted primarily from negative EBITDA of $39.2 million and a net increase in operating assets $4.5 million offset by investment income of approximately $19.0 million. Cash used in investing activities was $126.3 million and consisted primarily of $94.1 million in digital network equipment and assets under development and $18.1 million in computer hardware and software. Assets under development include all labour, material, transmission and related equipment, engineering, site development, building and other costs relating to the construction and development of Clearnet's MiKE and PCS networks. Cash provided by financing activities of $226.7 million for the twelve month period ended December 31, 1996 was primarily generated from the 9,200,000 million Class A non-voting share offering in May 1996. Proceeds from the issuance of the shares amounted to $226.4 million, net of $12.7 million in share issue costs. As a result of the above, cash and short-term investments increased during the period by $75.2 million to $347.5 million at December 31, 1996. Clearnet has made capital expenditures relating to its MiKE and PCS networks of approximately $244 million up to December 31, 1996. The Company expects significant future capital requirements (capital expenditures and negative operating cash flow) over the next several years in relation to the construction and initial operation of the Company's digital wireless networks and as a result of an expected significant future expansion of the Company's subscriber base. As a result of the $475 million in vendor financing for PCS equipment and services in conjunction with the Company's current amount of cash and short-term investments, Clearnet has pre-funded its $520 million capital expenditure program announced for 1997. Additional financing will be required subsequent to 1997 for Clearnet to complete its business plan and there is no assurance that such financing will be available or if available, that the terms thereof will be attractive to the Company. For a more complete description of Clearnet's financial position, see Clearnet's audited consolidated financial statements. -0-
CLEARNET COMMUNICATIONS INC.
CONSOLIDATED BALANCE SHEETS
[in thousands of Canadian dollars]
As at December 31
1996 1995
$ $
---------------------------------------------------------------
ASSETS
Current assets
Cash and short-term
investments 347,506 272,349
Trade accounts receivable
[net of allowance of
$503 at December 31,
1996 and $355 at
December 31, 1995] 14,531 6,560
Prepaid expenses 3,959 4,487
Inventories 16,440 4,320
Total current assets 382,436 287,716
Capital assets, net 252,313 134,300
Intangible and other assets 168,787 177,311
---------------------------------------------------------------
803,536 599,327
---------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities 83,922 71,638
Deferred revenue 97 130
---------------------------------------------------------------
Total current liabilities 84,019 71,768
---------------------------------------------------------------
Long-term debt 280,987 239,327
Deferred revenue 386 554
Deferred foreign exchange 1,027 2,698
---------------------------------------------------------------
Total liabilities 366,419 314,347
---------------------------------------------------------------
Commitments
Shareholders' equity
Capital 532,228 305,279
Deficit (95,155) (20,343)
Contributed surplus 44 44
---------------------------------------------------------------
Total shareholders' equity 437,117 284,980
---------------------------------------------------------------
803,536 599,327
---------------------------------------------------------------
CLEARNET COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME
[in thousands of Canadian dollars, except share and per share
data]
Eight month
Year ended period ended Years ended
December 31, December 31, April 30,
---------------------------------------------------------------
1996 1995 1995 1994
$ $ $ $
---------------------------------------------------------------
REVENUE
Network 15,639 9,590 10,323 5,815
Equipment sales,
rental and
service 23,123 12,418 14,757 12,104
---------------------------------------------------------------
38,762 22,008 25,080 17,919
---------------------------------------------------------------
Operating,
selling,
general and
administration
expenses 77,972 28,812 26,370 15,856
---------------------------------------------------------------
Operating
income (loss)
before depre-
ciation
and
amortiza-
tion (39,210) (6,804) (1,290) 2,063
Depreciation
and amort-
ization 27,244 5,322 4,077 1,851
---------------------------------------------------------------
Operating
income
(loss) (66,454) (12,126) (5,367) 212
Foreign
exchange
gain (loss) 932 (3,002) 449 -
Interest income
(expense) (8,078) 2,259 3,205 (257)
---------------------------------------------------------------
Loss before
income
taxes (73,600) (12,869) (1,713) (45)
Income tax
provision 1,212 251 1,571 46
Loss before
minority
interest (74,812) (13,120) (3,284) (91)
Minority
interest - - 177 114
---------------------------------------------------------------
Net income
(loss) for
the
period (74,812) (13,120) (3,107) 23
---------------------------------------------------------------
Net income
(loss)
per share (2.07) (0.43) (0.17) 0.01
---------------------------------------------------------------
Average number of
Class A
equivalent
shares
outstanding during
the period
[in
thousands] 36,225 30,734 18,039 3,956
-0-
CLEARNET COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF DEFICIT
[in thousands of Canadian dollars]
Eight month
Year ended period ended Years ended
December 31, December 31, April 30,
---------------------------------------------------------------
1996 1995 1995 1994
$ $ $ $
---------------------------------------------------------------
Deficit,
beginning
of period (20,343) (7,223) (3,185) (5,020)
Net income
(loss) for
the period (74,812) (13,120) (3,107) 23
Contributed
surplus - - - 1,812
Cumulative
minority
interest
share of
losses - - (541) -
Dividends
paid - - (520) -
Dividend tax
refund - - 130 -
---------------------------------------------------------------
Deficit, end
of period (95,155) (20,343) (7,223) (3,185)
---------------------------------------------------------------
CLEARNET COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[in thousands of Canadian dollars]
Eight month
Year ended period ended Years ended
December 31, December 31, April 30,
---------------------------------------------------------------
1996 1995 1995 1994
$ $ $ $
---------------------------------------------------------------
OPERATING ACTIVITIES
Net income
(loss) for
the period (74,812) (13,120) (3,107) 23
Adjustments to
reconcile
net income
(loss) to cash
provided by
(used for)
operating
activities
Gain on sale
of capital
assets - (9) (107) (57)
Depreciation
and amorti-
zation 27,244 5,322 4,077 1,851
Change in
minority
interest - - (177) (114)
Accreted
interest on
long-term
debt 26,837 1,430 - -
--------------------------------------------------------------
Funds provided
by (used in)
operating
activities (20,731) (6,377) 686 1,703
Decrease
(increase)
in non-cash
working
capital (4,525) 3,329 562 (1,961)
--------------------------------------------------------------
Cash provided
by (used in)
operating
activities (25,256) (3,048) 1,248 (258)
---------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from
issuance of
senior discount
notes and
warrants, net
of issue costs - 237,733 - -
Increase (decrease)
in accounts
payable for
capital assets (5,087) 58,242 - -
Proceeds from
issuance of
shares, net
of share issue
costs 226,949 752 294,525 -
Redemption of
convertible
preferred
shares - - (9,200) -
Dividends paid,
net of dividend
tax refund - - (390) -
Return of
paid-up capital - - (6,723) -
Deferred tax
effect of
share issuance
cost - - 985 -
Increase
(decrease) in
minority
interest
investment - - (5,999) 1,535
Issue (repayment)
of long-term
debt 4,880 (207) (2,242) (317)
Increase (decrease)
in bank
indebtedness - - (191) 191
---------------------------------------------------------------
Cash provided
by financing
activities 226,742 296,520 270,765 1,409
---------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition of
capital assets (124,569) (114,008) (14,684) (2,245)
Acquisition of
intangible and
other assets (425) (247) (1,392) (3,101)
Business
acquisitions (1,335) (800) (164,546) -
Contributed
surplus - - 44 -
---------------------------------------------------------------
Cash used in
investing
activities (126,329) (115,055) (180,578) (5,346)
---------------------------------------------------------------
Net increase
(decrease)
in cash during
the period 75,157 178,417 91,435 (4,195)
Cash and
short-term
investments,
beginning of
period 272,349 93,932 2,497 6,692
---------------------------------------------------------------
Cash and
short-term
investments,
end of period 347,506 272,349 93,932 2,497
---------------------------------------------------------------
-0- CONTACT: Clearnet Communications Inc. Vincent Surette, 905/ 837-3041 investorrelations@clearnet.com(Internet) |
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