SR Telecom Reports Fourth Quarter and Year-End Results
31 Marzo 2005 - 2:02PM
PR Newswire (US)
SR Telecom Reports Fourth Quarter and Year-End Results MONTREAL,
March 31 /PRNewswire-FirstCall/ -- SR Telecom Inc. (TSX: SRX,
NASDAQ: SRXA) today reported its results for the fourth quarter and
fiscal year ended December 31, 2004. "Despite the uncertainty
associated with the refinancing issues we are currently dealing
with, and the circumstances that caused our fourth quarter revenues
to fall short of our original forecasts, we remain encouraged by
the business opportunities we see with both new and longstanding
customers, and by the interest being generated by our products,
particularly the WiMAX-ready symmetry(TM) platform," said Pierre
St-Arnaud, SR Telecom's President and Chief Executive Officer.
"Further, in spite of disappointing results in the fourth quarter,
we have exceeded the objectives of our restructuring initiative by
reducing our operating costs by more than one-third on an
annualized basis." Consolidated Fourth Quarter Results Consolidated
revenues for the fourth quarter of fiscal 2004 totalled $24.8
million, compared to $41.6 million in the fourth quarter of fiscal
2003. The consolidated operating loss for the fourth quarter of
fiscal 2004 was $20.9 million, compared to an operating loss of
$12.8 million in the same period in 2003. The consolidated net loss
for the fourth quarter of 2004 was $41.9 million, compared to a
consolidated net loss of $14.2 million in the corresponding period
in 2003. "As we explained in January when we revised our guidance,
delays in receiving purchase orders from key customers, timing
issues related to the delivery of equipment, and the effect of
reduced supplier credit resulted in a decrease in overall sales
volumes in the fourth quarter of fiscal 2004," said Mr. St-Arnaud.
"In turn, our gross margins were also severely impacted by the
decreased sales volumes, under-absorbed overhead costs related to
lower manufacturing volumes, and variations in sales mix with
increased lower margin product sales." Certain one-time events also
had a substantial effect on the Corporation's results. Selling,
general and administrative expenses in the core wireless business
segment decreased to $14.1 million for the fourth quarter of 2004,
compared to $18.8 million for the same period in 2003. This
decrease was primarily due to the effects of the restructuring that
was implemented in the second and third quarters of 2004. However,
the benefits of the restructuring were partially offset by a
provision of $1.9 million related to an account receivable in the
Middle East, by the effect of eliminating the expected sub- lease
revenue of $1.6 million on the U.S. operating lease, and by a $0.9
million provision for an offer of settlement of a litigation.
Research and development expenses in the core wireless business
increased from $6.6 million in the fourth quarter of 2003 to $9.2
million in the fourth quarter of 2004. The increase is solely due
to a $4.2 million adjustment to the utilization of the federal
investment tax credits as management has determined that there is
insufficient evidence of reasonable assurance that this amount will
be realized within the remaining life of the investment tax
credits. "Excluding the effect of the charges associated with the
U.S. operating lease, the federal investment tax credits and the
litigation settlement provision, our operating costs have been
reduced by approximately 35% on an annualized basis, which was the
stated goal of our restructuring initiative," said David Adams, SR
Telecom's Senior Vice-President, Finance and Chief Financial
Officer. "Further, since the beginning of January we have taken
further steps to align our costs with current levels of business
activity and have temporarily laid-off a total of 156 employees. We
expect that employees will be recalled as production returns to
customary levels." During the fourth quarter of 2004 SR Telecom
also determined that an increase in the valuation allowance for
future income tax assets was appropriate, as a result of the
continued losses and the significant uncertainties surrounding the
future prospects of the Corporation. Consequently, consolidated
income tax expense was $21.9 million in the fourth quarter of 2004
compared to an income tax expense of $1.4 million in the
corresponding quarter in 2003. In the beginning of the third
quarter of 2003, the Corporation ceased recognizing additional tax
loss carry-forward benefits. Consolidated Fiscal 2004 Results
Consolidated revenues for fiscal 2004 totalled $123.9 million,
compared to $127.9 million reported in fiscal 2003. The
consolidated operating loss for fiscal 2004 was $65.8 million,
compared to an operating loss of $41.0 million for fiscal 2003. For
fiscal 2004, the consolidated net loss totalled $86.1 million,
compared to $44.8 million in the prior year. Restructuring, asset
impairment and other charges of $15.9 million were recorded in
fiscal 2004, compared to restructuring, asset impairment and other
charges of $3.7 million in fiscal 2003. The restructuring charges
were incurred in order to bring the Corporation's cost structure in
line with current and projected revenue levels. Core Wireless
Solutions Segment Fourth quarter revenues in SR Telecom's core
wireless solutions business were $20.5 million, compared to $38.0
million reported during the same period last year. The net loss for
the fourth quarter of fiscal 2004 totalled $35.1 million, compared
to $12.2 million in the fourth quarter of fiscal 2003. For fiscal
2004, wireless revenues were $105.4 million, compared to $113.8
million in fiscal 2003, and the net loss in fiscal 2004 reached
$77.1 million, compared to $42.3 million in fiscal 2003. Largely
due to the increase in the valuation allowance for future income
tax assets, the income tax expense was $13.4 million for the fourth
quarter of fiscal 2004, compared to an income tax recovery of
$128,000 in the corresponding quarter of fiscal 2003. CTR Segment
For the fourth quarter of fiscal 2004, CTR's revenues increased to
$4.3 million, compared to $3.6 million in the same period last
year. For the 2004 fiscal year, revenues reached $18.6 million,
compared to $14.1 million in fiscal 2003. In peso terms, net
revenue increased in the fourth quarter by 372 million pesos to
2,098 million pesos. The improvement is partially attributable to
the increase in access tariffs approved by the Chilean regulator,
Subtel, which took effect on March 1, 2004, and to the deployment
of new lines in urban areas of Chile. The operating loss for CTR
totalled $120,000 in the fourth quarter of fiscal 2004, compared to
an operating loss of $2.4 million in the same period last year. For
the 2004 fiscal year, CTR's operating loss totalled $86,000,
compared to an operating loss of $8.1 million in fiscal 2003. The
net loss for the fourth quarter of 2004 from CTR was $6.8 million
compared to a net loss of $2.0 million in the corresponding period
in 2003. For fiscal 2004, CTR's net loss was $9.0 million, compared
to $2.5 million in fiscal 2003. Largely due to the increase in the
valuation allowance for future income tax assets, the income tax
expense for the fourth quarter of fiscal 2004 was $8.5 million,
compared to an income tax expense of $1.6 million in the fourth
quarter of fiscal 2003. "We believe that CTR will be able to
continue to realize positive EBITDA, and we expect it will generate
approximately $7 million of EBITDA in fiscal 2005," said Mr. Adams.
Financial Position SR Telecom's consolidated cash and short-term
investment position, including restricted cash, decreased to $6.4
million as at December 31, 2004, compared to the $18.7 million
reported at December 31, 2003. The decrease in the outstanding cash
balance resulted from the repayment of outstanding debt in the
amount of $15.5 million in 2004 as well as the use of cash to fund
operations in excess of that generated from sales. The Corporation
has $71.0 million of debentures that mature on April 22, 2005. "At
present, we do not have sufficient cash and cash equivalents,
short- term investments, and cash from operations going forward to
satisfy our cash requirements," said Mr. Adams. "Accordingly, the
Corporation will have to refinance or roll over all or part of its
existing debt on or prior to April 22, 2005. SR Telecom is seeking
to raise additional working capital in conjunction with its plan to
refinance its existing debt. However, if the Corporation is unable
to obtain additional working capital to fund operations, its
ability to continue as a going concern could be significantly
impacted and it may be obliged to seek protection from its
creditors." Refinancing Initiative "Genuity Capital Markets and the
Corporation are currently engaged in continuing discussions with a
restricted group of debenture holders as well as with a possible
investor with respect to the potential recapitalization of the
Corporation," Mr. Adams stated. "However, there can be no assurance
that an agreement can be reached with respect to the
recapitalization or that such recapitalization can be concluded on
terms satisfactory to the Corporation." Recent Events - On March
21, 2005, SR Telecom announced that it had received follow-on
purchase orders for SR500(TM) valued at approximately $4 million
from Sonatel, the national telecommunications provider in Senegal.
Deliveries are scheduled to commence in the second quarter of 2005.
- On February 14, 2005, SR Telecom engaged Genuity Capital Markets
to act as financial advisor and investment banker to assist the
Corporation in its refinancing activities. - On February 14, 2005,
SR Telecom announced it had reached an agreement with the lenders
of Comunicacion y Telefonia Rural S.A. (CTR), its service provider
subsidiary in Chile. Pursuant to the agreement, CTR's lenders have
waived compliance with certain financial and operational covenants
contained in CTR's loan documents to March 31, 2005. Subsequently,
on March 30, 2005, CTR's lenders agreed to extend the waiver until
April 22, 2005. - On January 26, 2005, SR Telecom announced it had
taken steps to reduce its costs in order to align them with the
current level of business activity and laid-off 127 employees on a
temporary basis. The Corporation expects to recall employees as
soon as production returns to normal volumes. SR Telecom expects
that its results for the first quarter of fiscal 2005 will be
impacted by a reduction in the availability of supplier credit,
which has slowed raw material purchases and production. - On
January 26, 2005, SR Telecom announced follow-on orders for an
additional 15 angel(TM) base stations from Siemens for the ongoing
Telefonica TRAC project. Telefonica, a leading international
telecommunications operator, selected angel over a number of
competing technologies for an extensive multi-service Broadband
Fixed Wireless Access (BFWA) network, which will ultimately see the
deployment of approximately 100,000 lines throughout Spain. The
TRAC initiative will deliver high quality voice and high-speed data
to suburban and rural areas throughout the country. Deliveries of
this current order were completed during the first quarter of
fiscal 2005. - On January 26, 2005, SR Telecom announced that its
airstar(TM) product was selected by Teleunit S.P.A, a major Italian
telecommunications operator, for the deployment of its Broadband
Fixed Wireless Access network in the Tuscany region. The total
value of the current phase of this project, which marks the first
extension of Teleunit's initial roll-out of airstar systems, is
approximately $1.2 million. Further expansions of the WLL
infrastructure in the Tuscany and Marche regions of Central Italy
are expected to take place throughout 2005. - On January 19, 2005,
SR Telecom received new orders valued at approximately $1 million
from PT Aplikanusa Lintasarta, the largest data and corporate
network communications provider in Indonesia. These add-on orders
are for a project initiated in September 2003. Lintasarta has
selected the airstar wireless broadband solution to provide ATM,
frame relay and clear channel services to its customers in the
Java, Kalmantan and Sulawesi regions of Indonesia. With these
orders, Lintasarta will add airstar base stations and Customer
Premises Equipment to its growing network of airstar systems.
Deliveries have commenced. - On January 19, 2005, SR Telecom
announced the receipt of purchase orders valued at approximately
$10 million from a major telecommunications operator in Latin
America. These orders are part of a previously announced frame
contract under which the operator selected SR500 family of fixed
wireless access systems. Deliveries are scheduled to take place in
the first half of 2005. - On December 21, 2004, SR Telecom
announced that its symmetry Broadband Fixed Wireless Access system
was selected by Telecom Fiji Limited, the national service provider
in Fiji, as part of a commercial initiative to bring voice and
broadband access services to certain areas of the country.
Deliveries have commenced. - On December 16, 2004, SR Telecom
received new orders valued at approximately $7 million for its
swing(TM) fixed wireless access system product from ONATEL (Office
Nationale des Telecommunications), a national exchange carrier in
Burkina Faso for an urban telecommunication development project.
This is the third phase of a network expansion project that was
initiated in 2003. Deliveries have commenced. - On December 14,
2004, SR Telecom received follow-on orders from a leading South
American telecommunication service provider for its airstar
Broadband Fixed Wireless Access system. The orders are part of a
previously announced agreement that extends over three years and is
valued at approximately US$20 million. To date, SR Telecom has
received orders totaling approximately US$2.6 million. - On
December 13, 2004, SR Telecom announced an agreement with Telstra,
Australia's leading telecommunications and information service
provider, which confirms SR Telecom's key supplier relationship
with Telstra. As part of the agreement SR Telecom will provide
maintenance and support services for Telstra's extensive network of
swing fixed wireless access systems. The initial maintenance and
support period extends until July 2007 and is valued at
approximately $10 million. - On November 22, 2004, SR Telecom
announced that its symmetry Broadband Fixed Wireless Access
platform was selected by Telmex Argentina for a broadband data and
voice network across Argentina. This is the first contract win for
symmetry. Deliveries have commenced. - On November 3, 2004, SR
Telecom launched the industry's first OFDMA- based WiMAX-ready
platform, symmetry. An evolution of SR Telecom's proven angel
product technology, symmetry encompasses the key technologies
outlined in the latest draft of the 802.16e standard, including
OFDMA, diversity, and space-time coding. Additionally, it can be
immediately deployed to deliver carrier-class voice and broadband
data services. Outlook "Given the uncertainty generated by our
current financial situation, we are not in a position to provide
guidance for fiscal 2005. However, we remain optimistic about our
long-term opportunities in the broadband fixed wireless access
marketplace, and our ability to provide WiMAX-certified solutions
to that marketplace," Mr. St-Arnaud said. Detailed financial
results for SR Telecom's fiscal 2004 are filed with SEDAR and EDGAR
and are also available on the Company's website at
http://www.srtelecom.com/ . About SR Telecom SR TELECOM (TSX: SRX,
Nasdaq: SRXA) designs, manufactures and deploys versatile,
Broadband Fixed Wireless Access solutions. For over two decades,
carriers have used SR Telecom's products to provide field-proven
data and carrier-class voice services to end-users in both urban
and remote areas around the globe. SR Telecom's products have
helped to connect millions of people throughout the world. A
pioneer in the industry, SR Telecom works closely with carriers to
ensure that its broadband wireless access solutions directly
respond to evolving customer needs. Its turnkey solutions include
equipment, network planning, project management, installation and
maintenance. SR Telecom is a principal member of WiMAX Forum, a
cooperative industry initiative which promotes the deployment of
broadband wireless access networks by using a global standard and
certifying interoperability of products and technologies.
Conference Call SR Telecom will host a conference call on Thursday,
March 31, 2005 at 10:00 AM Eastern Standard Time to discuss these
results and update investors on operating progress. SR Telecom's
President & CEO Pierre St-Arnaud and Senior Vice-President,
Finance and CFO David Adams will host the conference call, which
will include a question and answer session. Investors, analysts and
media wishing to participate in this call may dial (514) 940-2795
(Montreal and overseas) or 1-800-814-4862 (elsewhere in North
America) fifteen minutes prior to the start time. For those who are
unable to listen to the call live, a replay will be available on
Thursday, March 31, 2005 as of 12:00 PM until 11:59 PM on Thuesday,
April 5, 2005 at 1 877 289 8525 (passcode 21118678). A live and
archived audio webcast of the call will also be available online
at: http://www.srtelecom.com/ . FORWARD-LOOKING STATEMENTS Except
for historical information provided herein, this press release may
contain information and statements of a forward-looking nature
concerning the future performance of the Company. These statements
are based on suppositions and uncertainties as well as on
management's best possible evaluation of future events. Such
factors may include, without excluding other considerations,
fluctuations in quarterly results, evolution in customer demand for
the Company's products and services, the impact of price pressures
exerted by competitors, and general market trends or economic
changes. As a result, readers are advised that actual results may
differ from expected results. SR TELECOM, SR500, ANGEL, AIRSTAR,
SWING and SYMMETRY are trademarks of SR Telecom Inc. All rights
reserved 2005. All other trademarks are property of their owners.