S R Telecom (NASDAQ:SRXA)
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SR Telecom Reports First Quarter Results
MONTREAL, May 12 /PRNewswire-FirstCall/ -- SR Telecom Inc. (TSX: SRX, NASDAQ:
SRXA) today reported its results for the first quarter of fiscal 2005 ended
March 31, 2005.
"During our fourth quarter conference call in March we explained how the effect
of reduced supplier credit would result in a significant decrease in overall
sales volumes in the first quarter of the current fiscal year," said Pierre
St-Arnaud, SR Telecom's President and Chief Executive Officer. "However, we are
encouraged by the support we have received from our customers and the current
level of bookings. In fact, we have just delivered our first equipment order
for the major rural project in Mexico. Once our recapitalization plan is
finalized, we will be able to resume production at a more normal level and we
expect our sales and deliveries to increase."
Consolidated First Quarter Results
Consolidated revenues for the first quarter of fiscal 2005 totalled $17.9
million, compared to $26.2 million in the first quarter of fiscal 2004. The
consolidated operating loss for the first quarter of fiscal 2005 was reduced to
$10.7 million, compared to an operating loss of $13.6 million in the same
period in 2004. The consolidated net loss for the first quarter of 2005 was
$13.8 million, compared to a consolidated net loss of $16.9 million in the
corresponding period in 2004.
"Our gross margins were also negatively impacted by the decreased sales volumes
and under-absorbed overhead costs related to lower manufacturing volumes," Mr.
St-Arnaud said.
Wireless Telecommunications Products Segment
Revenues in SR Telecom's core wireless business segment for the first quarter
of fiscal 2005 were $12.8 million, compared to $21.6 million reported during
the same period in 2004. The net loss for the first quarter of fiscal 2005
totalled $12.9 million, compared to a $15.1 million net loss in the
corresponding period last year.
Selling, general and administrative expenses in the core wireless business
segment decreased sharply to $9.8 million for the first quarter of 2005,
compared to $13.2 million for the same period in 2004. This decrease was
primarily due to the effects of the restructuring that was implemented in the
second and third quarters of 2004.
Research and development expenses in the core wireless business segment also
decreased significantly, from $7.3 million in the first quarter of 2004 to $3.5
million in the first quarter of 2005. This decrease is also attributable to the
restructuring initiative that was implemented by the Corporation in 2004. At
this time, the Corporation expects that R&D expenses will remain stable in
comparison to the first quarter levels.
In January 2005, SR Telecom took additional steps to align its costs with
current levels of business activity and temporarily laid-off 127 employees. The
Corporation expects that employees will be recalled as production returns to
customary levels.
Telecommunications Service Provider ("CTR") Segment
For the first quarter of fiscal 2005, CTR's revenues increased to $5.1 million,
compared to $4.6 million in the same period last year. In peso terms, net
revenue in the first quarter of 2005 was 2,408 million pesos, compared to 2,075
million pesos in the prior period. The improvement is largely 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.
Operating earnings for CTR totalled $350,000 in the first quarter of fiscal
2005, compared to an operating loss of $259,000 in the same period last year.
CTR's net loss for the first quarter of 2005 was $879,000 compared to a net
loss of $1.8 million in the corresponding period in 2004.
"As previously forecast, we are confident 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, SR Telecom's Senior
Vice-President, Finance and Chief Financial Officer.
Financial Position
SR Telecom's consolidated cash and short-term investment position, including
restricted cash, increased to $8.3 million at March 31, 2005, compared to $6.4
million at December 31, 2004.
Subsequent to quarter end, SR Telecom's Debenture Holders agreed to provide a
five-year secured Credit Facility of up to $50.0 million, subject to execution
of final documentation and the fulfillment of certain conditions. An amount of
up to $20.0 million will be available to the Corporation as certain approvals
are received. The balance will be available over the next three quarters,
subject to certain conditions. An initial drawdown of this Credit Facility is
anticipated in May 2005.
Subject to final documentation and registration of the Credit Facility, the
Convertible Debentures, and the CTR loan restructuring, SR Telecom will have
sufficient cash and cash equivalents, short-term investments, and cash from
operations going forward to satisfy its working capital requirements and
continue operations as a going concern for the next twelve months.
Recent Events
- On April 22, 2005, a restricted group representing approximately 75% of
the outstanding 8.15% debentures (the "Debenture Holders"), agreed to
waive compliance with certain covenants and extended the maturity and
interest payment dates to the earlier of June 30, 2005 and the closing
of the proposed re-capitalization plan.
- On April 18, 2005, SR Telecom announced that it had entered into an
agreement in principle with the Debenture Holders regarding a proposed
re-capitalization plan. The terms of the plan include the exchange of
the outstanding $71.0 million of principal and approximately
$2.9 million of accrued interest into 47,266,512 common shares and
approximately $63.9 million of new 10% Convertible Redeemable Secured
Debentures, due in 2010. Each $1,000 in principal amount of new
Convertible Debentures may be converted at the option of the Debenture
Holders into 4,727 common shares, representing a conversion price of
$0.21 per common share. The debenture exchange is expected to close in
June 2005, subject to the approval of the lenders of CTR.
- On April 18, 2005, SR Telecom also announced that the Debenture Holders
agreed to provide a five-year secured Credit Facility of up to
$50.0 million, subject to execution of final documentation and the
fulfillment of certain conditions. An amount of up to $20.0 million
will be available to the Corporation as certain approvals are received.
The balance will be available over the next three quarters, subject to
certain conditions. An initial drawdown of this Credit Facility is
anticipated in May 2005.
- On April 18, 2005, SR Telecom announced the intention to file a
preliminary prospectus relating to Rights Offering to existing
shareholders. Pursuant to the Rights Offering, the Corporation will
offer to existing shareholders the right to subscribe up to
$40.0 million of new common shares at a price to be determined, but no
less than $0.254 per share. The funds raised from the Rights Offering
will be used for working capital and general corporate purposes and the
pro-rata redemption of the new Convertible Debentures and the CTR US
debt at 95% of their face value.
- On April 18, 2005, SR Telecom announced that it has engaged Mr. William
Aziz, Managing Partner of Blue Tree Advisors, as Chief Restructuring
Officer on a contract basis to assist in identifying and implementing
strategies to capitalize on opportunities for the enhancement of
operating performance.
- On April 4, 2005, SR Telecom announced that it had received purchase
orders valued at approximately $11 million from Siemens for the ongoing
Telefonica TRAC initiative. The new orders are for the WiMAX-ready
symmetry(TM) solution, which Telefonica intends to use for the rest of
the TRAC deployment. Deliveries are scheduled to commence immediately.
- On March 21, 2005, SR Telecom announced that it had received follow-on
purchase orders valued at approximately $4 million of SR500(TM) from
Sonatel, the national telecommunications provider in Senegal as part of
a universal access program. 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. Since its engagement, Genuity and the
Corporation have commenced and are continuing discussions with the
Debenture Holders with respect to a proposed re-capitalization of the
Corporation.
- On February 14, 2005, SR Telecom 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 May 16, 2005. The Corporation and
the CTR lenders are in discussions regarding the proposed
re-capitalization plan and the restructuring of the debt at CTR.
- 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 an additional 127 employees on a temporary basis.
The Corporation expects to recall employees as soon as production
returns to normal volumes.
- On January 26, 2005, SR Telecom announced follow-on orders for
15 angel(TM) base stations from Siemens for the ongoing Telefonica TRAC
project. Telefonica 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. The entire TRAC project calls for
approximately 475 base stations.
- 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 BFWA 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 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.
- 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.
Detailed financial results for SR Telecom's first quarter of fiscal 2005 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, May 12, 2005 at 10:00 AM
Eastern Standard Time to discuss these results and update investors on
operating progress. SR Telecom President & CEO Pierre St-Arnaud and Senior VP
Finance & 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) 807-8791 (Montreal and overseas) or
1-800-814-4859 (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, May 12, 2005 as of 12:00 PM until 11:59 PM on Thursday,
May 19, 2005 at 1-877-289-8525 (passcode 21124458(pound key)). 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.