Cost-saving initiatives and streamlined operations improve
financial position MONTREAL, Nov. 16 /PRNewswire-FirstCall/ -- SR
Telecom Inc. (TSX: SRX, Nasdaq: SRXA), a leading vendor of licensed
OFDM solutions for broadband access networks with its symmetry(R)
products, today announced its results for the third quarter and
nine months ended September 30, 2005. The third quarter was one of
transition for SR Telecom as the Corporation's revenue grew 5% to
$38.3 million from the same period one year ago, as the result of
increased shipments of orders delayed in the first half of the
year. Net loss for the most recent quarter was $14.1 million, up
from $4.0 million in the corresponding period a year ago, due
primarily to restructuring charges and professional fees related to
the convertible debentures. The net loss improved significantly
over the second quarter of this year due in large part to the
Corporation recent cost-saving initiatives and restructuring
initiatives. "SR Telecom has experienced a very difficult period
and we are beginning to see some tangible results thanks to the
dedicated efforts of our employees, the renewed support of the
Corporation's supplier network and the loyalty of our customer
base," said William Aziz, SR Telecom's Interim President and Chief
Executive Officer. "We have empowered a new executive management
team to create a more agile organization. To this end, we have
initiated aggressive cost cutting measures which are continuing,
have dealt proactively with procurement issues and have adopted a
customer-centric approach." Consolidated Third Quarter Results
Consolidated revenue for the third quarter totalled $38.3 million,
representing a quarter-over-quarter increase of 116% and an
increase of 5% from $36.4 million in the third quarter of fiscal
2004. The revenue increase is primarily as a result of delayed
shipments in the first half of 2005 due to a
longer-than-anticipated period to finalize the credit facility, as
well as the effects of reduced supplier credit and production
slow-down. The consolidated operating loss for the third quarter
was $7.7 million, down significantly from $27.7 million in the
previous quarter and compared to an operating loss of $10.4 million
in the same period in 2004. Third quarter consolidated net loss was
$14.1 million, or $0.80 net loss per share, compared to
consolidated net losses of $30.7 million, or $1.74 net loss per
share, and $4.0 million, or $0.23 net loss per share, in the
previous quarter and the corresponding period a year ago,
respectively. Year-to-date, consolidated revenue was $73.8 million,
compared to $99.2 million in the first nine months last year. The
consolidated operating loss for the first nine months of the year
reached $46.1 million, compared to $44.9 million in the same period
a year ago. The year-to-date consolidated net loss totalled $58.5
million, or $3.32 net loss per share, compared to a consolidated
net loss $44.2 million, or $2.71 net loss per share, in the prior
period. Net losses for the third quarter and first nine months of
fiscal 2005 were impacted by one-time restructuring charges of $2.3
million, fees related to the convertible debentures of $4.4 million
and provision of the Haiti receivable of $3.7 million. Without
these items, consolidated earnings before interest, taxes,
depreciation and amortization (EBITDA) was a positive $3.9 million
for the third quarter of 2005. Core Wireless Solutions Segment
Third quarter revenue in SR Telecom's core wireless solutions
business was $33.5 million, compared to $31.7 million reported
during the same period in 2004. Net loss for the third quarter
totalled $14.1 million, compared to a $5.5 million net loss in the
corresponding period last year. For the first nine months of 2005,
revenue in the core wireless solutions business was $59.2 million,
compared to $84.9 million in the same period last year. Net loss
for the first nine months of fiscal 2005 totalled $55.4 million,
compared to a net loss of $42.0 million in the prior period.
Selling, general and administrative (SG&A) expenses in the
segment were $11.2 million for the third quarter of 2005, a $1.0
million increase compared to $10.2 million for the same period in
2004. For the nine-month period of fiscal 2005, SG&A expenses
decreased to $30.6 million, versus $35.5 million in the first nine
months of fiscal 2004. This was primarily due to the effects of the
restructuring that was implemented in 2004 and 2005 offset, in
part, by the provision for the Haiti receivable of $3.7 million. As
previously indicated, the Company has consolidated its research and
development facilities. Principally as a result of this
consolidation and a focus on developing WiMAX-ready and WiMAX
products under the symmetry(R) brand while reducing development
activities for legacy products, these expenses in the core wireless
business decreased significantly from $6.2 million in the third
quarter of 2004 to $3.2 million in the third quarter of 2005. For
the first nine months of fiscal 2005, R&D expenses were reduced
to $9.7 million, compared to $21.0 million in the corresponding
period in fiscal 2004. The decreases were also attributable to the
restructuring initiative that was implemented by the Company in
2004. Telecommunications Service Provider Segment (CTR) Revenue in
Canadian dollars in the Corporation's Chilean service provider,
CTR, was basically flat at $4.8 million for the three months ended
September 30, 2005, compared to $4.7 million for the three months a
year ago. Net revenue in Chilean pesos was 2,191 million pesos for
the third quarter of 2005 and 2,226 million pesos for the third
quarter of 2004, a decrease of 35 million pesos or 1.5%. The
decrease is partly attributable to the loss of a contract for the
provision of data services to a competitor and an unfavourable
change in the mix of access charges relating to higher-cost prepaid
and long-distance traffic. For the first nine months of fiscal
2005, CTR revenue increased slightly to $14.6 million, up from the
$14.3 million reported for the first nine months of 2004. Net
revenue in Chilean pesos was 6,810 million pesos for the first nine
months of 2005 and 6,641 million pesos for the first nine months of
2004, an increase of 169 million pesos or 3%. The increase is
attributable to the new access tariffs approved by the Chilean
regulator, Subtel, which took effect March 1, 2004 as well as the
expansion of urban wireless telecommunications services in several
cities in Chile. The CTR operating loss totalled $0.8 million in
the third quarter of fiscal 2005, compared to operating earnings of
$14,000 in the same period last year. The loss is the result of an
increase to $5.6 million in operating expenses for the quarter,
from $4.6 million for the three months the previous year. The
increase is primarily due to higher tariffs for wire support as
part of a new governmental decree. The net loss for the third
quarter of 2005 was $8,000, compared to a net income of $1.5
million in the corresponding period in 2004. For the first nine
months of fiscal 2005, the CTR operating loss totalled $1.7
million, compared to operating earnings of $34,000 in the
corresponding period in 2004. CTR's net loss for the first nine
months increased to $3.1 million, compared to a net loss of $2.3
million in the same period in 2004. The increase in net loss is
primarily due to professional and legal fees of approximately $1.0
million related to the renegotiation of the CTR loans, which were
extended for a period of three years as well as the new urban
initiative. EBITDA at CTR was $2.6 million for the third quarter
and $4.1 million year-to-date, down from $3.7 million and $4.5
million, respectively, for the same periods in 2004. Financial
Position The Corporation's consolidated cash, including restricted
cash, increased to $6.6 million at September 30, 2005, compared to
$6.4 million at December 31, 2004. On May 19, 2005, an agreement
was reached with certain debenture holders to provide up to $46.5
million (US$39.6 million) by way of a five-year secured credit
facility. An amount of $39.6 (US$33.7 million) million was made
available to the Corporation as at September 30, 2005. The
remainder of the facility will be available to the Corporation,
subject to approval of budgets and financial covenants when
finalized with the lenders. Further, the Corporation and the
debenture holders have also exchanged all but $270,000 of the face
value of the $71.0 million of the 8.15% debentures and
approximately $4.6 million of accrued new interest into new 10%
convertible redeemable secured debentures due October 15, 2011. The
Corporation still intends to file a preliminary prospectus relating
to a rights offering to shareholders to subscribe for new common
shares, subject to market conditions. With the refinancing
arrangements in place in relation to the credit facility, the
debenture exchange and the potential rights offering, 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. Outlook "Progress is being made
on several fronts but there remains much to be done to solidify
operations and deliver the desired results. As the global
marketplace continues to embrace emerging broadband wireless
technologies such as ours, we are continuing to position ourselves
to capitalize on our strong technology and our reputation among
carriers and operators around the globe. We are working diligently
with these customers to bring in new orders. It is anticipated that
a portion of the expected fourth quarter revenues will now be
pushed out to the first quarter of 2006," commented Mr. Aziz.
Detailed financial results for SR Telecom's third 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 designs, builds and deploys versatile, field-proven
Broadband Fixed Wireless Access solutions. SR Telecom products are
used by large telephone and Internet service providers to supply
broadband data and carrier- class voice services to end-users in
both urban and remote areas around the globe. With its principal
offices in Montreal, Mexico City and Bangkok, SR Telecom products
have been deployed in over 110 countries, connecting nearly two
million people. With its widely deployed symmetry(R) WiMAX-ready
solution, SR Telecom provides fixed wireless access solutions for
voice, data and Internet access applications. 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. For more information, visit
http://www.srtelecom.com/ . Conference Call SR Telecom will host a
conference call on Thursday, November 17, 2005 at 9:30 AM Eastern
Standard Time to discuss these results and update investors on
operating progress. SR Telecom Interim President and Chief
Executive Officer William E. Aziz and Senior Vice-President,
Finance and Chief Financial Officer David L. 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 1-800-814-4890
(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, November 17, 2005 as of 11:30 A.M.
until 11:59 P.M. on Thursday, November 24, 2005 at 1-877-289-8525
(passcode 21164110 (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 Corporation. 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 Corporation'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 and
symmetry(R) are trademarks of SR Telecom Inc. All rights reserved
2005. All other trademarks are property of their owners.
Consolidated Balance Sheets As at September 30th, 2005 and December
31st, 2004 (in thousands of dollars) 2005 2004 (unaudited)
(audited) Assets Current assets Cash and cash equivalents 4,479
4,549 Short-term restricted cash 2,117 1,394 Accounts receivable,
net 49,264 47,500 Income taxes receivable 1,765 911 Inventory
34,728 59,556 Prepaid expenses and deposits 7,433 3,504
-------------------------- 99,786 117,414 Investment tax credits
13,150 13,150 Long-term accounts receivable, net 1,757 5,644
Long-term restricted cash - 493 Property, plant and equipment, net
78,683 85,442 Intangible assets, net 3,818 4,494 Other assets, net
2,577 987 -------------------------- 199,771 227,624
-------------------------- -------------------------- Liabilities
Current liabilities Accounts payable and accrued liabilities 41,745
55,682 Customer advances 1,624 1,932 Current portion of lease
liability 7,435 5,043 Current portion of long-term debt 1,447
106,680 -------------------------- 52,251 169,337 Long-term credit
facility 40,205 - Long-term lease liability - 3,577 Long-term
liability 1,759 1,810 Long-term debt 33,882 260 Convertible
redeemable secured debentures 39,040 - --------------------------
167,137 174,984 Shareholders' equity Capital stock 219,653 219,653
Warrants 13,029 13,029 Equity component of convertible redeemable
secured debenture 37,851 - Contributed surplus 1,203 519 Deficit
(239,102) (180,561) -------------------------- 32,634 52,640
199,771 227,624 --------------------------
-------------------------- Consolidated Statements of Earnings (in
thousands of dollars, except for per share amounts) For the Three
Months ended September 30th, 2005 2004 Amended (unaudited)
(unaudited)
-----------------------------------------------------------
Wireless Tele- Wireless Tele- Tele- communi- Tele- communi-
communi- cations communi- cations cations Service Conso- cations
Service Conso- Products Provider lidated Products Provider lidated
Revenue Equipment 31,568 - 31,568 27,593 - 27,593 Services 1,912 -
1,912 4,124 - 4,124 Telecommuni- cations - 4,776 4,776 - 4,660
4,660 -----------------------------------------------------------
Total revenue 33,480 4,776 38,256 31,717 4,660 36,377 Cost of
revenue Equipment 21,692 - 21,692 17,754 - 17,754 Services 851 -
851 3,077 - 3,077
----------------------------------------------------------- Total
cost of revenue 22,543 - 22,543 20,831 - 20,831 Gross profit 10,937
4,776 15,713 10,886 4,660 15,546 Agent commissions 1,145 - 1,145
1,804 - 1,804 Selling, general and administrative expenses 11,162
5,595 16,757 10,184 4,646 14,830 Research and development expenses,
net 3,215 - 3,215 6,175 - 6,175 Restructuring, asset impairment and
other charges 2,307 - 2,307 3,096 - 3,096
-----------------------------------------------------------
Operating (loss) earnings (6,892) (819) (7,711) (10,373) 14
(10,359) Finance charges, net (8,163) (822) (8,985) (1,465) (638)
(2,103) Gain on sale of long-term investment - - - 3,444 - 3,444
Gain on settlement of claim - - - 4,583 - 4,583 Gain (loss) on
foreign exchange 793 1,633 2,426 (1,327) 2,118 791
----------------------------------------------------------- (Loss)
earnings before income taxes (14,262) (8) (14,270) (5,138) 1,494
(3,644) Income tax recovery (expense) 172 - 172 (339) - (339)
----------------------------------------------------------- Net
(loss) income (14,090) (8) (14,098) (5,477) 1,494 (3,983)
-----------------------------------------------------------
-----------------------------------------------------------
Weighted average number of common shares outstanding (in thousands)
17,610 17,610 Net loss per share, basic and diluted (0.80) (0.23)
Consolidated Statements of Earnings (in thousands of dollars,
except for per share amounts) For the Nine Months ended September
30th, 2005 2004 Amended (unaudited) (unaudited)
-----------------------------------------------------------
Wireless Tele- Wireless Tele- Tele- communi- Tele- communi-
communi- cations communi- cations cations Service Conso- cations
Service Conso- Products Provider lidated Products Provider lidated
Revenue Equipment 50,989 - 50,989 70,284 - 70,284 Services 8,223 -
8,223 14,592 - 14,592 Telecommuni- cations - 14,629 14,629 - 14,306
14,306 -----------------------------------------------------------
Total revenue 59,212 14,629 73,841 84,876 14,306 99,182 Cost of
revenue Equipment 37,789 - 37,789 44,335 - 44,335 Services 4,533 -
4,533 8,726 - 8,726
----------------------------------------------------------- Total
cost of revenue 42,322 - 42,322 53,061 - 53,061 Gross profit 16,890
14,629 31,519 31,815 14,306 46,121 Agent commissions 2,056 - 2,056
4,481 - 4,481 Selling, general and administrative expenses 30,619
16,358 46,977 35,516 14,272 49,788 Research and development
Expenses, net 9,736 - 9,736 20,983 - 20,983 Restructuring, asset
impairment and other charges 18,855 - 18,855 15,815 - 15,815
-----------------------------------------------------------
Operating (loss) earnings (44,376) (1,729) (46,105) (44,980) 34
(44,946) Finance charges, net (11,412) (2,267) (13,679) (3,731)
(2,130) (5,861) Gain on sale of long-term investment - - - 3,444 -
3,444 Gain on settlement of claim - - - 4,583 - 4,583 Gain (loss)
on foreign exchange 461 866 1,327 (676) (130) (806)
----------------------------------------------------------- Loss
before income taxes (55,327) (3,130) (58,457) (41,360) (2,226)
(43,586) Income tax expense (84) - (84) (637) (25) (662)
----------------------------------------------------------- Net
loss (55,411) (3,130) (58,541) (41,997) (2,251) (44,248)
-----------------------------------------------------------
-----------------------------------------------------------
Weighted average number of common shares outstanding (in thousands)
17,610 16,320 Net loss per share, basic and diluted (3.32) (2.71)
Consolidated Statements of Deficit For the Nine Months ended
September 30th, (in thousands of dollars) 2005 2004 Amended
(unaudited) (unaudited) Deficit, beginning of period as previously
reported (180,561) (90,941) Cumulative effect of adoption of new
accounting policy (note 3) - (272) --------------------------
Deficit, beginning of period as restated (180,561) (91,213) Net
loss (58,541) (44,248) Share issue costs - (3,214)
-------------------------- Deficit, end of period (239,102)
(138,675) -------------------------- --------------------------
Consolidated Statements of Cash Flows For the Three Months ended
September 30th, (in thousands of dollars) 2005 2004 Amended
(unaudited) (unaudited) Cash flows used in operating activities Net
loss (14,098) (3,983) Adjustments to reconcile net loss to net cash
used in operating activities: Depreciation and amortization 3,159
3,131 Loss on disposal of property, plant and equipment 379 2 Asset
write-down 110 717 Non-cash financing charges 4,717 - Gain on sale
of long-term investment - (3,444) Gain on settlement of claim -
(4,583) Stock-based compensation 545 73 Future income taxes - (134)
Changes in operating assets and liabilities: Increase in long-term
accounts receivable - (1,674) (Increase) decrease in non-cash
working capital items (21,779) 3,714 Unrealized foreign exchange
(1,759) (1,901) ------------ ---------- Net cash used in operating
activities (28,726) (8,082) ------------ ---------- Cash flows from
(used in) financing activities Increase in long-term credit
facility 28,807 - Increase in long-term debt 174 - Repayment of
long-term lease liability - (1,357) Increase in other assets (538)
- ------------ ---------- Net cash from (used in) financing
activities 28,443 (1,357) ------------ ---------- Cash flows (used
in) from investing activities (Increase) decrease in restricted
cash (72) 230 Purchase of property, plant and equipment (1,140)
(1,476) Proceeds on sale of property, plant and equipment 826 417
Purchase of short-term investments - (3,340) Proceeds on sale of
short-term investments - 7,935 Proceeds on sale of long-term
investments - 3,444 ------------ ---------- Net cash (used in) from
investing activities (386) 7,210 ------------ ---------- Decrease
in cash and cash equivalents (669) (2,229) Cash and cash
equivalents, beginning of period 5,148 10,561 ------------
---------- Cash and cash equivalents, end of period 4,479 8,332
------------ ---------- ------------ ---------- Supplemental
Information Cash paid for: Interest 1,563 4,030 Income taxes 6 4
Consolidated Statements of Cash Flows For the Nine Months ended
September 30th, (in thousands of dollars) 2005 2004 Amended
(unaudited) (unaudited) Cash flows used in operating activities Net
loss (58,541) (44,248) Adjustments to reconcile net loss to net
cash used in operating activities: Depreciation and amortization
8,972 9,512 Restructuring, asset impairment and other charges (note
5) 16,548 2,134 Loss (gain) on disposal of property, plant and
equipment 315 (81) Asset write-down 240 - Non-cash financing
charges 8,779 - Gain on sale of long-term investment - (3,444) Gain
on settlement of claim - (4,583) Stock-based compensation 684 185
Future income taxes - 301 Changes in operating assets and
liabilities: Increase in long-term accounts receivable - (103)
(Increase) decrease in non-cash working capital items (8,803) 5,919
Unrealized foreign exchange (1,354) (859) ------------ ----------
Net cash used in operating activities (33,160) (35,267)
------------ ---------- Cash flows from financing activities
Issuance of long-term credit facility 41,193 - Issuance of
long-term debt 324 - Repayment of bank indebtedness - (3,000)
Repayment of long-term lease liability (1,314) (4,208) Repayment of
long-term debt - (5,367) Proceeds from issue of shares and
warrants, net of share issue costs - 46,787 Increase in other
assets (5,296) - ------------ ---------- Net cash from financing
activities 34,907 34,212 ------------ ---------- Cash flows (used
in) from investing activities (Increase) decrease in restricted
cash (723) 1,777 Purchase of property, plant and equipment (2,252)
(3,871) Proceeds on sale of property, plant and equipment 1,158 648
Purchase of short-term investments - (44,553) Proceeds on sale of
short-term investments - 43,508 Proceeds on sale of long-term
investments - 3,444 ------------ ---------- Net cash (used in) from
investing activities (1,817) 953 ------------ ---------- Decrease
in cash and cash equivalents (70) (102) Cash and cash equivalents,
beginning of period 4,549 8,434 ------------ ---------- Cash and
cash equivalents, end of period 4,479 8,332 ------------ ----------
------------ ---------- Supplemental Information Cash paid for:
Interest 2,967 8,454 Income taxes 47 112 DATASOURCE: SR TELECOM
INC. CONTACT: William E. Aziz, Interim President and CEO, (514)
335-2429, Extension 4613; Rick Leckner, Maison Brison, (514)
731-0000; http://www.srtelecom.com/
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