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Sierra Wireless Reports Second Quarter 2013 Results

SIERRA WIRELESS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands of U.S. dollars, except where otherwise stated)

(unaudited)

   

Three months ended June 30,

 

Six months ended June 30,

    2013     2012     2013     2012  
Revenue   $ 109,589   $ 95,398 $ 210,990   $ 187,733
Cost of goods sold   73,115     65,317   141,138     129,778  
Gross margin   36,474     30,081   69,852     57,955  
 
Expenses
Sales and marketing 10,681 8,998 21,037 18,319
Research and development 17,869 14,674 36,232 29,605
Administration 8,903 8,562 17,026 17,021
Restructuring 26 1,531 143 1,711
Integration 27
Acquisition 599 599
Amortization   2,927     2,275   6,203     4,662  
    40,406     36,639   80,668     71,917  
Loss from operations (3,932 ) (6,558 ) (10,816 ) (13,962 )
Foreign exchange gain (loss) 1,709 336 (661 ) 542
Other income (expense)   34     10   (98 )   (161 )
Loss before income taxes (2,189 ) (6,212 ) (11,575 ) (13,581 )
Income tax expense   4,553     2,656   3,105     2,532  
Net loss from continuing operations (6,742 ) (8,868 ) (14,680 ) (16,113 )
Net earnings from discontinued operations   68,152     12,449   70,015     20,039  
Net earnings   $ 61,410     $ 3,581   $ 55,335     $ 3,926  
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $nil   636     (3,343 ) (268 )   (1,341 )
Comprehensive income   $ 62,046     $ 238   $ 55,067     $ 2,585  

Basic and diluted net earnings (loss) per shareattributable to the Company’s common shareholders (in dollars)

Continuing operations $ (0.22 ) $ (0.29 )

$

(0.48

) $ (0.52 )
Discontinued operations 2.22     0.41   2.28     0.65  
$ 2.00     $ 0.12   $ 2.28     $ 0.13  
Weighted average number of shares outstanding (in thousands)
Basic 30,768 30,817 30,732 30,996
Diluted   30,768     30,817   30,732     30,996  

SIERRA WIRELESS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)

(unaudited)

    June 30, 2013   December 31, 2012
Assets  
Current assets
Cash and cash equivalents $ 166,573 $ 63,646
Short-term investments 10,000

Accounts receivable, net of allowance for doubtful accounts of$2,038 (December 31, 2012 - $2,435)

108,886 108,624
Inventories 6,170 12,675
Deferred income taxes 3,625 22,199
Prepaids and other 34,423 24,252
Assets held for sale     54,340  
329,677 285,736
Property and equipment 20,936 20,039
Intangible assets 47,607 56,357
Goodwill 97,447 97,961
Deferred income taxes 4,490 3,880
Other assets   784   790  
    $ 500,941   $ 464,763  
 
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 117,384 $ 128,216
Deferred revenue and credits 2,303 1,312
Liabilities held for sale     10,353  
119,687 139,881
Long-term obligations 25,481 26,526
Deferred income taxes

 

300   300  
    145,468   166,707  
Equity
Shareholders’ equity

Common stock: no par value; unlimited shares authorized;

issued and outstanding 30,618,427 shares (December 31, 2012-30,592,423 shares)

323,211 322,770

Preferred stock: no par value; unlimited shares authorized;

issued and outstanding: nil shares

Treasury stock: at cost 270,457 shares (December 31, 2012 –

716,313 shares)

(1,983 ) (5,172 )
Additional paid-in capital 22,311 23,203
Retained earnings (deficit) 19,664 (35,283 )
Accumulated other comprehensive loss   (7,730 ) (7,462 )
    355,473   298,056  
    $ 500,941   $ 464,763  

SIERRA WIRELESS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands of U.S. dollars)

(unaudited)

         
  Common Stock   Treasury Shares        
    # of shares   $   # of shares   $  

Additional paid-in capital

 

Retained earnings (deficit)

 

Accumulated other comprehensive income (loss)

  Total
Balance as at December 31, 2011   31,306,692     $ 328,440     877,559     $ (6,141 )   $ 20,087   $ (62,482 )   $ (8,000 )   $ 271,904  
     
Common share cancellation (800,000 ) (6,312 ) (6,312 )
Stock option tax benefit for U.S. employees 71 71
Stock option exercises 85,051 637 (201) 436
Stock-based compensation 6,713 6,713
Purchase of treasury shares for RSU distribution 336,638 (2,489 ) (2,489 )
Distribution of vested RSUs 680 5 (497,884 ) 3,458 (3,467) (4 )
Net earnings 27,199 27,199
Foreign currency translation adjustments, net of tax                         538     538  
Balance as at December 31, 2012   30,592,423     $ 322,770     716,313     $ (5,172 )   $ 23,203   $ (35,283 )   $ (7,462 )   $ 298,056  
 
Common share cancellation (510,439 ) (5,384 ) (388 ) (5,772 )
Stock option exercises 494,054 5,495 (1,734) 3,761
Stock-based compensation 4,689 4,689
Distribution of vested RSUs 42,389 330 (445,856 ) 3,189 (3,847) (328 )
Net earnings 55,335 55,335
Foreign currency translation adjustments, net of tax                         (268 )   (268 )
Balance as at June 30, 2013   30,618,427     $ 323,211     270,457     $ (1,983 )   $ 22,311   $ 19,664     $ (7,730 )   $ 355,473  

SIERRA WIRELESS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)

   

Three months ended

June 30,

 

Six months ended

June 30,

    2013     2012   2013     2012  
Cash flows provided (used) by:    
Operating activities
Net earnings $ 61,410 $ 3,581 $ 55,335 $ 3,926
Items not requiring (providing) cash
Amortization 6,766 6,731 14,277 13,713
Stock-based compensation 2,761 1,636 4,689 3,315
Gain on sale of AirCard business (94,095 ) (94,095 )
Deferred income taxes 17,995 (843 ) 17,964 (1,873 )
Loss (gain) on disposal of property, equipment, and intangibles (20 ) (33 ) (20 ) 126
Impairment of assets related to discontinued operations 8 1,012
Other (1,237 ) 513
Taxes paid related to net settlement of equity awards (78 ) (328 )
Changes in non-cash working capital
Accounts receivable 19,628 (5,027 ) 12,985 (4,414 )
Inventories 5,199 (2,307 ) 12,553 917
Prepaid expenses and other (59 ) (3,677 ) (9,103 ) (2,961 )
Accounts payable and accrued liabilities (11,176 ) 28,557 (14,255 ) 21,472
Deferred revenue and credits   969     (178 ) 997     (658 )
Cash flows provided by operating activities   8,071     28,440   2,524     33,563  
Investing activities
Additions to property and equipment (3,696 ) (4,957 ) (5,895 ) (8,560 )
Proceeds from sale of property, equipment, and intangibles 21 3 32 64
Increase in intangible assets (455 ) (567 ) (1,114 ) (1,338 )
Net proceeds from sale of AirCard business 119,995 119,995
Net change in short-term investments   (10,000 )   (2,151 ) (10,000 )   7,194  
Cash flows provided (used) by investing activities   105,865     (7,672 ) 103,018     (2,640 )
Financing activities
Issuance of common shares 1,657 255 3,761 269
Repurchase of common shares for cancellation (4,395 ) (3,275 ) (5,772 ) (6,312 )
Purchase of treasury shares for RSU distribution (1,502 ) (2,489 )
Decrease in other long-term obligations   (92 )   (13 ) (719 )   (655 )
Cash flows used by financing activities   (2,830 )   (4,535 ) (2,730 )   (9,187 )
Effect of foreign exchange rate changes on cash and cash equivalents   (456 )   153   115     48  
Cash and cash equivalents, increase in the period 110,650 16,386 102,927 21,784
Cash and cash equivalents, beginning of period   55,923     106,773   63,646     101,375  
Cash and cash equivalents, end of period   $ 166,573     $ 123,159   $ 166,573     $ 123,159  

SIERRA WIRELESS, INC.

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(Unaudited)

(in thousands of U.S. dollars, except where otherwise stated)
  2013     2012 (1)
  Q2   Q1     Total   Q4   Q3   Q2   Q1
 
Gross margin - GAAP $ 36,474 $ 33,378 $ 125,274 $ 36,233 $ 31,086 $ 30,081 $ 27,874
Stock-based compensation   95   75       304   61   82   78   83  
Gross margin - Non-GAAP   $ 36,569   $ 33,453       $ 125,578   $ 36,294   $ 31,168   $ 30,159   $ 27,957  
 
Loss from operations - GAAP $ (3,932 ) $ (6,884 ) $ (22,206 ) $ (1,516 ) $ (6,728 ) $ (6,558 ) $ (7,404 )
Stock-based compensation 2,013 1,655 5,781 1,470 1,462 1,403 1,446
Acquisition 3,182 387 2,196 599
Restructuring 26 117 2,251 42 498 1,531 180
Integration 27
Impairment of an asset in R&D 280
Acquisition related amortization   3,363   3,393       11,890   3,338   2,906   2,665   2,981  
Earnings (loss) from operations - Non-GAAP $ 1,470 $ (1,412 ) $ 898 $ 3,721 $ 334 $ (360 ) $ (2,797 )

Amortization (excluding aquisition related amortization)

  3,403   3,212       11,747   3,293   2,904   2,717   2,833  
Adjusted EBITDA   $ 4,873   $ 1,800       $ 12,645   $ 7,014   $ 3,238   $ 2,357   $ 36  
 
Net earnings (loss) from continuing operations – GAAP $ (6,742 ) $ (7,938 ) $ (4,202 ) $ 15,523 $ (3,612 ) $ (8,868 ) $ (7,245 )
Stock-based compensation, restructuring and other, integration, and acquisition related amortization, net of tax 5,393 5,355 22,241 5,162 6,885 5,658 4,536
Unrealized foreign exchange loss (gain) (1,359 ) 1,874 (3,139 ) (1,655 ) (1,218 ) (165 ) (101 )
Income tax adjustments   3,754         (15,344 ) (14,540 ) (804 )    
Net earnings (loss) from continuing operations - Non-GAAP   $ 1,046   $ (709 )     $ (444 ) $ 4,490   $ 1,251   $ (3,375 ) $ (2,810 )
 
Net earnings from discontinued operations - GAAP $ 68,152 $ 1,863 $ 31,401 $ 4,083 $ 7,279 $ 12,449 $ 7,590
Stock-based compensation and disposition costs 876 1,733 2,395 1,696 233 233 233
Gain on sale of AirCard business   (69,077 )                
Net earnings (loss) from discontinued operations - Non-GAAP   $ (49 ) $ 3,596       $ 33,796   $ 5,779   $ 7,512   $ 12,682   $ 7,823  
 
Net earnings (loss) - GAAP $ 61,410 $ (6,075 ) $ 27,199 $ 19,606 $ 3,667 $ 3,581 $ 345
Net earnings (loss) - Non-GAAP 997 2,887 33,352 10,269 8,763 9,307 5,013
 
Diluted earnings (loss) from continuing operations per share
GAAP - (in dollars) $ (0.22 ) $ (0.26 ) $ (0.14 ) $ 0.50 $ (0.12 ) $ (0.29 ) $ (0.23 )
Non-GAAP - (in dollars) $ 0.03 $ (0.02 ) $ (0.01 ) $ 0.15 $ 0.04 $ (0.11 ) $ (0.09 )
 
Net earnings (loss) per share - diluted
GAAP - (in dollars) $ 2.00 $ (0.20 ) $ 0.88 $ 0.64 $ 0.12 $ 0.12 $ 0.01
Non-GAAP - (in dollars)   $ 0.03   $ 0.09       $ 1.08   $ 0.33   $ 0.29   $ 0.30   $ 0.16  

(1) Financial information has been retrospectively adjusted to reflect the presentation of the AirCard business as discontinued operations.

SIERRA WIRELESS, INC.

REVENUE BY PRODUCT LINES

(In thousands of U.S. dollars)

(Unaudited)

                   
  Three months ended June 30,     Six months ended June 30,
  2013   2012 (1)     2013   2012 (1)
 
OEM Solutions $ 95,076 $ 83,299 $ 184,308 $ 163,399
Enterprise Solutions 14,513   12,099   26,682   24,334
$ 109,589   $ 95,398   $ 210,990   $ 187,733

(1) Comparative information has been reclassified to conform to current period presentation.



Stock quotes in this article: SWIR 

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