SMRA Somera Communications (MM)

Company Also Announces Additional RecoveryPLUS Agreement in Q1 2006 DALLAS, Feb. 16 /PRNewswire-FirstCall/ -- Somera Communications (NASDAQ:SMRA), a global provider of telecommunications equipment, asset management, and recovery services, today announced financial results for the fourth quarter and 2005 fiscal year ended December 31, 2005. Total revenue for the fourth quarter of 2005 was $16.1 million, compared with $23.2 million in the fourth quarter of 2004 and $21.8 million in the third quarter of 2005, the decrease due to softer end of year demand for both new and refurbished equipment. Program and service revenues continued to grow, by 31% over the fourth quarter of 2004 and by 14% over the third quarter of 2005. In addition, new clients continued to engage the RecoveryPLUS program with a new client added in the fourth quarter of 2005. Further, in the first quarter of 2006, the company engaged another major U.S. wireless carrier to the company's existing RecoveryPLUS(TM) program clients. Net loss was $4.5 million, or ($0.09) per share for the fourth quarter of 2005, compared with a net loss of $6.2 million, or ($0.12) per share, for the fourth quarter of 2004 and a net loss of $4.2 million, or ($0.08) per share, for the third quarter of 2005. Gross margin for the fourth quarter of 2005 was 32%, compared with a gross margin of 27% in the fourth quarter of 2004 and 33% in the third quarter of 2005. While gross margins slightly dipped sequentially due to lower volume, overall gross margin is higher year over year. Operating expenses for the fourth quarter of 2005 were $9.6 million, compared with $12.9 million in the fourth quarter of 2004 and $11.5 million in the third quarter of 2005. The reduction in operating expenses in the sequential and year-over-year quarterly results is primarily attributable to cost actions taken at end of third quarter in 2005 and lower variable selling expenses due to the reduced volume. The company's balance sheet at December 31, 2005 included $17.8 million in cash, cash equivalents, and short-term investments, a current ratio of 1.73 and no long-term debt. Somera total revenue for fiscal year 2005 was $77.1 million, compared with $100.0 million for 2004. Net loss on a GAAP basis was $19.9 million, or a loss of ($0.40) per share, compared with a net loss of $22.6 million, or a loss of ($0.45) per share, for the prior year. Somera is in the process of executing its previously disclosed restructuring plan, the goal of which is to reduce operating costs so that the Company is positioned to achieve breakeven at $16-$18 million in quarterly revenues. In the first quarter of 2006, the Company expects to complete the elimination of 70-80 positions, rationalize leased facilities and re-assess the carrying value of certain of its assets including inventory and fixed assets in light of the new operating plan. The final charges associated with these actions have yet to be determined. "Given the positive response to the RecoveryPLUS program and its potential contribution to our business, our recent cost reduction actions better position the Company for a return to profitability," commented David Heard, CEO of Somera. "This restructuring affords us the financial flexibility to operate efficiently while RecoveryPLUS adoptions continue to mature, ultimately impacting our income statement." Conference Call and Webcast Management will hold a teleconference with simultaneous webcast today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to discuss fourth quarter results. Please dial 866-249-5225 for domestic callers, or 303-262-2131 for international callers. The call will be webcast on the Investor Relations page of the Somera web site at http://www.somera.com/. A telephonic replay will be available from one hour after the call ends through February 23, 2006, at 800-405-2236 for domestic callers, or 303-590-3000 for international callers, passcode 11053978. About Somera Somera Communications is a telecom asset management firm that assists service providers generate greater value from their network assets in the form of lower operating costs, longer product life, higher productivity, and real measurable savings. Somera provides immediate availability of quality, warranted new and refurbished equipment at savings of 25% to 60%. Extending these benefits is Somera RecoveryPLUS, which deploys knowledgeable personnel, proven processes and proprietary software to each client location to provide professional discovery, valuation and asset cataloging, thereby enhancing ongoing network efficiency while improving the accuracy and quality of reports required of today's regulatory environment. In addition, Somera offers outsourced network operations, logistics, and technical service, as well as comprehensive repair services for wireless, wireline, and data products -- all at significant savings and reduced cycle times. Founded in 1995, Somera has developed an impressive base of over 1,100 customers worldwide, including the industry leaders from each segment of the telecommunications market. Visit Somera on the web at http://www.somera.com/. Investors should note that the audit by our independent accounting firm of our financial results reported in this press release has not yet been completed. The preparation of final audited financial results requires a substantial amount of subjective judgment, which must be reviewed and approved by our Audit Committee and audited by our independent accounting firm. Accordingly, once the audit of our financial statements is completed the actual audited results may vary from the results reported in this press release. This news release contains forward-looking statements as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including the following statements: * The benefits to be obtained as a result of the organizational restructuring * Our ability to achieve the breakeven model and, if obtained, whether we can be profitable with this operating model * The amount and nature of any non-recurring charges which may be incurred in the future Actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements contained in this release, including, but not limited to, general economic conditions particularly affecting the telecommunications industry; capital equipment spending levels in the telecommunications industry, including the risk of continued customer spending delays associated with carrier consolidation; the impact of competition in the market for supplying equipment and equipment lifecycle management services to telecommunications operators; the risk of potential shortage of product supply; and Somera's ability to build its lifecycle management services capabilities; and other factors fully described in the company's reports to the Securities and Exchange Commission (SEC), including but not limited to, the Annual Report on Form 10-K for the fiscal year ended December, 31, 2004, and Quarterly Reports on Form 10-Q. The company does not undertake to update any forward-looking statements that may be made by or on behalf of the company. Copies of Somera's Securities & Exchange Commission filings may be obtained by contacting Financial Relations Board at 617-520-7064 or by visiting the Investor section of Somera's web site at http://www.somera.com/. Contact: Jim Gardner Vice President, Marketing and Investor Relations Somera Communications 972-304-5660, ext. 317 SOMERA COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited) Dec. 31, Dec. 31, 2005 2004 ASSETS Current Assets: Cash and cash equivalents $6,613 $7,654 Short-term investments 11,200 32,757 Accounts receivable, net 13,773 16,217 Inventories, net 16,959 10,027 Other current assets 1,410 1,876 Total current assets 49,955 68,531 Property and equipment, net 3,834 4,600 Other assets 4,399 148 Intangible assets -- 1,810 Total assets $58,188 $75,089 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $14,865 $12,396 Accrued compensation 1,701 2,503 Other accrued liabilities 8,999 11,139 Deferred revenue 3,232 723 Total current liabilities 28,797 26,761 Stockholders' Equity 29,391 48,328 Total liabilities and stockholders' equity $58,188 $75,089 SOMERA COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited) For the For the For the For the Three Months Three Months Twelve Months Twelve Months Dec. 31, 2005 Dec. 31, 2004 Dec. 31, 2005 Dec. 31, 2004 Equipment Revenue $12,785 $20,624 $66,622 $87,120 Service and Program Revenue 3,351 2,562 10,506 12,914 Total Revenue $16,136 $23,186 $77,128 $100,034 Equipment Cost of Revenue $9,106 $15,073 $45,066 $67,008 Service and Program Cost of Revenue 1,921 1,925 5,803 9,479 Total Cost of Revenue $11,027 $16,998 $50,869 $76,487 Gross profit $5,109 $6,188 $26,259 $23,547 Operating expenses: Selling, general & administrative 9,560 12,914 42,904 46,693 Impairment of goodwill -- -- 1,760 -- Other operating expense -- 17 1,306 67 Total operating expenses $9,560 $12,931 $45,970 $46,760 Loss from operations $(4,451) $(6,743) $(19,711) $(23,213) Interest and other income (expense), net 77 552 (10) 643 Loss before income taxes $(4,374) $(6,191) $(19,721) $(22,570) Income tax provision 98 16 135 58 Net loss $(4,472) $(6,207) $(19,856) $(22,628) Net loss per share - basic and diluted $(0.09) $(0.12) $(0.40) $(0.45) Weighted average number of shares outstanding: Basic and diluted 50,203 49,871 49,936 49,739 DATASOURCE: Somera Communications CONTACT: Jim Gardner, Vice President, Marketing and Investor Relations of Somera Communications, +1-972-304-5660, ext. 317 Web site: http://www.somera.com/

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