UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
Report of Foreign issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
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For the Month of July 2003
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(Commission File. No 0-30718).
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SIERRA WIRELESS, INC., A CANADA CORPORATION
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(Translation of registrant's name in English)
13811 Wireless Way
RICHMOND, BRITISH COLUMBIA, CANADA V6V 3A4
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(Address of principal executive offices and zip code)
Registrant's Telephone Number, including area code: 604-231-1100
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Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F:
Form 20-F X 40-F
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Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934:
Yes: No: X
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NEWS RELEASE TRANSMITTED BY CCN DISCLOSURE
FOR: Sierra Wireless, Inc.
TSX: SW
Nasdaq: SWIR
July 17, 2003
Sierra Wireless Reports Second Quarter 2003 Results
VANCOUVER, BRITISH COLUMBIA - Sierra Wireless, Inc. (NASDAQ: SWIR, TSX: SW)
is reporting better than expected second quarter results, including revenue of
$20.7 million, net earnings of $0.9 million and positive cash flow.
"We are pleased to report that, for the fourth quarter in a row, we grew
revenues over the comparable quarter, were profitable and generated positive
cash flow. The AirCard product line and sales in the United States, Europe and
the Asia-Pacific region each contributed significantly during the second
quarter", said David Sutcliffe, Chairman and Chief Executive Officer. "Looking
ahead, we plan to complete the AirPrime acquisition and business integration. We
expect overall economic and industry conditions to continue to be challenging.
Our business operating premise is profitable growth and our priorities remain
expansion of our distribution channels, sell through to end customers and
investment in new products for future growth."
Our results are reported in US dollars and are prepared in accordance with
United States generally accepted accounting principles. During the second
quarter of 2003, we received and recorded an unexpected additional recovery of
$0.3 million from Metricom. During the second quarter of 2002, we recorded
restructuring and other charges of $36.1 million. Our results, where described
as adjusted, exclude these amounts.
Results for the second quarter of 2003, relative to company guidance provided on
April 24, 2003:
Second quarter revenue for 2003 of $20.7 million was better than our guidance
range of $19.0 to $20.0 million. Gross margin was 40.3%, better than our
guidance of approximately 39.0%. Our adjusted operating expenses were $7.8
million, higher than our guidance range of $7.4 to $7.6 million. Our adjusted
net earnings of $0.6 million, or diluted earnings per share of $0.04, were
better than our net earnings guidance range of $0.1 to $0.3 million, or
diluted earnings per share of $0.01 to $0.02. We had a positive cash flow of
$0.5 million that was better than our guidance of neutral cash flow.
Results for the second quarter of 2003, compared to the second quarter of 2002:
Our revenue for the second quarter of 2003 increased by 22.4% to $20.7
million from $16.9 million for the same period in 2002. Adjusted gross margin
improved to 40.3% from 37.1%. Adjusted operating expenses declined to $7.8
million from $10.0 million. Second quarter adjusted earnings for 2003
increased to $0.6 million or diluted earnings per share of $0.04, compared to
an adjusted loss of $3.0 million or loss per share of $0.18.
Results for the second quarter of 2003, compared to the first quarter of 2003:
Our revenue for the three months ended June 30, 2003 amounted to $20.7
million, compared to $20.1 million in the first quarter of 2003, an increase
of 2.8%.
Gross margins were $8.3 million or 40.3% in the second quarter of 2003,
compared to $7.9 million or 39.5% in the first quarter of 2003. Our gross
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margin percentage improved compared to the previous quarter due to a greater
percentage of sales coming from our 2.5G AirCard products as well as product
cost reduction.
Adjusted operating expenses were $7.8 million, compared to $7.6 million in
the previous quarter. This increase is a result of decreased funding from our
research and development funding agreements compared to the previous quarter.
Our gross research and development investments were $3.1 million in both
quarters.
Our adjusted net earnings were $0.6 million for the three months ended June
30, 2003, compared to $0.4 million for the three months ended March 31, 2003.
Our adjusted diluted earnings per share were $0.04 for the second quarter of
2003, compared to diluted earnings per share of $0.02 for first quarter of
2003.
Acquisition of AirPrime, Inc.
On June 16, 2003, we announced a definitive agreement to acquire AirPrime, Inc.,
a privately-held, leading supplier of high-speed CDMA wireless products located
in Carlsbad, California. The combined entity is expected to be a well-positioned
market leader with a broad product line, innovative engineering, blue chip
customers, global channels and a strong balance sheet. We expect the combination
to close during August.
Changes to Supply Chain
During the quarter, we implemented significant changes to our supply chain.
These included the transfer of global fulfillment and CDMA product manufacturing
to Flextronics. By using their fully integrated supply chain services, we expect
to reduce product costs, improve alignment with our increasingly international
customer base and achieve increased operating efficiencies and scalability. We
expect to purchase finished goods closer to the time of shipment to our
customers, reducing our working capital requirements associated with carrying
inventory.
Previously, fulfillment services were provided by Globalware while CDMA
production was handled by SCI-Sanmina. We continue to have GSM production at
Solectron and CDPD and specialty production at Creation Technologies.
Second Quarter Highlights Included:
o We signed a distribution agreement with Panasonic Canada Inc, a division
of Matsushita Electric Industrial Co., Ltd. of Japan, one of the world's
largest producers of electronics and electric products for consumer,
business and industrial use. Under the agreement, Panasonic will
distribute our next generation product line, including CDMA2000 1X and
GSM/GPRS products, through its value added reseller channels in Canada.
o Together with Citrix Systems, Inc. and Zumasys, Inc., we announced that
Momentum Group, a leading supplier of contract textiles, has equipped its
North American sales force with a complete mobile solution that included
Panasonic Toughbooks, Citrix MetaFrame XP(TM)Presentation Server and the
Sierra Wireless AirCard(R)550 and AirCard 555. This new implementation
gives Momentum's sales representatives wireless access to critical
business applications, improving response time and overall customer
satisfaction.
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o Together with IBM, we announced a bundled wireless solution using the
Sierra Wireless AirCard 750, a wireless wide area network PC Card,
combined with the IBM ThinkPad T40 notebook series, a high-end notebook
computer with built in wireless local area network functionality. IBM
chose the AirCard specifically for its high performance wide area wireless
capabilities and for its ability to enhance an end-to-end mobile solution.
o We announced the commercial availability of the MP 750, the first of our
next generation MP ruggedized wireless modems, across North America and
Europe. The next generation MP Series, built for extreme environments and
industries that require an in-vehicle mobile solution, will include both
the MP 750 for GSM/GPRS networks, and the MP 555 for CDMA2000 1X networks.
The MP 555 is expected to be launched later this year.
o We announced that the Mesquite Police Department in Texas is the first
police force in North America to implement the MP 750 to protect its
community while patrolling over 377 miles of arterial and residential
streets. The next generation wireless data solution was chosen
specifically for its unique security features and its ability to provide
faster access to mission critical information.
o We appointed Charles E. Levine, formerly of Sprint PCS, to our Board of
Directors. Mr. Levine has more than 25 years of experience in building
businesses for some of North America's largest companies. Mr. Levine's
expertise in business strategy, marketing and sales will be invaluable to
our team.
Voluntary Option Surrender Initiative
During the second quarter, we instituted and completed a voluntary Employee
Stock Option Plan ("ESOP") surrender initiative. The objective of the ESOP is to
enable us to recruit, retain and motivate participants to increase the value of
our company on a sustainable basis. The objectives of the ESOP surrender
initiative are to have deeply "under water" stock options returned to the pool
now, rather than having them expire unexercised some time in the future, and to
enable us to operate the ESOP within the existing number of options that have
already been approved by shareholders. Surrenders by employees, officers and
directors were voluntary. The company had approximately 3.2 million net options
authorized, with 2.5 million issued and 0.7 million available for issuance.
Options with an exercise price below Cdn$20.00 were not eligible for surrender.
Of the 2.5 million issued, there were approximately 1.0 million eligible for
surrender. Of the eligible options, approximately 0.7 million were surrendered,
with exercise prices ranging from Cdn.$20.46 to Cdn.$212.00.
We do not intend to reprice existing options, either immediately or through a
short-term re-issuance of the surrendered options. ESOP participants who
surrendered options are "at risk" through the loss of the vesting associated
with those options and through the uncertainty as to availability, quantity,
timing and exercise price of future grants. Directors, including David
Sutcliffe, the company's Chairman and Chief Executive Officer, are ineligible to
receive any future recognition for their participation in the surrender program.
We expect over time to reduce the size of the ESOP as a percentage of issued and
outstanding shares.
Financial Guidance
For the third and fourth quarters ending September 30, 2003 and December 31,
2003, respectively, we are providing the following guidance reflecting our
current business indicators and expectations. Inherent in this guidance is
higher than normal risk resulting from uncertainty associated with the
acquisition of AirPrime, the timing of volume shipments to channels and with the
rate of end customer adoption of newer products. All figures are estimates and
are approximations.
This guidance reflects a planning assumption that the company will commence
consolidating financial results with AirPrime on September 1st, 2003. We expect
to incur AirPrime related restructuring costs in Q3 2003 and integration costs
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in both Q3 and Q4 2003. In both quarters, we expect to be profitable, excluding
the restructuring and integration costs. We expect integration activities and
costs to be substantially completed by year-end.
Q3 2003 Q4 2003
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Revenue $24 - $25 million $28 - $30 million
Gross margin 39% 38% - 39%
Operating expenses $8.4 - $8.7 million $9.8 - $10.4 million
Restructuring and other charges $2.5 million Nil
Integration costs $1.5 million $1.1 - $1.5 million
Net earnings (loss) $(2.9) - $(3.0) million $(0.2) - $(0.3) million
Diluted earnings (loss) per share $(0.17) $(0.01)
Net earnings (loss), excluding
restructuring and integration costs $0.9 - $1.0 million $0.8 - $1.3 million
Diluted earnings (loss) per share,
excluding restructuring and $0.05 - $0.06 $0.04 - $0.06
integration costs
Cash flow Neutral, excluding cash Neutral
costs related to the
acquisition
Management Retirement
Peter Roberts, CFO, has determined that he will be retiring from the company in
February, 2004. To allow for an orderly transition, the company has engaged Korn
Ferry to assist with the executive search for his replacement. Mr. Roberts
joined Sierra Wireless in January, 1999 and has been instrumental in helping the
company become a leading wireless solutions company.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements relate to, among other things,
plans and timing for the introduction or enhancement of our services and
products, statements about future market conditions, supply conditions, channel
and end customer demand conditions, revenues, gross margins, operating expenses,
profits, and other expectations, intentions, and plans contained in this press
release that are not historical fact. Our expectations regarding future revenues
and earnings depend in part upon our ability to develop, manufacture, and supply
products that we do not produce today and that meet defined specifications. When
used in this press release, the words "plan", "expect", "believe", and similar
expressions generally identify forward-looking statements. These statements
reflect our current expectations. They are subject to a number of risks and
uncertainties, including, but not limited to, changes in technology and changes
in the wireless data communications market. In light of the many risks and
uncertainties surrounding the wireless data communications market, you should
understand that we cannot assure you that the forward-looking statements
contained in this press release will be realized.
About Sierra Wireless
Sierra Wireless, Inc. is a global leader in delivering highly differentiated
wireless solutions. Sierra Wireless develops and markets the AirCard(R), a
wireless PC Card for portable computers, OEM modules for embedded applications,
and rugged vehicle-mounted wireless systems. Sierra Wireless is the founding
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member of the WirelessReady(TM) Alliance, a partnership of industry-leading
hardware, software, and service companies committed to the delivery of complete
and compelling wireless data solutions. For more information on Sierra Wireless,
visit our web site at WWW.SIERRAWIRELESS.COM.
"AirCard" and "WirelessReady" are registered trademarks of Sierra Wireless, Inc.
All other trademarks or service marks in this news release are the trademarks or
service marks of their respective owners.
Conference Call and Instant Replay
We will host a conference call to review our results on July 17, 2003 at 2:30 pm
PDT, 5:30 PM EDT. To participate in this conference call, please dial the
following toll free number approximately five minutes prior to the commencement
of the call:
1-888-458-1598 Passcode: 38226#
Should you be unable to participate, Instant Replay will be available for three
business days following the conference call by dialing:
1-877-653-0545 Passcode: 175600#
We look forward to having you participate in our call.
FOR FURTHER INFORMATION PLEASE CONTACT:
Sierra Wireless, Inc.
Peter W. Roberts, CA, CPA
Chief Financial Officer
(604) 231-1192
Website: WWW.SIERRAWIRELESS.COM
Email: ROBERTS@SIERRAWIRELESS.COM
INDUSTRY : CMT
SUBJECT : ERN
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SIERRA WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Expressed in thousands of United States dollars, except per share amounts)
(Prepared in accordance with United States generally accepted accounting
principles (GAAP))
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2003 2002 2003 2002
------- -------- -------- --------
Revenue.............................................. $20,665 $ 16,883 $ 40,760 $ 33,555
Cost of goods sold................................... 12,334 29,631 24,489 40,383
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Gross margin......................................... 8,331 (12,748) 16,271 (6,828)
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Expenses:
Sales and marketing................................ 2,590 2,920 5,319 5,630
Research and development, net ..................... 2,947 4,615 5,696 9,416
Administration..................................... 1,451 1,837 3,068 3,810
Restructuring and other charges ................... -- 13,093 -- 13,093
Amortization....................................... 546 594 1,099 1,247
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7,534 23,059 15,182 33,196
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Earnings (loss) from operations...................... 797 (35,807) 1,089 (40,024)
Other income (expense)............................... 167 96 271 (26)
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Earnings (loss) before income taxes.................. 964 (35,711) 1,360 (40,050)
Income tax expense (recovery)........................ 54 3,424 89 3,424
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Net earnings (loss).................................. 910 (39,135) 1,271 (43,474)
Deficit, beginning of period......................... (73,203) (36,240) (73,564) (31,901)
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Deficit, end of period...............................$(72,293) $(75,375) $(72,293) $(75,375)
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Earnings (loss) per share for the period:
Basic.............................................. $ 0.06 $ (2.40) $ 0.08 $ (2.67)
Diluted............................................ $ 0.05 $ (2.40) $ 0.08 $ (2.67)
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Weighted average number of shares (in
thousands)
Basic.............................................. 16,375 16,305 16,365 16,284
Diluted............................................ 16,754 16,305 16,736 16,284
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SIERRA WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States dollars)
(Prepared in accordance with United States GAAP)
JUNE 30, DECEMBER 31,
2003 2002
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(UNAUDITED) (AUDITED)
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 27,847 $ 34,841
Short-term investments ...................................... 10,222 --
Accounts receivable ......................................... 15,949 13,865
Inventories ................................................. 4,359 6,673
Prepaid expenses ............................................ 743 864
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59,120 56,243
Fixed assets .................................................. 5,354 7,198
Deferred income taxes ......................................... 500 500
Intangible assets ............................................. 7,808 6,907
Other ......................................................... 1,033 241
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$ 73,815 $ 71,089
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................. $ 5,398 $ 3,017
Accrued liabilities ......................................... 12,249 12,431
Deferred revenue and credits ................................ 228 297
Current portion of long-term liabilities .................... 3,114 2,803
Current portion of obligations under capital lease .......... 397 831
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21,386 19,379
Long-term liabilities ......................................... 2,311 2,896
Obligations under capital lease ............................... 52 60
Shareholders' equity:
Share capital ............................................... 123,088 123,047
Deficit ..................................................... (72,293) (73,564)
Accumulated other comprehensive income
Cumulative translation adjustments ....................... (729) (729)
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50,066 48,754
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$ 73,815 $ 71,089
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SIERRA WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars)
(Prepared in accordance with United States GAAP)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2003 2002 2003 2002
--------- -------- -------- ---------
Cash flows from operating activities:
Net earnings (loss) for the period................... $ 910 $(39,135) $ 1,271 $(43,474)
Adjustments to reconcile net earnings
(loss) to net cash provided by operating
activities .......................................... 1,383 1,961 2,721 4,150
Amortization
Non-cash restructuring and other charges.......... -- 25,905 -- 25,905
Loss on disposal.................................. 2 -- 2 120
Deferred income taxes............................. -- 3,754 -- 3,754
Accrued warrants.................................. 161 194 329 343
Changes in operating assets and liabilities
Accounts receivable............................... (5,809) 1,367 (2,084) (3,368)
Inventories....................................... 3,129 2,115 2,314 3,111
Prepaid expenses.................................. 115 (134) 121 469
Accounts payable.................................. 1,817 (6,754) 2,381 (995)
Accrued liabilities............................... 1,407 4,243 (182) 897
Deferred revenue and credits...................... (173) (782) (69) (265)
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Net cash provided by (used in) operating activities.. 2,942 (7,266) 6,804 (9,353)
Cash flows from investing activities:
Business acquisitions............................. (792) -- (792) --
Proceeds on disposal.............................. 4 -- 4 31
Purchase of fixed assets.......................... (214) (356) (357) (1,596)
Increase in intangible assets..................... (712) (16) (1,314) (836)
Purchase of short-term investments................ (10,222) (9,494) (10,222) (11,631)
Proceeds on maturity of short-term investments.... -- 16,778 -- 35,012
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Net cash provided by (used in) investing activities.. (11,936) 6,912 (12,681) 20,980
Cash flows from financing activities:
Issue of common shares............................ -- 5 41 330
Repayment of long-term liabilities................ (702) (510) (1,158) (909)
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Net cash used in financing activities................ (702) (505) (1,117) (579)
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Net increase (decrease) in cash and cash equivalents... (9,696) (859) (6,994) 11,048
Cash and cash equivalents, beginning of period......... 37,543 23,992 34,841 12,085
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Cash and cash equivalents, end of period............... $27,847 $ 23,133 $ 27,847 $ 23,133
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Sierra Wireless, Inc.
By: /s/ PETER W. ROBERTS
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Peter W. Roberts, Chief Financial Officer
Date: July 17, 2003
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