Newsroom
Stratos Announces First Quarter Financial Results
Revenue up 29 percent compared to first quarter of 2005; Xantic integration on track
BETHESDA, MD (May 8, 2006) - Stratos Global Corp. (TSX: SGB), the leading global provider of advanced mobile and fixed-site remote communications solutions, today announced financial results for the first quarter ended March 31, 2006. As previously announced, Stratos' first quarter results were negatively impacted by non-cash, after-tax write-offs of approximately US$23.3 million, primarily related to the acquisition of Xantic, which was completed on February 14, 2006. These after-tax charges included the write-down of US$19.6 million of capital assets related to the Goonhilly land earth station as a result of the planned post-acquisition network rationalization; the write-off of US1.0 million of deferred financing costs reflecting the successful financing of the Xantic acquisition; and the write-off of capital assets of US$2.7 million related to the breach-of-contract claim recently filed against a provider of business process solutions.
As a result, the Corporation reported a net loss for the quarter of US$24.9 million, or US$0.59 basic loss per share, compared with net earnings of US$3.5 million, or US$0.08 basic earnings per share, reported for the same period last year. First quarter 2005 results were favorably impacted by US$1.9 million, or US$0.04 per share, related to the settlement of a dispute over licensing and use of certain technology.
Excluding these items, as well as non-cash, after-tax amortization of US$1.1 million for customer intangibles related to both the Xantic and Plenexis acquisitions, the Corporation reported an adjusted net loss (non-GAAP measure) of US$0.5 million, or US$0.01 per share, in the first quarter of 2006, compared with adjusted net earnings of US$1.9 million, or US$0.04 per share, in the same quarter a year ago.
Revenue for the first quarter of 2006 was US$119.3 million, a 29 percent increase compared with the US$92.4 million achieved in the first quarter of 2005. This growth reflected Xantic revenue, which was consolidated with Stratos beginning February 14, 2006, as well as higher revenue from the Corporation's Broadband division.
In the Mobile Satellite Services (MSS) business, revenue increased by 35 percent to US$86.9 million in the first quarter of 2006, as compared to the first quarter of 2005, primarily reflecting revenue from the Xantic acquisition. MSS segment earnings declined by three percent to US$11.4 million in the first quarter of 2006, as compared to the same period a year ago. This decline reflected lower traffic volumes and margins from the land market sector, continuing a trend that began in the second half of 2003 following the peak period of activity associated with the conflict in Iraq.
Revenue in the Broadband division was US$32.3 million in the first quarter of 2006, a 15 percent increase over the same quarter a year ago. This increase reflected continued strong activity in the Gulf of Mexico following last year's hurricanes, as well as an additional month of revenue from Plenexis, which was acquired on January 31, 2005. Broadband segment earnings in the first quarter of 2006 totaled US$3.5 million, compared with US$3.8 million in the year-ago first quarter. This decline reflected a shift to lower-margin VSAT services following last year's hurricanes, as well as higher operating expenses.
Total debt increased to US$375.7 million at the end of the first quarter following the successful financing of the Xantic acquisition, which was acquired for a purchase price US$191.3 million (subject to post-closing adjustments). As of March 31, 2006, available cash totaled US$55.7 million, including US$33.2 million acquired in the Xantic transaction. As a result, net debt at the end of the first quarter was US$320.0 million.
"The first quarter was very important for Stratos, as we successfully completed the acquisition of Xantic, combining the power of two of the leaders in the mobile satellite industry," said Jim Parm, Stratos' president and chief executive officer. "With the transaction completed, we are now fully engaged in the integration process, which is pointing toward the higher end of our original synergy estimates and is proceeding on schedule."
"From an operational standpoint, in the first quarter, we were encouraged by the customer response to our initial BGAN rollout and by the improvement in our Broadband business, which continues to recover from the effects of last year's hurricanes in the Gulf of Mexico. We also see a number of emerging revenue opportunities driven by the introduction of BGAN in our MSS business, as well as further expansion of our Broadband business," continued Parm. "Looking ahead, we expect improvement in operational earnings throughout the remainder of the year, particularly in the second half, as we drive increased growth in revenue from the opportunities I just mentioned, earn greater volume discounts from Inmarsat, and begin to realize other cost synergies from the Xantic integration."
The Corporation's financial statements for the quarter ended March 31, 2006, and related notes, together with management's discussion and analysis of such results, are attached.
A conference call with analysts to discuss these results will be held at 8:30 a.m. EST on Tuesday, May 9, 2006. To access the conference call, please dial 1-866-249-1964. A replay of the conference call will also be available through Tuesday, May 16. To access the replay, please call 1-877-289-8525 and use access code 21186572#.
About Stratos
Stratos Global Corporation (www.stratosglobal.com) is a publicly traded company (TSX: SGB) and the leading global provider of a wide range of advanced mobile and fixed-site remote communications solutions for users operating beyond the reach of traditional networks. With its owned-and-operated infrastructure and extensive portfolio of industry-leading satellite and microwave technologies (including Inmarsat, Iridium, Globalstar, MSAT, VSAT, and others), Stratos serves the voice and high-speed data connectivity requirements of a diverse array of markets, including government, military, energy, industrial, maritime, aeronautical, enterprise, media and recreational users throughout the world.
Caution Concerning Forward-Looking Statements
Documents related to this release contain statements and information about potential future circumstances and developments. Such statements and information are qualified by the inherent risks and uncertainties surrounding future expectations generally and may differ materially from Stratos Global Corporation's actual future results. For additional information with respect to these risks and uncertainties, reference should be made to the Corporation's continuous disclosure materials filed with the Canadian Securities Administrators. Stratos Global Corporation disclaims any intention or obligation to update or revise any forward-looking statements or information, whether as a result of new information, future events, or otherwise.
For additional information :
Paula McDonald, FCA
Executive Vice President and Chief Financial Officer
709.724.5227
paula.mcdonald@stratosglobal.com