SMRAD Somera Communications, Inc.

DALLAS, May 10 /PRNewswire-FirstCall/ -- Somera Communications (NASDAQ:SMRAD), a global provider of telecommunications equipment, asset management, and recovery services, today announced financial results for the first quarter ended March 31, 2006. Total revenue for the first quarter of 2006 was $15.1 million, compared with $20.5 million in the first quarter of 2005 and $16.1 million in the fourth quarter of 2005. Service and program revenues were $3.9 million in the first quarter of 2006, an increase of 123% over the first quarter of 2005 and 15% over the fourth quarter of 2005. The increase in service and program revenue is attributable to greater repair activity and existing RecoveryPLUS(TM) programs continuing to move further along the implementation curve. Net loss was $5.9 million, or ($1.17) per share for the first quarter of 2006, compared with a net loss of $3.3 million, or ($0.66) per share, for the first quarter of 2005 and a net loss of $4.5 million, or ($0.89) per share, for the fourth quarter of 2005. Net loss for the first quarter of 2006 includes restructuring charges of $2.2 million, or ($0.44) per share. Excluding the restructuring charges, net loss was $3.7 million, or ($0.73) per share, for the first quarter of 2006. On April 12, 2006, the Company implemented a 10-to-1 reverse stock split. All per share amounts have been retroactively restated to reflect the reduced number of shares. Gross margin for the first quarter of 2006 was 30%, compared with a gross margin of 37% in the first quarter of 2005 and 32% in the fourth quarter of 2005. The decrease in gross margin was primarily related to increased inventory provisions driven by market price reductions occurring during the first quarter of 2006. Excluding the $2.2 million of restructuring charges, operating expenses for the first quarter of 2006 were $8.3 million, compared with $10.8 million in the first quarter of 2005 and $9.6 million in the fourth quarter of 2005. The reduction in operating expenses from the prior quarters is primarily attributable to cost reduction actions taken during the first quarter of 2006. The Company's balance sheet at March 31, 2006 included $15.4 million in cash, cash equivalents, and short-term investments, a current ratio of 1.7 and no long-term debt. The restructuring charges noted above were the result of the implementation of a series of rebalancing actions during the first quarter of 2006 that included the elimination of 66 positions, consolidation of certain facilities, write-off of fixed assets associated with those facilities and reduction of other overhead costs. The Company recognized $2.2 million of costs in the first quarter related to these restructuring actions. Somera anticipates that additional restructuring actions will occur in the second quarter of 2006 as the Company continues to progress towards a quarterly breakeven level of $16-$18 million in revenue. The Company expects that restructuring charges in the second quarter of 2006 will be less than those incurred in the first quarter. Commenting on the first quarter, David Heard, CEO of Somera Communications, said, "I'm pleased with the progress we made during the quarter in reducing our cost structure, while at the same time growing our service and program revenue and adding another RecoveryPLUS(TM) customer, as previously announced. The restructuring actions have significantly reduced our operating expenses and cash utilization rate, and we expect to see additional benefits as the impact from these actions are in place for a full quarter. Following the actions we have taken to realign the business, we believe the personnel, programs and financial resources in place can provide a much clearer path to profitability. We are continuing to work on optimizing the performance of both the brokerage operations and the service and program business, and given the positive trends in key areas of the Company, we are optimistic that we can continue to make steady progress towards profitability." 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 first quarter results. Please dial 800-257-3401 for domestic callers, or 303-262-2211 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 May 17, 2006, at 800-405-2236 for domestic callers, or 303-590-3000 for international callers, passcode 11060218. Non-GAAP Financial Measures This press release contains pro forma net loss per share results that are not in accordance with GAAP because they exclude identified non-recurring charges. The estimated amount of the expected excluded charges is stated in this release so that pro forma net loss per share results can be reconciled to GAAP results. The pro forma net loss per share results should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. Somera includes this pro forma measure in this press release because it believes this measure enhances comparability of Somera's results of operations to those of competitors', to operating results Somera historically has reported and to financial models and expectations of securities analysts. About Somera Somera Communications is a telecom asset management firm that assists service providers in generating 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 up 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. Founded in 1995, Somera has developed a base of over 900 customers worldwide, including the industry leaders from each segment of the telecommunications market. Visit Somera on the web at http://www.somera.com/. 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, 2005, 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 310-854-8317 or by visiting the Investor section of Somera's web site at http://www.somera.com/. Contact: Tony Rossi Investor Relations Financial Relations Board 310-854-8317 SOMERA COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) March 31, December 31, 2006 2005 ASSETS Current assets: Cash and cash equivalents $5,530 $6,508 Restricted cash - short-term 221 105 Short-term investments 9,900 11,200 Accounts receivable, net of allowance for doubtful accounts of $486 and $443 at March 31, 2006 and December 31, 2005, respectively 10,453 13,773 Inventories, net 11,656 15,157 Deferred cost 1,494 1,802 Other current assets 1,236 1,410 Total current assets 40,490 49,955 Property and equipment, net 3,312 3,834 Other assets 3,665 3,899 Restricted cash - long-term 500 500 Total assets $47,967 $58,188 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $9,947 $14,865 Accrued compensation 1,967 1,701 Other accrued liabilities 3,155 4,123 Current restructuring costs 940 -- Deferred revenue 3,079 3,232 Income taxes payable 4,940 4,876 Total current liabilities 24,028 28,797 Non-current restructuring costs 379 -- Total liabilities 24,407 28,797 Commitments (Note 6) Stockholders' equity: Preferred stock ($0.001 par value per share; authorized 20,000 shares, no shares issued) Common stock ($0.001 par value per share; authorized 200,000 shares, shares issued and outstanding: 5,034 and 5,028 at March 31, 2006 and December 31, 2005, respectively) 5 5 Additional paid-in capital 75,247 75,198 Unearned share-based compensation -- (120) Accumulated other comprehensive income 164 274 Accumulated deficit (51,856) (45,966) Total stockholders' equity 23,560 29,391 Total liabilities and stockholders' equity $47,967 $58,188 SOMERA COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Three Months Ended March 31, 2006 2005 Revenues: Equipment revenue $11,198 $18,804 Service and program revenue 3,852 1,730 Total revenues 15,050 20,534 Cost of revenues: Equipment cost of revenue 8,487 11,966 Service and program cost of revenue 2,116 880 Total cost of revenues 10,603 12,846 Gross profit 4,447 7,688 Operating expenses: Sales and marketing 5,065 5,830 General and administrative 3,249 4,990 Restructuring costs and other 2,235 -- Amortization of intangible assets -- 17 Total operating expenses 10,549 10,837 Loss from operations (6,102) (3,149) Other income (expense), net 285 (114) Loss before income taxes (5,817) (3,263) Income tax provision 73 13 Net loss (5,890) (3,276) Net loss per share: basic and diluted $(1.17) $(0.66) Weighted average shares: basic and diluted 5,031 4,994 DATASOURCE: Somera Communications CONTACT: Investor Relations, Tony Rossi of Financial Relations Board, +1-310-854-8317, , for Somera Communications Web site: http://www.somera.com/

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