6-K 1 b782111.htm Prepared and filed by St Ives Burrups

 

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of February 2005

WAVECOM S.A.

3, esplanade du Foncet
F-92442 Issy-Les-Moulineaux Cedex, France
Tel: 00 33 1 46 29 08 00
(Address of principal executive offices)


[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.]

Form 20-F    Form 40-F 

[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 

[If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_____.]

Press Release

Wavecom Announces Fourth Quarter 2004 Results

Issy-les-Moulineaux, France – February 10, 2005 – Wavecom SA (NASDAQ: WVCM; Euronext Nouveau Marché Euronext: AVM; ISIN: FR0000073066), a leader in pre-packaged wireless communications solutions for automotive, industrial and mobile professional applications, today announced financial results for its fourth quarter ended December 31, 2004.

Ron Black, chief executive officer commented “During the fourth quarter of 2004 we were once again able to significantly limit our cash consumption through continued tightened operational performance. We also successfully and swiftly completed a major restructuring related to our exit from the mobile handset business. We achieved this difficult task on-time and below budget. On the business front, both our sales and operation teams continued to make progress to meet our previously-stated goal of returning the company to breakeven within the second half of 2005.”

Fourth Quarter 2004 Financial Highlights:

All figures are unaudited and reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Condensed consolidated financial tables are provided at the end of this release. It should be noted that following the company’s announcement to exit the mobile telephone handset market in September 2004, the scope of the company’s business changed significantly thus making comparisons of consolidated results to the same period the previous year not meaningful.

Cash: Wavecom’s cash position was €53.3 million at December 31, 2004, slightly down from the previous quarter of €55 million. The company was able to continue to limit the decline in its cash reserves as a result of improved operating performance, particularly in accounts receivable and reduction of inventory.

Revenues: Total fourth quarter revenues were €37.4 million, increasing 3% from the previous quarter. With the significant decline of the U.S. dollar versus the Euro in the fourth quarter of 2004, foreign currencies1 had a €1.4 million unfavorable impact on revenues. Revenues for vertical applications (83% of total) remained flat on a like-for-like currency basis compared to the previous quarter with an increase in the Americas region offset by a decrease in EMEA (Europe Middle-East and Africa) due mainly to the successful completion of a major automotive project in the third quarter. Revenue breakdown for the fourth quarter by region was as follows: 50% EMEA, 44% APAC (Asia-Pacific) and 6% the Americas. Revenues for our PCD (Personal Communication Device) business (17% of total) increased from €3.8 million in the third quarter to €6.2 million in the fourth quarter as we continued to deliver products to fulfill contractual obligations to customers in this market. The customer portfolio remained balanced with no single customer representing more than 13% of total revenues in the fourth quarter. The top ten customers combined represented 71% of revenues as compared to 72% in the third quarter, four of which are key vertical applications accounts, five of which are distributors to the vertical markets representing thousands of manufacturers of wireless-enabled machines and one was a PCD customer.


1Calculation is based on the following weighted average rates, applied to sales denominated in U.S. dollars, for the period from July 1, 2004 to September 30, 2004 (1 euro = $1.2195) and October 1, 2004 to December 31, 2004 (1 euro = $1.3074)


 

Backlog: Backlog as of December 31, 2004 stood at €32 million, compared to €40 million at the end of the previous quarter which is consistent with typical seasonality. Orders for vertical applications, make up 90% of this backlog as compared to 84% of the backlog as of September 30, 2004.

Gross Margin: Total gross margin was 32% compared to 20% in the previous quarter which is approaching our previously-stated target range of 33% to 35%. It should be noted that the gross margin in the third quarter was exceptionally low due mainly to the decision to write-off approximately €4 million related to the excess inventories of products that had reached end-of-life, most of which had been destined for the handset market.

Operating results: Total operating expenses for the fourth quarter were €29.3 million, compared to €25.7 million in the third quarter. The company’s management successfully negotiated the terms of the restructuring plan announced in September 2004 within the fourth quarter. A charge of €11.1 million relating to the restructuring plans was taken during the fourth quarter of 2004, this includes a €2.5 million charge for impairment of assets. Expenses associated with R&D declined 17% in the fourth quarter 2004 compared to the third quarter due mainly to headcount and other restructuring-related cost reductions. Expenses for both Sales and Marketing and G&A also declined as compared to the third quarter of 2004 by 3.5% and 7.5% respectively. Management successfully sub-leased all excess office space during the fourth quarter. The company posted an operating loss for the fourth quarter 2004 of €17.3 million as compared to an €18.4 million operating loss during the previous quarter. Excluding the restructuring charges and related impairments for the third and fourth quarters of 2004, the operational results would have improved from a loss of €13.2 million in the third quarter to a loss of €6.2 in the fourth quarter.

Net result: Net result for the fourth quarter 2004 was a loss of €20.5 million compared to a loss of €18.2 for the previous quarter. This result included a net foreign exchange loss of €3.4 million in the fourth quarter while the net foreign exchange loss for the full year 2004 was €578,000.

Restatement of 2003 net result:

Wavecom also announced today that it is restating its financial accounts in U.S. GAAP related to incorrect accounting for its deferred income tax during the fiscal year ended December 31, 2003.

During the closure process of its 2004 accounts in February 2005, the company identified an error in accounting related to its deferred income tax during fiscal year 2003. The company believes that the error which led to the decision to restate its U.S. GAAP accounts was the result of a material weakness in internal control over financial reporting. The adjustments in its restated financial accounts will reflect an increase of approximately €5 million in income tax expense for fiscal year 2003. No cash outlays are expected as a result of the restatement. The net result as of December 31, 2003 will be restated to a net loss of €31.1 million from the previously published net loss of €25.9 million.

Ron Black, Wavecom CEO commented, “Any restatement of financial performance is a serious matter that must be addressed to ensure that errors of this type do not occur in the future.” The company intends to implement a more stringent review process over the filing of tax returns and preparation of its deferred tax computations on a prospective basis within the first half of 2005. He added “We did not identify any adjustments to our historical revenues or operating expenses for the period being restated.”


 

Conference Call:

Today at 3:00 p.m. Paris time, Wavecom management will host a conference call commenting on its fourth quarter 2004 results. Visit the Wavecom corporate website: www.wavecom.com investors section to listen to this conference call commentary webcast (in English).

Wavecom will announce its first quarter 2005 results on April 28, 2005 at 7:30 a.m. Paris time to be followed in the afternoon by a conference call hosted by management commenting on the results.

About Wavecom
Wavecom is a leading worldwide leader in pre-packaged wireless communication solutions for automotive, industrial and mobile professional applications. Wavecom's solutions include all the software and hardware elements that are necessary to develop truly innovative wireless devices, as well as the development tools and services needed to bring them to market quickly and easily.

Founded in 1993 and headquartered near Paris in Issy-les-Moulineaux, Wavecom has subsidiaries in Hong Kong (PRC), San Diego (USA), and Darmstadt (Germany). Wavecom is publicly traded on Euronext Paris (Nouveau Marché) in France and on the NASDAQ (WVCM) exchange in the U.S.
www.wavecom.com

For further information please contact:

Lisa Ann Sanders John D. Lovallo
Investor Relations Director Ogilvy Public Relations Worldwide
Tel. +33 1 46 29 41 81 Tel.: +1 (212) 880-5216
lisaann.sanders@wavecom.com john.lovallo@ogilvypr.com
   

This press release contains forward-looking statements that relate to the company's breakeven and gross margin objectives. The company's business is subject to numerous risks and uncertainties, including whether it will be commercially successful in implementing its strategic reorientation, whether there will be continued growth in the vertical markets, an unanticipated decrease in orders from one of the company’s principal customers or customer cancellation or scale-down of a major project, the company’s reliance on a single contract manufacturer in China for all production requirements, dependence on third parties, changes in foreign currency exchange rates and customer and supplier concerns regarding the company’s overall weakened financial position , and risks associated with managing growth. Unfavorable developments in connection with these and other risks and uncertainties described in the Company's reports on file with the Securities and Exchange Commission could cause the company to not return to breakeven during the second half of 2005, or to not reach its gross margin targets. As a result, the Company’s actual results may be materially different from those expressed by the forward-looking statements above.

-- Financial Table Follow –


 

WAVECOM S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)

Prepared in accordance with U.S. generally accepted accounting principles.

       Three months ended    
      December 31,     September 30,     December 31,  
      2003     2004     2004  






      Euro     Euro     Euro  
Revenues :                    
   Product sales     58,577     36,235     36,881  
   Technology development and other services     1,704     184     564  






      60,281     36,419     37,445  
Cost of revenues :                    
   Product sales :                    
      Cost of goods sold     37,811     27,264     22,581  
      Adjustment of royalty provision     (9,076 )        






         Total cost of product sales     28,735     27,264     22,581  
   Technology development and other services     2,084     1,825     2,901  






      30,819     29,089     25,482  






Gross profit     29,462     7,330     11,963  
Operating expenses :                    
   Research and development     13,354     10,187     8,441  
   Sales and marketing     5,142     4,108     3,964  
   General and administrative     10,197     6,266     5,799  
   Impairment of intangible and tangible assets     4,244         2,545  
   Restructuring costs         5,182     8,509  






         Total operating expenses     32,937     25,743     29,258  






Operating loss     (3,475 )   (18,413 )   (17,295 )






Interest income and other financial income, net     507     174     195  
Foreign exchange gain (loss), net     (2,129 )   389     (3,424 )






         Total financial income     (1,622 )   563     (3,229 )






Loss before minority interests and income taxes     (5,097 )   (17,850 )   (20,524 )
Minority interests              






Loss before income taxes     (5,097 )   (17,850 )   (20,524 )
Income tax expense (benefit)     (315 )   309     (33 )






Net loss     (4,782 )   (18,159 )   (20,491 )






Basic net loss per share     (0.31 )   (1.18 )   (1.34 )






Diluted net loss per share     (0.31 )   (1.18 )   (1.34 )






Number of shares used for computing :                    
   - basic net loss per share     15,183,387     15,342,435     15,342,940  
   - diluted net loss per share     15,183,387     15,342,435     15,342,940  

 


 

WAVECOM S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)

Prepared in accordance with U.S. generally accepted accounting principles.

       Year ended December 31,   
      2003     2003     2004  
      as reported     restated      






      Euro     Euro     Euro  
Revenues :                    
   Product sales     271,773     271,773     149,974  
   Technology development and other services     3,855     3,855     1,580  






      275,628     275,628     151,554  
Cost of revenues :                    
   Product sales :                    
      Cost of goods sold     177,541     177,541     107,134  
      Adjustment of royalty provision     (9,076 )   (9,076 )    






         Total cost of product sales     168,465     168,465     107,134  
Technology development and other services     4,704     4,704     8,391  






      173,169     173,169     115,525  






Gross profit     102,459     102,459     36,029  
Operating expenses :                    
   Research and development     62,123     62,123     47,083  
   Sales and marketing     27,766     27,766     15,685  
   General and administrative     39,141     39,141     28,956  
   Impairment of intangible and tangible assets     4,244     4,244     4,313  
   Restructuring costs             19,702  
   Amortization of deferred stock-based compensation     205     205      






         Total operating expenses     133,479     133,479     115,739  






Operating loss     (31,020 )   (31,020 )   (79,710 )






Interest income and other financial income, net     2,767     2,767     1,544  
Foreign exchange loss, net     (2,065 )   (2,065 )   (578 )






Total financial income     702     702     966  






Loss before minority interests and income taxes     (30,318 )   (30,318 )   (78,744 )
Minority interests     (38 )   (38 )    






Loss before income taxes     (30,280 )   (30,280 )   (78,744 )
Income tax expense (benefit)     (4,400 )   861     13  






Net loss     (25,880 )   (31,141 )   (78,757 )






Basic net loss per share     (1.71 )   (2.06 )   (5.14 )






Diluted net loss per share     (1.71 )   (2.06 )   (5.14 )






Number of shares used for computing :                    
   - basic net loss per share     15,098,795     15,098,795     15,317,661  
   - diluted net loss per share     15,098,795     15,098,795     15,317,661  

 


WAVECOM S.A.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

Prepared in accordance with U.S. generally accepted accounting principles.

       At December 31,   
     
2003
2003
2004
 
     
as reported
restated
 






     
Euro
Euro
Euro
 
ASSETS                    
                     
Current assets :                    
   Cash and cash equivalents     110,705     110,705     53,318  
   Accounts receivable, net     44,622     44,622     22,864  
   Inventory, net     33,809     33,809     16,409  
   Value added tax recoverable     2,235     2,235     1,102  
   Prepaid expenses and other current assets     11,442     11,442     5,481  
   Recoverable estimated tax payments     7,670     7,670      






         Total current assets     210,483     210,483     99,174  
   Intangible and tangible assets, net     27,862     27,862     12,617  
   Long-term investments     16,502     16,502     9,017  
   Other assets     9,410     9,410     5,295  
   Recoverable tax loss carryback and research tax credit     9,913     9,913     11,103  
   Deferred tax assets     6,320     1,059      






         Total assets     280,490     275,229     137,206  






                     
LIABILITIES AND SHAREHOLDERS' EQUITY                    
                     
Current liabilities :                    
   Accounts payable     85,995     85,995     36,393  
   Accrued compensation     7,208     7,208     8,089  
   Other accrued expenses     35,655     35,655     32,217  
   Current portion of capitalized lease obligations     855     855     466  
   Deferred revenue and advances received from customers     1,420     1,420     820  
   Other liabilities     71     71     731  






         Total current liabilities     131,204     131,204     78,716  
                     
Long-term portion of capitalized lease obligations     425     425     302  
Other long-term liabilities     6,267     6,267     1,732  






         Total long-term liabilities     6,692     6,692     2,034  
                     
Minority interests              
                     
Shareholders' equity :                    
Shares, Euro 1 nominal value, 15 506 290 shares issued at December 31, 2004                    
(15 342 789 at December 31, 2003)     15,343     15,343     15,506  
Additional paid-in capital     136,460     136,460     137,039  
Treasury stock (156 345 shares in treasury at December 31, 2004 and 2003)     (1,312 )   (1,312 )   (1,312 )
Deferred compensation     (323 )   (323 )    
Retained deficit     (9,326 )   (14,587 )   (93,344 )
Accumulated other comprehensive income     1,752     1,752     (1,433 )






         Total shareholders' equity     142,594     137,333     56,456  






         Total liabilities and shareholders' equity     280,490     275,229     137,206  






 


 

WAVECOM S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Prepared in accordance with U.S. generally accepted accounting principles.

       Year ended December 31,   
      2003     2003     2004  
      as reported     restated      






      Euro     Euro     Euro  
Cash flows from operating activities :                    
Net loss     (25,880 )   (31,141 )   (78,757 )
Adjustments to reconcile net loss to net cash provided from operating                    
activities :                    
   Amortization of intangible and tangible assets     14,193     14,193     13,468  
   Impairment of intangible and tangible assets     4,244     4,244     4,313  
   Reversal of long term investment depreciation             (716 )
   Amortization of deferred stock-based compensation     756     756     350  
   Minority interests     (38 )   (38 )    
   Goodwill revaluation     140     140        
   Deferred taxes     5,611     10,872     1,059  
   Net decrease in cash from working capital items     (4,761 )   (4,761 )   (2,199 )






         Net cash used by operating activities     (5,735 )   (5,735 )   (62,482 )






Cash flows from investing activities :                    
   Disposal of short-term investments     15,112     15,112      
   Disposal (acquisition) of long term investments     (2,350 )   (2,350 )   7,004  
   Purchase of minority interest in Arguin     (251 )   (251 )   (1,768 )
   Purchases of property and equipment     (11,381 )   (11,381 )   (2,554 )
   Proceeds from sale of property and equipment     76     76     767  
   Proceeds from sale of long term investments             1,638  






         Net cash provided by investing activities     1,206     1,206     5,087  






Cash flows from financing activities :                    
   Principal payments on capital lease obligations     (743 )   (743 )   (954 )
   Purchases of treasury stock     (1,312 )   (1,312 )    
   Proceeds from exercise of stock options and founders' warrants     791     791     742  






         Net cash used by financing activities     (1,264 )   (1,264 )   (212 )
Effect of exchange rate changes on cash and cash equivalents     (2,918 )   (2,918 )   220  






Net decrease in cash and cash equivalents     (8,711 )   (8,711 )   (57,387 )
Cash and cash equivalents, beginning of period     119,416     119,416     110,705  






Cash and cash equivalents, end of period     110,705     110,705     53,318  






                     

 


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.

 

  WAVECOM S.A.
     
Date: February 11, 2005 By: /s/ Chantal Bourgeat
    Chantal Bourgeat
    Chief Financial Officer