STRONG SELL Rec SRCM - Huge Losses, Huge Debt
This Information is taken directly from the SRCM 10K. Why would anyone risk owning this stock **BASED ON A RUMOR** when they have no superior technology; HUGE debt & historical losses; Dwindling Revenues?
From the 10K:
Substantial Leverage; Ability to Service Debt. The Company is highly leveraged and substantially all its assets are subject to security interests securing its Notes. As of December 31, 1997, the Company had total indebtedness of approximately $100 million...
The degree to which the Company is leveraged, together with the covenants imposed by the Notes and the Preferred Stock, could have adverse consequences, including the following: (i) substantial cash flow from the Company's operations will be required for the payment of principal and interest on the Notes and will not be available for other purposes; (ii) the Company's ability to obtain additional financing in the future, whether for acquisitions, capital expenditures, further development of Cable SuperSites, refinancings or otherwise, may be impaired; (iii) the Company may be more leveraged than certain of its competitors, which may place it at a competitive disadvantage; (iv) the Indenture imposes significant financial and operating restrictions; and (v) the Company's high degree of leverage makes it more vulnerable to changes in economic conditions and may limit its ability to withstand competitive pressures and technological developments, consummate acquisitions and capitalize on significant business opportunities...
The Company will require substantial cash flow to meet its interest payment obligations with respect to the Notes and any other borrowings. The Company's cash flow is dependent on the Company's future performance and is subject to financial, economic and other factors, some of which are beyond its control. If the Company is unable to generate sufficient cash flow from operations or otherwise to satisfy its interest obligations on the Notes and other indebtedness, it may be required to refinance all or a portion of such obligations or to sell assets. The Company expects that any payment of the principal of any of the Notes, the redemption of the Preferred Stock or any other borrowings, whether upon maturity, acceleration, redemption or other repurchase obligation, such as a change of control, may have to be refinanced in whole or in part or financed by the sale of assets or similar transactions. The Indenture contains restrictions on the Company's ability to incur additional indebtedness and to sell assets and, notwithstanding such restrictions, the Company may not be able to effect a refinancing or sell assets on acceptable terms when needed...
Historical and Projected Losses. The Company has reported an operating loss and a net loss in each year since its inception, including an operating loss of $24.5 million and a net loss attributable to common stockholders of $32.8 million in the year ended December 31, 1997. The Company expects to incur operating losses through 1998 and may incur operating losses thereafter. There can be no assurance that the Company will be able to operate profitably at any time or that the Company will not require substantial additional funds to implement its business plan....
Since its inception, the Company has financed its operations primarily through an aggregate $156.6 million raised from various financing activities, including the incurrence of debt and issuance of the Company's common stock and preferred stock. In October 1997, the Company issued $100.0 million of it Senior Secured Notes and $20.0 million of its Senior PIK Preferred Stock. The Company's primary source of liquidity is its cash and cash equivalents and short-term investments, which totaled $24.0 million at December 31, 1997...
As a result of the October 1997 Acquisitions, the Company expects that its revenues, operating costs and depreciation and amortization expenses will increase. The interest escrow account created pursuant to the Indenture will be used to fund the first four interest payments on the Senior Secured Notes... |
