Globecomm Systems Inc. (NASDAQ:GCOM), a leading communications
solutions provider, today announced financial results for the
fiscal 2013 fourth quarter and fiscal year ended June 30, 2013.
Globecomm is reporting its financial results on a generally
accepted accounting principles (GAAP) basis as well as adjusted
EBITDA and adjusted diluted net income per common share, both
non-GAAP financial measures, for which the Company provides
detailed reconciliations in the attached tables. The following are
highlights:
Revenues ($M)
Q4 FY13
Q4 FY12 %
Change FY13
FY12 %
Change Service $ 50.0 $ 50.1 (0.3) $199.1 $ 220.9 (9.9)
Infrastructure solutions $ 30.6 $ 54.7 (43.9) $ 120.5
$ 161.0 (25.1) Consolidated $ 80.6 $
104.8 (23.1) $ 319.6 $ 381.9 (16.3)
GAAP
Results ($M except
EPS)
Q4 FY13 Q4 FY12
% Change FY13
FY12 % Change Net
income $ 4.6 $ 7.1 (35.7) $ 15.2 $ 28.6 (46.6)
Diluted
EPS $ 0.20 $ 0.31 (35.5) $ 0.66 $ 1.26 (47.6)
Non-GAAP
Results ($M except
EPS)
Q4 FY13 Q4 FY12
% Change FY13
FY12 % Change Adjusted
EBITDA $ 10.3 $ 9.1 13.6 $38.5 $42.6 (9.6)
Adjusted Diluted
EPS $ 0.19 $ 0.13 46.2 $ 0.66 $ 0.74 (10.8)
Fiscal Year 2013 Fourth Quarter Results
Consolidated revenue for the Company’s fiscal 2013 fourth
quarter was $80.6 million as compared to $104.8 million in the same
period last year, a decrease of 23.1%. Revenues from services were
flat at $50.0 million as compared to $50.1 million in the same
period last year. Revenues from infrastructure solutions were $30.6
million as compared to $54.7 million in the same period last year,
a decrease of 43.9%. The decrease in infrastructure solutions was
primarily driven by the achievement of revenue milestones in the
fourth quarter of fiscal 2012 of approximately $15.6 million under
a major government program which was completed as of January
2013.
Net income for the Company’s fiscal 2013 fourth quarter was $4.6
million, or $0.20 of diluted net income per common share, compared
to net income of $7.1 million, or $0.31 of diluted net income per
common share, in the same period last year. During the fourth
quarter of fiscal 2012, the Company recorded a gain for the change
in fair value of the ComSource earn-out as a result of changes in
ComSource’s actual results and forecasted performance. In
accordance with GAAP, this change in the fair value of the earn-out
resulted in a $4.1 million ($0.18 per diluted share) gain to net
income. Excluding this gain, adjusted diluted net income per common
share for the fourth quarter of fiscal year 2013 was $0.19 compared
to $0.13 in the same period last year. The increase in adjusted
diluted net income per common share was primarily driven by the
increase in gross margin percentage in services and reductions in
other operating expenses based on certain cost cutting initiatives,
partially offset by the reduction of infrastructure revenue and
gross margin percentage erosion based on additional costs incurred
on certain fixed price contracts.
Adjusted EBITDA for the fourth quarter of 2013 was $10.3 million
as compared to $9.1 million in the same period last year.
Fiscal Year 2013 Full Year Results
Consolidated revenue for the Company’s fiscal year ended June
30, 2013 was $319.6 million as compared to $381.9 million last
year, a decrease of 16.3%. Revenues from services were $199.1
million as compared to $220.9 million last year, a decrease of
9.9%. The decrease in service revenues was primarily due to a
non-recurring $12.5 million equipment sale by ComSource in the
three months ended March 31, 2012 along with a decrease in the
managed network service access product line in the government
marketplace due to the reduction of services in Iraq and
Afghanistan. Revenues from infrastructure solutions were $120.5
million as compared to $161.0 million in the same period last year,
a decrease of 25.1%. The decrease in infrastructure solutions
revenues was primarily driven by a reduction of $34.1 million due
to the completion of a major government program in January 2013,
this program had lower than normal margin. This program contributed
$20.0 million in fiscal 2013 as compared to $54.1 million in fiscal
2012.
Net income for the Company’s fiscal 2013 year ended June 30,
2013 was $15.2 million, or $0.66 of diluted net income per common
share, compared to net income of $28.6 million, or $1.26 of diluted
net income per common share, last year. During fiscal year 2012,
the Company recorded a gain of $11.9 million ($0.52 per diluted
share) for the change in fair value of the ComSource earn-out as a
result of changes in ComSource’s actual results and forecasted
performance. Excluding this gain, adjusted diluted net income per
common share for the fiscal year 2013 year ended June 30, 2013 was
$0.66 as compared to $0.74 last year. The reduction in adjusted
diluted net income per common share was primarily driven by the
reduction of infrastructure solutions revenue and gross margin
percentage erosion based on additional costs incurred on certain
fixed price contracts and the reduction of service revenues,
partially offset by reductions in other operating expenses based on
certain cost cutting initiatives and the increase in gross margin
percentage in services.
Adjusted EBITDA for the year ended June 30, 2013 decreased to
$38.5 million as compared to $42.6 million last year.
The Transaction
On August 26, 2013 the Company announced that an affiliate of
Wasserstein & Co. has entered into a definitive agreement to
acquire Globecomm for $14.15 per share in cash. The purchase price
represents a premium of 21.9% over the closing price on January 14,
2013, the day on which Globecomm announced that it had retained
Needham & Company to assist it in a review of potential
strategic alternatives to enhance shareholder value. The
transaction is valued at approximately $340 million.
As a result of that announcement, the Company has not provided
guidance for fiscal 2014 and will not be hosting a conference call
to discuss the fourth quarter and full year financial results.
Non-GAAP Measures
Adjusted EBITDA is a non-GAAP measure which represents net
income before interest income, interest expense, provision for
income taxes, depreciation, amortization expense, non-cash stock
compensation expense, and earn-out fair value adjustments.
Globecomm believes this provides greater transparency by helping
illustrate comparability between current and prior periods. Under
an accounting pronouncement on business combinations, acquisition
related costs are required to be expensed rather than capitalized,
and changes to the fair value of earn-out payments must be
recognized in earnings. Therefore, the exclusion of the earn-out
fair value adjustments in the adjusted EBITDA calculation provides
better comparability.
Adjusted EBITDA does not represent cash flows as defined by
GAAP. Globecomm discloses adjusted EBITDA since it is a financial
measure commonly used in its industry. Because adjusted EBITDA
facilitates internal comparisons of the Company’s historical
financial position and operating performance on a more consistent
basis, the Company also uses adjusted EBITDA in measuring
performance relative to that of the Company’s competitors and in
evaluating acquisition opportunities. The Company’s management
regularly uses supplemental non-GAAP financial measures internally
to understand, manage and evaluate the Company’s business and make
operating decisions. Adjusted EBITDA is not meant to be considered
a substitute or replacement for net income as prepared in
accordance with GAAP. Adjusted EBITDA may not be comparable to
other similarly titled measures of other companies. Reconciliation
between GAAP net income and adjusted EBITDA is provided in a table
immediately following the Condensed Consolidated Balance
Sheets.
Reconciliation of adjusted diluted net income per common share
excludes earn-out fair value adjustments, which is not in
accordance with GAAP. However, Globecomm believes this measure
provides greater transparency by helping illustrate comparability
between current and prior periods. Non-GAAP financial measures are
not meant to be considered in isolation or as a substitute for
comparable GAAP measures, and should be read only in conjunction
with the Company’s consolidated financial statements prepared in
accordance with GAAP. The Company’s management regularly uses
supplemental non-GAAP financial measures internally to understand,
manage and evaluate the Company’s business and make operating
decisions.
About Globecomm Systems
Globecomm Systems Inc. (“we”, “our”, “us” or “Globecomm”), is a
leading global communications solutions provider. Employing our
expertise in emerging communication technologies, including
satellite and other transport mediums, we are able to offer a
comprehensive suite of system integration, system products, and
network services enabling a complete end-to-end solution for our
customers. We believe our integrated approach of in-house design
and engineering expertise combined with a world-class global
network and our 24 by 7 network operating centers provides us a
unique competitive advantage. We focus this value proposition in
selective vertical markets, including government, wireless, media,
enterprise and maritime. As a communications solutions provider we
leverage our global network to provide customers managed access
services to the United States Internet backbone, video content, the
public switched telephone network or their corporate headquarters
or government offices. We currently have customers for which we are
providing these solutions in the United States, Europe, South
America, Africa, the Middle East and Asia.
Based in Hauppauge, New York, Globecomm also maintains offices
in Maryland, New Jersey, Virginia, the Netherlands, South Africa,
Hong Kong, Germany, Singapore, the United Arab Emirates and
Afghanistan.
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. In connection with the proposed transaction,
Globecomm will file proxy materials with the Securities and
Exchange Commission, or the SEC, relating to the solicitation of
proxies to vote at a special meeting of stockholders to be called
to approve the proposed transaction. The definitive proxy statement
will be mailed to the stockholders of Globecomm in advance of the
special meeting. Stockholders of Globecomm are urged to read the
proxy statement and other relevant materials when they become
available, as they will contain important information about the
proposed transaction. Stockholders may obtain a free copy of the
proxy statement and any other relevant documents (when available)
at the SEC’s web site at http://www.sec.gov. The definitive proxy
statement and these other documents also will be available on
Globecomm’s website (http://www.globecomm.com) and may be obtained
free of charge from Globecomm by directing a request to Globecomm
Systems Inc., Attn: Corporate Secretary, 45 Oser Avenue, Hauppauge,
NY 11788.
Globecomm and its directors and certain executive officers may
be deemed to be participants in the solicitation of proxies from
Globecomm’s stockholders in respect of the proposed transaction.
Information about the directors and executive officers of Globecomm
and their respective interests in Globecomm by security holdings or
otherwise is set forth in its proxy statement relating to the 2012
annual meeting of stockholders, which was filed with the SEC on
October 5, 2012. Investors may obtain additional information
regarding the interest of the participants by reading the proxy
statement regarding the proposed transaction when it becomes
available.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of that term in Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements include statements regarding future
performance, benefits of the proposed transaction, financing for
the transaction and the completion of the transaction. These
statements are based on the current expectations of the management
of Globecomm. There are a number of risks and uncertainties that
could cause actual results to differ materially from the
forward-looking statements included in this document. For example,
among other things, our actual results, performance or achievements
may differ from those expressed or implied, conditions to the
closing of the transaction may not be satisfied and the transaction
may involve unexpected costs, unexpected liabilities or unexpected
delays. Additional factors that may affect the future results of
Globecomm are set forth in its Annual Report on Form 10-K for the
fiscal year ended June 30, 2013 and filed with the SEC on September
13, 2013, which is available at http://www.sec.gov. Unless required
by law, Globecomm undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Globecomm Systems Inc.
Consolidated Statements of Operations (In thousands,
except per share data)
Three Months Ended Year Ended June
30, June 30, June 30,
June 30, 2013 2012 2013
2012
Revenues from services
$
49,964
$
50,099
$
199,069
$
220,921
Revenues from infrastructure solutions 30,681
54,713 120,545
160,980 Total revenues 80,645
104,812 319,614
381,901 Costs and operating expenses: Costs from
services 31,760 35,334 132,573 152,302 Costs from infrastructure
solutions 28,922 48,292 110,517 142,831 Selling and marketing 4,679
5,285 17,870 19,576 Research and development 1,175 1,349 4,308
6,251 General and administrative 8,110 9,519 31,787 34,432 Earn-out
fair value adjustments - (4,129
) - (11,874 ) Total costs and
operating expenses 74,646 95,650
297,055 343,518
Income from operations 5,999 9,162 22,559 38,383 Interest
income 85 75 331 246 Interest (expense) (85 )
(111 ) (394 ) (574 ) Income
before income taxes 5,999 9,126 22,496 38,055 Provision for
income taxes 1,441 2,042
7,257 9,492 Net income $
4,558 $ 7,084 $ 15,239
$ 28,563
Basic net income per common share
$
0.20
$
0.32
$
0.67
$
1.29
Diluted net income per common share
$
0.20
$
0.31
$
0.66
$
1.26
Weighted-average shares used in the
calculation of basic net
income
per common share
22,900
22,296
22,690
22,078
Weighted-average shares used in the
calculation of diluted net
income
per common share
23,345
22,828
23,096
22,711
Globecomm Systems Inc. Condensed
Consolidated Balance Sheets (In thousands)
June 30, June 30,
2013 2012 Assets Current
assets: Cash and cash equivalents $ 87,286 $ 72,196 Accounts
receivable, net 58,426 59,224 Inventories 17,076 30,664 Prepaid
expenses and other current assets 4,056 4,101 Deferred income taxes
4,309 7,041 Total current assets
171,153 173,226 Fixed assets, net 50,367 47,712 Goodwill 68,818
68,463 Intangibles, net 16,576 19,331 Other assets 1,327
1,335 Total assets $ 308,241 $
310,067
Liabilities and Stockholders’ Equity
Current liabilities $ 42,819 $ 63,389 Other liabilities 111 230
Long term debt 8,475 14,575 Deferred income taxes 12,383 12,485
Total stockholders’ equity 244,453
219,388 Total liabilities and stockholders’ equity $ 308,241
$ 310,067
Globecomm Systems Inc.
Reconciliation of Net Income to adjusted EBITDA (In
thousands)
Three Months Ended Year Ended June 30,
June 30, June 30, June
30, 2013 2012 2013
2012
Net income
$
4,558
$
7,084
$
15,239
$
28,563
Adjustments: Interest (income) (85 ) (75 ) (331 ) (246 ) Interest
expense 85 111 394 574 Earn-out fair value adjustments - (4,129 ) -
(11,874 ) Provision for income taxes 1,441 2,042 7,257 9,492
Depreciation and amortization 3,344 3,223 12,087 12,614 Stock
compensation expense 998 849
3,867 3,476 Adjusted EBITDA $
10,341 $ 9,105 $ 38,513
$ 42,599
Globecomm Systems Inc.
Reconciliation of adjusted diluted Net Income per common
share
Three Months Ended Twelve Months Ended June
30, June 30, June 30,
June 30, 2013 2012 2013
2012
Diluted net income per common share
$
0.20
$
0.31
$
0.66
$
1.26
Earn-out fair value adjustments - (0.18 ) - (0.52 ) Legal expenses,
net of tax (A) 0.01 - 0.02 Non-recurring tax adjustment (B)
(0.02 ) - (0.02 )
Adjusted diluted net income per common
share
$
0.19
$
0.13
$
0.66
$
0.74
(A) Amount represents legal expenses associated with the
strategic alternatives review process, acquisition of certain
WorldCell assets, and defending shareholder class action complaint
discontinued in the second quarter of fiscal 2013.
(B) Amount represents a tax benefit for extraterritorial income
exclusion related to fiscal years 2001 through 2009.
For Globecomm Investor Relations information:Matthew
Byron, 631-457-1301Senior Vice President, Corporate Office
IR/M&Air@globecommsystems.comorGlobecomm Systems
Inc.Phone: 631-231-9800; Fax: 631-231-1557Web:
http://www.globecommsystems.com
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