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Globecomm Systems Inc. Reports Operating Results (10-Q)

February 09, 2011 | About:
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10qk

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Globecomm Systems Inc. (GCOM) filed Quarterly Report for the period ended 2010-12-31.

Globecomm Systems Inc. has a market cap of $219 million; its shares were traded at around $9.74 with a P/E ratio of 26.7 and P/S ratio of 0.9. Globecomm Systems Inc. had an annual average earning growth of 7% over the past 5 years.Hedge Fund Gurus that owns GCOM: Jim Simons of Renaissance Technologies LLC. Mutual Fund and Other Gurus that owns GCOM: Chuck Royce of Royce& Associates, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Revenues from Services. Revenues increased by $13.7 million, or 40.8%, to $47.3 million for the three months ended December 31, 2010 and increased by $28.0 million, or 45.1%, to $90.2 million for the six months ended December 31, 2010, compared to $33.6 million and $62.2 million for the three and six months ended December 31, 2009, respectively. The increase in revenues for the three and six months ended December 31, 2010 was due to an increase in our access service offering primarily in the government marketplace, along with $5.0 million and $9.3 million, respectively, of revenue from C2C and Evocomm.

At December 31, 2010, we had working capital of $85.9 million, including cash and cash equivalents of $40.1 million, restricted cash of $5.0 million, net accounts receivable of $56.9 million, inventories of $40.0 million, prepaid expenses and other current assets of $4.9 million and current deferred income taxes of $1.6 million, offset by $39.9 million in accounts payable, $4.5 million in deferred revenues, $5.0 million in accrued payroll and related fringe benefits, $10.7 million in other accrued expenses and $2.5 million in current portion of long term debt

At June 30, 2010, we had working capital of $76.7 million, including cash and cash equivalents of $42.9 million, restricted cash of $5.0 million, net accounts receivable of $49.2 million, inventories of $34.5 million, prepaid expenses and other current assets of $3.1 million and current deferred income taxes of $1.6 million, offset by $36.9 million in accounts payable, $2.3 million in deferred revenues, $6.4 million in accrued payroll and related fringe benefits, $11.5 million in accrued expenses and $2.5 million in current portion of long term debt.

Net cash provided by operating activities during the six months ended December 31, 2010 was $3.3 million. This primarily related to a non-cash item representing depreciation and amortization expense of $4.3 million comprised of depreciation expense related to the network operations center and satellite earth station equipment and amortization expense related to acquisitions, net income of $3.8 million, an increase in accounts payable of $2.6 million due to the increase in inventories and timing of payments to vendors, an increase in deferred revenue of $2.2 million due to timing differences between project billings and revenue recognition milestones resulting from specific customer contracts, a decrease in deferred income taxes of $2.2 million due to net income generated in the period, non-cash earn-out fair value adjustments of $2.1 million, partially offset by an increase in accounts receivable of $7.0 million due to the timing of billings and collections from customers and an increase in inventory of $5.5 million due to the timing of shipments and purchases of equipment for milestones to be reached in future periods, mainly attributable to one large long-term program.

Net cash provided by operating activities during the six months ended December 31, 2009 was $11.5 million. This primarily related to a decrease in accounts receivable of $5.8 million due to the timing of billings and collections from customers, a non-cash item representing depreciation and amortization expense of $3.4 million comprised of depreciation expense related to the network operations center and satellite earth station equipment and amortization expense related to acquisitions, net income of $2.6 million, an increase in accounts payable of $1.9 million due to the increase in inventories and timing of payments to vendors, an increase in deferred revenue of $1.8 million due to timing differences between project billings and revenue recognition milestones resulting from specific customer contracts, a decrease in deferred income taxes of $1.5 million due to net income generated in the period, non-cash stock compensation expense of $1.1 million and an increase in accrued expenses of $1.0 million resulting from customer deposits received as part of service agreements, offset by an increase in inventory of $7.9 million due to the timing of shipments and purchases of equipment for milestones to be reached in future periods.

On May 28, 2010, we entered into Amendment No.4 to our committed secured credit facility with Citibank, N.A. The credit facility has been extended and expires on May 26, 2011. The credit facility is comprised of a $65 million line of credit (the Line) and a foreign exchange line in the amount of $15 million. The Line includes the following sublimits: (a) $30 million available for standby letters of credit; (b) $20 million available for commercial letters of credit; (c) a line for up to two term loans, each having a term of no more than five years, in the aggregate amount of up to $40 million that can be used for acquisitions; and (d) $10 million available for revolving credit borrowings. At our discretion, advances under the Line bear interest at the prime rate or LIBOR plus applicable margin based on the Companys leverage ratio and are collateralized by a first priority security interest on all of the personal property of the Company. At December 31, 2010, the applicable margin on the LIBOR rate was 250 basis points. The Company is required to comply with various ongoing financial covenants, including with respect to the Companys leverage ratio, liquidity ratio, minimum cash balance, debt service ratio, EBITDA minimums and minimum capital base, with which the Company was in compliance at December 31, 2010. As of December 31, 2010, $10.6 million was outstanding under the Acquisition Loan, of which $2.5 million was due within one year. In addition there were standby letters of credit of approximately $8.4 million, which were applied against and reduced the amounts available under the credit facility as of December 31, 2010.

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