Service provider continues to show strong subscriber growth and annual increased earnings and revenue
MILPITAS, Calif., March 28 /PRNewswire-FirstCall/ -- Globalstar, Inc. (NASDAQ:GSAT), a leading provider of mobile satellite voice and data services to businesses, government and individuals, announced today its financial and operational results for the three and twelve month periods ended December 31, 2006, including continued strong annual adjusted EBITDA, service income and subscriber growth.
Major Company Highlights in 2006 Included: -- The granting of authority from the U.S. Federal Communications
Commission (FCC) to offer Ancillary Terrestrial Component services
(ATC) in the U.S. in conjunction with 11 MHz of its mobile satellite
services spectrum. -- The company's acquisition of the Globalstar independent gateway
operator in Nicaragua to provide Globalstar service throughout
Central America. -- The negotiation of $300 million in debt financing consisting of a
$50 million revolving credit facility, $100 million delayed draw
term loan and up to $150 million uncommitted incremental term loan
or "tack-on" facility. Combined with a commitment for $200 million
in equity capital to be invested by an affiliate of the Thermo
Companies, this completed a financing round of up to $500 million. -- The opening of a new satellite gateway ground station in Wasilla,
Alaska. -- The signing of a U.S. Federal Supply Schedule Contract with the U.S. General Services Administration (GSA), for the purchase of
Globalstar satellite voice and data products. -- The activation of the company's 250,000th subscriber. -- The completion of the company's initial public offering in November,
which generated approximately $118.6 million in net proceeds before
offering expenses. -- The signing of a euro 661 million (approximately $871 million)
contract with Alcatel Alenia Space for the design, manufacture and
delivery of 48 new satellites for the company's second-generation
satellite constellation. -- The launch of the GSP-1700, the world's smallest global satellite
handset.
"2006 was a watershed year for Globalstar," said Jay Monroe, Chairman and CEO of Globalstar, Inc. "From completing a successful IPO to securing our satellite constellation and space segment until 2025, Globalstar has not only reiterated its commitment to its current customers but has laid the foundation needed to help secure the company's long-term future. Additional 2006 initiatives, such as launching the world's smallest global satellite telephone to opening a new gateway and ground station in Alaska, further demonstrated our resolve to maintain our significant leadership position as North America's largest mobile satellite service provider." Globalstar ended 2006 with 262,802 total subscribers and with operating income of $1.1 million for the fourth quarter and $15.7 million for the full year and Adjusted EBITDA of $10.0 million for the fourth quarter and $33.8 million for the full year.
Net loss for the fourth quarter of 2006 was $0.7 million compared to net income of $8.0 million in the same period of 2005. The loss for the fourth quarter of 2006 was due to higher depreciation, non-cash stock compensation, and other non-cash charges in the fourth quarter including the write down of certain first-generation product inventory and certain foreign exchange losses on Euro-denominated cash balances and transactions totaling $6.9 million. Net income for 2006 increased to $23.6 million compared to $18.7 million for 2005.
Fourth quarter and annual service revenue in 2006 were $22.2 million and $92.0 million, respectively, a decrease of nine percent and an increase of 13 percent, respectively, from service revenue for the same periods in 2005. Adjusted service revenue (adjusted for the company's annual rate plans) was $25.3 million for the fourth quarter of 2006 and $99.9 million for 2006, a decrease of four percent and an increase of 19 percent, respectively, over the same periods in 2005. Subscriber equipment sales for the fourth quarter and 2006 were $7.0 million and $44.6 million, respectively, compared to $12.0 million and $45.7 million for the corresponding periods in 2005. Subscriber equipment sales in 2005 benefited from additional demand generated by Hurricanes Katrina and Wilma during the fourth quarter.
Annual fully diluted earnings per share (EPS) for 2006 was $0.37 compared to $0.30 for 2005. For the quarter ended December 31, 2006, EPS were $(0.01) compared to $0.13 for the same period in 2005. The decrease in the fourth quarter was due to higher depreciation, non-cash stock compensation, and other non-cash charges in the fourth quarter noted earlier totaling $6.9 million.
Key financial performance measures (see the chart titled "Definition of Terms and Reconciliation of Non-GAAP Financial Measures" found later in this release) for 2006 were as follows: -- Net subscriber growth of approximately 67,000 units during the year
boosted the total number of Globalstar subscribers at December 31,
2006 to 262,802, a 12-month increase of 34 percent.
-- Annual Revenue in 2006 increased by $9.5 million or seven percent to
$136.7 million compared to 2005. Annual Adjusted Revenue in 2006
increased by $15.2 million or 12 percent to $144.6 million compared
to 2005.
-- Operating income in 2006 decreased by 28 percent to $15.7 million
compared to 2005. The decrease in 2006 was due to higher
depreciation, non-cash stock compensation, and other non-cash
charges in 2006 resulting from the write down of certain first-
generation product inventories totaling $7.2 million for the year. Annual Adjusted EBITDA increased by 24 percent to $33.8 million
compared to 2005.
-- Net income in 2006 increased by 26 percent to $23.6 million compared
to 2005. This increase included a net income tax benefit of $14.1
million.
-- The annual average monthly Churn Rate in 2006 decreased by 15
percent to 1.1 percent compared to 2005.
Conference Call Note
As previously announced, Globalstar will conduct a conference call scheduled for March 28, 2007 at 5:00 p.m. Eastern Time to discuss the annual 2006 results.
Details are as follows:
Earnings Call: Dial: 866.713.8567 (US and Canada),
617.597.5326 (International) and
participant pass code # 81559092
Audio Replay: A replay of the earnings call will be
available for a limited time and can be heard
after 7:00 p.m. ET on March 28, 2007. Dial:
888-286-8010 (US and Canada), 617-801-6888
(International) and pass code # 10930990. An
audio replay will also be posted on the
Company website at http://www.globalstar.com/ About Globalstar, Inc. With over 250,000 activated satellite voice and data units, Globalstar offers high value, high quality satellite services to commercial and recreational users in more than 120 countries around the world. The company's voice and data products include mobile and fixed satellite telephones, simplex and duplex satellite data modems and flexible service packages. Many land based and maritime industries benefit from Globalstar with increased productivity from remote areas beyond cellular and landline service. Global customer segments include: oil and gas, government, mining, forestry, commercial fishing, utilities, military, transportation, heavy construction, emergency preparedness, and business continuity as well as individual recreational users. Globalstar data solutions are ideal for various asset tracking, data monitoring and SCADA applications.
For more information regarding Globalstar, please visit Globalstar's web site at http://www.globalstar.com/ Safe Harbor Language for Globalstar Releases This press release contains certain statements such as "From completing a successful IPO to securing our satellite constellation and space segment until 2025, Globalstar has not only reiterated its commitment to its current customers but has laid the foundation needed to help secure the company's long-term future," that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond Globalstar's control, including demand for the Company's products and services; problems relating to the construction, launch or in-orbit performance of its existing and future satellites, problems relating to the ground-based facilities operated by it or by independent gateway operators; its ability to attract sufficient additional funding if needed to meet its future capital requirements; competition and its competitiveness vis-a-vis other providers of satellite and ground-based communications products and services; the pace and effects of industry consolidation; the continued availability of launch insurance on commercially reasonable terms, and the effects of any insurance exclusions; changes in technology; its ability to continue to attract and retain qualified personnel; worldwide economic, geopolitical and business conditions and risks associated with doing business on a global basis; and legal, regulatory, and tax developments, including changes in domestic and international government regulation.
Any forward-looking statements made in this press release speak as of the date made and are not guarantees of future performance. Actual results or developments may differ materially from the expectations expressed or implied in the forward-looking statements, and the Company undertakes no obligation to update any such statements. Additional information on factors that could influence Globalstar's financial results is included in its filings with the Securities and Exchange Commission, including its Quarterly Report on Form 10- Q for the quarter ended September 30, 2006.
GLOBALSTAR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
Three months ended Year ended
December 31, December 31,
2005 2006 2005 2006
Revenue: Service $24,297 $22,186 $81,472 $92,037 Subscriber equipment 11,975 7,049 45,675 44,634 Total revenue 36,272 29,235 127,147 136,671
Operating expenses: Cost of services 6,187 7,508 25,432 28,091 Cost of subscriber
equipment 10,469 3,725 38,742 40,396 Marketing, general
and administrative 9,266 12,665 37,945 43,899 Depreciation and
amortization 1,018 2,255 3,044 6,679 Impairment of assets - 1,943 114 1,943 Total operating
expenses 26,940 28,096 105,277 121,008 Operating income 9,332 1,139 21,870 15,663 Interest income 124 726 242 1,172 Interest expense (25) (331) (269) (587) Interest rate
derivative income
(expense) - 203 - (2,716) Other income
(expense), net 35 (2,136) (622) (3,980) Income (loss) before
income taxes 9,466 (399) 21,221 9,552 Income tax expense
(benefit) 1,475 331 2,502 (14,071) Net income (loss) $7,991 $(730) $18,719 $23,623
Earnings (loss) per
common share:
Basic $0.13 $(0.01) $0.30 $0.37
Diluted $0.13 $(0.01) $0.30 $0.37 Weighted-average
shares outstanding:
Basic 61,855,668 67,986,890 61,855,668 63,709,763
Diluted 61,955,874 67,986,890 61,955,874 64,076,182
Definition of Terms and Reconciliation of Non-GAAP Financial Measures
The company utilizes certain financial measures that are widely used in the telecommunications industry and are not calculated based on GAAP. A reconciliation of these measures to GAAP and a discussion of certain other operating metrics used in the industry are presented below.
GLOBALSTAR, INC. RECONCILIATION OF GAAP TO ADJUSTED /1
(In thousands, except Retail ARPU)
(Unaudited) Q4
Annual Plans
GAAP Adjusted Adjusted /1
Unaudited
Consolidated Financial
Revenue
Service Revenue $22,186 $3,081 $25,267
Equipment Revenue 7,049 - 7,049
Total Revenue $29,235 $3,081 $32,316 Operating Expenses
Cost of Services 7,508 - 7,508
Cost of Subscriber Equipment 3,725 - 3,725
Marketing, General and
Administrative 12,665 - 12,665
Depreciation & Amortization 2,255 - 2,255
Impairment of Assets 1,943 - 1,943
Operating Income/(Loss) $1,139 $3,081 $4,220 Interest & Derivative
Income/(Expense), net 598 - 598
Other Income/(Expense) (2,136) - (2,136)
Income Tax Expense (Benefit) 331 - 331 Net Income/(Loss) $(730) $3,081 $2,351 EBITDA $1,258 $3,081 $4,339 Impairment of Assets - 1,943 1,943
Non-Cash Stock Compensation - 1,185 1,185
Other Non-Cash Charges - 396 396
Foreign Exchange Loss - 2,136 2,136 Adjusted EBITDA $1,258 $8,741 $9,999
Adjusted EBITDA Margin 4% 31% Retail ARPU $50.78 $6.51 $57.29
GLOBALSTAR, INC. RECONCILIATION OF GAAP TO ADJUSTED /1
(In thousands, except Retail ARPU)
(Unaudited) 2006
Annual Plans
GAAP Adjusted Adjusted /1
Unaudited
Consolidated Financial
Revenue
Service Revenue $92,037 $7,899 $99,936
Equipment Revenue 44,634 - 44,634
Total Revenue $136,671 $7,899 $144,570 Operating Expenses
Cost of Services 28,091 - 28,091
Cost of Subscriber Equipment 40,396 - 40,396
Marketing, General and
Administrative 43,899 - 43,899
Depreciation & Amortization 6,679 - 6,679
Impairment of Assets 1,943 - 1,943
Operating Income/(Loss) $15,663 $7,899 $23,562 Interest & Derivative
Income/(Expense), net (2,131) - (2,131)
Other Income/(Expense) (3,980) - (3,980)
Income Tax Expense (Benefit) (14,071) - (14,071) Net Income/(Loss) $23,623 $7,899 $31,522 EBITDA $18,362 $7,899 $26,261 Impairment of Assets - 1,943 1,943
Non-Cash Stock Compensation - 1,185 1,185
Other Non-Cash Charges - 396 396
Foreign Exchange Loss - 3,980 3,980 Adjusted EBITDA $18,362 $15,403 $33,765
Adjusted EBITDA Margin 13% 23% Retail ARPU $58.91 $5.55 $64.46
GLOBALSTAR, INC. RECONCILIATION OF GAAP TO ADJUSTED /1
(In thousands, except Retail ARPU)
(Unaudited)
2005
Q4 2005
GAAP Adjusted/1 GAAP Adjusted/1 Consolidated Financial
Revenue
Service Revenue $24,297 $26,241 $81,472 $83,715
Equipment Revenue 11,975 11,975 45,675 45,675
Total Revenue $36,272 $38,216 $127,147 $129,390 Operating Expenses
Cost of Services 6,187 6,187 25,432 25,432
Cost of Subscriber Equipment 10,469 10,469 38,742 38,742
Marketing, General and
Administrative 9,266 9,266 37,945 37,945
Depreciation & Amortization 1,018 1,018 3,044 3,044
Impairment of Assets - - 114 114
Operating Income/(Loss) $9,332 $11,276 $21,870 $24,113 Interest & Derivative
Income/(Expense), net 99 99 (27) (27)
Other Income/(Expense) 35 35 (622) (622)
Income Tax Expense (Benefit) 1,475 1,475 2,502 2,502 Net Income/(Loss) $7,991 $9,935 $18,719 $20,962 EBITDA $10,385 $12,329 $24,292 $26,535 Impairment of Assets - - - 114
Non-Cash Stock Compensation - - - -
Other Non-Cash Charges - - - -
Foreign Exchange Loss - (35) - 622 Adjusted EBITDA $10,385 $12,294 $24,292 $27,271
Adjusted EBITDA Margin 29% 32% 19% 21% Retail ARPU $63.76 $70.44 $68.10 $70.05 /1 Annual Plans are adjusted to reflect revenue as though they were monthly plans.
(1) Adjusted Service Revenue, Adjusted EBITDA and Adjusted APRU are
adjustments made to reflect the company's annual service pricing
plans that are adjusted and reported as though they were Globalstar
monthly service plans. Adjusted EBITDA is further adjusted to
exclude non-cash stock compensation expense, asset impairment
charges, foreign exchange gains/(losses) and certain other non-cash
charges. Management uses Adjusted figures for service revenue,
EBITDA, and ARPU in order to manage the company's business and to
compare its results more closely to the results of its peers.
(2) Average monthly revenue per user (ARPU) measures service revenues
per month divided by the average number of retail subscribers during
that month. Average monthly revenue per user as so defined may not
be similar to average monthly revenue per user as defined by other
companies in the company's industry, is not a measurement under GAAP
and should be considered in addition to, but not as a substitute
for, the information contained in the company's statement of
operations. The company believes that average monthly revenue per
user provides useful information concerning the appeal of its rate
plans and service offerings and its performance in attracting and
retaining high value customers.
(3) The company defines churn rate as the aggregate number of its retail
subscribers (excluding Simplex customers and customers of the
independent gateway operators) who cancel service during a month,
divided by the average number of retail subscribers during the
month. Others in the company's industry may calculate churn rate
differently. Churn rate is not a measurement under GAAP and should
be considered in addition to, but not as a substitute for, the
information contained in the company's statement of operations. The
company believes that churn rate provides useful information
concerning customer satisfaction with its services and products.
(4) EBITDA represents earnings before interest, income taxes,
depreciation and amortization. EBITDA does not represent and should
not be considered as an alternative to GAAP measurements, such as
net income, and the company's calculations thereof may not be
comparable to similarly entitled measures reported by other
companies.
The company uses EBITDA as the primary measurement of its operating performance because, by eliminating interest, taxes and the non-cash items of depreciation and amortization, the company believes it best reflects changes across time in the company's performance, including the effects of pricing, cost control and other operational decisions. The company's management uses EBITDA for planning purposes, including the preparation of our annual operating budget. The company believes that EBITDA also is useful to investors because it is frequently used by securities analysts, investors and other interested parties in their evaluation of companies in similar industries. As indicated, EBITDA does not include interest expense on borrowed money or depreciation expense on our capital assets or the payment of taxes, which are necessary elements of the company's operations. Because EBITDA does not account for these expenses, its utility as a measure of the company's operating performance has material limitations. Because of these limitations, the company's management does not view EBITDA in isolation and also uses other measurements, such as net income, revenues and operating profit, to measure operating performance.
GLOBALSTAR, INC. SCHEDULE OF SELECTED OPERATING METRICS
(Dollars In thousands)
(Unaudited) Three Months Ended Year Ended
December 31 December 31
2006 2005 2006 2005 Subscribers (End of Period) 262,802 195,968 262,802 195,968 Additions 7,073 12,042 66,834 54,518 Retail Churn 1.2% 1.9% 1.1% 1.3% ARPU
Retail
GAAP $50.78 $63.76 $58.91 $68.10
Adjusted $57.29 $70.44 $64.46 $70.05
Wholesale
GAAP $8.38 $15.85 $8.39 $10.70 Capital expenditures $40,143 $3,759 $107,544 $9,885 Available liquidity /1 $399,279 Note:
/1 Includes cash and restricted cash on hand ($96.3 million) at
December 31, 2006, liquidity from our credit facility ($150.0
million) and Thermo standby commitment ($152.7 million). DATASOURCE: Globalstar, Inc.
CONTACT: Dean Hirasawa of Globalstar, Inc., +1-408-933-4006, or Web site: http://www.globalstar.com/
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