10-QPeriod: Q1 FY2012

Globalstar, Inc. Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 10, 2012For Securities:GSAT

Summary

Globalstar, Inc.'s first quarter 2012 Form 10-Q filing reveals a challenging operational and financial period, marked by a net loss of $24.5 million on revenues of $16.7 million. The company continues to face significant headwinds related to its second-generation satellite constellation deployment, including delays and technical issues with momentum wheels on some satellites. Despite these challenges, Globalstar is actively working on solutions and strategic initiatives, such as an arbitration with Thales Alenia Space regarding satellite contracts and efforts to restructure payment arrangements with key service providers. The company's liquidity remains a concern, with cash and cash equivalents at $7.7 million. However, Globalstar has access to a $27.3 million contingent equity account and is exploring additional financing options for its longer-term plans. While the company generated increased revenue from its SPOT and Simplex product lines, its core Duplex service revenue declined due to ongoing communication issues. Investors should monitor the progress of the second-generation satellite launches, the resolution of the Thales arbitration, and the company's ability to secure future financing.

Financial Highlights

43 data points
Beta

Revenue

$16.74M

83.7% Gross Margin

Net Income

-$24.52M

-146.5% Net Margin

EPS (Diluted)

$-1.05

Total Assets

$1.42B

Cash & Equivalents

$7.74M

Free Cash Flow

-$2.70M

Financial Statements
Beta
Revenue$16.74M
Cost of Revenue$2.72M
Gross Profit$14.02M
SG&A Expenses$6.62M
Operating Expenses$31.67M
Operating Income-$14.93M
Net Income-$24.52M
EPS (Basic)$-1.05
EPS (Diluted)$-1.05
Shares Outstanding (Basic)23.83M
Shares Outstanding (Diluted)23.83M

Key Highlights

  • 1Net loss of $24.5 million for the quarter ended March 31, 2012, a significant increase from $6.5 million in the prior year's comparable period.
  • 2Total revenue decreased to $16.7 million from $18.3 million in the first quarter of 2011, largely due to the non-recurrence of a one-time revenue gain from the Open Range partnership termination.
  • 3Duplex service revenue experienced an 18% decline, attributed to ongoing two-way communication issues, although Simplex and SPOT revenues showed growth.
  • 4The company is in arbitration with Thales Alenia Space regarding the contract for additional second-generation satellites, with an uncertain outcome and potential financial implications.
  • 5Liquidity remains a concern with only $7.7 million in cash and cash equivalents, offset by $27.3 million in available contingent equity.
  • 6Capital expenditures continue, primarily for the completion and launch of the second-generation satellite constellation, with significant future payments estimated.
  • 7Globalstar is actively managing its debt, including discussions around potential waivers or amendments for non-financial covenants in its Facility Agreement.

Frequently Asked Questions

Globalstar reported a net loss of $24.5 million for the first quarter of 2012 and had only $7.7 million in cash and cash equivalents. While the company has access to $27.3 million from a contingent equity account, its overall liquidity position is tight, and it relies on ongoing draws from this account and its Facility Agreement to fund operations and capital expenditures. Securing additional financing will be critical for its longer-term plans.

The primary operational challenge is the ongoing deployment and technical issues with its second-generation satellite constellation. Delays in launches and technical problems like the 'momentum wheel' issues on some satellites are impacting service reliability, particularly for its core Duplex services. The company is actively working on solutions, including software-based fixes and arbitration with its satellite manufacturer, Thales.

Globalstar has a substantial amount of long-term debt, totaling $732.7 million. The company is managing its debt through various strategies, including refinancing, interest rate caps to mitigate variable rate exposure, and seeking waivers or amendments for certain covenants within its Facility Agreement. It is also exploring additional debt and equity financings to fund its future operations and capital needs.

While Duplex service revenue has declined due to operational issues, the company is seeing growth in its SPOT and Simplex product lines, driven by increased subscriber numbers in these segments. These growth areas are helping to offset some of the decline in Duplex revenue, but the company anticipates Duplex revenue will improve once the second-generation constellation is fully deployed and operational, resolving current service reliability issues.