10-QPeriod: Q2 FY2012

Globalstar, Inc. Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 9, 2012For Securities:GSAT

Summary

Globalstar, Inc.'s Q2 2012 10-Q filing reveals a challenging financial and operational period. The company reported a net loss of $27.5 million for the quarter, a significant increase from the prior year's loss of $14.1 million. Total revenue saw a modest increase to $19.98 million, driven by growth in SPOT and Simplex services and equipment sales, but this was largely offset by a decline in Duplex service revenue due to ongoing two-way communication issues. The company also incurred a substantial $22.0 million contract termination charge related to a settlement with Thales. Operationally, Globalstar is working to complete the deployment of its second-generation satellite constellation, with 18 of 24 satellites launched. However, significant financial risks remain, including uncertainty around obtaining additional financing to meet contractual obligations over the next 12 months and potential covenant breaches under its Facility Agreement due to launch delays. The company's liquidity is a key concern, with cash and cash equivalents at $4.8 million and a substantial amount of debt outstanding.

Financial Highlights

44 data points
Beta

Revenue

$19.98M

81.5% Gross Margin

Net Income

-$27.53M

-137.8% Net Margin

EPS (Diluted)

$-1.05

Total Assets

$1.42B

Cash & Equivalents

$4.82M

Free Cash Flow

$4.32M

Financial Statements
Beta
Revenue$19.98M
Cost of Revenue$3.70M
Gross Profit$16.28M
SG&A Expenses$7.02M
Operating Expenses$63.38M
Operating Income-$43.40M
Net Income-$27.53M
EPS (Basic)$-1.05
EPS (Diluted)$-1.05
Shares Outstanding (Basic)25.30M
Shares Outstanding (Diluted)25.30M

Key Highlights

  • 1Net loss widened significantly to $27.5 million in Q2 2012, compared to $14.1 million in Q2 2011.
  • 2Total revenue increased slightly to $19.98 million, driven by growth in SPOT and Simplex services, but Duplex service revenue declined due to technical issues.
  • 3A significant $22.0 million contract termination charge was recognized due to a settlement with Thales regarding satellite construction.
  • 4The company incurred a $7.1 million loss related to an adjustment in the carrying value of its first-generation satellite constellation.
  • 5Deployment of the second-generation satellite constellation is ongoing, with 18 out of 24 satellites launched, but remaining launches are subject to external factors.
  • 6Significant financial risks exist, including the need for additional financing, potential covenant breaches on debt, and ongoing operational challenges with Duplex services.
  • 7Cash and cash equivalents stood at $4.8 million as of June 30, 2012, highlighting liquidity concerns.

Frequently Asked Questions

The net loss increased significantly due to a substantial $22.0 million contract termination charge related to the settlement with Thales and a $7.1 million loss from an adjustment to the carrying value of the first-generation constellation. These one-time charges, combined with ongoing operational challenges impacting Duplex revenues, contributed to the wider net loss.

Globalstar has launched 18 out of 24 second-generation satellites and plans to launch the remaining six in late 2012. However, the deployment is subject to external factors. Key risks include the need to secure additional financing to complete the launch and the potential for covenant breaches under the Facility Agreement due to launch delays. Furthermore, technical issues with momentum wheels on some satellites require a software solution, and failure to implement this could impair their value.

The company faces significant liquidity concerns. Cash and cash equivalents were only $4.8 million as of June 30, 2012. Globalstar explicitly states it does not have sufficient cash on hand, operating cash flows, or available funds to meet its contractual obligations over the next 12 months. It is actively seeking additional external financing and amendments to its debt obligations. Potential breaches of financial covenants under its Facility Agreement are also a major risk, which could lead to acceleration of debt repayment.

The ongoing two-way communication issues with the Duplex service are negatively impacting the company's performance. This has led to a decrease in Duplex service revenue and a decline in the Duplex subscriber base. While the company is working to improve reliability with its second-generation satellites and has implemented competitive pricing, these issues continue to be a drag on revenue.