10-QPeriod: Q1 FY2013

Globalstar, Inc. Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 10, 2013For Securities:GSAT

Summary

Globalstar, Inc. reported a net loss of $25.1 million for the first quarter of 2013, compared to a net loss of $24.5 million in the same period of 2012. Revenue increased by 15% to $19.3 million, driven by a significant rise in service revenues, particularly from SPOT and Simplex services, and a rebound in Duplex equipment sales. However, the company faces significant going concern risks. Its liquidity sources are insufficient to meet existing contractual obligations over the next 12 months, necessitating additional external financing, debt restructuring, and covenant waivers. The company is in default on several covenants under its Facility Agreement, and a major concern is its inability to meet the April 1, 2013 repurchase obligation and interest payment for its 5.75% Convertible Senior Notes, leading to potential acceleration of other debt. The successful resolution of these financial challenges is critical for Globalstar's continued operation.

Financial Highlights

44 data points
Beta

Revenue

$19.33M

84.8% Gross Margin

Net Income

-$25.08M

-129.7% Net Margin

EPS (Diluted)

$-0.75

Total Assets

$1.39B

Cash & Equivalents

$6.24M

Free Cash Flow

-$772K

Financial Statements
Beta
Revenue$19.33M
Cost of Revenue$2.94M
Gross Profit$16.39M
SG&A Expenses$6.92M
Operating Expenses$37.72M
Operating Income-$18.39M
Net Income-$25.08M
EPS (Basic)$-0.75
EPS (Diluted)$-0.75
Shares Outstanding (Basic)31.48M
Shares Outstanding (Diluted)31.48M

Key Highlights

  • 1Total revenue increased by 15% to $19.3 million, primarily due to a 19.6% increase in service revenue to $15.4 million.
  • 2Net loss for the quarter was $25.1 million, a slight increase from $24.5 million in the prior year's quarter.
  • 3The company continues to be in a precarious financial position, with substantial doubt about its ability to continue as a going concern, requiring significant external financing and debt restructuring.
  • 4Default events occurred under the Facility Agreement due to the Thales arbitration ruling and settlement, and further defaults are anticipated regarding covenant compliance.
  • 5Globalstar failed to meet its April 1, 2013 obligations for its 5.75% Convertible Senior Notes, leading to a forbearance agreement and ongoing debt restructuring negotiations.
  • 6Capital expenditures for the quarter were $9.2 million, primarily for second-generation satellites and ground infrastructure, a decrease from $23.3 million in the prior year, reflecting the nearing completion of the satellite constellation.
  • 7Cash and cash equivalents significantly decreased to $1.3 million as of March 31, 2013, from $11.8 million as of December 31, 2012.

Frequently Asked Questions

Globalstar is facing significant financial challenges, with substantial doubt about its ability to continue as a going concern. The company reported a net loss for the quarter and has insufficient liquidity to meet its upcoming obligations, necessitating urgent external financing and debt restructuring. While revenue shows growth, the company's ability to service its debt and meet contractual obligations is a primary concern.

The primary risks include its inability to secure necessary financing, the potential acceleration of its debt due to defaults on loan covenants and missed payments, and the impact of ongoing litigation and disputes, such as the Thales arbitration. Failure to restructure its debt or obtain waivers could lead to bankruptcy.

The company has successfully launched all of its second-generation satellites, with the fourth and final launch in February 2013. This is nearing completion, leading to increased service levels and revenue growth, particularly in SPOT and Simplex services, and a recovery in Duplex equipment sales. However, depreciation expense associated with these new assets has increased.

Globalstar is in default on several aspects of its Facility Agreement and has failed to meet its obligations related to the 5.75% Convertible Senior Notes. The company is actively negotiating with lenders and noteholders for waivers, amendments, and debt restructuring. The outcome of these negotiations is uncertain but critical for the company's survival.