10-QPeriod: Q3 FY2013

Globalstar, Inc. Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 14, 2013For Securities:GSAT

Summary

Globalstar, Inc.'s Form 10-Q for the period ending September 30, 2013, reveals a company undergoing significant financial restructuring and operational improvements. The company reported a substantial net loss of $204.97 million for the third quarter of 2013, compared to a loss of $41.19 million in the same period of the previous year. This widened loss is heavily influenced by significant one-time charges, including a $66.1 million loss on extinguishment of debt related to the amendment of the Thermo Loan Agreement and a $47.2 million loss from the exchange of its 5.75% Notes. Despite these losses, total revenue showed a modest increase, reaching $22.5 million for the quarter, up from $20.5 million in the prior year, driven primarily by a rise in service revenues, particularly from Duplex, SPOT, and Simplex services. The company also highlighted the completion of its second-generation satellite constellation deployment, which is expected to improve service levels and drive future subscriber growth. Financially, Globalstar has been actively managing its debt and securing funding. Key events include the restructuring of its Facility Agreement and the successful securing of up to $85.0 million in equity or equity-linked financing from Thermo Funding Company LLC and a $30.0 million equity line with Terrapin Opportunity, L.P. These financial maneuvers, while complex and involving significant charges, appear aimed at providing the company with the necessary liquidity to execute its business plan and continue as a going concern. Investors should closely monitor the company's ability to generate positive operating cash flow and manage its substantial debt load in the coming periods, while also assessing the long-term impact of the second-generation constellation on service quality and market competitiveness.

Financial Statements
Beta

Key Highlights

  • 1Net loss widened significantly to $204.97 million in Q3 2013 from $41.19 million in Q3 2012, largely due to substantial debt extinguishment charges.
  • 2Total revenue increased by 10% to $22.5 million in Q3 2013, driven by a 10% rise in service revenues, particularly from Duplex, SPOT, and Simplex services.
  • 3The company successfully completed the deployment of its second-generation satellite constellation in August 2013, expecting improved service levels to drive future subscriber growth.
  • 4Globalstar undertook significant debt restructuring, including amending its Facility Agreement and exchanging 5.75% Notes for new 8.00% Notes, resulting in large debt extinguishment losses.
  • 5The company secured new financing commitments, including up to $85.0 million in equity/equity-linked financing from Thermo and a $30.0 million equity line from Terrapin, crucial for ongoing operations and strategic initiatives.
  • 6Cash used in investing activities decreased to $30.6 million for the first nine months of 2013, primarily due to the nearing completion of second-generation constellation deployment.
  • 7Total debt remained substantial, with $675.7 million in long-term debt outstanding as of September 30, 2013, though the company was in compliance with covenants following the Facility Agreement restructuring.

Frequently Asked Questions

Globalstar reported a significant net loss of $204.97 million for the third quarter of 2013, a substantial increase from the $41.19 million loss in the same quarter of 2012. This widened loss was primarily attributed to large charges from debt extinguishment and restructuring activities, including a $66.1 million loss on the Thermo Loan Agreement amendment and a $47.2 million loss from the exchange of 5.75% Notes. While revenue saw a modest increase to $22.5 million, driven by service revenues, the company continues to operate at a considerable loss.

A major operational milestone is the completion of the second-generation satellite constellation deployment in August 2013. The company expects this to significantly improve service quality and capacity, making its products and services more attractive to new and existing customers. Globalstar also introduced the SPOT Global Phone and the SPOT Gen3, aiming to capture more market share in the consumer and commercial segments.

The company has been actively engaged in debt restructuring. Key actions include amending its senior secured credit facility and exchanging older convertible notes for newer ones, although these transactions resulted in significant one-time losses. Globalstar has secured crucial financing to support its operations, including up to $85.0 million in equity or equity-linked financing from Thermo Funding Company LLC and a $30.0 million committed equity line with Terrapin Opportunity, L.P. These actions are critical for the company's ability to continue as a going concern and fund its strategic initiatives.

The filing reiterates risks previously disclosed in its 2012 Form 10-K, and also highlights the substantial uncertainties surrounding its ability to execute its business plan, particularly concerning financing arrangements and the modification of certain obligations. The company's ability to continue as a going concern is dependent on resolving these uncertainties. Additionally, the material adverse effects that could result from a successful arbitration award confirmation by Thales remain a significant risk. The company also faces ongoing market risks and competitive pressures in the satellite services industry.