<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
GLOBALSTAR TELECOMMUNICATIONS LIMITED
CEDAR HOUSE
41 CEDAR AVENUE
HAMILTON HM12, BERMUDA
TELEPHONE: (441) 295-2244
COMMISSION FILE NUMBER 0-25456
JURISDICTION OF INCORPORATION: BERMUDA
IRS IDENTIFICATION NUMBER: 13-3795510
------------------------
GLOBALSTAR, L.P.
3200 ZANKER ROAD
SAN JOSE, CA 95134
TELEPHONE: (408) 933-4000
COMMISSION FILE NUMBER: 333-25461
JURISDICTION OF INCORPORATION: DELAWARE
IRS IDENTIFICATION NUMBER: 13-3759824
The registrants have filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
and have been subject to such filing requirements for the past 90 days.
As of July 31, 1998, there were 82,006,780 shares of Globalstar
Telecommunications Limited common stock outstanding.
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<PAGE> 2
PART I. FINANCIAL INFORMATION
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
CONDENSED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- -------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Investment in Globalstar, L.P.:
Redeemable preferred partnership interests................ $ -- $303,089
Ordinary partnership interests............................ 598,200 297,417
Ordinary partnership warrants............................. 12,055 12,210
-------- --------
Total assets...................................... $610,255 $612,716
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Interest payable.......................................... $ -- $ 1,679
Convertible preferred equivalent obligations ($310,000
principal amount)......................................... -- 301,410
Commitments and contingencies (Note 4)
Shareholders' equity:
Common stock, $1.00 par value, 600,000,000 shares
authorized (82,000,012 and 30,638,152 issued and
outstanding at June 30, 1998 and December 31, 1997,
respectively).......................................... 82,000 30,638
Paid-in capital........................................... 588,633 318,643
Warrants.................................................. 12,055 12,210
Accumulated deficit....................................... (72,433) (51,864)
-------- --------
Total shareholders' equity............................. 610,255 309,627
-------- --------
Total liabilities and shareholders' equity........ $610,255 $612,716
======== ========
</TABLE>
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Note: The December 31, 1997 balance sheet has been derived from audited
financial statements at that date.
See notes to condensed financial statements.
1
<PAGE> 3
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ------------------
1998 1997 1998 1997
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Equity in net loss applicable to ordinary partnership
interests of Globalstar, L.P....................... $13,279 $6,323 $20,569 $10,703
Dividend income on Globalstar, L.P. redeemable
preferred partnership interests.................... (16,897) (5,301) (22,197) (10,601)
Interest expense on convertible preferred equivalent
obligations........................................ 16,897 5,301 22,197 10,601
------- ------ ------- -------
Net loss............................................. $13,279 $6,323 $20,569 $10,703
======= ====== ======= =======
Net loss per share -- basic and diluted.............. $ 0.18 $ 0.11 $ 0.30 $ 0.21
======= ====== ======= =======
Weighted average shares outstanding -- basic and
diluted............................................ 75,399 59,576 68,380 50,490
======= ====== ======= =======
</TABLE>
See notes to condensed financial statements.
2
<PAGE> 4
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1998 1997
--------- --------
<S> <C> <C>
Operating activities:
Net loss.................................................. $ (20,569) $(10,703)
Equity in net loss applicable to ordinary partnership
interests of Globalstar, L.P........................... 20,569 10,703
Increase in redemption value of redeemable preferred
partnership interests.................................. (351) (526)
Dividends accrued on redeemable preferred partnership
interests.............................................. 1,679 --
Amortization of convertible preferred equivalent
obligations costs...................................... 351 526
Change in operating liability:
Interest payable....................................... (1,679) --
--------- --------
Net cash provided by (used in) operating activities......... -- --
--------- --------
Investing activities:
Purchase of ordinary partnership interests in Globalstar,
L.P.................................................... (947) (140,887)
Purchase of warrants in Globalstar, L.P................... -- (12,210)
--------- --------
Net cash used in investing activities....................... (947) (153,097)
--------- --------
Financing activities:
Net proceeds from issuance of common stock upon exercise
of options and warrants................................ 947 --
Proceeds from issuance of warrants in connection with sale
of Globalstar, L.P.'s 11 3/8% Senior Notes............. -- 12,210
Proceeds from exercise of guarantee warrants.............. -- 110,911
Proceeds from exercise of rights.......................... -- 29,976
--------- --------
Net cash provided by financing activities................... 947 153,097
--------- --------
Net increase (decrease) in cash and cash equivalents........ -- --
Cash and cash equivalents, beginning of period.............. -- --
--------- --------
Cash and cash equivalents, end of period.................... $ -- $ --
========= ========
Noncash transactions:
Conversion of redeemable preferred partnership interests
and related dividend make-whole payment into ordinary
partnership interests.................................. $ 320,250
=========
Common stock issued upon conversion of convertible
preferred equivalent obligations and related interest
make-whole payment..................................... $ 320,250
=========
Supplemental information:
Interest paid during the period........................... $ 5,038 $ 10,075
========= ========
</TABLE>
See notes to condensed financial statements.
3
<PAGE> 5
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed financial statements have been prepared
by Globalstar Telecommunications Limited ("GTL") pursuant to the rules of the
Securities and Exchange Commission ("SEC") and, in the opinion of GTL, include
all adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of financial position, results of operations and cash flows.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to SEC rules. GTL believes that the
disclosures made are adequate to keep the information presented from being
misleading. The results of operations for the three and six months ended June
30, 1998 are not necessarily indicative of the results to be expected for the
full year. These financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the latest Annual
Report on Form 10-K for GTL and Globalstar, L.P. ("Globalstar").
2. ORGANIZATION AND BUSINESS
On November 23, 1994, GTL was incorporated as an exempted company under the
Companies Act 1981 of Bermuda. On February 14, 1995, GTL completed an initial
public offering of 40 million shares of common stock (as adjusted for
two-for-one stock split, see note 5) resulting in net proceeds of $185,750,000.
Effective February 22, 1995, GTL purchased 21.3% of the ordinary partnership
interests of Globalstar, L.P. (a development stage limited partnership) with the
net proceeds of the initial public offering. GTL's financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America.
GTL's sole business is acting as a general partner of Globalstar, which is
building and will operate a worldwide, low-earth orbit satellite-based wireless
digital telecommunications system.
At June 30, 1998, GTL held 34.8% of the ordinary partnership interests in
Globalstar. GTL accounts for its investment in Globalstar on the equity method,
recognizing its allocated share of net loss in the period incurred. GTL's
allocated share of Globalstar's net loss applicable to ordinary partnership
interests from the period February 22, 1995 through June 30, 1998 was
$72,433,000.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings Per Share
In 1997, GTL adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128"). The adoption of SFAS 128 had no effect on
reported net loss per share. For the three and six months ended June 30, 1998
and 1997, diluted weighted average shares outstanding excludes the assumed
conversion of GTL's 6 1/2% Convertible Preferred Equivalent Obligations due 2006
(the "CPEOs"), prior to their conversion, see Note 4, and excludes the assumed
exercise of outstanding options and warrants as their effect would have been
anti-dilutive due to GTL's net losses. Accordingly, basic and diluted weighted
average shares outstanding are based on the weighted average common shares
outstanding during the three and six months ended June 30, 1998 and 1997.
Comprehensive Income
Effective January 1, 1998, GTL adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). During the
periods presented, GTL had no changes in equity from transactions or other
events and circumstances from non-owner sources. Accordingly, a statement of
comprehensive loss has not been provided as comprehensive loss equals net loss
for all periods presented.
4
<PAGE> 6
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
4. REDEMPTION AND CONVERSION OF CPEO'S
On April 30, 1998, GTL redeemed all of its outstanding CPEOs, $310 million
aggregate principal amount. As of April 30, 1998, all the holders of the CPEOs
had converted their holdings into 20,123,230 shares of GTL common stock (as
adjusted for two-for-one stock split, see Note 5). As a result of such
conversion, Globalstar's Redeemable Preferred Partnership Interests ("RPPIs")
were converted into 4,769,230 Globalstar ordinary partnership interests. In
connection with the redemption, GTL issued 539,322 additional shares of GTL
common stock (as adjusted for two-for-one stock split, see Note 5) in
satisfaction of a required interest make-whole payment. A corresponding dividend
make-whole payment was also made by Globalstar for which an additional 134,830
Globalstar ordinary partnership interests were issued. Prior to the conversion,
interest on the CPEOs and, correspondingly, dividends on the RPPIs, were payable
quarterly at the rate of 6 1/2% per annum. The conversion of the CPEOs and the
related RPPIs will result in annual cash savings of approximately $20.1 million.
5. SHAREHOLDERS' EQUITY
On June 8, 1998, GTL issued a two-for-one stock split to shareholders of
record as of May 29, 1998 in the form of a 100% stock dividend. Accordingly, all
GTL share and per share amounts, excluding the balance sheet, have been restated
to reflect the two-for-one stock split. Prior to the stock split, GTL's equity
securities and convertible securities were represented by equivalent Globalstar
partnership interests on an approximate two-for-one basis. Globalstar's
partnership interests were not affected by the GTL stock split and, accordingly,
GTL's equity securities are now represented by equivalent Globalstar partnership
interests on an approximate four-for-one basis. At GTL's annual meeting on April
28, 1998, the shareholders approved a proposal to increase the number of GTL
authorized common shares, $1.00 par value, to 600 million shares.
6. SUBSEQUENT EVENT
Purchase of Globalstar Partnership Interests
On July 6, 1998, Loral Space & Communications Ltd. ("Loral"), the managing
general partner of Globalstar, purchased 4.2 million Globalstar ordinary
partnership interests (corresponding to 16.8 million shares of GTL common stock)
from certain founding service providers for $420 million in cash. The founding
service providers participating in this transaction have deposited half of their
proceeds ($210 million) into an escrow account to be used for the purchase of
Globalstar gateways and user terminals. Concurrently, entities advised by or
associated with Soros Fund Management L.L.C. ("Soros") purchased 8.4 million
shares of GTL common stock owned by Loral for $245 million in cash.
After giving effect to these transactions, Loral's fully diluted ownership
in Globalstar increased from approximately 38% to 42% and Soros owns GTL shares
equating to approximately 4% of Globalstar. Soros acquired from Loral, in lieu
of Globalstar limited partnership interests, shares of GTL common stock, which
are restricted for U.S. securities law purposes, and for which GTL has agreed to
file a shelf registration statement and have such registration statement
declared effective within one year.
5
<PAGE> 7
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except partnership interest data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 414,733 $ 464,154
Production gateways and user terminals.................... 63,205 24,124
Other current assets...................................... 7,671 5,502
---------- ----------
Total current assets.............................. 485,609 493,780
Property and equipment, net................................. 4,131 2,574
Globalstar System under construction:
Space segment............................................. 1,370,770 1,153,344
Ground segment............................................ 511,161 374,344
---------- ----------
1,881,931 1,527,688
Additional satellite spares................................. 126,316 99,225
Deferred costs and other assets............................. 57,851 25,786
---------- ----------
Total assets...................................... $2,555,838 $2,149,053
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable.......................................... $ 3,996 $ 1,272
Payable to affiliates..................................... 91,803 105,357
Vendor financing liability................................ 61,297 --
Accrued expenses.......................................... 6,743 8,312
Accrued interest.......................................... 31,725 28,869
---------- ----------
Total current liabilities......................... 195,564 143,810
Deferred revenues........................................... 23,652 23,652
Vendor financing liability, net of current portion.......... 256,971 197,723
Deferred interest payable................................... 439 420
11 3/8% Senior notes payable ($500,000 principal amount).... 477,572 475,579
11 1/4% Senior notes payable ($325,000 principal amount).... 305,295 303,641
10 3/4% Senior notes payable ($325,000 principal amount).... 320,654 320,311
11 1/2% Senior notes payable ($300,000 principal amount).... 287,774 --
Commitments and contingencies (Note 4,5,6 and 8)
Redeemable preferred partnership interests, $310,000
redemption value (none and 4,769,230 outstanding at June
30, 1998 and December 31, 1997, respectively)............. -- 303,089
Ordinary partners' capital:
Ordinary partnership interests (58,175,925 and 52,319,076
outstanding at June 30, 1998 and December 31, 1997,
respectively).......................................... 658,916 368,618
Warrants.................................................. 29,001 12,210
---------- ----------
Total ordinary partners' capital.................. 687,917 380,828
---------- ----------
Total liabilities and partners' capital........... $2,555,838 $2,149,053
========== ==========
</TABLE>
- ---------------
Note: The December 31, 1997 balance sheet has been derived from audited
consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
6
<PAGE> 8
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per interest data)
(Unaudited)
<TABLE>
<CAPTION>
CUMULATIVE
THREE MONTHS ENDED SIX MONTHS ENDED MARCH 23, 1994
JUNE 30, JUNE 30, (COMMENCEMENT OF
------------------ ------------------ OPERATIONS) TO
1998 1997 1998 1997 JUNE 30, 1998
------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Development costs................ $17,169 $16,569 $33,658 $27,810 $222,421
Marketing, general and
administrative................ 11,111 5,212 19,382 11,553 87,968
------- ------- ------- ------- --------
Total operating
expenses............... 28,280 21,781 53,040 39,363 310,389
Interest income.................... 4,656 4,814 9,820 7,109 50,456
------- ------- ------- ------- --------
Net loss........................... 23,624 16,967 43,220 32,254 259,933
------- ------- ------- ------- --------
Preferred distribution and related
increase in redeemable preferred
partnership interests............ 16,897 5,300 22,197 10,601 60,722
------- ------- ------- ------- --------
Net loss applicable to ordinary
partnership interests............ $40,521 $22,267 $65,417 $42,855 $320,655
======= ======= ======= ======= ========
Net loss per ordinary partnership
interest -- basic and diluted.... $ 0.71 $ 0.43 $ 1.20 $ 0.86
======= ======= ======= =======
Weighted average ordinary
partnership interests
outstanding -- basic and
diluted.......................... 56,705 51,894 54,525 49,622
======= ======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE> 9
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
CUMULATIVE
SIX MONTHS ENDED MARCH 23, 1994
JUNE 30, (COMMENCEMENT OF
--------------------- OPERATIONS) TO
1998 1997 JUNE 30, 1998
--------- --------- ----------------
<S> <C> <C> <C>
Operating activities:
Net loss................................................... $ (43,220) $ (32,254) $ (259,933)
Deferred revenues.......................................... -- -- 23,652
Stock compensation transactions............................ 643 647 2,250
Depreciation and amortization.............................. 773 2,922 3,026
Changes in operating assets and liabilities:
Production gateways and user terminals................... (39,081) -- (63,205)
Other current assets..................................... (2,169) (6,555) (7,671)
Other assets............................................. (2,198) (273) (3,011)
Accounts payable......................................... 2,923 (1,110) 4,124
Payable to affiliates.................................... 24,910 4,005 24,733
Accrued expenses............................................ (1,569) (2,294) 6,743
--------- --------- -----------
Net cash used in operating activities....................... (58,988) (34,912) (269,292)
--------- --------- -----------
Investing activities:
Globalstar System under construction....................... (354,243) (284,158) (1,881,931)
Payable to affiliates for Globalstar System under
construction............................................. (38,464) 21,853 58,270
Capitalized interest accrued............................... 9,560 23,177 54,323
Accounts payable........................................... (199) (1,058) (636)
Vendor financing liability.................................. 120,545 37,829 318,268
--------- --------- -----------
Cash used for Globalstar System............................ (262,801) (202,357) (1,451,706)
Additional satellite spares................................ (27,091) (46,388) (126,316)
Purchases of property and equipment........................ (2,330) (394) (7,142)
Deferred FCC license costs................................. (423) (459) (8,530)
Purchases of investments................................... -- -- (126,923)
Maturity of investments.................................... -- -- 126,923
--------- --------- -----------
Net cash used in investing activities....................... (292,645) (249,598) (1,593,694)
--------- --------- -----------
Financing activities:
Net proceeds from issuance of $500,000 11 3/8% Senior
Notes.................................................... -- 472,090 472,090
Proceeds from warrants issued in connection with $500,000
11 3/8% Senior Notes..................................... -- 12,210 12,210
Net proceeds from issuance of $325,000 11 1/4% Senior
Notes.................................................... -- 301,850 301,850
Net proceeds from issuance of $325,000 10 3/4% Senior
Notes.................................................... -- -- 320,197
Net proceeds from issuance of $300,000 11 1/2% Senior
Notes.................................................... 287,552 -- 287,552
Deferred financing costs................................... -- -- (2,125)
Proceeds of capital subscriptions receivable............... -- -- 282,441
Payment of accrued capital raising costs................... -- -- (2,400)
Sale of ordinary partnership interests..................... 19,697 140,887 346,377
Sale of redeemable preferred partnership interests to
GTL...................................................... -- -- 299,500
Distributions on redeemable preferred partnership
interests................................................ (5,037) (10,075) (40,020)
Prepaid interest on redeemable preferred partnership
interests................................................ -- -- 47
Borrowings under long-term revolving credit facility....... -- 65,000 171,000
Repayment of borrowings under long-term revolving credit
facility................................................. -- (161,000) (171,000)
--------- --------- -----------
Net cash provided by financing activities................... 302,212 820,962 2,277,719
--------- --------- -----------
Net increase (decrease) in cash and cash equivalents........ (49,421) 536,452 414,733
Cash and cash equivalents, beginning of period.............. 464,154 21,180 --
--------- --------- -----------
Cash and cash equivalents, end of period.................... $ 414,733 $ 557,632 $ 414,733
========= ========= ===========
Noncash transactions:
Payable to affiliates...................................... $ 9,308
===========
Accrual of capital raising costs........................... $ 2,400
===========
Deferred FCC license costs................................. $ 2,235
===========
Warrants issued in exchange for debt guarantee............. $ 22,601
===========
Increase in redemption value of preferred partnership
interests................................................ $ 351 $ 526 $ 3,940
========= ========= ===========
Ordinary partnership interests distributed upon conversion
of preferred partnership interests and related dividend
make-whole payment....................................... $ 320,250 $ 320,250
========= ===========
Warrants issued to China Telecom to acquire ordinary
partnership interests.................................... $ 31,917 $ 31,917
========= ===========
Supplemental Information:
Interest paid during the period............................ $ 64,732 $ 1,881 $ 114,072
========= ========= ===========
</TABLE>
See notes to condensed consolidated financial statements.
8
<PAGE> 10
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements have
been prepared by Globalstar, L.P. ("Globalstar") pursuant to the rules of the
Securities and Exchange Commission ("SEC") and, in the opinion of Globalstar,
include all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation of financial position, results of operations and cash flows.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such SEC rules. Globalstar believes
that the disclosures made are adequate to keep the information presented from
being misleading. The results of operations for the three and six months ended
June 30, 1998 are not necessarily indicative of the results to be expected for
the full year. These condensed consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and notes
thereto included in the latest Annual Report on Form 10-K for Globalstar
Telecommunications Limited ("GTL") and Globalstar.
2. ORGANIZATION AND BUSINESS
Globalstar, founded by Loral Space & Communications Ltd. ("Loral") and
QUALCOMM Incorporated ("Qualcomm"), is building and will operate a worldwide,
low-earth orbit satellite-based wireless digital telecommunications system (the
"Globalstar System").
Globalstar, a Delaware limited partnership with a December 31 fiscal year
end, was formed in November 1993. It had no activities until March 23, 1994,
when it received capital subscriptions for $275 million and commenced
operations. The accompanying condensed consolidated financial statements reflect
the operations of Globalstar from that date.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage Company
Globalstar is devoting substantially all of its efforts to the
construction, launch, licensing and testing of the Globalstar System and
establishing its business. Globalstar's planned principal operations have not
commenced and, accordingly, Globalstar is a development stage company as defined
in Statement of Financial Accounting Standards No. 7 "Accounting and Reporting
by Development Stage Enterprises."
Globalstar may encounter problems, delays and expenses, many of which may
be beyond Globalstar's control. These may include, but are not limited to,
launch delays and launch failures, in orbit failures, problems related to
technical development of the system, testing, regulatory compliance,
manufacturing and assembly, the competitive and regulatory environment in which
Globalstar will operate, marketing problems and costs and expenses that may
exceed current estimates. There can be no assurance that substantial delays in
any of the foregoing matters would not delay Globalstar's achievement of
profitable operations.
Production Gateways and User Terminals
Production gateways and user terminal costs represent amounts associated
with financing by Globalstar to assist in the deployment of the gateways and
user terminals. Globalstar expects to recoup such costs upon acceptance by the
service providers of the gateways and user terminals.
Earnings Per Ordinary Partnership Interest
In 1997, Globalstar adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share" ("SFAS 128"). The adoption of SFAS 128 had no effect
on reported net loss per ordinary partnership interest. For the three and six
months ended June 30, 1998 and 1997, diluted weighted average ordinary
partnership interests outstanding excludes the assumed conversion of the
Redeemable Preferred Partnership Interests (the "RPPIs") prior to their
conversion, see Note 7, and excludes the assumed issuance of ordinary
9
<PAGE> 11
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
partnership interests upon exercise of GTL's outstanding options and warrants as
their effect would have been anti-dilutive due to Globalstar's net losses.
Accordingly, basic and diluted weighted average ordinary partnership interests
outstanding is based on net loss applicable to ordinary partnership interests
and the weighted average ordinary partnership interests outstanding during the
quarters ended June 30, 1998 and 1997.
Comprehensive Income
Effective January 1, 1998, Globalstar adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
During the periods presented, Globalstar had no changes in ordinary partners'
capital from transactions or other events and circumstances from non-owner
sources. Accordingly, a statement of comprehensive loss has not been provided as
comprehensive loss equals net loss for all periods presented.
Reclassifications
Certain reclassifications have been made to conform prior amounts to the
current period presentation.
4. GLOBALSTAR SYSTEM UNDER CONSTRUCTION
As of July 31, 1998, Globalstar's budgeted expenditures for the design,
construction and deployment of the Globalstar System to commence commercial
service, including working capital, cash interest on borrowings and operating
expenses is approximately $2.8 billion. In addition to expenditures for
operating costs, working capital and debt service, Globalstar anticipates
additional expenditures on system software for the improvement of system
functionality and the addition of new features beyond those planned for the
commencement of commercial service.
In addition, Globalstar has agreed to purchase eight additional spare
satellites from SS/L, an affiliated satellite manufacturer, at a cost estimated
at $175 million. Further, in order to accelerate the deployment of gateways
around the world, Globalstar has agreed to finance approximately $80 million of
the cost of up to 32 of the initial 38 gateways. In December 1997, Globalstar
ordered 40,000 fixed access terminals from Ericsson for $84 million. Globalstar
has also agreed to finance approximately $67 million of the cost of handsets.
Globalstar expects to recoup the amounts so financed following the acceptance by
the service providers of the gateways, fixed access terminals and handsets.
Globalstar and Globalstar service providers entered into contracts with
Qualcomm, Ericsson OMC Limited and Telital S.p.A. for the initial manufacture
and delivery of approximately 300,000 production handheld and fixed access
terminals.
As of July 31, 1998, Globalstar had raised or received commitments for
approximately $2.9 billion. Globalstar believes that its current capital, vendor
financing commitments and the availability of the Globalstar credit agreement
($250 million available at June 30, 1998) are sufficient to fund its
requirements for the baseline system into the second quarter of 1999. If future
capital expenditures are not covered by future operating revenues, Globalstar
intends to raise the remaining funds required from a combination of sources
including: equity issuance, debt issuance (which may include an equity
component), financial support from the Globalstar partners, projected service
provider payments, projected net service revenues from initial operations and
anticipated payments from the sale of gateways and Globalstar subscriber
terminals. Although Globalstar believes it will be able to obtain these
additional funds, there can be no assurance that such funds will be available on
favorable terms or on a timely basis, if at all.
10
<PAGE> 12
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. VENDOR FINANCING LIABILITY
On March 4, 1998, Qualcomm entered into a deferred payment agreement with
Globalstar providing $100 million of vendor financing. The deferred payments
will accrue interest at a rate of 5.75% per annum, and will be added to the
outstanding principal balance. Beginning on January 1, 2000, Globalstar will
make eight equal quarterly principal payments. The final payment including all
unpaid interest is due October 1, 2001.
6. SENIOR NOTES
In May 1998, Globalstar sold $300 million principal amount of its 11 1/2%
Senior Notes due 2005 under terms generally consistent with Globalstar's
existing senior notes. The 11 1/2% Senior Notes may not be redeemed prior to
June 2003 and are subject to a prepayment premium prior to June 2001. Interest
is paid semi-annually. The 11 1/2% Senior Notes rank pari passu with all of
Globalstar's existing senior notes.
7. REDEMPTION AND CONVERSION OF CPEOS AND RPPIS
On April 30, 1998, GTL redeemed all of its outstanding Convertible
Preferred Equivalent Obligations ("CPEOs"), $310 million aggregate principal
amount. As of April 30, 1998, all the holders of the CPEOs converted their
holdings into 20,123,230 shares of GTL common stock (as adjusted for two-for-one
stock split, see Note 8). As a result of such conversion, Globalstar's RPPIs
were converted into 4,769,230 ordinary partnership interests. In connection with
the redemption, GTL issued 539,322 additional shares of GTL common stock (as
adjusted for two-for-one stock split, see Note 8) in satisfaction of a required
interest make-whole payment. A corresponding dividend make-whole payment was
also made by Globalstar for which an additional 134,830 ordinary partnership
interests were issued. Prior to the conversion, interest on the CPEOs and,
correspondingly, dividends on the RPPIs, were payable quarterly at the rate of
6 1/2% per annum. The conversion of the CPEOs and the related RPPIs will result
in annual cash savings of approximately $20.1 million.
8. ORDINARY PARTNERS' CAPITAL
Capital Contribution
In April 1998, China Telecom (Hong Kong) Group Ltd. ("China Telecom"),
through a subsidiary, exercised a warrant to acquire 937,500 Globalstar ordinary
partnership interests for an aggregate purchase price of $18,750,000. In
addition, China Telecom has a warrant to acquire an additional 937,500
Globalstar ordinary partnership interests for an aggregate purchase price of
$18,750,000 after commencement of service. Globalstar had previously granted
these warrants to China Telecom in connection with service provider arrangements
in China under which China Telecommunications Broadcast Satellite Corporation
("ChinaSat") will act as the sole distributor of Globalstar service in China.
The fair value of the warrants issued to China Telecom was approximately $31.9
million and has been recorded in the accompanying balance sheet in deferred
costs and other assets. The fair value of the warrants will be amortized over
7 1/2 years, the expected life of the first generation of satellites.
GTL Two-For-One Stock Split
On June 8, 1998, GTL, a general partner of Globalstar, issued a two-for-one
stock split of its common stock in the form of a 100% stock dividend. The stock
dividend was paid to shareholders of record as of May 29, 1998. Prior to the
stock split, GTL's equity securities and convertible securities were represented
by equivalent Globalstar partnership interests on an approximate two-for-one
basis. Globalstar's partnership interests were not affected by the GTL stock
split and, accordingly, GTL's equity securities and convertible securities are
now represented by equivalent Globalstar partnership interests on an approximate
four-for-one basis.
11
<PAGE> 13
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SUBSEQUENT EVENT
Purchase of Globalstar Partnership Interests
On July 6, 1998, Loral, the managing general partner of Globalstar,
purchased 4.2 million Globalstar ordinary partnership interests (corresponding
to 16.8 million shares of GTL common stock) from certain founding service
providers for $420 million in cash. The founding service providers participating
in this transaction have deposited half of their proceeds ($210 million) into an
escrow account to be used for the purchase of Globalstar gateways and user
terminals. Concurrently, entities advised by or associated with Soros Fund
Management L.L.C. ("Soros") purchased 8.4 million shares of GTL common stock
owned by Loral for $245 million in cash.
After giving effect to these transactions, Loral's fully diluted ownership
in Globalstar increased from approximately 38% to 42% and Soros owns GTL shares
equating to approximately 4% of Globalstar. Soros acquired from Loral, in lieu
of Globalstar limited partnership interests, shares of GTL common stock, which
are restricted for U.S. securities law purposes, and for which GTL has agreed to
file a shelf registration statement and have such registration statement
declared effective within one year.
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the matters
discussed in this Management's Discussion and Analysis of Financial Condition
and Results of Operations, and elsewhere in this Form 10-Q, are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In
addition, from time to time, Globalstar and or GTL or their representatives have
made or may make forward-looking statements, orally or in writing. Such
forward-looking statements may be included in, but are not limited to, various
filings made by Globalstar and or GTL with the Securities and Exchange
Commission, press releases or oral statements made by or with the approval of an
authorized executive officer of Globalstar and or GTL. Actual results could
differ materially from those projected or suggested in any forward-looking
statements as a result of a wide variety of factors or conditions. All
forward-looking statements involve risks and uncertainties, many of which may be
beyond Globalstar's and or GTL's control. These may include, but are not limited
to, problems relating to technical development of the system, testing,
regulatory compliance, manufacturing and assembly, the competitive and
regulatory environment in which Globalstar will operate, marketing problems and
costs and expenses that may exceed current estimates. See the section of GTL's
and Globalstar's registration statement on Form S-4 (File No. 333-57749),
entitled "Risk Factors."
GTL is a general partner of Globalstar and has no other business. GTL's
sole asset is its investment in Globalstar and GTL's results of operations
reflect its share of the results of operations of Globalstar on an equity
accounting basis.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased from $464.2 million at December 31,
1997 to $414.7 million at June 30, 1998. The net decrease is a result of
expenditures for the Globalstar System of $262.8 million, expenditures for
additional spare satellites of $27.1 million and net cash used in operating
activities of $59.0 million, including financing of production gateways and user
terminals totaling $39.1 million, offset by the net proceeds from the sale of
Globalstar's 11 1/2% Senior Notes due 2005 totaling $287.6 million and the
proceeds from the sale of partnership interests to China Telecom of $18.8
million.
Current liabilities increased from $143.8 million at December 31, 1997 to
$195.6 million at June 30, 1998, primarily as a result of the classification of
a portion of vendor financing due within one year and the timing of payments to
Globalstar contractors and accrued interest on the senior notes.
Through June 30, 1998, Globalstar incurred costs of approximately $2.1
billion for the design and construction of the space and ground segments. Costs
incurred to date during fiscal year 1998 were approximately $388 million.
On February 14, 1998, Globalstar launched its first four satellites and
launched four additional satellites on April 24, 1998. Globalstar expects to
begin commercial service in second quarter of 1999 following the launch of 36
additional satellites during 1998. The remaining 12 satellites, including eight
in-orbit spares, will be launched in the first half of 1999.
As of July 31, 1998, Globalstar's budgeted expenditures for the design,
construction and deployment of the Globalstar System to commence commercial
service, including working capital, cash interest on borrowings and operating
expenses is approximately $2.8 billion. In addition to expenditures for
operating costs, working capital and debt service, Globalstar anticipates
additional expenditures on system software for the improvement of system
functionality and the addition of new features beyond those planned for the
commencement of commercial service.
In addition, Globalstar has agreed to purchase from SS/L, an affiliated
satellite manufacturer, eight additional spare satellites at a cost estimated at
$175 million. Further, in order to accelerate the deployment of gateways around
the world, Globalstar has agreed to finance approximately $80 million of the
cost of up to 32 of the initial 38 gateways. In December 1997, Globalstar
ordered 40,000 fixed access terminals from Ericsson for $84 million. Globalstar
has also agreed to finance approximately $67 million of the cost of handsets.
13
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Globalstar expects to recoup such costs upon acceptance by the service providers
of the gateways and user terminals.
Globalstar and Globalstar service providers entered into contracts with
Qualcomm, Ericsson OMC Limited and Telital S.p.A. for the initial manufacture
and delivery of approximately 300,000 production handheld and fixed access
terminals.
On March 4, 1998, Qualcomm entered into a deferred payment agreement with
Globalstar providing $100 million of vendor financing. The deferred payments
will accrue interest at a rate of 5.75% per annum, and will be added to the
outstanding principal balance. Beginning January 1, 2000, Globalstar will make
eight equal quarterly principal payments. The final payment including all unpaid
interest is due October 1, 2001.
In April 1998, China Telecom (Hong Kong) Group Ltd. ("China Telecom"),
through a subsidiary, exercised, a warrant to acquire 937,500 Globalstar
ordinary partnership interests for an aggregate purchase price of $18,750,000.
In addition, China Telecom has a warrant to acquire an additional 937,500
Globalstar ordinary partnership interests for an aggregate purchase price of
$18,750,000 after commencement of service. Globalstar had previously granted
these warrants to China Telecom in connection with service provider arrangements
in China under which China Telecommunications Broadcast Satellite Corporation
("ChinaSat") will act as the sole distributor of Globalstar service in China.
As of July 31, 1998, Globalstar had raised or received commitments for
approximately $2.9 billion. Globalstar believes that its current capital, vendor
financing commitments and the availability of the Globalstar credit agreement
($250 million available at June 30, 1998) are sufficient to fund its
requirements for the baseline system into the second quarter of 1999. If future
capital expenditures are not covered by future operating revenues, Globalstar
intends to raise the remaining funds required from a combination of sources
including: equity issuance, debt issuance (which may include an equity
component), financial support from the Globalstar partners, projected service
provider payments, projected net service revenues from initial operations and
anticipated payments from the sale of gateways and Globalstar subscriber
terminals. Although Globalstar believes it will be able to obtain these
additional funds, there can be no assurance that such funds will be available on
favorable terms or on a timely basis, if at all.
On April 30, 1998, GTL redeemed all of its outstanding CPEOs, $310 million
aggregate principal amount. As of April 30, 1998, all the holders of the CPEOs
had converted their holdings into 20,123,230 shares of GTL common stock (as
adjusted for two-for-one stock split). As a result of such conversion,
Globalstar's RPPIs were converted into 4,769,230 Globalstar ordinary partnership
interests. In connection with the redemption, GTL issued 539,322 additional
shares of GTL common stock (as adjusted for two-for-one stock split) in
satisfaction of a required interest make-whole payment. A corresponding dividend
make-whole payment was also made by Globalstar for which an additional 134,830
Globalstar ordinary partnership interests were issued. Dividend payments and
related increase in RPPIs were $16.9 million and $22.2 million for the three and
six months ended June 30, 1998, respectively and $5.3 million and $10.6 million
for the three and six months ended June 30, 1997, respectively. The interest
make-whole payment and related dividend make-whole payment were recorded as
interest expense and dividends, by GTL and Globalstar, respectively. Prior to
the conversion, interest on the CPEOs and, correspondingly, dividends on the
RPPIs, were payable quarterly at the rate of 6 1/2% per annum. The conversion of
the CPEOs and the related RPPIs will result in annual cash savings of
approximately $20.1 million.
On July 6, 1998, Loral, the managing general partner of Globalstar,
purchased 4.2 million Globalstar ordinary partnership interests (corresponding
to 16.8 million shares of GTL common stock) from certain founding service
providers for $420 million in cash. The founding service providers participating
in this transaction have deposited half of their proceeds ($210 million) into an
escrow account to be used for the purchase of Globalstar gateways and user
terminals. Concurrently, entities advised by or associated with Soros Fund
Management L.L.C. ("Soros") purchased 8.4 million shares of GTL common stock
owned by Loral for $245 million in cash.
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
After giving effect to these transactions, Loral's fully diluted ownership
in Globalstar increased from approximately 38% to 42% and Soros owns GTL shares
equating to approximately 4% of Globalstar. Soros acquired from Loral, in lieu
of Globalstar limited partnership interests, shares of GTL common stock, which
are restricted for U.S. securities law purposes, and for which GTL has agreed to
file a shelf registration statement and have such registration statement
declared effective within one year.
RESULTS OF OPERATIONS
Globalstar is a development stage partnership and has not commenced
commercial operations. For the period March 23, 1994 (commencement of
operations) to June 30, 1998, Globalstar has recorded cumulative net losses
applicable to ordinary partnership interests of $320.7 million. The net loss
applicable to ordinary partnership interests for the six months ended June 30,
1998 increased to $65.4 million as compared to $42.9 million for the six months
ended June 30, 1997. The net loss applicable to ordinary partnership interests
for the three months ended June 30, 1998 increased to $40.5 million as compared
to $22.3 million for the three months ended June 30, 1997. The net loss for both
periods increased primarily as a result of increased activity in the development
of Globalstar user terminals, increased in-house engineering and marketing
efforts and the net effect of the RPPI conversion during the quarter ended June
30, 1998. Globalstar is expending significant funds for the construction,
launch, testing and deployment of the Globalstar System and expects such losses
to continue until commencement of commercial operations.
Globalstar has earned interest income of $50.5 million on cash balances and
short-term investments since commencement of operations. Interest income during
the six months ended June 30, 1998 was $9.8 million as compared to $7.1 million
for the six months ended June 30, 1997 as a result of higher average cash
balances available for investment during the period. Interest income during the
three months ended June 30, 1998 was $4.7 million as compared to $4.8 million
for the three months ended June 30, 1997 as a result of lower average cash
balances available for investment during the second quarter of 1998.
Operating Expenses. Development costs during the six months ended June 30,
1998 were $33.7 million as compared to $27.8 million for the six months ended
June 30, 1997. Development costs during the three months ended June 30, 1998
were $17.2 million as compared to $16.6 million for the three months ended June
30, 1997. Development costs for both periods increased as a result of increased
activity in the development of Globalstar user terminals and in-house
engineering.
Marketing, general and administrative expenses were $19.4 million and $11.6
million for the six months ended June 30, 1998 and 1997, respectively and were
$11.1 million and $5.2 million for the three months ended June 30, 1998 and
1997, respectively. The increase in marketing, general and administrative
expenses is primarily the result of an increase in the number of employees as
compared to the first and second quarters of 1997 and an increase in marketing
costs as Globalstar gears up for operations.
Depreciation. Globalstar intends to capitalize all costs, including
interest as applicable, associated with the design, construction and deployment
of the Globalstar System, except costs associated with the development of the
Globalstar user terminals and certain technologies under a cost sharing
arrangement with Qualcomm. Globalstar will not record depreciation expense on
the Globalstar System under construction until the commencement of commercial
operations, as assets are placed into service.
Income Taxes. Globalstar is organized as a limited partnership. As such,
no income tax provision or benefit is included in the accompanying financial
statements since U.S. income taxes are the responsibility of its partners.
Generally, taxable income or loss, deductions and credits of Globalstar will be
passed through to its partners.
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, Globalstar adopted the Financial Accounting
Standards Board Statement No. 130, "Reporting Comprehensive Income" ("SFAS
130"). The requirements of SFAS 130 had no effect on the financial statements
presented.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"), and in February 1998, issued Statement No. 132, "Employers'
Disclosures About Pensions and Other Postretirement Benefits" ("SFAS 132"). SFAS
131 establishes annual and interim reporting standards for an enterprise's
business segments and related disclosures about its products, services,
geographic areas and major customers. SFAS 132 expands and standardizes the
disclosure requirements for pensions and other postretirement benefits.
Globalstar is required to adopt SFAS 131 and SFAS 132 in 1998 and the financial
statements of Globalstar will reflect the appropriate disclosures.
YEAR 2000 ISSUE
Globalstar is evaluating the potential effect on its information processing
systems to determine what actions will be necessary or appropriate in connection
with the "Year 2000 Issue." The Year 2000 Issue is the result of computer
programs which were written using two digits rather than four to signify a year
(i.e., the year 1997 is denoted "97" and not "1997"). Computer programs written
using only two digits may recognize the year 2000 as the year 1900. This could
result in a system failure or miscalculations causing disruption of operations.
It is not known at this time what modifications, if any, will be required. All
costs associated with any modification will be expensed as incurred. In
addition, Globalstar has requested, and will continue to seek, information from
third-party entities on which it relies, certifying that their computer systems
will not negatively affect its operations. No assurance can be given that there
will not be some unforeseen issue, in particular, in connection with third
parties' systems, that may materially affect Globalstar's operations.
16
<PAGE> 18
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this report:
Exhibit 12 -- Statement Regarding Computation of Ratios
Exhibit 27 -- Financial Data Schedules
(b) Reports on Form 8-K
<TABLE>
<CAPTION>
DATE OF REPORT DESCRIPTION
-------------- -----------
<S> <C>
April 2, 1998 Item 5 -- GTL declares two-for-one stock split and
conversion of Convertible Preferred Equivalent Obligations
April 2, 1998 Item 5 -- GTL declares two-for-one stock split and
conversion of Convertible Preferred Equivalent
Obligations -- Amendment
May 20, 1998 Item 5 -- Globalstar issues $300 million of 11 1/2% Senior
Notes in a private offering
June 9, 1998 Item 5 -- Status of deployment of satellite constellation
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
GLOBALSTAR TELECOMMUNICATIONS LIMITED
GLOBALSTAR, L.P.
-------------------------------------
Registrants
Nicholas C. Moren
-------------------------------------
Treasurer
(Principal Financial Officer)
and
Registrants' Authorized Officer
Date: August 13, 1998
17
<PAGE> 1
EXHIBIT 12
STATEMENT REGARDING COMPUTATION OF RATIOS
(IN THOUSANDS, EXCEPT RATIOS)
GLOBALSTAR TELECOMMUNICATIONS LIMITED
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Earnings:
Net loss.................................................. $(20,569) $(10,703)
Add:
Equity in loss applicable to ordinary partnership
interests of Globalstar, L.P. ...................... 20,569 10,703
Interest expense 22,197 10,601
-------- --------
Earnings available to cover fixed charges(1)................ $ 22,197 $ 10,601
======== ========
Fixed charges -- interest expense........................... $ 22,197 $ 10,601
======== ========
Ratio of earnings to fixed charges.......................... 1x 1x
======== ========
</TABLE>
- ---------------
(1) The earnings of GTL available to cover fixed charges, consisted solely of
dividends from Globalstar, L.P. on the redeemable preferred partnership
interests held by GTL.
GLOBALSTAR, L.P.
DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Net loss.................................................... $ (43,220) $(32,254)
Dividends on redeemable preferred partnership interests..... (22,197) (10,601)
Capitalized interest........................................ (81,434) (32,547)
--------- --------
Deficiency of earnings to cover fixed charges............... $(146,851) $(75,402)
========= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary consolidated financial information extracted from
the financial statements of Globalstar Telecommunications Limited for the
quarter ended June 30, 1998 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000933401
<NAME> GLOBALSTAR TELECOMMUNICATIONS LIMITED
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 610,255
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 82,000
<OTHER-SE> 528,255
<TOTAL-LIABILITY-AND-EQUITY> 610,255
<SALES> 0
<TOTAL-REVENUES> 22,197
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,197
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,569)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,569)
<EPS-PRIMARY> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary consolidated financial information extracted from
the financial statements of Globalstar L.P. for the quarter ended June 30, 1998
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001037927
<NAME> GLOBALSTAR, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 414,733
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 485,609
<PP&E> 2,015,389
<DEPRECIATION> 3,026
<TOTAL-ASSETS> 2,555,838
<CURRENT-LIABILITIES> 195,564
<BONDS> 1,391,295
0
0
<COMMON> 687,917
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,555,838
<SALES> 0
<TOTAL-REVENUES> 9,820
<CGS> 0
<TOTAL-COSTS> 53,040
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (43,220)
<INCOME-TAX> 0
<INCOME-CONTINUING> (43,220)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (65,417)
<EPS-PRIMARY> (1.20)
<EPS-DILUTED> (1.20)
</TABLE>
