Intelsat Reports Second Quarter 2006 Results; Revenue Increases on Solid Performance of Lease Services and Managed Solutions; Cost Reduction Efforts Yield Improved Margins; PanAmSat Integration on Schedule
Results for both periods include Intelsat, Ltd. and its subsidiaries, referred to as Intelsat or the company. Results do not reflect our July 3, 2006 acquisition of PanAmSat Holding Corporation, which we renamed Intelsat Holding Corporation.
“By making key integration decisions early on, we have been able to focus as one company on customers and the marketplace. Recent orders such as Intelsat General's contract in support of the German Military Satellite program validate that effort and position us to create 2007 revenue momentum.”
Intelsat, Ltd., reported revenue of $310.5 million and a net loss of $42.7 million for the quarter ended June 30, 2006.
The company also reported EBITDA, or Intelsat, Ltd. earnings before interest, taxes and depreciation and amortization, for the quarter of $221.6 million, or 71 percent of revenue, and the company also reported Sub Holdco Adjusted EBITDA(1) for the same period of $241.0 million, or 78 percent of revenue(2). Sub Holdco Adjusted EBITDA less the benefit of a one-time channel termination fee of $20.6 million recognized in the second quarter was $220.4 million, or 76 percent of revenue.
For the six months ended June 30, 2006, Intelsat reported revenue of $591.0 million, a net loss of $132.8 million, and EBITDA of $401.7 million, or 68 percent of revenue. Sub Holdco Adjusted EBITDA for the six month period was $447.7 million, or 76 percent of revenue. Sub Holdco Adjusted EBITDA less the benefit of the one-time channel termination fee of $20.6 million described above was $427.1 million, or 75 percent of revenue.
Intelsat generated strong free cash flow from operations of $123.5 million through the second quarter of 2006. Free cash flow from operations is defined as net cash provided by operating activities, less payments for satellites and other property, plant and equipment and associated capitalized interest.
"The second quarter featured solid performance at Intelsat and concluded with the closing of the PanAmSat transaction, a deal that has created the new global leader in satellite-based communications services," said Intelsat Chief Executive Officer, Dave McGlade. "Intelsat's core lease services and GlobalConnex(SM) managed solutions, up 8 percent and 26 percent respectively as compared to the year-ago quarter, continued to lead our business performance, driven by demand for corporate data and Voice Over IP applications. With the benefits of our controls over operating expense now demonstrated by the expansion in our margins, we are ready to enhance our global operations through continuing to execute a disciplined integration of PanAmSat."
"The integration is on track and proceeding as planned," McGlade added. "By making key integration decisions early on, we have been able to focus as one company on customers and the marketplace. Recent orders such as Intelsat General's contract in support of the German Military Satellite program validate that effort and position us to create 2007 revenue momentum."
Integration Process Highlights
Intelsat's integration process includes four primary thrusts: sales and marketing, staffing, operations and facilities. The sales and marketing organizations were integrated shortly after closing, with near term objectives that include network optimization in order to increase marketable capacity. Staffing decisions are largely complete. Intelsat expects total headcount to reduce from approximately 1,350 at deal close to a steady-state headcount of approximately 1,000 by mid-year 2008. Most facility closures and integration of back office functions are expected to be completed by mid-2007. Intelsat expects to conclude much of the satellite fleet and operations center integration in 2007, with the process fully complete by the end of 2008.
Intelsat expects to realize approximately $92 million in annualized operating cost savings by the end of 2008. In order to achieve these expected savings, Intelsat believes it will incur approximately $180 million in one time expenditures, approximately half of which are expected to be incurred in the second half of 2006 and substantially all of the balance in 2007. Integration expenses include approximately $40 million to $45 million in capital expenditures.
Financial Results for the Three Months Ended June 30, 2006
Total revenue increased $20.7 million, or 7 percent, for the three months ended June 30, 2006 from $289.8 million for the three months ended June 30, 2005, driven by strong results from lease, channel, and managed solutions service offerings. Lease services revenue increased $13.9 million, or 8 percent, to $196.9 million as compared to $183.0 million in the same period in 2005, primarily due to increased demand from Network Services and Telecom customers in North America, Africa, and the Middle East. Channel revenue increased $9.5 million to $66.7 million for the three months ended June 30, 2006 from $57.2 million for the three months ended June 30, 2005. The increase was primarily attributable to the previously mentioned one-time fee of $20.6 million, offset by the continuing decline in legacy channel services revenue. Mobile Satellite Services, or MSS, and other revenue declined by $9.9 million, or 45 percent, to $12.0 million for the three months ended June 30, 2006, as compared to $21.9 million in the prior-year period, primarily due to reduced usage of mobile satellite services sold to customers of Intelsat General. These declines were partially offset by increases in managed solutions revenue, which increased by $7.2 million, or 26 percent, to $34.9 million from $27.7 million in the year-ago period, driven primarily by increased demand for trunking and private line solutions for Network Services and Telecom customers.
Total operating expenses for the three months ended June 30, 2006 declined $7.1 million to $231.8 million, from $238.9 million in the same period in 2005. Depreciation and amortization expense increased $4.8 million, or 3 percent, to $148.6 million for the three months ended June 30, 2006 from $143.8 million for the same period in 2005, primarily due to the accelerated depreciation of certain retiring non-satellite assets. Direct cost of revenue declined by $13.9 million, or 23 percent, to $46.1 million for the period from $60.0 million for the same period in 2005, primarily due to the reduction in third party capacity costs related to the decline in MSS and lease service sales to customers of Intelsat General and lower insurance costs. Selling, general and administrative expense for the second quarter of 2006 was $37.1 million, an increase of $2.0 million from $35.1 million in the three months ended June 30, 2005, due primarily to lower bad debt expense for the period in 2005.
Net loss of $42.7 million for the three months ended June 30, 2006 reflected a decrease of $10.7 million from $53.4 million of net loss for the three months ended June 30, 2005. The net loss decrease resulted primarily from the higher revenues and lower costs described above, offset somewhat by higher interest expense. Interest expense increased $8.9 million to $108.3 million for the three months ended June 30, 2006, from $99.5 million for the same period in 2005. Current period interest expense included $14.9 million in non-cash expenses associated with the amortization and accretion of discounts recorded on existing debt.
EBITDA of $221.6 million, or 71 percent of revenue, for the three months ended June 30, 2006 reflected an increase of $27.1 million, or 14 percent, from $194.5 million, or 67 percent of revenue, for the same period in 2005. This increase was primarily due to the higher revenues and lower costs described above. Sub Holdco Adjusted EBITDA increased $33.8 million to $241.0 million, or 78 percent of revenue, for the three months ended June 30, 2006 from $207.2 million, or 71 percent of revenue, for the same period in 2005. Sub Holdco Adjusted EBITDA less the benefit of the one-time channel termination fee was $220.4 million, or 76 percent of revenue.
Financial Results for the Six Months Ended June 30, 2006
On January 28, 2005, Intelsat, Ltd. was acquired by Intelsat Holdings, Ltd. (the "Acquisition"). For comparative purposes, when we refer in this news release to our results for the six months ended June 30, 2005, we are referring to our combined results for the period from January 1, 2005 through January 31, 2005 and for the period (post-Acquisition) from February 1, 2005 through June 30, 2005.
Total revenue increased $8.0 million, or 1 percent, to $591.0 million for the six months ended June 30, 2006 from $583.0 million for the six months ended June 30, 2005, driven by increases in sales of lease and managed solutions service offerings. Lease services increased $14.6 million, or 4 percent, to $386.7 million as compared to $372.1 million in the same period in 2005, due to increased demand from Network Services and Telecom customers in Africa, the Middle East and North America. Channel revenue decreased $2.2 million to $115.4 million for the six months ended June 30, 2006 from $117.6 million for the six months ended June 30, 2005 due to the continuing decline in the use of legacy channel services. MSS and other revenue declined by $17.2 million to $22.7 million for the six months ended June 30, 2006, as compared to $39.9 million in the prior-year period, primarily due to reduced usage of mobile satellite services sold to customers of Intelsat General. These declines were partially offset by increases in managed solutions revenue, which increased by $12.8 million to $66.2 million for the six months ended June 30, 2006 from $53.4 million for the year-ago period, driven by increased demand for trunking and private line solutions for Network Services and Telecom customers.
Total operating expenses for the six months ended June 30, 2006 declined $114.9 million to $481.4 million, from $596.3 million for the same period in 2005, which included a $69.2 million satellite impairment charge due to the failure of our IS-804 satellite in January 2005. Depreciation and amortization expense increased $24.2 million, or 9 percent, to $303.2 million for the six months ended June 30, 2006 from $279.0 million for the same period in 2005, primarily due to purchase accounting treatment following the Acquisition and accelerated depreciation for retiring non-satellite assets, as well as to our IA-8 satellite, which entered service in July 2005. Direct costs of revenue declined by $29.6 million, or 23 percent, to $101.2 million for the first half of 2006 from $130.8 million for the same period in 2005, primarily due to the reduction in third party capacity costs related to the decline in MSS and lease service sales to customers of Intelsat General. Selling, general and administrative expense for the first half of 2006 was $77.0 million, a decline of $40.0 million from $117.0 million in the six months ended June 30, 2005. The decrease was due primarily to lower professional fees of $40.8 million as compared to the first six months of 2005, incurred mainly in connection with the Acquisition, offset by recovery of previously written-off bad debts of $7.3 million in 2005.
Net loss of $132.8 million for the six months ended June 30, 2006 reflected a decrease of $72.3 million from $205.1 million of net loss for the six months ended June 30, 2005. This decrease was primarily due to the IS-804 impairment charge and professional fees associated with the Acquisition that were incurred in 2005, and the higher revenues and lower costs in 2006 described above.
EBITDA of $401.7 million, or 68 percent of revenue, for the six months ended June 30, 2006 reflected an increase of $135.8 million from $265.9 million, or 46 percent of revenue, for the same period in 2005. This increase was primarily due to the IS-804 impairment charge and fees associated with the Acquisition incurred in 2005, and higher revenues and lower costs in 2006 described above. Sub Holdco Adjusted EBITDA increased $32.0 million to $447.7 million, or 76 percent of revenue, for the six months ended June 30, 2006 from $415.7 million, or 71 percent of revenue, for the same period in 2005. Sub Holdco Adjusted EBITDA less the benefit of the one-time channel termination fee of $20.6 million was $427.1 million, or 75 percent of revenue.
At June 30, 2006, Intelsat's backlog, representing expected future revenue under contracts with customers, was $3.74 billion. At March 31, 2006, Intelsat's backlog was $3.80 billion.
Intelsat management has reviewed the data pertaining to the use of the Intelsat system and is providing revenue information with respect to that use by service category and customer set in the following tables. Intelsat management believes this provides a useful perspective on the changes in revenue and customer trends over time.
Revenue Percentage Contribution Comparison by Customer Set
and Service Category
By Customer Set
------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2005 2006 2005 2006
---------------------------------------
Network Services and Telecom 61% 66% 61% 66%
Government 22% 17% 22% 17%
Media 17% 17% 17% 17%
By Service Category
------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2005 2006 2005 2006
---------------------------------------
Lease 63% 64% 64% 65%
Channel 20% 21% 20% 20%
Managed Solutions 9% 11% 9% 11%
Mobile Satellite Services 8% 4% 7% 4%
Conference Call Information
Intelsat management will host a conference call with investors and analysts at 11:00 a.m. EDT on August 14, 2006 to discuss the company's financial results for the second quarter of 2006. Access to the live conference call will also be available via the Internet at the Intelsat web site: www.intelsat.com/investors.
To participate on the live call, United States-based participants should call (800) 591-6945. Non-U.S. participants should call +1 (617) 614-4911. The participant pass code is 96833580. Participants will have access to a replay of the conference call through August 21, 2006. The replay number for U.S.-based participants is (888) 286-8010 and for non-U.S. participants is +1 (617) 801-6888. The participant pass code is 85800450.
(1) Intelsat Subsidiary Holding Company, Ltd., or Intelsat Sub Holdco,
and its subsidiaries are the entities that conduct Intelsat's
operations.
(2) In this release, financial measures are presented both in
accordance with United States generally accepted accounting
principles ("GAAP") and also on a non-GAAP basis. All EBITDA,
EBITDA margin, Sub Holdco Adjusted EBITDA, Sub Holdco Adjusted
EBITDA margin and free cash flow from operations figures in this
release are non-GAAP financial measures. Please see the
consolidated financial statements below for information
reconciling non-GAAP financial measures to comparable GAAP
financial measures. Sub Holdco Adjusted EBITDA is a term based on
consolidated EBITDA, as defined in Intelsat Sub Holdco's credit
agreement dated July 3, 2006 (the "Credit Agreement"). Please see
the reconciliation of Sub Holdco Adjusted EBITDA to EBITDA
provided with the consolidated financial statements below.
About the New Intelsat
Intelsat is the largest provider of fixed satellite services (FSS) worldwide and is the leading provider of these services to each of the media, network services and telecom and government customer sectors, enabling people and businesses everywhere constant access to information and entertainment. Intelsat offers customers a greater business potential by providing them access to unrivaled resources with ease of business and peace of mind. Our services are utilized by an extensive customer base, including some of the world's leading media and communications companies, multinational corporations, Internet service providers and government/military organizations. Real-time, constant communication with people anywhere in the world is closer, by far.
Intelsat Safe Harbor Statement: Some of the statements in this news release constitute "forward-looking statements" that do not directly or exclusively relate to historical facts. The forward-looking statements made in this release reflect Intelsat's intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, including known and unknown risks, uncertainties and other factors, many of which are outside of Intelsat's control. Important factors that could cause actual results to, differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Known risks include, but are not limited to insufficient market demand for the services offered by Intelsat; inadequate supply of Intelsat capacity; the quality and price of comparable communications services offered or to be offered by other satellite operators; Intelsat's access to sufficient capital to meet its operating and financing needs; and the perceptions of our business, operations and financial condition and the industry in which we operate by the financial community and ratings agencies. In connection with Intelsat's acquisition of PanAmSat as described in this news release, factors that may cause results or developments to differ materially from the forward-looking statements made in this news release include, but are not limited to: our substantial level of indebtedness following consummation of the acquisition; certain covenants in our debt agreements following consummation of the acquisition; the ability of our subsidiaries to make distributions to us in amounts sufficient to make required interest and principal payments on our debt; a change in the health of, or a catastrophic loss of, one or more of our satellites, including those acquired in the acquisition; the failure to successfully integrate or to obtain expected synergies from the acquisition on the expected timetable or at all; and the failure to achieve the strategic objectives envisioned for the acquisition of PanAmSat. Detailed information about some of the known risks is included in Intelsat's quarterly report on Form 10-Q for the quarter ended June 30, 2006 and Intelsat's registration statement on Form S-4 on file with the U.S. Securities and Exchange Commission. Because actual results could differ materially from Intelsat's intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward-looking statements contained in this news release with caution. Intelsat does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
INTELSAT, LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands)
Three Months Ended Three Months Ended
June 30, June 30,
2005 2006
------------------ ------------------
Revenue $289,824 $310,534
Operating expenses:
Direct costs of revenue 59,997 46,084
Selling, general and
administrative 35,083 37,145
Depreciation and amortization 143,845 148,602
------------------ ------------------
Total operating expenses 238,925 231,831
------------------ ------------------
Income from operations 50,899 78,703
Interest expense 99,475 108,331
Interest income 2,215 4,919
Other expense, net (222) (5,731)
------------------ ------------------
Loss from operations before
income taxes (46,583) (30,440)
Provision for income taxes 6,826 12,245
------------------ ------------------
Net loss $(53,409) $(42,685)
================== ==================
INTELSAT, LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
AND RECONCILIATION TO COMBINED UNAUDITED CONSOLIDATED STATEMENTS
OF OPERATIONS
($ in thousands)
Predecessor Successor
Entity Entity Combined
----------- ----------- -----------
Period Period
January 1, February 1, Six Months Six Months
2005 to 2005 to Ended Ended
January 31, June 30, June 30, June 30,
2005 2005 2005 2006
-----------------------------------------------
Revenue $97,917 $485,081 $582,998 $590,980
Operating expenses:
Direct costs of
revenue 26,939 103,834 130,773 101,195
Selling, general and
administrative 55,443 61,563 117,006 76,960
Depreciation and
amortization 39,184 239,798 278,982 303,206
Impairment of asset
value 69,227 - 69,227 -
Restructuring costs 263 - 263 -
----------- ----------- ----------- -----------
Total operating
expenses 191,056 405,195 596,251 481,361
----------- ----------- ----------- -----------
Income (loss) from
operations (93,139) 79,886 (13,253) 109,619
Interest expense 13,241 167,438 180,679 217,804
Interest income 191 3,306 3,497 8,271
Other income
(expense), net 863 (676) 187 (11,142)
----------- ----------- ----------- -----------
Loss from operations
before income taxes (105,326) (84,922) (190,248) (111,056)
Provision for income
taxes 4,400 10,412 14,812 21,740
----------- ----------- ----------- -----------
Net loss $(109,726) $(95,334) $(205,060) $(132,796)
=========== =========== =========== ===========
INTELSAT, LTD.
RECONCILIATION OF NET LOSS TO EBITDA
(Unaudited)
($ in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2006 2005 2006
--------- --------- ---------- ----------
Net loss $(53,409) $(42,685) $(205,060) $(132,796)
Add:
Interest expense 99,475 108,331 180,679 217,804
Provision for income taxes 6,826 12,245 14,812 21,740
Depreciation and
amortization 143,845 148,602 278,982 303,206
Subtract: Interest income 2,215 4,919 3,497 8,271
--------- --------- ---------- ----------
EBITDA $194,522 $221,574 $265,916 $401,683
========= ========= ========== ==========
EBITDA margin 67% 71% 46% 68%
Note:
EBITDA consists of Intelsat, Ltd. earnings before interest, taxes
and depreciation and amortization. EBITDA is a measure commonly used
in the fixed satellite services sector, and Intelsat presents EBITDA
to provide further information with respect to its operating
performance. EBITDA margin is defined as EBITDA divided by total
revenues. Intelsat uses EBITDA as one criterion for evaluating its
performance relative to that of its peers. Intelsat believes that
EBITDA is an operating performance measure, and not a liquidity
measure, that provides investors and analysts with a measure of
operating results unaffected by differences in capital structures,
capital investment cycles and ages of related assets among otherwise
comparable companies. However, EBITDA is not a measure of financial
performance under GAAP, and our EBITDA may not be comparable to
similarly titled measures of other companies. You should not consider
EBITDA or EBITDA margin as an alternative to operating or net income
or operating or net income margin, determined in accordance with GAAP,
as an indicator of Intelsat's operating performance, or as an
alternative to cash flows from operating activities, determined in
accordance with GAAP, as an indicator of cash flows, or as a measure
of liquidity.
INTELSAT, LTD.
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO SUB HOLDCO
ADJUSTED EBITDA
(Unaudited)
($ in thousands)
Combined
------------
Three Months Three Months Six Months Six Months
ended ended ended ended
June 30, June 30, June 30, June 30,
2005 2006 2005 2006
---------------------------------------------------
(in thousands) (in thousands)
Reconciliation of
Intelsat, Ltd.
net cash provided
by operating
activities to
Intelsat, Ltd.
net loss:
Net cash
provided by
operating
activities $140,712 $164,058 $246,643 $188,547
Depreciation and
amortization (143,845) (148,602) (278,982) (303,206)
Satellite
impairment
charges - - (69,227) -
Provision for
doubtful
accounts 1,503 93 7,566 851
Foreign currency
transaction
loss (gain) 487 60 366 280
Deferred income
taxes 134 - (2,241) -
(Gain) Loss on
Disposal of
Assets - (11) - (11)
Stock-based
compensation - (29) - (110)
Compensation
cost paid by
Parent - (2,160) - (7,992)
Amortization of
bond discount
and issuance
costs (16,617) (17,624) (26,496) (34,713)
Share in loss of
affiliate (2,289) (7,864) (3,920) (14,134)
Changes in
assets and
liabilities,
net of effects
of acquisitions (33,494) (30,607) (78,769) 37,692
------------ ------------ ------------ ------------
Intelsat, Ltd. net
loss $(53,409) $(42,686) $(205,060) $(132,796)
============ ============ ============ ============
Add:
Interest expense 99,475 108,331 180,679 217,804
Provision for
income taxes 6,827 12,245 14,812 21,740
Depreciation and
amortization 143,845 148,602 278,982 303,206
Subtract:
Interest income 2,214 4,919 3,497 8,271
------------ ------------ ------------ ------------
Intelsat, Ltd.
EBITDA $194,524 $221,573 $265,916 $401,683
============ ============ ============ ============
Add (Subtract):
Parent and
intercompany
expenses, net
(1) 4,335 3,359 8,082 7,866
Compensation and
benefits (2) 818 1,074 11,764 2,057
Restructuring
costs (3) - - 263 -
Acquisition
related
expenses (4) 3,449 3,000 52,428 6,000
Equity
investment
losses (5) 2,289 7,864 3,920 14,134
Satellite
impairment
charge (6) - - 69,227 -
Non-recurring
and other non-
cash items (7) 1,763 4,108 4,133 15,922
------------ ------------ ------------ ------------
Sub Holdco
Adjusted EBITDA $207,178 $240,978 $415,733 $447,662
============ ============ ============ ============
Sub Holdco
Adjusted EBITDA
margin 71% 78% 71% 76%
Note:
Intelsat calculates a measure called Sub Holdco Adjusted EBITDA,
based on the term consolidated EBITDA, as defined in the Credit
Agreement of Intelsat Sub Holdco dated July 3, 2006. Sub Holdco
Adjusted EBITDA consists of EBITDA as adjusted to exclude certain
unusual items, certain other operating expense items and other
adjustments permitted in calculating covenant compliance under the
Credit Agreement as described in the table above. Sub Holdco Adjusted
EBITDA as presented above is calculated only with respect to Intelsat
Sub Holdco and its subsidiaries. Sub Holdco Adjusted EBITDA is a
material component of certain covenant ratios used in the Credit
Agreement that apply to Intelsat Sub Holdco and its subsidiaries, such
as the secured debt leverage ratio and total leverage ratio. Sub
Holdco Adjusted EBITDA is not a measure of financial performance under
GAAP, and our Sub Holdco Adjusted EBITDA may not be comparable to
similarly titled measures of other companies. You should not consider
Sub Holdco Adjusted EBITDA as an alternative to operating or net
income, determined in accordance with GAAP, as an indicator of
Intelsat's operating performance, or as an alternative to cash flows
from operating activities, determined in accordance with GAAP, as an
indicator of cash flows or as a measure of liquidity.
INTELSAT, LTD.
CONSOLIDATED BALANCE SHEETS
($ in thousands)
As of As of
December 31, June 30,
2005 2006
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $360,070 $475,338
Receivables, net of allowance of $26,342
in 2005 and $23,911 in 2006 203,452 194,499
Deferred income taxes 10,752 10,888
------------ ------------
Total current assets 574,274 680,725
Satellites and other property and
equipment, net 3,327,341 3,111,226
Amortizable intangible assets, net 493,263 474,561
Non-amortizable intangible assets 560,000 560,000
Goodwill 111,388 111,388
Other assets 228,178 211,414
------------ ------------
Total assets $5,294,444 $5,149,314
============ ============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Current portion of long-term debt $11,097 $16,271
Accounts payable and accrued liabilities 332,907 318,656
Deferred satellite performance incentives 7,418 7,391
Deferred revenue 30,143 25,192
------------ ------------
Total current liabilities 381,565 367,510
Long-term debt, net of current portion 4,790,016 4,807,555
Deferred satellite performance incentives,
net of current portion 36,027 33,914
Deferred revenue, net of current portion 157,580 139,642
Accrued retirement benefits 107,778 108,069
Other long-term liabilities 27,743 23,796
------------ ------------
Total liabilities 5,500,709 5,480,486
------------ ------------
Shareholder's deficit:
Ordinary shares, 12,000 shares authorized,
issued and outstanding 12 12
Paid-in capital 9,104 17,206
Accumulated deficit (215,558) (348,354)
Accumulated other comprehensive income
(loss)
Unrealized gain (loss) on available-for-
sale securities, net of tax 177 (36)
------------ ------------
Total shareholder's deficit (206,265) (331,172)
------------ ------------
Total liabilities and shareholder's
deficit $5,294,444 $5,149,314
============ ============
INTELSAT, LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
Predecessor Successor
Entity Entity
------------- ---------------------------
Period Period Six Months
January 1 to February 1 Ended
January 31, to June 30, June 30,
2005 2005 2006
------------- ------------- -------------
Cash flows from operating
activities:
Net loss $(109,726) $(95,334) $(132,796)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation and
amortization 39,184 239,798 303,206
Impairment charge for
IS-804 satellite 69,227 - -
Provision for doubtful
accounts (5,799) (1,767) (851)
Foreign currency
transaction (gain) loss 75 (441) (280)
Deferred income taxes 585 1,656 -
Loss on disposal of
assets - - 11
Stock compensation - - 110
Compensation cost paid
by parent - - 7,992
Amortization of bond
discount and issuance
costs 430 26,066 34,713
Share in losses of
affiliate 402 3,518 14,134
Changes in operating
assets and liabilities,
net of effects of
acquisitions:
Receivables (32,168) 31,513 9,804
Other assets 3,194 (2,811) (3,309)
Accounts payable and
accrued liabilities 51,722 55,489 (17,642)
Deferred revenue (2,388) (22,177) (22,889)
Accrued retirement
benefits (27) 2,411 291
Other long-term
liabilities (3,327) (2,662) (3,947)
------------- ------------- -------------
Net cash provided by
operating activities 11,384 235,259 188,547
------------- ------------- -------------
Cash flows from investing
activities:
Payments for satellites
and other property and
equipment (953) (83,777) (65,009)
Proceeds from insurance
receivable 38,561 19,759 -
------------- ------------- -------------
Net cash provided by (used
in) investing activities 37,608 (64,018) (65,009)
------------- ------------- -------------
Cash flows from financing
activities:
Repayment of long-term
debt - (201,750) (2,625)
Proceeds from bond
issuance - 305,348 -
Proceeds from credit
facility borrowings - 200,000 -
Principal payments on
deferred satellite
performance incentives (475) (2,008) (2,140)
Principal payments on
capital lease obligations - (1,867) (3,785)
Dividends to shareholders - (305,913) -
------------- ------------- -------------
Net cash used in financing
activities (475) (6,190) (8,550)
------------- ------------- -------------
Effect of exchange rate
changes on cash (75) 441 280
------------- ------------- -------------
Net change in cash and
cash equivalents 48,442 165,492 115,268
Cash and cash equivalents,
beginning of period 141,320 194,682 360,070
------------- ------------- -------------
Cash and cash equivalents,
end of period $189,762 $360,174 $475,338
============= ============= =============
Note: The increase in cash between the predecessor entity ending
balance and the successor entity opening balance is due to the
retention by Intelsat, Ltd. of approximately $5 million in Acquisition
financing proceeds.
INTELSAT, LTD.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW FROM OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------
2005 2006 2005 2006
(in thousands) (in thousands)
Net cash provided by operating
activities $140,712 $164,058 $246,643 $188,547
Payments for satellites and
other property and equipment (78,522) (43,530) (84,730) (65,009)
--------- --------- --------- ---------
Free cash flow from operations $62,190 $120,528 $111,913 $123,538
========= ========= ========= =========
Note:
Free cash flow from operations consists of net cash provided by
operating activities, less payments for satellites and other property
and equipment and associated capitalized interest. Free cash flow from
operations is not a measurement of cash flow under GAAP. Intelsat
believes free cash flow from operations is a useful measure of
financial performance that shows a company's ability to fund its
operations. Free cash flow from operations is used by Intelsat in
comparing its performance to that of its peers and is commonly used by
analysts and investors in assessing performance. Free cash flow from
operations does not give effect to cash used for debt service
requirements, and thus does not reflect funds available for investment
or other discretionary uses. Free cash flow from operations is not a
measure of financial performance under GAAP, and our free cash flow
from operations may not be comparable to similarly titled measures of
other companies. You should not consider free cash flow from
operations as an alternative to operating or net income, determined in
accordance with GAAP, as an indicator of Intelsat's operating
performance, or as an alternative to cash flows from operating
activities, determined in accordance with GAAP, as an indicator of
cash flows or as a measure of liquidity.
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