- First quarter revenue of $538.5
million
- First quarter net loss attributable to
Intelsat S.A. of $34.6 million
- First quarter Adjusted EBITDA of $409.8
million or 76 percent of revenue
- $8.5 billion contracted backlog
- Intelsat reaffirms 2017 Guidance
- Exchange Offers and Consent
Solicitations launched in March 2017 pursuant to Conditional Merger
with OneWeb
Intelsat S.A. (NYSE: I), operator of the world’s first
Globalized Network and leader in integrated satellite
communications, today announced financial results for the three
months ended March 31, 2017.
Intelsat reported total revenue of $538.5 million and net loss
attributable to Intelsat S.A. of $34.6 million for the three months
ended March 31, 2017.
Intelsat reported EBITDA1, or earnings before net interest, gain
on early extinguishment of debt, taxes and depreciation and
amortization, of $398.1 million and Adjusted EBITDA1 of $409.8
million, or 76 percent of revenue for the three months ended March
31, 2017.
Intelsat’s Chief Executive Officer, Stephen Spengler, said,
“Revenue of $538 million and Adjusted EBITDA of $410 million for
the first quarter reflect our continuing business transition as we
continue to make progress on the initiatives that will enable new
services and create top line growth for our company. Over the
course of the first quarter, Intelsat 33e and Intelsat 32e entered
into service. Our managed services, IntelsatOne® Flex, are
attracting new customers and will begin to generate incremental
revenues as these networks activate over the course of 2017.”
Mr. Spengler continued, “Growth in our media business was driven
by the two fully-committed satellites placed into service in 2016.
While we continue to work through some near-term headwinds, our
network services and government businesses are leveraging the
higher performance services available from the Intelsat EpicNG
network, which is now available on five continents. Backlog as of
March 31, 2017 was $8.5 billion.”
Mr. Spengler concluded, “Our proposed conditional merger with
OneWeb, which was announced on 28 February, is pending completion
of our announced debt exchange transactions and receipt of certain
other approvals. We believe the transaction creates a company with
greater growth opportunities and a strong financial foundation.
Importantly, we will be better positioned to achieve our shared
mission to unlock new applications for satellite-based solutions,
connecting people and devices everywhere.”
First Quarter 2017 Business Highlights
Intelsat provides critical communications infrastructure to
customers in the network services, media and government sectors.
Our customers use our services for broadband connectivity to
deliver fixed and mobile telecommunications, enterprise, video
distribution and fixed and mobile government applications. For
additional details regarding the performance of our customer sets,
see our Quarterly Commentary.
Network Services
Network services revenue was $212.9 million (or 39 percent of
Intelsat’s total revenue) for the three months ended March 31,
2017, a decrease of 7 percent compared to the three months ended
March 31, 2016.
Media
Media revenue was $225.1 million (or 42 percent of Intelsat’s
total revenue) for the three months ended March 31, 2017, an
increase of 6 percent compared to the three months ended March 31,
2016.
Government
Government revenue was $91.9 million (or 17 percent of
Intelsat’s total revenue) for the three months ended March 31,
2017, a decline of 11 percent compared to the three months ended
March 31, 2016.
Average Fill Rate
Intelsat’s average fill rate on our approximately 2,050
station-kept wide-beam transponders was 78 percent at March 31,
2017, compared to 77 percent as of December 31, 2016. Note that
Intelsat 31, an in-orbit spare satellite, is not included in the
station-kept transponder count. Separately, our fleet includes
approximately 650 36MHz units of high-throughput Intelsat EpicNG
capacity.
Satellite Launches
Intelsat 32e, the Intelsat EpicNG Ku-band payload, was
successfully launched on February 14, 2017 and entered service on
March 30, 2017.
The company has two additional satellite launches scheduled for
2017: Intelsat 35e in late June 2017 on a SpaceX, Falcon 9 rocket;
and Intelsat 37e in the third quarter of 2017 on an Arianespace,
Ariane 5 rocket.
Contracted Backlog
At March 31, 2017, Intelsat’s contracted backlog, representing
expected future revenue under existing contracts with customers,
was $8.5 billion, as compared to $8.7 billion at December 31,
2016.
Conditional Combination Agreement with WorldVu Satellites
Limited (“OneWeb”)
Intelsat and OneWeb announced on February 28, 2017 that they had
entered into a conditional combination agreement (the “Combination
Agreement”), pursuant to and subject to the terms and conditions of
which, OneWeb, the builder of a new Low Earth Orbit (“LEO”) global
communications system, will merge with and into Intelsat to create
a next-generation communications company (the “Merger”). In
addition, subject to the terms and conditions of a share purchase
agreement between Intelsat and SoftBank Group Corp. (“SoftBank”),
which currently owns equity in OneWeb and has additional
investments in OneWeb pending subject to certain conditions,
SoftBank is expected to invest an additional $1.7 billion in newly
issued common and preferred equity of the combined company (the
“SoftBank Investment”) to support the acceleration of the combined
company’s growth strategies and strengthen Intelsat’s capital
structure.
The Merger and the SoftBank Investment are expected to be
completed late in the third quarter of 2017, and are conditioned
upon the consummation of certain Intelsat debt exchange offers, the
receipt of certain regulatory approvals, and the consent and
approval by both Intelsat and OneWeb shareholders, as well as other
customary closing conditions. Further details on the status of the
exchange offers are provided below. There can be no assurance that
the Merger or the SoftBank Investment will be completed, or whether
the terms will be amended from those described above.
Capital Structure Activities
In January 2017, Intelsat (Luxembourg) S.A. completed an
exchange offer whereby it exchanged $403.3 million aggregate
principal amount of its 6 ¾% Senior Notes due 2018 (the “2018 Lux
Notes”) for an equal aggregate principal amount of its newly issued
12.5% Senior Notes due 2024 (the “2024 Lux Notes”). This exchange
consisted of the tender of $377.6 million aggregate principal
amount of 2018 Lux Notes held by Intelsat Connect Finance S.A.
which it acquired as a result of exchange transactions completed in
December 2016, together with $25 million aggregate principal amount
of 2018 Lux Notes that Intelsat (Luxembourg) S.A. repurchased in
the first quarter of 2015.
On March 24, 2017, Intelsat S.A. announced that its indirect
wholly-owned subsidiaries, Intelsat Jackson Holdings S.A.
(“Intelsat Jackson”), Intelsat Connect Finance S.A. (“ICF”), and
Intelsat (Luxembourg) S.A. (“Intelsat Luxembourg” and, together
with Intelsat Jackson and ICF, the “Issuers”) each had commenced an
offer or offers to exchange (collectively, the “Exchange Offers”)
certain of their respective outstanding senior unsecured notes (the
“Existing Notes”) for new Exchange Notes.
The Exchange Offers and related Consent Solicitations are being
conducted pursuant to the Combination Agreement. The Exchange
Offers are subject to certain conditions precedent, including,
among others, the tender of a minimum of 85% of the aggregate
outstanding principal amount of each series of Existing Notes.
On April 21, 2017, Intelsat announced that the deadline for
tenders in the Exchange Offers had been extended to May 10,
2017.
Financial Results for the Three Months Ended March 31,
2017
On-Network revenues generally include revenue from any services
delivered via our satellite or ground network. On-Network services
also include revenues from our channel services product, which are
not detailed here as they are immaterial in size and we no longer
actively market these services. Off-Network and Other Revenues
generally include revenue from transponder services, Mobile
Satellite Services (“MSS”) and other satellite-based transmission
services using capacity procured from other operators, often in
frequencies not available on our network. Off-Network and Other
Revenues also include revenue from consulting and other services
and sales of customer premises equipment.
Total On-Network Revenues reported a decline of $2.4
million to $491.4 million as compared to the three months ended
March 31, 2016:
- Transponder services reported an
aggregate decrease of $1.5 million, primarily due to a
$19.3 million decrease in revenue from network services
customers, partially offset by a $17.8 million increase from
media customers. The network services decline was mainly due to
previously noted lower pricing on renewing wide-beam services for
enterprise and wireless infrastructure related to activity in
Africa, and non-renewals of point-to-point services from customers
operating in Africa and Latin America. The network services decline
was also due to non-renewals of services related to the challenging
economic environment in Russia. The media increase resulted
primarily from growth in direct-to-home television services in the
Latin America, Caribbean and Africa regions, partially offset by
declines in the Asia-Pacific and North America regions.
- Managed services reported an
aggregate increase of $0.3 million, largely due to a net increase
of $8.1 million in revenue from network services customers for
broadband services for primarily air and maritime mobility
applications, largely offset by declines in revenue of $2.2 million
from network services customers for point-to-point trunking
applications, which are switching to fiber alternatives, and a $1.7
million decrease from media customers for occasional video
solutions.
Total Off-Network and Other Revenues reported an
aggregate decline of $11.8 million, or a decrease of 20 percent, to
$47.0 million, as compared to the three months ended March 31,
2016:
- Transponder, MSS and other
Off-Network services reported an aggregate decrease of $10.8
million, primarily due to reduced sales of customer premises
equipment and decreases in services for government applications,
largely related to sales of Off-Network managed services.
- Satellite-related services
reported a slight aggregate decrease of $1.0 million, primarily due
to decreased revenue from professional services supporting
third-party satellites.
For the three months ended March 31, 2017, changes in operating
expenses, interest expense, net, and other significant income
statement items are described below.
Direct costs of revenue (excluding depreciation and
amortization) decreased by $3.0 million, or 3 percent, to $84.5
million, as compared to the three months ended March 31, 2016. This
reflects a decrease of $8.4 million largely due to lower cost of
sales for customer premise equipment related to our government
customer set and declines in cost of Off-Network fixed satellite
services and managed services capacity purchased in support of our
government business. This was partially offset by an increase of
$1.8 million in staff-related expenses in relation to the company’s
managed services strategy, an increase of $1.4 million in
satellite-related insurance costs due to recent launches and a $1.2
million increase in licenses and fees.
Selling, general and administrative expenses remained
consistent at $57.3 million, as compared to the three months ended
March 31, 2016. A $6.4 million increase in professional services
fees were substantially offset by a $6.6 million decline in bad
debt expense from the Latin America region.
Depreciation and amortization expense increased by $10.3
million, or 6 percent, to $179.1 million, as compared to the three
months ended March 31, 2016.
Interest expense, net consists of the interest expense we
incur offset by interest income earned and the amount of interest
we capitalize related to assets under construction. Interest
expense, net increased by $29.3 million, or 14 percent, to $246.2
million for the three months ended March 31, 2017, as compared to
$216.9 million in the three months ended March 31, 2016. This was
principally due to a net increase of $18.1 million in interest
expense primarily driven by new debt issuances in 2016, which was
offset by certain discounted debt repurchases and exchanges in
2016, and an increase of $10.4 million from lower capitalized
interest for the three months ended March 31, 2017, primarily
resulting from a decreased number of satellites and related assets
under construction.
The non-cash portion of total interest expense, net was $11.8
million for the three months ended March 31, 2017, due to the
amortization of deferred financing fees and the accretion and
amortization of discounts and premiums.
Other income, net was $1.3 million for the three months
ended March 31, 2017, as compared to other expense, net of $0.6
million for the three months ended March 31, 2016. The increase of
$1.9 million was primarily due to a $2.0 million increase in income
related to our business conducted in Brazilian reais.
Provision for income taxes was $6.8 million for the three
months ended March 31, 2017, as compared to $5.4 million for the
three months ended March 31, 2016. The increase was principally due
to higher income for our U.S. subsidiaries for the three months
ended March 31, 2017. Cash paid for income taxes, net of refunds,
totaled $16.5 million for the three months ended March 31, 2017, as
compared to $11.6 million for the three months ended March 31,
2016.
Net Income, Net Income per Diluted Common Share attributable
to Intelsat S.A., EBITDA and Adjusted EBITDA
Net loss attributable to Intelsat S.A. was $34.6 million
for the three months ended March 31, 2017, compared to net income
attributable to Intelsat S.A. of $15.3 million for the same period
in 2016.
Net loss per diluted common share attributable to Intelsat
S.A. was $0.29 for the three months ended March 31, 2017,
compared to net income per diluted common share of $0.13 for the
same period in 2016.
EBITDA was $398.1 million for the three months ended
March 31, 2017, compared to $407.5 million for the same period in
2016.
Adjusted EBITDA was $409.8 million for the three months
ended March 31, 2017, or 76 percent of revenue, compared to $417.7
million, or 76 percent of revenue, for the same period in 2016.
Intelsat management has reviewed the data pertaining to the use
of the Intelsat network, and is providing revenue information with
respect to that use by customer set and service type in the
following tables. Intelsat management believes this provides a
useful perspective on the changes in revenue and customer trends
over time.
By Customer Set
Three Months EndedMarch
31,
Three Months EndedMarch
31,
2016 2017 Network Services $ 227,687 41
% $ 212,933 39 %
Media 212,138 38 % 225,054 42 %
Government 103,532 19 % 91,919 17 %
Other
9,286 2 % 8,578 2 % $ 552,643 100 % $ 538,484 100 %
By Service Type
Three Months EndedMarch
31,
Three Months EndedMarch
31,
2016 2017 On-Network Revenues Transponder
services $ 390,374 71 % $ 388,878 72 % Managed services 100,614 18
% 100,917 19 % Channel services 2,837 1 % 1,640 0 %
Total on-network revenues 493,825 89 % 491,435 91 %
Off-Network
and Other Revenues Transponder, MSS and other off-network
services 46,217 8 % 35,439 7 % Satellite-related services
12,601 2 % 11,610 2 % Total off-network and other revenues
58,818 11 % 47,049 9 % Total $ 552,643 100 % $
538,484 100 %
Free Cash Flow Used in Operations
Net cash provided by operating activities was $178.4 million for
the three months ended March 31, 2017, and free cash flow used in
operations1 was $18.4 million for the same period. Free cash flow
from (used in) operations is defined as net cash provided by
operating activities, less payments for satellites and other
property and equipment (including capitalized interest) and other
payments for satellites from financing activities. Payments for
satellites and other property and equipment from investing
activities during the three months ended March 31, 2017 was $178.5
million.
Financial Outlook 2017
Today, Intelsat reaffirmed its 2017 revenue and Adjusted EBITDA
guidance issued on February 28, 2017, in which the company expects
the following:
Revenue: Intelsat forecasts full-year 2017 revenue to be
in a range of $2.180 billion to $2.225 billion.
Adjusted EBITDA: Intelsat forecasts Adjusted EBITDA
performance for the full-year 2017 to be in a range of $1.655
billion to $1.700 billion.
Capital Expenditures: As disclosed on February 28, 2017,
in light of the proposed Merger with OneWeb, we will defer
providing guidance on capital expenditures prior to the completion
of the transaction. Once the Merger is completed, the results of a
thorough technical and business evaluation will be quantified to
produce a combined capital expenditure plan.
1In this release, financial measures are presented both in
accordance with U.S. GAAP and also on a non-U.S. GAAP basis.
EBITDA, Adjusted EBITDA (or “AEBITDA”), free cash flow from (used
in) operations and related margins included in this release are
non-U.S. GAAP financial measures. Please see the consolidated
financial information below for information reconciling non-U.S.
GAAP financial measures to comparable U.S. GAAP financial
measures.
Q1 2017 Quarterly Commentary
Intelsat provides a detailed quarterly commentary on the
Company’s business trends and performance. Please visit
www.intelsat.com/investors for management’s commentary on the
Company’s progress against its operational priorities and financial
outlook.
Conference Call Information
Intelsat management will hold a public conference call at 8:30
a.m. ET on Thursday, April 27, 2017 to discuss the Company’s first
quarter financial results for the period ended March 31, 2017.
Access to the live conference call will also be available via the
Internet at www.intelsat.com/investors. To participate on the live
call, participants should dial +1 844-834-1428 from North America,
and +1 920-663-6274 from all other locations. The participant pass
code is 92095288.
Participants will have access to a replay of the conference call
through May 4, 2017. The replay number for North America is +1
855-859-2056, and for all other locations is +1 404-537-3406. The
participant pass code for the replay is 92095288.
About Intelsat
Intelsat S.A. (NYSE: I) operates the world’s first Globalized
Network, delivering high-quality, cost-effective video and
broadband services anywhere in the world. Intelsat’s Globalized
Network combines the world’s largest satellite backbone with
terrestrial infrastructure, managed services and an open,
interoperable architecture to enable customers to drive revenue and
reach through a new generation of network services. Thousands of
organizations serving billions of people worldwide rely on Intelsat
to provide ubiquitous broadband connectivity, multi-format video
broadcasting, secure satellite communications and seamless mobility
services. The end result is an entirely new world, one that allows
us to envision the impossible, connect without boundaries and
transform the ways in which we live. For more information, visit
www.intelsat.com.
Intelsat Safe Harbor Statement:
Some of the information and statements contained in this
earnings release and certain oral statements made from time to time
by representatives of Intelsat constitute "forward-looking
statements" that do not directly or exclusively relate to
historical facts. When used in this earnings release, the words
“may,” “will,” “might,” “should,” “expect,” “plan,” “anticipate,”
“project,” “believe,” “estimate,” “predict,” “intend,” “potential,”
“outlook,” and “continue,” and the negative of these terms, and
other similar expressions are intended to identify forward-looking
statements and information. Forward-looking statements include: our
statements regarding certain plans, expectations, goals,
projections, and beliefs about the benefits of the proposed merger
and investment transactions, the transactions parties’ plans,
objectives, expectations and intentions, and the expected timing of
completion of the proposed transactions; our expectation that the
launches of our satellites in the future will position us for
growth; our plans for satellite launches in the near to mid-term;
our guidance regarding our expectations for our revenue performance
and Adjusted EBITDA performance; our capital expenditure guidance
over the next several years; our belief that the scale of our fleet
can reduce the financial impact of satellite or launch failures and
protect against service interruptions; our belief that the
diversity of our revenue and customer base allow us to recognize
trends across regions and capture new growth opportunities; our
expectation that developing differentiated services and investing
in new technology will allow us to unlock essential opportunities;
our expectations as to the increased number of transponder
equivalents on our fleet over the next several years; and our
expectations as to the level of our cash tax payments in the
future.
The forward-looking statements reflect Intelsat's intentions,
plans, expectations, anticipations, projections, estimations,
predictions, outlook, assumptions and beliefs about future events
and are subject to 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. Some of the factors that could
cause actual results to differ from historical results or those
anticipated or predicted by these forward-looking statements
include: risks associated with operating our in-orbit satellites;
satellite anomalies, launch failures, satellite launch and
construction delays and in-orbit failures or reduced performance;
potential changes in the number of companies offering commercial
satellite launch services and the number of commercial satellite
launch opportunities available in any given time period that could
impact our ability to timely schedule future launches and the
prices we pay for such launches; our ability to obtain new
satellite insurance policies with financially viable insurance
carriers on commercially reasonable terms or at all, as well as the
ability of our insurance carriers to fulfill their obligations;
possible future losses on satellites that are not adequately
covered by insurance; U.S. and other government regulation; changes
in our contracted backlog or expected contracted backlog for future
services; pricing pressure and overcapacity in the markets in which
we compete; our ability to access capital markets for debt or
equity; the competitive environment in which we operate; customer
defaults on their obligations to us; our international operations
and other uncertainties associated with doing business
internationally; the possibility that the proposed Merger and
SoftBank Investment do not close when expected or at all; potential
adverse reactions or changes to business or employee relationships,
including those resulting from the announcement or completion of
the proposed Merger and SoftBank Investment; competitive responses
to the proposed Merger and SoftBank Investment; the possibility
that the anticipated benefits of the Merger and SoftBank Investment
are not realized when expected or at all, including as a result of
the impact of, or problems arising from, the integration of the two
companies, or conditions imposed in order to obtain regulatory
approvals to complete the Merger and SoftBank Investment; the
possibility that the proposed Merger and SoftBank Investment may be
more expensive to complete than anticipated, including as a result
of unexpected factors or events; diversion of management’s
attention from ongoing business operations and opportunities; the
possibility that the condition to the Merger and SoftBank
Investment relating to the completion of exchange offers may not be
satisfied, or may be satisfied on different terms than currently
proposed; and litigation. Known risks include, among others, the
risks described in Intelsat’s annual report on Form 20-F for the
year ended December 31, 2016, and its other filings with the U.S.
Securities and Exchange Commission, the political, economic and
legal conditions in the markets we are targeting for communications
services or in which we operate and other risks and uncertainties
inherent in the telecommunications business in general and the
satellite communications business in particular.
Because actual results could differ materially from Intelsat's
intentions, plans, expectations, anticipations, projections,
estimations, predictions, outlook, assumptions and beliefs about
the future, you are urged to view all forward-looking statements
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 S.A.
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS
($ in thousands, except per share
amounts)
Three MonthsEndedMarch
31, 2016
Three MonthsEndedMarch
31, 2017
Revenue $ 552,643 $ 538,484 Operating expenses: Direct costs of
revenue (excluding depreciation and amortization) 87,460 84,461
Selling, general and administrative 57,130 57,295 Depreciation and
amortization 168,880 179,132 Total
operating expenses 313,470 320,888
Income from operations 239,173 217,596 Interest expense, net
216,910 246,246 Gain on early extinguishment of debt - 504 Other
income (expense), net (582 ) 1,344 Income
(loss) before income taxes 21,681 (26,802 ) Provision for income
taxes 5,389 6,840 Net income (loss)
16,292 (33,642 ) Net income attributable to noncontrolling interest
(966 ) (928 ) Net income (loss) attributable to
Intelsat S.A. $ 15,326 $ (34,570 ) Net income
(loss) per common share attributable to Intelsat S.A.: Basic $ 0.14
$ (0.29 ) Diluted $ 0.13 $ (0.29 )
INTELSAT S.A.
UNAUDITED RECONCILIATION OF NET
INCOME/(LOSS) TO EBITDA
($ in thousands)
Three MonthsEndedMarch
31,2016
Three MonthsEndedMarch
31,2017
Net income (loss) $ 16,292 $ (33,642 ) Add (Subtract): Interest
expense, net 216,910 246,246 Gain on early extinguishment of debt -
(504 ) Provision for income taxes 5,389 6,840 Depreciation and
amortization 168,880 179,132 EBITDA $
407,471 $ 398,072 EBITDA Margin 74 % 74
%
Note:
Intelsat calculates a measure called EBITDA to assess the
operating performance of Intelsat S.A. EBITDA consists of earnings
before net interest, gain on early extinguishment of debt, taxes
and depreciation and amortization. Given our high level of
leverage, refinancing activities are a frequent part of our efforts
to manage our costs of borrowing. Accordingly, we consider gain on
early extinguishment of debt an element of interest expense. EBITDA
is a measure commonly used in the Fixed Satellite Services (“FSS”)
sector, and we present EBITDA to enhance the understanding of our
operating performance. We use EBITDA as one criterion for
evaluating our performance relative to that of our peers. We
believe that EBITDA is an operating performance measure, and not a
liquidity measure, that provides investors and financial 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.
EBITDA is not a measure of financial performance under U.S.
GAAP, and our EBITDA may not be comparable to similarly titled
measures of other companies. EBITDA should not be considered as an
alternative to operating income (loss) or net income (loss),
determined in accordance with U.S. GAAP, as an indicator of our
operating performance, or as an alternative to cash flows from
operating activities, determined in accordance with U.S. GAAP, as
an indicator of cash flows, or as a measure of liquidity.
INTELSAT S.A.
UNAUDITED RECONCILIATION OF NET
INCOME/(LOSS) TO ADJUSTED EBITDA
($ in thousands)
Three MonthsEndedMarch
31, 2016
Three MonthsEndedMarch
31, 2017
Net income (loss) $ 16,292 $ (33,642 ) Add (Subtract):
Interest expense, net 216,910 246,246 Gain on early extinguishment
of debt - (504 ) Provision for income taxes 5,389 6,840
Depreciation and amortization 168,880 179,132
EBITDA 407,471 398,072 Add:
Compensation and benefits 7,669 4,902 Non-recurring and other
non-cash items 2,530 6,864 Adjusted
EBITDA $ 417,670 $ 409,838 Adjusted
EBITDA Margin 76 % 76 %
Note:
Intelsat calculates a measure called Adjusted EBITDA to assess
the operating performance of Intelsat S.A. Adjusted EBITDA consists
of EBITDA as adjusted to exclude or include certain unusual items,
certain other operating expense items and certain other adjustments
as described in the table above. Our management believes that the
presentation of Adjusted EBITDA provides useful information to
investors, lenders and financial analysts regarding our financial
condition and results of operations, because it permits clearer
comparability of our operating performance between periods. By
excluding the potential volatility related to the timing and extent
of non-operating activities, our management believes that Adjusted
EBITDA provides a useful means of evaluating the success of our
operating activities. We also use Adjusted EBITDA, together with
other appropriate metrics, to set goals for and measure the
operating performance of our business, and it is one of the
principal measures we use to evaluate our management’s performance
in determining compensation under our incentive compensation plans.
Adjusted EBITDA measures have been used historically by investors,
lenders and financial analysts to estimate the value of a company,
to make informed investment decisions and to evaluate performance.
Our management believes that the inclusion of Adjusted EBITDA
facilitates comparison of our results with those of companies
having different capital structures.
Adjusted EBITDA is not a measure of financial performance under
U.S. GAAP, and our Adjusted EBITDA may not be comparable to
similarly titled measures of other companies. Adjusted EBITDA
should not be considered as an alternative to operating income
(loss) or net income (loss), determined in accordance with U.S.
GAAP, as an indicator of our operating performance, or as an
alternative to cash flows from operating activities, determined in
accordance with U.S. GAAP, as an indicator of cash flows, or as a
measure of liquidity.
INTELSAT S.A. CONSOLIDATED
BALANCE SHEETS ($ in thousands, except per share
amounts)
As ofDecember
31,2016
As ofMarch
31,2017
(unaudited) ASSETS Current assets: Cash and cash
equivalents $ 666,024 $ 622,675 Receivables, net of allowance of
$54,744 in 2016 and $52,481 in 2017 203,036 197,555 Prepaid
expenses and other current assets 55,908
57,203 Total current assets 924,968 877,433 Satellites and
other property and equipment, net 6,185,842 6,189,773 Goodwill
2,620,627 2,620,627 Non-amortizable intangible assets 2,452,900
2,452,900 Amortizable intangible assets, net 391,838 381,274 Other
assets 365,834 389,896 Total assets $
12,942,009 $ 12,911,903
LIABILITIES AND
SHAREHOLDERS' DEFICIT Current liabilities: Accounts payable and
accrued liabilities $ 215,987 $ 157,503 Taxes payable 16,733 7,544
Employee related liabilities 50,178 28,248 Accrued interest payable
204,840 289,918 Deferred satellite performance incentives 23,455
28,738 Deferred revenue 157,684 161,935 Other current liabilities
64,786 50,743 Total current liabilities
733,663 724,629 Long-term debt, net of current portion 14,198,084
14,209,427 Deferred satellite performance incentives, net of
current portion 210,706 228,195 Deferred revenue, net of current
portion 906,744 892,608 Deferred income taxes 168,445 172,177
Accrued retirement benefits 186,284 183,178 Other long-term
liabilities 148,081 141,221 Shareholders' deficit: Common
shares; nominal value $0.01 per share 1,180 1,188 Paid-in capital
2,156,911 2,161,947 Accumulated deficit (5,715,931 ) (5,750,501 )
Accumulated other comprehensive loss (76,305 )
(74,741 ) Total Intelsat S.A. shareholders' deficit (3,634,145 )
(3,662,107 ) Noncontrolling interest 24,147
22,575 Total liabilities and shareholders' deficit $
12,942,009 $ 12,911,903
INTELSAT S.A. UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS ($ in thousands)
Three MonthsEnded March
31, 2016
Three MonthsEnded March
31, 2017
Cash flows from operating activities: Net income (loss) $
16,292 $ (33,642 ) Adjustments to reconcile net income (loss) to
net cash provided by operating activities: Depreciation and
amortization 168,880 179,132 Provision for doubtful accounts 6,258
(329 ) Foreign currency transaction gain (1,710 ) (1,539 ) Loss on
disposal of assets - 24 Share-based compensation 7,669 4,902
Deferred income taxes (2,422 ) (1,325 ) Amortization of discount,
premium, issuance costs and related costs 5,066 11,812 Gain on
early extinguishment of debt - (504 ) Unrealized gains on
derivative financial instruments (764 ) - Amortization of actuarial
loss and prior service credits for retirement benefits 840 893
Other non-cash items 1,191 18 Changes in operating assets and
liabilities: Receivables 5,476 6,653 Prepaid expenses and other
assets (11,840 ) (6,433 ) Accounts payable and accrued liabilities
(15,046 ) (39,932 ) Accrued interest payable 150,094 85,078
Deferred revenue 25,477 (23,408 ) Accrued retirement benefits
(2,413 ) (3,106 ) Other long-term liabilities 90
70 Net cash provided by operating activities
353,138 178,364
Cash flows from investing
activities: Payments for satellites and other property and
equipment (including capitalized interest) (227,176 ) (178,473 )
Purchase of cost method investments (4,000 ) (16,000 ) Capital
contributions to unconsolidated affiliates (456 )
(3,022 ) Net cash used in investing activities (231,632 )
(197,495 )
Cash flows from financing activities:
Proceeds from issuance of long-term debt 1,250,000 - Debt issuance
costs (19,200 ) - Payments on debt exchange - (14 ) Dividends paid
to preferred shareholders (2,480 ) - Other payments for satellites
- (18,333 ) Principal payments on deferred satellite performance
incentives (3,971 ) (4,570 ) Dividends paid to noncontrolling
interest (2,310 ) (2,500 ) Other financing activities -
503 Net cash provided by (used in) financing
activities 1,222,039 (24,914 ) Effect of
exchange rate changes on cash and cash equivalents 237
696 Net change in cash and cash equivalents
1,343,782 (43,349 ) Cash and cash equivalents, beginning of period
171,541 666,024 Cash and cash
equivalents, end of period $ 1,515,323 $ 622,675
Supplemental cash flow information: Interest paid,
net of amounts capitalized $ 61,925 $ 149,724 Income taxes paid,
net of refunds 11,630 16,489
Supplemental disclosure of non-cash
investing activities: Accrued capital expenditures $ 98,090 $
46,775 Capitalization of deferred satellite performance incentives
31,600 27,325
INTELSAT
S.A. UNAUDITED RECONCILIATION OF NET CASH PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW FROM (USED IN)
OPERATIONS ($ in thousands)
Three MonthsEndedMarch
31,
Three MonthsEndedMarch
31,
2016 2017 Net cash provided by operating
activities $ 353,138 $ 178,364 Payments for satellites and other
property
and equipment (including capitalized
interest)
(227,176 ) (178,473 ) Other payments for satellites from financing
activities - (18,333 ) Free cash flow from
(used in) operations $ 125,962 $ (18,442 )
Note:
Free cash flow from (used in) operations consists of net cash
provided by operating activities, less payments for satellites and
other property and equipment (including capitalized interest) from
investing activities and other payment for satellites from
financing activities. Free cash flow from (used in) operations is
not a measurement of cash flow under U.S. GAAP. Intelsat believes
free cash flow from (used in) operations is a useful measure of
financial performance that shows a company’s ability to fund its
operations. Free cash flow from (used in) operations is used by
Intelsat in comparing its performance to that of its peers and is
commonly used by financial analysts and investors in assessing
performance. Free cash flow from (used in) 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 (used in) operations is not a measure of
financial performance under U.S. GAAP, and free cash flow from
(used in) operations may not be comparable to similarly titled
measures of other companies. You should not consider free cash flow
from (used in) operations as an alternative to operating income
(loss) or net income (loss), determined in accordance with U.S.
GAAP, as an indicator of Intelsat’s operating performance, or as an
alternative to cash flows from operating activities, determined in
accordance with U.S. GAAP, as an indicator of cash flows, or as a
measure of liquidity.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170427005347/en/
IntelsatDianne VanBeberVice President, Investor Relations and
Corporate Communications+1
703-559-7406dianne.vanbeber@intelsat.com
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