SPOT Spotify Technology SA

PanAmSat Reports First Quarter 2004 Results Company Revenues Increase as First U.S. High-Definition Satellite Neighborhood Is Turned On; Transaction With KKR Announced WILTON, Conn., May 3 /PRNewswire-FirstCall/ -- PanAmSat Corporation today reported financial results for the first quarter ended March 31, 2004 during which total revenues increased to $205.4 million compared to $199.8 million in 2003. An unusual non-cash charge of approximately $100 million resulted in reported earnings per share (EPS) being reduced from $0.21 to $(0.21)(3). Without this charge and the related income tax effect, the Company met or exceeded its guidance including maintaining a strong financial position with Free Cash Flow (1) of $57.6 million for the first quarter compared to $37.8 million in the same period of 2003. The Company also ended the first quarter of 2004 with a cash balance of $612 million versus $511 million at the end of 2003 even after paying down $850 million in debt last year. "Despite this weak market, we continued to deliver strong cash flow and profitability. Our reported financials were affected by an unusual non-cash charge that was due to an impairment loss on one of our in-orbit international spares, PAS-6, after the March 2004 failure of the satellite's power system. There were no customers on this satellite and there is no impact on our revenues," said Joe Wright, president and CEO of PanAmSat. "During the quarter, we launched the first high-definition (HD) neighborhood on Galaxy 13 and signed one of the largest contracts in our history with the Fox Entertainment Group. As a result, PanAmSat has the industry's leading HD satellite neighborhoods with such powerhouses as Bravo HD+, Cinemax HD, ESPN HD, Encore HD, HBO HD, HDNet, HDNet Movies, Showtime HD, Starz! HD, TNT HD, the WB HD and Wealth TV. In fact, every major cable movie network is leveraging the power of the Galaxy fleet to launch their HD services. With more than 2,100 cable and broadcast channels already coming through our network, it is easy to see why the major programmers come to us to deliver their content," said Wright. On April 20, 2004, PanAmSat and its 80.5 percent stakeholder, The DIRECTV Group, Inc. announced that they signed a definitive transaction agreement with affiliates of Kohlberg Kravis Roberts & Co. ("KKR") for the sale of PanAmSat Corp. at $23.50 in cash per share. The aggregate transaction value, including the expected assumption of approximately $750 million of net debt, is approximately $4.3 billion. Subject to applicable regulatory approvals, including the Federal Communications Commission and approval by the stockholders of PanAmSat, the transaction is expected to be completed in the second half of 2004. The boards of directors of both PanAmSat Corp. and The DIRECTV Group voted unanimously in favor of the transaction. Wright continued, "For the past three years we have focused on improving the fundamentals of our business and we are now ready for growth. Over the course of the next several years, we will launch two more satellites to expand our HD offering and continue to develop our services to the U.S. Government, which is the single largest user of FSS services in the world. We will also continue to bring satellite-based products and services to market in partnership with our customers. Recently, we launched PASPort, our global hybrid satellite and fiber network as well as several new products under our PanAmSat On Demand brand. These include QuickSPOT, a family of auto-acquisition satellite terminals. We are also co-marketing with BT SatNet, skIP Broadband Services and others. As we move ahead, we will continue to focus on the delivery of strong financial results while maintaining our leadership in the delivery of advanced digital applications in the air and on the ground. We are delighted that KKR selected PanAmSat as its platform for growth in our industry. They, as we, have a well-deserved reputation for excellence and the delivery of results for their investors." Financial Results for Three Months Ended March 31, 2004 Total revenues for the first quarter of 2004 were $205.4 million, compared to revenues of $199.8 million for the first quarter of 2003. Operating lease revenues were $201.2 million for the first quarter of 2004, compared to $195.4 million for the same period in 2003. The increase in operating lease revenues was primarily attributable to additional government services revenue related to our G2 Satellite Solutions segment (G2) and an increase in network services revenue. These increases were partially offset by lower video services revenues recorded primarily due to customer credit-related issues. Total sales and sales-type lease revenues were $4.2 million for the quarter ended March 31, 2004, compared to $4.3 million for the same period in 2003. Total direct operating costs and selling, general & administrative costs for the three months ended March 31, 2004 were $57.2 million compared to $51.2 million for the same period in 2003. This increase is primarily attributable to costs related to revenues from G2. On March 17, 2004, our PAS-6 satellite suffered an anomaly resulting in a loss of power. On April 1, 2004, this satellite experienced another anomaly and more significant loss of power. Following that event, we commenced deorbiting the satellite. As a result of the March 17 event, we recorded a non-cash impairment charge of $99.9 million within income from operations in the first quarter of 2004. This resulted in an approximate $63.3 million non-cash charge to net income after taxes. PAS-6 had been previously replaced and was used as a backup for another satellite. Accordingly, this event has not affected service to any of our customers and we anticipate that it will not affect our revenues in 2004. We do not plan to replace this satellite. For the three months ended March 31, 2004, operating profit before depreciation and amortization(2) was $46.4 million, as compared to $148.5 million for the same period in 2003. This decrease was primarily the result of the PAS-6 impairment loss and a change in the revenue mix of the Company's services, including the previously mentioned increase in G2 revenue. Excluding the PAS-6 impairment loss recorded during the first quarter of 2004, our operating profit before depreciation and amortization and income from operations would have been $146.4 million(3) and $71.0 million(3), respectively. For the three months ended March 31, 2004, net income (loss) was ($31.9) million, compared to $30.9 million for the same period in 2003. EPS was ($0.21) per share for the first quarter of 2004 compared to $0.21 per share for the first quarter of 2003. The change in net income and earnings per share was primarily due to the PAS-6 impairment loss and related income tax effect recorded during the first quarter of 2004 and the other changes in operating profit before depreciation and amortization described above. Excluding the PAS-6 impairment loss recorded during the first quarter of 2004, our earnings per share would have been $0.21 per share(3). Segment Information Our operations are comprised of the following two segments: Fixed Satellite Services ("FSS") -- We lease transponder capacity to customers for various applications, including broadcasting, news gathering, Internet access and transmission, private voice and data networks, business television, distance learning and direct-to-home television ("DTH") and provide telemetry, tracking and control services ("TT&C") and network services to customers. Government Services ("G2 Satellite Solutions" [G2]) -- We provide global satellite and related telecommunications services to the Federal government, international government entities, and their contractors through our wholly owned subsidiary, formerly a division of ours. FSS Segment: Three Months Ended March 31, 2004 2003 Revenue $189,427 $195,672 Operating Profit Before Depreciation and Amortization(2) $44,224 $146,671 Income (Loss) From Operations ($ 30,673) $74,414 FSS revenues for the three months ended March 31, 2004 decreased $6.2 million compared to the same period in 2003. This decease was primarily due to lower program distribution and DTH video revenues attributable to lower net new business and customer credit issues, partially offset by higher network services revenues and revenues related to satellite capacity leased to the G2 operating segment. Video services revenues of $115.7 million for the three months ended March 31, 2004 decreased $11.1 million from the $126.8 million recorded during the same period in 2003. This decrease was primarily a result of lower DTH revenues due to customer credit issues and capacity reduction, which were largely associated with two customers. Network services revenues of $55.1 million for the three months ended March 31, 2004 increased $4.7 million from the $50.4 million recorded during the same period in 2003. The increase in network services revenues is primarily a result of net new business recorded from network resellers. These increases were partially offset by lower Internet related revenues as a result of contract expirations. Operating profit before depreciation and amortization and income from operations for the three months ended March 31, 2004 decreased by $102.4 million and $105.1 million, respectively, as compared to the same period in 2003. These decreases were primarily due to the loss on the impairment of PAS-6 of $99.9 million and lower revenue as described above. Excluding the PAS-6 impairment loss recorded during the first quarter of 2004, the operating profit before depreciation and amortization and income from operations of the FSS segment would have been $144.2 million(3) and $69.3 million(3), respectively. G2 Segment: Three Months Ended March 31, 2004 2003 Revenue $21,816 $9,631 Operating Profit Before Depreciation and Amortization(2) $2,188 $1,871 Income From Operations $1,750 $1,861 The increase in G2 segment revenues of $12.2 million in 2004 reflects a full quarter of the acquisitions made during 2003, including Hughes Global Services and Esatel, as well as an increase in equipment-based sales as compared to the same period in 2003. The increase in G2 segment operating profit before depreciation and amortization of $0.3 million resulted from higher revenue that includes a larger mix of equipment and non-satellite bandwidth sales, which carry lower margins. In addition, income from operations remained flat as a result of a full quarter of depreciation in 2004 on the Silver Spring teleport acquired with the Esatel business. Financial Guidance for Second Quarter and Full-Year 2004 The Company projects its financial results for the second quarter and full-year 2004 will be as follows: Consolidated Second Quarter 2004 Full Year 2004 Total revenues $200 - $215 million $835 - $865 million Operating profit before depreciation and amortization(2) $135 - $150 million $475 - $495 million Depreciation and amortization $70 - $80 million $280 - $310 million Income from operations $60 - $75 million $165 - $195 million Earnings per share $0.17 - $0.23 per share $0.40 - $0.55 per share Capital expenditures $50 - $70 million $165 - $195 million Segments Second Quarter 2004 Full Year 2004 Revenues: FSS $182 - 192 million $755 - 775 million G2 $20 - 30 million $90 - $110 million Operating profit before depreciation and amortization(2): FSS $135 - 145 million $465 - 480 million G2 $ 1 - 5 million $ 10 - 15 million Income from operations: FSS $60 - 70 million $155 - 180 million G2 $ 1 - 5 million $ 10 - 15 million NON-GAAP FINANCIAL RECONCILIATION SCHEDULES The tables below are non-GAAP disclosures. Management encourages readers to use GAAP disclosures referred to earlier in this release to evaluate the Company's results of operations. These non-GAAP tables are included to aid the reader in understanding our GAAP financial statements. Second Consolidated PanAmSat First First Quarter Full Year Quarter Quarter 2004 2004 2004 2003 Guidance Guidance Actual Actual Operating profit before depreciation and amortization(2) $ 46.4M $148.5M $135 - 150M $475 - 495M Less: Depreciation and amortization 75.3M 72.2M $70 - 80M $280 - 310M Income (loss) from operations $(28.9M) $ 76.3M $60 - 75M $165 - 195M Net cash flow provided by operating activities: $ 79.8M $ 79.1M Net cash flow provided by N/A N/A (used in) investing activities: 6.7M (42.1)M (Sale)/Purchase of short-term investments: (28.9)M 0.8M Free Cash Flow(1) $57.6M $37.8M First First Second FSS Segment Quarter Quarter Quarter Full Year 2004 2003 2004 2004 Actual Actual Guidance Guidance Operating profit before depreciation and amortization(2) $ 44.2M $146.6M $135 - 145M $465 - 480M Less: Depreciation and amortization 74.9M 72.2M $70 - 80M $280 - 310M Income (loss) from operations $ (30.7M) $ 74.4M $60 -70M $155 - 180M First First Second G2 Segment Quarter Quarter Quarter Full Year 2004 2003 2004 2004 Actual Actual Guidance Guidance Operating profit before depreciation and amortization(2) $ 2.2M $ 1.9M $1 - 5M $10 - 15 M Less: Depreciation and amortization 0.4M - M - M - M Income from operations $ 1.8M $ 1.9M $1 - 5M $10 - 15 M (1) Free Cash Flow, which is a non-GAAP financial measure, equals net cash provided by operating activities plus (less) net cash provided by (used in) investing activities (excluding purchases and sales of short-term investments) as presented in the attached Summarized Statements of Cash Flows. This measure should be used in conjunction with other GAAP financial measures and is not presented as an alternative measure of cash flow as determined in accordance with accounting principles generally accepted in the United States of America. PanAmSat's management uses Free Cash Flow to evaluate the operating performance of its business, and as a measure of performance for incentive compensation purposes. PanAmSat believes Free Cash Flow is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. PanAmSat's management also uses this metric to measure cash flows generated from operations that could be used to service debt, fund future capital expenditures or pay taxes. Free Cash Flow 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 as presented herein may not be comparable to similarly titled measures reported by other companies. (2) Operating profit before depreciation and amortization, which is a non-GAAP financial measure, is the sum of income (loss) from operations and depreciation and amortization as presented in the attached Summaries of Operating Results and Selected Segment Data. This measure should be used in conjunction with other GAAP financial measures and is not presented as an alternative measure of operating results or cash flow from operations, as determined in accordance with accounting principles generally accepted in the United States of America. PanAmSat's management uses Operating profit before depreciation and amortization to evaluate the operating performance of its business, and as a measure of performance for incentive compensation purposes. PanAmSat believes Operating profit before depreciation and amortization is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. PanAmSat's management also uses this metric to measure income generated from operations that could be used to service debt, fund future capital expenditures or pay taxes. In addition, multiples of current or projected Operating profit before depreciation and amortization are used to estimate current or prospective enterprise value. Operating profit before depreciation and amortization does not give effect to cash used for debt service requirements, and thus does not reflect funds available for investment or other discretionary uses. Operating profit before depreciation and amortization as presented herein may not be comparable to similarly titled measures reported by other companies. PAS - 6 IMPAIRMENT LOSS RECONCILIATION SCHEDULE The following schedule reconciles certain amounts presented in the attached Summary of Operating Results and Selected Segment Data to amounts reflected within this earnings release which exclude the impact of the PAS-6 impairment loss recorded during the first quarter of 2004. For the three months ended March 31, 2004 Operating profit before Income Earnings depreciation and (loss) from Net Income (loss) per amortization(2) Operations (loss) share Consolidated Reported $46,412 $(28,923) $(31,929) $(0.21) PAS-6 Impairment loss 99,946 99,946 63,336 0.42 Adjusted(3) $146,358 $71,023 $31,407 $0.21 FSS Reported $44,224 $(30,673) N/A N/A PAS-6 Impairment loss 99,946 99,946 Adjusted(3) $144,170 $69,273 (3) Amounts indicated are non-GAAP financial measures as they exclude the impact of the PAS-6 impairment loss recorded during the first quarter of 2004. These measures should be used in conjunction with GAAP financial measures presented in the attached Summary of Operating Results and Selected Segment Data and are not presented as an alternative measure of operating results as determined in accordance with accounting principles generally accepted in the United States of America. As the PAS-6 impairment loss is an unusual charge, we believe that the Company's operating results, excluding the impact of the PAS-6 impairment loss, are important to an understanding of the Company's ongoing results of operations. We believe these adjusted amounts may be more comparable to our historical and future operating results and therefore should be used in conjunction with our GAAP financial measures when evaluating our operating performance. For more detailed information about our financial guidance and trends, please visit the "Financial Guidance/Recent Presentations" page of the Investor Relations section of our website located at http://www.panamsat.com/. PanAmSat will hold a conference call at 11:00 a.m. ET on May 3, 2004 to discuss its first quarter 2004 financial results, as well as its financial outlook for 2004. The dial-in number is 1-800-406-5356 (domestic) or 1-913-981-5572 (international). To listen to the call live via web cast, please visit http://www.panamsat.com/. About PanAmSat PanAmSat Corporation (NASDAQ:SPOT) is one of the world's top three satellite operators managing a global fleet of 29 satellites, 24 of which are wholly-owned by the Company, for the delivery of news, sports and other television programming. In total, this fleet is capable of reaching more than 98 percent of the world's population through cable television systems, broadcast affiliates, direct-to-home operators, Internet service providers and telecommunications companies. In addition, PanAmSat supports the largest concentration of satellite-based business networks in the U.S., as well as specialized communications services in remote areas throughout the world. PanAmSat is 80.5 percent owned by The DIRECTV Group Inc. For more information, visit the Company's web site at http://www.panamsat.com/. The DIRECTV Group, Inc. The DIRECTV Group, Inc. (NYSE:DTV) formerly Hughes Electronics Corp. (NYSE:HS), is a world-leading provider of digital multichannel television entertainment, broadband satellite networks and services, and global video and data broadcasting. The DIRECTV Group, Inc. is 34 percent owned by Fox Entertainment Group, which is approximately 82 percent owned by News Corporation Ltd. NOTE: The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. When used in this press release, the words "estimate," "plan," "project," "anticipate," "expect," "intend," "outlook," "believe," and other similar expressions are intended to identify forward-looking statements and information. Actual results may differ materially from anticipated results due to certain risks and uncertainties, which are more specifically set forth in the "Financial Guidance/Recent Presentations" page of the Investor Relations section of our website and the Company's annual report on Form 10-K for the year ended December 31, 2003 on file with the Securities and Exchange Commission. These risks and uncertainties include but are not limited to (i) risks of launch failures, launch and construction delays and in-orbit failures or reduced performance, (ii) risk that we may not be able to obtain new or renewal satellite insurance policies on commercially reasonable terms or at all, (iii) risks related to domestic and international government regulation, (iv) risks of doing business internationally, (v) risks related to possible future losses on satellites that are not adequately covered by insurance, (vi) risks of inadequate access to capital for growth, (vii) risks related to competition, (viii) risks related to the Company's contracted backlog for future services, (ix) risks associated with the Company's indebtedness, (x) risks related to control by our majority stockholder and (xi) litigation. PanAmSat cautions that the foregoing list of important factors is not exclusive. Further, PanAmSat operates in an industry sector where securities values may be volatile and may be influenced by economic and other factors beyond the Company's control. Summary of Operating Results For the Three Months Ended March 31, 2004 and 2003 Amounts in thousands (except share data) PanAmSat PanAmSat 3/31/04 3/31/03 Revenues Operating leases, satellite services and other $201,165 $195,420 Outright sales and sales-type leases 4,265 4,336 Total Revenues 205,430 199,756 Costs and Expenses Direct operating costs (exclusive of depreciation and amortization) 39,668 33,188 Selling, general & administrative costs 17,549 18,026 PAS-6 impairment loss 99,946 -- Facilities restructuring and severance costs 1,855 -- Total 159,018 51,214 Operating income before depreciation and amortization 46,412 148,542 Depreciation and amortization expense 75,335 72,267 Income (loss) from operations (28,923) 76,275 Interest expense, net 31,086 34,275 Income (loss) before income taxes (60,009) 42,000 Income tax expense (benefit) (28,080) 11,142 Net income (loss) ($31,929) $30,858 Earnings (loss) per share $(0.21) $0.21 Weighted average common shares outstanding 150.2 150.0 Summarized Balance Sheets As of March 31, 2004 and December 31, 2003 (Amounts in thousands) 3/31/04 12/31/03 ASSETS CURRENT ASSETS Cash and cash equivalents $612,339 $511,248 Short-term investments 10,013 38,936 Accounts receivable, net 71,008 77,006 Net investment in sales-type leases 23,707 23,068 Prepaid expenses and other 21,931 20,428 Insurance claim receivable -- 260,000 Deferred income taxes 6,940 7,688 Total current assets 745,938 938,374 SATELLITES AND OTHER PROPERTY AND EQUIPMENT, Net 2,105,976 2,306,705 NET INVESTMENT IN SALES-TYPE LEASES 106,841 116,653 GOODWILL 2,244,553 2,243,611 RESTRICTED CASH 287,041 -- DEFERRED CHARGES 172,591 129,534 TOTAL ASSETS $5,662,940 $5,734,877 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $60,125 $71,794 Current portion of long-term debt 278,500 3,500 Current portion of satellite incentive obligations 13,476 12,654 Accrued interest payable 19,660 45,462 Deferred revenues 24,322 22,436 Total current liabilities 396,083 155,846 LONG-TERM DEBT 1,420,625 1,696,500 DEFERRED INCOME TAXES 399,261 430,512 DEFERRED CREDITS AND OTHER 296,807 273,261 TOTAL LIABILITIES 2,512,776 2,556,119 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY 3,150,164 3,178,758 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,662,940 $5,734,877 Summarized Statements of Cash Flows For the Three Months Ended March 31, 2004 and 2003 (Amounts in thousands) 3/31/04 3/31/03 CASH FLOWS PROVIDED BY OPERATING ACTIVITIES Net Income (loss) $(31,929) $30,858 Depreciation and amortization expense 75,335 72,267 PAS-6 impairment loss 99,946 -- Facilities restructuring and severance costs 1,855 -- Changes in working capital and other accounts (65,392) (24,006) NET CASH PROVIDED BY OPERATING ACTIVITIES 79,815 79,119 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (including capitalized interest)(a ) (21,684) (33,081) Net sales (purchases) of short-term investments 28,939 (830) Acquisitions, net of cash acquired (522) (8,216) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 6,733 (42,127) CASH FLOWS FROM FINANCING ACTIVITIES Repayments of debt (875) (200,000) New incentive obligations 16,250 -- Repayment of incentive obligations (3,413) (2,829) Stock issued in connection with employee benefit plans 2,615 1,008 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 14,577 (201,821) EFFECT OF EXCHANGE RATE CHANGES ON CASH (34) -- NET INCREASE (DECREASE)IN CASH AND CASH EQUIVALENTS 101,091 (164,829) CASH AND CASH EQUIVALENTS, beginning of period 511,248 783,998 CASH AND CASH EQUIVALENTS, end of period $612,339 $619,169 (a) Includes Capitalized Interest of $0.2 million and $4.9 million for the quarter ended March 31, 2004 and 2003, respectively. Selected Segment Data: Three Months Ended March 31, (in 000's) 2004 2003 FSS Revenue $189,427 $195,672 Operating profit before depreciation and amortization(2) 44,224 146,671 Depreciation and Amortization Expense 74,897 72,257 Income (loss) from operations (30,673) 74,414 Capital Expenditures 21,684 33,081 G2 Revenue 21,816 9,631 Operating profit before depreciation and amortization(2) 2,188 1,871 Depreciation and Amortization Expense 438 10 Income from operations 1,750 1,861 Capital Expenditures -- -- Eliminations Revenue (5,813) (5,547) Total Revenue 205,430 199,756 Operating profit before depreciation and amortization(2) 46,412 148,542 Depreciation and Amortization Expense 75,335 72,267 Income (loss) from operations (28,923) 76,275 Capital Expenditures 21,684 33,081 DATASOURCE: PanAmSat Corporation CONTACT: Kathryn Lancioni, PanAmSat Corporation, +1-646-293-7415 Web site: http://www.panamsat.com/

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