Telesat Canada (“Telesat”) today announced its financial results
for the three and six-month periods ended June 30, 2017. All
amounts are in Canadian dollars and are reported under
International Financial Reporting Standards (“IFRS”) unless
otherwise noted.
For the quarter ended June 30, 2017, Telesat
reported consolidated revenues of $226 million, or a decline of 3%
($6 million) from the same period in 2016. The decline in
revenue was primarily due to short-term services provided to
another satellite operator in the second quarter of 2016, partially
offset by favorable foreign exchange rate changes on the conversion
of U.S. dollar revenue, as the U.S. dollar was approximately 5%
stronger on average against the Canadian dollar than it was during
the second quarter of 2016. Excluding the impact of foreign
exchange rate changes, revenue decreased by 5% ($12 million)
compared to the same period in 2016.
Operating expenses of $44 million for the
quarter were 5% ($2 million) higher than the same period in 2016,
or 2% ($1 million) higher excluding the impact of changes in
foreign exchange rates. Adjusted EBITDA1 for the quarter was
$184 million, a decrease of 4% ($7 million) compared to the same
period in 2016 and a decrease of 7% ($13 million) when adjusted for
foreign exchange rate changes. The Adjusted EBITDA margin1 for the
second quarter of 2017 was 81.3%, as compared to 82.5% in the same
period in 2016.
For the six-month period ended June 30, 2017,
revenue was $461 million, a decrease of 1% ($6 million) compared to
the same period in 2016. When adjusted for changes in foreign
exchange rates, revenues declined 2% ($9 million) compared to the
same period in 2016. Operating expenses were $99 million, an
increase of 11% ($10 million) from the first half of 2016.
The increase in operating expenses was due to compensation expense
associated with certain payments to option holders made in
connection with the cash distribution to shareholders in the first
quarter of 2017. Adjusted EBITDA1 was $376 million, a
decrease of 2% ($6 million). When adjusted for foreign exchange
rate changes Adjusted EBITDA1 declined by 2.5% ($10 million)
compared to 2016. The Adjusted EBITDA margin1 for the first half of
2017 was 81.6%, compared to 81.9% in the same period in 2016.
Telesat’s net income for the quarter was $148
million compared to net income of $62 million for the quarter ended
June 30, 2016. The $86 million difference was the result of a
higher non-cash gain on foreign exchange arising principally from
the translation of Telesat’s U.S. dollar denominated debt into
Canadian dollars and favorable changes in the fair value of
financial instruments in the second quarter of 2017.
For the six-month period ended June 30, 2017,
net income was $236 million, compared to net income of $299 million
for the same period in 2016. The decrease in net income for the
first half of the year was principally the result of lower gains on
foreign exchange in the first half of 2017, arising from the
translation of Telesat’s U.S. dollar denominated debt into Canadian
dollars, partially offset by favorable changes in the fair value of
financial instruments.
“Lower revenue and Adjusted EBITDA1 in the
second quarter compared to the same period last year is a function
principally of certain short-term satellite services we provided to
another satellite operator in the prior period that did not recur
in the second quarter of this year,” commented Dan Goldberg,
Telesat’s President and CEO. “Absent that item our results would
have been more stable. Looking ahead, we are focused on increasing
the utilization of our available in-orbit capacity, maintaining our
operating discipline and executing on our key growth
initiatives.”
Business Highlights
• At June 30, 2017:
- Telesat had contracted backlog2 for future services of
approximately $3.9 billion.
- Fleet utilization was 94% for Telesat’s North American fleet
and 64% for Telesat’s international fleet.
Telesat’s report on Form 6-K for the quarter
ended June 30, 2017, has been filed with the United States
Securities and Exchange Commission (“SEC”) and may be accessed on
the SEC’s website at www.sec.gov.
Telesat has scheduled a conference call on
Wednesday July 26, 2017, at 09:00 a.m. ET to discuss its financial
results for the three and six month periods ended June 30,
2017. The call will be hosted by Daniel S. Goldberg,
President and Chief Executive Officer, and Michel Cayouette, Chief
Financial Officer, of Telesat.
Prior to the commencement of the call, Telesat
will post a news release containing its financial results on its
website (www.telesat.com) under the tab “News & Events” and the
heading “News”.
Dial-in Instructions:
The toll-free dial-in number for the
teleconference is +1 (800) 377-0758. Callers outside of North
America should dial +1 (416) 340-2218. The conference reference
number is 4264739. Please allow at least 15 minutes prior to
the scheduled start time to connect to the teleconference.
Dial-in Audio Replay:
A replay of the teleconference will be available
one hour after the end of the call on July 26, 2017, until 11:59
p.m. ET on August 9, 2017. To access the replay, please call
+1 (800) 408-3053. Callers outside of North America should
dial +1 (905) 694-9451. The access code is 8681512 followed
by the number sign (#).
All Adjusted EBITDA, Adjusted EBITDA margins and
backlog measures included in this release are non-IFRS financial
measures, as described in the End Notes section of this release.
For information reconciling Adjusted EBITDA and the Adjusted EBITDA
margins to the most comparable IFRS financial measures, please see
the consolidated financial information below.
Forward-Looking Statements Safe
Harbor
This news release contains statements that are
not based on historical fact and are ‘‘forward-looking statements’’
within the meaning of the Private Securities Litigation Reform Act
of 1995. When used in this news release, the words “looking ahead”,
“executing”, and “maintaining”, or other variations of these words
or other similar expressions are intended to identify
forward-looking statements and information. Actual results may
differ materially from the expectations expressed or implied in the
forward-looking statements as a result of known and unknown risks
and uncertainties. Detailed information about some of the known
risks and uncertainties is included in the “Risk Factors” section
of Telesat Canada’s Annual Report on Form 20-F for the fiscal year
ended December 31, 2016 which can be obtained on the SEC website at
http://www.sec.gov. Known risks and uncertainties include but are
not limited to: risks associated with operating satellites and
providing satellite services, including satellite construction or
launch delays, launch failures, in-orbit failures or impaired
satellite performance, volatility in exchange rates and risks
associated with domestic and foreign government regulation. The
foregoing list of important factors is not exhaustive. The
information contained in this news release reflects Telesat’s
beliefs, assumptions, intentions, plans and expectations as of the
date of this news release. Except as required by law, Telesat
disclaims any obligation or undertaking to update or revise the
information herein.
About Telesat (www.telesat.com)
Telesat is a leading global satellite operator,
providing reliable and secure satellite-delivered communications
solutions worldwide to broadcast, telecom, corporate and government
customers. Headquartered in Ottawa, Canada, with offices and
facilities around the world, the company’s state-of-the-art fleet
consists of 15 satellites, the Canadian payload on ViaSat-1, and
two new satellites under construction. An additional two prototype
satellites are under construction for launch into low earth orbit
(LEO) as part of Telesat’s plans to deploy an advanced, global LEO
satellite constellation offering low latency, high throughput
broadband services. Telesat also manages the operations of
additional satellites for third parties. Privately held, Telesat’s
principal shareholders are Canada’s Public Sector Pension
Investment Board and Loral Space & Communications Inc.
(NASDAQ:LORL).
|
|
|
|
|
|
|
|
Telesat Canada(Formerly Telesat Holdings
Inc.) |
Condensed Consolidated Statements of Income |
For the periods ended June 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months |
|
Six months |
(in
thousands of Canadian dollars) (unaudited) |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Revenue |
|
$ |
225,982 |
|
|
$ |
231,686 |
|
|
$ |
460,651 |
|
|
$ |
466,619 |
|
|
Operating expenses |
|
|
(43,980 |
) |
|
|
(42,302 |
) |
|
|
(99,178 |
) |
|
|
(89,149 |
) |
|
|
|
|
182,002 |
|
|
|
189,384 |
|
|
|
361,473 |
|
|
|
377,470 |
|
|
Depreciation |
|
|
(56,129 |
) |
|
|
(56,193 |
) |
|
|
(112,251 |
) |
|
|
(112,478 |
) |
|
Amortization |
|
|
(6,585 |
) |
|
|
(7,150 |
) |
|
|
(13,172 |
) |
|
|
(13,760 |
) |
|
Other operating gains
(losses), net |
|
|
3 |
|
|
|
(43 |
) |
|
|
(21 |
) |
|
|
(2,547 |
) |
|
Operating income |
|
|
119,291 |
|
|
|
125,998 |
|
|
|
236,029 |
|
|
|
248,685 |
|
|
Interest expense |
|
|
(50,448 |
) |
|
|
(46,846 |
) |
|
|
(100,198 |
) |
|
|
(97,065 |
) |
|
Interest and other
(expense) income |
|
|
(1,332 |
) |
|
|
1,199 |
|
|
|
(1,140 |
) |
|
|
2,374 |
|
|
Gain (loss) on changes
in fair value of financial instruments |
|
|
1,783 |
|
|
|
(18,428 |
) |
|
|
14,305 |
|
|
|
(24,297 |
) |
|
Gain on foreign
exchange |
|
|
96,106 |
|
|
|
18,977 |
|
|
|
119,593 |
|
|
|
208,499 |
|
|
Income before tax |
|
|
165,400 |
|
|
|
80,900 |
|
|
|
268,589 |
|
|
|
338,196 |
|
|
Tax expense |
|
|
(17,766 |
) |
|
|
(19,171 |
) |
|
|
(32,972 |
) |
|
|
(39,101 |
) |
|
Net
income |
|
$ |
147,634 |
|
|
$ |
61,729 |
|
|
$ |
235,617 |
|
|
$ |
299,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telesat Canada(Formerly Telesat Holdings
Inc.) |
Condensed Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of Canadian dollars) (unaudited) |
|
June 30, 2017 |
|
December 31, 2016 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
354,719 |
|
$ |
782,406 |
Trade and other
receivables |
|
|
45,588 |
|
|
55,639 |
Other current financial
assets |
|
|
2,350 |
|
|
2,548 |
Prepaid expenses and
other current assets |
|
|
40,568 |
|
|
61,107 |
Total current
assets |
|
|
443,225 |
|
|
901,700 |
Satellites, property
and other equipment |
|
|
1,845,507 |
|
|
1,915,411 |
Deferred tax
assets |
|
|
4,506 |
|
|
2,844 |
Other long-term
financial assets |
|
|
50,042 |
|
|
35,687 |
Other long-term
assets |
|
|
3,452 |
|
|
3,815 |
Intangible assets |
|
|
823,081 |
|
|
832,512 |
Goodwill |
|
|
2,446,603 |
|
|
2,446,603 |
Total
assets |
|
$ |
5,616,416 |
|
$ |
6,138,572 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Trade and other
payables |
|
$ |
29,476 |
|
$ |
44,107 |
Other current financial
liabilities |
|
|
26,698 |
|
|
58,992 |
Other current
liabilities |
|
|
98,661 |
|
|
80,448 |
Current
indebtedness |
|
|
15,427 |
|
|
21,931 |
Total current
liabilities |
|
|
170,262 |
|
|
205,478 |
Long-term
indebtedness |
|
|
3,649,680 |
|
|
3,829,707 |
Deferred tax
liabilities |
|
|
459,463 |
|
|
471,233 |
Other long-term
financial liabilities |
|
|
77,711 |
|
|
81,252 |
Other long-term
liabilities |
|
|
362,195 |
|
|
356,861 |
Total
liabilities |
|
|
4,719,311 |
|
|
4,944,531 |
|
|
|
|
|
|
|
Shareholders'
Equity |
|
|
|
|
|
|
Share capital |
|
|
152,682 |
|
|
658,735 |
Accumulated
earnings |
|
|
703,480 |
|
|
467,863 |
Reserves |
|
|
40,943 |
|
|
67,443 |
Total
shareholders' equity |
|
|
897,105 |
|
|
1,194,041 |
Total
liabilities and shareholders' equity |
|
$ |
5,616,416 |
|
$ |
6,138,572 |
|
|
|
|
|
|
|
Telesat Canada(Formerly Telesat Holdings
Inc.) |
Condensed Consolidated Statements of Cash
Flows |
For the six months ended June 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of Canadian dollars) (unaudited) |
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
Net
income |
|
$ |
235,617 |
|
|
$ |
299,095 |
|
Adjustments
to reconcile net income to cash flows from operating
activities |
|
|
|
|
|
|
|
Depreciation |
|
|
112,251 |
|
|
|
112,478 |
|
|
Amortization |
|
|
13,172 |
|
|
|
13,760 |
|
|
Tax expense |
|
|
32,972 |
|
|
|
39,101 |
|
|
Interest expense |
|
|
100,198 |
|
|
|
97,065 |
|
|
Interest income |
|
|
(2,513 |
) |
|
|
(3,109 |
) |
|
Gain on foreign
exchange |
|
|
(119,593 |
) |
|
|
(208,499 |
) |
|
(Gain) loss on changes
in fair value of financial instruments |
|
|
(14,305 |
) |
|
|
24,297 |
|
|
Share-based
compensation |
|
|
1,689 |
|
|
|
3,324 |
|
|
Loss on disposal of
assets |
|
|
21 |
|
|
|
2,547 |
|
|
Other |
|
|
(21,269 |
) |
|
|
(19,158 |
) |
Income
taxes paid, net of income taxes received |
|
|
(33,047 |
) |
|
|
(65,090 |
) |
Interest
paid, net of capitalized interest and interest received |
|
|
(107,377 |
) |
|
|
(77,388 |
) |
Repurchase
of stock options |
|
|
— |
|
|
|
(24,658 |
) |
Operating
assets and liabilities |
|
|
54,111 |
|
|
|
71,720 |
|
Net
cash from operating activities |
|
|
251,927 |
|
|
|
265,485 |
|
|
|
|
|
|
|
|
Cash flows used in investing activities |
|
|
|
|
|
|
Satellite
programs, including capitalized interest |
|
|
(66,973 |
) |
|
|
(99,523 |
) |
Purchase of
property and other equipment |
|
|
(5,726 |
) |
|
|
(3,785 |
) |
Purchase of
intangible assets |
|
|
(12,653 |
) |
|
|
(36,745 |
) |
Net
cash used in investing activities |
|
|
(85,352 |
) |
|
|
(140,053 |
) |
|
|
|
|
|
|
|
Cash flows used in financing activities |
|
|
|
|
|
|
Repayment
of indebtedness |
|
|
(16,241 |
) |
|
|
(49,824 |
) |
Payment of
debt issue costs |
|
|
(42,867 |
) |
|
|
— |
|
Return of
capital to shareholders |
|
|
(506,135 |
) |
|
|
— |
|
Capital
lease payments |
|
|
(15 |
) |
|
|
(15 |
) |
Satellite
performance incentive payments |
|
|
(4,349 |
) |
|
|
(3,652 |
) |
Proceeds
from exercise of stock options |
|
|
77 |
|
|
|
— |
|
Settlement
of derivatives |
|
|
206 |
|
|
|
— |
|
Net
cash used in financing activities |
|
|
(569,324 |
) |
|
|
(53,491 |
) |
|
|
|
|
|
|
|
Effect of
changes in exchange rates on cash and cash equivalents |
|
|
(24,938 |
) |
|
|
(26,398 |
) |
|
|
|
|
|
|
|
(Decrease)
increase in cash and cash equivalents |
|
|
(427,687 |
) |
|
|
45,543 |
|
Cash and
cash equivalents, beginning of period |
|
|
782,406 |
|
|
|
690,726 |
|
Cash and cash equivalents, end of period |
|
$ |
354,719 |
|
|
$ |
736,269 |
|
|
|
|
|
|
|
|
|
|
Telesat’s Adjusted EBITDA margin(1)
|
|
Three months ended June 30, |
|
Six months ended June 30, |
(in
thousands of Canadian dollars) (unaudited) |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Net income |
|
$ |
147,634 |
|
|
$ |
61,729 |
|
|
$ |
235,617 |
|
|
$ |
299,095 |
|
Tax expense |
|
|
17,766 |
|
|
|
19,171 |
|
|
|
32,972 |
|
|
|
39,101 |
|
(Gain) loss on changes
in fair value of financial instruments |
|
|
(1,783 |
) |
|
|
18,428 |
|
|
|
(14,305 |
) |
|
|
24,297 |
|
Gain on foreign
exchange |
|
|
(96,106 |
) |
|
|
(18,977 |
) |
|
|
(119,593 |
) |
|
|
(208,499 |
) |
Interest and other
expense (income) |
|
|
1,332 |
|
|
|
(1,199 |
) |
|
|
1,140 |
|
|
|
(2,374 |
) |
Interest expense |
|
|
50,448 |
|
|
|
46,846 |
|
|
|
100,198 |
|
|
|
97,065 |
|
Depreciation |
|
|
56,129 |
|
|
|
56,193 |
|
|
|
112,251 |
|
|
|
112,478 |
|
Amortization |
|
|
6,585 |
|
|
|
7,150 |
|
|
|
13,172 |
|
|
|
13,760 |
|
Other operating losses,
net |
|
|
(3 |
) |
|
|
43 |
|
|
|
21 |
|
|
|
2,547 |
|
Non-recurring
compensation expenses(3) |
|
|
845 |
|
|
|
142 |
|
|
|
12,710 |
|
|
|
1,302 |
|
Non-cash expense
related to share-based compensation |
|
|
790 |
|
|
|
1,579 |
|
|
|
1,689 |
|
|
|
3,324 |
|
Adjusted EBITDA |
|
$ |
183,637 |
|
|
$ |
191,105 |
|
|
$ |
375,872 |
|
|
$ |
382,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
225,982 |
|
|
$ |
231,686 |
|
|
$ |
460,651 |
|
|
$ |
466,619 |
|
Adjusted EBITDA
Margin |
|
81.3 |
% |
|
|
82.5 |
% |
|
|
81.6 |
% |
|
|
81.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End Notes
1 The common definition of EBITDA is “Earnings
Before Interest, Taxes, Depreciation and Amortization.” In
evaluating financial performance, Telesat uses revenue and deducts
certain operating expenses (including share-based compensation
expense and unusual and non-recurring items, including
restructuring related expenses) to obtain operating income before
interest expense, taxes, depreciation and amortization (“Adjusted
EBITDA”) and the Adjusted EBITDA margin (defined as the ratio of
Adjusted EBITDA to revenue) as measures of Telesat’s operating
performance.
Adjusted EBITDA allows Telesat and investors to
compare Telesat’s operating results with that of competitors
exclusive of depreciation and amortization, interest and investment
income, interest expense, taxes and certain other expenses.
Financial results of competitors in the satellite services industry
have significant variations that can result from timing of capital
expenditures, the amount of intangible assets recorded, the
differences in assets’ lives, the timing and amount of investments,
the effects of other income (expense), and unusual and
non-recurring items. The use of Adjusted EBITDA assists Telesat and
investors to compare operating results exclusive of these items.
Competitors in the satellite services industry have significantly
different capital structures. Telesat believes the use of Adjusted
EBITDA improves comparability of performance by excluding interest
expense.
Telesat believes the use of Adjusted EBITDA and
the Adjusted EBITDA margin along with IFRS financial measures
enhances the understanding of Telesat’s operating results and is
useful to Telesat and investors in comparing performance with
competitors, estimating enterprise value and making investment
decisions. Adjusted EBITDA as used here may not be the same as
similarly titled measures reported by competitors. Adjusted EBITDA
should be used in conjunction with IFRS financial measures and
is not presented as a substitute for cash flows from operations as
a measure of Telesat’s liquidity or as a substitute for net income
as an indicator of Telesat’s operating performance.
2 Contracted revenue backlog (‘‘backlog’’)
represents Telesat’s expected future revenue from existing service
contracts (without discounting for present value) including any
deferred revenue that Telesat will recognize in the future in
respect of cash already received. The majority of Telesat’s
contracted revenue backlog is generated from contractual agreements
for satellite capacity. Backlog is not a presentation made in
accordance with IFRS. The presentation of backlog is not comparable
to other similarly titled measures of other companies because not
all companies use identical calculations of backlog. Telesat
believes the disclosure of the recognition of backlog provides
information that is useful to an investor’s understanding of its
expected known revenue recognition.
3 Includes severance payments and special compensation and
benefit for executives and employees.
For further information:
Michael Bolitho, Telesat, +1 (613) 748-8700 ext. 2336; ir@telesat.com
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