Telesat Canada (“Telesat”) today announced its consolidated
financial results for the three month and one year periods ended
December 31, 2017. All amounts are in Canadian dollars and are
reported under International Financial Reporting Standards (“IFRS”)
unless otherwise noted.
For the quarter ended December 31, 2017, Telesat
reported revenues of $252 million, an increase of approximately 5%
($12 million) compared to the same period in 2016. The U.S. dollar
was approximately 4% weaker on average against the Canadian dollar
than it was during the fourth quarter of 2016. After
adjusting for the impact of changes in foreign exchange rates,
revenue increased by 7% ($18 million) compared to the same period
in 2016. The growth in revenue was primarily driven by
short-term services provided to other satellite
operators.
Operating expenses of $47 million for the
quarter were slightly ($1 million) higher than the same period in
2016. After adjusting for the impact of changes in foreign exchange
rates, expenses were $2 million higher.
Adjusted EBITDA1 for the quarter was $207
million, an increase of 7% ($13 million) compared to the same
period in 2016. After adjusting for the impact of changes in
foreign exchange rates, Adjusted EBITDA1 was 9% ($18 million)
higher. The Adjusted EBITDA margin1 was 82.0% in the fourth
quarter of 2017, an increase from 81.0% during the same period in
2016.
Telesat’s net income for the quarter was $72
million compared to a loss of $21 million for the quarter ended
December 31, 2016. The variation was primarily due to lower foreign
exchange losses in 2017 compared to 2016, and a loss on refinancing
in 2016.
For the year ended December 31, 2017, revenue
was $927 million or $3 million lower compared to the same period in
2016. During 2017, the U.S. dollar was approximately 2% weaker on
average than it was during 2016. After adjusting for the impact of
changes in foreign exchange rates, revenues increased by $2 million
compared to 2016.
Operating expenses were $188 million, 7% ($13
million) higher than the prior year or 8% ($14 million) higher
after adjusting for the impact of changes in foreign exchange
rates. The increase in operating expenses was primarily due to an
increase in compensation and employee benefits expense arising from
special payments made to stock option holders in connection with a
return of capital of US$387 million to Telesat’s shareholders in
the first quarter of 2017.
Adjusted EBITDA1 for the year ended December 31,
2017 was $757 million, or 1% ($5 million) lower compared to 2016
and slightly ($1 million) lower after adjusting for the impact of
changes in foreign exchange rates. The Adjusted EBITDA margin1 for
the year ended December 31, 2017, was 81.6% compared to 81.9% in
2016.
For the year ended December 31, 2017, net income
was $505 million, compared to net income of $293 million in 2016.
The variation was principally the result of a larger gain on
foreign exchange, arising from the translation of Telesat’s U.S.
dollar denominated debt into Canadian dollars, a larger gain on the
fair value of financial instruments in 2017 and a loss on
refinancing in 2016.
“I am pleased with our performance last quarter
and over the past year, particularly given the challenging
conditions that continue to prevail in many of the markets we
serve,” commented Dan Goldberg, Telesat’s President and CEO. “Our
solid results highlight the strength of our business, which is
underpinned by our industry leading contractual backlog to revenue
ratio, as well as our strong operating discipline, which is
reflected in part in our favorable Adjusted EBITDA margin1 and
improving capacity utilization. We also took significant
steps in 2017 to best position Telesat for the years ahead,
including progressing the construction of our planned Telstar 18
VANTAGE and Telstar 19 VANTAGE satellites, which we anticipate will
launch mid-2018. In addition, earlier this year we
successfully launched our first Low Earth Orbit (LEO) satellite to
support the development of our state-of-the-art, high capacity LEO
constellation that will deliver transformative, low latency,
fiber-like broadband to commercial and government users worldwide.
Looking ahead, we remain focused on increasing the utilization of
our in-orbit satellites and executing on our key growth
initiatives.”
Business Highlights
- At December 31, 2017:
- Telesat had contracted backlog2 for future services of
approximately $3.8 billion.
- Fleet utilization was 95% for Telesat’s North American fleet
and 71% for Telesat’s international fleet.
- In April 2017, Telesat announced that Erwin Hudson, one of the
industry’s most accomplished executives in the field of
satellite-enabled broadband networks, joined the company as Vice
President, Telesat LEO.
- In September 2017, Telesat announced that Bell Canada signed a
15-year contract for substantially all of the HTS spot beam
capacity over northern Canada on Telesat’s new Telstar 19 VANTAGE
satellite. Bell Canada subsidiary Northwestel will use the capacity
to dramatically enhance broadband connectivity for communities in
Nunavut, Canada’s northernmost territory.
- In November 2017, the U.S. Federal Communications Commission
(FCC) granted Telesat’s petition to access the U.S. market using
Telesat’s planned global LEO satellite constellation.
- In January 2018, Telesat announced the successful launch of its
first LEO satellite, an important milestone in the company’s plans
to deploy a global LEO constellation that will revolutionize
broadband communications services around the world. Telesat’s LEO
constellation will deliver high-performing, cost-effective,
fiber-like broadband anywhere in the world for business, government
and individual users.
Conference Call
Telesat has scheduled a conference call on
Thursday, March 1, 2018, at 10:30 a.m. ET to discuss its financial
results for the three month and one-year periods ended December 31,
2017, and other recent developments. 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 4281477. 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 March 1, 2018, until 11:59 p.m. ET on March 15, 2018. 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 3685094 followed by the number sign (#).
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”,
“anticipate”, “planned”, “improving”, “position” and “will”, 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, 2017 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, the company’s
state-of-the-art fleet consists of 15 GEO satellites, the Canadian
payload on ViaSat-1 and one Phase 1 LEO satellite which is the
start of Telesat's planned global LEO satellite constellation that
will offer low latency, high throughput broadband services. An
additional two GEO satellites are under construction with launches
planned for mid-2018. Telesat is also a leading technical
consultant providing high value expertise and support to satellite
operators, insurers and other industry participants on a global
basis. Privately held, Telesat’s principal shareholders are
Canada’s Public Sector Pension Investment Board and Loral Space
& Communications Inc. (NASDAQ:LORL).
For further information: Michael Bolitho,
Telesat, +1 (613) 748-8700 ext. 2336 (ir@telesat.com)
Telesat
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
(Formerly Telesat Holdings Inc.) |
|
|
|
|
|
|
|
|
|
Consolidated Statements of Income |
For
the periods ended December 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months |
|
Twelve months |
(in
thousands of Canadian dollars) |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Revenue |
|
$ |
252,404 |
|
|
$ |
240,063 |
|
|
$ |
927,407 |
|
|
$ |
930,854 |
|
Operating expenses |
|
|
(46,865 |
) |
|
|
(46,175 |
) |
|
|
(187,687 |
) |
|
|
(174,923 |
) |
|
|
|
205,539 |
|
|
|
193,888 |
|
|
|
739,720 |
|
|
|
755,931 |
|
Depreciation |
|
|
(54,109 |
) |
|
|
(56,102 |
) |
|
|
(221,058 |
) |
|
|
(224,773 |
) |
Amortization |
|
|
(6,580 |
) |
|
|
(6,967 |
) |
|
|
(26,330 |
) |
|
|
(27,690 |
) |
Other operating gains
(losses), net |
|
|
6,190 |
|
|
|
(12 |
) |
|
|
5,902 |
|
|
|
(2,565 |
) |
Operating income |
|
|
151,040 |
|
|
|
130,807 |
|
|
|
498,234 |
|
|
|
500,903 |
|
Interest expense |
|
|
(51,483 |
) |
|
|
(55,461 |
) |
|
|
(200,144 |
) |
|
|
(198,815 |
) |
Loss on
refinancing |
|
|
— |
|
|
|
(31,850 |
) |
|
|
— |
|
|
|
(31,850 |
) |
Interest and other
income |
|
|
2,550 |
|
|
|
1,716 |
|
|
|
3,004 |
|
|
|
6,078 |
|
Gain on
changes in fair value of financial instruments |
21,376 |
|
|
|
27,952 |
|
|
|
60,306 |
|
|
|
7,877 |
|
(Loss) gain on foreign
exchange |
|
|
(27,332 |
) |
|
|
(68,823 |
) |
|
|
223,898 |
|
|
|
92,613 |
|
Income before tax |
|
|
96,151 |
|
|
|
4,341 |
|
|
|
585,298 |
|
|
|
376,806 |
|
Tax expense |
|
|
(23,746 |
) |
|
|
(25,322 |
) |
|
|
(80,245 |
) |
|
|
(83,906 |
) |
Net income
(loss) |
|
$ |
72,405 |
|
|
$ |
(20,981 |
) |
|
$ |
505,053 |
|
|
$ |
292,900 |
|
Telesat
Canada |
|
|
|
|
|
|
|
(Formerly Telesat Holdings Inc.) |
|
|
Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of
Canadian dollars) |
|
|
|
|
|
|
|
December 31,2017 |
December
31, 2016 |
Assets |
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
479,045 |
|
$ |
782,406 |
Trade and
other receivables |
|
|
64,986 |
|
|
55,639 |
Other
current financial assets |
|
|
2,437 |
|
|
2,548 |
Prepaid
expenses and other current assets |
|
|
8,503 |
|
|
61,107 |
Total current assets |
|
|
554,971 |
|
|
901,700 |
Satellites,
property and other equipment |
|
|
1,791,847 |
|
|
1,915,411 |
Deferred
tax assets |
|
|
4,617 |
|
|
2,844 |
Other
long-term financial assets |
|
|
83,531 |
|
|
35,687 |
Other
long-term assets |
|
|
3,056 |
|
|
3,815 |
Intangible
assets |
|
|
812,995 |
|
|
832,512 |
Goodwill |
|
|
2,446,603 |
|
|
2,446,603 |
Total assets |
|
$ |
5,697,620 |
|
$ |
6,138,572 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Trade and
other payables |
|
$ |
37,919 |
|
$ |
44,107 |
Other
current financial liabilities |
|
|
26,355 |
|
|
58,992 |
Other
current liabilities |
|
|
77,324 |
|
|
80,448 |
Current
indebtedness |
|
|
14,486 |
|
|
21,931 |
Total current liabilities |
|
|
156,084 |
|
|
205,478 |
Long-term
indebtedness |
|
|
3,528,891 |
|
|
3,829,707 |
Deferred
tax liabilities |
|
|
445,114 |
|
|
471,233 |
Other
long-term financial liabilities |
|
|
58,831 |
|
|
81,252 |
Other
long-term liabilities |
|
|
365,879 |
|
|
356,861 |
Total liabilities |
|
|
4,554,799 |
|
|
4,944,531 |
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
Share
capital |
|
|
152,682 |
|
|
658,735 |
Accumulated
earnings |
|
|
968,408 |
|
|
467,863 |
Reserves |
|
|
21,731 |
|
|
67,443 |
Total shareholders' equity |
|
|
1,142,821 |
|
|
1,194,041 |
Total liabilities and shareholders' equity |
|
$ |
5,697,620 |
|
$ |
6,138,572 |
Telesat Canada |
|
|
|
|
|
|
|
(Formerly Telesat Holdings Inc.) |
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows |
|
|
|
|
For
the years ended December 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of Canadian dollars) |
|
|
2017 |
|
|
|
2016 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net
income |
|
$ |
505,053 |
|
|
$ |
292,900 |
|
Adjustments
to reconcile net income to cash flows from operating
activities |
|
|
|
|
|
Depreciation |
|
|
221,058 |
|
|
|
224,773 |
|
|
Amortization |
|
|
26,330 |
|
|
|
27,690 |
|
|
Tax expense |
|
|
80,245 |
|
|
|
83,906 |
|
|
Interest expense |
|
|
200,144 |
|
|
|
198,815 |
|
|
Interest income |
|
|
(6,024 |
) |
|
|
(6,700 |
) |
|
Gain on foreign
exchange |
|
|
(223,898 |
) |
|
|
(92,613 |
) |
|
Gain on changes in fair
value of financial instruments |
|
|
(60,306 |
) |
|
|
(7,877 |
) |
|
Share-based
compensation |
|
|
2,856 |
|
|
|
5,770 |
|
|
Loss on disposal of
assets |
|
|
269 |
|
|
|
2,565 |
|
|
Loss on
refinancing |
|
|
— |
|
|
|
31,850 |
|
|
Other |
|
|
(49.040 |
) |
|
|
(36,966 |
) |
Income
taxes paid, net of income taxes received |
|
|
(62,991 |
) |
|
|
(120,472 |
) |
Interest
paid, net of capitalized interest and interest received |
|
|
(195,248 |
) |
|
|
(152,261 |
) |
Repurchase
of stock options |
|
|
— |
|
|
|
(24,658 |
) |
Operating
assets and liabilities |
|
|
48,252 |
|
|
|
100,637 |
|
Net
cash from operating activities |
|
|
486,700 |
|
|
|
527,359 |
|
Cash flows used in investing activities |
|
|
|
|
|
|
Satellite
programs, including capitalized interest |
|
|
(135,986 |
) |
|
|
(236,834 |
) |
Purchase of
property and other equipment |
|
|
(10,616 |
) |
|
|
(6,977 |
) |
Purchase of
intangible assets |
|
|
(18,011 |
) |
|
|
(42,285 |
) |
Net
cash used in investing activities |
|
|
(164,613 |
) |
|
|
(286,096 |
) |
Cash flows used in financing activities |
|
|
|
|
|
|
Repayment
of indebtedness |
|
|
(31,620 |
) |
|
|
(4,008,356 |
) |
Proceeds
from indebtedness |
|
|
— |
|
|
|
3,935,576 |
|
Payment of
debt issue costs |
|
|
(42,867 |
) |
|
|
(58,141 |
) |
Return of
capital to shareholders |
|
|
(506,135 |
) |
|
|
— |
|
Capital
lease payments |
|
|
(30 |
) |
|
|
(30 |
) |
Satellite
performance incentive payments |
|
|
(8,436 |
) |
|
|
(8,934 |
) |
Settlement
of derivatives |
|
|
207 |
|
|
|
130 |
|
Proceeds
from exercise of stock options |
|
|
77 |
|
|
|
— |
|
Dividends
paid on preferred shares |
|
|
(10 |
) |
|
|
(10 |
) |
Net
cash used in financing activities |
|
|
(588,814 |
) |
|
|
(139,765 |
) |
|
|
|
|
|
|
|
|
Effect of
changes in exchange rates on cash and cash equivalents |
|
|
(36,634 |
) |
|
|
(9,818 |
) |
|
|
|
|
|
|
|
|
(Decrease)
increase in cash and cash equivalents |
|
|
(303,361 |
) |
|
|
91,680 |
|
Cash and
cash equivalents, beginning of year |
|
|
782,406 |
|
|
|
690,726 |
|
Cash and cash equivalents, end of year |
|
$ |
479,045 |
|
|
$ |
782,406 |
|
Telesat’s Adjusted EBITDA margin(1)
|
|
Three months ended December 31, |
|
Twelve months ended December 31, |
(in
thousands of Canadian dollars) (unaudited) |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Net income (loss) |
|
$ |
72,405 |
|
|
$ |
(20,981 |
) |
|
$ |
505,053 |
|
|
$ |
292,900 |
|
Tax expense |
|
|
23,746 |
|
|
|
25,322 |
|
|
|
80,245 |
|
|
|
83,906 |
|
Gain on changes in fair
value of financial instruments |
|
|
(21,376 |
) |
|
|
(27,952 |
) |
|
|
(60,306 |
) |
|
|
(7,877 |
) |
Loss (gain) on foreign
exchange |
|
|
27,332 |
|
|
|
68,823 |
|
|
|
(223,898 |
) |
|
|
(92,613 |
) |
Interest and other
income |
|
|
(2,550 |
) |
|
|
(1,716 |
) |
|
|
(3,004 |
) |
|
|
(6,078 |
) |
Interest expense |
|
|
51,483 |
|
|
|
55,461 |
|
|
|
200,144 |
|
|
|
198,815 |
|
Loss on
refinancing |
|
|
— |
|
|
|
31,850 |
|
|
|
— |
|
|
|
31,850 |
|
Depreciation |
|
|
54,109 |
|
|
|
56,102 |
|
|
|
221,058 |
|
|
|
224,773 |
|
Amortization |
|
|
6,580 |
|
|
|
6,967 |
|
|
|
26,330 |
|
|
|
27,690 |
|
Other operating (gains)
losses, net |
|
|
(6,190 |
) |
|
|
12 |
|
|
|
(5,902 |
) |
|
|
2,565 |
|
Non-recurring
compensation expenses(3) |
|
|
1,110 |
|
|
|
(421 |
) |
|
|
14,547 |
|
|
|
899 |
|
Non-cash expense
related to share-based compensation |
|
|
382 |
|
|
|
889 |
|
|
|
2,856 |
|
|
|
5,770 |
|
Adjusted EBITDA |
|
$ |
207,031 |
|
|
$ |
194,356 |
|
|
$ |
757,123 |
|
|
$ |
762,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
252,404 |
|
|
$ |
240,063 |
|
|
$ |
927,407 |
|
|
$ |
930,854 |
|
Adjusted EBITDA
Margin |
|
|
82.0 |
% |
|
|
81.0 |
% |
|
|
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. Telesat’s contracted
backlog is based upon our revenue recognition policies as of
December 31, 2017 and does not take into account changes, if any,
that may be required upon adoption of IFRS 15. 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
benefits for executives and employees.
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