Company Achieves Strong Revenue Growth and Record Adjusted EBITDA
as Revenues Increase 3.4%; Increases Guidance for Full Year 2005
WILTON, Conn., Aug. 9 /PRNewswire-FirstCall/ -- PanAmSat Holding
Corporation (NYSE:PA), the largest satellite-based distributor of
TV channels in the world and a leading global provider of network
distribution services, reported financial results for the second
quarter and six months ended June 30, 2005 and raised its revenue
and Adjusted EBITDA guidance for the full year. Joe Wright, chief
executive officer of PanAmSat said, "This quarter clearly
demonstrates the stability and strength of our business and our
ability to deliver opportunities for meaningful growth in our
target markets consistent with the prudent management principles we
have established. We are pleased to increase our guidance for the
year on revenue growth from 3.0% to 3.5% or more and on Adjusted
EBITDA growth from 4.0% to 5.5% or more over 2004. If we close our
Europe*Star transaction in August as expected, we anticipate
revenues will increase by 4.0% or more and Adjusted EBITDA will
increase by 6.0% or more over 2004." Highlights for the second
quarter include: * Total revenues increased 3.4% over Q2 2004 *
Program distribution and video services revenues, the "core"
markets of the business which represent 64% of total revenues, grew
10.0% over Q2 2004 * Adjusted EBITDA(1) was up 7.6% over Q2 2004 on
a net loss of $32.2 million, which included charges of $18.6
million for an interest rate hedge and $46.5 million related to
early debt repayments * Adjusted EBITDA Margin 1 increased to 76%
from 72% in Q2 2004 * Total debt decreased by $381.9 million during
the quarter, reducing the net leverage ratio of net debt to
Adjusted EBITDA from 6.1x as of December 31, 2004 to 4.9x at June
30, 2005 * A joint venture was signed with JSAT to develop capacity
for the growing U.S. market * An agreement was reached with Alcatel
to acquire Europe*Star to provide coverage of Europe and obtain the
capacity to serve the growing markets in the Middle East and Africa
that will be immediately accretive to our business * The Banda
Ancha broadband network was launched and the e-Mexico Internet
service was expanded in Mexico, channels were added to the
PanGlobal TV direct-to-home platform in Australia and new global
distribution agreements were entered into with CCTV, China Radio
International and TV Azteca in Mexico. Total revenues for the
second quarter of 2005 were $213.9 million, compared to revenues of
$206.8 million for the same quarter last year, an increase of 3.4
%. Adjusted EBITDA(1) which is a key performance and liquidity
metric for the Company, was $167.0 million for the second quarter
of 2005, as compared to $155.2 million for the same period in 2004,
an increase of 7.6 %. Net loss for the quarter was $(32.2) million,
compared to net income of $10.7 million for the same period in
2004. Net loss for the second quarter of 2005 was impacted by
several items as described above. Net income in the second quarter
of 2004 was impacted by a $29.6 million write-off related to the
termination of a customer transponder lease. Highlights for the
first six months include: * Total revenues increased 2.5% over 2004
* Program distribution and video services revenues, the "core"
markets of the business, grew 8.6% over 2004 * Adjusted EBITDA(2)
was up 6.9% over 2004 on a net loss of $31.1 million, which
included charges of $18.6 million for an interest rate hedge, $56
million related to early debt repayments and fees of $10 million
for termination of our Sponsors' management agreement * Adjusted
EBITDA Margin(2) increased to 76% vs. 72% in 2004 $671.9 million of
long-term debt was repaid in the first six months of 2005 * Total
dividends were paid to shareholders of $252.8 million through July
15, 2005, of which $200 million were paid from the proceeds of the
IPO to pre-IPO stockholders. Total revenues for the six months of
2005 were $422.7 million, compared to revenues of $412.3 million
for the same period last year, an increase of 2.5%. Adjusted
EBITDA(2) was $330.4 million for the first six months of 2005, as
compared to $309.2 million for the same period in 2004, an increase
of 6.9%. Net loss for the six months was $(31.1) million, compared
to a net loss of $(21.3) million for the same period in 2004. Net
loss for the six months ended June 30, 2005 was impacted by several
items as described in the bullet above. Net loss in the first half
of 2004 was impacted by a $99.9 million satellite impairment charge
and a $29.6 million write-off related to a customer transponder
lease termination. "Now that we have PanAmSat in great operating
shape and our margins are up, we are focusing on growing the
business in the three areas we believe have the biggest potential:
video, network services and government services. The results are
already coming in. Our core video revenues, which make up nearly
two-thirds of our business, grew 10% in the quarter over last year
because (1) we provided the highest reliability and fastest service
in the industry and (2) we are servicing the largest number of High
Definition channels in the U.S. Our high-definition television
(HDTV) neighborhood Galaxy HD continues to be the place to be,"
said Wright. "Our network services business will begin to benefit
from new contracts for the Banda Ancha broadband and e-Mexico
Internet projects, as well as from the new VSAT customers we will
acquire from the Europe*Star acquisition. Wright continued, "We
also made significant headway in our G2 government business.
Revenues were up 17.8% for the quarter and 9% for the first half of
the year(3) if we exclude a unique project associated with an
L-Band payload on our Galaxy 15 satellite. The excluded contract is
different from G2's core business of selling bandwidth,
communications services and related equipment and its inclusion
would mask the results in that core business. In 2005, G2
introduced a new, managed network service product based upon the
iDirect platform which is quickly becoming their fastest growing
service. Some other highlights include: the renewal of a contract
with the National Geospatial Association to support their global
mapping and imagery network, expansion of various state and local
intelligence networks, support of special operations in Africa,
Latin America and other regions battling the global war on terror
and work with the State of Alaska to develop a VSAT network
providing Internet connectivity to schools in remote parts of the
state." Wright continued, "Looking ahead, we will increase our
position as the number-one distributor of television channels in
the world and expect to need additional capacity for growth in the
U.S. and Europe/Middle East/Africa markets. That's why we took
important steps to obtain this capacity efficiently with the
pending acquisition of Europe*Star and the joint venture with JSAT.
Both of these deals are in-line with our approach of obtaining
growth capacity through carefully focused investments rather than
the traditional way of simply launching expensive satellites. The
acquisition of Europe*Star will substantially strengthen our
presence in the European, African and Middle Eastern marketplaces
as well as expand our global reach into key growth regions. We now
have two well-positioned orbital slots over this region, a powerful
new satellite and an established customer base for network
services. The JSAT joint venture will give us much-needed capacity
over the lucrative US arc to support everything from HDTV and
IP-based content distribution networks to broadband Internet and
satellite news gathering services. While our management team is
focused on profitable growth, we are also intent on staying
financially strong in order to continue to provide predictable and
attractive dividends to our shareholders. We are on track to do
exactly that and are convinced that our forward momentum will
continue, which is why we are increasing our financial guidance for
2005." Business Highlights Fixed Satellite Services ("FSS") Through
FSS, PanAmSat leases 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 (DTH) in addition
to providing telemetry, tracking and control (TT&C) and network
services to customers. For the Three Months Ended June 30, 2005 FSS
revenues for the second quarter of 2005 increased $9.7 million to
$198.4 million, from $188.8 million in the same period in 2004.
This increase was primarily attributable to higher video services
revenues of $12.4 million which was partially offset by a $7.5
million reduction in network services revenues. The increase in
video revenues was due to increases in DTH and program distribution
revenues of $11.3 million. The decrease in network services
revenues was primarily attributable to the expiration of a lease
associated with a non-core satellite that was used by a network
services customer during the first eight months of 2004. FSS
segment income from operations for the second quarter of 2005
increased by $31.2 million to $72.1 million, compared to $40.9
million for the same period in 2004. This increase was primarily
due to the $29.6 million pre- tax charge recorded within selling,
general and administrative expenses during the three months ended
June 30, 2004 in relation the termination of a customer lease
agreement. Other contributing factors were the increase in FSS
revenues of $9.7 million and a decrease in depreciation and
amortization expense of approximately $4.1 million, which resulted
primarily from reduced depreciation on satellites that were fully
depreciated or de-orbited over the last twelve months These
increases were partially offset by the loss on undesignated
interest rate swap of approximately $18.6 million that was recorded
during the three months ended June 30, 2005. FSS Segment EBITDA(4)
for the second quarter of 2005 increased by $12.1 million to $163.3
million as compared to $151.3 million for the same period in 2004.
This increase is primarily due to the increased FSS revenues of
$9.7 million and lower operating expenses of $2.4 million. For the
Six Months Ended June 30, 2005 FSS revenues for the first six
months of 2005 increased $14.1 million to $392.3 million, from
$378.2 million in the same period in 2004. This increase was
primarily attributable to higher video services revenues of $21.5
million which was partially offset by an $11.5 million reduction in
network services revenues. The increase in video revenues was due
to increases in DTH and program distribution revenues of $18.0
million as well as occasional services and other revenues of $3.2
million. The decrease in network services revenues was primarily
attributable to the expiration of a lease associated with a
non-core satellite that was used by a network services customer
during the first eight months of 2004. FSS segment income from
operations for the first six months of 2005 increased by $131.3
million to $141.3 million, compared to income from operations of
$10.3 million for the same period in 2004. This increase was due
primarily to the $99.9 million satellite impairment loss recorded
during the first quarter of 2004, the $29.6 million pre-tax charge
recorded within selling, general and administrative expenses during
the three months ended June 30, 2004 in relation to the termination
of a customer lease agreement, the increase in FSS revenues of
$14.1 million, and a decrease in depreciation and amortization
expense of approximately $9.5 million, which resulted primarily
from reduced depreciation on satellites that were fully depreciated
or de-orbited over the last twelve months. These increases were
partially offset by the loss on undesignated interest rate swap of
$18.6 million recorded during the second quarter of 2005 and the
$10.4 million of Sponsor management fees recorded during the first
quarter of 2005. FSS Segment EBITDA(5) for the first six months of
2005 increased by $20.3 million to $323.4 million as compared to
$303.1 million for the same period in 2004. This increase was
driven by the increase in FSS revenues of $14.1 million and lower
operating expenses of $6.2 million. Government Services ("G2")
Through G2, PanAmSat provides global satellite and related
telecommunications services to the U.S. government, international
government entities, and their contractors. For the Three Months
Ended June 30, 2005 G2 segment revenues were $22.5 million for the
three months ended June 30, 2005 compared to $22.6 million for the
same period in 2004. G2 revenues for the quarter grew from $18.3
million in Q2 2004 to $21.5 million in Q2 2005, a 17.8% increase,
after excluding the revenues related to the construction of an
L-Band payload on Galaxy 15(6). This increase in revenues was
driven primarily by the lease of additional PanAmSat FSS satellite
capacity of $3.3 million and an increase in revenues related to the
new G2 managed network services offering of $1.6 million, partially
offset partially by reduced fiber services revenues. Revenues
related to the L-Band payload project were $1.0 million in Q2 2005
compared to $4.3 million in Q2 2004, a decrease of $3.3 million due
to the timing of completion of certain milestones on this
construction project. G2 income from operations of $3.5 million
decreased by $0.1 million and Segment EBITDA(5) of $4.1 million
increased by $0.2 million for the three months ended June 30, 2005,
as compared to the same period in 2004. For the Six Months Ended
June 30, 2005 G2 segment revenues were $43.0 million for the six
months ended June 30, 2005 compared to $44.4 million for the six
months ended June 30, 2005. G2 revenues grew from $37.7 million in
the first half of 2004 to $41.1 million for the first half of 2005,
a 9.0% increase, after excluding the effects of the L-band payload
construction program revenues(6). This increase in revenues was
driven primarily by the lease of net additional FSS satellite
capacity of $1.2 million (including additional sales of PanAmSat
FSS satellite capacity of $3.8 million) and an increase in revenues
related to the new G2 managed network services offering of $3.1
million, partially offset by reduced fiber services revenues.
Revenues related to the L-Band payload project were $1.9 million in
the first half of 2005 compared to $6.7 million in the first half
of 2004, a decrease of $4.8 million due to the timing of completion
of certain milestones on this construction project. G2 income from
operations of $6.5 million and Segment EBITDA(7) of $7.5 million
increased by $1.2 million and $1.4 million, respectively, for the
six months ended June 30, 2005, as compared to the same period in
2004. These increases were primarily driven by a shift in the
composition of G2 segment revenues to services/products with higher
margins during the six months ended June 30, 2005. Fiscal 2005
Guidance For the year ending December 31, 2005, the Company is
updating its previously issued financial guidance. This revised
guidance does not take into account the Company's recently
announced Europe*Star acquisition which is expected to close in the
third quarter of 2005. Prior Revenue and Adjusted EBITDA guidance:
expected total consolidated revenues will increase by 3.0 % or more
and Adjusted EBITDA will increase by 4.0% or more over full year
2004 actual reported results. Revised Revenue and Adjusted EBITDA
Guidance: expected total consolidated revenues will increase by
3.5% or more and Adjusted EBITDA will increase by 5.5% or more over
full year 2004 actual reported results. Assuming the Europe*Star
transaction closes as anticipated in August 2005, expected total
consolidated revenues would increase by 4.0% or more and Adjusted
EBITDA would increase by 6.0% or more over full year 2004 actual
reported results. The Company reaffirms its prior guidance that it
expects that for full year 2005 cash payments in respect of capital
expenditures, including approximately $23 million of incentive
payments and interest on satellites in service but excluding the
Europe*Star investment, will be in the range of $155 million to
$170 million and that cash interest payments on the Company's debt
obligations will be in the range of $200 million to $215 million.
Our acquisition of Europe*Star, which is scheduled to close in the
third quarter of 2005, is expected to be funded from cash on hand.
This acquisition is expected to enhance our ability to pay future
dividends, service debt or fund future capital expenditures. For
more detailed information about the Company's financial guidance
and trends, please visit the "Financial Guidance/Recent
Presentations" page of the Investor Relations section of the
Company's website located at http://www.panamsat.com/. Investors'
Conference Call PanAmSat will host a conference call on August 9,
2005 at 11 a.m. ET to discuss the Company's fiscal second quarter
and six months ended June 30, 2005. Investors can participate in
the conference call by dialing (866) 483-1149 (U.S. and Canada) or
(706) 643-3802 (International); use the confirmation code 'PA'. For
your convenience, the conference call can be replayed in its
entirety beginning at 12 p.m. ET on August 9, 2005 through August
16, 2005. If you wish to listen to the replay of this conference
call, please dial (800) 642-1687 or (706) 645-9291 and enter pass
code 8266630. The conference call will also be broadcast live
through a link on the Investor Relations page on the PanAmSat Web
site at http://www.panamsat.com/. Please go to the Web site at
least 15 minutes prior to the call to register, download and
install any necessary audio software. About PanAmSat Through its
owned and operated fleet of 23 satellites, PanAmSat (NYSE:PA) is a
leading global provider of video, broadcasting and network
distribution and delivery services. It transmits 1,991 television
channels worldwide and, as such, is the leading carrier of standard
and high-definition signals. In total, the Company's in-orbit fleet
is capable of reaching over 98% 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. For more information, visit the Company's web site at
http://www.panamsat.com/. (1) See Adjusted EBITDA Reconciliation
and Adjusted EBITDA Margin Reconciliation. (2) See Adjusted EBITDA
Reconciliation and Adjusted EBITDA Margin Reconciliation. (3) See
G2 Revenue reconciliation table. (4) See Reconciliation of Income
(loss) From Operations To Segment EBITDA. (5) See Reconciliation of
Income (loss) From Operations to Segment EBITDA. (6) See G2 Revenue
Reconciliation table. (7) See Reconciliation of Income (loss) From
Operations to Segment EBITDA 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 within our registration
statement on Form S-1 (File No. 333-121463) filed with the
Securities and Exchange Commission ("SEC"), as such registration
statement became effective on March 16, 2005, and all of our other
filings filed with the SEC from March 16, 2005 through the current
date pursuant to the Securities Exchange Act of 1934. These risks
and uncertainties include but are not limited to: (i) the ability
of our subsidiaries to make distributions to us in amounts
sufficient to make required interest and principal payments on the
notes; (ii) risks associated with operating our in-orbit
satellites; (iii) satellite launch failures, satellite launch and
construction delays and in-orbit failures or reduced performance;
(iv) our ability to obtain new or renewal satellite insurance
policies on commercially reasonable terms or at all; (v) possible
future losses on satellites that are not adequately covered by
insurance; (vi) domestic and international government regulation;
(vii) changes in our contracted backlog or expected contracted
backlog for future services; (viii) pricing pressure and
overcapacity in the markets in which we compete; (iv) inadequate
access to capital markets; (x) competition; (xi) customer defaults
on their obligations owed to us; (xii) our international operations
and other uncertainties associated with doing business
internationally; (xiii) our high level of indebtedness; (xiv)
control by our controlling stockholders; and (xv) litigation.
PanAmSat Holding Corporation cautions that the foregoing list of
important factors is not exclusive. Further, the Company 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. PanAmSat Holding Corporation Summary of
Operating Results Amounts in thousands (except share data) Three
Months Ended June 30, June 30, 2004 2005 Revenues Operating leases,
satellite services and other $ 202,732 $ 210,345 Outright sales and
sales-type leases 4,093 3,507 Total Revenues 206,825 213,852 Costs
and Expenses Cost of outright sales and sales-type leases - (1,450)
Depreciation and amortization 71,312 67,165 Direct operating costs
(exclusive of depreciation and amortization) 40,167 33,891 Selling,
general & administrative expenses 49,756 20,307 Loss on
undesignated interest rate swap - 18,637 Transaction-related costs
500 - Facilities restructuring and severance costs 573 416 Total
operating costs and expenses 162,308 138,966 Income from operations
44,517 74,886 Interest expense, net 33,623 101,626 Income (loss)
before income taxes 10,894 (26,740) Income tax expense 228 5,434
Net income (loss) $10,666 $ (32,174) Net income (loss) per share --
basic and diluted $0.02 $(0.26) Weighted average common shares
outstanding -- basic 432,267,000 122,585,000 Weighted average
common shares outstanding -- diluted 433,874,000 122,585,000
PanAmSat Holding Corporation Summary of Operating Results Amounts
in thousands (except share data) Six Months Ended June 30, June 30,
2004 2005 Revenues Operating leases, satellite services and other $
403,897 $ 415,546 Outright sales and sales-type leases 8,358 7,114
Total Revenues 412,255 422,660 Costs and Expenses Cost of outright
sales and sales-type leases - (4,303) Depreciation and amortization
146,647 136,930 Direct operating costs (exclusive of depreciation
and amortization) 79,835 68,838 Selling, general &
administrative expenses 67,305 39,061 Loss on undesignated interest
rate swap - 18,637 Transaction-related costs 500 - Sponsor
management fees - 10,444 Loss on termination of sales-type lease -
2,307 Facilities restructuring and severance costs 2,428 3,765
Satellite impairment loss 99,946 - Total operating costs and
expenses 396,661 275,679 Income from operations 15,594 146,981
Interest expense, net 64,709 177,152 Loss before income taxes
(49,115) (30,171) Income tax expense (benefit) (27,852) 902 Net
loss $ (21,263) $ (31,073) Net loss per share - basic and diluted
$(0.05) $(0.31) Weighted average common shares outstanding -- basic
432,150,000 100,483,000 Weighted average common shares outstanding
-- diluted 432,150,000 100,483,000 PanAmSat Holding Corporation
Summarized Balance Sheets (Amounts in thousands) December 31, June
30, 2004 2005 ASSETS CURRENT ASSETS Cash and cash equivalents
$38,982 $119,490 Accounts receivable, net 69,380 61,586 Net
investment in sales-type leases 24,776 18,735 Prepaid expenses and
other current assets 26,595 24,715 Deferred income taxes 7,817
7,817 Assets held for sale 3,300 - Total current assets 170,850
232,343 SATELLITES AND OTHER PROPERTY AND EQUIPMENT - Net 1,955,664
1,906,831 NET INVESTMENT IN SALES-TYPE LEASES 74,990 67,452
GOODWILL 2,244,131 2,244,131 DEFERRED CHARGES AND OTHER ASSETS -
NET 326,296 298,030 TOTAL ASSETS $ 4,771,931 $ 4,748,787
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts
payable and accrued liabilities $69,456 $88,248 Current portion of
long-term debt 4,100 12,400 Current portion of satellite incentive
obligations 13,148 12,260 Accrued interest payable 45,589 36,079
Dividends payable - 47,507 Deferred gains and revenues 26,618
17,977 Total current liabilities 158,911 214,471 LONG-TERM DEBT
3,859,038 3,192,073 DEFERRED INCOME TAXES 31,779 31,188 DEFERRED
CREDITS AND OTHER 271,100 285,636 TOTAL LIABILITIES 4,320,828
3,723,368 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY
451,103 1,025,419 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $
4,771,931 $ 4,748,787 PanAmSat Holding Corporation Summarized
Statements of Cash Flows (Amounts in thousands) Six Months Ended
June 30, June 30, 2004 2005 CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (21,263) $ (31,073) Depreciation and amortization
expense 146,647 136,930 Deferred income taxes (30,528) 736
Amortization of debt issuance costs and other deferred charges
3,962 10,063 Loss on undesignated interest rate swap - 18,637
Accretion on senior discount notes - 13,235 Provision for
uncollectible receivables 30,456 33 Loss on early extinguishment of
debt 5,455 24,161 Satellite impairment loss 99,946 - Facilities
restructuring and severance costs 2,021 3,765 Reversal of
sales-type lease liabilities - (4,303) Loss on termination of
sales-type leases - 2,307 Other non-cash items (3,208) (1,052)
Changes in working capital and other accounts (11,229) (6,289) NET
CASH PROVIDED BY OPERATING ACTIVITIES 222,259 167,150 CASH FLOWS
FROM INVESTING ACTIVITIES Capital expenditures (including
capitalized interest) (a) (83,886) (65,802) Insurance proceeds from
satellite recoveries 286,915 - Net sales of short-term investments
170,659 - Proceeds from sale of teleport - 3,161 Acquisitions, net
of cash acquired (522) - NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 373,166 (62,641) CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock - initial public offering - 900,000
Repayments of long-term debt (350,000) (671,900) Dividends to
stockholders - (205,278) Capitalized costs of initial public
offering - (40,923) Capitalized debt issuance costs - (725) New
incentive obligations 16,250 - Repayment of incentive obligations
(6,818) (6,441) Other equity related transactions 3,493 19 NET CASH
USED IN FINANCING ACTIVITIES (337,075) (25,248) EFFECT OF EXCHANGE
RATE CHANGES ON CASH (136) 1,247 NET INCREASE IN CASH AND CASH
EQUIVALENTS 258,214 80,508 CASH AND CASH EQUIVALENTS, beginning of
period 176,087 38,982 CASH AND CASH EQUIVALENTS, end of period $
434,301 $ 119,490 (a) Includes capitalized interest of $2.2 million
and $11.0 million for the six months ended June 30, 2004 and 2005,
respectively. PanAmSat Holding Corporation Selected Segment Data
(Amounts in thousands) Three Months Ended Six Months Ended June 30,
June 30, June 30, June 30, 2004 2005 2004 2005 FSS Revenue $
188,782 $ 198,448 $ 378,209 $ 392,317 Depreciation and Amortization
Expense 70,970 66,875 145,867 136,350 Income (loss) from operations
40,942 72,126 10,269 141,618 Segment EBITDA(8) 151,252 163,316
303,054 323,365 Capital Expenditures 62,202 43,290 83,886 64,555 G2
Revenue $22,605 $22,522 $44,421 $42,981 Depreciation and
Amortization Expense 342 290 780 580 Income from operations 3,575
3,502 5,325 6,504 Segment EBITDA(8) 3,917 4,068 6,105 7,490 Capital
Expenditures - 465 - 1,247 Eliminations Revenue $(4,562) $(7,118)
$(10,375) $(12,638) Parent Loss from operations - $(742) - $(1,141)
Total Revenue $ 206,825 $ 213,852 $ 412,255 $ 422,660 Depreciation
and Amortization Expense 71,312 67,165 146,647 136,930 Income
(loss) from operations 44,517 74,886 15,594 146,981 Capital
Expenditures 62,202 43,755 83,886 65,802 NON-GAAP RECONCILIATION
TABLES PanAmSat Holding Corporation G2 Operating Segment Non-GAAP
Revenue Reconciliation (Amounts in thousands) Three Months Ended
Six Months Ended June 30, June 30, June 30, June 30, 2004 2005 2004
2005 G2 Revenues As reported $22,605 $22,522 $44,421 $42,981 Less:
L-Band payload revenues (4,342) (1,000) (6,683) (1,842) Adjusted G2
Revenues $18,264 $21,522 $37,738 $41,139 Adjusted G2 revenues are
not a presentation made in accordance with GAAP and does not
purport to be an alternative to G2 revenues determined in
accordance with GAAP. Because not all companies use identical
calculations, this presentation of Adjusted G2 revenues may not be
comparable to other similarly titled measures of other companies.
The table above sets forth a reconciliation of G2 revenues to
Adjusted G2 revenues for the periods indicated. Adjusted G2
revenues are defined as G2 revenues as reported less L-Band payload
revenues recognized during each respective period. L-Band payload
revenues represent revenues recognized on a long-term construction
contract with a customer to construct an L-Band navigational
payload on our Galaxy 15 satellite. This construction contract has
had a substantial impact on G2's business but is very different
from G2s core business of selling satellite and non-satellite
bandwidth, selling equipment and performing consulting and managed
network services. Management therefore analyzes G2s results with
and without these L-Band payload revenues in order to evaluate G2's
core business elements. (8) See Reconciliation of Income (loss)
From Operations to Segment EBITDA. PanAmSat Holding Corporation
Adjusted EBITDA Reconciliation (Amounts in thousands) Three Months
Ended Six Months Ended June 30, June 30, June 30, June 30, 2004
2005 2004 2005 Reconciliation of Net Cash Provided by Operating
Activities to Net Income (Loss): Net cash provided by operating
activities $ 142,444 $ 103,826 $ 222,259 $ 167,150 Depreciation and
amortization (71,312) (67,165) (146,647) (136,930) Deferred income
taxes 82 (8,351) 30,528 (736) Amortization of debt issue costs and
other deferred charges (1,971) (4,751) (3,962) (10,063) Accretion
on senior discount notes - (6,701) - (13,235) Provision for
uncollectible receivables (30,262) 57 (30,456) (33) Other non-cash
items (5) 810 3,208 1,052 Satellite impairment loss - - (99,946) -
Loss on termination of sales-type leases - - - (2,307) Facilities
restructuring and severance costs (166) (416) (2,021) (3,765)
Reversal of sales-type lease liabilities - 1,450 - 4,303 Loss on
early extinguishment of debt (5,455) (14,640) (5,455) (24,161) Loss
on undesignated interest rate swap - (18,637) - (18,637) Changes in
assets and liabilities, net of acquired assets and liabilities
(22,689) (17,656) 11,229 6,289 Net income (loss) $10,666 $ (32,174)
$ (21,263) $ (31,073) Reconciliation of Net Income (Loss) to
EBITDA: Net income (loss) $10,666 $ (32,174) $ (21,263) $ (31,073)
Interest expense, net 33,623 101,626 64,709 177,152 Income tax
expense (benefit) 228 5,434 (27,852) 902 Depreciation and
amortization 71,312 67,165 146,647 136,930 EBITDA $ 115,829
$142,051 $ 162,241 $ 283,911 Reconciliation of EBITDA to Adjusted
EBITDA: EBITDA $ 115,829 $ 142,051 $ 162,241 $ 283,911 Adjustment
of sales-type leases to operating leases (a) 6,313 6,677 12,403
13,210 Loss on termination of sales-type leases (b) - - - 2,307
Satellite impairment (c) - - 99,946 -- Restructuring charges (d)
573 416 2,428 3,765 Reserves for long-term receivables (e) 28,146
(1,450) 28,146 (4,303) Reversal of allowance for customer credits
(f) 2,700 -- 5,400 -- Transaction-related costs (g) 500 101 500
10,749 Loss on undesignated interest rate swap (h) - 18,637 -
18,637 Other items (i) 1,108 562 (1,905) 2,156 Adjusted EBITDA $
155,169 $ 166,994 $ 309,159 $ 330,432 Adjusted EBITDA Margin
Reconciliation: Revenues $ 206,825 $ 213,852 $ 412,255 $ 422,660
Adjustment of sales-type leases to operating leases (a) 6,313 6,677
12,403 13,210 Reversal of allowance for customer credits (f) 2,700
-- 5,400 -- Adjusted Revenues $ 215,838 $ 220,529 $ 430,058 $
435,870 Adjusted EBITDA $ 155,169 $ 166,994 $ 309,159 $ 330,432
Adjusted EBITDA Margin (j) 72% 76% 72% 76% Adjusted EBITDA is not a
presentation made in accordance with GAAP, and does not purport to
be an alternative to net income (loss) determined in accordance
with GAAP or as a measure of operating performance or to cash flows
from operating activities determined in accordance with GAAP as a
measure of liquidity. Additionally, Adjusted EBITDA is not intended
to be a measure of cash flow for management's discretionary use, as
it does not consider certain cash requirements such as interest
payments, tax payments and debt service requirements. Because not
all companies use identical calculations, this presentation of
Adjusted EBITDA may not be comparable to other similarly titled
measures of other companies. The table above sets forth a
reconciliation of Adjusted EBITDA and EBITDA to net income (loss)
and to net cash provided by operating activities for the periods
indicated. The indenture governing the Company's 10 3/8% senior
discount notes, the indenture governing PanAmSat Corporation's 9%
senior notes and PanAmSat Corporation's senior secured credit
facilities contain financial covenant ratios, specifically total
leverage and interest coverage ratios, that are calculated by
reference to Adjusted EBITDA. Adjusted EBITDA is defined as net
income (loss) plus net interest expense, income tax expense
(benefit) and depreciation and amortization, further adjusted to
give effect to unusual items, non-cash items and other adjustments
specifically required in calculating covenant ratios and compliance
under the indenture governing the Company's 10 3/8% senior discount
notes, the indenture governing PanAmSat Corporation's 9% senior
notes due 2014 and PanAmSat Corporation's senior secured credit
facilities. These adjustments include unusual items such as
severance, relocation costs and one-time compensation charges,
non-cash charges such as non-cash compensation expense and the
other adjustments shown below. Adjusted EBITDA is a material
component of these covenants. For instance, non-compliance with the
financial ratio maintenance covenants contained in the senior
secured credit facilities could result in the requirement that
PanAmSat immediately repay all amounts outstanding under such
facilities and a prohibition on PanAmSat paying dividends to the
Company, and non-compliance with the debt incurrence ratios
contained in the Company's 10 3/8% senior discount notes and
PanAmSat Corporation's 9% senior notes prohibit us from being able
to incur additional indebtedness or make restricted payments,
including payments of dividends on our common stock, other than
pursuant to specified exceptions. In addition, under the restricted
payments covenants contained in the indentures, the ability of the
Company and PanAmSat Corporation, as applicable, to pay dividends
is restricted by a formula based on the amount of Adjusted EBITDA.
We believe the adjustments listed below are in accordance with the
covenants discussed above. (a) For all periods presented,
adjustment of sales-type leases to operating leases represents the
principal portion of the periodic sales-type lease payments that
are recorded against the principal balance outstanding. These
amounts would have been recorded as operating lease revenues if
these agreements had been accounted for as operating leases instead
of sales-type leases. These adjustments have the effect of
including the principal portion of our sales-type lease payments in
the period during which cash is collected. (b) For the six months
ended June 30, 2005, loss on termination of sales-type leases
represents the non-cash loss of $2.3 million incurred upon the
conversion of one of our customer's sales-type lease agreements to
an operating lease agreement in the first quarter of 2005. (c) For
the six months ended June 30, 2004, satellite impairment represents
the pre-tax impairment charge related to the anomalies experienced
by our PAS-6 satellite during the first quarter of 2004, which
resulted in this satellite being de-orbited on April 2, 2004. (d)
Restructuring charges represent severance costs, leasehold
termination costs and/or other facility closure costs. (e) For the
three and six months ended June 30, 2004, amount represents the
write-off of long-term receivable balances due from a customer of
$28.1 million. For the three months ended June 30, 2005, amount
represents the reversal of approximately $1.5 million of in-orbit
insurance liabilities related to sales-type leases on our Galaxy 4R
satellite that is no longer insured. For the six months ended June
30, 2005, amount represents the reversal of approximately $4.3
million of in-orbit insurance liabilities related to sales-type
leases on our Galaxy 4R and Galaxy 10R satellites that are no
longer insured. During the six months ended June 30, 2005, the
insurance policies covering our Galaxy 4R and Galaxy 10R satellites
expired, were not replaced and as a result, these satellites and
their related assets are no longer insured. (f) For the three and
six months ended June 30, 2004, we recorded an allowance for
customer credits related to receivables from a customer affiliated
with The News Corporation, as collectibility was not reasonably
assured. The adjustment represents the amount of revenues that
would have been recognized had the allowance for customer credits
not been recorded. (g) For the three and six months ended June
2004, amount represents proxy solicitation costs. For the three
months ended June 30, 2005, amount primarily represents costs
associated with our initial public offering. For the six months
ended June 30, 2005, amount represents (i) $10.0 million paid to
the Sponsors on March 22, 2005, in relation to the termination of
their respective management services agreement with us, (ii) costs
associated with initial public offering, and (iii)
non-capitalizable third party costs incurred. (h) For the three and
six months ended June 30, 2005, loss on undesignated interest rate
swap represents changes in the fair value of the interest rate swap
prior to the swap being designated as a hedge and qualifying for
hedge accounting treatment. (i) For the three months ended June 30,
2004, other items consist of (i) $0.8 million of non-cash stock
compensation expense, (ii) $0.1 million loss from an investment
accounted for by the equity method and (iii) $0.2 million of
transaction costs related to acquisitions not consummated. For the
three months ended June 30, 2005, other items consist of (i) $0.1
million of expenses for management advisory services from the
Sponsors, (ii) $0.3 million of non-cash stock compensation expense,
(iii) $0.1 million of acquisition fees, (iv) $0.2 million of loss
from discontinue operations, offset by $0.1 million gain on
disposal of fixed assets, and $0.1 million gain from an equity
investment. For the six months ended June 30, 2004, other items
consist of (i) $2.6 million of non-cash reserve adjustments and
(ii) $1.4 million gain on the disposal of assets, partially offset
by (x) $1.5 million of non-cash stock compensation expense, (y)
$0.3 million loss from an investment accounted for by the equity
method and (z) $0.3 million of transaction costs related to
acquisitions not consummated. For the six months ended June 30,
2005, other items consist of (i) $0.5 million of expenses for
management advisory services from the Sponsors, (ii) $0.1 million
loss on disposal of fixed assets, (iii) $1.2 million of non-cash
stock compensation expense, (iv) $0.4 million loss from
discontinued operations, (v) $0.1 million of acquisition costs,
less $0.1 million of gains on equity investment. (j) Adjusted
EBITDA Margin is calculated as Adjusted EBITDA divided by Adjusted
Revenues (revenue plus the principal portion of periodic sales-type
lease payments made during the period that are recorded against the
principal balance outstanding and the revenues that would have been
recognized as a result of the reversal of the allowance for
customer credits) See notes (a) and (f) above. Adjusted EBITDA
Margin is not a presentation made in accordance with GAAP and does
not purport to be an alternative to net income (loss) determined in
accordance with GAAP or as a measure of operating performance
determined in accordance with GAAP. The company utilizes Adjusted
EBITDA margin as a measure of internal operating performance and to
track the company's operating performance against its competitors.
PanAmSat Holding Corporation FSS and G2 Operating Segments
Reconciliation of Income From Operations To Segment EBITDA (Amounts
in thousands) Three Months Ended Six Months Ended June 30, June 30,
June 30, June 30, 2004 2005 2004 2005 FSS Operating Segment:
Reconciliation of income from operations to Segment EBITDA: Income
from operations $40,942 $72,126 $10,269 $ 141,618 Depreciation and
amortization 70,970 66,875 145,867 136,350 EBITDA 111,912 139,001
156,136 277,968 Adjustment of sales-type leases to operating leases
(a) 6,313 6,677 12,403 13,210 Loss on termination of sales-type
leases (b) - - - 2,307 Satellite impairment (c) - - 99,946 -
Restructuring charges (d) 573 140 2,428 3,359 Reserves for
long-term receivables (e) 28,146 (1,450) 28,146 (4,303) Reversal of
allowance for customer credits (f) 2,700 -- 5,400 -
Transaction-related costs (g) 500 12 500 10,545 Loss on
undesignated interest rate swap (h) -- 18,637 - 18,637 Other items
(i) 1,108 299 (1,905) 1,642 Segment EBITDA $ 151,252 $ 163,316 $
303,054 $ 323,365 G2 Operating Segment: Reconciliation of income
from operations to Segment EBITDA: Income from operations $3,575
$3,502 $5,325 $6,504 Depreciation and amortization 342 290 780 580
EBITDA 3,917 3,792 6,105 7,084 Restructuring charges (b) - 276 -
406 Segment EBITDA $3,917 $4,068 $6,105 $7,490 As a result of the
Recapitalization, we began utilizing Segment EBITDA as a measure of
performance for our operating segments beginning in the third
quarter of 2004. We evaluate the performance of our operating
segments based on several factors, of which the primary financial
measure is segment net income (loss) plus net interest expense,
income tax expense (benefit) and depreciation and amortization,
further adjusted to exclude non-recurring items and other non-cash
adjustments largely outside of the segment operating managers'
control ("Segment EBITDA"). Segment EBITDA is presented herein
because our chief operating decision maker evaluates and measures
each business unit's performance based on its Segment EBITDA
results. (a) For all periods presented, adjustment of sales-type
leases to operating leases represents the principal portion of the
periodic sales-type lease payments that are recorded against the
principal balance outstanding. These amounts would have been
recorded as operating lease revenues if these agreements had been
accounted for as operating leases instead of sales-type leases.
These adjustments have the effect of including the principal
portion of our sales-type lease payments in the period during which
cash is collected. (b) For the six months ended June 30, 2005, loss
on termination of sales- type leases represents the non-cash loss
of $2.3 million incurred upon the conversion of one of our
customer's sales-type lease agreements to an operating lease
agreement in the first quarter of 2005. (c) For the six months
ended June 30, 2004, satellite impairment represents the pre-tax
impairment charge related to the anomalies experienced by our PAS-6
satellite during the first quarter of 2004, which resulted in this
satellite being de-orbited on April 2, 2004. (d) Restructuring
charges represent severance costs, leasehold termination costs
and/or other facility closure costs. (e) For the three and six
months ended June 30, 2004, amount represents the write-off of
long-term receivable balances due from a customer of $28.1 million.
For the three months ended June 30, 2005, amount represents the
reversal of approximately $1.5 million of in-orbit insurance
liabilities related to sales-type leases on our Galaxy 4R satellite
that is no longer insured. For the six months ended June 30, 2005,
amount represents the reversal of approximately $4.3 million of
in-orbit insurance liabilities related to sales-type leases on our
Galaxy 4R and Galaxy 10R satellites that are no longer insured. In
the six months ended June 2005, the insurance policies covering our
Galaxy 4R and Galaxy 10R satellites expired, were not replaced and
as a result, these satellites and their related assets are no
longer insured. (f) For the three and six months ended June 30,
2004, we recorded an allowance for customer credits related to
receivables from a customer affiliated with The News Corporation,
as collectibility was not reasonably assured. The adjustment
represents the amount of revenues that would have been recognized
had the allowance for customer credits not been recorded. (g) For
the three and six months ended June 2004, amount represents proxy
solicitation costs. For the three months ended June 30, 2005,
amount represents third party costs incurred in relation to the
amendment of our senior secured credit facilities which was
effective in March 2005. For the six months ended June 30, 2005,
amount represents (i) $10.0 million paid to the Sponsors on March
22, 2005, in relation to the termination of their respective
management services agreement with us and (ii) non-capitalizable
third party costs incurred . (h) For the three and six months ended
June 30, 2005, .loss on undesignated interest rate swap represents
changes in the fair value of the interest rate swap prior to the
swap being designated as a hedge and qualifying for hedge
accounting treatment. (i) For the three months ended June 30, 2004,
other items consist of (i) $0.8 million of non-cash stock
compensation expense, (ii) $0.1 million loss from an investment
accounted for by the equity method and (iii) $0.2 million of
transaction costs related to acquisitions not consummated. For the
three months ended June 30, 2005, other items consist of (i) $0.1
million of expenses for management advisory services from the
Sponsors, (ii) $0.1 million of non-cash stock compensation expense,
(iii) $0.1 million of acquisition fees, (iv) $0.2 million of loss
from discontinue operations, offset by $0.1 million gain on
disposal of fixed assets, and $0.1 million gain from an equity
investment. For the six months ended June 30, 2004, other items
consist of (i) $2.6 million of non-cash reserve adjustments and
(ii) $1.4 million gain on the disposal of assets, partially offset
by (x) $1.5 million of non-cash stock compensation expense, (y)
$0.3 million loss from an investment accounted for by the equity
method and (z) $0.3 million of transaction costs related to
acquisitions not consummated. For the six months ended June 30,
2005, other items consist of (i) $0.5 million of expenses for
management advisory services from the Sponsors, (ii) $0.1 million
loss on disposal of fixed assets, (iii) $0.6 million of non-cash
stock compensation expense, (iv) $0.4 million loss from
discontinued operations, (v) $0.1 million of acquisition costs,
less $0.1 million of gains on equity investment. DATASOURCE:
PanAmSat Holding Corporation CONTACT: Kathryn Lancioni, VP,
Corporate Communications of PanAmSat Corporation, +1-203-210-8000;
or Mark McCall of Financial Dynamics, +1-212-850-5600 Web site:
http://www.panamsat.com/
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