INTELSAT, LTD. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND RECONCILIATION TO COMBINED UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands)
Successor Combined
Predecessor Entity Entity
------------------- --------- ---------
Three Three
Months Jan. 1 Feb. 1 Months
Ended to to Ended
March 31, Jan. 31, March 31, March 31,
2004 2005 2005 2005
--------- --------- --------- ---------
Revenue $ 233,913 $ 97,917 $ 195,257 293,174
Operating expenses:
Direct costs of revenue
(exclusive of depreciation
and amortization shown
separately below) 33,467 26,939 43,837 70,776
Selling, general and
administrative 33,051 55,443 26,481 81,924
Depreciation and
amortization 103,886 39,184 95,953 135,137
Impairment of asset value - 69,227 - 69,227
Restructuring costs 424 263 - 263
--------- --------- --------- ---------
Total operating expenses 170,828 191,056 166,271 357,327
--------- --------- --------- ---------
Operating (loss) income
from continuing operations 63,085 (93,139) 28,986 (64,153)
Interest expense 40,217 13,241 67,964 81,205
Interest income 2,464 191 1,092 1,283
Other income (expense), net (212) 863 (453) 410
--------- --------- --------- ---------
Income (loss) from
continuing operations
before income taxes 25,120 (105,326) (38,339) (143,665)
Provision for income taxes 4,513 4,400 3,586 7,986
--------- --------- --------- ---------
Income (loss) from
continuing operations 20,607 (109,726) (41,925) (151,651)
Loss from discontinued
operations, net of
minority interest (3,852) - - -
--------- --------- ---------- ---------
Net income (loss) $ 16,755 $(109,726) $ (41,925) $(151,651)
========= ========= ========= =========
INTELSAT, LTD.
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
(UNAUDITED)
Three Months Ended March 31,
2004 2005
-------------- --------------
($ in thousands)
Net income (loss) $ 16,755 $ (151,651)
Add:
Interest expense 40,217 81,205
Provision for income taxes 4,513 7,986
Depreciation and amortization 103,886 135,137
Subtract: Interest income 2,464 1,283
-------------- ----------------
EBITDA $ 162,907 $ 71,394
============== ================
EBITDA margin 70% 24%
Note:
EBITDA consists of earnings before interest, taxes and
depreciation and amortization. EBITDA is a measure commonly used in
the fixed satellite services sector, and Intelsat presents EBITDA to
enhance your understanding of its operating performance. EBITDA margin
is defined as EBITDA divided by total revenues. Intelsat uses EBITDA
as one criterion for evaluating its performance relative to that of
its peers. Intelsat believes that EBITDA is an operating performance
measure, and not a liquidity measure, that provides investors and
analysts with a measure of operating results unaffected by differences
in capital structures, capital investment cycles and ages of related
assets among otherwise comparable companies. However, EBITDA is not a
measure of financial performance under GAAP, and our EBITDA may not be
comparable to similarly titled measures of other companies. You should
not consider EBITDA as an alternative to operating or net income,
determined in accordance with GAAP, as an indicator of Intelsat's
operating performance, or as an alternative to cash flows from
operating activities, determined in accordance with GAAP, as an
indicator of cash flows, or as a measure of liquidity.
INTELSAT, LTD.
RECONCILIATION OF EBITDA TO COVENANT EBITDA
(UNAUDITED)
Three Months Ended
2004 2005
---------- ----------
($ in thousands)
EBITDA $ 162,907 $ 71,394
Add (Subtract):
Loral pro forma 22,027 -
COMSAT General pro forma 6,150 -
Compensation & benefit adjustments 2,323 11,792
Restructuring costs 424 263
Transaction - related expenses - 48,979
Equity investment losses 1,114 1,631
Satellite impairment charge - 69,227
Loss from discontinued operations 3,852 -
Non-recurring and unusual gains/losses 1,145 2,944
Non-cash income - (574)
---------- ----------
Covenant EBITDA $ 199,942 $ 205,656
========== ==========
Note:
Intelsat calculates a measure of EBITDA, called "covenant EBITDA,"
based on the term Consolidated EBITDA, as defined in the covenants of
its credit agreement dated January 28, 2005. Covenant EBITDA consists
of EBITDA as adjusted to exclude certain unusual items and other
adjustments permitted in calculating covenant compliance under our
credit agreement. Covenant EBITDA is presented on a pro forma basis,
as if the Company's March 2004 acquisition of the Intelsat Americas
assets and October 2004 acquisition of the COMSAT General business had
occurred as of January 1, 2004. The measure also adjusts for certain
operating expense items. We present covenant EBITDA because it is used
to test the permissibility of certain types of transactions in the
covenants related to our credit agreement; similar provisions are also
used to test the permissibility of transactions in the covenants
related to our senior notes and senior discount notes. However,
covenant EBITDA is not a measure of financial performance under GAAP,
and our covenant EBITDA may not be comparable to similarly titled
measures of other companies. You should not consider covenant EBITDA
as an alternative to operating or net income, determined in accordance
with GAAP, as an indicator of Intelsat's operating performance, or as
an alternative to cash flows from operating activities, determined in
accordance with GAAP, as an indicator of cash flows, or as a measure
of liquidity.
INTELSAT, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands, except share and per share amounts)
Predecessor Successor
Entity Entity
------------- -----------
As of As of
Dec. 31, March 31,
2004 2005
------------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 141,320 $ 299,667
Receivables, net of allowance of $35,343
and $28,410, respectively 228,294 261,146
Insurance receivable 58,320 -
Deferred income taxes 12,854 10,581
------------- -----------
Total current assets 440,788 571,394
Satellites and other property and
equipment, net 3,637,357 3,584,954
Amortizable intangible assets, net 104,612 531,838
Non-amortizable intangible assets 255,002 560,000
Goodwill 130,829 122,653
Investment in affiliate 52,246 50,615
Other assets 173,422 202,144
------------- -----------
Total assets $ 4,794,256 $ 5,623,598
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 200,000 -
Accounts payable and accrued liabilities 246,474 307,544
Deferred satellite performance incentives 7,968 7,919
Deferred revenue 39,566 34,239
Capital lease obligations 5,569 5,657
------------- -----------
Total current liabilties 499,577 355,359
Long-term debt, net of current portion 1,742,566 4,759,451
Deferred satellite performance incentives,
net of current portion 48,806 43,471
Deferred revenue, net of current portion 123,992 173,071
Accrued retirement benefits 56,016 107,328
Other long-term liabilities 17,478 19,300
------------- -----------
Total long-term liabilties 2,488,435 5,457,980
------------- -----------
Commitments and contingencies
Shareholders' equity
Preference shares, $3.00 par value,
2,500,000 shares authorized, no shares
issued or outstanding - -
Ordinary shares, $3.00 par value,
216,666,666(2/3) shares authorized,
167,261,024 shares issued and
160,382,120 shares outstanding as of
December 31, 2004 500,000 -
Common stock, $1.00 par value, 12,000
shares authorized, issued and
outstanding - 12
Contributed capital - 207,697
Paid-in capital 1,301,886 -
Retained earnings (deficit) 610,520 (41,925)
Accumulated other comprehensive (loss)
income:
Minimum pension liability, net of tax (1,367) -
Unrealized gain on available-for-sale
securities, net of tax 1,600 (166)
Ordinary shares purchased by subsidiary,
6,284,635 shares (106,818) -
------------- -----------
Total shareholders' equity 2,305,821 165,618
------------- -----------
Total liabilities and shareholders'
equity $ 4,794,256 $ 5,623,598
============= ===========
INTELSAT, LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND
RECONCILIATION TO COMBINED UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
($ in thousands)
Predecessor Entity Successor Combined
Entity
------------------- --------------------
Three Three
Months Feb. 1 Months
Ended Jan. 1 to to Ended
March 31, Jan. 31, March 31, March 31,
2004 2005 2005 2005
--------- --------- --------- ---------
Cash flows from operating
activities:
Net income (loss) $ 16,755 $(109,726) $ (41,925) $(151,651)
Loss from discontinued
operations, net of
minority interest 3,852 - - -
--------- --------- --------- ---------
Income from continuing
operations $ 20,607 $(109,726) $ (41,925) $(151,651)
Adjustments to reconcile
income from continuing
operations to net cash
provided by operating
activities:
Depreciation and
amortization 103,886 39,184 95,953 135,137
Impairment charge for IS-
804 satellite - 69,227 - 69,227
Provision for doubtful
accounts 3,265 (5,799) (264) (6,063)
Foreign currency
transaction loss 410 75 46 121
Deferred income taxes - 2,375 - 2,375
Amortization of bond
discount and issuance
costs 1,492 430 9,879 10,309
Equity in losses of
affiliate 1,114 402 1,229 1,631
Changes in operating
assets and liabilities,
net of effects of
acquisitions:
Receivables (20,947) (32,168) (5,132) (37,300)
Other assets 1,625 3,194 217 3,411
Accounts payable and
accrued liabilities 10,163 49,932 36,552 86,484
Deferred revenue (7,761) (2,388) (4,072) (6,460)
Accrued retirement
benefits 2,379 (27) 1,914 1,887
Other long-term
liabilities - (3,327) 150 (3,177)
--------- --------- --------- ---------
Net cash provided by
operating activities 116,233 11,384 94,547 105,931
--------- --------- --------- ---------
Cash flows from investing
activities:
Payments for satellites
and other property and
equipment (82,950) (953) (5,255) (6,208)
Payments for future
satellite (50,000) - - -
Increase in restricted
cash 700,000 - - -
Proceeds from insurance
receivable - 38,561 19,759 58,320
Payments for asset
acquisitions (961,063) - - -
Other (371) - - -
--------- --------- --------- ---------
Net cash used in investing
activities (394,384) 37,608 14,504 52,112
--------- --------- --------- ---------
Cash flows from financing
activities:
Repayment of long-term
debt (200,000) - (200,875) (200,875)
Proceeds from bond
issuance - - 305,348 305,348
Proceeds from credit
facility borrowings 200,000 - 200,000 200,000
Debt issuance costs (4,000) - - -
Principal payments on
deferred satellite
performance incentives (1,256) (475) (771) (1,246)
Principal payments on
capital lease obligations (1,747) - (1,809) (1,809)
Dividends to shareholders - - (305,913) (305,913)
--------- --------- --------- ---------
Net cash provided by (used
in) financing activities (7,003) (475) (4,020) (4,495)
--------- --------- --------- ---------
Effect of exchange rate
changes on cash (410) (75) (46) (121)
Effect of discontinued
operations on cash (20,559) - - -
--------- --------- --------- ---------
Net change in cash and
cash equivalents (306,123) 48,442 104,985 $ 153,427
---------
Cash and cash equivalents,
beginning of period 576,793 141,320 194,682
--------- --------- ---------
Cash and cash equivalents,
end of period $ 270,670 $ 189,762 $ 299,667
--------- --------- ---------
Note: The increase in the cash between the predecessor entity
ending balance and the successor entity opening balance is due to
excess financing proceeds raised by one of the amalgamated entities
that were not distributed up to Intelsat Holdings, Ltd.
INTELSAT, LTD. AND SUBSIDIARIES
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO
FREE CASH FLOW FROM OPERATIONS
Three Months Ended
March 31,
2004 2005
-------- --------
($ in thousands)
Net cash provided by operating activities $116,223 $105,931
Payments for satellites and other property and
equipment (82,950) (6,208)
Payment for deposit on future satellite (50,000) -
-------- --------
Free cash flow from operations $(16,727) $ 99,723
======== ========
Note:Free cash flow from operations consists of net cash provided
by operating activities, less payments for satellites and other
property and equipment and payment for deposit on future satellite.
Free cash flow from operations is not a measure of cash flow under
GAAP. Intelsat believes free cash flow from operations is a useful
measure of financial performance that shows a company's ability to
fund its operations. Free cash flow from operations is used by
Intelsat in comparing its performance to that of its peers and is
commonly used by analysts, investors and other readers of financial
information in assessing performance. Free cash flow from operations
does not give effect to cash used in connection with investing
activities, cash used for debt service requirements or other uses of
cash in respect of financing activities, and thus does not reflect
funds available for investment or other discretionary uses. Free cash
flow from operations as presented herein may not be comparable to
similarly titled measures of other companies.