- Second quarter revenue of $482.0 million
- Second quarter net loss attributable to Intelsat S.A. of $405.4
million
- Second quarter Adjusted EBITDA of $342.4 million or 71 percent
of revenue
- June 30, 2020 contracted backlog of $6.4 billion
Intelsat S.A. (OTC: INTEQ), today announced financial results
for the three months ended June 30, 2020.
Intelsat reported total revenue of $482.0 million and net loss
attributable to Intelsat S.A. of $405.4 million for the three
months ended June 30, 2020.
Intelsat reported EBITDA1, or earnings before net interest, gain
on early extinguishment of debt, taxes and depreciation and
amortization, loss of $18.8 million and Adjusted EBITDA1 of $342.4
million, or 71 percent of revenue, for the three months ended June
30, 2020.
Intelsat’s Chief Executive Officer, Stephen Spengler, said, “Our
business demonstrated resiliency in a challenging operating
environment, highlighted by a sequential quarterly increase in
revenue and Adjusted EBITDA largely from the successful execution
of a new agreement with Speedcast in our network services business.
Financial results, when compared to the same period last year,
reflect the ongoing challenges in our network services business due
to the impacts of COVID-19 in the cruise maritime and aeronautical
mobility, despite booking new business in merchant maritime and
enterprise network applications. The decline in the media business
was driven by ongoing secular headwinds that we have experienced
over several quarters. Finally, the government services business
delivered year-over-year growth in revenues resulting from strong
uptake of third-party services and growth in our new FlexGround
managed services."
Spengler concluded, “During the period we filed our initial
C-band transition plan with the FCC, detailing our roadmap to meet
their accelerated spectrum clearing deadlines. The final transition
plans are due to be filed with the FCC on August 14, 2020. We will
consult with the FCC and continue to refine our plan as that date
approaches. Ongoing engagement with our supply chain, vendors, and
customers gives us a high degree of confidence that we can execute
our transition plan and ensure that the U.S. maintains its 5G
leadership position."
Second Quarter 2020 Business Highlights
Intelsat provides critical communications infrastructure to
customers in the network services, media and government sectors.
Our customers use our services for broadband connectivity to
deliver fixed and mobile telecommunications, enterprise, video
distribution and fixed and mobile government applications.
Network Services
Network services revenue was $176.7 million (or 37 percent of
Intelsat’s total revenue) for the three months ended June 30, 2020,
a decrease of 5 percent compared to the three months ended June 30,
2019.
Media
Media revenue was $202.6 million (or 42 percent of Intelsat’s
total revenue) for the three months ended June 30, 2020, a decrease
of 9 percent compared to the three months ended June 30, 2019.
Government
Government revenue was $96.1 million (or 20 percent of
Intelsat’s total revenue) for the three months ended June 30, 2020,
an increase of 3 percent compared to the three months ended June
30, 2019.
Average Fill Rate
Intelsat’s average fill rate at June 30, 2020 on our
approximately 1,675 36 MHz station-kept wide-beam transponders was
75.1 percent, as compared to an average fill rate at March 31, 2020
of 78.5 percent on our approximately 1,675 transponders. In
addition, at June 30, 2020 our fleet included approximately 1,225
36 MHz equivalent transponders of high-throughput Intelsat Epic
capacity, reflecting no change from the prior quarter.
Contracted Backlog
At June 30, 2020, Intelsat’s contracted backlog, representing
expected future revenue under existing contracts with customers,
was $6.4 billion, as compared to $6.6 billion at March 31,
2020.
C-band Proceeding at the U.S. Federal Communications
Commission ("FCC")
On June 19, 2020, the Company successfully filed its initial
C-band transition plan with the FCC. This comprehensive plan was
submitted after two years of coordinated outreach with customers,
vendors, and industry stakeholders to ensure that Intelsat is well
positioned to achieve the milestones outlined in the FCC's C-band
order. Given those proactive efforts, Intelsat is poised to
expedite the accelerated clearing process while maintaining the
high-quality service to our customers and helping the U.S. defend
its technology leadership position by providing valuable spectrum
on which it can deploy next generation 5G networks.
Subsequent to the end of the period, comments were submitted to
the FCC on Intelsat's initial transition plan from a number of
C-band stakeholders and interested external parties. The Company is
currently reviewing the comments and working with the FCC to
constructively address any relevant concerns. Intelsat expects to
provide feedback on these comments by the August 14, 2020
deadline.
Financial Results for the Three Months Ended June 30,
2020
Total revenue for the three months ended June 30, 2020
decreased by $27.4 million to $482.0 million, or a decrease of 5
percent as compared to the three months ended June 30, 2019. By
service type, our revenues increased or decreased due to the
following:
Total On-Network Revenues decreased by $32.5 million, or
7 percent, to $429.0 million as compared to the three months ended
June 30, 2019 primarily due to the following:
- Transponder services reported an aggregate decrease of
$26.0 million, primarily due to volume reductions and non-renewals
in both the network services and media business which was partially
offset by new business driven by mobility and enterprise networks
customers.
- Managed services reported an aggregate decrease of $6.3
million, primarily due to a decline in media revenues, which was
driven by lower occasional use video services and a termination of
a video contract, partially offset by new FlexGround services
provided to our government customers.
Total Off-Network and Other Revenues increased by $5.1
million, or 11 percent, to $53.0 million, as compared to the three
months ended June 30, 2019 primarily due to the following:
- Transponder, MSS and other Off-Network services revenues
increased by an aggregate of $5.9 million to $43.6 million,
primarily due to an increase in government revenues driven by new
business in third-party services.
- Satellite-related services reported a decrease of $0.8
million to $9.4 million, primarily due to delays in launch missions
due to COVID-19.
Direct costs of revenue (excluding depreciation and
amortization) increased by $11.5 million, or 12 percent, to
$107.0 million for the three months ended June 30, 2020, as
compared to the three months ended June 30, 2019. The increase was
primarily due to a $5.7 million increase in third-party capacity
costs incurred in connection with government customers, a $3.4
million increase in staff-related expenses largely relating to our
employee retention incentive plans and a $3.2 million increase in
service fees related to the use of mission extension vehicle 1
(MEV-1).
Selling, general and administrative expenses increased by
$8.0 million, or 14 percent, to $63.9 million for the three months
ended June 30, 2020, as compared to the three months ended June 30,
2019. The increase was primarily due to a $3.5 million increase in
bad debt expense and a $3.0 million increase in staff-related
expenses.
Depreciation and amortization expense decreased by $1.2
million, or 1 percent, to $162.6 million for the three months ended
June 30, 2020, as compared to the three months ended June 30, 2019,
primarily due to the timing of a satellite becoming fully
depreciated.
Interest expense, net consists of the gross interest
expense we incur, together with gains and losses on interest rate
cap contracts we hold (which reflect the change in their fair
value), offset by interest income earned and the amount of interest
we capitalize related to assets under construction. As of June 30,
2020, we held interest rate cap contracts with an aggregate
notional amount of $2.4 billion to mitigate the risk of interest
rate increases on the floating-rate term loans under our senior
secured credit facilities. The contracts have not been designated
as hedges for accounting purposes.
Interest expense, net decreased by $98.1 million, or 31 percent,
to $222.5 million for the three months ended June 30, 2020, as
compared to $320.7 million in the three months ended June 30, 2019.
The decrease was principally due to the following:
- a decrease of $89.6 million in interest expense primarily
resulting from Chapter 11 restructuring activities; and
- a decrease of $10.8 million corresponding to the decrease in
fair value of the interest rate cap contracts we hold; partially
offset by
- an increase of $2.7 million from lower capitalized interest
primarily resulting from decreased levels of satellites and related
assets under construction.
The non-cash portion of total interest expense, net was $34.3
million for the three months ended June 30, 2020, primarily
consisting of interest expense related to the significant financing
component identified in customer contracts, amortization of
deferred financing fees, and amortization and accretion of
discounts and premiums.
Other income (expense), net was $2.8 million income for
the three months ended June 30, 2020, as compared to other expense,
net of $28.7 million for the three months ended June 30, 2019.
Other expense, net for the three months ended June 30, 2019
primarily consisted of a net loss of $32.0 million related to a
change in value of certain investments in third parties.
Reorganization items reflect direct costs incurred in
connection with the Chapter 11 cases. Reorganization items, net of
$298.7 million for the three months ended June 30, 2020 primarily
consisted of $197.0 million related to the write-off of debt
discount, premium and issuance costs, $52.2 million of financing
fees related to the DIP Facility and $49.0 million in professional
fees. There were no comparable amounts for the three months ended
June 30, 2019.
Asset Impairments reflect an impairment charge of $34.0
million for the three months ended June 30, 2020 relating to
certain satellite and launch vehicle deposits. We recognized an
impairment charge of $381.6 million during the three months ended
June 30, 2019 relating to the failure of Intelsat 29e.
Provision for (Benefit from) income taxes increased from
income tax benefit by $8.3 million to income tax expense of $0.8
million for the three months ended June 30, 2020, as compared to
the three months ended June 30, 2019. The increase was principally
attributable to the tax benefit related to the satellite impairment
loss recognized in the three months ended June 30, 2019 and higher
income for our U.S. subsidiaries in the three months ended June 30,
2020.
Cash paid for income taxes, net of refunds, totaled $4.8 million
and $1.7 million for the three months ended June 30, 2019 and 2020,
respectively.
Net Income, Net Income per Diluted Common Share attributable
to Intelsat S.A., EBITDA and Adjusted EBITDA
Net loss attributable to Intelsat S.A. was $405.4 million
for the three months ended June 30, 2020, compared to a net loss of
$529.7 million for the same period in 2019.
Net loss per diluted common share attributable to Intelsat
S.A. was $2.85 for the three months ended June 30, 2020,
compared to net loss of $3.76 per diluted common share for the same
period in 2019.
EBITDA was a loss of $18.8 million for the three months
ended June 30, 2020, compared to a loss of $52.1 million for the
same period in 2019, reflecting lower revenue and higher operating
costs, as described above.
Adjusted EBITDA was $342.4 million for the three months
ended June 30, 2020, or 71 percent of revenue, compared to $373.8
million, or 73 percent of revenue, for the same period in 2019.
Free Cash Flow Used In Operations1
Net cash provided by operating activities was $40.2 million for
the three months ended June 30, 2020. Free cash flow used in
operations was $121.6 million for the same period. Free cash flow
from (used in) operations is defined as net cash provided by
operating activities and other proceeds from satellites from
investing activities, less payments for satellites and other
property and equipment (including capitalized interest). Payments
for satellites and other property and equipment from investing
activities, net during the three months ended June 30, 2020 were
$161.9 million.
____
1In this release, financial measures are presented both in
accordance with U.S. GAAP and also on a non-U.S. GAAP basis.
EBITDA, Adjusted EBITDA (or AEBITDA), free cash flow from (used in)
operations and related margins included in this release are
non-U.S. GAAP financial measures. Please see the condensed
consolidated financial information below for information
reconciling non-U.S. GAAP financial measures to comparable U.S.
GAAP financial measures.
Conference Call Information
In light of the Company and certain of its subsidiaries’
decision to file voluntary petitions for relief under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy
Court for the Eastern District of Virginia, the Company will not
host a financial results conference call this quarter. Additional
details regarding the Company's results and the bankruptcy
proceedings are included in the Company's Quarterly Report on Form
10-Q for the second quarter of 2020, which was filed with the U.S.
Securities and Exchange Commission this morning. Additional
operational and financial details are also available on our
Investor Relations website at investors.intelsat.com.
About Intelsat
As the foundational architects of satellite technology, Intelsat
S.A. (OTC: INTEQ) operates the world’s largest and most advanced
satellite fleet and connectivity infrastructure. We apply our
unparalleled expertise and global scale to connect people,
businesses and communities, no matter how difficult the challenge.
Intelsat is uniquely positioned to help our customers turn
possibilities into reality – transformation happens when
businesses, governments and communities use Intelsat’s
next-generation global network and managed services to build their
connected future. Imagine Here, with us, at Intelsat.com.
Intelsat Safe Harbor Statement:
Some of the information and statements contained in this
earnings release and certain oral statements made from time to time
by representatives of Intelsat constitute "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995 that do not directly or exclusively relate to
historical facts. When used in this earnings release, the words
“may,” “will,” “might,” “should,” “expect,” “plan,” “anticipate,”
“project,” “believe,” “estimate,” “predict,” “intend,” “potential,”
“outlook,” and “continue,” and the negative of these terms, and
other similar expressions are intended to identify forward-looking
statements and information. Forward-looking statements include
statements regarding: the effects of the Company and certain of its
subsidiaries’ voluntary commencement of cases under Chapter 11 (the
“Chapter 11 Cases”) of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Eastern District of Virginia
(the “Bankruptcy Court”) on our liquidity or results of operations
or business prospects; our ability to confirm and consummate a plan
of reorganization; our belief as to the likelihood of the cause of
the failure of Intelsat 29e occurring on our other satellites; our
guidance regarding our expectation that the launches of our
satellites in the future will position us for growth; our plans for
satellite launches in the near to mid-term; our intention to
maximize the value of our spectrum rights; our expectations as to
our ability to comply with the final U.S. Federal Communications
Commission (“FCC”) order regarding clearing C-band spectrum in
North America, including the availability of adequate resources and
funds required to comply and the receipt of accelerated clearing
payments set forth in the FCC order; our belief that the scale of
our fleet can reduce the financial impact of any satellite
anomalies or launch failures and protect against service
interruptions; our belief that the diversity of our revenue allows
us to benefit from changing market conditions and lowers our risk
from revenue fluctuations in our service applications and
geographic regions; our belief that developing differentiated
services and investing in related software- and standards-based
technology will allow us to unlock opportunities that are essential
to providing global broadband connectivity; and our assessments
regarding how long satellites that have experienced anomalies in
the past should be able to provide service on their
transponders.
The forward-looking statements reflect Intelsat's intentions,
plans, expectations, anticipations, projections, estimations,
predictions, outlook, assumptions and beliefs about future events
and are subject to risks, uncertainties and other factors, many of
which are outside of Intelsat's control. Important factors that
could cause actual results to differ materially from the
expectations expressed or implied in the forward-looking statements
include known and unknown risks. Some of the factors that could
cause actual results to differ from historical results or those
anticipated or predicted by these forward-looking statements
include: risks associated with operating our in-orbit satellites;
satellite launch failures, satellite launch and construction delays
and in-orbit failures or reduced satellite performance; potential
changes in the number of companies offering commercial satellite
launch services and the number of commercial satellite launch
opportunities available in any given time period that could impact
our ability to timely schedule future launches and the prices we
pay for such launches; our ability to obtain new satellite
insurance policies with financially viable insurance carriers on
commercially reasonable terms or at all, as well as the ability of
our insurance carriers to fulfill their obligations; possible
future losses on satellites that are not adequately covered by
insurance; U.S. and other government regulation; changes in our
contracted backlog or expected contracted backlog for future
services; pricing pressure and overcapacity in the markets in which
we compete; our ability to access capital markets for debt or
equity; the competitive environment in which we operate; customer
defaults on their obligations to us; the impact of the novel
coronavirus (COVID-19) pandemic on our business, the economic
environment and our expected financial results; our international
operations and other uncertainties associated with doing business
internationally; litigation; risks, uncertainties, and increased
administrative and legal costs related to the Chapter 11 Cases; our
ability to improve our liquidity and long-term capital structure
and address our debt service obligations through the restructuring;
our ability to obtain timely approval by the Bankruptcy Court with
respect to the motions that we have filed or will file in the
Chapter 11 Cases; objections to the Company’s restructuring process
or other pleadings filed that could protract the Chapter 11 Cases
or interfere with the Company’s ability to consummate the
restructuring; the length of time that the Company will operate
under Chapter 11 protection and the continued availability of
operating capital during the pendency of the Chapter 11 Cases; our
substantial level of indebtedness and related debt service
obligations and restrictions, including those expected to be
imposed by covenants in any exit financing, that may limit our
operational and financial flexibility; the conditions to which our
debtor-in-possession (DIP) financing is subject and the risk that
these conditions may not be satisfied for various reasons,
including for reasons outside of our control; our ability to
develop and execute our business plan during the pendency of the
Chapter 11 Cases; potential delays in the Chapter 11 process due to
the effects of the COVID-19 pandemic; our ability to continue as a
going concern and maintain relationships with regulators,
suppliers, customers, employees and other third parties as a result
of such going concern during the restructuring. Known risks
include, among others, the risks described in Intelsat’s Annual
Report on Form 10-K for the year ended December 31, 2019,
Intelsat’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2020 and its other filings with the U.S. Securities and
Exchange Commission; the political, economic, regulatory and legal
conditions in the markets we are targeting for communications
services or in which we operate; and other risks and uncertainties
inherent in the telecommunications business in general and the
satellite communications business in particular. Because actual
results could differ materially from Intelsat's intentions, plans,
expectations, anticipations, projections, estimations, predictions,
outlook, assumptions and beliefs about the future, you are urged to
view all forward-looking statements with caution. Intelsat does not
undertake any obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
INTELSAT S.A.
(DEBTOR-IN-POSSESSION)
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per
share amounts)
Three Months Ended June
30, 2019
Three Months Ended June
30, 2020
Revenue
$
509,407
$
482,034
Operating expenses:
Direct costs of revenue (excluding
depreciation and amortization)
95,447
106,961
Selling, general and administrative
55,855
63,863
Depreciation and amortization
163,808
162,614
Satellite impairment loss
381,565
—
Impairment of non-amortizable intangible
and other assets
—
34,043
Total operating expenses
696,675
367,481
Income (loss) from operations
(187,268
)
114,553
Interest expense, net
320,680
222,533
Other income (expense), net
(28,671
)
2,762
Reorganization items
—
(298,691
)
Loss before income taxes
(536,619
)
(403,909
)
Provision for (benefit from) income
taxes
(7,507
)
818
Net loss
(529,112
)
(404,727
)
Net income attributable to noncontrolling
interest
(610
)
(628
)
Net loss attributable to Intelsat S.A.
$
(529,722
)
$
(405,355
)
Net loss per common share attributable to
Intelsat S.A.:
Basic
$
(3.76
)
$
(2.85
)
Diluted
$
(3.76
)
$
(2.85
)
INTELSAT S.A.
(DEBTOR-IN-POSSESSION)
UNAUDITED RECONCILIATION OF
NET INCOME (LOSS) TO EBITDA
($ in thousands)
Three Months Ended June
30, 2019
Three Months Ended June
30, 2020
Net loss
$
(529,112
)
$
(404,727
)
Add (Subtract):
Interest expense, net
320,680
222,533
Provision for (benefit from) income
taxes
(7,507
)
818
Depreciation and amortization
163,808
162,614
EBITDA
$
(52,131
)
$
(18,762
)
EBITDA Margin
NM
NM
Note:
Intelsat calculates a measure called EBITDA to assess the
operating performance of Intelsat S.A. EBITDA consists of earnings
before net interest, loss (gain) on early extinguishment of debt,
taxes and depreciation and amortization. Given our high level of
leverage, refinancing activities are a frequent part of our efforts
to manage our costs of borrowing. Accordingly, we consider loss
(gain) on early extinguishment of debt an element of interest
expense. EBITDA is a measure commonly used in the Fixed Satellite
Services (“FSS”) sector, and we present EBITDA to enhance the
understanding of our operating performance. We use EBITDA as one
criterion for evaluating our performance relative to that of our
peers. We believe that EBITDA is an operating performance measure,
and not a liquidity measure, that provides investors and financial
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.
EBITDA is not a measure of financial performance under U.S.
GAAP, and our EBITDA may not be comparable to similarly titled
measures of other companies. EBITDA should not be considered as an
alternative to operating income (loss) or net income (loss),
determined in accordance with U.S. GAAP, as an indicator of our
operating performance, or as an alternative to cash flows from
operating activities, determined in accordance with U.S. GAAP, as
an indicator of cash flows, or as a measure of liquidity.
INTELSAT S.A.
(DEBTOR-IN-POSSESSION)
UNAUDITED RECONCILIATION OF
NET INCOME (LOSS) TO ADJUSTED EBITDA
($ in thousands)
Three Months Ended June
30, 2019
Three Months Ended June
30, 2020
Net loss
$
(529,112)
$
(404,727)
Add (Subtract):
Interest expense, net
320,680
222,533
Provision for (benefit from) income
taxes
(7,507)
818
Depreciation and amortization
163,808
162,614
EBITDA
(52,131)
(18,762)
Add:
Compensation and benefits(1)
3,584
20,149
Non-recurring and other non-cash
items(2)
33,655
4,431
Satellite impairment loss(3)
381,565
—
Impairment of non-amortizable intangible
and other assets(4)
—
34,043
Reorganization items(5)
—
298,691
Proportionate share from unconsolidated
joint venture(6):
Interest expense, net
2,480
1,045
Depreciation and amortization
4,691
2,814
Adjusted EBITDA(7)(8)
$
373,844
$
342,411
Adjusted EBITDA margin
73
%
71
%
(1)
Reflects non-cash expenses incurred
relating to our equity compensation plans for the three months
ended June 30, 2019 and 2020, and our employee retention incentive
plan in connection with our Chapter 11 proceedings for the three
months ended June 30, 2020.
(2)
Reflects certain non-recurring expenses,
gains and losses and non-cash items, including the following:
professional fees related to our liability, business strategy and
tax management initiatives; costs associated with our C-band
spectrum proposal; severance, retention and relocation payments;
changes in fair value of certain investments; certain foreign
exchange gains and losses; and other various non-recurring
expenses. In 2019, these costs were partially offset by non-cash
income related to the recognition of deferred revenue on a
straight-line basis for certain prepaid capacity service
contracts.
(3)
Reflects a non-cash impairment charge
recorded in connection with the Intelsat 29e satellite loss.
(4)
Reflects a non-cash impairment charge
recorded in connection with the write-off of a satellite launch
vehicle deposit for the three months ended June 30, 2020.
(5)
Reflects direct, incremental costs
incurred in connection with our Chapter 11 proceedings.
(6)
Reflects adjustments related to our
interest in Horizons-3 Satellite LLC ("Horizons 3").
(7)
For the three months ended June 30, 2019
and 2020, Adjusted EBITDA included $25.1 million and $26.4 million,
respectively, of revenue relating to the significant financing
component identified in customer contracts in accordance with the
adoption of ASC 606, Revenue from Contracts with Customers. These
impacts are not permitted to be reflected in the applicable
consolidated and Adjusted EBITDA definitions under our debt
agreements.
(8)
For the three months ended June 30, 2019
and 2020, Intelsat S.A. Adjusted EBITDA reflected $5.9 million and
$5.1 million, respectively, of Adjusted EBITDA attributable to
Intelsat Horizons-3 LLC, its subsidiaries and its proportionate
share of Horizons 3. These entities are considered to be
unrestricted subsidiaries under the definitions set forth in our
applicable debt agreements.
Note:
Intelsat calculates a measure called Adjusted EBITDA to assess
the operating performance of Intelsat S.A. Adjusted EBITDA consists
of EBITDA as adjusted to exclude or include certain unusual items,
certain other operating expense items and certain other adjustments
as described in the table above. Our management believes that the
presentation of Adjusted EBITDA provides useful information to
investors, lenders and financial analysts regarding our financial
condition and results of operations, because it permits clearer
comparability of our operating performance between periods. By
excluding the potential volatility related to the timing and extent
of non-operating activities, our management believes that Adjusted
EBITDA provides a useful means of evaluating the success of our
operating activities. We also use Adjusted EBITDA, together with
other appropriate metrics, to set goals for and measure the
operating performance of our business, and it is one of the
principal measures we use to evaluate our management’s performance
in determining compensation under our incentive compensation plans.
Adjusted EBITDA measures have been used historically by investors,
lenders and financial analysts to estimate the value of a company,
to make informed investment decisions and to evaluate performance.
Our management believes that the inclusion of Adjusted EBITDA
facilitates comparison of our results with those of companies
having different capital structures.
Adjusted EBITDA is not a measure of financial performance under
U.S. GAAP, and our Adjusted EBITDA may not be comparable to
similarly titled measures of other companies. Adjusted EBITDA
should not be considered as an alternative to operating income
(loss) or net income (loss), determined in accordance with U.S.
GAAP, as an indicator of our operating performance, or as an
alternative to cash flows from operating activities, determined in
accordance with U.S. GAAP, as an indicator of cash flows, or as a
measure of liquidity.
INTELSAT S.A.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE
SHEETS
($ in thousands)
December 31, 2019
June 30, 2020
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
810,626
$
1,091,758
Restricted cash
20,238
19,227
Receivables, net of allowances of $40,028
in 2019 and $27,578 in 2020
255,722
224,053
Contract assets
47,721
33,546
Prepaid expenses and other current
assets
39,230
83,588
Total current assets
1,173,537
1,452,172
Satellites and other property and
equipment, net
4,702,063
4,643,723
Goodwill
2,620,627
2,620,627
Non-amortizable intangible assets
2,452,900
2,440,700
Amortizable intangible assets, net
276,752
261,200
Contract assets, net of current
portion
74,109
59,799
Other assets
504,394
560,966
Total assets
$
11,804,382
$
12,039,187
LIABILITIES AND SHAREHOLDERS’
DEFICIT
Current liabilities:
Accounts payable and accrued
liabilities
$
88,107
$
147,880
Taxes payable
6,402
14,393
Employee related liabilities
44,648
31,602
Accrued interest payable
308,657
13,861
Current portion of long-term debt
—
5,398,236
Contract liabilities
137,706
130,748
Deferred satellite performance
incentives
42,835
36,002
Other current liabilities
62,446
58,269
Total current liabilities
690,801
5,830,991
Long-term debt
14,465,483
—
Contract liabilities, net of current
portion
1,113,450
1,080,175
Deferred satellite performance incentives,
net of current portion
175,837
158,937
Deferred income taxes
55,171
75,523
Accrued retirement benefits, net of
current portion
125,511
117,244
Other long-term liabilities
166,977
213,042
Liabilities subject to compromise
—
10,172,846
Shareholders’ deficit:
Common shares, nominal value $0.01 per
share
1,411
1,421
Paid-in capital
2,565,696
2,569,404
Accumulated deficit
(7,503,830
)
(8,128,872
)
Accumulated other comprehensive loss
(63,135
)
(61,839
)
Total Intelsat S.A. shareholders’
deficit
(4,999,858
)
(5,619,886
)
Noncontrolling interest
11,010
10,315
Total liabilities and shareholders’
deficit
$
11,804,382
$
12,039,187
INTELSAT S.A.
(DEBTOR-IN-POSSESSION)
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
Three Months Ended June
30, 2019
Three Months Ended June
30, 2020
Cash flows from operating
activities:
Net loss
$
(529,111
)
$
(404,727
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
163,808
162,614
Provision for doubtful accounts
6,117
9,598
Foreign currency transaction (gain)
loss
(244
)
547
Loss on disposal of assets
131
—
Satellite impairment loss
381,565
—
Impairment of non-amortizable intangible
and other assets
—
34,043
Share-based compensation
3,584
2,774
Deferred income taxes
(7,142
)
3,450
Amortization of discount, premium,
issuance costs and related costs
10,304
6,081
Non-cash reorganization items
—
196,974
Debtor-in-possession financing fees
—
52,182
Amortization of actuarial loss and prior
service credits for retirement benefits
112
658
Unrealized losses on derivative financial
instruments
9,953
14
Unrealized losses on investments and loans
held-for-investment
33,464
730
Sales-type lease
151
—
Other non-cash items
(1
)
—
Changes in operating assets and
liabilities:
Receivables
(19,226
)
2,205
Prepaid expenses, contract and other
assets
13,919
(47,596
)
Accounts payable and accrued
liabilities
(3,564
)
12,796
Accrued interest payable
(33,822
)
49,532
Contract liabilities
(8,293
)
(33,449
)
Accrued retirement benefits
(4,015
)
(4,367
)
Other long-term liabilities
(1,459
)
(3,842
)
Net cash provided by operating
activities
16,231
40,217
Cash flows from investing
activities:
Payments for satellites and other property
and equipment (including capitalized interest)
(65,207
)
(161,866
)
Origination of loans
held-for-investment
(3,424
)
—
Proceeds from loans
held-for-investment
—
—
Capital contribution to unconsolidated
affiliate (including capitalized interest)
—
(2,692
)
Other proceeds from satellites
3,750
—
Net cash used in investing activities
(64,881
)
(164,558
)
Cash flows from financing
activities:
Proceeds from issuance of long-term
debt
400,000
—
Debt issuance costs
(4,612
)
—
Proceeds from debtor-in-possession
financing
—
500,000
Debtor-in-possession financing fees
—
(52,182
)
Principal payments on deferred satellite
performance incentives
(7,936
)
(11,389
)
Dividends paid to noncontrolling
interest
(1,469
)
—
Proceeds from exercise of employee stock
options
3
—
Other financing activities
(1
)
—
Net cash provided by financing
activities
385,985
436,429
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(920
)
(1,725
)
Net change in cash, cash equivalents and
restricted cash
336,415
310,363
Cash, cash equivalents, and restricted
cash, beginning of period
511,758
800,622
Cash, cash equivalents, and restricted
cash, end of period
$
848,173
$
1,110,985
Supplemental cash flow
information:
Cash paid for reorganization items
included in cash flows from operating activities
$
—
$
28,913
Interest paid, net of amounts
capitalized
322,624
139,944
Income taxes paid, net of refunds
4,815
1,664
Supplemental disclosure of non-cash
investing activities:
Accrued capital expenditures
$
(4,773
)
$
16,187
INTELSAT S.A.
(DEBTOR-IN-POSSESSION)
UNAUDITED RECONCILIATION OF
NET CASH PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW FROM (USED
IN) OPERATIONS
($ in thousands)
Three Months Ended June
30, 2019
Three Months Ended June
30, 2020
Net cash provided by operating
activities
$
16,231
$
40,217
Other proceeds from satellites from
investing activities
3,750
—
Payments for satellites and other property
and equipment (including capitalized interest)
(65,207
)
(161,866
)
Free cash flow from (used in)
operations
$
(45,226
)
$
(121,649
)
Note:
Free cash flow from (used in) operations consists of net cash
provided by (used in) operating activities and other proceeds from
satellites from investing activities, less payments for satellites
and other property and equipment (including capitalized interest)
from investing activities and other payments for satellites from
financing activities. Free cash flow from (used in) operations is
not a measurement of cash flow under U.S. GAAP. Intelsat believes
free cash flow from (used in) operations is a useful measure of
financial performance that shows a company’s ability to fund its
operations. Free cash flow from (used in) operations is used by
Intelsat in comparing its performance to that of its peers and is
commonly used by financial analysts and investors in assessing
performance. Free cash flow from (used in) operations does not give
effect to cash used for debt service requirements and thus does not
reflect funds available for investment or other discretionary uses.
Free cash flow from (used in) operations is not a measure of
financial performance under U.S. GAAP, and free cash flow from
(used in) operations may not be comparable to similarly titled
measures of other companies. You should not consider free cash flow
from (used in) operations as an alternative to operating income
(loss) or net income (loss), determined in accordance with U.S.
GAAP, as an indicator of Intelsat’s operating performance, or as an
alternative to cash flows from operating activities, determined in
accordance with U.S. GAAP, as an indicator of cash flows, or as a
measure of liquidity.
INTELSAT S.A.
(DEBTOR-IN-POSSESSION)
SUPPLEMENTARY TABLE
REVENUE BY CUSTOMER SET AND
SERVICE TYPE
($ in thousands)
By Customer Set
Three Months Ended June
30, 2019
Three Months Ended June
30, 2020
Increase (Decrease)
Percentage Change
Network Services
$
185,183
36%
$
176,699
37%
$
(8,484
)
(5)%
Media
223,469
44%
202,563
42%
(20,906
)
(9)%
Government
93,282
18%
96,106
20%
2,824
3%
Other
7,473
1%
6,666
1%
(807
)
(11)%
Total
$
509,407
$
482,034
$
(27,373
)
(5)%
By Service Type
Three Months Ended June
30, 2019
Three Months Ended June
30, 2020
Increase (Decrease)
Percentage Change
On-Network Revenues:
Transponder services
$
369,586
73%
$
343,599
71%
$
(25,987
)
(7)%
Managed services
91,335
18%
85,050
18%
(6,285
)
(7)%
Channel
585
—%
391
—%
(194
)
(33)%
Total on-network revenues
461,506
91%
429,040
89%
(32,466
)
(7)%
Off-Network and Other Revenues:
Transponder, MSS and other off-network
services
37,717
7%
43,617
9%
5,900
16%
Satellite-related services
10,184
2%
9,377
2%
(807
)
(8)%
Total off-network and other revenues
47,901
9%
52,994
11%
5,093
11%
Total
$
509,407
$
482,034
$
(27,373
)
(5)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806006114/en/
Tahmin Clarke Vice President, Investor Relations
Investor.Relations@Intelsat.com +1 703 559 7406 (o)