OTTAWA, Oct. 30, 2014 (GLOBE NEWSWIRE) -- Telesat Holdings Inc. ("Telesat") today announced its financial results for the three and nine month periods ended September 30, 2014. All amounts are in Canadian dollars and are reported under International Financial Reporting Standards ("IFRS") unless otherwise noted.
For the quarter ended September 30, 2014, Telesat reported consolidated revenue of $228 million, a decrease of 4% ($10 million) compared to the same period in 2013. During the quarter, the U.S. dollar was 4% stronger than it was during the third quarter of 2013, resulting in a positive impact on the conversion of U.S. dollar denominated revenue and a negative impact on the conversion of U.S. dollar denominated expenses. When adjusted for foreign exchange rate changes, revenue decreased by 6% ($14 million) compared to the same period in 2013. The decrease was mainly related to revenue earned in the prior period from short-term services provided to another satellite operator and from the Nimiq 2 satellite which was returned by a customer late in the third quarter of 2013.
Operating expenses of $49 million were 6% ($3 million) lower than the same period in 2013, or 8% ($4 million) lower when taking into account changes in foreign exchange rates. The reduction was mainly due to a decrease in share-based compensation expense related to stock options granted during the third quarter of 2013. Adjusted EBITDA1 was $182 million, a decrease of 5% ($10 million) compared to the same period in 2013, or a decrease of 7% ($13 million) when adjusted for foreign exchange rate changes. The Adjusted EBITDA margin1 was 80% for the third quarter of 2014 compared to 81% for the same period in 2013.
For the nine month period ended September 30, 2014, consolidated revenue was $695 million, an increase of 3% ($22 million) compared to the same period in 2013. During the first nine months of 2014, the U.S. dollar was 6% stronger than it was during the first nine months of 2013. When adjusted for foreign exchange rate changes, revenue increased by 1% ($4 million) compared to the same period in 2013. The increase was primarily due to revenue earned on the Anik G1 satellite, which entered commercial service in May 2013, partially offset by a decrease in revenue earned on the Nimiq 2 satellite and by lower equipment sales. Operating expenses were $142 million, a decrease of 6% ($9 million) compared to the first nine months of 2013 or 8% ($12 million) when adjusted for foreign exchange rate changes. This decrease was related to lower cost of equipment sales and lower expenses in certain other areas. Adjusted EBITDA1 was $563 million, an increase of 5% ($29 million) compared to the same period in 2013, or an increase of 3% ($14 million) when adjusted for foreign exchange rate changes. The Adjusted EBITDA margin1 for the first nine months of 2014 was 81% compared to 79% in the same period in 2013.
Telesat's net loss for the quarter ended September 30, 2014 was $41 million compared to net income of $102 million for the same period in 2013. The reduction in net income was principally due to a non-cash loss on foreign exchange resulting from the Canadian dollar weakening during the quarter relative to the U.S dollar, negatively impacting the translation of Telesat's U.S. dollar denominated debt into Canadian dollars. The decrease was partially offset by non-cash gains on the fair value of financial instruments. For the nine month period ended September 30, 2014, net income was $39 million compared to a net income of $20 million for the same period in 2013, primarily as a result of higher revenues.
"I am pleased with our performance in the third quarter and year to date," commented Dan Goldberg, Telesat's President and CEO. "The market environment has been relatively stable throughout the course of the year and, as a result of our strategic focus and disciplined execution, we grew revenues, reduced operating expenses, increased Adjusted EBITDA1 and expanded our Adjusted EBITDA margin1 compared to the first nine months of last year. Our revenues remain well diversified and our industry-leading contractual backlog provides strong visibility into the stability of our future revenue and cash flow."
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At September 30, 2014:
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Telesat had contracted backlog for future services of approximately $4.6 billion.
- Fleet utilization was 91% for Telesat's North American fleet and 83% for its international fleet.
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Telesat had contracted backlog for future services of approximately $4.6 billion.
Telesat's report on Form 6-K for the quarter ended September 30, 2014 has been filed with the U.S. Securities and Exchange Commission (SEC) and may be accessed on the SEC's website at www.sec.gov.
Telesat has scheduled a conference call on Thursday, October 30, 2014 at 10:30 a.m. ET to discuss its financial results for the quarter ended September 30, 2014 and other recent developments. The call will be hosted by Daniel S. Goldberg, President and Chief Executive Officer, and Michel Cayouette, Chief Financial Officer, of Telesat.
Dial-in Instructions:
The toll-free dial-in number for the teleconference is +1 (866) 226-1792. Callers outside of North America should dial +1 (416) 340-2216. The conference reference number is 4181895. Please allow at least 15 minutes prior to the scheduled start time to connect to the teleconference.
Dial-in Audio Replay:
A replay of the teleconference will be available one hour after the end of the call on October 30, 2014, until 11:59 p.m. ET on November 13, 2014. To access the replay, please call +1 (800) 408-3053. Callers outside of North America should dial +1 (905) 694-9451. The access code is 9330944 followed by the number sign (#).
All Adjusted EBITDA and Adjusted EBITDA margins included in this release are non-IFRS financial measures, as described in the End Notes section of this release. For information reconciling non-IFRS financial measures to the most comparable IFRS financial measures, please see the consolidated financial information below.
Forward-Looking Statements Safe Harbor
This news release contains statements that are not based on historical fact and are ''forward-looking statements'' within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this news release, the words "provides", "visibility", "future" or other variations of these words or other similar expressions are intended to identify forward-looking statements and information. Actual results may differ materially from the expectations expressed or implied in the forward-looking statements as a result of known and unknown risks and uncertainties. Detailed information about some of the known risks and uncertainties is included in the "Risk Factors" section of Telesat Holdings Inc.'s Annual Report on Form 20-F for the fiscal year ended December 31, 2013, as well as Telesat's other filings with the United States Securities and Exchange Commission (SEC), which can be obtained on the SEC's website at http://www.sec.gov. Known risks and uncertainties include but are not limited to: risks associated with operating satellites and providing satellite services, including satellite construction or launch delays, launch failures, in-orbit failures or impaired satellite performance, volatility in exchange rates and risks associated with domestic and foreign government regulation. The foregoing list of important factors is not exhaustive. The information contained in this news release reflects Telesat's beliefs, assumptions, intentions, plans and expectations as of the date of this news release. Except as required by law, Telesat disclaims any obligation or undertaking to update or revise the information herein.
About Telesat (www.telesat.com)
Telesat is a leading global satellite operator, providing reliable and secure satellite-delivered communications solutions worldwide to broadcast, telecom, corporate and government customers. Headquartered in Ottawa, Canada, with offices and facilities around the world, the company's state-of-the-art fleet consists of 14 satellites and the Canadian payload on ViaSat-1 with another satellite under construction. Telesat also manages the operations of additional satellites for third parties. Privately held, Telesat's principal shareholders are Canada's Public Sector Pension Investment Board and Loral Space & Communications Inc. (Nasdaq:LORL).
| Telesat Holdings Inc. | ||||
| Condensed Consolidated Statements of (Loss) Income | ||||
| For the period ended September 30 | ||||
| Three months | Nine months | |||
| (in thousands of Canadian dollars) (unaudited) | 2014 | 2013 | 2014 | 2013 |
| Revenue | $ 227,797 | $ 237,571 | $ 695,396 | $ 672,769 |
| Operating expenses | (49,054) | (51,555) | (141,853) | (150,918) |
| 178,743 | 186,016 | 553,543 | 521,851 | |
| Depreciation | (54,038) | (54,300) | (162,319) | (156,878) |
| Amortization | (7,686) | (8,162) | (23,157) | (24,516) |
| Other operating losses, net | (178) | (31) | (246) | (1,593) |
| Operating income | 116,841 | 123,523 | 367,821 | 338,864 |
| Interest expense | (53,026) | (54,723) | (160,061) | (170,602) |
| Loss on financing | -- | -- | -- | (18,493) |
| Interest and other income | 908 | 337 | 3,278 | 11,313 |
| Gain (loss) on changes in fair value of financial instruments | 36,420 | (5,689) | 24,048 | 11,529 |
| (Loss) gain on foreign exchange | (123,571) | 57,196 | (139,433) | (110,878) |
| (Loss) income before tax | (22,428) | 120,644 | 95,653 | 61,733 |
| Tax expense | (18,764) | (18,378) | (56,816) | (41,967) |
| Net (loss) income | $ (41,192) | $ 102,266 | $ 38,837 | $ 19,766 |
| Telesat Holdings Inc. | ||
| Condensed Consolidated Balance Sheets | ||
| (in thousands of Canadian dollars) (unaudited) |
September 30, 2014 |
December 31, 2013 |
| Assets | ||
| Cash and cash equivalents | $ 498,441 | $ 298,713 |
| Trade and other receivables | 50,608 | 50,266 |
| Other current financial assets | 974 | 7,174 |
| Prepaid expenses and other current assets | 21,553 | 18,665 |
| Total current assets | 571,576 | 374,818 |
| Satellites, property and other equipment | 1,878,477 | 1,962,759 |
| Deferred tax assets | 7,918 | 10,024 |
| Other long-term financial assets | 18,598 | 76,006 |
| Other long-term assets | 3,347 | 2,765 |
| Intangible assets | 824,248 | 845,286 |
| Goodwill | 2,446,603 | 2,446,603 |
| Total assets | $ 5,750,767 | $ 5,718,261 |
| Liabilities | ||
| Trade and other payables | $ 35,769 | $ 34,484 |
| Other current financial liabilities | 120,950 | 164,755 |
| Other current liabilities | 97,595 | 122,058 |
| Current indebtedness | 58,156 | 57,364 |
| Total current liabilities | 312,470 | 378,661 |
| Long-term indebtedness | 3,391,394 | 3,284,502 |
| Deferred tax liabilities | 513,124 | 515,207 |
| Other long-term financial liabilities | 58,070 | 72,803 |
| Other long-term liabilities | 307,462 | 345,185 |
| Total liabilities | 4,582,520 | 4,596,358 |
| Shareholders' Equity | ||
| Share capital | 656,769 | 656,660 |
| Accumulated earnings | 494,840 | 456,013 |
| Reserves | 16,638 | 9,230 |
| Total shareholders' equity | 1,168,247 | 1,121,903 |
| Total liabilities and shareholders' equity | $ 5,750,767 | $ 5,718,261 |
| Telesat Holdings Inc. | |||
| Condensed Consolidated Statements of Cash Flows | |||
| For the nine months ended September 30 | |||
| (in thousands of Canadian dollars) (unaudited) | 2014 | 2013(2) | |
| Cash flows from operating activities | |||
| Net income | $ 38,837 | $ 19,766 | |
| Adjustments to reconcile net income to cash flows from operating activities | |||
| Depreciation | 162,319 | 156,878 | |
| Amortization | 23,157 | 24,516 | |
| Deferred tax (recovery) expense | (6,113) | 6,946 | |
| Interest expense | 160,061 | 170,602 | |
| Interest income | (2,142) | (796) | |
| Unrealized foreign exchange loss | 147,172 | 114,477 | |
| Gain on changes in fair value of financial instruments | (24,048) | (11,529) | |
| Share-based compensation | 8,280 | 9,866 | |
| Loss on disposal of assets | 246 | 1,593 | |
| Loss on financing | -- | 18,493 | |
| Other | (53,911) | (37,873) | |
| Income taxes paid | (71,554) | (11,416) | |
| Interest paid, net of capitalized interest | (134,276) | (147,841) | |
| Interest received | 2,140 | 752 | |
| Repurchase of stock options and exercise of share appreciation rights | -- | (1,196) | |
| Operating assets and liabilities | 71,206 | 67,270 | |
| Net cash from operating activities | $ 321,374 | $ 380,508 | |
| Cash flows used in investing activities | |||
| Satellite programs, including capitalized interest | $ (57,336) | $ (42,486) | |
| Purchase of other property and equipment | (7,741) | (6,975) | |
| Purchase of intangible assets | (75) | (6) | |
| Proceeds from sale of assets | 311 | 1,022 | |
| Net cash used in investing activities | $ (64,841) | $ (48,445) | |
| Cash flows used in financing activities | |||
| Repayment of indebtedness | $ (52,860) | $ (260,216) | |
| Payment of premium on early retirement of indebtedness | -- | (13,793) | |
| Payment of debt issue costs | -- | (810) | |
| Proceeds from exercise of stock options | 103 | 99 | |
| Dividends paid on preferred shares | (10) | (10) | |
| Satellite performance incentive payments | (3,734) | (3,524) | |
| Net cash used in financing activities | $ (56,501) | $ (278,254) | |
| Effect of changes in exchange rates on cash and cash equivalents | $ (304) | $ 510 | |
| Increase in cash and cash equivalents | $ 199,728 | $ 54,319 | |
| Cash and cash equivalents, beginning of period | 298,713 | 180,961 | |
| Cash and cash equivalents, end of period | $ 498,441 | $ 235,280 | |
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Telesat's Adjusted EBITDA margin(1) |
||||
| Three months | Nine months | |||
| (in thousands of Canadian dollars) (unaudited) | 2014 | 2013 | 2014 | 2013 |
| Net (loss) income | $ (41,192) | $ 102,266 | $ 38,837 | $ 19,766 |
| Tax expense | 18,764 | 18,378 | 56,816 | 41,967 |
| (Gain) loss on changes in fair value of financial instruments | (36,420) | 5,689 | (24,048) | (11,529) |
| Loss (gain) on foreign exchange | 123,571 | (57,196) | 139,433 | 110,878 |
| Interest and other income | (908) | (337) | (3,278) | (11,313) |
| Loss on financing | -- | -- | -- | 18,493 |
| Interest expense | 53,026 | 54,723 | 160,061 | 170,602 |
| Depreciation | 54,038 | 54,300 | 162,319 | 156,878 |
| Amortization | 7,686 | 8,162 | 23,157 | 24,516 |
| Other operating losses, net | 178 | 31 | 246 | 1,593 |
| Special compensation, benefits expense and severance payments | 573 | 521 | 1,105 | 2,184 |
| Non-cash expense related to share-based compensation | 2,657 | 5,023 | 8,280 | 9,866 |
| Adjusted EBITDA | $ 181,973 | $ 191,560 | $ 562,928 | $ 533,901 |
| Revenue | $ 227,797 | $ 237,571 | $ 695,396 | $ 672,769 |
| Adjusted EBITDA Margin | 79.9% | 80.6% | 81.0% | 79.4% |
End Notes
1 The common definition of EBITDA is "Earnings Before Interest, Taxes, Depreciation and Amortization." In evaluating financial performance, Telesat uses revenue and deducts certain operating expenses (including share-based compensation expense and unusual and non-recurring items, including restructuring related expenses) to obtain operating income before interest, taxes, depreciation and amortization ("Adjusted EBITDA") and the Adjusted EBITDA margin (defined as the ratio of Adjusted EBITDA to revenue) as measures of Telesat's operating performance.
Adjusted EBITDA allows Telesat and investors to compare Telesat's operating results with that of competitors exclusive of depreciation and amortization, interest and investment income, interest expense, taxes and certain other expenses. Financial results of competitors in the satellite services industry have significant variations that can result from the timing of capital expenditures, the amount of intangible assets recorded, the differences in assets' lives, the timing and amount of investments, the effects of other income (expense), and unusual and non-recurring items. The use of Adjusted EBITDA assists Telesat and investors in making comparisons of operating results exclusive of these items. Competitors in the satellite services industry have significantly different capital structures. Telesat believes the use of Adjusted EBITDA improves comparability of performance by excluding interest expense.
Telesat believes the use of Adjusted EBITDA and the Adjusted EBITDA margin along with IFRS financial measures enhances the understanding of Telesat's operating results and is useful to Telesat and investors in comparing performance with competitors, estimating enterprise value and making investment decisions. Adjusted EBITDA as used here may not be the same as similarly titled measures reported by competitors. Adjusted EBITDA should be used in conjunction with IFRS financial measures and is not presented as a substitute for cash flows from operations as a measure of Telesat's liquidity or as a substitute for net income as an indicator of Telesat's operating performance.
2 A change in accounting policy for the year ended December 31, 2013 has resulted in a change to the 2013 comparative figures on the condensed consolidated statements of cash flows. For more information on the impact of this change, please refer to Note 3 of Telesat's unaudited interim condensed consolidated financial statements, filed with the SEC on a Form 6-K dated today.