New Skies Sat (NYSE:NSE)
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Third Quarter Revenues up 14 Percent to $61.2 Million, Adjusted
EBITDA Increased 25 Percent to $39.8 Million
New Skies Satellites Holdings Ltd. (NYSE:NSE), the global
satellite communications company, today reported financial results for
the three- and nine-month periods ended September 30, 2005. Revenues
for the quarter were $61.2 million, up 14 percent over the same period
in the prior year, net income was $6.1 million and Adjusted EBITDA (
A) was $39.8 million, up 25 percent over the same period in the
prior year.
Commenting on the results, Dan Goldberg, CEO of New Skies, said:
"I am pleased to report that the strong performance New Skies
achieved in the first half of the year has carried through to the
third quarter. Revenues are 14 percent higher relative to the same
period last year, a consequence of the improvement in our fill rate to
63 percent compared to 55 percent a year ago and an environment where
pricing has been stable. New business and renewals in the quarter were
driven in large part by demand from government users as well as
corporate network and video requirements.
"As in the first half of the year, strong top line growth coupled
with meaningful cost savings from our continued efforts to enhance our
operational efficiency resulted in significant growth in Adjusted
EBITDA and Adjusted EBITDA margins. Relative to the same period last
year, Adjusted EBITDA increased 25 percent and Adjusted EBITDA margins
grew from 59 percent to 65 percent.
"In addition to our strong operating and financial performance,
and as reported previously, in the third quarter we signed an
agreement with SES Global S.A. affiliates that resolved certain
orbital slot coordination matters. As a result of this agreement, we
received $9.5 million in August of this year (which is excluded from
the calculations above relating to revenue and Adjusted EBITDA
growth). In addition, in August we signed an agreement with
Multiemedia Limited to acquire our Australian teleport facilities for
$10.0 million, which we received yesterday upon the closing of the
transaction. The proceeds from these agreements are being used to
decrease our total outstanding debt, which has been reduced by more
than one-third since the beginning of the year. And in addition to our
strong focus on delevering, our commitment to return value to
shareholders was underscored by our recent dividend payment.
"In sum we had a strong third quarter and first nine months and
remain on track for a record year in terms of revenue and Adjusted
EBITDA."
Financial highlights:
For the three- and nine- month periods ended September 30, 2005,
New Skies achieved the following financial results:
-- Revenues for the three months ended September 30, 2005 were
$61.2 million, an increase of $7.4 million, or 14 percent,
from $53.8 million in the same period in 2004. For the first
nine months of 2005, revenues were $179.1 million, up $22.2
million, or 14 percent, compared to $156.9 million in the
first nine months of 2004. These amounts exclude proceeds
arising from the resolution of certain orbital slot
coordination matters in 2005 and 2004. The revenue growth was
primarily due to an increase in the overall satellite fleet
fill rate to 63 percent as of September 30, 2005 compared to
55 percent as of September 30, 2004.
-- Cost of Operations and Selling, General and Administrative
costs, decreased by $1.8 million, or 8 percent, in the quarter
relative to the same period last year, primarily as a result
of reductions in third party teleport costs and other
operating expenditures.
For the nine month period, our Cost of Operations and Selling,
General and Administrative costs decreased by $7.3 million, or 10
percent, as compared to the same period in 2004, primarily due to
lower third party teleport costs, in-orbit insurance and overall
operating expenditures.
-- Stock-based compensation recorded in accordance with Statement
of Financial Accounting Standards was $4.4 million and $17.6
million for the three- and nine-month periods ended September
30, 2005, respectively, compared to $0.2 and $1.6 million,
respectively, in the same periods in 2004.
-- The company received a one-time payment from SES Global S.A.
affiliates of $9.5 million in the third quarter 2005 arising
from the successful resolution of certain frequency
coordination matters. Coupled with the frequency coordination
payment received in the first quarter 2005, total amounts
received were $19.5 million for the first nine months of 2005.
In 2004, we received a one-time payment from Intelsat LLC of
$32.0 million relating to frequency coordination matters.
-- Interest expense, net was $12.3 million and $48.2 million for
the three- and nine-month periods ended September 30, 2005,
respectively, compared to $0.2 million and $0.8 million,
respectively, in the same periods in 2004. The net increase
was due to the addition of new debt issued in connection with
the purchase of New Skies Satellites N.V. by affiliates of The
Blackstone Group in November 2004. Also included are non-cash
charges of $0.9 million and $9.5 million, for the three- and
nine-month periods ended September 30, 2005, respectively,
related to the accelerated amortization of debt issuance costs
associated with the early repayments of a portion of the term
loan facility.
-- Net income for the third quarter of 2005 was $6.1 million
compared to $2.2 million in the same period in the prior year.
For the nine-month period net loss was $6.7 million compared
to net income of $21.8 million in the same period in 2004.
-- In the third quarter of 2005, Adjusted EBITDA was $39.8
million, compared to $31.9 million for the same period in the
prior year, reflecting an increase of $7.9 million, or 25
percent. Adjusted EBITDA margin increased to 65 percent in the
third quarter of 2005 from 59 percent in the same period in
the prior year. Adjusted EBITDA for the nine months ended
September 30, 2005 increased $25.4 million, or 28 percent, to
$115.2 million, as compared to $89.8 million for the same
period in 2004. The Adjusted EBITDA margin for the nine-month
period ended September 30, 2005 was 64 percent compared to 57
percent in the same period in 2004.
-- Backlog at the end of the third quarter of 2005 was $538
million, approximately two and a half times annual revenues,
compared to $620 million in the same period last year and $517
million at the beginning of 2005. As previously disclosed, the
decline in backlog compared to 2004 in large part relates to a
one-time adjustment in the fourth quarter 2004 relating to the
termination of two long term agreements.
-- Total long-term debt as of September 30, 2005 was $488.6
million, reflecting a total paydown of $256.4 million for the
first nine months of 2005, thus reducing long-term third party
debt(1) to Adjusted EBITDA(2) from 6.2x as of December 31,
2004 to 3.3x as of September 30, 2005.
-- During the quarter ended September 30, 2005, New Skies also
declared a quarterly cash dividend for the third quarter of
2005, in the amount of $0.463125 per share, with an intended
dividend level of $1.8525 per share for the first four full
fiscal quarters following the initial public offering which
was completed in May 2005.
-- On November 8, 2005, New Skies announced the completion of the
sale of its Australian subsidiary, New Skies Networks PTY
Limited, to Multiemedia Limited for $10.0 million. The company
will use the net proceeds of the sale transaction to further
reduce outstanding borrowings under its term loan facility.
(A) See definition of Adjusted EBITDA and the related
reconciliations in Note 2 of "Notes to the consolidated quarterly
financial information".
(1)() Long-term third party debt includes borrowings under the
senior secured credit facilities and amounts outstanding under the
senior floating rate notes and senior subordinated notes, amounting to
$745.0 million and $488.6 million as of December 31, 2004 and
September 30, 2005, respectively.
(2)() Adjusted EBITDA for the twelve month periods ended December
31, 2004 and September 30, 2005 was $120.5 million and $145.9 million,
respectively.
As an update to New Skies' August 2005 press statement regarding
the Intelsat IS-804 satellite failure, Lockheed Martin has completed
its investigation of this failure, although it has not yet released
its final report. Based upon information provided to New Skies by
Lockheed Martin, it is New Skies' understanding that the IS-804
failure was not likely to have been caused by an IS-804 specific
workmanship or hardware element, but was most likely caused by a high
current event in the battery circuitry triggered by an electrostatic
discharge that in turn caused the failure of the satellite's high
voltage power system. New Skies further understands that, although
this risk exists for other satellites of the same series manufactured
by Lockheed Martin, including two satellites owned by New Skies (NSS-5
and NSS-806), the risk to any individual satellite is low.
About New Skies Satellites (NYSE: NSE)
New Skies is one of only four fixed satellite communications
companies with global satellite coverage, offering data, video,
Internet and voice communications services to a range of
telecommunications carriers, broadcasters, large corporations,
Internet service providers and government entities around the world.
New Skies has five satellites in orbit, one spacecraft under
construction (NSS-8) and ground facilities around the world. New Skies
is headquartered in Hamilton, Bermuda, and has subsidiaries with
offices in The Hague, Hong Kong, New Delhi, Sao Paulo, Singapore,
Sydney and Washington, D.C.
Conference call:
CEO Dan Goldberg and CFO Andrew Browne will host a conference call
today at 11:00 a.m. (EST). To listen in please dial +1 877 491 0064,
passcode "New Skies." International dial-in number is +1 334 323 6201.
The call will also be webcast live on the New Skies web site at:
http://www.newskies.com/investors.htm.
The conference call will be available for replay, 24 hours a day
for the subsequent 5 working days and will also be archived on New
Skies' website. The dial-in number for the replay is +1 888 365 0240
or +1 954 334 0342 for international callers. Passcode: 682946.
Safe Harbor
Section 27A of the U.S. Securities Act of 1933 and Section 21E of
the U.S. Securities Exchange Act of 1934 provide a "safe harbor" for
forward-looking statements made by an issuer of publicly traded
securities and persons acting on its behalf. New Skies Satellites
Holdings Ltd. has made certain forward-looking statements in this
document in reliance on those safe harbors. A forward-looking
statement concerns the company's or management's intentions or
expectations, or are predictions of future performance. These
statements are identified by words such as "intends", "expects",
"anticipates", "believes", "estimates", "may", "will", "should" and
similar expressions. By their nature, forward-looking statements are
not a matter of historical fact and involve risks and uncertainties
that could cause New Skies' actual results to differ materially from
those expressed or implied by the forward-looking statements for a
number of reasons. Factors which may affect the future performance of
New Skies include: delays or problems in the construction or launch of
future satellites; technical performance of in-orbit satellites and
earth-based infrastructure; increased competition and changes in
technology; growth of and access to the company's target markets;
legal and regulatory developments affecting the company's business;
and worldwide business and economic conditions, among other things.
These risks and other risks affecting New Skies' business are
described in the company's periodic filings with the U.S. Securities
and Exchange Commission, including but not limited to New Skies'
Registration Statement on Form S-1 (File No. 333-122322). Copies of
these filings may be obtained by contacting the SEC. New Skies
disclaims any obligation to update the forward-looking statements
contained in this document.
New Skies Satellites Holdings Ltd. and Subsidiaries
Consolidated Balance Sheets
September 30, 2005 and December 31, 2004 (unaudited)
(In thousands of U.S. Dollars, except share data)
-0-
*T
September 30, December 31,
2005 2004
------------------ ----------------
Assets
Current Assets
Cash and cash equivalents $ 53,918 $ 37,974
Trade receivables 35,421 36,371
Prepaid expenses and other assets 5,404 10,591
------------------ ----------------
Total Current Assets 94,743 84,936
Communications, plant and other
property, net 634,640 895,906
Intangible assets 28,276 -
Deferred tax asset 18,578 17,362
Debt issuance costs 20,096 32,109
Restricted cash 30,000 -
------------------- ----------------
TOTAL $ 826,333 $1,030,313
================== ================
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued
liabilities $ 26,960 $ 28,381
Accrued interest 12,805 4,880
Dividends payable 15,341 -
Income taxes payable 20,055 20,480
Deferred tax liabilities 7,468 10,848
Deferred revenues and other
liabilities 24,291 21,031
Satellite performance incentives 5,090 6,332
------------------- ----------------
Total Current Liabilities 112,010 91,952
Deferred revenues and other
liabilities 9,052 10,224
Satellite performance incentives 29,531 30,597
Preferred equity securities subject to
mandatory redemption - 164,327
Long-term debt 488,560 745,000
-------------------- ----------------
Total Liabilities 639,153 1,042,100
-------------------- ----------------
Shareholders' Equity (Deficiency)
Ordinary Shares(3) (57,142 shares
authorized, par value $35.00; 43,312
shares issued as of December 31,
2004) - 1,516
Preferred Shares (250,000,000 shares
authorized, par value $0.01; none
issued) - -
Ordinary Shares(D) (500,000,000 shares
authorized, par value $0.01;
32,299,631 shares issued as of
September 30, 2005) 323 -
Additional paid-in capital 300,988 -
Accumulated deficit (114,515) (13,973)
Accumulated other comprehensive income 384 670
---------------------- ----------------
Total Shareholders' Equity
(Deficiency) 187,180 (11,787)
---------------------- ----------------
TOTAL $826,333 $1,030,313
================== ================
See notes to the consolidated
quarterly financial information
*T
New Skies Satellites Holdings Ltd. and Subsidiaries
Consolidated Statements of Income
Three- and nine-month periods ended September 30, 2005 and 2004
(unaudited)
(In thousands of U.S. Dollars, except per share data)
-0-
*T
Three-month periods ended Nine-month periods ended
September 30 September 30
--------------------------- ---------------------------
Successor(4) Predecessor(E) Successor(E) Predecessor(E)
------------ -------------- ------------ --------------
2005 2004 2005 2004
------------ -------------- ------------ --------------
Revenues $61,242 $53,781 $179,136 $156,889
Operating
expenses:
Depreciation 24,039 25,976 71,317 77,619
Cost of
operations 11,239 13,548 33,068 40,759
Selling,
general and
administrative 10,187 9,692 30,841 30,452
Stock-based
compensation 4,412 198 17,581 1,594
Monitoring
agreement fees - - 6,938 -
Transaction
related
expenses - 780 - 3,626
------------ -------------- ------------ --------------
Total Operating
Expenses 49,877 50,194 159,745 154,050
Gain on
frequency
coordination 9,500 - 19,500 32,000
------------ -------------- ------------ --------------
Operating
Income 20,865 3,587 38,891 34,839
Interest
expense, net 12,340 194 48,226 782
------------ -------------- ------------ --------------
Income (Loss)
Before Income
Tax Expense
(Benefit) 8,525 3,393 (9,335) 34,057
Income tax
expense
(benefit) 2,430 1,222 (2,661) 12,261
------------ -------------- ------------ --------------
Net Income
(Loss) $6,095 $2,171 $(6,674) $21,796
============ ============== ============ ==============
Earnings (Loss)
Per Share(3)
Basic $0.19 $0.02 $(0.26) $0.18
Diluted $0.18 $0.02 $(0.26) $0.18
Weighted
Average Shares
Outstanding(3)
(in thousands
of shares)
Basic 32,289 118,277 25,654 118,057
Diluted 33,825 120,075 25,654 119,797
See notes to the consolidated quarterly financial information
*T
(3)() At December 31, 2004, ordinary shares relate to New Skies
Investment S.a.r.l. As part of the reorganization that occurred on May
10, 2005, New Skies Satellites Holdings Ltd. indirectly acquired the
shares of New Skies Investments S.a.r.l. and became the Group's
ultimate parent company. At September 30, 2005, 32,299,631 shares were
issued and outstanding.
(4)() New Skies Satellites Holdings Ltd. commenced trading on May
10, 2005, the date upon which the Company successfully completed its
Initial Public Offering (the "IPO"). Immediately prior to the IPO, the
Company performed an internal restructuring pursuant to which
pre-existing shareholders indirectly contributed 100 percent of the
equity and preferred equity certificates of New Skies Satellites
S.a.r.l. to New Skies Satellites Holdings Ltd. As New Skies Satellites
Holdings Ltd. did not trade prior to the restructuring, the results
for the nine-month period ended September 30, 2005 represent the
combination of the results of New Skies Investments S.a.r.l for the
period up to and including the date of the restructuring and those of
New Skies Satellites Holdings Ltd. for the periods thereafter (the
"successor").
On November 2, 2004, New Skies Investments S.a.r.l, through its
wholly owned subsidiaries New Skies Holding B.V. and New Skies
Satellites B.V., purchased substantially all of the assets and
liabilities of New Skies Satellites N.V. Prior to this transaction,
New Skies Investments S.a.r.l did not trade. Accordingly, the results
for the quarter and the nine-month period ended September 30, 2004
represent the results of New Skies Satellites N.V. (the
"predecessor").
New Skies Satellites Holdings Ltd. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
Nine-month periods ended September 30, 2005 and 2004
(In thousands of U.S. Dollars)
-0-
*T
Nine-month periods
ended September 30
-----------------------
Successor Predecessor
---------- ------------
2005 2004
---------- ------------
Cash flows from operating activities:
Net income (loss) $(6,674) $21,796
Adjustments for non-cash items:
Depreciation 71,317 77,619
Deferred taxes (4,586) 1,057
Stock-based compensation expense 12,126 1,594
Non-cash interest on preferred equity
securities 4,379 -
Amortization of debt issuance costs 12,527 321
Changes in operating assets and
liabilities:
Trade receivables 926 (302)
Prepaid expenses and other assets 5,325 5,742
Accounts payable and accrued liabilities (1,331) 2,696
Accrued interest 7,925 -
Income taxes payable (408) 10,373
Other liabilities 2,111 960
---------- ------------
Net Cash Provided By Operating Activities 103,637 121,856
---------- ------------
Cash flows from investing activities:
Payments for communication, plant and
other
property (4,379) (5,961)
Reimbursement of NSS-8 construction
costs 168,000 -
Increase in restricted cash (30,000) -
---------- ------------
Net Cash Provided by (Used In) Investing
Activities 133,621 (5,961)
---------- ------------
Cash flows from financing activities:
Repayment of long-term debt (256,440) -
Proceeds from Initial Public Offering,
net of expenses 202,313 -
Issue of preferred equity certificates 4,639 -
Repayment of preferred equity securities (88,000) -
Dividends paid (78,527) (4,457)
Stock options exercised - 3,138
Satellite performance incentives and
other (5,247) (4,532)
---------- ------------
Net Cash Provided By (Used In) Financing
Activities (221,262) (5,851)
---------- ------------
Effect of exchange rate differences (52) 403
---------- ------------
Net change in cash and cash equivalents 15,944 110,447
Cash and cash equivalents, beginning of
year 37,974 23,253
---------- ------------
Cash and cash equivalents, end of period $53,918 $133,700
========== ============
*T
Cash payments for interest (net of amounts capitalized) were $23.9
million and nil for the nine-month periods ended September 30, 2005
and 2004. Income taxes paid amounted to $2.4 million and $1.6 million
for the nine-month periods ended September 30, 2005 and 2004,
respectively.
See notes to the consolidated quarterly financial information.
New Skies Satellites Holdings Ltd. and Subsidiaries
Notes to the consolidated quarterly financial information
(in thousands of U.S. dollars)
Three- and nine-month periods ended September 30, 2005 and 2004
(unaudited)
(1) Basis of presentation
New Skies Satellites Holdings Ltd. commenced trading on May 10,
2005, the date upon which the Company successfully completed its
Initial Public Offering (the "IPO"). Immediately prior to the IPO, the
Company performed an internal restructuring pursuant to which
pre-existing shareholders contributed 100 percent of the equity and
preferred equity certificates of New Skies Satellites S.a.r.l. to New
Skies Satellites Holdings Ltd. As New Skies Satellites Holdings Ltd.
did not trade prior to the restructuring, the results for the
nine-month period ended September 30, 2005 represent the combination
of the results of New Skies Investments S.a.r.l for the period up to
and including the date of the restructuring and those of New Skies
Satellites Holdings Ltd. for the periods thereafter (the "successor").
On November 2, 2004, New Skies Investments S.a.r.l, through its
wholly owned subsidiaries New Skies Holding B.V. and New Skies
Satellites B.V., purchased substantially all of the assets and
liabilities of New Skies Satellites N.V. Prior to this transaction,
New Skies Investments S.a.r.l did not trade. Accordingly, the results
for the quarter and the nine-month period ended September 30, 2004
represent the results of New Skies Satellites N.V. (the
"predecessor").
(2) Adjusted EBITDA
Adjusted EBITDA is defined as EBITDA (i.e. earnings before
interest, taxes, depreciation and amortization), further adjusted to
give effect to adjustments required in calculating covenant ratios and
compliance under the indentures governing the notes and the senior
secured credit facilities. We use Adjusted EBITDA to give effect to
adjustments required in calculating covenant ratios and compliance
under the indentures governing the notes and the senior secured credit
facilities. For instance, both the indentures governing the notes and
the senior secured credit facilities contain financial ratios that are
calculated by reference to Adjusted EBITDA. Non-compliance with the
financial ratio maintenance covenants contained in the senior secured
credit facilities could result in the requirement to immediately repay
all amounts outstanding under such facilities, while non-compliance
with the debt incurrence ratio contained in the indentures governing
the notes would prohibit us from being able to incur additional
indebtedness other than pursuant to specified exceptions. Adjusted
EBITDA is not presented as an alternative measure of operating results
or cash flows provided by operating activities, as determined in
accordance with accounting principles generally accepted in the United
States. Adjusted EBITDA as presented in this release may not be
comparable to similarly titled measures reported by other companies.
The following table sets forth the reconciliation of net cash provided
by operating activities and net income (loss) to EBITDA and Adjusted
EBITDA for the periods indicated.
Reconciliation of Net Income (Loss) to EBITDA
-0-
*T
Three-month periods Nine-month periods ended
ended September 30,
September 30,
-----------------------------------------------
2005 2004 2005 2004
-----------------------------------------------
Net income (loss) $6,095 $2,171 $(6,674) $21,796
Income tax expense
(benefit) 2,430 1,222 (2,662) 12,261
Interest expense, net 12,340 194 48,226 782
Depreciation 24,039 25,976 71,317 77,619
-----------------------------------------------
EBITDA $44,904 $29,563 $110,207 $112,458
===============================================
*T
Reconciliation of EBITDA to Adjusted EBITDA
-0-
*T
Three-month Nine-month periods
periods ended ended
September 30, September 30,
----------------------------------
2005 2004 2005 2004
----------------------------------
EBITDA $44,904 $29,563 $110,207 $112,458
Gain arising on frequency
coordination (a) (9,500) - (19,500) (32,000)
Transaction related
expenses (b) - 780 - 3,626
Unused satellite capacity leased from
third
party (c) - 1,404 - 4,119
Costs related to stock-based
compensation
(d) 4,412 198 17,581 1,594
Monitoring fee paid to Blackstone
Management Partners IV L.L.C.(e) - - 6,938 -
----------------------------------
Adjusted EBITDA $39,816 $31,945 $115,226 $89,797
==================================
*T
(a) Reflects a one-time payment from Intelsat LLC of $32.0 million
in 2004 and payments from SES Global affiliates of $10.0 million in
the first quarter 2005 and $9.5 million in the third quarter 2005
following the successful resolution of certain frequency coordination
matters.
(b) Represents non-recurring costs incurred in connection with the
purchase of assets and liabilities of New Skies Satellites N.V.
(c) Reflects costs related to unused capacity on leased
transponders, with the underlying contract expiring in November 2004.
(d) Stock-based compensation includes $5.4 million of cash
payments made for bonuses and taxes due.
(e) Reflects the monitoring fee paid to Blackstone Management
Partners IV L.L.C., of which $6.1 million represents a payment for the
termination of the monitoring agreement in connection with the
Company's Initial Public Offering.
Reconciliation of Net Cash Provided by Operating Activities to Net
Income (Loss)
-0-
*T
Three-month periods Nine-month periods
ended ended
September 30, September 30,
------------------------------------------
2005 2004 2005 2004
------------------------------------------
Net cash provided
by operating
activities $48,401 $31,645 $103,637 $121,856
Depreciation (24,039) (25,976) (71,317) (77,619)
Deferred taxes (1,767) (282) 4,586 (1,057)
Stock-based
compensation
expense (4,387) (198) (12,126) (1,594)
Amortization of
debt issuance
costs (1,750) - (12,527) (321)
Change in operating
assets and
liabilities (10,363) (3,018) (14,548) (19,469)
Interest on
preferred equity
securities - - (4,379) -
------------------------------------------
Net Income (loss) $6,095 $2,171 $(6,674) $21,796
==========================================
*T
(3) Earnings (Loss) per share
Basic net earnings (loss) per share is computed by dividing net
income (loss) by the weighted average ordinary shares outstanding. For
the purpose of calculating the weighted average shares outstanding for
the nine-month period ended September 30, 2005, the effects of the
internal restructuring immediately prior to the Initial Public
Offering are deemed to have occurred at the beginning of the period,
and reflect 18.5 million shares.
Diluted earnings (loss) per share reflects the potential dilution
that could occur if potential dilutive securities, such as stock
options, convertible securities and contracts that may be settled in
cash or stock, were converted to shares as of the beginning of the
period, if dilutive. For the purpose of calculating diluted loss per
share for the nine-month period ended September 30, 2005,
approximately 1.5 million potentially dilutive common shares relating
to outstanding stock options have been excluded from the calculation
of adjusted weighted average shares outstanding as their inclusion
would have had an anti-dilutive effect due to the net loss in that
period.