Telesat Holdings Inc. (“Telesat”) today announced its financial results for the three month and one year periods ended December 31, 2012. All amounts are in Canadian dollars and are reported under International Financial Reporting Standards (“IFRS”) unless otherwise noted.
For the year ended December 31, 2012, Telesat reported consolidated revenues of $846 million, an increase of approximately 5 percent ($37 million) compared to 2011. When adjusted for foreign exchange rate changes, revenue increased by 4percent ($36 million) compared to 2011. Revenue growth was driven, in part, by the successful deployment of the Nimiq 6 satellite in the second quarter of 2012 and a full year of revenue from the Canadian payload on the ViaSat-1 satellite, which entered commercial service in December 2011. Operating expenses of $245 million were 31 percent ($58 million) higher than in 2011 or 30 percent ($57 million) higher when taking into account changes in foreign exchange rates. Excluding one-time items totaling $54 million related primarily to special compensation payments to executives and certain employees in connection with the cash distributions made to Telesat’s shareholders, 2012 operating expenses were just $4 million (2 percent) higher than in 2011. Adjusted EBITDA1 was $656 million, an increase of 5 percent ($33 million) over 2011. The Adjusted EBITDA margin1 for 2012 was 78 percent compared to 77 percent for 2011.
Telesat’s net income for 2012 was $27 million compared to net income of $237 million for 2011, a decrease of $210 million. The 2012 net income was lower than 2011 due in part to the recognition in 2011 of a $135 million gain from insurance proceeds received in connection with an insurance claim filed for the failure of a solar array on Telstar 14R/Estrela do Sul 2. Net income was also adversely impacted by a loss on financing of $77 million in 2012, which was the result of the repurchase and redemption of Telesat’s 11.0 percent Senior Notes as well as the write-off of deferred financing costs capitalized with the carrying value of the previous senior secured credit facilities. Results were also negatively impacted by increased operating expenses, an increase relating primarily to the special compensation payments, partially offset by an increase in revenue.
For the three month period ended December 31, 2012, Telesat had consolidated revenue of $228 million, an increase of approximately 11 percent ($23 million) compared to the same period in 2011. When adjusted for foreign exchange rate changes over the period, revenue increased by 13 percent ($27 million) compared to the same period in 2011, driven in part by Nimiq 6 and the Canadian payload on ViaSat-1. Operating expenses in the quarter were $61 million, or an increase of $12 million compared to 2011. The increase was primarily due to an increase in the cost of equipment sales, the special compensation payments and an increase in revenue-related expenses associated with the lease of transponders on Nimiq 1. Adjusted EBITDA1 for the fourth quarter of 2012 was $173 million, an increase of 10 percent ($16 million) compared to the fourth quarter of 2011 and an increase of 12 percent ($19 million) when adjusted for foreign exchange rate changes. The Adjusted EBITDA margin1 was 76 percent for the fourth quarter compared to 77% for the same period in 2011.
“I am very pleased with our strong performance in 2012,” commented Dan Goldberg, Telesat’s President and CEO. “Compared to 2011, we experienced meaningful growth in revenue and Adjusted EBITDA as well as continued expansion of our Adjusted EBITDA margin. In addition to our favorable financial performance, we refinanced our debt, brought our new Nimiq 6 satellite on line, and completed construction of our Anik G1 satellite. Anik G1, which we expect to be launched in the first half of this year, has considerable expansion capacity, a significant portion of which is already contracted for the life of the satellite. In light of our strong growth in the second half of last year, the anticipated near term launch of Anik G1, and our industry-leading contractual backlog, we are well positioned for 2013 and beyond.”
Business Highlights
At December 31, 2012:
- Telesat had contracted backlog for future services of approximately $5.1 billion.
- Fleet utilization was 91percent for Telesat’s North American fleet and 83 percent for Telesat’s international fleet.
- On May 18, 2012, Telesat successfully launched its Nimiq 6 direct broadcast satellite, which entered commercial service at the 91.1 degree West orbital location in June 2012. The entire capacity of Nimiq 6 is contracted for 15 years to Bell TV.
- Telesat completed the construction of the Anik G1 satellite, which is expected to be launched in the first half of 2013. Anik G1’s 16 extended Ku-band transponders have been contracted for 15 years to Shaw Direct for DTH services in Canada. Telesat also has entered into a 15 year contract with Paradigm Services for the full X-band payload of three transponders for government services. In addition, Anik G1 will double Telesat’s existing capacity in South America from the 107.3 degree West orbital location.
Telesat completed a series of refinancing transactions in 2012:
- On March 28, 2012, Telesat Canada entered into a new credit agreement for Senior Secured Credit Facilities which provided for the extension of credit in an approximate amount of USD $2,550 million. Telesat Canada simultaneously terminated and paid all outstanding amounts under its previously existing credit facilities. In connection with the refinancing, on March 28, 2012, Telesat declared a cash distribution to its shareholders, as a reduction in stated capital, in the amount of approximately $656 million. Approximately $586 million of the distribution was paid in the first quarter while the remaining $70 million was paid in the third quarter.
- On May 14, 2012, Telesat Canada issued, through a private placement, USD $700 million of 6.0 percent Senior Notes due May 15, 2017. The net proceeds of the offering, along with available cash on hand, were used to repurchase and redeem all of Telesat Canada’s outstanding 11.0 percent Senior Notes due November 1, 2015.
- On October 29, 2012, Telesat issued an additional USD $200 million of 6.0 percent Senior Notes due May 15, 2017. The net proceeds from the offering were used to fund the repayment of certain indebtedness owed to Telesat’s principal shareholders, including accrued and unpaid interest thereon, and for general corporate purposes.
- Under Telesat’s Unanimous Shareholders’ Agreement, either Public Service Pension Investment Board (“PSP”) or Loral Space & Communications Inc. (“Loral”) can initiate the process of Telesat conducting an initial public offering of the equity shares of Telesat if an initial public offering has not been completed by October 31, 2011. In Q3 2012, PSP delivered to Telesat and Loral a notice initiating this process, which notice PSP subsequently withdrew.
Telesat’s report on Form 20-F for the year ended December 31, 2012 has been filed with the U.S. Securities and Exchange Commission and may be accessed on the SEC’s website at www.sec.gov.
