New Skies
Satellites N.V. (AEX, NYSE: NSK), the global satellite communications
company, today reported financial results for the three- and six-month
periods ended June 30, 2004. Revenues for the quarter were $83.3
million, EBITDA(A) was $56.5 million, and net income was $19.5
million, or $0.16 diluted earnings per share.
The 2004 performance includes two non-recurring events(B): (i) the
orbital slot coordination agreement with Intelsat disclosed last
quarter and the corresponding receipt of a one-time cash payment of
$32.0 million in the second quarter 2004 and (ii) costs incurred
relating to the purchase of the Company by affiliates of The
Blackstone Group of $0.7 million and $2.8 million, in the first and
second quarters of 2004, respectively.
Commenting on the results, New Skies CEO Dan Goldberg said:
The second quarter represented yet another solid performance for
New Skies, with revenues, EBITDA and free cash flow coming in at
significantly higher levels, primarily as a result of the recognition
of a one-time cash payment from Intelsat of $32 million. If we exclude
this one-time payment, revenues were consistent with the previous
quarter, but down from the same period last year. Although we secured
a number of important commercial opportunities for a range of video,
data, IP and government services, excess satellite capacity continues
to place downward pressure on transponder rates.
Notwithstanding the challenging operating environment, we were
able to substantially increase free cash flow© to $86 million for
the six-month period, and we continue to leverage the strengths of our
global network to attract new business, increasing the fleet-wide fill
rate during the quarter and growing backlog modestly.
In particular, the DTH and video capabilities of our newer
satellites, NSS-6 and NSS-7, continue to be in strong demand by
broadcasters. During the quarter, we concluded a major contract with
India’s Department of Space to provide NSS-6 capacity for Zee
Television’s DTH service in India. Adding to the agreement secured
last quarter for the DTH platform of Doordarshan, India’s national
broadcaster, this latest contract firmly establishes NSS-6 as the
premier DTH satellite for the Indian subcontinent.
Additionally, we signed a significant agreement with Globecast for
the distribution of a number of Algerian channels throughout the
Middle East and North Africa, further strengthening NSS-7’s position
as the leading satellite for video distribution throughout the whole
of Africa.
Finally, I’m pleased to report that our agreement for the sale of
the company to affiliates of The Blackstone Group is on track and we
now expect the transaction to be completed by the end of this year.
Financial highlights:
For the three- and six-month periods ended June 30, 2004, New
Skies achieved the following financial results:
- Revenues for the three months ended June 30, 2004 were $83.3
million, an increase of $28.6 million, or 52 percent, from
$54.7 million in the same period in 2003. For the first six
months of the year, revenues were $135.1 million, up $28.4
million, or 27 percent, compared to $106.7 million in 2003.
Revenues for the current quarter and six-month period include
the orbital location coordination agreement signed with
Intelsat resulting in a corresponding one-time cash receipt of
$32.0 million. Excluding this agreement, revenues were $51.3
million for the quarter and $103.1 million for the first six
months of the year. - Operating expenses, excluding depreciation, increased $2.8
million for the quarter, and $5.2 million for the six months
ended June 30, 2004, as compared to the same periods in 2003.
These net increases are primarily due to certain costs
relating to the currently undertaken purchase of New Skies by
affiliates of The Blackstone Group ($2.8 million for the
quarter and $3.5 million for the six-month period), increased
in-orbit insurance costs ($0.8 million for the quarter and
$2.3 million for the six-month period) and increased stock
compensation expense ($0.4 million for the six-month period),
partially offset by savings rising from careful management of
our discretionary costs. - Net income for the second quarter 2004 was $19.5 million
compared to $3.1 million in the same period in the prior year,
while the net income for the six-month period ended June 30,
2004 was $19.6 million compared to $6.7 million in the same
period in the prior year. Net income for the three months
ended June 30, 2004 reflected the orbital location
coordination agreement and corresponding receipt of a one-time
cash payment of $32.0 million and the incurrence of
acquisition-related expenses of $2.8 million ($3.5 million for
the six month period ended June 30, 2004). Excluding these two
non-recurring events, net income for quarter was $0.8 million,
and $1.4 million for the six-month period. - In the second quarter 2004, EBITDA was $56.5 million, compared
to $30.7 million for the same period in the prior year. EBITDA
for the six months ended June 30, 2004 was $82.9 million, as
compared to $59.7 million for the same period in 2003.
Excluding the two non-recurring events previously mentioned,
EBITDA for the second quarter 2004 was $27.3 million, and
$54.4 million for the six-month period ended June 30, 2004. - The company achieved positive free cash flow position of $58.8
million in the second quarter 2004 compared to $26.3 million
in 2003. Free cash flow for the six months ended June 30, 2004
was $86.0 million compared to free cash flow of $36.1 million
in the same period in the prior year. Excluding the two
non-recurring events previously mentioned, free cash flow for
the second quarter 2004 was $29.6 million, and $57.5 million
for the six-month period ended June 30, 2004. - Backlog at the end of the second quarter 2004 was $649
million, approximately three times annual revenues, compared
to $700 million in the same period last year, and to $645
million at the end of the first quarter 2004.
Operating highlights:
the quarter, including agreements with:
-- The commercial arm of India's Department of Space, Antrix Corporation, for multiple transponders on the NSS-6 satellite to support the expansion of Zee Telefilms' direct-to-home television service DISH TV in India. -- Globecast for capacity to distribute several Algerian television channels throughout North Africa and the Middle East over the NSS-7 satellite.
voice services contracts with:
-- Com-ToNet S.A., a leading Greek IP service provider and teleport operator, for a full transponder on NSS-6 to offer broadband connections to the European Internet backbone for corporations, government agencies, telecommunications companies and Internet service providers operating throughout the Middle East. -- Streamlink Communications, a Kuwaiti-based broadband service provider, to support a new two-way IP network using multiple transponders on the high-powered NSS-6 satellite. -- Nursat, a leading private telecommunications operator in Kazakhstan, for capacity on the NSS-703 Indian Ocean region satellite to support rural telecommunications throughout the Central Asian country.
- Government services continued to play an important role as New
Skies signed significant contracts with AT&T and the
International Broadcasting Bureau. - During the quarter, New Skies also announced two new Internet
offerings, IPsys® Broadband(sm) for Asia and IPsys®
Bandwidth on Demand(sm) for Latin America. The services are
designed to deliver next-generation two-way satellite
broadband services, such as virtual private networks and
high-speed Internet connectivity, video conferencing, rural
telecommunications, Voice over IP, and distance learning
networks. - Additionally, New Skies supported special events programming,
including UEFA Euro 2004, Wimbledon, the French Open and
Formula One Racing for ABC, BT Broadcast Services, CNN, EBU,
NHK, NTL, RAI, Reuters, and TV Globo among others.
Recent developments:
the sale of the company to affiliates of The Blackstone Group,
a leading private investment firm, for $956 million in cash,
equivalent to approximately $7.96 per fully diluted share. New
Skies and The Blackstone Group have received certain
regulatory and shareholder approvals necessary for the
completion of the transaction, including:
-- On July 2, 2004, New Skies and The Blackstone Group received early termination of the required waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 for Blackstone's acquisition of New Skies. -- On July 19, 2004, New Skies' shareholders overwhelmingly approved the sale of the company, with 92.4 percent of shares in attendance voting for the acquisition. -- The Netherlands' Ministry of Economic Affairs formally approved the transaction on July 28, 2004.
New Skies anticipates that the transaction will be completed by
the end of 2004, following the receipt of the remaining approvals and
satisfaction of other customary closing conditions.
About New Skies Satellites (AEX, NYSE: NSK)
New Skies Satellites is one of only four fixed satellite
communications companies with truly global satellite coverage,
offering video, data, voice, and Internet 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, ground
facilities around the world and one additional spacecraft under
construction. The company also has secured certain rights to make use
of additional orbital positions for future growth. New Skies is
headquartered in The Hague, the Netherlands, and has offices in
Beijing, Hong Kong, New Delhi, Sao Paulo, Singapore, Sydney and
Washington, D.C. Additional information is available at
www.newskies.com.
Conference call:
CEO Dan Goldberg and CFO Andrew Browne will host a conference call
today at 5 p.m. (CET). To listen in please dial +44 20 7162 0025,
passcode “New Skies.”
The call will also be webcast live on the New Skies web site at:
http://www.newskies.com/ir.
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 international dial-in number for the replay is +44
20 8288 4459 (callers in the United States may dial +1 334 323 6222;
for the UK only on free phone number: 0500 637 880) Passcode: 737852.
(A) See definition of EBITDA and "Reconciliation of EBITDA to net income" in Note 3 of "Notes to the consolidated quarterly financial information". (B) See Note 2 of "Notes to the consolidated quarterly financial information". (C) See definition of free cash flow and "Reconciliation of net cash provided by operating activities to free cash flow from operations" in Note 4 of "Notes to the consolidated quarterly financial information".
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 N.V.
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’ Annual Report on Form 20-F for the year ended
December 31, 2003. 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 N.V. and Subsidiaries Consolidated Balance Sheets June 30, 2004 and December 31, 2003 (In thousands of U.S. Dollars, except share data) ---------------------------------------------------------------------- June 30, December 31, 2004 2003 ------------ ------------ (unaudited) Assets Current Assets Cash and cash equivalents $ 102,917 $ 23,253 Trade receivables 43,339 41,870 Prepaid expenses and other assets 11,740 14,782 ------------ ------------ Total Current Assets 157,996 79,905 Communications, plant and other property, net 978,441 1,026,580 Deferred tax asset 8,620 8,748 Other assets 258 603 ------------ ------------ TOTAL $ 1,145,315 $ 1,115,836 ============ ============ Liabilities and Shareholders' Equity Current Liabilities Accounts payable and accrued liabilities $ 23,430 $ 17,518 Income taxes payable 42,282 32,346 Deferred revenues and other liabilities 8,745 8,138 Satellite performance incentives 6,561 6,429 ------------ ------------ Total Current Liabilities 81,018 64,431 Long Term Liabilities 46,070 49,615 Shareholders' Equity Governance preference shares (227,530,000 shares authorized, par value EUR 0.05; none issued) - - Cumulative preferred financing shares (22,753,000 shares authorized, par value EUR 0.05; none issued) - - Ordinary Shares (204,777,000 shares authorized, par value EUR 0.05; 118,096,572 and 117,668,652 shares issued, respectively) 5,458 5,431 Additional paid-in capital 928,122 926,109 Retained earnings 82,758 67,854 Unearned compensation (82) (179) Accumulated other comprehensive income 1,971 2,575 ------------ ------------ Total Shareholders' Equity 1,018,227 1,001,790 ------------ ------------ TOTAL $ 1,145,315 $ 1,115,836 ============ ============
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New Skies Satellites N.V. and Subsidiaries Consolidated Statements of Income Three-month periods ended June 30, 2004 and 2003 (unaudited) (In thousands of U.S. Dollars, except share data) Three-month periods ended June 30 2004 2003 -------- -------- Revenues (See Note 2) $83,253 $54,650 -------- -------- Operating expenses: Cost of operations 13,623 13,114 Selling, general and administrative (See Note 2) 13,151 10,874 Depreciation 25,775 25,701 -------- -------- Total Operating Expenses 52,549 49,689 -------- -------- Operating Income 30,704 4,961 Interest expense, net 258 68 -------- -------- Income Before Income Tax Expense 30,446 4,893 Income tax expense 10,961 1,761 -------- -------- Net Income $19,485 $3,132 ======== ======== Earnings Per Share: Basic $ 0.17 $ 0.03 Diluted 0.16 0.03 ======== ========
Six-month periods ended June 30, 2004 and 2003 (unaudited) (In thousands of U.S. Dollars, except share data) Six-month periods ended June 30 2004 2003 --------- --------- Revenues (See Note 2) $135,108 $106,661 --------- --------- Operating expenses: Cost of operations 27,375 25,694 Selling, general and administrative (See Note 2) 24,838 21,307 Depreciation 51,643 48,626 --------- --------- Total Operating Expenses 103,856 95,627 --------- --------- Operating Income 31,252 11,034 Interest expense, net 588 549 --------- --------- Income Before Income Tax Expense 30,664 10,485 Income tax expense 11,039 3,775 --------- --------- Net Income $ 19,625 $6,710 ========= ========= Earnings Per Share: Basic $ 0.17 $0.06 Diluted 0.16 0.06 ========= =========
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New Skies Satellites N.V. and Subsidiaries Consolidated Statements of Cash Flows (unaudited) Six-month periods ended June 30, 2004 and 2003 (In thousands of U.S. Dollars) ---------------------------------------------------------------------- Six-month periods ended June 30 2004 2003 --------- -------- Cash flows from operating activities: Net income $ 19,625 $6,710 Adjustments for non-cash items: Depreciation 51,643 48,626 Deferred taxes 775 641 Stock compensation expense 1,396 968 Changes in operating assets and liabilities: Trade receivables (1,573) (3,048) Prepaid expenses and other assets 2,297 1,476 Accounts payable and accrued liabilities 5,428 1,776 Income taxes payable 9,846 1,563 Other liabilities 453 (2,449) --------- -------- Net Cash Provided By Operating Activities 89,890 56,263 --------- -------- Cash flows from investing activities: Payments for communication, plant and other property (3,859) (20,210) --------- -------- Net Cash Used In Investing Activities (3,859) (20,210) --------- -------- Cash flows from financing activities: Repayment of short-term borrowings - (5,000) Treasury stock acquired - (32,162) Stock options exercised 741 - Dividends paid (3,985) - Satellite performance incentives and other (2,838) (2,421) --------- -------- Net Cash Used In Financing Activities (6,082) (39,583) --------- -------- Effect of exchange rate differences (285) 310 --------- -------- Net change in cash and cash equivalents 79,664 (3,220) Cash and cash equivalents, beginning of year 23,253 8,329 --------- -------- Cash and cash equivalents, end of period $102,917 $5,109 ======== ====== Cash payments for interest (net of amounts capitalized) were nil for the six-month periods ended June 30, 2004 and 2003. Income taxes paid amounted to $1.1 million and $1.8 million for the six-month periods ended June 30, 2004 and 2003, respectively.
New Skies Satellites N.V. and Subsidiaries
Notes to the consolidated quarterly financial information
Three- and six-month periods ended June 30, 2004 and 2003
(unaudited)
(1) Acquisition of the Company On June 5, 2004, the Company signed a definitive agreement for the sale of the Company to affiliates of The Blackstone Group ("Purchaser"), a private investment firm, for $956 million in cash, equivalent to approximately $7.96 per fully diluted share ("Blackstone Transaction"). According to the agreement, the sale of the Company involves the transfer of New Skies' business and operations to certain wholly-owned subsidiaries of Cayman Islands private equity funds affiliated with The Blackstone Group and the distribution of the cash proceeds to our shareholders. The sale would be structured as the sale of substantially all assets to, and the assumption of substantially all liabilities by, the Purchaser. On July 19, 2004, New Skies' shareholders approved the sale of the company, with 92.4 percent of shares in attendance voting for the acquisition. It is expected that the transaction will be completed once the applicable regulatory approvals have been received and certain financing and other customary conditions have been satisfied. After the closing of the Blackstone Transaction, a liquidation of New Skies is contemplated, pursuant to which two liquidation distributions will be paid to shareholders: (i) an initial liquidation distribution which is expected to consist of approximately 95 percent of the cash proceeds of the asset sale shortly after the closing of the Blackstone Transaction; and (ii) a final liquidation distribution of the remaining cash proceeds approximately ten weeks after the initial distribution. This process is expected to conclude by approximately the end of 2004 or early 2005. (2) Additional information The second quarter and year-to-date 2004 performance includes two non-recurring events: (i) a comprehensive agreement with Intelsat relating to certain longstanding orbital slot coordination matters, whereby New Skies agreed not to bring a satellite into use at the 120.8 degrees west longitude location in order to ensure Intelsat's IA-13 satellite will be able to operate at 121 degrees west longitude without interference. In return, Intelsat made a one-time payment to New Skies of $32 million. Both parties also resolved all outstanding coordination issues regarding operations at 340 degrees east longitude and 57 degrees east longitude, safeguarding New Skies' planned operations in the Atlantic Ocean region and for our NSS-8 satellite, planned for operation in the Indian Ocean region, and (ii) costs incurred relating to the purchase of the Company by affiliates of The Blackstone Group of $0.7 million and $2.8 million, in the first and second quarters of 2004, respectively. (3) Reconciliation of EBITDA to net income New Skies believes earnings before interest, taxes, depreciation, amortization and other expenses, primarily financing costs relating to the revolving credit facility, (EBITDA) is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. EBITDA is not presented as an alternative measure of operating results or cash flow from operations, as determined in accordance with generally accepted accounting principles in the U.S. EBITDA as presented herein may not be comparable to similarly titled measures reported by other companies. EBITDA is reconciled to net income as follows:
(in thousands of U.S. dollars) Three-month Six-month periods ended periods ended June 30, June 30, 2004 2003 2004 2003 -------- -------- -------- ------- Net income $19,485 $ 3,132 $19,625 $ 6,710 Income tax expense 10,961 1,761 11,039 3,775 Interest expense 382 696 784 1,187 Interest expense capitalized (382) (696) (784) (1,187) Interest-financing costs 258 68 588 549 Depreciation 25,775 25,701 51,643 48,626 -------- -------- -------- ------- EBITDA $56,479 $30,662 $82,895 $59,660 ======== ======== ======== ========
(4) Reconciliation of net cash provided by operating activities to free cash flow from operations New Skies believes free cash flow from operations is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. Free cash flow from operations is not presented as an alternative measure of cash flow from operations, as determined in accordance with generally accepted accounting principles in the U.S. Free cash flow from operations as presented herein may not be comparable to similarly titled measures reported by other companies. Free cash flow from operations is reconciled to net cash provided by operating activities as follows:
(in thousands of U.S. dollars) Three-month periods Six-month periods ended June 30, ended June 30, 2004 2003 2004 2003 -------- -------- -------- -------- Net cash provided by operating activities $60,479 $31,102 $89,890 $56,263 Payments for communication, plant and other property (1,674) (4,776) (3,859) (20,210) -------- -------- -------- -------- Free cash flow from operations $58,805 $26,326 $86,031 $36,053 ======== ======== ======== ========
(5) Stock based compensation Effective January 1, 2003, New Skies adopted the fair value based method of accounting for stock compensation under SFAS 123, Accounting for Stock-Based Compensation, transitioning via the prospective method. The following table illustrates the effect on net income and earnings per share if New Skies had applied the fair value recognition provisions of SFAS 123 for all stock-based compensation awards.
Three-month Six-month (in thousands of U.S. dollars, periods ended periods ended except earnings per share data) June 30, June 30, 2004 2003 2004 2003 -------- -------- -------- ------- Net income, as reported $19,485 $ 3,132 $19,625 $6,710 Add: Stock-based employee compensation expense included in reported net income, net of taxes 521 425 991 666 Less: Total stock-based employee compensation expense determined under fair value based Method for all awards, net of taxes (876) (1,270) (1,871) (2,632) -------- -------- -------- ------- Pro forma net income $19,130 $ 2,287 $18,745 $4,744 ======== ======== ======== =======
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Three-month Six-month periods periods ended ended June 30, June 30, 2004 2003 2004 2003 ------ ------ ------ ------ Earnings per share: Basic, as reported $0.17 $0.03 $0.17 $0.06 Basic, pro forma 0.16 0.02 0.16 0.04 Diluted, as reported 0.16 0.03 0.16 0.06 Diluted, pro forma 0.16 0.02 0.16 0.04 ====== ====== ====== ======
Contact:
New Skies Satellites Corporate Communications Jeff Bothwell, +31 70 306 4239 +31 6 1131 0183 Jbothwell@newskies.com or New Skies Satellites Investor Relations Boris Djordjevic, +31 70 306 4183 bdjordjevic@newskies.com or SPJ Leon Melens, +31 20 647 8181 lmelens@spj.nl