OTTAWA – Telesat is blaming an insurance claim for a $210 million drop in annual profit as reported in its quarterly and full year financials. Revenues for 2012 were $846 million, a 5% increase over the $809 million it recorded in 2011, but net income was only $27 million compared to $237 million in 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% 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,” said Telesat in a statement.
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, adds Telesat.
“I am very pleased with our strong performance in 2012,” said 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.”
Operating expenses of $245 million were 31% ($58 million) higher than in 2011 or 30% ($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 $4 million (2%) higher than in 2011. Adjusted was $656 million, an increase of 5% ($33 million) over 2011.
For the three month period ended December 31, 2012, Telesat had consolidated revenue of $228 million, an increase of approximately 11% ($23 million) compared to the same period in 2011. When adjusted for foreign exchange rate changes over the period, revenue increased by 13% ($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. Telesat said 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.
Business Highlights:
- Telesat had contracted backlog for future services of approximately $5.1 billion.
- Fleet utilization was 91% for Telesat’s North American fleet and 83% 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.
- 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 $2.550 billion (U.S.). 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% 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% Senior Notes due November 1, 2015.
- On October 29, 2012, Telesat issued an additional $200 million (U.S.) of 6.0% 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.
