OREANDA-NEWS. Telesat Holdings Inc. (“Telesat”) today announced its consolidated financial results for the three and six month periods ended June 30, 2016. All amounts are in Canadian dollars and are reported under International Financial Reporting Standards (“IFRS”) unless otherwise noted.

For the quarter ended June 30, 2016, Telesat reported revenues of $232 million, an increase of approximately 2% ($5 million) compared to the same period in 2015.  During the quarter, the U.S. dollar was approximately 4% stronger than it was during the second quarter of 2015 and, as a result, there was a favorable impact on the conversion of U.S. dollar denominated revenues.  When adjusted for foreign exchange rate changes, revenue was largely unchanged (an increase of $1 million) compared to the same period in 2015. 

Operating expenses of $42 million for the quarter were 5% ($2 million) lower than the same period in 2015, and 7% ($3 million) lower when taking into account changes in foreign exchange rates.  Adjusted EBITDA1 for the quarter was $191 million, an increase of 3% ($6 million) compared to the same period in 2015 and an increase of 2% ($3 million) when adjusted for foreign exchange rate changes. The Adjusted EBITDA margin1 improved to 82.5% in the second quarter of 2016 from 81.4% during the same period in 2015. 

For the six month period ended June 30, 2016, revenue was $467 million, an increase of 2% ($11 million) compared to the same period in 2015. During the first half of 2016, the U.S. dollar was 8% stronger than it was during the first half of 2015. When adjusted for changes in foreign exchange rates, revenues were essentially unchanged (a decrease of $2 million) compared to the same period in 2015. Operating expenses were $89 million, unchanged from the first half of 2015 or 2% ($2 million) lower when adjusted for foreign exchange rate changes.  Adjusted EBITDA1 was $382 million, an increase of 3% ($11 million) compared to the same period in 2015 and unchanged when adjusted for foreign exchange rate changes. The Adjusted EBITDA margin1 for the first half of 2016 was 81.9%, compared to 81.4% in the same period in 2015.

Telesat’s net income for the quarter was $62 million compared to net income of $56 million for the quarter ended June 30, 2015. The $6 million difference was principally the result of higher revenue and lower operating expenses for the quarter ended June 30, 2016, as compared to the same period in 2015, combined with favorable changes in the fair value of financial instruments and a lower tax expense, which were offset by unfavorable changes in the gain on foreign exchange and higher depreciation expense.  For the six month period ended June 30, 2016, net income was $299 million, compared to a net loss of $98 million for the same period in 2015. The increase in net income for the first half of the year was principally the result of a gain on foreign exchange in the first quarter of 2016 arising from the translation of Telesat’s U.S. dollar denominated debt into Canadian dollars.

“I am very pleased with our second quarter results,” commented Dan Goldberg, Telesat’s President and CEO. “Compared to the same period last year and adjusting for foreign exchange rate changes, revenue was stable, operating expenses were 7% lower, Adjusted EBITDA1 was 2% higher, and our Adjusted EBITDA margin1 was slightly higher at 82.5%. Although headwinds persist in certain markets we serve, our solid performance for the quarter and year to date highlights the broad strength and stability of our overall business, which is underpinned by our industry leading contractual backlog to revenue ratio. Looking ahead, we remain focused on the sale of our available in-orbit capacity, the construction of Telstar 19 VANTAGE and Telstar 18 VANTAGE, and the further development of certain other important growth initiatives.” 

Business Highlights

  • At June 30, 2016:
     
    • Telesat had contracted backlog for future services of approximately $4.5 billion.
       
    • Fleet utilization was 94% for Telesat’s North American fleet and 66% for Telesat’s international fleet. 

Telesat’s report on Form 6-K for the quarter ended June 30, 2016, has been filed with the United States 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 Tuesday, July 26, 2016, at 10:30 a.m. ET to discuss its financial results for the three and six month periods ended June 30, 2016, 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. 

Prior to the commencement of the call, Telesat will post a news release containing its financial results on its website (www.telesat.com) under the tab “News & Events” and the heading “News”. 

Dial-in Instructions:
The toll-free dial-in number for the teleconference is +1 (866) 225-0198.  Callers outside of North America should dial +1 (416) 340-2216. The conference reference number is 4227926.  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 July 26, 2016, until 11:59 p.m. ET on August 12, 2016.  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 2632487 followed by the number sign (#).

All Adjusted EBITDA1 and Adjusted EBITDA1 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 “looking ahead”, and “further development”, 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, 2015 which can be obtained on the SEC 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

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 15 satellites plus the Canadian payload on ViaSat-1 with two new satellites under construction. An additional two prototype satellites are under construction and will be deployed in low earth orbit. 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.  

Telesat Holdings Inc.                        
Consolidated Statements of Income (Loss)
For the periods ended June 30            
                         
    Three months   Six months
(in thousands of Canadian dollars) (unaudited)       2016         2015         2016         2015  
Revenue   $   231,686     $   227,291     $   466,619     $   455,999  
Operating expenses       (42,302 )       (44,273 )       (89,149 )       (88,747 )
        189,384         183,018         377,470         367,252  
Depreciation       (56,193 )       (51,607 )       (112,478 )       (104,045 )
Amortization       (7,150 )       (6,940 )       (13,760 )       (14,094 )
Other operating losses, net       (43 )       (8 )       (2,547 )       (26 )
Operating income       125,998         124,463         248,685         249,087  
Interest expense       (46,846 )       (45,260 )       (97,065 )       (90,202 )
Interest and other income       1,199         707         2,374         1,697  
Loss on changes in fair value of financial instruments   (18,428 )       (52,147 )       (24,297 )       (7,812 )
Gain (loss) on foreign exchange       18,977         53,263         208,499         (207,278 )
Income (loss) before tax       80,900         81,026         338,196         (54,508 )
Tax expense       (19,171 )       (24,895 )       (39,101 )       (43,550 )
Net income (loss)   $   61,729     $   56,131     $   299,095     $   (98,058 )
                                         
Telesat Holdings Inc.              
Consolidated Balance Sheets  
               
               
(in thousands of Canadian dollars) (unaudited)               June 30,
2016
   December 31,
 2015
Assets            
Cash and cash equivalents   $ 736,269   $ 690,726
Trade and other receivables     62,372     50,781
Other current financial assets     7,903     1,186
Prepaid expenses and other current assets     20,555     17,100
Total current assets     827,099     759,793
Satellites, property and other equipment     1,867,423     1,925,265
Deferred tax assets     7,740     7,791
Other long-term financial assets     19,924     40,362
Other long-term assets     13,272     13,438
Intangible assets     835,328     811,397
Goodwill     2,446,603     2,446,603
Total assets   $ 6,017,389   $ 6,004,649
             
Liabilities            
Trade and other payables   $ 26,272   $ 44,166
Other current financial liabilities     38,183     36,425
Other current liabilities     92,140     80,637
Current indebtedness     1,511,560     87,386
Total current liabilities     1,668,155     248,614
Long-term indebtedness     2,271,090     3,975,835
Deferred tax liabilities     458,382     467,971
Other long-term financial liabilities     93,473     94,190
Other long-term liabilities     349,097     299,911
Total liabilities     4,840,197     5,086,521
             
Shareholders' Equity            
Share capital     658,735     656,874
Accumulated earnings     470,392     188,479
Reserves     48,065     72,775
Total shareholders' equity     1,177,192     918,128
Total liabilities and shareholders' equity   $ 6,017,389   $ 6,004,649
             
Telesat Holdings Inc.            
Consolidated Statements of Cash Flows      
For the six months ended June 30            
               
(in thousands of Canadian dollars) (unaudited)       2016         2015  
Cash flows from operating activities            
Net income (loss)   $   299,095     $   (98,058 )
Adjustments to reconcile net income (loss) to cash flows from operating activities        
  Depreciation       112,478         104,045  
  Amortization       13,760         14,094  
  Tax expense       39,101         43,550  
  Interest expense       97,065         90,202  
  Interest income       (3,109 )       (1,743 )
  (Gain) loss on foreign exchange       (208,499 )       207,278  
  Loss on changes in fair value of financial instruments       24,297         7,812  
  Share-based compensation       3,324         3,631  
  Loss on disposal of assets       2,547         26  
  Other       (19,158 )       (19,500 )
Income taxes paid, net of income taxes received       (65,090 )       (102,632 )
Interest paid, net of capitalized interest and interest received       (77,388 )       (79,763 )
Repurchase of stock options       (24,658 )       —  
Operating assets and liabilities       71,720         7,449  
Net cash from operating activities       265,485         176,391  
Cash flows used in investing activities            
Satellite programs, including capitalized interest       (99,523 )       (59,100 )
Purchase of other property and equipment       (3,785 )       (3,802 )
Purchase of intangible assets       (36,745 )       (5 )
Net cash used in investing activities       (140,053 )       (62,907 )
Cash flows used in financing activities            
Repayment of indebtedness       (49,824 )       (36,597 )
Capital lease payments       (15 )       —  
Satellite performance incentive payments       (3,652 )       (3,186 )
Net cash used in financing activities       (53,491 )       (39,783 )
               
Effect of changes in exchange rates on cash and cash equivalents       (26,398 )       16,775  
               
Increase in cash and cash equivalents       45,543         90,476  
Cash and cash equivalents, beginning of period       690,726         497,356  
Cash and cash equivalents, end of period   $   736,269     $   587,832